UPDATE: Goldman Sachs Downgrades Progressive Corp. (PGR) to Sell

(Updated - November 16, 2015 8:59 AM EST)

Goldman Sachs downgraded Progressive Corp. (NYSE: PGR) from Neutral to Sell with a price target of $28. Analyst Michael Nannizzi said development levels are unsustainable, especially against a backdrop of elevated frequency trends in its core auto book.

"We believe favorable reserve development for Progressive will peak in 2015, as reserve releases generate 20% of the company’s earnings. The last time reserves drove such elevated levels of development was in 2011, after which prior period development normalized. However, unlike today in 2011 PGR was seeing growth slow (not accelerate), and frequency was not inflecting negatively," said Nannizzi.

The analyst added, "We expect that margins will erode on an accident year basis for at least the next 6-9 months as the company responds to elevated frequency it first acknowledged in 3Q results. At the same time we believe favorable development is not sustainable, and thus we expect development should at a minimum be lower in 2016 than in 2015, and given the emergence of frequency trends so late in 2015, we believe the potential for less prior year development to be offset by current year margin expansion is unlikely."

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 $30.72 yesterday.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Stifel Upgrades Barry Callebaut AG (BARN:SW) (BYCBF) to Buy
• Evercore ISI starts 'accelerating AI play' AMD (AMD) at Outperform
• Baird Downgrades Berry Global Group (BERY) to Neutral, 'a second inflation pulse is taking hold led by crude oil'