Bank of America analysts report that insurance equities have underperformed the broader market since the April 2025 tariff announcements and are currently trading beneath their long-run valuation ranges. According to the analysts, investors have concentrated more on the prospect of future margin normalization than on recent robust earnings results.
The firm describes the sector as caught between the reality of peak underwriting margins and a market that has favored companies with secular growth narratives. That positioning has weighed on insurance valuations even where earnings have been strong.
Analysts also point to structural traits of insurance stocks that have influenced performance. Insurance names typically show low beta, modest trading velocity and limited short interest. Those characteristics have historically provided downside protection during periods of market stress, but in momentum-driven markets they can act as liabilities because active managers often seek higher-growth opportunities with greater trading liquidity.
Bank of America warned against reading too much into the performance of any single company as a proxy for a whole subsector. The analysts highlighted the recent rally in Brown & Brown (BRO) - the weakest performer among U.S. large-cap insurance stocks - as an example that contrasts with more muted moves from Aon (AON), Marsh McLennan (MMC) and Willis Towers Watson (WTW). They suggested that BRO's strength may reflect that the stock has hit a valuation floor, rather than indicating a broad-based sector recovery.
Within the carrier group, the analysts called out Allstate (ALL) and Progressive (PGR) as firms that continue to deliver earnings results above consensus while facing investor skepticism about the sustainability of margins. Progressive, in particular, has been among the sector's largest underperformers outside the insurance-broker category, a dynamic that has compressed its valuation multiples.
Bank of America noted that both Allstate and Progressive have consistently surpassed earnings estimates by wide margins and have expanded market share. The analysts argued that the combination of recurring earnings upside, prior stock underperformance and relatively low valuations can create a setting in which improving investor sentiment may be backed by fundamentals.
Finally, the firm expressed an expectation that personal-lines insurers are likely to outperform multi-line property and casualty insurers and insurance brokers in the coming period.