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Lower auto insurance premiums at least several quarters away, William Blair says



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Euro STOXX 600 index up >1%

Dollar slides; gold, crude gain; bitcoin up >3%

U.S. 10-Year Treasury yield tumbles to ~4.26%

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LOWER AUTO INSURANCE PREMIUMS AT LEAST SEVERAL QUARTERS AWAY, WILLIAM BLAIR SAYS

Auto insurance premiums are unlikely to get cheaper in the next several quarters as companies will keep prices high to soften the blow from inflation, brokerage William Blair wrote in a note this week.

Auto insurers have been burdened by a surge in repair costs due to increasingly complicated vehicles and frequent damage induced by adverse weather, prompting them to charge higher premiums to customers.

In April, the cost to insure motor vehicles jumped 22.6% from a year earlier, the largest annual increase since the 1970s.

But despite the hefty increase, insurers still have room to hike prices further. There is little competition to offer cheaper alternatives as most of the big players in the industry are not aggressively looking for new customers, according to William Blair.

Younger customers, who typically earn less than other cohorts, are buying less expensive insurance policies, or in fact are opting out of car ownership entirely - a trend that may help insurers cut their losses as such drivers can crash three times more than older age groups, the analysts wrote.

The same trends that are hurting customers, however, could boost earnings at the insurance companies, the brokerage said, with Allstate ALL.N and Progressive PGR.N being its top picks.

Allstate shares have climbed 15.5% so far this year, while Progressive has soared 30.9%. Both have outperformed the S&P 500 index's .SPX 12.7% jump.


(Niket Nishant)

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