Think "progressive," and you might think of rock bands like Fates Warning and Queensryche, or politicians like presidential wannabes Howard Dean and Dennis Kucinich. But a Fool thinking about insurance might instead think of Progressive (NYSE:PGR), the auto insurer.

On the surface, Progressive's December quarter results look quite strong. Net premiums written grew 15%, the combined ratio (a measure of the cost of losses and expenses incurred) dropped from 85.9 to 85.5, and earnings per share of $2.01 blew away the median analysts' estimate of $1.67. Even if you factor out $0.31 per share of favorable reserve adjustments, the company still beat the Street.

So what's not to love? Well, the company acknowledged yet again that business is slowing. Auto insurers have been enjoying a "perfect storm" of rising policy rates and lower-than-forecast accident claims, and their coffers have filled with cash. So far, so good. Right?

When insurers find cash piling up, they have a few options -- they can buy back stock, they can pay the money out in dividends, or they can write even more insurance and grow their business. Not surprisingly, most companies pick option No. 3. As a result, insurers are becoming more aggressive with their policy pricing and are driving down profitability.

Ultimately, insurers like Progressive will have to decide whether to chase business that will be less profitable and/or more risky or to simply step back and watch other insurers snatch up business. Neither option is especially appealing, now, is it?

Progressive is no doubt a high-quality insurer, but Wall Street has already bestowed its reward. When comparing price-to-book value with other insurers, such as Torchmark (NYSE:TMK), AON (NYSE:AOC), Chubb (NYSE:CB), or Safeco (NASDAQ:SAFC), Progressive is certainly trading at a premium. What's more, of the list below, only Progressive and AON are projected to actually have lower earnings next year.

Company P/E Price/Book Forward P/E
Torchmark 13.4 1.8 11.9
AON 10.4 1.5 12.6
Chubb 12.7 1.6 9.7
Safeco 10.6 1.6 9.0
PGR 11.0 3.0 12.8

Given that Progressive is a high-quality company, many investors may be tempted to just hold on -- after all, the insurer may hit a few potholes, but it's probably not going to smack into a tree. And we at the Motley Fool staunchly believe in the virtues of long-term buy-and-hold investing. Still, those who don't already own the shares (and maybe some of the more short-term-oriented of those who do) might want to look at shares of Pfizer (NYSE:PFE) or Applied Materials (NASDAQ:AMAT) for a sneak peek and what a cyclical down period can look like.

Fool contributor Stephen Simpson holds a CFA and has no ownership interest in any stocks mentioned.