Progressive Earnings: Results Stay Strong Amid Favorable Market Conditions

Narrow-moat Progressive continued its strong momentum in the third quarter, with the company benefiting from multiple industry-level tailwinds as well as its own strategic decisions. Return on equity for the last 12 months was 38%, a level that is well above the company’s historical average. We will maintain our $151 per share fair value estimate and see the shares as being materially overvalued. We think the market is overly focused on near-term results. We don’t doubt the magnitude of the current tailwinds or the strength of the company’s competitive position. However, insurance is an inherently mean-reverting industry, and we don’t believe current returns can be maintained over time.