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Allstate's (ALL) Premiums Gain From Auto Rate Hikes in October

The Allstate Corporation ALL recently announced hiking its auto insurance rates in October 2022.

The Allstate brand enforced rate hikes of 14% across 15 locations last month, amounting to premium increases of $307 million. Rate increases in October had a positive impact of 1.3% on the total Allstate brand insurance premium.

Shares of Allstate lost 1.4% on Nov 18, replicating declines in broader markets.

ALL has been swift enough to implement successive rate hikes since the beginning of 2022. Such continuous rate increases had a favorable impact of 12.1% on premiums, raising the same by $2.9 billion on a year-to-date basis.

The reason for the property and casualty (P&C) insurer resorting to frequent rate hikes can be attributed to the headwind arising from persistent inflationary pressures and higher auto insurance severities.

With more vehicles plying on roads following relaxation of COVID restrictions, claim costs are likely to increase for auto insurers. Escalating claim expenses pose a threat to insurers and inflation seems to aggravate their woes. Further, the price of auto parts and components witnesses an uptick due to the continued impact of inflation, which in turn, might elevate the repair costs of vehicles.

Also, the labor shortage issue continuously gripping the United States will not spare auto insurers either. The scarcity of labor propels auto insurers to hire temporary labor at higher rates, thus shooting up labor expenses.

To counter the above-mentioned headwinds, auto insurers are compelled to increase rates, further driving their premiums. With sound growth in premiums (the most significant contributor to an insurer’s top line), the insurer is able to rein in the rising auto parts expenses or labor costs.

Amid the ongoing concern over inflation, Allstate might be relieved about estimated catastrophe losses remaining below the $150-million reporting threshold in October 2022. The decline in catastrophe losses drives an insurer’s underwriting results. In the first nine months of 2022, ALL incurred catastrophe losses of $2.3 billion, down 17% year over year.

Shares of Allstate have rallied 16.9% in a year compared with the industry’s growth of 9%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Zacks Rank & Key Picks

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

Some better-ranked stocks in the P&C insurance space are W. R. Berkley Corporation WRB, Berkshire Hathaway Inc. (BRK.B) and Kinsale Capital Group, Inc. KNSL. While W.R. Berkley sports a Zacks Rank #1 (Strong Buy), Berkshire Hathaway and Kinsale Capital carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average being 25.63%. The Zacks Consensus Estimate for WRB’s 2022 earnings suggests an improvement of 26.2%, while the same for revenues suggests growth of 16.1% from the respective year-ago reported figures. The consensus mark for WRB’s 2022 earnings has moved 5.1% north in the past 30 days.

The bottom line of Berkshire Hathaway outpaced estimates in each of the trailing four quarters, the average being 22.18%. The Zacks Consensus Estimate for BRK.B’s 2022 earnings suggests an improvement of 22.5%, while the same for revenues suggests growth of 7.4% from the corresponding year-ago reported numbers. The consensus mark for BRK.B’s 2022 earnings has moved 6.5% north in the past seven days.

Kinsale Capital’s earnings surpassed estimates in each of the trailing four quarters, the average being 15.16%. The Zacks Consensus Estimate for KNSL’ 2022 earnings indicates a rise of 27.5%, while the same for revenues suggests an improvement of 26.2% from the comparable prior-year actuals. The consensus mark for KNSL’s 2022 earnings has moved 5% up in the past 30 days.

Shares of W.R. Berkley, Berkshire Hathaway and Kinsale Capital have gained 33.4%, 9.1% and 43.9%, respectively, in a year.

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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report

Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report

The Allstate Corporation (ALL) : Free Stock Analysis Report

Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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Zacks Investment Research