Progressive(US:PGR) ZACKSยท2025-11-18 17:31Core Insights - The profitability of Progressive Corporation (PGR) is significantly influenced by its management of underwriting expenses, which include policy acquisition costs and other underwriting-related expenses [1][5]. Underwriting Expenses - Policy acquisition costs account for over 50% of underwriting expenses, directly contributing to top-line growth by increasing the number of active insurance policies [2]. - Underwriting expenses have represented one-fifth of total expenses over the past three years, fluctuating between 17-20% of total revenues during the same period [3]. - Effective management of underwriting expenses leads to an improved combined ratio, which is a key measure of underwriting profitability [3]. Cost Management Strategies - Progressive employs data-driven underwriting and automation to manage underwriting expenses, enhancing cost control and competitive positioning in the market [4][9]. - Although underwriting expenses have increased in the last two years due to higher business volumes, they remain a crucial driver of profitability and long-term intrinsic value growth for PGR [5][9]. Peer Comparison - Similar to Progressive, Berkshire Hathaway (BRK.B) and Allstate Corporation (ALL) also rely on effective management of underwriting expenses to sustain profitability and long-term value creation [6][7]. Stock Performance - PGR shares have declined by 6% year-to-date, underperforming the industry average [8]. Valuation Metrics - PGR has a price-to-book value ratio of 3.73, which is above the industry average of 1.5, but it holds a Value Score of B [10]. Earnings Estimates - The Zacks Consensus Estimate for PGR's fourth-quarter 2025 EPS has increased by 4.5%, while estimates for the first-quarter 2026 have decreased by 0.9% over the past 30 days [11]. - The consensus estimates indicate year-over-year revenue increases for 2025 and 2026, but a decline in EPS for 2026 [12]. Current Ranking - PGR currently holds a Zacks Rank 3 (Hold) [13].