Allstate Buys Auto Repair Firm Sterling

Allstate Corp., the second-largest home and car insurer in the U.S., said Tuesday that it has bought auto repair company Sterling Collision Centers Inc. to make car repairs and the processing of insurance claims more efficient. Terms weren’t disclosed.

Allstate and other auto and home insurers are facing rising claims at a time when competition makes it hard to raise prices. Analysts say many companies are trying to reduce costs by teaming up with preferred car repair services.

“This is the first I’ve heard of an insurer actually owning a repair service. It’s sort of an HMO for car repair,” Jay Cohen, an analyst at Merrill Lynch & Co., told Bloomberg News. Merrill rates Allstate a “near-term neutral.”

Cohen said the acquisition will allow Allstate to gain more control over the claims process and eventually reduce costs. He said it would probably take time to persuade customers to use the car repair service owned by Allstate.

Allstate, which provides insurance services to more than 14 million households, said the acquisition will help reduce repair times, improve customer service and increase efficiency. Customers still will be able to choose repair shops, it said.

Allstate bought Sterling from private investment groups Conning Capital Partners and Berkshire Partners, which set up the auto repair company in 1997 along with its management.

Sterling operates 39 damage-repair shops in seven states and has more than $100 million in annual revenue. Allstate said it will maintain Sterling’s name and management.

Last May, Allstate formed an alliance with Home Depot Inc. that the insurer expected would save it $50 million a year in repair costs by allowing claims adjusters to use Home Depot stores to provide home-repair materials and services at reasonable prices.

Shares of Northbrook, Ill.-based Allstate rose 68 cents to close at $41.90 on the New York Stock Exchange.