With a bit of consistency and patience, investing in the stock market can be an excellent way to build long-term wealth. Depending on your choices, some stocks will deliver stellar growth and outstanding returns, thanks to the sound business models and strong market positions of the companies they represent.
One standout stock that achieved impressive returns over the past four decades is Progressive (PGR -0.76%). The stock returned an average of 19.3% annually over this period. That means a $10,000 investment in Progressive in 1985 would be worth almost $5.2 million today.
This insurance company stock's performance has crushed the S&P 500 average along the way, but has mostly slipped under the radar in terms of publicity. What this shows is that some blue-chip stocks can be hidden gems you need to seek out and find.
Let's look at why Progressive is a monster stock that deserves a place in your portfolio.
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Progressive is a top player in a stable industry
The odds are good that you are familiar with Progressive and its humorous (and seemingly ever-present) marketing campaign led by Flo. What you may not know is that Progressive is one of the best-run insurers in the United States and has delivered strong returns for its investors over a long period.
What sets Progressive apart is its ability to accurately assess risks and offer competitive prices. This is vital in the very competitive insurance landscape, where numerous companies clamor for your business. Another benefit is that insurance is a steady business, and Progressive's insurance coverage will always be in demand.
Progressive stands out among the competition, thanks to its long-standing commitment to generating a modest underwriting profit. When Peter B. Lewis took over as CEO of Progressive in 1965, he committed to growing the company through profitable policies.
Up until this point, many insurers accepted that they would break even on their insurance policies and make their real profits from their investments. Progressive rejected that notion and, instead, focused on underwriting policies that would generate about $4 in profits for every $100 in premiums.
With a commitment to underwriting profitable insurance policies, Progressive has leveraged technology to make sure it achieves its goal and an edge over the competition. For example, one reason for Progressive's underwriting advantage is its use of telematics. The insurer was one of the first to utilize driver data, such as mileage driven, speed, and braking time, to personalize rates for drivers.
Over the past 24 years, Progressive has consistently achieved a combined ratio of 96% or better. This solid underwriting performance has been achieved across multiple recessions and various soft and hard market environments.
Data by YCharts.
Why insurers could do well in today's economy
In addition to its solid underwriting, Progressive has an advantage compared to non-insurance companies thanks to its collect-now-pay-later business model. Insurers collect premiums upfront and pay out claims at a later point in time. In the meantime, insurers hold on to the premiums they collect and can invest these as they see fit (usually in relatively safe Treasuries and other instruments) to boost their income. This business model has been especially beneficial over the past few years, with Treasury yields rising to their highest level in two decades over concerns about inflation.
In 2022, Progressive earned $1.2 billion from investment income, which includes interest income from its fixed-income investments, such as bonds, and dividends from its stock holdings. Last year, Progressive's net investment income was $2.8 billion, representing a 127% increase over the previous two years as the Federal Reserve's benchmark interest rate increased from near zero to as high as 5.5% early last year in an effort to curb what had been rising inflation.
There remain concerns about the potential for another inflationary flare-up. According to the University of Michigan Survey of Consumers, the median inflation expectation for the next year is 5.1% (as of June 2025), up from 2.6% in November 2024. If inflation were to stay elevated, Progressive is well-positioned, as it can identify early on if inflationary pressures are emerging and adjust premiums the next time customers renew their policies, which generally occurs every six months.
A solid blue chip stock
Progressive has a proven track record of navigating various economic environments thanks to its disciplined approach to underwriting policies and a long-standing commitment to generating at least $4 in profit for every $100 in premiums written. The company leverages telematics and a data-driven approach to underwriting, which positions it well if inflation remains stubbornly high.
On the other hand, if the Federal Reserve achieves a soft landing (lowering inflation without triggering a recession), steady demand should help Progressive continue to grow alongside an expanding economy.
Progressive continues to outperform and maintains its strong position in the automotive insurance market. Given its track record and competitive advantage in underwriting, Progressive is a stellar blue-chip stock that investors can confidently hold onto for the long haul.
