The Equal Ventures Insurance Index

Equal Ventures
6 min readJul 23, 2024

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Q2 2024

By: Adam Chadroff & Rick Zullo

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The Equal Ventures Insurance Index is a quarterly summary of public equity performance in P&C insurance. This post provides an overview of performance of indices of legacy and insurtech companies in Q2 2024, highlighting themes, catalysts, and trends in the insurance sector.

Stocks generally continued to rip in Q2 with tech leading the market higher. But coming off very strong price action in Q1 for both insurers and brokers, the insurance sector underperformed in Q2 and traded modestly lower. Below the surface was volatility in insurtechs and an ongoing shift in relative growth away from commercial lines to personal lines. Read on for additional commentary about the trends we found interesting in Q2.

Q2 2024 Summary Stats:

  • During Q2, each of our indices underperformed their market benchmarks (SPY +440bps; QQQ +810bps). This is a meaningful reversal from Q1, during which each of the indices outperformed the market. With insurers now at a profitable point in the cycle, the market is looking for growth and expectations are high.
  • 1H performance against the market is more mixed. Brokers (+16%) are roughly in line with SPYs (+15%), whereas carriers (+12%) are slightly trailing. Personal lines (auto in particular) and Specialty lines are outperforming commercial segments.
  • Our insurtech indices had fairly muted average performance in Q2 (insurtech carriers -7%; distribution & marketing companies -5%). But this masks significant volatility across companies in each index, and is on the back of very strong returns in recent quarters. Insurtech carriers continue to post big beats on underwriting/expense margin expansion (and have ripped higher in the weeks since Q2 ended).
Source: Bloomberg Financial as of 6/28/2024; Earnings & Revenue are based on forward estimates
Source: Bloomberg Financial as of 6/28/2024; EPS, Revenue, and EBITDA are based on forward estimates

Takeaways from Q2 Performance:

As we commented on last quarter, expectations were high in the P&C sector going into Q1 earnings reports. After a challenging 2023, carriers turned the corner in the latter part of the year on realizing rates and improved profitability. Carriers continued to post impressive y/y improvements during the April — June period, though the market reaction was more muted given expectations of the recovery already well underway and huge stock moves in the preceding two quarters. Carrier earnings in the quarter continued to show improved profitability. The industry combined ratio fell to a reported 94.2%, vs 102.5% in the prior year period — representing a swing from an underwriting loss of >$8b to an underwriting profit in excess of $9b. SwissRe now projects an industrywide ROE of ~10% for this year and next, approximately 3x what it was just a year ago. The cycle changes fast.

Given higher profitability at this stage in the cycle compared to a year ago (when combined ratios were much worse), growth is more in focus. Total P&C premium in the quarter grew by roughly 10% y/y, though this is set to slow over the next several quarters as rate increases decelerate. But amid the healthy growth in rate and premiums now, there is an ongoing transition of where that growth is coming from. After lagging in rate growth and posting larger underwriting losses throughout 2023, growth in personal lines (PL) premiums meaningfully outperformed commercial lines (CL) last quarter. SwissRe estimates PL premiums rose by 15% in Q1 earnings y/y, vs. just 5% in CL. This trend is visible in our carrier index as well: Progressive, for example, a mostly personal lines carrier, grew its personal lines NPW by 20% and shaved 14ppts off its PL combined ratio; its stock was flat in Q2 (outperforming the index) and was up 30% in 1H. Travelers, on the other hand, posted <10% growth in its business segment on an essentially flat combined ratio; TRV fell 11% in Q2 and lags the insurer index YTD.

Another result of the transition toward greater PL growth is recovering advertising budgets. Ad spend fell off a cliff in 2021 as carriers deprioritized customer growth in favor of profitability while they waited out rate increases. But from Q423 to 1Q24, auto insurance ad spend more than doubled, is expected to continue to rise in upcoming quarters. As shown in the chart below, P&C ad spend fell by >$3b over the preceding three years; Geico alone accounted for >$1bn of this decline. The inflection towards higher ad spend is supporting comparative pricing platforms like EVER and MAX; while these stocks are each extremely volatile and have market caps <$1b, EVER was up 70% in 1H and >200% over the preceding 12 months.

Source: chart recreated from MediaAlpha Investor Presentation, May 2024

Insurtech carriers in our index were volatile in Q2 and ended the quarter slightly lower — but are continuing to post material improvements in both underwriting performance and growth. After its stock rose >400% in Q1, ROOT briefly ripped to a record following its April 10Q release before reversing lower. The company grew GWP by >145%, lowered its net combined ratio to close to 100%, and reported positive adjusted EBITDA, proving that there are legs to the transformation its been working on over the past several years. LMND likewise posted significant (though smaller) operating improvements: its gross loss ratio fell 8ppts y/y and in-force premium grew by 22%, and they guided to being cash flow positive by early 2025. One stat we found particularly interesting in LMND’s Q1 results is the reduction in ops costs per claim. The chart below highlights their loss adjusted expense per claim at <8% last quarter compared to >10% a year earlier, demonstrating how technology (and AI) enablement can drive operating/expense efficiencies — a theme we think is broadly interesting across the insurance ecosystem.

Source: Lemonade’s Q1 2024 Shareholder Letter

Despite decelerating commercial growth, premiums and submissions in E&S segments remain strong. Similar to last year, we continue to see strong performance of specialty carriers and brokers. This was visible in our brokerage index where RYAN (+5% in Q2) outperformed its broader brokerage peers, and was up 35% in 1H. Bowhead Specialty (a specialty carrier, not in our index) went public in May and was up ~49% by the end of Q2 — a potentially strong signal for both specialty insurers and for insurance capital markets activity generally.

Q3 is already shaping up to be an eventful period for the P&C sector. Insurtechs are rapidly squeezing higher after sideways price action in Q2, and ahead of their Q2 earnings reports over the coming weeks. And despite softness in commercial property rates last quarter, the early wildfire season has been active and experts are bracing for an “abnormally busy” hurricane season. With carriers in a much more profitable and higher-growth part of the cycle compared to a year ago, it looks like there will be much to comment upon over the coming quarter. As always, if you’re interested to further discuss any of the themes in this post, don’t hesitate to reach out.

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