We retain our Neutral recommendation on
) given an increasing trend in total expense, increased
competition and a soft economic situation challenging growth.
Progressive carries a Zacks Rank #3 (Hold).
Why the Reiteration?
Continued growth at the Commercial Auto businesses could be
challenging owing to the soft economy combined with increased
competition. In the months of October and November last year, the
Commercial Auto business experienced dwindling results.
In addition, Progressive has been experiencing an upscale in
expenses. Results of the last two reported months also exhibited
a rise in expenses. Higher losses and loss adjustment
expense, policy acquisition costs and other underwriting expenses
continue to drive higher expenses.
Nevertheless, Progressive's focus on customer retention, efforts
to return value to shareholders, and a dominant position in
product, service and distribution innovation, especially in
personal auto, is expected to weather these negatives.
In Dec 2013, the Board approved a special dividend of $1.00,
testifying the inherent strength of its balance sheet. With
respect to share buybacks, it spent $38.1 million to buy back 1.5
million shares in the third quarter of 2013.
Of the share repurchase authorization involving 75 million
shares approved in Jun 2011, the company is still left with 35.3
million shares to be bought back. Given its favorable financial
strength, we expect more shares to be repurchased going forward.
ASPEN INS HLDGS (AHL): Free Stock Analysis
ALLIED WORLD AS (AWH): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
PROGRESSIVE COR (PGR): Free Stock Analysis
To read this article on Zacks.com click here.
Additionally, the debt-to-capital ratio continues to improve over
the years. During the third quarter, Progressive bought back
debentures worth $54.1 million, and beginning fourth quarter it
retired $150 million 7% Notes. Going forward, we expect
Progressive's deleveraging activities to further improve its
Other Stocks to Consider
Some better-ranked stocks in the insurance space include
Allied World Assurance Company Holdings, AG
Aspen Insurance Holdings Ltd
Hilltop Holdings Inc
). All these stocks sport a Zacks Rank #1 (Strong Buy).