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Progressive's premium growth continues with YOY double-digit surge in FY'19

Progressive Corp. experienced a strong year of premium growth in 2019 and further increased its market share in the U.S. private auto insurance industry.

According to an S&P Global Market Intelligence analysis, the insurer posted a 14.7% year-over-year increase in private auto direct premiums written, the highest among the top 20 such insurers and the only one that rose by double digits.

Progressive wrote about $31 billion in private auto premiums in the year, the third-most behind top-ranked State Farm Mutual Automobile Insurance Co., which saw its premiums decline 2.6% to $40.88 billion, and Berkshire Hathaway Inc.'s GEICO Corp. at $34.89 billion, up 5.5% from 2018.

Progressive also increased its share of the market to 12.2%, closing in on GEICO, which was up slightly to 13.8%. State Farm ended the year with control of 16.1% of the market.

Both GEICO and Progressive have enjoyed a decade of rapid growth in their pursuits of State Farm, more than doubling their private auto written premiums since 2010. Progressive has gone from $12.85 billion to $31.03 billion in that time, while GEICO total has ballooned from $14.17 billion to $34.90 billion.

State Farm's growth has been comparatively modest, rising from $31.13 billion in 2010 to the 2019 total of $40.88 billion.

The difference-maker for GEICO and Progressive has been the way they interact with consumers, according to Moody's analyst Paulette Truman.

"GEICO and Progressive have been the leaders in direct distribution," Truman said in an interview. "I think their emphasis on that has been a major factor in their market share."

Bruce Ballentine, also an analyst for Moody's, said direct distribution generally has lower costs than agency distribution, which is State Farm's primary method of delivery. Customers becoming more comfortable with direct purchasing has been a boon for GEICO and Progressive, he added.

Customer preference for the direct channel could rise further due to stay-at-home orders issued during the COVID-19 pandemic. Truman noted a similar discussion about telematics during Progressive's first-quarter earnings call.

"[Progressive executives] said they felt there were people who were more willing to adopt usage-based insurance because they realize they're not driving as much and they could actually benefit from adopting it," she said.

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Overall, private auto written premiums rose 2.7% year over year to $253.5 billion in 2019 from $246.8 billion in 2018. The combined ratio for the industry, when excluding policyholder dividends, ticked up to 98.2% from 97.3%.

Allstate Corp. was fourth in 2019 premiums written at $23.63 billion. United Services Automobile Association rounded out the top five at $15.23 billion.

Kemper Corp. and Auto Club Exchange Group tied for the second-highest increase in premiums written behind Progressive at 9.6%, while Auto Club Exchange was fourth with a 6.7% rise.

Seven companies in the top 20 saw written premiums fall last year. Nationwide Mutual Group had the steepest decline at 7.2%, followed by Hartford Financial Services Group Inc. at 3.9% and State Farm at 2.6%.

Eight insurers in this analysis ended 2019 had combined ratios above 100%; Erie Indemnity Co. had the highest ratio at 110.2%. Kemper posted the lowest combined ratio for 2019 at 88.5%.