The pandemic's short-term effect on auto insurers may be increased underwriting profitability at the expense of lower premium growth, if Progressive Corp.'s recent results turn out to be typical for the industry.
An S&P Global Market Intelligence analysis of Progressive's monthly earnings reports shows that the insurer saw improvement in its personal auto combined ratio while its premium growth slowed. Those effects were realized on both year-over-year and month-to-month bases for March and April.
Progressive's combined ratios for April and March were 79.4% and 74.7%, respectively. The company has not recorded such low monthly combined ratios since 2010.
The figures compare to combined ratios of 86.7% and 87.1% for the same respective months in 2019. They also are sharp improvements from the first two months of this year, prior to the COVID-19 pandemic taking hold in the U.S. Progressive's combined ratios for January and February were 92.8% and 89.9%, respectively.
The insurer's loss ratio actually improved significantly in April compared to a month earlier. The combined ratio worsened because of the company's premium rebate plan. Progressive recorded its April rebates of $506.5 million as expenses, which added 13.9 percentage points to the expense ratio.
Progressive has been gaining market share in the auto space over the past few years thanks to premium growth rates that are much higher than the industry average. The company recorded premium growth of 14.7% year over year in 2019, compared to just 2.8% for the industry as a whole. But that rate slowed considerably in the spring; year-over-year growth rates for April and March were 5.3% and 1.1%, respectively.
These monthly reports from Progressive may provide a window into what many other auto insurers will report in their second-quarter earnings releases. Quarterly GAAP and statutory reports from January to March covered only a small portion of the time that the novel coronavirus spread across the U.S., and thus there was not much hard data as to what impact the pandemic will have on the industry.
Earnings reports for the second quarter will not be disclosed until July at the earliest.