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Progressive (PGR) October Earnings Decline, Revenues Rise Y/Y

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The Progressive Corporation (PGR - Free Report) reported earnings per share of 40 cents for October 2020, marking a year-over-year decline of 22%. The decline is attributable to higher expenses and net realized loss on securities.

Year to date, Progressive’s shares have gained 22.5% against the industry’s 5.4% decline.



Numbers in October

Progressive recorded net premiums written of $3.8 billion in the month, up 4% from $3.7 billion in the year-ago quarter. Net premiums earned were around $3.9 billion, up 11% from $3.5 billion last May.

Net realized loss on securities in the quarter was $440.3 million against an income of $93.6 million in the prior-year quarter.

Combined ratio — percentage of premiums paid out as claims and expenses — improved 140 basis points (bps) year over year to 92.6.

Total operating revenues were $4.1 billion, improving 10.4% year over year, owing to an 11% increase in premiums, a 24.6% rise in fees and other revenues, and a 13.9% jump in service revenues. However, 22.7% lower investment income was a drag.

Total expenses rose 9.7% to $3.7 billion, primarily because of 9% higher losses and loss adjustment expenses, and a 12.4% jump in policy acquisition costs and 9.4% higher other underwriting expenses in August 2020. The company incurred $3 million in policyholder credit expenses in tandem with the plan to issue a credit to personal auto customers, with a policy in force, in response to the reduction in auto accident frequency resulting from COVID-19 restrictions.

In October, policies in force were impressive in both Vehicle and Property businesses. In its vehicle business, the Personal Auto segment improved 11% year over year to 21.3 million. Special Lines increased 8% from the year-earlier month to 4.9 million policies.

In Progressive’s Personal Auto segment, Agency Auto expanded 9% to 7.6 million, while Direct Auto increased 14% to 8.8 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.8 million. The Property business had 2.4 million policies in force in the reported month, up 13% year over year.

The company’s book value per share was $30.20 as of Oct 31, 2020, up 26.5% from $23.87 on Oct 31, 2019.

Return on equity in the trailing 12 months was 34.5%, down 100 bps from 35.5% in October 2019. Debt-to-total-capital ratio improved 50 bps year over year to 22.9 as of Oct 31, 2020.

Progressive currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked companies from the same space are Alleghany (Y - Free Report) , The Hanover Insurance Group (THG - Free Report) and American Financial Group (AFG - Free Report) .    

Alleghany delivered an earnings surprise of 195.85% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Hanover Insurance Group delivered an earnings surprise of 9.85% in the last reported quarter. It currently sports a Zacks Rank #1.

American Financial delivered an earnings surprise of 58.06% in the last reported quarter. It currently carries a Zacks Rank #2 (Buy).

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