Allstate is Friday's IBD Stock Of The Day as the insurance stock hits the gas after reporting on catastrophe losses and auto and homeowners rate increases for March. ALL stock bounded off key support and past a buy point on Thursday and continued higher in the buy zone on Friday.
Allstate's move is part of a wider move for insurance stocks. Progressive hit a new high on Friday. The group has been able to push through big premium increases and also benefits from a lift to investment income from higher interest rates.
Catastrophe-Loss Update
On Thursday, Allstate announced $343 million in catastrophe losses in March, bringing the first-quarter total to $731 million. In March, 80% of the losses related to one hail event.
Rate increases for its Allstate auto insurance brand raised premiums by 0.9% in March and 2.4% year to date. Allstate homeowners insurance rate increases lifted premiums by 0.7% in March. Allstate said that rate increases and inflation in home replacement costs boosted average homeowner premiums by 11.9% vs. a year ago.
In a Friday note, William Blair analyst Adam Klauber said that following the catastrophe-loss update, he's forecasting Q1 earnings per share of $5.10 vs. a year-earlier loss and a consensus view of $3.95. Allstate is set to report Q1 results late on May 1.
"We continue to rate Allstate outperform, given the likely turnaround in personal auto," he wrote.
Allstate brand auto insurance rates rose 33.3% over 2022 and 2023. Last December, Allstate received approval for increases of 30% in California, 14.6% in New York and 20% in New Jersey.
The combination of rate increases and expense reductions now has Allstate approaching a pivot to growth. "The transformative growth initiatives to drive Property-Liability market share growth can be implemented in more states this year now, as auto margins have been improved," CEO Tom Wilson said on the Feb. 8 Q4 earnings call.
On March 28, HSBC upgraded Allstate stock to buy from hold, while hiking its price target to 190 from 158. The firm said that the combination of rate increases and decelerating inflation for things like auto repair puts the industry in a "sweet spot."
ALL Stock Performance
Allstate rose 2.3% to 172.96 in Friday's stock market action. That followed Thursday's 3.8% bounce.
ALL closed at 169.11 on Thursday, just above a 168.05 buy point from a cup base, according to MarketSurge.
The buy zone runs through 176.45.
Allstate's relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, is at a 52-week high, a good sign when a stock is breaking out.
IBD Stock Checkup rates Allstate as the No. 7 stock in the Insurance-Prop/Cas/Title Group, based on fundamental and technical factors, with a 97 IBD Composite Rating. The industry group includes insurers offering property, casualty and life insurance, as well as other products.
Investors should be cautious about new buys in the current market however.
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