What happened

Shares of insurance company Progressive (NYSE:PGR) rose 10.7% during the first six months of 2020, according to data provided by S&P Global Market Intelligence. That beat the S&P 500, which declined 4% in the first half of the year. It also handily outperformed most other major U.S. insurance companies, many of which saw share price declines of more than 30%. 

So what

Progressive just happened to be in the right sector of the insurance industry in 2020: auto insurance. 

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Image source: Getty Images.

Although Progressive does offer other insurance products, including life insurance and homeowners insurance, the majority of the insurance it sells is auto insurance. According to its May 2020 business update, of Progressive's 23.6 million active policies, about two-thirds (15.8 million) are personal auto insurance policies. It doesn't break out its business policies by type, but some of them are sure to be auto insurance policies as well.

While the coronavirus pandemic made investors nervous that health and life insurers would see increased payouts and shutdowns caused concerns that business casualty insurers would be on the hook for lost revenue, travel restrictions and stay-at-home orders meant that there were far fewer people on the roads in the first half of 2020. On Progressive's first-quarter 2020 earnings call, CEO Susan Patricia Griffith told analysts that "by the end of [March], the daily driving for vehicle miles traveled was 40% lower than pre-COVID baseline."

Fewer people on the roads meant fewer accidents and fewer claims for Progressive to pay. The company was doing so well, in fact, that it offered 20% premium discounts to its auto insurance customers in April and May.

Now what

Progressive has been progressively (sorry, Flo: I couldn't resist) growing its revenue, net income, and customer base for the past three years. Of course, in Q1 2020, revenue was essentially flat and net income fell by 9.7%. Despite the stock's outperformance, though, it trades at just 12.7 times earnings, at the low end of its historical range. However, compared to other players in the industry, that's very high. Rival Allstate, for example, is trading at just 7.2 times earnings. 

Among insurers, Progressive is clearly a standout company, and investors looking to add an insurance company to their portfolios may want to give it a closer look. However, given the current economic uncertainty and market volatility affecting the industry as a whole, there are probably better bets right now.