PGR vs. BRK.B: Which Insurer is a Safer Investment Option?

Industry Overview - The U.S. auto insurance market is projected to reach $349.37 billion by 2025, with an average spending per capita of $1,020 [1] - The average cost of full coverage car insurance is expected to reach a record high of $2,101 per year [1] - Growth in the auto insurance industry is driven by increased awareness, technological advancements, evolving car ownership trends, rising costs, and the emergence of online platforms [2] Company Analysis: Progressive Corporation (PGR) - PGR is one of the largest auto insurance groups in the U.S., leading in motorcycle and boat policies, commercial auto insurance, and ranking among the top 15 homeowners carriers [3][4] - Personal auto insurance contributes about 90% to Personal Lines net premiums written and 75% of total company premiums, significantly impacting profitability [4] - The Personal Auto segment is expected to grow due to rate increases, higher new applications, increased advertising, and a strong independent agents' network [5] - PGR's Snapshot program enhances personalized pricing, improving customer retention and policy life expectancy [6] - PGR has maintained an average combined ratio under 93% over the past decade, outperforming the industry average of over 100% [7] - The company has shown continuous improvement in net margin, expanding by 950 basis points in the last two years [8] - PGR's return on equity (ROE) stands at 35.4%, significantly higher than the industry average of 7.8% [10][11] - The Zacks Consensus Estimate for PGR's 2025 revenues and EPS implies a year-over-year increase of 16.5% and 24.4%, respectively [17] Company Analysis: Berkshire Hathaway Inc. (BRK.B) - BRK.B is a diversified conglomerate with over 90 subsidiaries, with insurance being the most prominent segment, contributing approximately one-fourth of total revenues [12] - GEICO, a key part of BRK.B's insurance operations, has faced market share pressure but is investing in telematics and technology to regain competitiveness [14] - BRK.B's net margin has improved by 1,650 basis points in the last two years, with a strong cash position of over $100 billion [16] - The Zacks Consensus Estimate for BRK.B's 2025 revenues implies a year-over-year increase of 8.5%, while EPS indicates a decline of 6.7% [19] Comparative Analysis - PGR's solid cash flow supports continuous investment in growth initiatives, enhancing margins and lowering leverage [11] - PGR's price-to-book multiple is 4.37, below its five-year median of 5.37, while BRK.B's price-to-book multiple is 1.53, above its median of 1.48 [20] - PGR has a VGM Score of A and a Zacks Rank of 2 (Buy), while BRK.B has a VGM Score of D and a Zacks Rank of 3 (Hold) [23]