Back to top

Image: Shutterstock

Why You Should Hold Progressive (PGR) in Your Portfolio

Read MoreHide Full Article

The Progressive Corporation’s (PGR - Free Report) compelling portfolio, leadership position, strength in Vehicle and Property businesses, healthy policies in force, retention and solid capital position make it worth retaining in one’s portfolio.

Earnings of this largest seller of motorcycle and boat policies have risen 6.9% over the last five years. The Zacks Consensus Estimate for 2024 has moved 0.6% north in the past 30 days reflecting analyst optimism.

Return on Equity

PGR’s trailing 12-month return on equity was 15.7%, which came ahead of the industry average of 6.7%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

Zacks Rank & Price Performance

PGR currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 13.5% against the industry’s decline of 0.1%.

Zacks Investment Research
Image Source: Zacks Investment Research

Optimistic Growth Projection

The Zacks Consensus Estimate for Progressive’s 2023 earnings is pegged at $6.52 per share, indicating an increase of 60.6% on 15.4% higher revenues of $59.5 billion. The Zacks Consensus Estimate for 2024 earnings is pegged at $8.08, indicating an increase of 23.8% on 11.2% higher revenues of $66.1 billion.

The long-term earnings growth rate is currently pegged at 23.9%, better than the industry average of 14.6%.

Growth Drivers

Premiums of Progressive, a market leader in commercial auto insurance and one of the top 15 homeowner carriers based on premiums written, increased 11% in the last 10 years and surpassed the industry average of 4%. We expect the insurer to retain this momentum, banking on a compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio.

Policy life expectancy, 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 retain its momentum. The insurer thus has been focusing on cross-selling homes with auto insurance.

PGR’s combined ratio averaged less than 93% in a decade and compared favorably with the industry average of more than 100%. Prudent underwriting and favorable reserve development should help Progressive continue to deliver improvement in the combined ratio.

In tandem with the industry, PGR continues to invest heavily in technology. It estimates accelerated digitalization to improve the non-acquisition ratio in 2023.

Banking on operational excellence, PGR has a solid capital position and engages in capital deployment that in turn enhances shareholders’ value. Progressive has been paying dividends uninterruptedly since 1971 and has a 24.4 million share buyback program under its authorization.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Cincinnati Financial Corporation (CINF - Free Report) , Everest Re Group and Kinsale Capital Group (KNSL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cincinnati Financial delivered earnings surprise in two of the last four quarters while missing estimates in the other two. Year to date, CINF has gained 8.9%.

The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings indicates a year-over-year increase of 21% and 15.1%, respectively.  

Everest Re delivered a four-quarter average earnings surprise of 18.41%. Year to date, RE has rallied 10.1%.

The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings indicates a respective year-over-year increase of 68.5% and 16.2%.

Kinsale delivered a four-quarter average earnings surprise of 13.83%. Year to date, the insurer has gained 17%.

The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates a respective year-over-year increase of 27.2% and 20.4%.

Published in