Progressive's stock slides after April results; life insurers mixed

The Progressive Corp.'s shares came under pressure during a week that saw it report April financial results that were hit by unfavorable reserve development and catastrophe losses.

The S&P 500 declined 0.43% to 4,155.86 for the week ending May 21.

Progressive recorded net income attributable to the company of $316.2 million, or 54 cents per share in April, down from $952.6 million, or $1.62 per share, a year ago. The combined ratio for the month deteriorated on a year-over-year basis to 96.0%, primarily due to reserve development and catastrophe losses.

April results showed the impact of declining favorable frequency trends, which are anticipated to improve as driving trends rebound to more normalized levels, according to Wells Fargo analyst Elyse Greenspan.

"We remain cautious on Progressive as we are still in soft auto market and remain wary on the personal lines sector due to the absence of any pricing power and improvement in miles driven" as the pandemic abates in the U.S., Greenspan said in a research note.

Piper Sandler analyst Paul Newsome said Progressive's underwriting profits are likely to deteriorate following a projected surge in driving activity as the COVID-19 pandemic subsides and the economy rebounds. Margins should also decline as the company lowered prices in 2020 and inflation increases claim costs, he said in a note to clients.

Progressive was one of the worst performers among all publicly traded insurance stocks, losing 7.43% this week.

Another major property and casualty insurer lost a bit of ground after it posted a monthly update.

The Allstate Corp. this week said it experienced estimated pretax catastrophe losses of $544 million, or $430 million after tax, for the month of April. About 60% of those losses were due to one large hail event that hit Texas and Oklahoma.

CFRA analyst Cathy Seifert said Allstate's financial results, like Progressive's, are likely to be impacted by a return to normal driving patterns. That said, she believes the company's underwriting profitability will stay above industry averages thanks to the work it has done to deal with increased claim frequency and severity.

Allstate's stock finished the week down 1.31%.

Life insurance stocks were mixed in a week that saw both Fitch Ratings and Moody's revise their outlooks on the entire sector to stable from negative.

Fitch attributed the outlook revision to an improved macroeconomic environment and reduced concerns around asset quality deterioration. Moody's said mass vaccination against the coronavirus is propelling a strong economic rebound for the U.S. However, very low interest rates remain a challenge for the sector and will continue to negatively impact life insurers' investment and spread-derived income.

Lincoln National Corp. and MetLife Inc. ticked down 2.56% and 1.81% respectively, while Great-West Lifeco Inc. rose 1.88% and Genworth Financial Inc. was up 2.20%.