Allstate (ALL) is expected to grow its auto policy-in-force by approximately 3.8% year-over-year in 2025 and around 2% in 2026 due to improved retention rates and an increase in new policies, Morgan Stanley said in a note Thursday.
The investment firm said that this expected growth will be driven by Allstate's heightened ad spending and a more favorable pricing environment, with retention rates expected to rise from the current 84.7% to approximately 87% by 2026.
"We assume the ad spending effectiveness will hold up in 2024 and 2025 due to limited competition and also Allstate's eventual return to market in New York, New Jersey and California," Morgan Stanley added.
Allstate's retention rate will increase due to a deceleration in rate filings and improved auto underwriting profitability, the firm said.
Morgan Stanley said that its estimates for Allstate's EPS in 2025 and 2026 are significantly higher than consensus, reflecting confidence in an improving combined ratio due to rate increases. The investment firm also projects a multiple expansion if the company successfully demonstrates growth.
The firm said Allstate is now one of its top picks, while reiterating an overweight rating on the stock and boosting its price target to $228 from $220.
Price: 189.94, Change: +1.15, Percent Change: +0.61
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