Shares of auto and personal property insurer Progressive (NYSE: PGR) have rebounded from a five-month drop, as the company appears to remain best in class.
The stock stumbled 29% from June 2-Nov. 3. But it has bounced back 15% since then. Progressive has a market capitalization of $138 billion. It’s the largest auto insurer after State Farm, which is privately held.
Progressive stands out for its technological prowess, its shift toward selling policies directly to consumers rather than through agents, and its strong marketing campaigns.
That helps explain why its stock has vastly outperformed the S&P 500 and its competitors over the last three-, five- and 10-year periods. The company has returned an annualized 22.9%, 21.3% and 23.7% over those periods.
Looking at marketing, Progressive floods the zone on television with its quirky spokesperson character Flo. That has helped the company become a household name.
Technology, earnings
In terms of technology, Progressive was apparently the first in its field to use telematics, digitally monitoring customers’ complete driving activity through its Snapshot program. As for the company’s sales channels, direct sales of its policies have risen to account for 60% of auto policies in force. The other 40% are sold through agents.
Auto makes up 69% of Progressive’s policies in force, recreational vehicles make up 18%, personal property 10% and commercial policies 3%. Total policies in force climbed 13% in the first nine months of the year from a year earlier.
Progressive’s revenue rose 14% to $22.5 billion in the third quarter from a year ago. Its net income increased 12% to $2.62 billion. The company’s net underwriting profit margin (underwriting profit divided by net premiums earned) dipped to 10.5% in the third quarter from 10.9% a year earlier.
The combined ratio rose to 89.5% from 89%. That ratio measures the sum of claims paid, adjustment expenses and operating costs divided by earned premiums. So the smaller the number, the better.
Auto-insurance pricing is an issue that has turned against Progressive and its competitors. They benefited from price increases during the Covid pandemic and afterward, including ascents of more than 10% in 2023 and 2024.
Price changes, margins, ROE
But based on earnings from Progressive and its peers, Morningstar analyst Brett Horn thinks price increases have dwindled. “Pricing may be starting to decline,” he wrote. “While it will take some time to work into results, this will likely weaken underwriting performance.” The auto insurers also are faced with rising costs to fix damaged cars.
In this environment, Progressive’s “ample profit margins look set to decline in 2026, resulting in lower earnings,” writes Andrew Bary of Barron’s. Still, when it comes return on equity, Progressive is handily outperforming not just its direct competitors, but also other top financial companies like JPMorgan Chase (NYSE: JPM) and insurer Chubb (NYSE: CB), he points out.
Horn predicts an average adjusted ROE of 28% over the next five years, compared to an average of 22% during the past decade. Progressive has an auto-insurance market share of 15% to 17%, and many expect that number to grow. State Farm is No. 1 with about 19%.
So the future looks bright for Progressive. “We believe the company will maintain its industry-leading profitability,” Horn said.
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