PGR vs. TRV: Which Property and Casualty Insurer is a Better Buy?

Globe and Mail

13-05-2025

Despite a rise in catastrophic activities, the property and casualty insurance industry is poised to grow as it continually focuses on personalized offerings to enhance customer experience, leveraging digitalization. Solid retention, exposure growth across business lines and improved pricing are driving higher premiums and helping insurers maintain profitability. The Progressive Corporation PGR and The Travelers Companies Inc. TRV — both notable P&C insurers — are expected to grow, banking on these positives.
To safeguard their balance sheet, insurers are increasingly seeking reinsurance arrangements. Climate risk modeling is also helping a lot. Insurers' pricing is thus influenced by higher reinsurance costs and more restrictive terms, as well as higher inflation.
Yet, as an investment option, which stock, PGR or TRV, 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. 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.
In line with industry trends, Progressive has embraced digital transformation, including the adoption of AI technologies. Its Snapshot program supports personalized pricing, strengthening its competitive position across all markets. Its expanded multi-product portfolio continues to fuel growth and has led to improvements in policy life expectancy (PLE) — a key measure of customer retention — which has consistently risen across all business segments in recent years.
Over more than 10 years, PGR's average combined ratio has stayed under 93%, outperforming the industry average of over 100%. This performance reflects strong underwriting discipline and favorable reserve development, both of which should help the company retain the momentum.
Progressive's comprehensive reinsurance program shields it from the adverse financial impacts of catastrophic events and active weather periods, helping to maintain the integrity of its balance sheet.
Net margin, measuring a company's profitability, has been showing continuous improvement. The metric expanded 950 basis points in the last two years, banking on rising demand for personal auto insurance policies as well as prudent risk management.
PGR's solid cash flow ensures continuous investment in growth initiatives, including digitalization, which helps 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.
Its return on equity of 33.5% betters the industry average of 7.8%.
Factors to Consider for TRV
Travelers boasts a strong market presence in auto, homeowners' insurance and commercial U.S. property-casualty insurance with solid inorganic growth.
Travelers has grown net written premiums by more than 70% to over $43 billion over the past eight years, driven by strong retention rates, positive renewal premium changes and higher new business premiums in both Domestic Automobile and Domestic Homeowners and other across all three segments.
Travelers' commercial business continues to deliver strong results, driven by stable market conditions and the successful implementation of its strategies. It has maintained historically high retention levels, achieved improved pricing, and grown new business. While Travelers expects renewal premium change to remain elevated as it continues to seek rate increases in response to higher loss costs, it also anticipates a gradual moderation over time.
To solidify its competitive advantage in the Bond & Specialty segment, it plans to launch products in 2025.
Net margin improved 170 basis points over the last two years on prudent underwriting.
On the flip side, the majority of Travelers' revenues are generated from the North American market, exposing it to concentrated geographic risk.
Over the last four years, Travelers has been witnessing a rising debt level that has induced higher interest expenses. Though its debt of $8 billion at first-quarter 2025 end remained flat from 2024 end, both its leverage and times earned interest compared unfavorably with the industry average.
Nonetheless, a solid capital deployment strategy supports growth and helps return wealth to shareholders. Its return on equity of 16.8% is better than the industry average.
Estimates for PGR and TRV
The Zacks Consensus Estimate for PGR's 2025 revenues and EPS implies a year-over-year increase of 16.5% and 12.2%, respectively. EPS estimates have moved 1.2% northward over the past 30 days. PGR has a Growth Score of A.
On the other hand, the Zacks Consensus Estimate for TRV's 2025 revenues implies a year-over-year increase of 5.4% while the same for EPS indicates a decline of 14.8% year over year. EPS estimates have moved 6.1% northward over the past 30 days. TRV has a Growth Score of D.
Are PGR and TRV Shares Expensive?
Progressive is trading at a price-to-book multiple of 5.67, above its median of 4.72 over the last five years.
Travelers' price-to-book multiple sits at 2.15, above its median of 1.74 over the last five years.
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. Travelers is set to gain from continued strong renewal rate change, retention and an increase in new business. Underwriting excellence and solid investment income drive its earnings.
Both these 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 TRV. Progressive has a VGM Score of A while Travelers carries a VGM Score of B.
PGR shares have gained 17% year to date and outperformed the industry, while TRV has gained 11.3% and underperformed the industry. Though both PGR and TRV carry a Zacks Rank #2 (Buy), 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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The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
The Progressive Corporation (PGR): Free Stock Analysis Report