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The Progressive Corporation (PGR) Thoughts on Price to Book

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The ubiquitous Flo ads on TV remind us that at The Progressive Corporation (NYSE:PGR), you see the price they offer along with the price of their competitors.  It got me thinking that I should look at their stock price and compare it to their competitors.  The top 4 car insurance companies are:

The Progressive Corporation (NYSE:PGR)

1. State Farm — owned by their policy holders

2. The Allstate Corporation (NYSE:ALL)

3. GEICO — owned by Berkshire Hathaway

4. Progressive

Progressive and Allstate are the only pure-play insurance companies, so let’s compare some financial data.

Progressive Allstate
Market Capitalization (in billions) 14.6 22.05
Price/Earnings 16.32 9.84
Price/Book 2.42 1.07
Dividend .28 .88
Dividend Yield 1.2% 1.9%
Debt/Equity 34.35 29.43

The number that jumps out at me is Progressive’s price to book.  I love to buy financial stocks that are trading below book value.  For example, I own American International Group, Inc. (NYSE:AIG) shares as they are trading at .60 times book, so could I consider owning a stock trading at 2.3 times book?  I wondered if this is normal for Progressive, so I looked at the price to book from 2008 to 2012.

PGR Price / Book Value data by YCharts

Seriously?  What is it about Progressive?  Their price to book stayed around 2 after the financial meltdown in 2008.  It looks like it is time to dig into the details.

Laser Focus

Progressive only sells insurance on cars/boats/RVs.  They do not sell property/casualty or life insurance like Allstate.  Stocks that do one thing well tend to have higher valuations.  The difference in the latest 10-K is a great example.  Allstate has 9 subsections of risks including my favorite “Predicting claim expense relating to asbestos, environmental, and other discontinued lines is inherently uncertain and may have a material effect on our operating results and financial condition”.

Partnering instead of building

Allstate and State Farm both offer discounts to policyholders that add homeowners insurance.  To combat this, Progressive offers homeowners insurance by partnering with 8 property/casualty companies.  Progressive will get you a quote from these companies, thereby “offering” a bundled package, yet they do not have to underwrite the homeowner’s policy.

Agency and Direct Options

Progressive offers policies through independent insurance agents (55% of premiums) and directly through (45% of premiums).  This differs from State Farm and Allstate that rely on the bulk of their offerings from captive insurance agencies that only sell their products.  GEICO also has captive insurance agents, but the bulk of their sales are direct.  That makes Progressive the only top insurer that works with independent agents. In the last quarter, the direct policies were more profitable than agency.  In the year earlier it was the opposite. Tapping into two channels to sell products is good strategy.


Let’s face it, Wall Street loves growth and Progressive is delivering it.  In the last quarter, Progressive grew agency premiums by 8% and direct by 10%.  Earnings were down 2% mainly due to losses from super storm Sandy which resulted in 230,000 cars being damaged.  Had Progressive also underwritten homeowner’s policies, their losses would have been much greater.

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