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PROGRESSIVE CORP/OH/ (PGR)·Q1 2025 Earnings Summary

Executive Summary

  • Progressive delivered strong Q1 performance with companywide combined ratio at 86.0% (vs. 86.1% a year ago; 87.9% in Q4), record growth (NPW +17% YoY; NPE +20%), and double-digit EPS growth; management called it “one of our best quarters ever with near-record margins coupled with record growth.”
  • Versus S&P Global consensus, Q1 EPS ($4.37) and total revenues ($20.409B) both missed (consensus EPS $4.75*, revenue $21.73B*); revenue was pressured by net realized losses on securities (-$212M YTD) despite higher investment income (+32% YoY), while underwriting margins remained robust. [functions.GetEstimates]
  • Growth engines remain intact: personal auto new applications hit a new Q1 record (>20% above the prior record), PIF up 18% YoY, and all three major businesses (personal auto, property, commercial) posted YTD combined ratios below 90. Management is leaning into advertising spend while keeping CPS ≤ TAC.
  • Key 2025 narrative: maintain rate “small bites” by state, sustain growth at/below 96% CR target, and actively model tariff scenarios to react quickly if loss-cost trends rise; capital posture remains conservative (duration ~3.4, common equities ~4% of portfolio).

What Went Well and What Went Wrong

  • What Went Well
    • Broad-based profitable growth: NPW +17% and NPE +20% (YTD), combined ratio 86.0% YTD; personal auto, property, and commercial all sub-90 CR YTD.
    • Demand and competitiveness: “first quarter 2025 personal auto new applications surpassed the previous record by over 20%,” with strong quote and conversion metrics; PIF +18% YoY to 36.3M.
    • Investment income tailwind and prudent risk: investment income +32% YoY; low equity exposure (~4% of portfolio) and duration at ~3.4 years, supporting resilient capital while keeping sensitivity in check.
  • What Went Wrong
    • Consensus miss: Q1 EPS $4.37 vs. $4.75* and revenue $20.409B vs. $21.73B*, with realized losses (-$212M YTD) part of the revenue drag; month of March included $(211)M realized losses. [functions.GetEstimates]
    • Retention/PLE pressure amid heavy shopping and mix normalization (more “Sams”): management acknowledged PLE trending lower on trailing metrics even as renewal app growth improves; the focus is on stable rates and customer preservation to turn trends.
    • Tariff uncertainty: management emphasized tariffs are inflationary and one-sided to loss costs; they are running granular, evolving scenarios by vehicle/USMCA status and are in dialogue with state DOIs.

Financial Results

MetricQ3 2024Q4 2024Q1 2025 ActualQ1 2025 Consensus
Revenue ($USD Billions)$19.03*$19.93*$20.22*$21.73*
Diluted EPS ($)$3.97 $4.01 $4.37 $4.75*
Combined Ratio (%)89.0 87.9 86.0 N/A

Notes: Values marked with * retrieved from S&P Global.

Company-reported Q1 2025 total revenues were $20.409B (YTD basis equals the quarter for Q1) and net income was $2.567B; diluted EPS was $4.37.

Segment breakdown (YTD Q1 2025):

SegmentNPW ($USD Millions)NPE ($USD Millions)Combined Ratio (%)NPW Growth YoY (%)NPE Growth YoY (%)
Personal Lines – Agency Vehicles$7,473 $7,026 81.9% 17% 20%
Personal Lines – Direct Vehicles$10,067 $8,908 88.6% 25% 27%
Personal Lines – Property$733 $776 87.2% 0% 9%
Total Personal Lines$18,273 $16,710 85.7% 20% 23%
Commercial Lines$3,933 $2,699 87.5% 5% 6%
Companywide$22,206 $19,409 86.0% 17% 20%

KPIs and operating metrics:

KPIQ1 2025Q1 2024
Companywide Policies in Force (000s)36,292 30,834
Personal Auto – Agency (000s)10,146 8,593
Personal Auto – Direct (000s)14,771 11,855
Special Lines (000s)6,637 6,076
Property PIF (000s)3,576 3,209
Net Premiums Written ($M)22,206 18,962
Net Premiums Earned ($M)19,409 16,149
Investment Income ($M)814 618

Balance sheet & capital (as of 3/31/2025):

  • Book value per share: $49.39; Debt-to-total capital: 19.2%; TTM ROE (net income): 34.2%; fixed-income duration: 3.4; weighted average credit quality: AA-.

Guidance Changes

Metric/PolicyPeriodPreviousCurrentChange
Combined ratio (calendar-year target)FY 2025≤96% target≤96% targetMaintained
Rate posture2025“Small bites,” state-by-stateContinued small increases/decreases; broadly stableMaintained
Advertising spend2025Spend if CPS ≤ TACWill flex spend as long as growth is efficient; auctions getting more competitiveMaintained
DividendQ2 2025N/A$0.10 per share declared, payable Apr 11, 2025New
Investment posture2025Low equities; duration ~3.3~4% equities; duration ~3.4Maintained
Property strategy2025Focus on less volatile states; bundlingContinue non-renewals in FL to complete ~115k; cautious in CA; push bundlingMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroCat events (Helene/Milton) emphasized risk; early tariff watch (Q4 call). Detailed, surgical tariff modeling (USMCA, parts, vehicle compliance); outreach to DOIs; tariffs viewed as inflationary to loss costs. Intensifying focus
Rate/CompetitivenessInto “small bites” posture in late 2024. Rates up in some states/down in others; broadly flat; balancing growth at/below 96%. Stable/competitive
AdvertisingIncreased spend in 2H24; delayed-response brand investments. Spending into high shopping season; cost per sale still efficient; auctions more competitive. Rising but disciplined
Retention/PLEAcknowledged PLE pressure from prior rate actions. Continued T3/T12 PLE pressure amid heavy shopping and mix; customer preservation efforts. Pressure persists
Claims tech/dataQ4 deep dive on photo estimating, ML, productivity; LAE at historical lows. Reinforced execution excellence; using data to react to macro (e.g., tariffs). Expanding capability
PropertyBlueprint: derisk, DP-3 exit, bundling; cat impacts in 2024. Sub-90 CR in Q1 property; renters growth; targeted FL non-renewals; cautious in CA; continue bundling push. Improving quality mix
InvestmentConservative alloc, low equity exposure, up in duration; higher new money yields. Investment income +32% YoY; duration ~3.4; equities ~4%. Supportive yields

Management Commentary

  • “We just delivered one of our best quarters ever with near-record margins coupled with record growth.” — CEO Tricia Griffith
  • “First quarter 2025 personal auto new applications surpassed the previous record by over 20%… strong conversion suggests very good price competitiveness.” — CEO
  • “We took about a dozen state rates up and a dozen state rates down, but mainly flat… we’re sitting on some nice margin with an 86% combined ratio in the first quarter.” — CEO
  • “Our investment portfolio generated investment income that was 32% greater than the first quarter last year… At quarter end, common equities were only 4% of our total portfolio.” — CEO
  • “We are as prepared as anyone” on tariffs; models reflect USMCA compliance, parts sourcing, and evolving policy changes; contacting insurance departments proactively. — CEO

Q&A Highlights

  • Rates and growth: Maintain “small bites” by state to grow at/below 96% CR; posture broadly flat with selective up/down moves.
  • Advertising efficacy: Spend remains efficient (CPS ≤ TAC), but auctions more competitive; leverage digital, TV, radio, and even direct mail where efficient.
  • Retention/PLE: PLE depressed by mix (more “Sams”), heavy shopping, and policy rewrites; using preservation teams and stable rates to improve trends over time.
  • Tariffs impact: Tariffs are one-sided to loss costs; Progressive built granular models (vehicle-level, USMCA) and will react quickly; engaging state DOIs on methodology.
  • Property strategy: Continue derisking; complete FL non-renewals by May; cautious approach in CA; push bundled growth and renters.
  • Investments: Higher new money yields, modest duration increase (~3.4), low equities (~4%); patient and opportunistic stance to drive long-term ROE.

Estimates Context

  • Q1 2025 vs S&P Global consensus: EPS $4.37 vs $4.75* (miss); total revenues $20.409B vs $21.73B* (miss). Underwriting margins were strong (86.0% CR), but realized losses on securities (-$212M YTD; $(211)M in March) weighed on revenue and EPS relative to estimates. [functions.GetEstimates]
  • Street models may need to reflect: stronger sustained margins (sub-90 CRs across businesses YTD), higher investment income run-rate, and potential tariff-driven loss-cost scenarios later in 2025 balanced by Progressive’s rate agility.

Notes: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Margin-dilutive macro (tariffs) is the key 2H25 risk, but Progressive’s modeling/rate agility and current margin buffer (86% CR in Q1) position it well to respond quickly.
  • Growth remains exceptional and efficient: record new apps, +18% PIF YoY, willingness to flex ad spend while keeping CPS ≤ TAC.
  • Segment quality improved: all major businesses sub-90 CR YTD; property showing better underwriting after derisking/bundling strategy.
  • Investment tailwinds: rising book yields, larger asset base, and conservative equity exposure support earnings durability.
  • Watchlist for Q2–Q3: retention/PLE stabilization, competitive ad intensity, state-by-state rate moves, catastrophe season, and any tariff-induced severity shifts.
  • Capital flexibility: debt-to-capital ~19%, strong ROE, and modest dividend signal capacity to support growth and opportunistic investments.

Additional Q1 2025 press releases of note:

  • Declared $0.10 per share common dividend (payable Apr 11, 2025).
  • Announced hiring plan to support growth (>12,000 roles).
  • Reported March 2025 results (as in 8-K exhibit).