AHL Aspen Insurance Holdings Limited Ordinary Shares

We retain our Neutral recommendation on Progressive Corp. (PGR) given an increasing trend in total expense, increased competition and a soft economic situation challenging growth. Progressive carries a Zacks Rank #3 (Hold).

Why the Reiteration?

Continued growth at the Commercial Auto businesses could be challenging owing to the soft economy combined with increased competition. In the months of October and November last year, the Commercial Auto business experienced dwindling results.

In addition, Progressive has been experiencing an upscale in expenses. Results of the last two reported months also exhibited a rise in expenses.  Higher losses and loss adjustment expense, policy acquisition costs and other underwriting expenses continue to drive higher expenses.

Nevertheless, Progressive’s focus on customer retention, efforts to return value to shareholders, and a dominant position in product, service and distribution innovation, especially in personal auto, is expected to weather these negatives.

In Dec 2013, the Board approved a special dividend of $1.00, testifying the inherent strength of its balance sheet. With respect to share buybacks, it spent $38.1 million to buy back 1.5 million shares in the third quarter of 2013.

Of the share repurchase authorization involving 75 million shares approved in Jun 2011, the company is still left with 35.3 million shares to be bought back. Given its favorable financial strength, we expect more shares to be repurchased going forward.

Additionally, the debt-to-capital ratio continues to improve over the years. During the third quarter, Progressive bought back debentures worth $54.1 million, and beginning fourth quarter it retired $150 million 7% Notes. Going forward, we expect Progressive’s deleveraging activities to further improve its debt-to-capital ratio.

Other Stocks to Consider

Some better-ranked stocks in the insurance space include Allied World Assurance Company Holdings, AG (AWH), Aspen Insurance Holdings Ltd. (AHL) and Hilltop Holdings Inc. (HTH). All these stocks sport a Zacks Rank #1 (Strong Buy).

 
ASPEN INS HLDGS (AHL): Free Stock Analysis Report
 
ALLIED WORLD AS (AWH): Free Stock Analysis Report
 
HILLTOP HLDGS (HTH): Free Stock Analysis Report
 
PROGRESSIVE COR (PGR): Free Stock Analysis Report
 
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