Strong earnings, rising competition and the outlook for AI were key themes on US property and casualty insurers' first-quarter earnings calls.
The sector posted its strongest first quarter in 25 years for underwriting gains and combined ratio, according to an S&P Global Market Intelligence analysis. Underwriting gains totaled $22.10 billion, and the combined ratio before policyholder dividends was 89.1%.
Piper Sandler analyst Paul Newsome said overall profitability was strong.
"When you step back, earnings were pretty good," Newsome said in an interview. "Companies had very high ROEs, even though the weather was normal to heavy in the quarter."
Growth stories
The Progressive Corp. continued to grow in the quarter, booking net income of $2.82 billion, total revenue of $22.19 billion and an underwriting profit margin of 13.6%. Net premiums written rose to $23.6 billion, and the Mayfield, Ohio-based insurer added 3.3 million policies in force, bringing its total to 39.57 million.
CEO Tricia Griffith said on the company's first-quarter earnings call that the current soft market shows no sign of ending, though competition is intensifying "because everyone has great margins" and the competition "is great for consumers."
"We think this is a really great opportunity to continue on our growth trajectory and continue to get more and more policyholders to [...] not just to be No. 1 in private passenger auto, but to be the No. 1 destination," Griffith said.
Progressive achieved that first goal at the end of March, when it overtook State Farm Mutual Automobile Insurance Co. as the biggest private auto insurer. Progressive's direct premiums written in the 12 months ended March 31 surpassed State Farm's, ending its run as segment leader since 1942.
The Allstate Corp. grew its NPW to $14.63 billion and total revenue to $16.9 billion. Its property-liability business grew policies in force to 38.56 million and posted underwriting income of $2.66 billion. Chubb Ltd. also reported growth in NPW in its North American P&C segment.
Pricing and competition
Competition received little attention on first-quarter property and casualty earnings calls, CFRA Research analyst Cathy Seifert said.
"Nobody necessarily wanted to 'pierce the veil' as far as how competitive market conditions are [because] there is perhaps a fear of a self-fulfilling prophecy," Seifert said in an interview. "No carrier wants to be viewed as sort of behind the 8-ball and I think they've all tried to position themselves in that, 'Yes, the market is challenging, but we're maintaining pricing discipline, and we are able to generate ... whatever.'"
Heritage Insurance Holdings Inc. was more direct about the competitive pressure it is facing, particularly in its commercial residential line. CEO Ernie Garateix said on the Tampa, Florida-based insurer's earnings call that competition in the state's commercial lines market contributed to a 7.8% decline in commercial residential premiums in the quarter.
Despite the increased competition, Garateix said he does not believe many rivals will be able to manage market cycles effectively.
"We believe our scale, balance sheet strength, experienced workforce and local expertise position us well to selectively evaluate opportunities that meet our disciplined criteria."
Newsome said investors on the calls he covered were focused on pricing and the risk that competition could compress margins for some insurers.
"I don't know if I should say I was surprised, but there are definitely pockets within property insurance and large accounts and reinsurance where pricing is just not economic," Newsome said. "That was sort of disappointing in that you would have hoped that the industry would just be a little bit more disciplined and I think the industry needs to look at itself and realize that it is its own enemy."
Which way on AI?
Discussions about insurers' AI initiatives focused on how the technology is being used.
The Hartford Insurance Group Inc. CEO Chris Swift said during the company's earnings call that the company is expanding AI use in underwriting and distribution. It has added an AI assistant that "augments key components of the underwriting process" across its business lines. Lemonade Inc.'s autonomous vehicle coverage project recognizes AI as a "driver," enabling the company to price coverage.
Chubb CEO Evan Greenberg stated during a conference call that AI models like Anthropic's Mythos have transformed vulnerability identification, noting that "what were once minor vulnerabilities can now be aggregated in a much more insightful way."
Progressive's Griffith said in March that the company established a strategy council to oversee AI projects, including deploying predictive AI on unstructured data and voice for claims support and customer service, as well as testing agentic AI in its direct channel for "easy policies."
Seifert said it makes sense for companies to use AI in claims and customer service, adding that they are likely integrating it into those areas first before expanding further.
"I've heard the argument that AI could potentially enable some of the tech laggards to catch up and leapfrog over intermediate technology initiatives some carriers have adopted, but my sense is that the industry has been pretty much on the [disabled list] in terms of what they're doing with AI," Seifert said.
Newsome noted it is "too early" to assess AI's impact, citing a "fear factor" within the industry.
"There's a lot of fear out there [...] that there'll be a lot of change quickly, and that you won't be able to figure out who's going to have that impact right away," he said.
Greenberg highlighted AI's role in transforming cyber risk management, noting that "most companies also use open source in their [cybersecurity] estates," which can help identify vulnerabilities even before suppliers do.
