Allstate, Progressive, etc. – How do they compare?

Allstate, Progressive, etc. - How do they compare?

Credit rating agency Fitch Ratings has just released its peer reviews of U.S. personal line insurers. The study included Allstate Insurance, Horace Mann Educators, Intact Financial, Mercury General, The Progressive Corporation and Kemper Corporation.

Driving the result was what Fitch said was a “sharp deterioration” in personal auto liability due to continued rising litigation costs and seriousness issues. The loss rate is up 11 percentage points from the first nine months of last year to 75%, and even the historically stable physical damage segment has an immediate loss rate of 80% in the first nine months of 2022. Fitch attributed the latter loss rate to supply chain shortages, high used car prices and a tight labor market.

The homeowner loss rate for the first nine months of 2022 remains high at 76%, similar to the previous year.

Fitch Ratings peer review notes that risk-adjusted capitalization is a key credit factor for this group of personal line insurers and has a strong impact on each company’s rating. Their capital adequacy ratios, as measured by Fitch Ratings’ Prism capital model, range from “Strong” to “Very Strong,” with scores equal to or better than Insurer Financial Strength (IFS) Ratings, with the exception of Progressive Corporation.

The peer review notes that among individual line insurers, catastrophe risk is a significant source of volatility in financial performance, although most insurers manage risk well through reinsurance and managing risk aggregation in catastrophe-prone regions. Life insurers that primarily write auto business—Kemper and Progressive Corporation have the highest auto-to-home business ratios of the six insurers, at 94.8 percent and 94.4 percent, respectively—tend to have relatively low underwriting risk and thus have a high Level of advantage or operating leverage. In contrast, homeowner businesses typically require lower levels of operating leverage.

All six peers maintain their presence at the top end of the U.S. property/casualty industry.

In general, due to the short-tail nature of auto insurance products, personal auto insurers’ portfolios consist almost entirely of high-quality, short-term, fixed-income investments. The Fitch Ratings peer review notes that Allstate has the highest combined risk-to-asset ratio of the individual line insurers analyzed. The six insurance companies generally maintain a moderate allocation of various risk assets.

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