Berkshire Hathaway vs. Allstate: Which Insurer is a Safer Play?
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 trends.The 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 profitability.Led 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 strategy.Financially, 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 strength.Berkshire's 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 lines.Allstate 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 risk.Net 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 profitability.Despite 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 benchmarks.Its 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 D.Allstate 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 A.On 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.
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This article originally published on Zacks Investment Research (zacks.com).
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