Progressive (PGR, Financial) reported higher than expected loss trends during the summer months. Much of this was due to inflation in the automobile supply chain. Over the past few years, its policy pricing actions have been relatively benign, so we think the Company has plenty of room with customers and pent-up goodwill with regulators to take up pricing and offset this pressure while maintaining its double-digit policy volume growth. The stock trades at a significant discount to the market, as financials – particularly insurers – are out of favor with “growth technology” investors. Progressive represents the rare financial that can post attractive growth due to its best-in-class ability to segment its markets and leverage its low-cost direct distribution.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners third-quarter 2021 shareholder letter.
