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Progressive Tops Earnings on Higher Premiums

PGR Y AFSI

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Progressive Corp.’s (PGR - Analyst Report) earnings per share for the second quarter of 2013 were 54 cents, surging nearly 176% from 19 cents in the year-ago quarter. The result also surpassed the Zacks Consensus Estimate of 40 cents. Net income shot up 174% from the second quarter of 2012 to $324.6 million in the reported quarter.

Progressive recorded net premiums of $4.4 billion in the quarter under review, up 6% from $4.1 billion in the year-ago quarter. Net premiums earned were $4.3 billion, up 7% from $4.0 billion in the year-ago quarter.

Net realized gains on securities in the quarter were $132.9 million, rebounding from a loss of $4.7 million in the year-ago quarter. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 430 basis points from the prior-year quarter to 93.3% in the reported quarter.

Numbers in June

Progressive publishes monthly financial reports. During June, policies in force remained healthy, with the Personal Auto segment increasing 1% year over year and 0.1% sequentially. Special Lines increased 1% year over year and 0.6% sequentially.

In Personal Auto, Direct Auto grew 2% year over year and 0.3% from the preceding month. Agency Auto declined 1% year over year, although it improved 0.01% from the preceding month. Progressive’s Commercial Auto segment grew 0.3% year over year.

Total expenses for the reported month increased 3.3% to $1.35 billion from $1.26 billion in Jun 2012. The major components contributing to the increase in total expenses were a 5% increase in losses and loss adjustment expenses.

Progressive reported book value per share of $10.87, up from $10.32 as of Jun 30, 2012 but down from $10.98 as of May 31, 2013.

Return on equity on a trailing 12-month basis was 17.9%, up from 12.5% in Jun 2012 but down from 19.9% in May 2013. The debt-to-total-capital ratio was 24.4% as of Jun 30, 2013, down from 24.7% as of Jun 30, 2012 but slightly up from 23.8% as of May 31, 2013.

Progressive carries a Zacks Rank #2 (Buy). Insurers Alleghany Corporation (Y - Snapshot Report), American Safety Insurance Holdings Ltd. and AmTrust Financial Services, Inc. (AFSI - Snapshot Report), among others, also carry a Zacks Rank #1(Strong Buy) and appear impressive.

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