The Allstate Corporation ALL recently announced that the company will keep raising its auto insurance rates to combat inflationary challenges to auto insurance severities throughout the second half of 2022. It reported July’s estimated catastrophe losses of $223 million ($176 million after taxes).
In July, Allstate hiked rates by 8.9% in six locations, which provided a total insurance premium impact of 1%. Year to date, the company implemented 64 rate hikes at an average of around 9% in 51 locations. The rate hikes in the first half of 2022 totaled $1.5 billion, followed by $240 million for July.
Inflation is likely to keep pushing insurance prices higher. With relaxed travel bans, millions of cars are coming back to the roads, raising repair costs for insurers. Also, the supply chain shortage is likely to keep increasing costs for Allstate’s auto insurance business. The ongoing inflation scenario is further boosting the cost of those repairs.
July’s estimated catastrophe losses compare favorably with June’s figure of $356 million ($281 million after taxes). ALL’s catastrophe losses for the last month incorporated 12 events estimated at $233 million. This was partly offset by favorable reserve estimates. The events were geographically widespread and mostly wind and hail.
In 2021, the company incurred $3,339 million of catastrophe losses, which increased 18.8% from the 2020 level. Allstate incurred $1,570 million of catastrophe loss in the first half of 2022. Though the company remains focused on reducing losses through its catastrophe management strategy and reinsurance programs and limiting exposure to riskier geographic markets by raising premiums, it might affect the number of policies in force.
Allstate has declined 1.2% in the past year compared with the industry’s 1.5% fall.
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Zacks Rank & Key Picks
Allstate currently has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the broader finance space are Berkshire Hathaway Inc. (BRK.B), SmartFinancial, Inc. SMBK and Paramount Group, Inc. PGRE, 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.
Headquartered in Omaha, NE, Berkshire Hathaway is a holding company, which owns more than 90 subsidiaries in insurance, railroads, utilities, manufacturing services, retail and home building. The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 bottom line indicates 5.3% year-over-year growth.
Based in Knoxville, TN, SmartFinancial is a leading financial services provider for individuals and corporate clients. The Zacks Consensus Estimate for SMBK’s 2022 earnings indicates 18% year-over-year growth.
New York-based Paramount Group works as a fully-integrated real estate investment trust. The Zacks Consensus Estimate for PGRE’s 2022 bottom line indicates 4.4% year-over-year growth. Paramount Group beat earnings estimates in each of the past four quarters with an average surprise of 6.7%.
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