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Progressive (PGR) Continues to Improve on Higher Premiums

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We issued an updated research report on Progressive Corp.PGR on Aug 18, 2015.

Last month, the company reported second-quarter 2015 earnings that were line with the Zacks Consensus Estimate. However, the bottom line improved 20% year over year on the back of higher premiums. Notably, the company has delivered positive earnings surprises in three of the last four quarters with an average beat of 13.37%.

Progressive is a leader in product, service and distribution innovation, especially in personal auto. It is also one of the foremost companies in underwriting technology and the application of quantitative analytics in pricing and risk selection. The company's rates are very competitive in all its markets and it continues to gain from its expanded multi-product offering.

Management continues to focus on customer retention. Policy life expectancy (PLE), a measure for customer retention continues to grow for the insurer. We expect the company to report a higher PLE in the coming quarters given its emphasis on competitive pricing for current customers to ensure their retention. Additionally, the company has several initiatives underway that aim at providing consumers with distinctive new auto insurance options.

To return more value to shareholders, Progressive undertakes share buybacks along with paying annual dividends. This reflects the inherent strength of the company's balance sheet. Moreover, over a period of five years the insurer's debt-to-capital ratio has also improved.

However, Progressive is exposed to uncertainty of catastrophic events. If any severe catastrophes occur in the near term, the combined ratio could get affected, which in turn, might hurt the company's profitability.

Continued growth at Commercial Auto businesses could also be challenging. The soft economy, combined with heightened competition, has adversely affected this market.

Progressive presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the property and casualty insurance space are Hallmark Financial Services Inc. HALL , Selective Insurance Group Inc. SIGI and First American Financial Corporation FAF . All three stocks sport a Zacks Rank #1 (Strong Buy).

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PROGRESSIVE COR (PGR): Free Stock Analysis Report

FIRST AMER FINL (FAF): Free Stock Analysis Report

HALLMARK FINL (HALL): Free Stock Analysis Report

SELECT INS GRP (SIGI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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