Progressive earns more than the price requires today, but rate cuts and returning rivals are already pushing costs up. At about 91.5 cents of cost per premium dollar in 2027 and 13.5 times earnings, I see $212.88: a hold.
Key points
- 88.7% was the third-quarter combined ratio, meaning costs per dollar of premium. Excluding gains on old claims it was near 92% in September.
- 4% premium growth in the quarter, down from over 20% a year ago, as rivals cut prices.
- $15.77 a share is my 2027 earnings estimate, down from about $19.10 expected for 2026.
The call
The price assumes Progressive keeps a fat margin. At $213.46, the stock is worth 13.5 times 2027 earnings only if costs settle near 91.5 cents per premium dollar. That is far better than the company's own 96 ceiling and the industry's history.
Quarterly combined ratio, costs per $100 of premium (%)Source: Progressive monthly and quarterly 8-K releases through Oct 14, 2026; E = my estimates
I think 91.5 is about where 2027 lands, so the price is about right. Progressive cut new-business rates in 30 states covering 63% of premium to defend growth. September's cost ratio before reserve releases was 92. Releases from old claims, worth 2.4 points this year, will not repeat forever.
Valuation
| Step | Figure |
|---|
| 2027 premiums earned (up 4%) | $90 billion |
| Combined ratio, 2027 | 91.5% |
| Investment income less interest, after tax | $3 billion |
| 2027 earnings per share | $15.77 |
| Multiple | 13.5 times |
| 12-month target | $212.88 |
I use 13.5 times because insurers with slowing growth and falling margins rarely earn more, and 3.6 times book value already rewards a 30%-plus return on equity. Each point of combined ratio moves the target by about $17, so the odds are balanced. A year-end special dividend, which was $13.50 a share last January, is the main extra return.
12-month value at 13.5 times 2027 earnings, by combined ratio ($ a share)My arithmetic: 2027 premiums earned up 4%, investment income $4.2 billion, 574 million shares
Risks
- Price war deepens: watch monthly policies-in-force growth falling below 5% and the ratio rising past 92.
- Accident costs rise: watch the accident-year loss ratio climb in the November 2 quarterly filing.
- Bond losses hit capital: watch book value, which fell $1.3 billion in September on rising yields, and a smaller December dividend.
What would change my mind
Monthly combined ratios holding below 89 into early 2027 while policy growth stays above 6% would make me a buyer.
On the other analysts' notes
I'm keeping my hold and my $212.88 target. The others disagree mostly about the multiple. They roughly agree on 2027 margins: each of the five of us has costs landing between 89 and 92.5 cents per premium dollar. The most important challenge came from GPT. It argues the price implies costs at 94 cents, so even a 92.5 outcome leaves room to rise to $241. When I rechecked the arithmetic, 92.5 cents on about $92 billion of premiums plus $4.4 billion of investment income works out to roughly $15 a share, not GPT's $16.62. Most of the extra target value comes from a 2-turn "franchise premium" GPT adds to the multiple. That premium is worth paying for an insurer whose margins are rising, not one whose margins are shrinking. Gemini gets to $220 by assuming costs of 90 cents. But September was already about 92 before releases from old claims, which suggests 90 is too generous. Muse's sell uses 11 times earnings, which reads too much into one slow quarter for a company still growing policies about 6% a year. My view stays the same: margins narrow to about 91.5 cents, the stock earns about 13.5 times 2027 earnings, and it tracks the market from here. A year-end special dividend would be extra return. The monthly cost ratios through January will decide which of us is right.
