Insurance stocks have been market leaders so far this year – but one company is outrunning its peers. 

Shares of Progressive have soared 59% in 2024 thus far, making competing personal insurers like Allstate and Traveler’s appear lackluster in comparison. Still, those companies’ 33% and 24% jumps, respectively, are outpacing the S&P overall, which has risen 22% so far this year.

While the insurance sector is performing well overall, profits in the first half of the year surged a whopping 377% year-over year, pushing Progressive ahead of its competitors. The company’s consumer-friendliness, savvy yet low-risk business model and conservative investment portfolio are all contributing to its success, analysts say. 

“Flo is getting the flow,” said Josh Shanker, U.S. insurance senior research analyst at Bank of America, referencing the fictional saleswoman from Progressive commercials. 

“I think Progressive is the greatest company in the S&P 500.”

Major loss events and inflation drive the insurance industry’s profitability cycle – and investors are keeping an eye on these sector-specific risks.

Insurance companies fall under the umbrella of financials, which have risen 10.3% over the past three months. But when bank stocks fell at the beginning of the month, Shanker said investors of the sector turned their attention toward insurance.

“Maybe people were just de-risking. Insurance companies are perceived, whether right or wrong, as defensive,” he said. “Broadly speaking, unfortunately, insurance companies might be up because banks are down.”

The inverse occurred last month after the Federal Reserve cut interest rates by 50 basis points. Bank stocks rose and insurance fell, in line with Shanker’s thesis. 

He also pointed to Warren Buffett’s investment in insurance company Chubb earlier this year, which translated to increased confidence in the sector. Berkshire Hathaway, Buffett’s hedge fund which owns Geico, revealed a 6.4% stake in Chubb in May.  

While Progressive is benefitting from these sector-wide boosts, analysts say the company’s unique story sets it apart, keeping it in the lead as competitors chase after the company’s valuation.   

The company went through a long period of time where revenue was growing, but net profits weren’t, said Piper Sandler managing director Paul Newsome. Zooming out on a timeline of Progressive’s share price shows it stayed below $50 until 2017 – a stark contrast to the $253 on Friday afternoon.

But between 2016 and 2018, high auto policy prices and a policyholder preference shift toward direct-to-consumer models benefitted Progressive. The company capitalized on these changes by maintaining competitive pricing and better margins than its rivals.

Chai Gohil, a portfolio manager and buy-side analyst at Neuberger Berman, is bullish on Progressive stock. But Gohil, whose research focuses on the insurance industry, pointed out the cyclical nature of the sector. 

The industry is at the peak of its profitability cycle, and Gohil cautioned that it’s likely to moderate in the coming years. Neuberger Berman holds 3.3 million shares of the company’s stock.

Despite this, Gohil highlighted that Progressive consistently outperforms its peers regardless of where the broader sector stands in the cycle. The company passed Geico last year to claim the No. 2 spot of U.S. car insurance market share, accounting for 15.24%. State Farm is the market leader with 18.31% market share.

Looking again at the broader sector, while the iShares U.S. Insurance ETF is outpacing the S&P 500 this year by eight percentage points, analysts say volatility among smaller companies within the sector is something to pay attention to.

ProAssurance, a Birmingham, Alabama-based company that offers medical malpractice insurance, is up just 6.6% year to date, sitting at $14.74 on Friday afternoon. Shares of New Jersey-based Selective Insurance dropped 6% to $93.83.

“By buying an ETF, you have bought into an industry where interest rates and mortality and consumer behaviors are impacting them completely differently,” Shanker said, “Insurance companies are all very specific and behave differently.”