MARKET SAVVY : SAVVY CONFIDENTIAL: A Briefing for Investors : Progressive’s Problems, Others’ Opportunities?

Progressive Corp. may not be living up to its name lately--at least as far as shareholders are concerned--but its problems could spell progress for its rivals, analysts said Tuesday.

Allstate Corp., Hartford Financial Services Group Inc. and some other U.S. property and casualty insurers could benefit from Progressive’s woes, according to analysts.

Progressive shares plummeted 14% on Monday after the Ohio firm warned that third-quarter earnings will fall short of Wall Street estimates. The news dragged Allstate down 5% as investors bet that other car insurers will suffer from the mounting claim and other costs that hurt Progressive.

More likely, though, Progressive will be forced into price increases that signal opportunity for competitors, said Alain Karaoglan and Mark Bourguignon, analysts with Donaldson, Lufkin & Jenrette who reiterated “buy” recommendations on Allstate, Hartford Financial and Travelers Property Casualty Corp.

“A lot of the issues at Progressive are company-specific,” Karaoglan said. Shares of Allstate, Hartford and other insurers “have gotten beaten more than I would have expected” because of Progressive’s announcement.

Progressive cut prices more rapidly than rivals, said Karaoglan, who in January reduced his rating on Progressive stock to “market perform” from “buy.”

Medical costs, hurricanes and other conditions point to bigger claims, yet “the trends seen by Progressive are exacerbated” by its “business strategy and growth,” the analysts said in a report. The company has invested in advertising and technology as it tries to expand beyond its main business of insuring high-risk drivers.

Horace Mann Educators Corp., which specializes in insuring teachers, and Seattle’s Safeco Corp. reported that auto insurance costs rose in the second quarter, although expenses haven’t kept climbing in the current quarter.

However, the report pointed out risks to Allstate, which relies on its 15,000-member agent force to sell most of its policies. The company is seen as potentially losing ground to Progressive, Berkshire Hathaway Inc.’s Geico Corp. and other rivals that use the Internet and toll-free phone numbers to remove agents’ commissions from the price of insurance, the report said.

Progressive eased another 75 cents Tuesday to $102. The stock is down about 40% year to date.

Allstate, the largest publicly traded auto insurer, fell 88 cents to $32.81; Horace Mann gained 6 cents to $30.13; Travelers, 84%-owned by Citigroup Inc., rose 13 cents to $35.50; Hartford Financial fell $1.25 to $45.44; Safeco rose $1 to $35.63; Berkshire’s Class B shares dipped $1 to $2,003. Safeco trades on Nasdaq, the others on the New York Stock Exchange.

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Seeking Progress

Progressive’s troubles could spell opportunity for other insurers, analysts said. Like Progressive, many of its competitors in property-casualty insurance are down significantly from their peaks:

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Ticker Tuesday 52-week: 52-week: P/E* Company symbol close High Low ratio Allstate ALL $32.81 $48.38 $32.50 11 Berkshire Hathaway BRK/B 2,003.00 2,713.00 1,893.00 35 Hartford Financial HIG 45.44 66.44 37.63 12 Horace Mann HMN 30.13 33.00 20.25 16 Progressive PGR 102.00 174.00 94.00 17 Safeco SAFC 35.63 46.75 34.38 16 Travelers Property TAP 35.50 41.88 24.13 11 S&P; 500 index SPX 1,320.41 1,420.14 923.32 27

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* Price-to-earnings ratio based on previous 12 months’ earnings.

Sources: Blooomberg News, Times research