Goldman Sachs analyst Robert Cox reiterated the Buy rating on Progressive Corporation (NYSE:PGR) with a price objective of $294.

The analyst increased the company's 2025/2026 EPS estimate by 4%, mainly driven by a more favorable outlook for the personal lines loss ratio.

Cox suggests that their view of a modest improvement in the expense ratio (excluding advertising) over the next two years remains largely unchanged, projecting a 35bps increase.

However, the analyst raised estimate for the consolidated expense ratio by 20-30bps in 2025/2026 due to expectations of higher advertising spending.

Additionally, Cox revised the net interest income (NII) estimates upwards, reflecting the updated forward curve for fixed income yields.

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As a result, the analyst's 2025/2026 EPS estimates increase by 5%/4%, remaining approximately 7% above consensus estimates.

The analyst notes that, in their updated loss trend analysis, he is maintaining a severity trend of approximately 4% for 2025. This forecast takes into account a 6% increase in bodily injury severity and a 2% rise in physical damage severity, driven by a shift from depreciation to moderate inflation in used car prices, along with more normalized inflation in repair costs.

The analyst states that he is raising their estimates for personal auto policy-in-force (PIF) growth by 100bps in 2025 and 20bps in 2026. Additionally, Cox increased the estimate for the consolidated expense ratio by 20-30bps.

This adjustment reflects the continued expectation that advertising efficiency in 2025/2026 will remain, on average, more than 30% below the pre-pandemic (2017-2019) levels.

Price Action: PGR shares are trading higher by 2.76% to $254.93 at last check Wednesday.

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