The Progressive Corp.'s stock outperformed many of its competitors this week after the company released better-than-expected July earnings.
The company logged net income of $688.8 million in July, up 170% from $255.4 million a year earlier.
Progressive experienced claim cost inflation earlier and took corrective action sooner than its peers, perhaps helping it more quickly get past the problems plaguing its competitors, according to CFRA analyst Cathy Seifert.
"What the numbers for July tell me is that the company looks to be shoring up the personal lines book of business," Seifert said.
Although results from a single month do not make a trend, Seifert said it does look as though some claim cost inflation may be subsiding.
Auto insurers may continue to be challenged by the inflation and post-pandemic recovery cycle, said Seifert, but some, including The Allstate Corp., may be beginning to round the corner.
"I think from an investment perspective, investors are going to start to parse companies' abilities to manage through these processes and it shouldn't surprise anyone that auto cost inflation trends have remained elevated," Seifert said.
Piper Sandler analyst Paul Newsome said in a research note that Allstate may be on the upswing as he sees the company's efforts to shift its distribution toward direct and independent agents and away from its exclusive agent system, combined with efficiency and cost-cutting efforts, as likely to be successful.
Progressive and Allstate saw gains of 4.69% and 0.59%, respectively.
U.S. equities overall lost ground for the week ending Aug. 19 as the S&P 500 dropped 1.21% to 4,228.48. Insurance companies fared a bit better as the S&P 500 Insurance index ticked up 0.26% to 573.98.
GoHealth proceeds with caution
Medicare-focused digital health company GoHealth Inc. saw its shares tumble after disclosing second-quarter results that showed a revenue decline of 19% year over year and a net loss of $113.8 million.
GoHealth CEO Vijay Kotte in a release said cost actions aimed at strengthening the company's ability to achieve cash flow breakeven on a trailing-12-month basis to show results by the middle of 2023.
The company announced earlier in August that it terminated 835 employees, about a quarter of its total head count.
In a research note, William Blair analyst Adam Klauber rated the company as "outperform" and said the longer-term GoHealth initiatives, such as increasing post-enrollment contracts with carriers, should improve cash flow.
"In the longer term, we remain optimistic that GoHealth can transition to more sustainable growth given its scale and noncommission revenue streams," Klauber said.
Credit Suisse, on the other hand, has an "underperform" recommendation, acknowledging the company's efforts to reorient the business in a challenging environment but expressing concerns about the impact of fewer agents enrolling new members. While GoHealth should get better retention rates in the upcoming annual enrollment period, and the company is taking remedial action, it still faces a "challenging path forward," Credit Suisse said.
GoHealth's stock finished the week down 43.26%.
Reinsuring retirement
Equitable Holdings Inc. saw a modest bump of 1.13% following the announcement that Global Atlantic Financial Group Ltd. would insure part of the company's group retirement annuities. Under the deal, the Equitable will transfer approximately $3 billion in general account assets under management to Global Atlantic subsidiary First Allmerica Financial Life Insurance Co.
Wells Fargo analyst Elyse Greenspan wrote in a research note that the transaction removes a layer of uncertainty while only being very modestly dilutive to 2023 EPS.
