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Yahoo
2 days ago
- Business
- Yahoo
Berkshire Hathaway vs. Allstate: Which Insurer is a Safer Play?
Improved pricing, rising climate-related risks and rapid digitalization are poised to shape the insurance industry's trajectory in 2025. While insurers continue to face exposure to catastrophe losses linked to climate change, stronger pricing is helping to sustain profitability. MarketScout's Market Barometer reports a 3% composite rate increase in the commercial insurance segment, with personal lines seeing a more pronounced rise of 4.9% in the first quarter of 2025, up from 4% in the fourth quarter of 2024. Although the Federal Reserve has maintained interest rates between 4.25% and 4.5% since December, speculation is rising around a potential rate cut in July or September. Yet, Berkshire Hathaway Inc. (BRK.B) and The Allstate Corporation ALL — two insurance behemoths — are expected to stay strong. Meanwhile, the industry's growing embrace of digital innovation is expected to fuel a surge in merger and acquisition (M&A) activity, especially in technology-driven deals, according to Willis Towers Watson's Quarterly Deal Performance Monitor. Yet, as an investment option, which stock is more attractive for long-term insurance-focused investors? Let's closely look at the fundamentals of these stocks. Berkshire Hathaway is a diversified conglomerate with ownership in more than 90 subsidiaries across a broad range of industries, including insurance and consumer products, helping to minimize concentration risk. Of these, insurance is the most prominent, contributing approximately one-fourth of the company's total revenues. This segment is well-positioned for continued growth, driven by increased market exposure, disciplined underwriting practices and favorable pricing growth of its insurance business not only expands its float but also strengthens earnings, improves return on equity and provides the financial flexibility to pursue strategic acquisitions. With a strong cash position, Berkshire frequently acquires companies or raises its stakes in those that deliver consistent earnings and high returns on equity. While large acquisitions introduce new growth opportunities, smaller bolt-on deals enhance operational efficiency and by Warren Buffett, Berkshire has consistently followed a disciplined investment philosophy, targeting undervalued assets with strong long-term potential. Key investments in firms like Coca-Cola, American Express, Apple, Bank of America, Chevron and Occidental Petroleum exemplify this the company remains solid, with its net margin improving by 190 basis points year over year. With over $100 billion in cash reserves, minimal debt, and a strong credit profile, Berkshire Hathaway's balance sheet continues to reflect exceptional resilience and financial return on equity of 7.2% lags the industry average of 8% but this company has improved the same over time. BRK.B shares have gained 8.2% year to date, outperforming the industry's increase of 8.1%. Allstate is the third-largest property-casualty insurer and the largest publicly traded personal lines carrier in the United States. The company is focused on transforming into a low-cost, digitally enabled insurer with broad distribution capabilities. Its auto insurance segment has returned to target margins, while the homeowners segment continues to deliver solid returns. Allstate is refining its strategy by emphasizing core strengths and exiting less profitable business expects growth in total Property-Liability policies in force, driven by improving auto policy renewal rates and an increase in new business. However, its strong dependence on the U.S. market presents geographic concentration margin has expanded by 980 basis points over the past two years, supported by prudent underwriting practices. Nonetheless, ongoing efforts to reduce losses may lead to fewer policies in force. The increase in vehicle traffic could result in higher claim frequency, making it more difficult for Allstate to maintain its mid-90s combined ratio target in auto. Additionally, inflation, supply chain constraints, and advanced automotive technologies are driving up repair and replacement costs, adding further pressure on these challenges, Allstate's disciplined capital deployment strategy continues to support growth and shareholder returns. However, its relatively high debt level remains a concern, with leverage and interest coverage metrics falling short of industry return on equity of 24.6% is better than the industry average. ALL shares have gained 3.9% year to date, but underperformed the industry. The Zacks Consensus Estimate for BRK.B's 2025 revenues implies a year-over-year increase of 8.6% while that for EPS implies a year-over-year decrease of 6.7%. EPS estimates have moved 0.2% north over the past 30 days. Image Source: Zacks Investment Research The Zacks Consensus Estimate for ALL's 2025 revenues implies a year-over-year increase of 7.6% while that for EPS implies a year-over-year decrease of 0.7%. EPS estimates have moved 1.7% north over the past 30 days. Image Source: Zacks Investment Research Berkshire is trading at a price-to-book multiple of 1.61, above its median of 1.39X over the last five years. ALL's price-to-book multiple sits at 2.65, above its median of 1.97X over the last five years. Image Source: Zacks Investment Research Holding shares of Berkshire Hathaway adds dynamism to shareholders' portfolios. It gives the feel of investing in mutual funds while being rewarded with higher returns. Above all, the company has Warren Buffett at its helm, who has been creating tremendous value for shareholders over nearly six decades with his unique skills. However, all eyes are now on how the behemoth fares when Greg Abel succeeds Warren Buffett as CEO of Berkshire, starting Jan. 1, 2026. Warren Buffett will continue to be the company's executive chairman. BRK.B has a VGM Score of represents a compelling investment opportunity, underpinned by improved profitability through disciplined underwriting, ongoing digital transformation, and a renewed emphasis on its core personal lines business. While short-term challenges such as inflation and elevated claims costs persist, the rebound in auto margins, increasing policy count, and a robust capital return strategy position the company well for sustained long-term growth. ALL has a VGM Score of the basis of return on equity, which reflects a company's efficiency in generating profit from shareholders' equity as well as gives a clear picture of the company's financial health, ALL scores higher than BRK.B. Though both these stocks carry a Zacks Rank #3 (Hold), ALL has an edge over BRK.B. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report The Allstate Corporation (ALL) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
11-04-2025
- Business
- Yahoo
Growing uncertainty stalls expected M&A comeback
This story was originally published on To receive daily news and insights, subscribe to our free daily newsletter. Mergers and acquisitions activity got off to a slower than expected start in the first quarter of 2025, with companies pausing to assess increasing economic uncertainty. It was a rather quick turnaround in sentiment, as the beginning of the year had brought optimism that the pace of dealmaking would pick up. Even aside from President Trump's November election, which many companies and CFOs in the United States believed would have a positive impact on business generally, the economic ingredients for a surge in deals appeared to be in place. Fundamentals like inflation, interest rates and valuations were moving in the right direction and in fact had been doing so during much of 2024, noted Daniel Friedman, global leader of transactions and integrations for Boston Consulting Group (BCG). Instead, the already-sluggish level of M&A activity dipped even further in the first quarter, and it was a worldwide trend. The number of completed transactions worth at least $100 million, compared with the fourth quarter of 2024, fell from 91 to 80 in North America, from 42 to 29 in Europe, and from 61 to 44 in Asia, according to Willis Towers Watson's Quarterly Deal Performance Monitor. This embedded content is not available in your region. 'The recent dip has been driven by weaker equity markets and rising policy uncertainty, and it's clear that's making many companies more hesitant to pursue deals aggressively,' said Friedman. And the present outlook for completing deals, at least for the time being, doesn't look any better. 'The introduction of broad new U.S. tariffs, coupled with geopolitical instability, is expected to dampen the M&A landscape in the near future,' said David Dean, managing director of M&A Consulting for Willis Towers Watson. 'Boardrooms are likely to put deals on hold as they assess the implications for their operations, adopting a cautious approach until the situation becomes clearer.' At present, it's not clear what levels the tariffs will ultimately settle at — if they settle at all — or how long they will last. In fact, even the motivations for them may be uncertain enough to influence companies toward standby mode. Speaking with Dean suggested that in order to make good M&A decisions, executives would benefit from knowing whether the main goal is, for example, bringing manufacturing jobs to the U.S., negotiating new deals with countries, or something else. Some perspective may be in order, however. Friedman pointed out that private equity has a lot of dry powder, and strategic buyers are looking to deploy capital. 'As we get more clarity — especially around political direction and regulatory signals — I'd expect companies and funds that have been sitting on the sidelines to move more decisively,' he said. Meanwhile, there was one positive M&A trend in the first quarter: Deals finally generated positive results for shareholders. It marked the end of a seven-quarter dry spell for acquiring companies, whose shares had underperformed the broad equities market since late 2022. Based on share-price performance, companies that completed M&A deals valued over $100 million in this year's first quarter outperformed the wider market by a global average of 1.5 percentage points, according to Willis Towers Watson's research. The quarterly analysis measures share-price performance as a percentage change in share price from six months before a deal's announcement date to the end of the quarter in which the deal was completed, relative to the MSCI World Index and regional MSCI indices. European acquirers outperformed their regional index by a startling 16.0 percentage points during the first quarter. Asia-Pacific buyers were 5.8 percentage points above their regional index. Dealmakers in North America, by contrast, underperformed their regional index by 2.2 percentage points — the ninth successive quarter of negative performance in the region. Recommended Reading The M&A market may spike this year, but weighty challenges loom Sign in to access your portfolio
