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Allstate (ALL) Keeps Hiking Auto Rates to Combat Inflation

The Allstate Corporation ALL announced that the company continued raising its auto insurance rates to combat inflationary challenges in February. The company is expected to continue the momentum this year to improve profitability. It also reported February’s estimated catastrophe losses of $211 million ($167 million after taxes).

In February, Allstate hiked rates by 7.6% in ten locations, which provided a total premium impact of 0.5%. In the first two months of 2023, the company implemented rate hikes at an average of 8.8% in 22 locations. The rate hikes in February are likely to boost annualized written premiums by $127 million.

Inflationary costs are expected to keep pushing insurance prices higher. Due to relaxed travel restrictions, millions of cars continue coming back to the roads, raising repair costs for insurers. The high inflationary pressure will further raise the cost of those repairs. Also, the disrupted supply chain is likely to keep increasing costs for Allstate's auto insurance business.

As such, the company is expected to increase profitability through cost reductions with the help of digitization, improving efficiency and leveraging scale with strategic partnerships. It is expected to restrict new businesses with stricter underwriting requirements in 37 states.

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February’s estimated catastrophe losses compare favorably with January’s figure of $307 million ($243 million after taxes). ALL’s catastrophe losses for the last month incorporated nine events estimated at $241 million, partly offset by favorable reserve estimates. The events were geographically widespread and mostly wind and rain. For the first two months, catastrophe losses totaled $518 million.

In 2021 and 2022, the company incurred catastrophe losses of $3,339 million and $3,112 million, respectively. It remains focused on reducing losses through its catastrophe management strategy and reinsurance programs, and limiting exposure to riskier geographic markets by raising premiums. However, it might affect the number of policies in force.

Price Performances

Allstate has declined 14.3% in the past year compared with the industry’s 10.5% fall.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Zacks Rank & Stocks to Consider

Allstate currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader finance space are Arthur J. Gallagher & Co. AJG, CNA Financial Corporation CNA and Arch Capital Group Ltd. ACGL, 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 consensus mark for Arthur J. Gallagher’s 2023 earnings indicates a 12.9% year-over-year increase. The consensus estimate for AJG’s revenues in 2023 suggests 12.5% year-over-year growth.

The Zacks Consensus Estimate for CNA Financial’s 2023 earnings suggests 10.4% year-over-year growth. Also, the consensus mark for CNA’s revenues in 2023 suggests 5.9% year-over-year growth.

The Zacks Consensus Estimate for Arch Capital’s 2023 earnings implies 25.5% year-over-year growth. Over the past 30 days, ACGL has witnessed two upward estimate revisions against none in the opposite direction.

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The Allstate Corporation (ALL) : Free Stock Analysis Report

CNA Financial Corporation (CNA) : Free Stock Analysis Report

Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report

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Zacks Investment Research