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Allstate's (ALL) Auto Rate Hiking Spree Continues in April

The Allstate Corporation ALL unveiled auto rate increases that it enforced in the month of April 2023. Simultaneously, it disclosed catastrophe loss estimates for April.

The Allstate brand imposed a rate hike of 8.6% across 13 locations in April, which had a favorable impact of 1.6% on overall insurance premiums.

ALL has been prudent enough to implement successive rate hikes since the beginning of 2023. Such continuous rate increases had a positive impact of 3.3% on premiums, thereby raising annualized written premiums by roughly $862 million.

The rate improvements are in sync with efforts to boost profits of the auto insurance business of Allstate, which is of dire need amid the persistent inflationary headwinds and uninterrupted claim expenses, which are roadblocks in the way of insurers.

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Inflation may escalate prices of auto parts and components, thereby increasing the repair costs of a vehicle and making it more difficult for insurers to address claim costs uninterruptedly.

In order to counter the above-mentioned headwinds, auto insurers are compelled to increase rates. This, in turn, is likely to drive the most significant contributor to an insurer’s top line — premiums.

Additionally, catastrophe losses for April are anticipated to be $631 million, post-tax ($799 million, pre-tax). Out of the total, three-fifth of the losses stemmed from two wind and hail events. Favorable reserve reestimates for previous events may provide some strength to Allstate to endure catastrophe losses.

Being a property and casualty (P&C) insurer, ALL’s underwriting results always remain susceptible to catastrophe losses. The insurer incurred catastrophe losses of $1,691 million in the first quarter of 2023, which increased nearly four-fold year over year. As a result, its combined ratio deteriorated 1,130 basis points year over year in the same time frame. A dent in underwriting results can also hamper bottom-line growth of an insurer.

Shares of Allstate have declined 3.4% in a year against the industry’s 6.7% growth. Nevertheless, strong fundamentals are likely to help shares bounce back in the days ahead. ALL currently carries a Zacks Rank #3 (Hold).

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Stocks to Consider

Some better-ranked stocks in the P&C insurance space are RLI Corp. RLI, AXIS Capital Holdings Limited AXS and Universal Insurance Holdings, Inc. UVE. RLI sports a Zacks Rank #1 (Strong Buy), and AXIS Capital and Universal Insurance carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

RLI’s earnings surpassed estimates in each of the last four quarters, the average surprise being 43.50%. The Zacks Consensus Estimate for RLI’s 2023 earnings suggests an improvement of 4.1%, while the same for revenues suggests growth of 15.2% from the year-ago reported figures. The consensus mark for RLI’s 2023 earnings has moved 10.2% north in the past 30 days.

The bottom line of AXIS Capital outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 6.50%. The Zacks Consensus Estimate for AXS’s 2023 earnings suggests an improvement of 33.2%, while the same for revenues suggests growth of 7.6% from the year-ago reported numbers. The consensus mark for AXS’s 2023 earnings has moved 4.9% north in the past 30 days.

Universal Insurance’s earnings surpassed estimates in three of the trailing four quarters and missed the mark once, the average surprise being 93.83%. The Zacks Consensus Estimate for UVE’s 2023 earnings is pegged at $2.00 per share. A loss of 41 cents per share was reported in the prior year. The same for revenues suggests an improvement of 7.3% from the prior-year actual. The consensus mark for UVE’s 2023 earnings has moved 21.2% in the past 30 days.

Shares of RLI, AXIS Capital and Universal Insurance have gained 10.5%, 1.4% and 30.2%, respectively, in a year.

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RLI Corp. (RLI) : Free Stock Analysis Report

The Allstate Corporation (ALL) : Free Stock Analysis Report

Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report

UNIVERSAL INSURANCE HOLDINGS INC (UVE) : Free Stock Analysis Report

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Zacks Investment Research