Progressive’s Profit Soars 82% in January; Street Says Hold

Shares of Progressive Corp. closed 1.3% higher on Wednesday after the insurance company posted strong double-digit earnings growth for January. While its bottom line improved on a year-over-year basis, unfavorable prior year developments resulted in a month-on-month sequential decline.

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Progressive’s (PGR) January earnings per share surged about 82% to $0.95 year-on-year. However, it decreased by 20.8% from $1.20 in December 2020.

Net premiums earned during the reported period rose 10% year-over-year, while net premiums written grew 14%. Its combined ratio (percentage of premiums paid out as claims and expenses) declined to 86.3 in January from 92.1 in the prior-year period. Progressive’s policies-in-force in January were 11% higher than during the year-ago period.

The company said, “Excluding the impact of catastrophe losses in both January 2021 and 2020, our companywide loss/LAE [loss adjustment expense] ratio was 5.0 points lower than January last year, in part reflecting continued lower auto accident frequency on a year-over-year basis.” (See Progressive stock analysis on TipRanks)

Following the January results, Wells Fargo analyst Elyse Greenspan lowered the stock’s price target from $93 to $90 (4.4% upside potential) and maintained a Sell rating.

In a note to investors, Greenspan said, “We are seeing rate declines in the personal auto sector and the level of rate should slow as the industry factors in the Covid-19 favorable frequency levels. Further, as miles driven rebound from Covid-19 lows the favorable frequency trends should subside from here.”

Overall, consensus among analysts is a Hold based on 4 Holds, 2 Buys and 2 Sells. The average analyst price target of $98.38 implies upside potential of about 14% from current levels. Shares have gained around 8.4% over the past year.

Furthermore, TipRanks data shows that financial blogger opinions are 100% Bullish, compared to a sector average of 71%.