In this week’s Tuesday Ticker, auto insurers face changes in claims and underwriting performance, automotive auction volumes increase, an advanced driver assistance systems supplier cuts earnings expectations and a Toronto fleet manager is reducing staff while pursuing an Australian acquisition.
Claims climb
Geico is facing a massive drop in its underwriting profits.
Second-quarter results from Berkshire Hathaway-owned GEICO, a U.S. private passenger auto insurer, show a 45% drop in pre-tax underwriting profit as accident claims and marketing expenses increased.
In the first quarter, private passenger property-damage and collision claim frequency increased 2% to 4% from a year earlier. Average claim severity for property-damage and collision coverage also increased 2% to 4%. Pre-tax underwriting profit fell to US$1.42 billion from US$2.17 billion a year earlier.
Berkshire Hathaway Class B shares were trading at about US$529.28 on Aug. 10, up 1.4%.
Auto profit
Allstate enjoyed a significant boost to its own underwriting activities.
Second-quarter results from Northbrook, Ill.-based Allstate, which sells auto, home and other insurance, show a 20.7% increase in auto underwriting income.
Auto underwriting income rose to US$1.61 billion from US$1.33 billion a year earlier. Auto policies in force increased 2.8% to 25.95 million, while the average underlying loss per policy fell 3.5% to US$978. Claims and expenses were equivalent to 83.3% of auto premiums, down from 86% a year earlier.
Chief executive Tom Wilson said Allstate delivered “strong operating and financial results” during the quarter.
Allstate shares were trading at about US$270.64 on Aug. 10, up 1.4%.
ADAS drop
Executives at Aptiv, a Swiss supplier of radar, cameras, software and other advanced driver assistance systems technology, has lowered the company’s earnings forecast following its second-quarter results.
Adjusted earnings were US$1.63 per share on revenue of US$3.3 billion. Analysts had expected adjusted earnings of about US$1.40 per share.
The revised outlook calls for third-quarter adjusted earnings of about US$1.30 per share, below the US$1.60 analysts had expected. The full-year forecast was lowered to about US$5.70 per share from about US$5.90. Executives cited changes to product schedules, delayed product launches and software timing.
“While the macroeconomic landscape for Automotive remains dynamic and customer mix has presented as an incremental headwind, we remain committed to delivering continued revenue growth and strong operating performance this year,” CEO Kevin Clark said.
Aptiv shares fell 16.6% on Aug. 4 to US$47.72. They were trading at about US$49.57 on Aug. 10.
Salvage gains
Second-quarter results from Westchester, Ill.-based RB Global, which operates vehicle and equipment marketplaces including salvage auction provider IAA, show higher automotive auction volumes.
Automotive lots sold increased 11% from a year earlier to about 659,000, while the value of automotive transactions rose 13% to about US$2.45 billion. The category includes damaged and total-loss vehicles sold through IAA as well as other used vehicles.
Chief financial officer Eric Guerin said automotive growth helped support higher earnings during the quarter. Executives also raised the full-year forecast for growth in the total value of transactions.
RB Global shares were trading at about US$93.60 on Aug. 10, down 1.2%.
Fleet moves
Second-quarter results from Toronto-based Element Fleet Management, which provides fleet financing, vehicle acquisition, maintenance, accident management and remarketing services, show higher revenue as executives prepare to cut 8% of the company’s workforce. Element has also reportedly entered the bidding for Australian fleet manager FleetPartners.
Adjusted net revenue reached US$318.1 million, up 10% from a year earlier. Services revenue rose 8% to US$164 million, while the number of vehicles under management increased 3% to 1.56 million. Vehicle originations fell 9% to US$1.72 billion.
Executives expect the workforce reduction to save about US$20 million a year beginning in 2027. Chief executive Laura Dottori-Attanasio said the results reflected “our ability to execute consistently while continuing to invest in the future of our business.”
The full-year financial forecast was maintained.
The Australian reported Aug. 10 that Element had proposed paying A$4 per share for FleetPartners, subject to exclusive due diligence. The proposal would value FleetPartners at about A$820 million. Private equity firm Pacific Equity Partners had previously proposed A$3.60 per share. Element operates in Australia and New Zealand through Custom Fleet.
No public announcement of an Element offer for FleetPartners had been made.
Element shares were trading at about $29.01 on Aug. 10, down 2.1%.
