Progressive Sees EPS Spike 111% In July

Progressive Corp. reported triple-digit earnings growth in July on a lower companywide loss/LAE [Loss Adjustment Expense] ratio. The insurance company’s earnings per share in July surged about 111% to $1.38 compared with the same month a year ago.

Progressive’s (PGR) net premium earned last month rose 10% year-over-year, while premium written grew 12% over the same period. Combined ratio (percentage of premiums paid out as claims and expenses) declined 6.8 percentage points to 83.5 in July from the prior-year level. Active policies in July were 10% higher than in the year-ago period.

A decline in car accidents due to the stay-at-home restrictions put in place as a result of the coronavirus pandemic led to a 5.8 points drop in the companywide loss/LAE ratio. Moreover, the company’s expense ratio was 1.0 point lower than the prior-year period due to a 2 point net reduction in allowance for doubtful accounts.

Earlier this month, Argus Research analyst Kevin Heal downgraded Progressive’s stock to Hold from Buy. The analyst said that PGR shares have reached his price target of $90 (0.45% downside potential) and look fairly valued at current levels. (See PGR stock analysis on TipRanks).

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 6 Buys and 4 Holds. Given the year-to-date stock price gain of 29.2%, the average price target of $95.2 now implies a more modest upside potential of 5.3%.

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