Progressive Reports In Line

Progressive Corp.’s ( PGR - Analyst Report ) earnings per share for February 2012 were 17 cents, flat year over year but 5 cents higher than last month. Net income for the month was $106.3 million, down 7% year over year but up 42% over January 2012.

The company recorded net premiums of $1.38 billion during February 2012, up 6% from $1.30 billion in February 2011 but down 5.4% from $1.46 billion in January 2012. Net premiums earned were $1.19 billion, up 5% from $1.13 billion in the year-ago period but down 18.8% from $1.46 billion in the prior month.

Net realized gains on securities were $29.4 million during February 2012, up 25% from $23.6 million in February 2011 and down 9% from $32.3 million in January 2012. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 180 basis points over the prior-year period to 91.2% in the month under review.

Progressive publishes monthly financial reports. During February, policies in force remained healthy, with the Personal Auto segment increasing 8% year over year, though 29.4% down sequentially. Special Lines also increased 5% year over year and inched up 0.3% from the preceding month.

In Personal Auto, Direct Auto reported a growth of 7% year over year and 1.8% from the preceding month. Agency Auto was up 5% year over year and 1.8% from the last month. For the second consecutive month, Progressive’s Commercial Auto segment posted an increase of 1.1% year over year.

Total expenses for the reported month increased 7.4% to $1.1 billion from $1.0 billion in February 2012. The major components contributing to the rise in total expenses were increases of 6.5% in losses and loss adjustment expenses, 15% in underwriting expenses and 4% in policy acquisition costs.

Progressive reported a book value per share of $10.06, up from $9.51 as of February 28, 2011 and up from $9.78 as of January 31, 2012.

Return on equity on a trailing 12-month basis was 15.8%, down from 17.9% in February 2011 and 15.9% in January 2012. The debt-to-total-capital ratio was 25.4% as of February 2012, up from 23.8% as of February 2011 but slightly down from 25.9% in January 2012.

We maintain our Neutral recommendation on Progressive. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in Mayfield Village, Ohio, Progressive Corporation is one of the largest auto insurers in the country. It is a leading independent agency writer of private passenger auto coverage, a market leader for the motorcycle product and an ace in the commercial auto insurance market. It competes with Allstate Corporation ( ALL - Analyst Report ) .