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Progressive reported third quarter EPS of $1.89, beating the consensus of $1.71. The insurer also topped analyst expectations on the top line in the third quarter, with net premiums written of $15.59 billion, compared to $15.40B expected.
Shortly after it reported results, Progressive’s stock was upgraded from Neutral to Overweight by analysts at Piper Sandler. The upgrade was tied directly to the stronger-than-expected print.
“Following Progressive’s stronger than expected September results we now believe it is the case that all the personal lines writers we follow will show underlying underwriting improvement. We believe this will be a catalyst for the quarter as pricing and profitability are now both improving,” wrote Piper Sandler analysts.
The analysts added, “CPI data shows motor vehicle insurance costs rising at a mid-teens pace while claims cost inflation was just over 10% for most insurers we follow in the second quarter. Assuming claim cost inflation is at about second quarter pace or, perhaps lower, as overall inflation has moderated, it would appear auto insures are now achieving margin expansion. Our earnings estimates for the third quarter estimate that all the personal lines writers we follow will achieve underlying underwriting margin expansion in the quarter.”
Progressive climbed 7.5% shortly after results were published. The better-than-expected results also lifted Progressive’s peers, including Allstate (NYSE:ALL).
Progressive and Allstate were the second and third best-performing stocks in the S&P 500 index.
