Progressive Outshines in August

Progressive Corp.’s ( PGR - Analyst Report ) earnings per share for August 2012 were 23 cents, a stellar improvement from 4 cents in the year-ago quarter. Net income jumped to $141.5 million from $22.5 million in August 2011.

The company recorded net premiums of $1.28 billion in August 2012, up 7% from $1.21 billion in August 2011. Net premiums earned were $1.25 billion, up 8% from $1.15 billion in the year-ago period.

Progressive had net realized gain on securities of $141.9 million in August 2012, reversing the loss of $37.5 million incurred in August 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − improved 110 basis points over the prior-year to 96.5% in the reported month.

During August, policies in force remained healthy, with the Personal Auto segment increasing 6% year over year but skidding 0.2% sequentially. Special Lines also elevated 4% year over year and 0.1% from the preceding month.

In Personal Auto, Direct Auto reported an increase of 6% year over year but waned 0.2% from the preceding month. Agency Auto was up 5% year over year, but down 0.2% from the last month. Progressive’s Commercial Auto segment reported an increase of 3% year over year.

Total expenses for the reported month escalated 7.2% to $1.52 billion from $1.14 billion in August 2011. The major components contributing to the increase in total expenses were a 9% hike in losses and loss adjustment expenses, and a surge of 2% in policy acquisition costs. However, a meager decline of 1.0% in underwriting expenses acted as a partial offset.

Progressive reported book value per share of $10.63, up from $9.65 as of August 31, 2011 and $10.49 as of July 31, 2012.

Return on equity on a trailing 12-month basis was 16.7%, marginally down from 16.8% in August 2011 and up from 13.5% in July 2012. The debt-to-total-capital ratio was 24.3% as of August 2012, down from 28.7% as of August 2011 and 24.5% as of July 2012.

The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term. Allstate Corporation ( ALL - Analyst Report ) , which closely competes with Progressive, shares a Zacks #3 Rank.