PGR strategy and positioning

I think I do not own another company with such a clear, and I guess logical and potentially value creating, strategy.

This is not investment advice. Please read the disclaimer. I might own discussed stock(s) currently or at a later time. I might transact in any securities at any time.

If I remember Spitznagel’s definition of strategy as ‘means of gaining greater superiority’ PGR’s goal of growing as fast as possible while maintaining combined ratios or CR ≤96 might fit this definition perfectly. I think I do not own another company with such a clear, and I guess logical and potentially value creating, strategy. Some might want to say flywheel effect and I guess my very first post on PGR might have included that:
• Growing in car insurance means more data and thus potentially yet better segmentation/pricing (still a factor at PGR’s size?)
• Being the biggest car insurer means less cents per dollar of premium income being spend on national advertising for building PGR’s brand (which might be responsible for customers choosing PGR instead of competitors at equal prices). Related to Intel’s R&D spend our dollar of sales vs smaller competitors in and yet…
• On an absolute level more money available for technology development (R&D) vs peers if using equal amount of cents per dollar of premium revenue.
• Basically, a higher ER and lower LR with comparable CR as competitors should enhance competitive positioning.
• With selling more products per customer (bundling) PGR increases its customers’ policy life expectancy or PLE should rise, or at least be above peers’ average, thus drive profitability (PLE was recently down but recovering).
• Car insurance is a product nobody likes to buy, but it it mandatory. Price is the factor.
Trends in advertising spend
GEICO slashes ad spend by nearly 40% in 2022 | S&P Global Market Intelligence (

PGR spends the most, which can either be seen as
• PGR is wasting money and using less efficient advertising (unlikely from what we read about their inhouse teams – but we (=me!) might be biased)
• PGR spends more on advertising and thus further builds its brand mortifying and still improving its relative positioning vs peers. If (big if), all their CRs are the same, then PGRs lt. value creation should benefit on higher relative spend on advertising (from $1 in premiums) while competitors pay out more of $1 of their premiums in claims with no further benefit (if assuming PGR pays fair claims – which I do!)

Though, the stock seems not screamingly cheap and recent months saw negative revisions to prior period losses, effectively pushing the CR for 2022 above the 96 threshold! Further, the very high NPW growth is driven by NTC contracts, but an adjusted NPW growth is still strong.


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