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On Wednesday, Goldman Sachs reaffirmed its Buy rating on Progressive Corp. (NYSE: PGR), a $164 billion market cap insurance giant, with a steady price target of $304.00. According to InvestingPro data, 15 analysts have recently revised their earnings estimates upward for the upcoming period, with analyst targets ranging from $183 to $320. The firm’s analysis acknowledged that Progressive’s March operating earnings per share (EPS) of $1.17 fell short of the Visible Alpha Consensus and Goldman Sachs’ expectations of $1.23 and $1.44, respectively. The discrepancy was largely attributed to catastrophe losses that were approximately 300 basis points (bps) higher than anticipated, coupled with a 40bps shortfall in the attritional combined ratio.
Progressive’s Personal Auto segment experienced a notable year-over-year policy-in-force (PIF) growth of 21.9%, surpassing Goldman Sachs’ projection of 20.8%. This growth aligns with the company’s overall revenue expansion of 21.36% over the last twelve months, as reported by InvestingPro, which shows Progressive maintaining strong financial health with an overall score of 3.47 out of 5. This growth, which represented an addition of 572,000 policies month-over-month, exceeded both Goldman Sachs and Visible Alpha Consensus estimates of 275,000 and 354,000, respectively. The growth was driven by stronger-than-expected performance across both the Direct and Agency channels.
Despite these gains, net premiums written (NPW) grew by 17%, which was below Goldman Sachs’ forecast of 19% NPW growth. This shortfall was primarily due to the Personal Lines segment growing at 21.2%, less than the 23.6% predicted by Goldman Sachs. Nevertheless, the Personal Auto expense ratio was slightly better than expected, coming in at 19.6% compared to the estimated 20.2%. This suggests that Progressive is maintaining high levels of advertising spending, a strategy that Goldman Sachs views positively.
Catastrophe losses for March were reported at a 6.0% cat loss ratio, missing the estimates of 3.2% set by both Goldman Sachs and Visible Alpha Consensus. Progressive attributed the elevated cat losses to March storm and catastrophe events, with actual losses amounting to $410 million, significantly higher than the $220 million to $225 million range anticipated by analysts.
Goldman Sachs expects the market to react favorably to Progressive’s robust PIF growth, especially given the context of a weaker performance in February. While this optimism is tempered by the underperformance in personal auto underlying loss results, InvestingPro’s analysis suggests the stock is slightly undervalued at current levels. The firm’s stance on Progressive remains positive, with expectations for the stock to continue to attract investor interest based on its strong growth metrics and attractive PEG ratio of 0.16, indicating good value relative to growth prospects. Want deeper insights? InvestingPro offers an extensive research report on Progressive, part of its coverage of 1,400+ top US stocks, providing detailed analysis of valuation metrics, growth drivers, and risk factors that matter most to investors.
In other recent news, The Progressive Corporation (NYSE:PGR) reported mixed financial results for the first quarter ending March 31, 2025. The insurance company saw a notable 17% increase in net premiums written, reaching $22.206 billion for the quarter. However, net income for March decreased by 42% to $522 million, though it rose by 10% to $2.567 billion for the quarter. Earnings per share increased by 11% to $4.37 for the quarter, despite a drop in March. Progressive also experienced significant pretax net realized losses on securities, totaling $(212) million for the quarter.
On the analyst front, Raymond (NSE:RYMD) James maintained an Outperform rating with a $305 target for Progressive, citing consistent growth and value creation. Similarly, Keefe, Bruyette & Woods raised their price target for Progressive to $300, highlighting earnings outperformance and improved reserve releases. BMO Capital Markets also maintained an Outperform rating, although they adjusted near-term organic growth estimates downward due to negative trends in repair shops. Meanwhile, Allstate (NYSE:ALL), another major player in the insurance industry, saw its price target reduced by Keefe, Bruyette & Woods to $228 while maintaining an Outperform rating.
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