On Wednesday, BofA Securities revised its price target for shares of Progressive Corp. (NYSE: NYSE:PGR), reducing it to $273 from the previous $279. The firm, however, continues to hold a positive outlook on the stock, maintaining a Buy rating.
The adjustment in the price target comes amid considerations of Progressive's historical performance metrics. The company, known for its auto insurance services, has maintained an average combined ratio—a key profitability indicator in the insurance industry—of 91-92% over the past three decades. This ratio represents the percentage of premiums paid out in claims and expenses; a lower ratio indicates better profitability.
The analysis took into account an exceptional period from March 2020 to February 2021, during which the pandemic's impact on driving patterns led to fewer claims and an unusually favorable combined ratio. Excluding this period, the average combined ratio for Progressive is estimated to be slightly higher, at 92-93%.
Despite a recent combined ratio of 84%, which might suggest exceptional profitability, the analyst cautioned against jumping to conclusions based on such a short-term figure. Seasonal factors and the inherent cyclicality of the underwriting cycle can lead to temporary phases of higher profitability, which can persist for a few years.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.