Progressive's (PGR) underlying loss ratio could continue to move higher as pricing trends remain below loss-cost inflation, while policies in force growth decelerates in an increasingly competitive landscape, UBS said in a note Friday.

The company posted worse-than-expected underlying loss ratio in August, but the EPS beat was driven by better-than-expected net favorable reserve development and lower catastrophe losses, the note said.

There was also a $19 million adverse actuarial reserve development in the commercial auto segment in August, which is historically the second-worst month for underlying loss ratios, according to the note.

UBS reiterated its neutral rating on the stock and price target of $234 per share.

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