Progressive (PGR, Financial) continues to report double-digit growth in policies in force (PIF), having added nearly 750,000 personal automobile and commercial PIFs in the first quarter of 2021, compared to the Company’s closest competitor, GEICO (a subsidiary of Berkshire Hathaway), which added just 124,000 PIFs. However, Progressive’s loss ratio has been elevated over the past few months due to a large, unseasonal ice storm that affected the southwestern U.S. We expect the financial effects of this to be short-lived and that the Company’s core earnings power should continue compounding in-line with its growth in PIFs. Traditional financial businesses are historically and relatively out of favor, if only evidenced by their slim weightings in major U.S. benchmarks, but there are pockets of exceptional growth businesses, such as Progressive, where we are happy to be contrarians.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners second-quarter 2021 shareholder letter.
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