Progressive Earnings: Multiple Tailwinds Continue to Drive Strong Results

Narrow-moat Progressive produced another strong quarter, with results roughly in line with the previous quarter. We think the company is benefiting from two main tailwinds currently, as stronger pricing is boosting underwriting results and higher interest rates are producing stronger investment income. The trailing 12-month return on equity of 35% highlights the benefits Progressive is seeing. While we appreciate the strong near-term outlook, we see insurance as a highly competitive industry that is inherently mean-reverting, and we don’t think the current environment will persist. We will maintain our $144 per share fair value estimate and see shares as materially overvalued. We think the market is overly focused on Progressive’s near-term prospects.