Progressive insurance hit by rising auto claims and low premiums in the second quarter



Progressive Corp. reported a 56% drop in net income to $ 790.1 million for the second quarter. Net income is down 9% over the first six months.

The company said the main contributor to the year-over-year declines was reduced underwriting revenue, which fell 68% for the quarter and 38% for the first six months of 2021. The margin of Company-wide underwriting for the second quarter of 2021 was 3.5. %, compared to 12.3% for the same period last year.

The combined ratio rose 8.8 points to 96.5 from 87.7 in the same period last year.

The results reflect a higher frequency and severity of traffic accidents in personal and business auto insurance products, as well as lower average premiums per policy for its personal auto insurance products.

Based on the results, the third-largest auto insurer said it was increasing its auto prices and cutting advertising costs.

Despite some negative trends, both premiums and in-force policies increased in the second quarter compared to the same period last year. Company-wide net written premiums increased 13% in the quarter to $ 11.5 billion, with personal lines up 6%, commercial lines 66% and property and casualties. 15%, mainly reflecting an increase in volume from all segments.

The company ended the second quarter of 2021 with 26.4 million business-wide policies, 2.6 million more than in force as of June 30, 2020. Renewal requests personal lines insurance increased 9%, and business and property insurance increased 8%. New demand for special line products including policies for motorcycles, boats and recreational vehicles increased by 1%.

Personal lines insurance generated an underwriting margin of 3.8%, while commercial insurance generated an underwriting margin of 8.0%. The property segment had an underwriting loss margin of 16.6% for the quarter, reflecting significant catastrophe losses of $ 128.0 million, or 25.5 points on the combined ratio for the quarter.

The insurer noted that as pandemic-related restrictions were significantly reduced in the second quarter of 2021, the frequency and kilometers traveled by vehicles increased, especially later in the second quarter. The company said the increase in the severity of personal cars reflects higher costs for car repairs and for medical expenses. The year-over-year increase in the severity of collision coverage partly reflects an increase in used vehicle valuation in 2021. Personal injury coverage also saw an increase in the quarter due to more serious accidents.

The insurer’s personal auto accident frequency increased 47% in the second quarter of 2021, compared to the previous year, and the severity increased by 8%. With the increase in the number of people driving and the kilometers traveled by vehicles, the frequency of losses is more in line with the pre-pandemic experience. Collision is a major factor in increased severity with increasing valuation of used vehicles increasing overall losses and repair costs. The company noted that it also had a lower collision severity in Q2 2020 due to COVID-19 restrictions.

In the second quarter of 2021, overall, personal automobile rate changes for the quarter were approximately 2%.

“Management continues to assess miles traveled, driving habits, severity of losses, weather events and other elements of expected loss costs state by state and, if necessary, adjusts fares accordingly. We are also looking to identify where we might need to further tighten underwriting criteria when losses indicate insufficient rates, ”the company said.

In addition to the pricing actions, at the start of the third quarter of 2021, Progressive began to reduce its advertising spending in certain areas.

“We will continue to review KPIs to assess additional actions needed and respond quickly to meet those needs. These actions could result in fewer new business applications, ”the company said.

The insurer noted that some comparisons with last year are affected by COVID-19, when there was a significant reduction in the frequency of car accidents.

Underwriting expense ratios were 12.5 points and 6.6 points lower for the second quarter and first six months of 2021, respectively, compared to the same periods last year. In April and May 2020, the company extended loans to personal auto policyholders and recorded additional bad debts related to leniency and billing moratoria that were in place until mid-May 2020, which contributed to the discrepancies in the bill. ‘year after year.

Source: Progressive

The subjects
Claims Trends Automatic Pricing Trends

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