Progressive Stock’s Slide May Have Gone Too Far. It’s a Chance to Buy.

Progressive is a technology leader in auto insurance, using real-time driving information to price policies and other sophisticated analytics to measure and price risk. (Courtesy Progressive)

Wall Street may have overreacted to bad news at Progressive, slamming the stock and sending shares lower across the auto insurance industry.

Progressive was the second-worst performing stock in the S&P 500 , falling 5.8% Wednesday to $226.50 after hitting a 52-week low of $217.20 earlier in the session. The stock peaked at $292 in May.

Allstate shares fell 4.3% to $200.42 and Travelers was down 2.3% to $269.45.

The problem was that Progressive, tops among U.S. property and casualty insurers with a market value of $130 billion, reported a profit of 52 cents a share for September, down 48% from the year-earlier period. There doesn’t appear to be a monthly consensus forecast on FactSet, but the profit for the September quarter of $4.45 a share was below the consensus call of $5.04.

A closer look at the results shows that the big auto insurer’s underlying profits were strong. Its combined ratio—the sum of expenses and claims as a percentage of premiums—came in 86.5% for September, excluding a $950 million so-called policyholder-credit expense for Florida customers, according to the company. The insurer will have to hand that amount back to clients because its profits in the state are expected to have exceeded statutory limits from 2023 through the end of this year.

A combined ratio of 86.5% translates into a healthy underwriting profit margin of 13.5% (100 minus 86.5), considerably above Progressive’s stated goal of 4%. Including the Florida expense, the combined ratio of Progressive’s personal-lines insurance business was 102.5% in September, meaning that part of the business had an underwriting loss. Progressive also earns money from investing premiums it collects.

Progressive is a rarity in the S&P 500 because it reports financial results monthly. While Progressive called out the Florida expense in its earnings report, it didn’t appear to report an adjusted earnings figure and it didn’t hold a conference call to go over the results. It plans a call on Nov. 4.

The stock now trades for about 12 times projected 2025 earnings of $18.30 a share. The shares are at 13 times estimated 2026 profits of $16.50 a share.

Key insurance metrics for Progressive were strong in September including 12% year-over-year growth in total policies in force to 38 million. Net written premiums rose 8% to $7.1 billion.

Analysts and investors have expected some slowdown of the growth at Progressive and some degradation of its ample margins going into 2026. It has made bumper profits over the past year and competition is increasing in the auto-insurance market.

Progressive remains an industry standout with a No. 2 market share, behind only State Farm. It has the best growth among leading companies. The carrier is a technology leader in auto insurance, using real-time driving information to price policies and other sophisticated analytics to measure and price risk.

The Florida credit expense of $950 million stems from insurance-law overhauls enacted in the state in early 2023 to curb litigation and abuses in the system. Despite taking action to lower auto-insurance rates in the state last year, Progressive expects its profits for the three years ending in 2025 to exceed statutory limits. It will credit policyholders active in the state on Dec. 31 of this year. A final figure will be determined in the coming months.

The company’s 2.7 million policyholders in the state will start getting rebates in 2026, and they could average over $300 each.

All that means the financial hit Wednesday was a one-time event. It indicates that the stock selloff could offer a good entry point in Progressive, which is one of the best-run big companies in the P&C insurance industry.

Write to Andrew Bary at andrew.bary@barrons.com