Allstate (ALL) Continues Auto Rate Hikes to Combat Inflation
The Allstate Corporation ALL announced that it continued auto insurance rate hikes to combat ongoing inflationary pressures in May. The company is expected to continue the momentum to improve profitability. It also reported May’s estimated catastrophe losses of $885 million ($699 million after taxes).
Let’s delve deeper.
Last month, Allstate hiked rates by 9.3% in 15 locations, which provided a total premium impact of 1.6%. In the quarter-to-date period ended May 31, 2023, the company implemented rate hikes in 27 locations, which resulted in a total increase of $828 million. The rate hikes since 2023 beginning had a premium impact of 4.9%, which are likely to boost annualized written premiums by $1.28 billion.
The high inflation environment is expected to keep pushing insurance prices higher. Millions of cars continue coming back to the roads, raising repair costs for insurers. Also, the disrupted supply chain is likely to keep costs at an elevated level for Allstate's auto insurance business.
Hence, the company is expected to improve profitability through cost-curbing efforts with the help of digitization, improving efficiency, leveraging scale with strategic partnerships and stricter underwriting requirements. Also, lowering distribution expenses will support its margins.
May’s estimated catastrophe losses compare unfavorably with April’s figure of $799 million ($631 million after taxes). ALL’s catastrophe losses for the last month incorporated 12 events estimated at $893 million, partly offset by favorable reserve re-estimates. Around 70% of the losses stemmed from two wind and hail events.
In 2021 and 2022, the company incurred catastrophe losses of $3,339 million and $3,112 million, respectively. ALL’s catastrophe losses were $1,691 million in the first quarter of 2023 alone, which increased nearly four-fold year over year. It remains focused on lowering losses through its catastrophe management strategy, reinsurance programs and restricting exposure to riskier geographic markets by expanding premiums. Nevertheless, this is likely to affect the number of policies in force.
Price Performances
Allstate shares have declined 1.3% in the past three months against the industry’s 7.7% rise.
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Zacks Rank & Key Picks
ALL currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader finance space are AMERISAFE, Inc. AMSF, Employers Holdings, Inc. EIG and Lemonade, Inc. LMND, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for AMERISAFE’s 2023 earnings has improved 11.5% over the past 60 days. AMSF beat earnings estimates in all the last four quarters, with an average of 24%.
The Zacks Consensus Estimate for Employers Holdings’ 2023 earnings indicates 6.8% year-over-year growth. EIG beat earnings estimates in all the last four quarters, with an average of 35.6%.
The Zacks Consensus Estimate for Lemonade’s 2023 earnings suggests 15.9% year-over-year growth. Also, the consensus mark for LMND’s 2023 revenues implies a 53.6% year-over-year surge.
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