Progressive Outshines Estimates

Progressive Corp.’s ( PGR - Analyst Report ) earnings per share for the third quarter of 2012 were 46 cents, surging nearly 92% from 24 cents in the year-ago quarter. Results outpaced the Zacks Consensus Estimate of 26 cents. Net income shot up 84% from the third quarter of 2011 to $277.0 million in the quarter.

The company recorded net premiums of $4.24 billion in the quarter under review, up 10% from $3.87 billion in the year-ago quarter. Net premiums earned were $4.05 billion, up 8% from $3.74 billion in the year-ago quarter.

Net realized gains on securities in the quarter were $171.9 million, rebounding form net realized losses of $52.6 million in the year-ago quarter. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 70 basis points from the prior-year quarter to 95.9% in the reported quarter.

Numbers in September

Progressive publishes monthly financial reports. During September, policies in force remained healthy, with the Personal Auto segment increasing 5% year over year but down 0.2% sequentially. Special Lines also increased 4% year over year, though declined 0.2% from the preceding month.

In Personal Auto, Direct Auto reported a profit of 6% year over year but inched down 0.1% from the preceding month. Agency Auto was up 5% year over year but down 0.4% from last month. Progressive’s Commercial Auto segment reported an increase of 2.5% year over year.

Total expenses for the reported month increased 10.5% to $1.19 billion from $1.08 billion in September 2011. The major components contributing to the increase in total expenses were a 12.9% increase in losses and loss adjustment expenses, and a 4% increase in other underwriting expenses and a 1% increase in policy acquisition costs.

Progressive reported book value per share of $10.84, up from $9.37 as of September 30, 2011 and $10.63 as of August 31, 2012.

Return on equity on a trailing 12-month basis was 20.1%, up from 16.9% in September 2011 and 16.7% in August 2012. The debt-to-total-capital ratio was 23.9% as of September 30, 2012, down from 29.6% as of September 30, 2011 and from 24.3% as of August 31, 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, carries Zacks #2 Rank, translating into short term Buy rating.