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Progressive (PGR) and Subsidiaries Receive Rating Action

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The Progressive Corporation (PGR - Free Report) and its units’ ratings were reiterated by Moody’s Investors Service. The rating agency has affirmed Progressive’s A2 senior unsecured debt rating and the Aa2 insurance financial strength (IFS) ratings for the company’s main property-casualty insurance operating units. The outlook of such ratings remained stable.

Ratings Representation of Progressive and its Units

The ratings affirmation of Progressive and its primary operating insurance units represents the group’s strong foothold in the US auto insurance market, excellent underwriting and expense management, balanced distribution channels and a robust capital position. Additionally, Progressive boasts a decent risk-adjusted capitalization, having a superior quality, liquid investment portfolio and short-tail, granular insurance liabilities.

However, Progressive’s moderately high operating leverage and its dynamic payments to shareholders via variable and special dividends plus share buybacks can partially offset the aforementioned strengths.

Factors Resulting in Ratings Upgrade/Downgrade

Continued lower operating leverage and consolidated financial leverage below 20% are a few factors that could lead to an upgrade of Progressive’s ratings.

On the other hand, factors that might induce Progressive’s ratings downgrade include weakened core profitability, consolidated financial leverage above 30% and a substantial increase in gross or net catastrophe exposure as compared to the shareholders’ equity.

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence plus maintaining a stock’s credit worthiness. On the other hand, rating downgrades not only damage business but also increase the cost of future debt issuances. We believe that such ratings will help Progressive retain investors’ trust and write more businesses going forward.

Zacks Rank and Share Price Movement

Progressive carries a Zacks Rank #3 (Hold). Shares of Progressive have surged 44.5% year to date, significantly outperforming the industry’s increase of 11.3%. We expect top-line growth, higher premiums and a robust capital position to drive the shares higher in the near term.



Stocks to Consider

Some better-ranked stocks from the insurance industry are Radian Group Inc. (RDN - Free Report) and First American Financial Corporation (FAF - Free Report) and Health Insurance Innovations, Inc. , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Radian Group offers mortgage and real estate products plus services in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 4.52%. Notably, shares of Radian Group gained 10.5% year to date, outperforming its industry’s increase of 8.5%.

First American Financial offers financial services. The company delivered positive surprises in all of the last four quarters with an average beat of 12.74%. Moreover, shares of First American gained 49.3% year to date, significantly outperforming its industry’s increase of 11.3%.

Health Insurance operates as a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 40.54%. Shares of Health Insurance gained 35.9% year to date, outperforming its industry’s increase of 24.5%.

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