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Progressive (PGR) Q4 Earnings Top Estimates as Premiums Rise

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The Progressive Corporation’s (PGR - Free Report) fourth-quarter 2018 operating earnings per share of $1.13 beat the Zacks Consensus Estimate of $1.01. The bottom line nearly doubled from 65 cents in the year-ago quarter.

Behind the Headlines

Net premiums written were $17.9 billion in the quarter under review, up 18% from $6.8 billion in the year-ago period. Net premiums earned grew 20% year over year to $8.2 billion from $6.8 billion a year ago.

Net realized losses on securities were $572.2 million, wider than the year-ago loss of $9.7 million.

Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 110 basis points (bps) from the prior-year quarter’s level to 92.5%.

The Progressive Corporation Price, Consensus and EPS Surprise

Full Year Highlights

Operating income of 52 cents per share in 2018 surged 70% year over year.

Operating revenues rose 21% year over year to $32.4 billion driven by 46% higher investment income, 20% rise in premiums earned, 25% rise in service revenues and 27% higher fees as well as other revenues.

Total expense increased 16.7% to $28.8 billion. This increase can be primarily attributed to 15.5% rise in loss and loss adjustment expenses, 21.1% increase in policy acquisition costs and 21% increase in other underwriting expenses.

Policies in Force Solid in December

In December, policies in force were impressive at the Personal Auto segment, having improved 14% from the year-ago month to 13.4 million. Special Lines inched up 0.4% from the prior-year month’s figure to 4.4 million.

In Progressive’s Personal Auto segment, Direct Auto grew 16% year over year to 7 million while Agency Auto improved 12% year over year to 6.4 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.7 million. The Property business had about 1.9 million policies in force in the reported month, up 32% year over year.

Financial Update

Progressive’s book value per share was $17.71 as of Dec 31, 2018, up 11% from $15.96 as of Dec 31, 2017.

Return-on-equity on a trailing 12-month basis was 23.81%, having expanded 210 bps year over year. Debt-to-total capital ratio deteriorated 260 bps year over year to 28.9% as of Dec 31, 2018.

Dividend Update

The company will pay annual variable dividend of $2.5140 per share on Feb 11, 2019

Zacks Rank

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

Performance of Other Insurers

MGIC Investment Corporation (MTG - Free Report) reported fourth-quarter 2018 operating net income per share of 42 cents, beating the Zacks Consensus Estimate by 13.5%.

The Travelers Companies, Inc.’s (TRV - Free Report) fourth-quarter 2018 core income of $2.13 per share beat the Zacks Consensus Estimate of $1.98 by 7.6%.

Upcoming Industry Release

RLI Corp. (RLI - Free Report) will release fourth-quarter 2018 earnings on Jan 23. The Zacks Consensus Estimate for the same stands at 6 cents per share, indicating a year-over-year plunge of 88.2%.

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