Progressive Insurance: Disclosure Strategy
Progressive Insurance had refused to play Wall Street's earning game. Progressive didn't manage reported earnings nor did management give guidance to analysts. Management then considered taking their unique disclosure strategy one step further to become the first to move to monthly reporting of operating results. Significant benefits had accrued from Progressive's refusal to play the earnings game. Management's time wasn't wasted manipulating reported results or talking to analysts, and reported numbers didn't mislead internal or external decision making. However, there were significant costs, as well. Unguided analysts' forecasts were often well off the mark, causing Progressive's stock price to fluctuate widely around quarterly earnings announcements. Analysts' forecasting abilities seemed to be getting worse--during four consecutive quarters in 1999-2000, management felt compelled to give mid-quarter warnings that earnings would fall significantly below the First Call's consensus estimate. To eliminate the need for such mid-quarter warnings, management considered moving to monthly reporting of operating results. With this data, analysts presumably would be able to update their forecasts. Management must decide if the release of monthly results would give competitors information to use against Progressive, and if the release of monthly results would increase or decrease Progressive's stock price volatility.