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Progressive (PGR) Q3 Earnings Beat, Policies in Force Solid

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The Progressive Corp.’s (PGR - Free Report) third-quarter 2017 operating earnings per share of 41 cents beat the Zacks Consensus Estimate of 30 cents. Earnings improved 13.9% year over year.

Including net realized losses, the net income per share was 38 cents, up 13% year over year.

Behind the Headlines

Progressive recorded net premiums written of $7.1 billion in the quarter under review, up 18% from $6 billion in the year-ago quarter. Also net premiums earned, grew 14% year over year from $6.5 billion to $5.7 billion.

Net realized losses on securities were $24.7 million, wider than $20.7 million loss incurred in the year-ago quarter. Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 80 basis points (bps) from the prior-year quarter to 97.4%.

Progressive Corporation (The) Price, Consensus and EPS Surprise

Numbers in September

Operating revenues improved 15% year over year to $2.1 billion in the quarter. The top-line growth was driven by a 15% increase in premiums, 20% higher investment income, 16% rise in fees and other revenues, plus 22% jump in service revenues.

Total expense increased 21.5% to $2.1 billion. This rise in expenses can be primarily attributed to 22.5% higher losses and loss adjustment expenses, 14.2% increase in policy acquisition costs and 21% higher other underwriting expenses.

In September, policies in force were impressive at the Personal Auto segment, improving 11% from September 2016 to 11.4 million. Special Lines inched up 2% from the prior-year month to 4.4 million.

In Progressive’s Personal Auto segment, both Direct Auto and Agency Auto ascended 11% year over year to 5.9 million and 5.5 million, respectively.

Progressive’s Commercial Auto segment grew 4% year over year to 0.6 million. The Property business had about 1.4 million policies in force in the reported month, up 16% year over year.

Progressive’s book value per share was $15.97 as of Sep 30, 2017, up 14.6% from $13.94 as of Sep 30, 2016.

Return-on-equity on a trailing 12-month basis was 18.4%, having expanded 200 bps from 14.0% in September 2016. Debt-to-total capital ratio contracted 170 bps year over year to 26.3% as of Sep 30, 2017.

Zacks Rank and Performance of Another Insurer

Progressive carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brown & Brown, Inc. (BRO - Free Report) reported third-quarter 2017 earnings of 53 cents per share, beating the Zacks Consensus Estimate by 8.2%.

Stocks to Consider

A couple of stocks worth considering from the insurance industry are Radian Group Inc. (RDN - Free Report) and Reinsurance Group of America, Inc. (RGA - Free Report) .

Radian Group supports homebuyers, mortgage lenders, loan servicers and investors with a suite of private mortgage insurance and related risk-management products and services. The company is set to release third-quarter results on Oct 26. The Zacks Consensus estimate for earnings per share is pegged at 42 cents.

Reinsurance Group is primarily engaged in life reinsurance and international life and disability insurance on a direct and reinsurance basis. The company is set to release third-quarter results on Oct 26. The Zacks Consensus estimate for earnings per share is pegged at $2.57.

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