Progressive, Allstate outpace property and casualty peers on Wall Street in H2

Shares in The Progressive Corp. and The Allstate Corp. have outpaced many of their larger property and casualty peers since the start of the second half as the industry turns a corner toward improved profitability,

Progressive ranked fourth and Allstate ranked eighth in terms of the top-performing listed US insurers. Progressive shares increased 20.1% between June 28 and close of business Sept. 5, while Allstate was up 16.3%.

The two insurers' positive stock movement was likely driven by the fact that both are on a profitable path, CreditSights analyst Josh Esterov said in an interview. This has contributed to a "mounting body of evidence" that the recovery in the retail auto insurance market is "sustainable."

"Progressive is way ahead of the curve relative to other leading insurers in terms of having already restored strong profitability," Esterov said. "Allstate is probably going to be next in line in terms of demonstrating sustainable profitability out of retail auto."

Signs of success

During the second-quarter earnings season, talk of positive news in the personal auto lines segment dominated earnings calls by property and casualty insurers as executives focused on growth.

Progressive and Allstate were both standouts with their second-quarter results.

Progressive's second-quarter revenue in its personal lines business surged 21% to $13.8 billion, from $11.4 billion a year ago. Roughly 93% of its personal lines are written for personal auto insurance. Progressive's net premiums in personal lines also grew significantly, rising 26% to $14.6 billion from $11.6 billion.

Allstate also experienced positive momentum in the second quarter, driven by growth in its personal auto profitability. Earned and written premiums for the insurer's auto segment grew 11.8% and 12.3%, respectively, year over year. Allstate's underlying combined ratio improved 8.7 percentage points to 93.5%, from 102.2% in the second quarter of 2023.

Esterov said Allstate has now posted several consecutive quarters of profitability, evidence that the insurer would be next to see a "permanent restoration of profitability."

Another factor that could be contributing to the two insurers' positive stock momentum is that hurricane activity has yet to pick up, Esterov said. This hurricane season is being touted by forecasters as likely to be extremely damaging.

Best, worst performers

Insurers from other sectors have also found themselves among the top performers in the second half so far.

Aflac Inc. placed second and was the highest life insurer among the group as its stock increased 22.8% since the start of the second half. UnitedHealth Group Inc. was the highest ranking managed care insurer as its shares increased 16.9%.

Even the worst-performing insurers on the list still fared relatively well as there were no double-digit stock decreases. Corebridge Financial Inc., which found itself on the very bottom of the rankings, only had a 5.1% decrease in share value since the start of the second half.

Esterov noted that the general steady performance of insurers during the time period is likely due in part to the higher interest rate environment. He said that even if interest rates come down, investment yields should still be "well in excess of pre-pandemic levels," which he views as a positive extending into the medium to long term.

While property and casualty is seeing improvements, life insurers are also seeing a favorable mortality trend, creating an operational background, which Esterov said is "fairly supportive" for insurance companies.