Progressive (PGR) Gains From Premium Growth, Cat Loss A Woe
Zacks Investment Research | May 21, 2018 11:53PM ET
The Progressive Corporation (NYSE:PGR) has reputation in the market as an industry-leading independent agency writer when it comes to automobile insurance. Its excellent record confirms its successful client servicing, catering to diverse needs. Over the years, the customers have gained a lot from the company’s broad portfolio of varied insurance products and services and by retaining this favorable buzz among brokers, the Zacks Rank #1 (Strong Buy) P&C insurer consistently emerges stronger over time and looks set to maintain its hot streak in the near future.
Growth Drivers
Given the credibility of its product portfolio, Progressive has been witnessing premium growth over a considerable period of time and we expect the company to sustain this momentum in the near term. Interestingly, the company’s Personal and Commercial business lines have also been displaying an upward trend pertaining to premiums, driven by its expanded multi-product offering and competitive market rates.
Improvement in investment income as well as premiums has enabled the company to grow its revenues over an extended time frame and we expect this trend to continue, going forward.
Also, the company’s efforts in boosting customer retention has led to improving policy life expectancy (PLE) over the past few years with the company anticipating to report higher PLE in the upcoming quarters. On the back of competitive pricing, the company strives to ensure that its consumer retention and innovative product offerings address clients’ needs.
Further, a robust capital position has allowed the company to enhance shareholder value via dividend payouts, which includes special dividends as well as share buybacks. With respect to dividend payment, the P&C insurer has registered a five-year CAGR (2013-2018) of nearly 41%. Hence, these shareholder-friendly moves continue to raise optimism among investors.
In future, we expect Progressive to capitalize on cross-selling auto policies and Progressive Home Advantage (PHA) to better its bundled strategy that will carve out the course for satisfying customers’ need in choosing a combination of home and auto insurance. Also, judicious buyouts will help the company boost its bundling strategy, which might result in policies in force growth in the short term.
An Outperformer: Shares of Progressive have gained 9.5% year to date, outperforming the Zacks Investment Research
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