The Progressive Corporation’s PGR 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 carries a Zacks Rank #3 (Hold). Shares have gained 6.2% in a year compared with the industry’s increase of 16.3%.
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Optimistic Growth Projections
The Zacks Consensus Estimate for Progressive’s 2023 earnings is pegged at $4.60 per share, indicating an increase of 13.3% on 17.7% higher revenues of $60.3 billion. The Zacks Consensus Estimate for 2024 earnings is pegged at $7.62, indicating an increase of 65.6% on 11.3% higher revenues of $67.5 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 30.1%.
Growth Drivers
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.
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), Axis Capital Holdings AXS and Assurant AIZ, each sporting a Zacks Rank #1 (Strong Buy) at present. 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. Shares of ACGL have gained 51.9% year to date.
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. Shares of AXS have gained 51.9% year to date.
Assurant delivered a four-quarter average earnings surprise of 24.39%. Year to date, the insurer has gained 41.1%. The consensus estimate for 2023 and 2024 earnings has moved up 13.2% and 6.6%, respectively, in the past 30 days.
The Zacks Consensus Estimate for AIZ’s 2023 and 2024 earnings indicates a year-over-year increase of 13% and 1.6%, respectively.
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