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Where Will Sale Leave Buyers, Investors? : Insurance: Allstate policyholders probably won't be affected, but shareholders could be hurt, analysts say.


Allstate Corp., the "good hands" insurer that Sears, Roebuck & Co. founded in 1931, taking the name from a brand of Sears tires, will be completely on its own after the huge spinoff Sears announced Thursday.

For Allstate policyholders, that probably won't make much difference, because the Northbrook, Ill.-based insurer has been operating independently since Sears sold a 19.9% stake to the public last year.

For Allstate investors, however, analysts said the effect may be negative, at least in the short term, as Sears' remaining Allstate stake--360 million shares--will be distributed to Sears shareholders, many of whom don't particularly want an insurance stock.

Allstate, California's second-largest auto and homeowners insurer, faces estimated gross claims of $1.3 billion from the Jan. 17 Northridge earthquake. Disasters can make earnings fluctuate sharply, distressing investors.

"Some institutions have been pressuring Sears to get rid of Allstate because they don't like the volatility of an insurance company," Merrill Lynch analyst Gerald Lewinsohn said. Such investors may want to sell their new Allstate shares, depressing the price, he said.

Allstate stock dropped 75 cents to $24.125 in trading Thursday on the New York Stock Exchange.

Allstate will also lose some of the tax advantages that came with consolidating its results with those of its retailer parent. For example, Lewinsohn said, Sears could use Allstate catastrophe losses to reduce its own tax liability and Allstate would get cash in exchange.

Sears, in announcing the spinoff, said the loss of tax consolidation will reduce Allstate's 1995 earnings by 5 cents to 10 cents a share, depending on the date the transaction is completed.

However, some analysts said they think that having no corporate parent looking over its shoulder will let Allstate be quicker on its feet. "They can make more aggressive moves because they don't have to filter them through Sears," said analyst John A. Hall of Northington Partners in Avon, Conn.

"We're extremely pleased by this," Allstate spokeswoman Kathleen Hogan told Bloomberg Business News. "In the past, when we've made decisions for insurance reasons, we had to be concerned with its effect on Sears customers."

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