Auto insurance premiums are soaring and it is not clear when they will come back down to earth. A recent New York Times article highlighted the following reasons for rising car insurance premiums:
- Repair costs are rising tied to the increasing use of sensors and other technologies embedded in cars.
- New cars are more expensive
- Out of practice drivers were in more serious accidents coming out of the pandemic.
- Insurers are trying to recoup losses experienced in 2021, 2022 and 2023
While rate increases are bad news for consumers, they are a catalyst for gains in insurers’ stock prices. A deep dive into the revenue of two leaders in the auto insurance space reveals a lot. Specifically, the stock prices of Progressive and Allstate increased 31% and 15%, respectively, from January 1 through June 30; that represents an outperformance or match of the S&P 500, which was up 15%. Exhibit 1 shows that the universe of public, large cap insurers with a majority of their revenue from automotive premiums is limited. These 10 largest auto insurers have roughly 80% of the total US market share, interestingly only three are standalone public companies.
Exhibit 1: Top 10 Automobile Insurers In The United States
Key takeaways:
Progressive and AllState are the only public large cap insurers that have a majority of their revenue from auto insurance coverage; the third public company, Travelers, has 18% of its revenue tied to writing automobile premiums.
Four companies (State Farm, Liberty Mutual, American Family, Nationwide) are mutual insurance companies owned by their policyholders.
Two insurers are embedded in large public companies (Geico and Farmers Insurance), while USAA has a unique structure as a reciprocal insurance exchange.
Exhibit 2: Small and Mid Cap U.S. Companies with Substantial Automobile Premiums
The analysis highlights the value of having the granular product line revenue data found in Syntax’s FIS industry classification system. If you have a specific idea or theme you are considering investing in, FIS can help you more precisely screen and identify companies that align with your idea. For more information, you can learn more at syntaxdata.com.