Progressive Falls Short of Estimate


Progressive Corp.’s (PGR) earnings per share for the second quarter of 2012 were 19 cents, down 50% from 38 cents in the year-ago quarter. Results also lagged the Zacks Consensus Estimate of 27 cents. Net income dropped 52% from the second quarter of 2011 to $118.6 million in the quarter.

The company recorded net premiums of $4.13 billion in the quarter under review, up 8% from $3.84 billion in the year-ago quarter. Net premiums earned were $4.0 billion, up 7% from $3.72 billion in the year-ago quarter.

Net realized loss on securities in the quarter was $4.7 million, compared with the profit of $26 million in the second quarter of 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 420 basis points over the prior-year quarter to 97.6% in the reported quarter.

Numbers in June

Progressive publishes monthly financial reports. During June, policies in force remained healthy, with the Personal Auto segment increasing 6% year over year and 0.4% sequentially. Special Lines also increased 5% year over year and 0.8% from the preceding month.

In Personal Auto, Direct Auto reported a profit of 7% year over year and 0.4% from the preceding month. Agency Auto was up 6% year over year and 0.4% from the last month. Progressive’s Commercial Auto segment reported an increase of 2.5% year over year.

Total expenses for the reported month increased 13.3% to $1.26 billion from $1.12 billion in June 2011. The major components contributing to the increase in total expenses were a 16.6% increase in losses and loss adjustment expenses, and a 4% increase in both other underwriting expenses and policy acquisition costs.

Progressive reported book value per share of $10.32, up from $9.88 as of June 30, 2011 and $10.22 as of May 31, 2012.

Return on equity on a trailing 12-month basis was 12.9%, down from 18.4% in June 2011 and up from 11.4% in May 2012. The debt-to-total-capital ratio was 24.7% as of June 2012, up from 23.6% as of June 2011 but slightly down from 24.9% as of May 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.

Headquartered in Mayfield Village, Ohio, Progressive Corporation is one of the largest auto insurers in the country. It is a leading independent agency writer of private passenger auto coverage, market leader for the motorcycle insurance and is one of the leading companies in the commercial auto insurance market. It competes with Allstate Corporation (ALL).

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