UPDATE: UBS Bullish on Progressive (PGR) Following ASI Acquisition, Upgrades to Buy

(Updated - April 30, 2015 12:49 PM EDT)

UBS upgraded Progressive Corp. (NYSE: PGR) from Neutral to Buy with a price target of $31 (from $28), suggesting upside of about 16%. Analyst Brian Meredith thinks its ARX Holdings acquisition will drive accelerated agency growth.

"We believe that PGR's acquisition of a controlling stake in ARX Holdings (which closed April 1, 2015) will drive premium growth in its Agency channel (which accounts for 49% of company-wide revenues) and be accretive to earnings in 2016 and beyond," said Meredith.

"Growth in Agency will come as PGR will have a true "package" policy (combining homeowners insurance and personal auto insurance) to sell through its Agency channel, fostering new business and improved retentions. Coupled with continued high single digit growth in PGR's Direct business, we see upward estimate revisions and P/E multiple expansion for PGR's shares over the next twelve to eighteen months. Longer-term, PGR is one of the best positioned P&C insurers to benefit from rising short-term rates with one of the shortest duration portfolios in the industry," added the analyst.

For an analyst ratings summary and ratings history on Progressive Corp. click here. For more ratings news on Progressive Corp. click here.

Shares of Progressive Corp. closed at $26.55 yesterday.

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