The recent imposition of tariffs by President Trump will have an impact on the insurance industry, especially auto insurance. The imposition of 25% tariffs on imported vehicles will definitely increase car prices and consequently lead to an increase in insurance premiums. The Progressive Corporation PGR and The Allstate Corporation ALL — both notable auto insurers — are expected to be impacted by the tariffs. Higher inflation, as well as an increase in the cost of repairs, will also have an effect on these insurers and eventually impact pricing.
Yet, as an investment option, which stock is more attractive? Let’s closely look at the fundamentals of these stocks.
Factors to Consider for PGR
PGR is one of the country’s largest auto insurance groups, the largest seller of motorcycle and boat policies, the market leader in commercial auto insurance and one of the top 15 homeowners carriers based on premiums written.
In tandem with the industry trend, PGR has also implemented digitalization, including the adoption of AI. Its Snapshot program helps it offer customized pricing. PGR’s rates are very competitive in all its markets and it continues to gain from its expanded multi-product offering. This, in turn, helps the insurer improve policy life expectancy (PLE), a measure of customer retention, which has improved in the last few years across all business lines.
Over a decade, PGR’s combined ratio has averaged less than 93%, which compares favorably with the industry average combined ratio of more than 100%. Prudent underwriting, coupled with favorable reserve development, should help the company maintain its momentum. Also, its reinsurance program shields the balance sheet from the impacts of catastrophic events and active weather years.
Net margin, measuring a company's profitability, has been showing continuous improvement. The metric expanded 980 basis points in the last two years, banking on rising demand for personal auto insurance policies as well as prudent risk management.
The company’s solid cash flow ensures continuous investment in growth initiatives, including digitalization, to improve margins. PGR has been enhancing its book value and lowering leverage, banking on operational expertise. Though its leverage compares unfavorably with the industry average, times interest earned, reflecting a company’s debt servicing capabilities, outperforms the industry.
Most of PGR’s premium comes from auto insurance, though it is on track to expand its offerings into homeowners and commercial insurance. As part of its growth strategy, Progressive is prioritizing auto bundles, lowering exposure to risky properties and increasing segmentation through product rollouts.
Its return on equity of 33.8% betters the industry average of 8.3%
Factors to Consider for ALL
Allstate is the third-largest property-casualty insurer and the largest publicly held personal lines carrier in the United States. It aims to be a low-cost digital insurer with broad distribution capabilities. Improved profitability at Auto restored target margins and Homeowners insurance generated attractive returns. It continues to refine its business strategy by focusing on core strengths and moving away from underperforming segments.
Allstate expects total Property-Liability policies in force to increase this year as auto insurance policy renewal rates improve and new business continues to grow. Allstate is largely dependent on its operations in the United States, exposing it to concentration risk.
Net margin improved 980 basis points over the last two years on prudent underwriting.
Though the company remains focused on reducing losses through several strategies, this would likely lead to a decline in the number of policies in force. Given the higher number of vehicles plying on roads, auto claims could increase, posing difficulty for Allstate to attain its combined ratio target in the mid-90s for the auto business. Also, continued inflationary headwinds, supply chain shortages and new technology advancements in cars have resulted in escalating repair costs for cars and increased car replacement expenses.
Its high debt level remains a concern. Both its leverage and times earned interest compare unfavorably with the industry average.
Nonetheless, a solid capital deployment strategy supports growth and helps return wealth to shareholders. Its return on equity of 28.2% betters the industry average.
Estimates for PGR and ALL
The Zacks Consensus Estimate for PGR’s 2025 revenue and EPS implies a year-over-year increase of 16.1% and 9.8%, respectively. EPS estimates have moved northward over the past 30 days.
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On the other hand, the Zacks Consensus Estimate for ALL’s 2025 revenues and EPS implies a year-over-year increase of 2% and 7.9%, respectively. Its EPS estimates have also moved northward over the past 30 days.
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Are PGR and ALL Shares Expensive?
Progressive is trading at a price-to-book multiple of 5.97X, above its median of 4.65X over the last five years. Allstate’s price-to-book multiple sits at 2.51X, above its median of 1.9X over the last five years.
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Image Source: Zacks Investment Research
Conclusion
PGR remains focused on increasing the share of auto and home-bundled households, investing in mobile applications and rolling out products in a higher number of states to drive growth. Allstate, on the other hand, remains well-poised on the back of rising premiums, growing protection services business and its streamlining initiatives.
Both these auto insurers have weathered cost challenges well, as evident from their continued net margin improvement.
Yet, on the basis of return on equity, which reflects a company’s efficiency in generating profit from shareholders' equity as well as gives a clear picture of the company's financial health, PGR scores higher than ALL.
PGR shares have gained 26.3% in the past year, while ALL has gained 8.1%. While PGR carries a Zacks Rank #2 (Buy), ALL currently carries a Zacks Rank #3 (Hold). Thus, PGR seems a safer bet.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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