4. The Progressive Corporation (NYSE:PGR)
Stake Value in Abrams Bison Investment’s 13F Portfolio: $84.41 million
Percentage of Abrams Bison Investments portfolio: 9.54%
Number of Hedge Funds: 54
The Progressive Corporation (NYSE:PGR) is an Ohio-based insurance holding company that operates in three segments – Personal Lines, Commercial Lines, and Property. Riding on increased premiums, the company stock is rising. On 17 August 2022, there was a 3.1% hike in the company stock’s value. In the second fiscal quarter, The Progressive Corporation (NYSE:PGR) reported a normalized EPS of $0.79. The company’s revenue in the second quarter came in at $12.42 billion.
Raymond James analyst C. Gregory Peters kept an Outperform rating on shares and raised the firm’s price target to $140 from $135.
Overall, the company remained a popular stock among hedge funds. At the end of the second quarter of 2022, 54 hedge funds in the database of Insider Monkey held stakes worth $1.82 billion in The Progressive Corporation (NYSE:PGR). As of September 12, Orbis Investment Management owned shares worth $542.01 million in The Progressive Corporation (NYSE:PGR), making it the largest shareholder.
Here is what LRT Capital Management has to say about The Progressive Corporation (NYSE:PGR) in its Q1 2022 investor letter:
Progressive is a leading U.S. auto insurer that has pioneered telemetrics as a source of differentiation in its underwriting and it operates through a direct (non-agency) sales model. We believe that the company’s sales model, which is still the minority model in the industry, confers on the company a durable process-based cost advantage that has allowed the company to deliver industry leading combined ratios (a standard measure of profitability in the insurance industry).
The company has plenty of room to grow and take market share from players such as State Farm, Farmers and Nationwide. The cost advantages conferred by the direct sales model are unstoppable, and the scale advantages the company has in advertising and other customer acquisition costs furthers its strong competitive position. We believe the industry structure is going to evolve towards a duopoly with Progressive and GEICO as the two main players.
While we do not believe telemetrics itself confers any competitive advantage as it is a technology that has been copied by other players, Progressive is a very innovative company, and it has evolved from being an insurer for the highest risk drivers to one that now targets the general population. GEICO on the other hand began its life as an insurer for the best drivers and has now evolved in the direction of insuring everyone. On the surface the companies are similar, but their different pasts continue to shape their corporate cultures and are evident in subtle ways in their decision-making processes arounds expense management and claims processing.
The company has a very conservative investment portfolio with over $44 billion in fixed income securities. 75% of their portfolio is held in securities with a duration of under five years, which means that an increase in interest rates will benefit the company as the portfolio will relatively rapidly reprice into higher yielding securities.
