Inflationary Pressure Drops and Other Positive Signals for Homeowners Insurance

In this insurance sector analysis, we discuss the event of the week, the macro trend, and EPS implications. 

Event of the Week

The environment for homeowners insurance has improved. Two factors have contributed to the current environment and bode well for further improvement. First, inflation has eased, which will lower claim costs and help drive down benefit ratios. Keep in mind that small declines in benefit ratios can have an outsized impact on the amount of premium that drops to the bottom line.

Another major improvement is the rate environment. As most homeowners are aware, rate increases in the high teens (or more) have been implemented over the past year (or longer). Taken together, improved benefit ratios and a hard rate environment place the large writers of homeowners insurance in a favorable position withing the insurance industry. 

Macro Trend

The macro environment is improving for writers of homeowners insurance. Throughout 2025 insurance companies were exposed to increases in inflation, which hit writers of homeowners and auto insurance especially hard. These companies saw claim costs and benefit ratios rise in the wake higher-priced goods, such as imported computer chips, lumber, and auto parts that were purchased to settle policyholder claims for auto accidents and homeowner repairs.

The outlook for the macro landscape is positive. Inflation levels have dropped from last year, and the improvement is expected to continue. The FactSet data in the tables below highlight the steady improvement in PPI and CPI for the remainder of the year and into 2027 and 2028. 

Linking Macro Trends to Potential EPS Impact

Our Macro Tracker table lists key economic data relevant to insurance company earnings. The right-hand column ties macro trends to the potential impact on company earnings.

FactSet Data: Macro Trend and Event of the Week 

Given the improvement in the macro environment, it is not surprising to see corresponding improvements in analyst estimates. The table below shows selected estimates for several large insurance companies, including expected YOY improvement in combined ratios. 

FactSet data and functionality surfaced the following insurance companies as the largest writers of homeowners insurance in the United States. While an analysis of an individual company’s premium profile would identify homeowners insurance concentration as a percentage of total book, the largest absolute writers shown below have significant upside to the improving pricing and macro landscape discussed earlier in this report.

Notable public companies include Progressive and Chubb, which have also maintained below-industry combined ratios for the period shown.

The valuation table below highlights Chubb. It trades below the peer group average as measured by P/B, which is understandable given its below average ROE. However, with significant exposure to a favorable homeowners insurance market, if Chubb’s ROE were to improve as a result its P/B would also likely improve, which implies a higher stock price.

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