The Progressive Corporation’s ( PGR Quick Quote 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 rose 6.9% in the last five years.
Zacks Rank and Price Performance
Progressive presently carries a Zacks Rank #3 (Hold). Shares of the company gained 9.3% in the past month compared with the
industry’s growth of 6.1%. Image Source: Zacks Investment Research Return on Equity
PGR’s trailing 12-month return on equity was 12%, outperforming the industry average of 6.7%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
The Zacks Consensus Estimate for Progressive’s 2023 earnings per share (EPS) is pegged at $4.69, indicating an increase of 15.5% on 17.6% higher revenues of $60.6 billion. The Zacks Consensus Estimate for 2024 EPS is pegged at $7.66, indicating an increase of 63.4% on 11.6% higher revenues of $67.6 billion.
The long-term earnings growth rate is currently pegged at 24.9%, better than the industry average of 12.1%. We expect the 2025 bottom line to increase at a three-year CAGR of 29.2%.
Progressive is a market leader in commercial auto insurance and one of the top 15 homeowner carriers based on premiums written. PGR’s premiums written increased 11% in the last 10 years and surpassed the industry average of 4%. On the strength of a compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio, PGR should continue to deliver improved premiums. We estimate 2025 net written premiums to increase at a three-year CAGR of 9.6%.
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 continue to deliver solid PLE. The insurer 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%. Progressive is poised to deliver a better combined ratio, banking on prudent underwriting and favorable reserve development. It aims to record a combined ratio close to 96% for 2023.
The company also earns through investing premiums received. We expect net investment income to rise 54.8% in 2023.
In tandem with the industry, PGR continues to invest heavily in technology. It estimates accelerated digitalization to improve the non-acquisition ratio in 2023.
Prudent Use of Capital
Banking on operational excellence, PGR engages in effective capital deployment. This, in turn, enhances shareholders’ value. Progressive has been paying
dividends uninterruptedly since 1971, yielding 0.3%, and has a 25 million share buyback program under its authorization. Stocks to Consider
Some better-ranked stocks from the same industry are
Arch Capital Group ( ACGL Quick Quote ACGL - Free Report) , Axis Capital Holdings ( AXS Quick Quote AXS - Free Report) and HCI Group, Inc. ( HCI Quick Quote HCI - Free Report) . Each stock currently sports a Zacks Rank #1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
The Zacks Consensus Estimate for Arch Capital’s 2023 and 2024 earnings indicates a year-over-year increase of 38.2% and 10.4%, respectively. ACGL delivered a four-quarter average earnings surprise of 26.83%. The consensus estimate for 2023 and 2024 earnings has moved up 7.7% and 6.6%, respectively, in the past 30 days.
AXS delivered a four-quarter average earnings surprise of 9.75%. The Zacks Consensus Estimate for Axis Capital’s 2023 and 2024 earnings indicates a year-over-year increase of 44.7% and 10.7%, respectively. The consensus estimate for 2023 and 2024 earnings has moved up 10.4% and 9.8%, respectively, in the past 30 days.
HCI Group delivered a four-quarter average earnings surprise of 448.4%. The Zacks Consensus Estimate for HCI’s 2023 and 2024 earnings indicates a year-over-year increase of 159.3% and 33.9%, respectively. The Zacks Consensus Estimate for 2023 and 2024 revenues indicates a year-over-year increase of 1.1% and 6.2%, respectively.