Progressive (PGR) Is a Strong Contender with Geico for Auto-Insurance Superiority
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Progressive (NYSE: PGR) is listed as one of the nation's Bet-Run auto insurance companies, according to an article in Barron's. The other is Geico, which is part of Berkshire Hathaway (NYSE: BRK-A) and isn't separately traded.
The article says that Progressive shares look so good because they trade historically at a low valuation. The stock is trading about 11x project FY09 EPS, about $1.47. The stock also is valued at close to 2x Book Value, still at the lower end over the past 15 years. Typically, the stock is three times book value.
Revenue may be up in the mid-single digit numbers in 2010, which would boos return on equity to 20%, nearly double what the auto-insurance industry sees.
Progressive has a $14 billion portfolio which is 45% in cash equivalent and Treasuries and just 3% in stocks.
Geico and Progressive share a good size of the market, 8% and 7% respectively. State Farm is still the leader at 18% and Allstate claims 10%. Progressive an Geico are at the top of direct policy sales as well, which generally produces a cheaper policy by cutting out the agent. Plus, younger people are more likely to get a policy over the phone or Internet.
Progressive also provides earnings monthly, the only S&P 500 company to do so, although it doesn't offer guidance.
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