Allstate: Sale of Employer Voluntary Benefits Business Is a Good Move

Allstate announced it has reached a deal to sell its employer voluntary benefits business to StanCorp Financial for $2.0 billion. This is part of management’s plan to sell its health and benefits businesses. We like this move, as we don’t see a good strategic connection between this segment and the company’s core property-casualty insurance operations. The price for this business looks reasonable to us and should result in a gain of $600 million. It will also free up about $1.6 billion in capital, which we see as a positive, since Allstate’s balance sheet is recovering from losses over the last two years. While we like this move, it is not large enough to materially affect our valuation, and we will maintain our $130 fair value estimate for the no-moat company. We see the shares as overvalued at the moment, as we believe the market is overly focused on near-term tailwinds for the business.