Auto insurer Progressive Corporation (NYSE:PGR) reported first quarter results on Thursday that were better than expected. The stock isn't cheap when comparing its price to quarter-end book value, but the company is one of the best managed insurers out there and growth trends could be perking up.
TUTORIAL: Stock Basics

First Quarter Recap
Total revenues increased a healthy 3.2% to $3.9 billion as net premiums earned rose 5% to account for 94% of the top line. Realized gains on the company's investment portfolio accounted for most of the rest and more than tripled to $99.7 million. Service revenue improved 24% and accounted for the remaining $5.2 million in revenues. Net premiums written, another measure of operating health, rose 3% to $3.9 billion.

Net income jumped 23% to $362.9 million, or 55 cents per diluted share. This came in ahead of analyst projections. The combined ratio, which is one of the primary profit measures for an insurance company and calculated by taking operating costs and dividing them by earned premiums, came in at 90.3%. A ratio below 100% signifies an underwriting profit. Return on equity was also strong at 18%.

Outlook
Analysts currently expect full-year revenue growth in excess of 6% and total revenues of $15.4 billion. Profit expectations call for $1.58 in earnings, or nearly 5% ahead of last year's levels.

Bottom Line
Progressive is the fourth largest auto insurer behind privately-held State Farm, Allstate (NYSE:ALL), and Berkshire Hathaway's (NYSE:BRK.A) (NYSE:BRK.B) Geico insurance unit. A recent analysis by the investment blog the Rational Walk detailed that the performance of Progressive and Geico have been similar in recent years and it concluded that Geico has grown faster over the past decade and been more disciplined in its underwriting given a lower loss ratio. However, Progressive has been a very close second and extremely disciplined in its underwriting and overall cost controls.

As evidenced by a price-to-book multiple greater than two, Progressive isn't the cheapest insurer out there. For comparison purposes, Allstate's stock trades at approximately 88% of book value while property and casualty insurer Traveler's (NYSE:TRV), which also sells auto policies, trades at 102% of book. It also hasn't grown revenues or profits much in the last five years, but its ten-year track record is solid as it has grown the top line at over 8% annually and profits at nearly 40% each year over this period. Growth trends look to be rebounding again and make the shares worth a closer look. (For related reading that may be helpful, see Analyze Investments Quickly With Ratios.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!