The Progressive Corporation (PGR) and Loews Corporation (L) are prominent players in the U.S. property and casualty insurance industry. PGR provides personal and commercial auto, personal residential and commercial property, general liability, and other specialty property-casualty insurance products and related services. The company sells its products through independent insurance agencies, directly on the internet, and over the phone. On the other hand, L provides commercial property and casualty insurance services, transportation and storage of natural gas and natural gas liquids, and operates a chain of hotels. It markets its insurance products and services through independent agents, brokers, and managing general underwriters.
The Fed’s aggressive interest rate hikes to fight the multi-decade high inflation should help the insurance industry generate solid returns. Also, companies in this space should benefit from increased digital presence. Investors’ interest in P&C insurance stocks is evident from the Invesco KBW Property & Casualty Insurance ETF’s (KBWP) 6.5% returns over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 1.2% gains. The U.S. P&C insurance market is expected to grow at an approximately 6% CAGR between 2022 and 2027. Therefore, both PGR and L should benefit.
While L rose 11.7% over the past six months, PGR surged 25.8%. PGR is a clear winner with 16.5% gains year-to-date versus L’s 9.8%. But which of these stocks is a better pick now? Let’s find out.
Recent Financial Results
PGR’s total revenues for its fiscal 2022 first quarter ended March 31, 2022, increased 3.5% year-over-year to $11.84 billion. The company’s pre-tax income came in at $390.20 million, indicating a 79.1% year-over-year decline. While its net income decreased 78.8% year-over-year to $313.90 million, its EPS fell 79.3% to $0.52.
For the fiscal 2022 third quarter ended March 31, 2022, L’s total revenues decreased 6.1% year-over-year to $3.40 billion. However, the company’s pre-tax income came in at $462 million, up 13.5% from the year-ago period. L’s net income came in at $338 million, indicating a 29.5% year-over-year improvement. Its EPS increased 40.2% year-over-year to $1.36.
Past Financial Performance
Over the past three years, PGR’s EBITDA, net income, and EPS have declined at CAGRs of 8.3%, 9.8%, and 10%, respectively.
Over the past three years, L’s EBITDA, net income, and EPS have increased at CAGRs of 8.7%, 31%, and 40.5%, respectively.
Valuation
In terms of training-12-month Price/Sales, PGR is currently trading at 1.45x, 29.5% higher than L’s 1.12x. In terms of trailing-12-month EV/EBITDA, L’s 8.12x compares with PGR’s 23.52x.
Profitability
PGR’s trailing-12-month revenue is 3.3 times L’s. However, L is more profitable, with a 21.8% EBITDA margin versus PGR’s 6.9%.
Furthermore, L’s gross profit margin and net income margin of 21.8% and 11.5% compare with PGR’s 6.7% and 4.5%, respectively.
POWR Ratings
While L has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, PGR has an overall C grade, equating to Neutral. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
Both PGR and L have been graded a B for Stability, consistent with their lower volatility compared to broader markets. PGR has a 0.49 beta, while L has a beta of 0.85.
In terms of Momentum, both L and PGR have been graded a B, in sync with their impressive price gains over the past year. L has gained 11.7% over the past six months, while PGR surged 25.8%.
Of the 55 stocks in the C-rated Insurance - Property & Casualty industry, PGR is ranked #30, while L is ranked #4.
Beyond what we have stated above, our POWR Ratings system has graded PGR and L for Value, Growth, Quality, and Sentiment. Get all PGR ratings here. Also, click here to see the additional POWR Ratings for L.
The Winner
Property and casualty insurance’s growth prospects due to the rising interest rate environment should benefit PGR and L. However, relatively lower valuation and higher profitability make L a better buy.
Our research shows that the odds of success increase if one invests in stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Insurance - Property & Casualty industry.
PGR shares . Year-to-date, PGR has gained 12.76%, versus a -15.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
Better Buy: Progressive vs. Loews StockNews.com
