As inflationary pressures continue to plague insurers, The Allstate Corp.’s response may be falling behind its competitors.
The property and casualty insurer held a special topics call on Dec. 2 to address its reserving and claim process. During the call, Allstate reiterated that its $875 million second-quarter charge was principally related to inflationary pressures. The insurer also noted an increase in severe auto accidents related to distracted drivers had increased the portion of claims related to bodily injury.
According to Piper Sandler analyst Paul Newsome, Allstate was only partially successful at reassuring investors that a large reserve charge they took is not a reflection of things going poorly.
“I think that still remains an issue for investors, who are not sure if what we’re seeing at Allstate is truly reflective of the macro environment or is there something else going on that they need to be aware,” he said.
In terms of rates, Newsome said there is a spectrum of insurers keeping pace with inflation, like The Progressive Corp., and those playing catch up.
“It’s particularly interesting for Allstate because I think they were one of the earliest companies to be able to signal publicly that there were inflationary problems as we got out of the pandemic, but it looks like Progressive and some other companies have gotten ahead of them,” the Piper Sandler analyst said.
The most uncertain piece for investors is what inflation will be for auto and home companies, Newsome said. While inflation as indicated by the consumer price index may be decelerating, Newsome said claims for auto and home insurance do not precisely match the CPI.
“I think a lot of what will happen with Allstate, as well as all the other personalized writers, will depend on inflation more than pricing,” he said. “Everyone knows that pricing needs to go up and just about every company is raising rates, the question is whether it will be enough to overcome the inflation.”
Allstate’s shares declined 1.89% to $128.37 for the week ending Dec. 9. Fellow property and casualty insurers Progressive and Chubb Ltd. also saw their prices decline 2.37% and 0.79%, respectively.
The decline largely matched the S&P 500, which lost 3.37% to close at 3,934.38, while the S&P 500 U.S. Insurance index lost 2.46% to end at 595.26.
Centene divesture
Centene Corp.’s stock price rose slightly to 0.46% to $86.19 a share during the same week it completed the sale of one of its subsidiaries.
On Monday, the managed care insurer completed the sale of Magellan Rx to Prime Therapeutics LLC. The transaction is part of the company’s planned divestment of its entire pharmacy businesses, from which it expects aggregate proceeds of approximately $2.8 billion.
In a November research note following the deal’s announcement, Stephens analyst Scott Fidel said since acquiring Magellan for approximately $2.2 billion, Centene had been crafting deals to sell the Magellan Rx and NIA segments for basically the same value as it originally paid for all of Magellan.
Centene is set to hold an investor call on Dec. 16, which, according to a research note from J.P. Morgan analyst Calvin Sternick, will likely focus on the company’s long-term strategy and detailed vision for 2025 and beyond. The strategic plan will be CEO Sarah London’s “first opportunity to set the long-term direction of the company,” Sternick wrote, adding that he will be focused on the insurer broadening its provider strategy and bolstering its data technology and digital innovation.
Despite its gains, Centene was outperformed for the week ending Dec. 9 by competitors Cigna Corp. and Molina Healthcare Inc., whose shares rose 1.65% and 2.03%, respectively.
Source : SPGlobal