Travelers (TRV) vs Progressive (PGR) - Not all Insurance Companies Are Created Equal
This past week, both Travelers (TRV) and Progressive (PGR) reported 2Q2024 financials and interestingly they demonstrated the importance of a good underwriting platform. Progressive derives about 85% of its premiums earned underwriting personal auto/vehicle and home insurance. For the 2Q2024, PGR grew premiums earned by 19% year over year and generated $1.4 billion of underwriting income with a combined ratio of 91.9%. In contrast, for 2Q2024 TRV grew its personal auto & home insurance premiums earned 10% to $4.1 billion but given its underwriting losses and expenses (its combined ratio was 108.5%) it generated an underwriting loss of $296 million.
Given this fundamental divergence in the core underwriting platforms of the two companies its no surprise that over the past 5 years PGR’s stock has compounded at an annual rate of 25% while TRV’s stock has compounded at an annual rate of 8% - quality matters.
