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Allstate's stock mostly flat amid SafeAuto deal; big broker merger partners dip

A relatively quiet, holiday-shortened week saw several deals announced in the insurance industry and mixed results for its stocks.

Insurance companies modestly underperformed the broader market for the week ending June 4. The SNL U.S. Insurance Index ticked down 0.20% to 1,436.53, while the S&P 500 rose 0.61% to 4,229.89.

The Allstate Corp. on June 1 announced it is acquiring nonstandard auto insurance carrier SafeAuto for $270 million in cash. The deal, expected to close in the third quarter, also includes approximately $30 million in pre-close dividends of certain noninsurance assets.

Piper Sandler analyst Paul Newsome said in a research note that the SafeAuto deal is small for Allstate financially but adds to its business outside of its core exclusive agent distribution channel. The analyst said SafeAuto is being acquired for about 160% of book value, which strikes him as a reasonable valuation.

Keefe Bruyette & Woods analyst Meyer Shields said the pending acquisition reflects Allstate's commitment to "'transformative growth,'" which he said will likely lead to "sustained competitive pricing in the near term." SafeAuto's direct written premium has grown by only 1.5% over the past decade, Allstate's marketing capabilities, pricing skills and above-average claims capabilities should lead to faster growth and a better underwriting margin than it achieved on its own, Shields said in a note.

Allstate finished the week down 0.28%.

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Elsewhere in the property and casualty sector, The Progressive Corp. this week said it completed the $338 million acquisition of Carmel, Ind.-based Protective Insurance Corp. Progressive's stock climbed 1.29%.

Big life insurance stocks were mixed, with names like MetLife Inc. and Aflac Inc. notching decent gains, while Great-West Lifeco Inc. and Manulife Financial Corp. moved lower. MetLife climbed 1.84%, Aflac added 1.41%, Great-West dropped 2.86% and Manulife slid 2.51%.

In the insurance brokerage space, Aon PLC made yet another sale announcement tied to its proposed combination with Willis Towers Watson PLC. The company this week said it agreed to sell its U.S. retirement business to Aquiline Capital Partners LLC and its Aon Retiree Health Exchange business to Alight for a total gross consideration of $1.4 billion.

The company already announced a multibillion-dollar asset sale with Arthur J. Gallagher & Co. and plans to shed its German retirement and investment consulting business to help get its merger with Willis Towers Watson to the finish line. Aon CEO Greg Case in a statement said the transactions with Alight and Aquiline "further accelerate" the company's momentum toward finishing the tie-up.

Aon's stock slipped 0.93% on the week. Its merger partner lost 0.62%.