The Progressive Corp (NYSE:PGR)

CAPS Rating: 4 out of 5

An insurance holding company which offers a number of personal and commercial property-casualty insurance products primarily related to motor vehicles.

Recs

1
Player Avatar SuperPicks (29.13) Submitted: 5/26/2009 7:29:52 PM : Underperform Start Price: $16.51 PGR Score: +18.11

This is a great short opportunity as it seems its trading at a premium to most insurance companies.
Over the next 5 years, we may see increased claim payout costs by property insurance carriers. Costs that I bet haven't been foreseen by the market in general for property insurance carrier (& if it has, well, definitely not for PGR). Therefore when reality hits the market in the face, this stock will underperform.
Ironic, as the company may have already foreseen such risks through its actuarial models & priced its premiums accordingly - however that matters not, because the market values the company itself on it's own criterion.
As going short is risky, I would instead offset a short on PGR with a buy in UTR which appears fairly valued.
Maybe CAPS can help on this one; why would anyone buy PGR for $11billion when one can buy UTR for just under $1billion??
Any comments, questions, criticisms are appreciated.

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Member Avatar JtHExperimental (20.93) Submitted: 6/23/2009 11:26:59 PM
Recs: 0

Check out Ravi Nagarajan's article on Progressive (PGR):

http://seekingalpha.com/article/144346-geico-vs-progressive-selected-10-year-metrics

That might explain, to a large extent, why the market would put a premium on Progressive. I'm tempted to green thumb this, but I might wait for it to drop a bit lower.

Member Avatar JtHExperimental (20.93) Submitted: 6/23/2009 11:31:48 PM
Recs: 0

Also, consider that PGR's balance sheet looks significantly better and they've been consistently profitable, whereas UTR has been slipping as of recent times. But I agree that UTR does look considerably cheaper.

I've never completely understood how to value insurance stocks, so they still remain a bit of a mystery to me in some sense.

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