Progressive Corp (NYSE:PGR) stock is up 35% year-to-date, which is very impressive given the fact that the U.S. was hammered by Hurricanes Harvey, Irma and Maria. But the real strength of PGR stock isn’t in homeowners or commercial property insurance, where it makes the top 20.
Its bread and butter is auto insurance, where it ranks in the top 4. For motorcycles and commercial vehicles, it’s No. 1.
Certainly, there were plenty of cars damaged during the hurricanes, but those losses pale in comparison to housing and commercial buildings.
While its YTD performance is impressive, PGR stock did drop after Harvey. But then went right back to its highs in September. It even hit its 52-week high in early October.
What’s more, even after its big run this year, Progressive stock is still trading at a price-to-earnings ratio of 20.
Earlier this week, PGR released its September numbers. Every month it releases the numbers from the trailing month and the results were impressive, given the chaotic events during the month.
The key profitability ratio for property and casualty (P&C) insurers like Progressive is what’s called their combined ratio. The company saw a spike in its usually strong combined ratio in August because of Hurricane Harvey. But by September, that number had almost come down to its normal range, which is a bullish sign moving forward.
Also, PGR continued to see double-digit growth in its policy growth for autos, both in direct sales and agency sales.
Another thing to remember about P&C insurers is they keep a large amount of their cash in highly liquid securities like U.S. Treasury bonds and notes. As rates rise, these holdings grow in value.