UnitedHealth's stock rises after releasing Q3 earnings; Progressive ticks up

The Progressive Corp.'s stock managed to post a gain during a week in which it reported financial results significantly impacted by Hurricane Ida.

Insurance stocks modestly underperformed the broader markets, but both groups moved higher for the week ending Oct. 15. The S&P 500 rose 1.82% to 4,471.37, while the S&P 500 Insurance index climbed 1.41% to 542.75.

Progressive recorded a net loss attributable to the company of $130.3 million, or 23 cents per share in September, compared to net income of $231.4 million, or 39 cents per share, a year ago. The combined ratio for the month deteriorated on a year-over-year basis to 100.1% from 88.3%.

The company's combined ratio was above 100% for a second consecutive month, which is well above its long-term maximum combined ratio target of 96%, Piper Sandler analyst Paul Newsome said. Increased claim frequency and higher severity impacted the ratio.

"We continue to be fearful that Progressive's strategy to accelerate growth by lowering prices during the pandemic will prove to be a mistake," Newsome said in a research note. Driving activity has rebounded so significantly that those price decreases now look inappropriate, he said.

On the positive side, Progressive's commercial business shined as it continued to grow at a very quick pace. Newsome said Progressive's commercial growth is exceptional, but the sustained underlying profitability combined ratio of 89.5% in September was even more impressive. That figure was significantly better than the results the analyst has seen from every other major public property and casualty insurer.

Progressive's shares finished the week up 0.35%.

That relatively flat performance was mirrored by several other large P&C names, including Chubb Ltd., which lost 0.80%, and The Allstate Corp., which edged down 0.09%. American International Group Inc.'s shares fared a little better, rising 1.16%.

UnitedHealth Group Inc. kicked off third-quarter earnings season in the managed care space, recording a year-over-year increase in earnings from operations. The company said the results reflected strong member growth, reduced net COVID-19 effects and a continued focus on operating cost management.

The health insurer expects full-year net earnings to range from $17.70 to $17.95 per share and adjusted earnings to be between $18.65 and $18.90 per share.

Cantor Fitzgerald analyst Steven Halper expects there to be an impact from COVID-19 in 2022, but less than the $1.80 per-share effect seen for this year.

Speaking on an earnings conference call, Brian Thompson, CEO of UnitedHealthcare government programs, said the Medicare and Medicaid businesses are both still "below baseline on a net basis" in the wake of the spike of COVID-19 cases in late summer and early fall. That said, Thompson is "encouraged" by physician encounters, primary care and annual wellness visits that the company is seeing now.

"I certainly expect less of a headwind in 2022 due to those encounters," he said, according to a transcript of his remarks.

UnitedHealth's shares were up 4.80% for the week.