Progressive Corp (PGR) is well known for its long-standing advertising campaign with insurance agent Flo, who has a regular cast of characters that are always helping people find the best coverage for their homes, vehicles and boats.
PGR was actually the first modern property and casualty insurance company to compare the rates of its competitors when you ask for a quote from them. This was a brilliant marketing move, since it made a PGR a hub for people shopping for insurance.
In the Internet age, this meant PGR got their data (email address, what they were looking for, how long they stayed, etc.) and could then send emails to them to follow up and promote its products. This is still an innovative strategy.
But PGR is hardly a newcomer to the game like Allstate Corp‘s (ALL) totally online Esurance subsidiary. PGR has been around since 1937. In 1987, Progressive listed on the NYSE under the PGR symbol, and it has continued to innovate and grow since then. For example:
- It was the first insurance company to offer discounts for low-risk drivers.
- It had the first drive-in claims office.
- It was the first P&C firm that allowed customers to pay premiums in installments.
What’s more, while other industries are struggling, the domestic insurance market is doing very well. All its customers are U.S. dollar-based, so it doesn’t have to worry about foreign sales being affected by the strong dollar.
Here’s What Makes PGR Stock a Steady Pick
It’s likely — at least for this year — that U.S. Treasuries are one of the best investments anywhere in the market. And, similar to U.S. Treasuries, P&C companies hold massive amounts of cash and very liquid assets.
Insurance companies also reinvest some of that cash back into the markets. That is how they make money. So, PGR has a solid portfolio of investments along with large reinforcement from U.S. Treasuries that all benefit its bottom line.
That’s why the stock has hit new 52-week highs this week and it’s up an impressive 25% in the past year. However, the one piece to watch with PGR’s investment portfolio is its exposure to mortgage-back securities. These are the investments that brought down the markets in 2008.
Given the amount of new regulation in the housing market and the higher level of scrutiny banks now have when issuing mortgages, this isn’t as risky a sector as it used to be, but until the U.S. gets its economy moving — and the real estate sector is a big factor in that — mortgage-backed securities pose some risk.
On the other hand, PGR’s 2.5% dividend is a decent payment for those concerns.
Aside from its investment portfolio, PGR isn’t too tightly linked to economic growth. It has to find ways to grow its customer base and get its customers to insure more property with it. That happens more when the economy is healthy, but PGR has been in this game for a long time, so it knows how to stay in front of the line and innovate for market share.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
