Progressive, Allstate stocks surge as insurance prices jump

Progressive (NYSE: PGR) and Allstate (NYSE: ALL) stock prices are soaring, helped by higher insurance premium costs. The two have jumped by more than 50% in the past 12 months, adding billions of dollars to their market caps. 

Progressive is up by 220% in the past five years while AllState is up by almost 100% in the same period. Its market cap has jumped to over $120 billion while AllState is valued at more than $40 billion.

Progressive vs Allstate stocks

The main reason for this surge is that insurance premiums in the United States have been surging in the past few years. Data by Bankrate shows that the average price to insure a car in the US has jumped to $2,545, a 26% increase from the same period in 2023. Auto insurance is one of the top reasons why inflation in the US has been quite sticky.

All auto insurance companies have boosted their insurance premium rates, according to S&P Global. The report found that the biggest increases between 2022 and 2023 was by companies like Farmers Insurance, Allstate, and State Farm. 

Other forms of insurance premiums are jumping sharply in the country. Data by S&P shows that homeowners insurance rates rose by more than 11% in 2023. Other data providers quote a higher price increase.

These trends have helped push revenues of the top insurance companies to record highs, raising concerns about profiteering. Progressive had over $58 billion in revenue in 2023, a big increase from $49 billion in 2022. Similarly, AllState made over $52 billion in 2023, up from $47 billion a year earlier. 

However, the two companies have diverged in terms of profitability. Progressive had a net income of over$3.9 billion while AllState made a net loss of over $133 million. That loss was a big improvement from the previous year’s loss of over $1.2 billion.

Insurance companies have attributed the premium increases to numerous factors. For example, they note that inflation has affected the cost of vehicle repair in the United States. The cost of spare parts has also gone parabolic in the past few months.

At the same time, Americans are getting more reckless, as evidenced by the rising number of vehicle accidents. The number of death rate from motor vehicles has risen gradually in the past few years.

Meanwhile, climate change is having an impact on the housing and vehicle insurance. Recent hurricanes and fires have forced some insurance companies to move way from some states like California and Florida.

In all this, the main beneficiary is investors, who are making a fortune through stock price increases, dividends, and share repurchases.

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