Progressive Beats Q1 Earnings by a Penny

Zacks Equity Research
April 9, 2014

Progressive Corp.’s (PGR) operating earnings for the first quarter of 2014 came in at 41 cents per share, beating the Zacks Consensus Estimate by a penny. However, earnings fell a penny short of the year-ago results.

Including net realized gains on securities (including net impairment losses), net income came in at $321.3 million or 54 cents per share, increasing from $308.6 million or 51 cents per share in the year-ago quarter.

Progressive recorded net premiums of $4.68 billion in the quarter under review, up 5% from $4.45 billion a year ago. Net premiums earned were $4.40 billion, up 5% from $4.18 billion in the year-ago quarter.

Net investment income improved 3% year over year to $103.3 million.

Total revenue in the quarter improved 5.3% to $4.59 billion, well above the Zacks Consensus Estimate of $4.29 billion.

On the other hand, total expense increased 6% to $4.23 billion in the reported quarter. The major components contributing to the increase in total expense were a 3% increase in policy acquisition costs, a 7% rise in losses and loss adjustment expenses and a 4% increase in other underwriting expenses.

Combined ratio − the percentage of premiums paid out as claims and expenses − improved 100 basis points (bps) from the prior-year quarter to 93.4%.

Numbers in March

Progressive publishes monthly financial reports. In the month of March, policies in force remained healthy, with the Personal Auto segment increasing 3% year over year to 13.28 million. Special Lines increased 1% year over year to 3.92 million.

In Progressive's Personal Auto segment, Direct Auto grew 7% year over year to 4.38 million. Agency Auto increased only 1% year over year to 4.91 million. Progressive’s Commercial Auto segment declined 2% on a year-over-year basis.  

Progressive reported book value per share of $10.86 as on Mar 31, 2014, up from $10.72 as of Feb 28, 2014.

Return on equity on a trailing 12-month basis was 17.6%, compared with 17.9% in Feb 2014. The debt-to-total capital ratio was 22.4% as of Mar 31, 2014, improving from 22.6% as of Feb 28, 2014.

Zacks Rank

Progressive carries a Zacks Rank #3 (Hold). Some better-ranked insurers worth considering include Alleghany Corp. (Y), AmTrust Financial Services, Inc. (AFSI) and Atlas Financial Holdings, Inc. (AFH). All these stocks sport a Zacks Rank #1 (Strong Buy).

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