Progressive Corp

Progressive Corp delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings. NPW grew very healthy with policies in force growth. The growth in new applications represents an increase in quotes from the current shopping in the marketplace as well as an increase in the convention. Since the pandemic, business of Progressive pummeled by unforeseen events. In the quarter, it is not on track for achieving its calendar year aim of a 96 combined ratio. To manage its margin, Progressive has increased rates, decreased its expense ratio, and tightened its underwriting scrutiny and verification of new business. The largest controllable variable expense of Progressive is advertising spend. The company’s slowest and largest-moving lever is rates. Over the last few months, the company started seeing data that was not in line with the expectations of the management. This resulted in increasing reserves as well as reach with increases in rate. In the personal lines division, the reserve strengthening of the company occurred largely in short-tailed fixing car coverages. In commercial lines, the management of Progressive is adequately reserved. The company saw high severity trends in the previously closed claims in the personal auto, mainly in fixing vehicle coverages. We give Progressive a ‘Hold’ rating with a revised target price.