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Is Progressive (PGR) Still Worth Buying Post Q2 Earnings?
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The Progressive Corporation (PGR - Free Report) reported strong second-quarter 2024 results, wherein the top line and the bottom line beat the Zacks Consensus Estimate. Net premiums written increased 22%, driven by the strong performance of operating businesses. Combined ratio — the percentage of premiums paid out as claims and expenses — improved 850 basis points (bps) from the prior-year quarter’s level to 91.9.
PGR is one of the country’s largest auto insurance groups, the largest seller of motorcycle and boat policies, the market leader in commercial auto insurance and one of the top 15 homeowners carriers based on premiums written. A solid market presence, a convincing portfolio of products and services, and underwriting and operational expertise should help this insurer deliver steady profitability.
A Sneak Peek Into Q2 Results
Personal Lines witnessed strong premium and policy growth with steady profitability. Net premiums written (NPW) grew 26% year over year, driven by sturdy growth in new business applications. Personal Lines policies-in force were nearly 28 million at second quarter end. Combined ratio of 88.6 reflected an improvement of 1090 basis points year over year and was better than the guidance of 96. Lower frequency, more favorable loss trends and rate increase drove the improvement. Auto frequency was down 8% and severity was relatively flat.
NPW of Commercial Lines business grew 6% while the combined ratio improved 780 basis points, driven by enhanced underwriting actions.
The property combined ratio was 166.3, attributable to weather losses stemming from the unusually high number of severe storms. This business line continues to experience both policy and premium growth. PIFs were 3.3 million, up 12% year over year. Net premiums written grew 11%, driven primarily by growth in new business applications and increased policy life expectancy.
Growth Story Remains Impressive
Progressive’s premiums are poised to improve given a compelling product portfolio, its leadership position, healthy policies in force, better pricing and a solid retention ratio. The company is focused on prioritizing auto bundles and lowering risk properties as well as increasing segmentation through the rollout of the newest product model.
Policy life expectancy (PLE), a measure of customer retention, has improved in the last few years across all business lines. Strategic initiatives to provide consumers with a distinctive new auto insurance option along with competitive pricing should help Progressive deliver solid PLE. The insurer has been focusing on cross-selling homes with auto insurance.
PGR’s combined ratio averaged less than 93% over the last 10 years and compared favorably with the industry average of more than 100%. Prudent underwriting coupled with favorable reserve development should continue to support Progressive in delivering a better combined ratio. Also, PGR has a reinsurance program in place to shield its balance sheet from the impact of catastrophe events and active weather years.
PGR strategically maintains an investment portfolio with investments skewed toward U. S. Treasuries. A solid capital position helps it navigate a volatile market as well as invest in growth opportunities.
In tandem with the industry’s trends of making continuous investments in technology, Progressive has also been investing to ramp up digitalization.
Optimistic Projections
The Zacks Consensus Estimate for Progressive’s 2024 earnings is pegged at $12.02 per share, indicating an increase of 96.7% from the year-ago reported figure on 19.5% higher revenues of $73.8 billion. The consensus estimate for 2025 earnings is pegged at $12.66 per share, indicating a year-over-year increase of 5.4% on 13.4% higher revenues of $83.6 billion. The long-term earnings growth rate is currently pegged at 23.8%, better than the industry average of 11%. It has a Growth Score of B.
Price Performance
Shares of Progressive have gained 39.2% year to date, outperforming the industry’s increase of 20%, the Finance sector’s rise of 7.7% and the Zacks S&P 500 composite’s increase of 12.3% in the said time frame. The outperformance is backed by a compelling product portfolio, operational expertise and a solid capital position.
PGR vs. Industry, Sector, S&P 500
Image Source: Zacks Investment Research
Shares of Progressive have also outperformed some other auto insurers like The Allstate Corporation (ALL - Free Report) and The Travelers Companies Inc. (TRV - Free Report) , which have rallied 10.1% and 22.5%, respectively, in a year.
PGR Trading Above 50-Day Moving Average
Progressive shares are trading above the 50-day moving average, indicating a bullish trend.
PGR Price Movement vs. 50-Day Moving Average
Image Source: Zacks Investment Research
Estimate Revision Trend
Earnings estimates for Progressive for 2024 have moved up 8.1% to $12.02 over the past 30 days, while the same for 2025 have gone up by 3.8% to $12.66.
Image Source: Zacks Investment Research
Expensive Valuation
PGR is currently expensive. It is trading at a P/B multiple of 5.56, higher than the industry average of 1.47. Given its market-leading presence, growth prospects, rising estimates and better return on invested capital, a premium valuation is justified.
Image Source: Zacks Investment Research
To Conclude
Progressive remains committed to enhancing customers’ experience through improved services that, in turn, help it grow policies in force through better retention and the addition of new customers. Efforts to increase the share of Progressive auto and home bundled households, investments in mobile applications and the rollout of new products in a higher number of states are some of the strategic infinitives taken by PGR.
Progressive has an impressive history of paying dividends uninterruptedly since 1971. Its solid growth prospects, northbound estimate revisions, decent earnings surprise history and its VGM Score of B instill confidence in the stock.
Therefore, despite its premium valuation, this Zacks Rank #2 (Buy) stock remains a strong contender for addition to one’s portfolio.
Image: Shutterstock
Is Progressive (PGR) Still Worth Buying Post Q2 Earnings?
The Progressive Corporation (PGR - Free Report) reported strong second-quarter 2024 results, wherein the top line and the bottom line beat the Zacks Consensus Estimate. Net premiums written increased 22%, driven by the strong performance of operating businesses. Combined ratio — the percentage of premiums paid out as claims and expenses — improved 850 basis points (bps) from the prior-year quarter’s level to 91.9.
PGR is one of the country’s largest auto insurance groups, the largest seller of motorcycle and boat policies, the market leader in commercial auto insurance and one of the top 15 homeowners carriers based on premiums written. A solid market presence, a convincing portfolio of products and services, and underwriting and operational expertise should help this insurer deliver steady profitability.
A Sneak Peek Into Q2 Results
Personal Lines witnessed strong premium and policy growth with steady profitability. Net premiums written (NPW) grew 26% year over year, driven by sturdy growth in new business applications. Personal Lines policies-in force were nearly 28 million at second quarter end. Combined ratio of 88.6 reflected an improvement of 1090 basis points year over year and was better than the guidance of 96. Lower frequency, more favorable loss trends and rate increase drove the improvement. Auto frequency was down 8% and severity was relatively flat.
NPW of Commercial Lines business grew 6% while the combined ratio improved 780 basis points, driven by enhanced underwriting actions.
The property combined ratio was 166.3, attributable to weather losses stemming from the unusually high number of severe storms. This business line continues to experience both policy and premium growth. PIFs were 3.3 million, up 12% year over year. Net premiums written grew 11%, driven primarily by growth in new business applications and increased policy life expectancy.
Growth Story Remains Impressive
Progressive’s premiums are poised to improve given a compelling product portfolio, its leadership position, healthy policies in force, better pricing and a solid retention ratio. The company is focused on prioritizing auto bundles and lowering risk properties as well as increasing segmentation through the rollout of the newest product model.
Policy life expectancy (PLE), a measure of customer retention, has improved in the last few years across all business lines. Strategic initiatives to provide consumers with a distinctive new auto insurance option along with competitive pricing should help Progressive deliver solid PLE. The insurer has been focusing on cross-selling homes with auto insurance.
PGR’s combined ratio averaged less than 93% over the last 10 years and compared favorably with the industry average of more than 100%. Prudent underwriting coupled with favorable reserve development should continue to support Progressive in delivering a better combined ratio. Also, PGR has a reinsurance program in place to shield its balance sheet from the impact of catastrophe events and active weather years.
PGR strategically maintains an investment portfolio with investments skewed toward U. S. Treasuries. A solid capital position helps it navigate a volatile market as well as invest in growth opportunities.
In tandem with the industry’s trends of making continuous investments in technology, Progressive has also been investing to ramp up digitalization.
Optimistic Projections
The Zacks Consensus Estimate for Progressive’s 2024 earnings is pegged at $12.02 per share, indicating an increase of 96.7% from the year-ago reported figure on 19.5% higher revenues of $73.8 billion. The consensus estimate for 2025 earnings is pegged at $12.66 per share, indicating a year-over-year increase of 5.4% on 13.4% higher revenues of $83.6 billion. The long-term earnings growth rate is currently pegged at 23.8%, better than the industry average of 11%. It has a Growth Score of B.
Price Performance
Shares of Progressive have gained 39.2% year to date, outperforming the industry’s increase of 20%, the Finance sector’s rise of 7.7% and the Zacks S&P 500 composite’s increase of 12.3% in the said time frame. The outperformance is backed by a compelling product portfolio, operational expertise and a solid capital position.
PGR vs. Industry, Sector, S&P 500
Image Source: Zacks Investment Research
Shares of Progressive have also outperformed some other auto insurers like The Allstate Corporation (ALL - Free Report) and The Travelers Companies Inc. (TRV - Free Report) , which have rallied 10.1% and 22.5%, respectively, in a year.
PGR Trading Above 50-Day Moving Average
Progressive shares are trading above the 50-day moving average, indicating a bullish trend.
PGR Price Movement vs. 50-Day Moving Average
Image Source: Zacks Investment Research
Estimate Revision Trend
Earnings estimates for Progressive for 2024 have moved up 8.1% to $12.02 over the past 30 days, while the same for 2025 have gone up by 3.8% to $12.66.
Image Source: Zacks Investment Research
Expensive Valuation
PGR is currently expensive. It is trading at a P/B multiple of 5.56, higher than the industry average of 1.47. Given its market-leading presence, growth prospects, rising estimates and better return on invested capital, a premium valuation is justified.
Image Source: Zacks Investment Research
To Conclude
Progressive remains committed to enhancing customers’ experience through improved services that, in turn, help it grow policies in force through better retention and the addition of new customers. Efforts to increase the share of Progressive auto and home bundled households, investments in mobile applications and the rollout of new products in a higher number of states are some of the strategic infinitives taken by PGR.
Progressive has an impressive history of paying dividends uninterruptedly since 1971. Its solid growth prospects, northbound estimate revisions, decent earnings surprise history and its VGM Score of B instill confidence in the stock.
Therefore, despite its premium valuation, this Zacks Rank #2 (Buy) stock remains a strong contender for addition to one’s portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.