Veterans Insurance Company Allstate (NYSE: ALL) reached an important milestone on the stock market on Wednesday. The company’s shares rose 5% and closed at the highest level in their history. The up-and-coming company also benefited from several positive analyst comments. Allstate’s rise exceeded that of the S&P500 Index, which rose by just under 0.4% on the day.
A major asset sale
Investors were particularly excited about a major sale announced by Allstate The Tomorrow. The company announced that it has signed a definitive agreement to sell its voluntary employee benefits business for a whopping $2 billion in cash. The buyer is the comparable insurance company StanCorp Financial.
The move is part of Allstate’s efforts to exit the health and social insurance business. After the sale, two business lines will remain under that umbrella – individual and group health insurance.
In its press release on the sale of the voluntary employee benefits, Allstate stated that the divestitures already completed and planned will enable the affected units to “realize their full growth potential by combining with companies that have additional capacity.”
Allstate expects to realize a gain of approximately $600 million from the announced sale and increase available capital by $1.6 billion. The deal is expected to close in the first half of next year.
Share buybacks could be brought forward
Several analysts reiterated their positive view of Allstate following Wednesday’s announcement. One of them was TD Cowen’s Andrew Kligerman, who maintained his buy rating and $193 per share price target on the insurer’s stock. He believes the deal could be beneficial for the stock as it increases the likelihood that share buybacks will be implemented sooner rather than later.
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Eric Volkman does not own any stocks mentioned. The Motley Fool does not own any stocks mentioned. The Motley Fool has a disclosure policy.
Why Allstate Stock Is Up 5% Today was originally published by The Motley Fool.
