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Progressive (PGR) Down 4.4% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Progressive (PGR - Free Report) . Shares have lost about 4.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Progressive due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Progressive Q4 Earnings Beat, Premiums Improve Y/Y

The Progressive Corporation’s fourth-quarter 2021 earnings per share of $1.05 beat the Zacks Consensus Estimate of 99 cents. However, the bottom line declined 43.2% from the year-ago quarter.

Behind the Headlines

Net premiums written were $10.7 billion in the quarter, up 13% from $9.5 billion a year ago. Net premiums earned grew 14% to nearly $11.6 billion.

Net realized gains on securities were $425.3 million, which slumped 44% year over year.

Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 630 basis points (bps) from the prior-year quarter to 94.7.

Revenues and Expenses Rise in December

Operating revenues in December were $3.8 million, up 14.1% year over year. The improvement was driven by a 14.2% increase in premiums, 8.8% higher fees and other revenues, 12.2% increase in service revenues and 14% higher investment income.

Total expenses increased 26.2% year over year to $3.5 billion in December due to 35.9% higher losses and loss adjustment expenses and 12.3% increase in policy acquisition costs.

In December, policies in force were impressive at the Personal Auto segment, having improved 6% from the year-ago month to 17.4 million. Special Lines improved 8% to 5.3 million.

In Progressive’s Personal Auto segment, Direct Auto grew 3% year over year to 7.9 million while Agency Auto improved 8% to 9.6 million.

Progressive’s Commercial Auto segment rose 18% year over year to about 1 million. The Property business had about 2.8 million policies in force in December, up 12%.

Full Year Highlights

Net premiums written increased 14% year over year to $46.4 billion.

Combined ratio of 95.3 improved 760 bps over 2020.

Financial Update

Progressive’s book value per share was $30.35 as of Dec 31, 2021, up 7.4% from $28.27 on Dec 31, 2020.

Return-on-equity in December 2021 was 13.6%, down 2570 bps year over year. Debt-to-total capital ratio improved 290 bps to 21.2%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

The consensus estimate has shifted 28.65% due to these changes.

VGM Scores

Currently, Progressive has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Progressive has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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