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'Planets ... align' for Progressive as insurer grows rapidly, boosts margins

Progressive Corp. plans to continue to gain share of the personal lines market after a year in which it generated double-digit percentage growth in net premiums written in its personal vehicle and property businesses.

"The addressable market on both the auto and home side, it's almost $300 billion, of which we have about $30 billion," CEO Tricia Griffith said during Progressive's quarterly investor relations call March 1. "So a lot of runway."

In her annual letter to shareholders released Feb. 27, Griffith highlighted Progressive's success in not only achieving strong growth but also in meeting management's longstanding target for a 96% combined ratio. Progressive's 93.4% combined ratio in 2017 across businesses marked an improvement from 95.1% in 2016. She noted that the company achieved the wider underwriting profit margin despite the impact of hurricanes Harvey and Irma making landfall in two of its largest states.

"Based on our estimates using statutory data through September [2017], we think our private passenger auto programs were more profitable than all of our major competitors and about 10 points more profitable than the industry," Griffith wrote. "We also believe we grew our market share by approximately half of a point to almost 10% of the market. There are occasions where the planets (high growth plus profit) align and that occurred for us in 2017."

Griffith attributed a portion of Progressive's success from a profitability perspective to "persistent favorable frequency trends that were not anticipated when we priced the auto book." She added during the March 1 call that it is "hard to understand and predict frequency."

In addition to previously reported statistics regarding growth in premiums and policies in force across business lines, Progressive disclosed in its annual report increases in new applications for personal vehicle policies in its agency and direct channels for 2017 for 21% and 16%, respectively. New property applications increased 48%. In each case the rates of increase represented accelerations from 2016's results. Although the rate of increase in the commercial lines for the full year was only 1%, Progressive noted that new applications in that segment rose 17% for the second half of 2017.

The company also reported a 7% increase in trailing-12-month policy life expectancy in its personal vehicle businesses, and Griffith said customer retention remains "a central component of our strategy."