Rating Action on Progressive - Analyst Blog
February 02 2012 - 12:10PM
Zacks
A.M. Best reiterated issuer credit ratings (ICR) of “a” and debt
ratings of senior unsecured notes on The
Progressive Corporation (PGR). The outlook remains
stable.
Concurrently, the rating agency also reiterated the financial
strength rating (FSR) of A+ (Superior) and ICR of “aa” on
Progressive Agency Pool, Progressive Direct Pool and Progressive
Commercial Auto Group and their members. Also, A.M. Best reiterated
FSR of A (Excellent) and ICR of “a+” on National Continental
Insurance Company. The outlook for all the ratings remains
stable.
The rating affirmations came following Progressive’s solid
capitalization, better operating performance and favorable
competitive advantages. The company’s capitalization is supported
by solid underwriting results and turnaround in the investment
portfolio. Progressive’s management team, brand positioning,
multiple channel distribution and underwriting and claims handling
technology augur well for future growth.
However, these positives are somewhat offset by the company’s
high underwriting leverage compared with the industry averages.
Though the company’s financial leverage also remained high, A.M.
Best expects the same to come down as Progressive pays down $350
million of senior debt.
Nevertheless, the rating agency might downgrade their ratings if
operating results and capitalization lag expectation and the
capital erodes. On the other side, if Progressive delivers superior
operating results with improved capitalization, A.M. Best might
consider rating upgrades.
Recently, Progressive clocked fourth quarter earnings of 42
cents per share, surpassing the Zacks Consensus Estimate, but
lagging year-ago results.
Over the last 7 days, only 1 out of 16 analysts covering the
stock raised the estimates for the first quarter and fiscal 2012.
We expect the rating affirmation to elicit more analysts to pull up
their estimates.
The Zacks Consensus Estimate for first-quarter 2012 is 41 cents
per share. For full years 2012 and 2013, the Zacks Consensus
Estimates are, respectively, $1.58 per share and $1.61 per
share.
We maintain our Neutral recommendation on Progressive. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the shares over the near
term.
Headquartered in Mayfield Village, Ohio, Progressive Corporation
is one of the largest auto insurers in the country. It is a leading
independent agency writer of private passenger auto coverage,
market leader for the motorcycle product and is one of the leading
companies in the commercial auto insurance market. It competes with
Allstate Corporation (ALL).
ALLSTATE CORP (ALL): Free Stock Analysis Report
PROGRESSIVE COR (PGR): Free Stock Analysis Report
To read this article on Zacks.com click here.
Allstate (NYSE:ALL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Allstate (NYSE:ALL)
Historical Stock Chart
From Jul 2023 to Jul 2024