Progressive Keeps Me Amazed

A wonderful insurance stock in my portfolio

Progressive Corporation has just released its October results. While one month’s performance is insignificant, my reaction is purely emotional. One of the largest U.S. Property and Casualty insurers continues to grow premiums by an impressive 19-20% while maintaining an enviable combined ratio of 89.6% YTD — despite fierce competition from Buffett’s Geico and the rest of the industry. How is this even possible?

I last reviewed the Progressive this August (“Accumulate This Amazing Performer on Weaknesses”) and it is too early for a deep dive. So only one short comment from me.

The company doesn’t directly reveal the secrets behind its success, but I suspect that, among other factors, its early move into UBI (usage-based insurance), where the insurer monitors individual drivers, has provided a significant edge in AI training. As the #2 auto insurer, Progressive’s deep data moat has become a formidable barrier for most competitors. It’s akin to trying to surpass Google’s YouTube in video AI training.

Economists often state that insurance is a commodity, but that may be only in theory, especially over the medium term…