Progressive's Premium Growth A Boon, Rising Costs A Concern
Zacks Investment Research | Dec 18, 2018 10:11PM ET
The Progressive Corporation (NYSE:PGR) should continue to witness improving premiums, given its leading market presence, competitive pricing and a compelling product portfolio. Vehicle and Property businesses, contributing to strength in both Personal and Commercial business lines should retain the growth momentum. These in turn, should help the company witness a consistently strong policy life expectancy, a measure of customer retention.
Given the rising interest rates, Progressive has been experiencing better investment results over the last several quarters and we expect this growth trend to sustain not only on the back of a favorable interest rate environment but also a combination of improved average assets and portfolio yields.
Riding on the strength of steady premium growth and higher investment income, the company’s top line has been witnessing a substantial rise over the past several years (with the metric ascending 8.1% over the last five years). In fact, the Zacks Consensus Estimate for current-year revenues is pegged at $32 billion, reflecting a 19.6% jump on a year-over-year basis while for 2019, the consensus mark stands at $36.9 billion, representing a 15.1% climb.
With respect to enhancement of shareholder value, the company has been indulging in a few good shareholder-friendly moves like share buybacks and annual as well as special dividend payouts. In the last five years, the company’s annual dividend payment registered a five-year CAGR (2013-2018) of about 41%. Such measures underscore the company’s strong liquidity position and in turn, not only retain the existing investors’ faith in the stock but also attract new ones.
Shares of this Zacks Rank #3 (Hold) P&C insurer have gained 8.5% year to date against the Zacks Investment Research
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