Should long-term investors may see an opportunity in share price weakness.
The stock market came roaring back after selling off earlier this year. In 2025, the S&P 500 index has returned 14.4% through Nov. 7.
Technology stocks have received a lot of attention, particularly those connected to generative artificial intelligence. And many have had outsize gains, like Nvidia‘s share price appreciation of 40.1%.
However, other sectors have lagged. For instance, the S&P 500 financials sector has underperformed the overall index with a 9% increase this year. Can you find bargains within the group?
Within the financials sector, let’s take a look at well-known insurer Progressive (PGR +0.94%) to see if the stock warrants buying for those eyeing long-term gains.
Image source: Getty Images.
Historically strong underwriting
People may recognize the Progressive brand from its ubiquitous commercials that appear on television and elsewhere. The company operates in the property and casualty (P&C) insurance segment. It provides insurance for cars, motorcycles, recreational vehicles, and homes, among other things, protecting individuals and businesses.
Historically, the company has done a good job underwriting its coverage, meaning that it typically prices policies properly for the risk that it bears.
You can measure its effectiveness by looking at the company’s combined ratio, which tells you about an insurer’s underwriting profitability. In 2023 and 2024, Progressive had a combined ratio of 83.4 and 84.1, respectively. Anything below 100 indicates a profit, and the lower the figure, the better.
Its underwriting profitability is also much better than the P&C insurance industry as a whole, according to the National Association of Insurance Commissioners. In the years 2014 through 2023, the industry’s combined ratio ranged from 97.3 to 103.9.
It may sound strange that the P&C insurance industry as a whole doesn’t make much money from its core insurance operations. That’s because its members either don’t price the risk correctly, or they’re hoping to make money from their investment portfolio. Personally, I like to see an insurance company produce a profit from its core business without relying on its investments.
Progressive has also been writing more policies. During 2024, its premiums written rose to about $6 billion, up 22% from the previous year.
A blip or longer-term issue?
However, third-quarter results appear to have concerned some investors. While net premiums written increased 9% versus a year ago to $6.8 billion, Progressive’s combined ratio jumped to 100.4 from 93.4.
That’s due in part to a Florida law requiring insurers to return a portion of insurance profits when they exceed a certain level for the 2023 to 2025 period. In September, Progressive took a $950 million policyholder credit expense for this item. That lifted the company’s combined ratio, but I’m not concerned since it didn’t stem from taking higher risks or improperly pricing it.
Value stock or value trap?
Progressive’s share price, losing 9.3% this year, has underperformed the overall S&P 500 and the insurance sector. The second half has been particularly weak for the shares, including a negative reaction following its third-quarter earnings release.
Today’s Change
(0.94%) $2.09
Current Price
$225.24
Key Data Points
Market Cap
$132B
Day’s Range
$221.04 – $227.06
52wk Range
$199.90 – $292.99
Volume
128K
Avg Vol
3.3M
Gross Margin
0.00%
Dividend Yield
0.02%
Does this represent an opportunity for long-term investors to buy shares at a good value? One prominent valuation metric, the price-to-book ratio (P/B), is a good one to use for insurance companies.
On that basis, the stock has become much cheaper. It currently trades at a P/B of 3.6, down from well over 6 earlier this year. Still, that’s higher than the S&P 500 Financials’ P/B of 2.4 as of Oct. 31.
Progressive’s share price might not represent a bargain compared to the financial sector, but I would view the price weakness and better valuation as a buying opportunity, given it’s one of the better-run P&C insurance companies.