Progressive Corp. continued to gobble up market share in the commercial auto insurance space and kept its combined ratio well below the industry average in 2018.
The commercial auto industry posted another full-year underwriting loss, though its combined ratio did decline to 108.0% after two straight years of being over the 110% mark, according to an S&P Global Market Intelligence analysis.
CFRA analyst Cathy Seifert partly attributed the improvement to insurers receiving rate increases and seeking to re-underwrite and reassess their risk profiles in commercial auto. She said a number of marginal carriers have left the business or severely reduced their underwriting, giving the remaining carriers a greater degree of pricing power.
"That has helped increase rates that have basically offset some of the underwriting and increased profitability and lowered the combined ratio," Seifert said in an interview.
Progressive preserved its top spot in the commercial auto market share rankings in 2018, continuing to grow its direct premiums written since taking first place from Travelers Cos. Inc. in 2017. Travelers remained in second for 2018.
Liberty Mutual Holding Co. Inc. was the third-largest commercial auto writer with about $1.80 billion in direct premiums written for the year. Nationwide Mutual Group climbed to fourth from fifth, with about $1.63 billion in direct premiums written for 2018.
Progressive was also one of the outliers in terms of its underwriting profitability. It recorded a combined ratio of 85.7%, making it one of four insurers in the top 20 with combined ratios below 100%. The other three were Berkshire Hathaway Inc. with 97.0%, Chubb Ltd. with 92.0% and Great American Insurance with 90.7%.
Keefe Bruyette & Woods analyst Meyer Shields in an April 16 research note praised Progressive's sustained commercial auto margins and growth, which "contrast markedly" with the broader industry's struggles.
The industry's loss ratio averaged 67.3% in 2018, with Progressive again bucking the trend with one of the lowest ratios at 57.4%. Among the top 20, Great American Insurance had the lowest loss ratio at 48.6%.
Allstate Corp. jumped to 17th place from 25th in 2017 as its partnership with Uber Technologies Inc. continues to spur growth. Allstate Vice Chairman Steven Shebik in an earnings call for third-quarter 2018 results said "virtually all" of the increase in written premium for that quarter and for the year up to that point was due to the company's relationship with Uber.
American International Group Inc. continued to lose market share, dropping three places to 15th place in 2018. Seifert said the company aggressively priced its policies a number of years ago, and the effect may have manifested in its commercial auto line.
S&P Global Market Intelligence offers a variety of tools to analyze underwriting performance of insurance companies.
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