8-KOther Events

ALLSTATE CORP 8-K Report, Corporate Update (Jun 27, 2007)

Filed June 27, 2007For Securities:ALLALL-PJALL-PBALL-PHALL-PI

Summary

On June 27, 2007, The Allstate Corporation announced it entered into an accelerated share repurchase agreement with Lehman Brothers OTC Derivatives Inc. to buy back approximately $500 million of its outstanding common stock. This repurchase is part of Allstate's broader $4.0 billion stock repurchase program, which is targeted for completion by March 31, 2008. The agreement involves Lehman OTC purchasing shares in the open market over the next four months, with the final price and number of shares to be determined by the volume-weighted average price during that period. Allstate has the flexibility to settle any remaining balance in cash or additional shares. This move signals the company's confidence in its stock and its commitment to returning capital to shareholders.

Key Highlights

  • 1Allstate entered into an accelerated share repurchase agreement for approximately $500 million of its common stock.
  • 2The counterparty for the repurchase is Lehman Brothers OTC Derivatives Inc.
  • 3The shares repurchased will be acquired by Lehman OTC in the open market over the next four months.
  • 4The final settlement will be based on the volume-weighted average price of Allstate's stock during the repurchase period.
  • 5Allstate can choose to settle the repurchase with cash or additional shares of its own stock.
  • 6This $500 million repurchase is part of a larger $4.0 billion share buyback program previously announced.
  • 7The overall $4.0 billion repurchase program is expected to be completed by March 31, 2008.

Frequently Asked Questions

An accelerated share repurchase (ASR) agreement is a contract where a company buys back its own stock from a financial institution. The institution typically purchases the shares in the open market over a specified period, and the final cost to the company is based on the average price paid by the institution during that time. This allows companies to execute large buybacks efficiently and often at a favorable average price.

Allstate is undertaking this repurchase as part of a larger $4.0 billion program. Companies typically repurchase their stock to reduce the number of outstanding shares, which can increase earnings per share (EPS), signal management's confidence in the company's valuation, and return capital to shareholders.

The exact purchase price per share and the number of shares delivered will be fixed according to the agreement. It is expected that Lehman OTC will purchase shares in the market over the next four months. The agreement will be settled at its conclusion, with the final amount determined by the volume-weighted average price (VWAP) of Allstate's common stock during the period Lehman OTC makes its purchases.

The flexibility to settle the remaining balance in either cash or additional shares of its common stock provides Allstate with strategic options. Settling in cash directly uses the company's financial resources. Settling in stock would increase the number of shares outstanding, potentially counteracting some of the intended dilutive effects of the buyback, though the primary goal is usually share reduction or capital return.