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Higher Premiums Drive PGR July Results

Zacks Equity Research

Progressive Corp.’s (PGR) earnings per share (EPS) for Jul 2013 surged 70% year over year to 17 cents from 10 cents reported in Jul 2012. Net income shot up 72% year over year to $101.5 million in the reported month.

Progressive recorded net premiums of $1.73 billion in the reported month, up 5% from $1.65 billion in the year-ago period. Net premiums earned were $1.65 billion, up 6% from $1.55 billion in the year-ago period.

Net realized gains on securities in Jul 2013 were $11.5 million, down 32% from $16.9 million in the year-ago month. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 420 basis points (bps) from Jul 2012 to 92.7% in the reported month.

Numbers in July

In the month under review, policies in force remained healthy with the Personal Auto segment increasing 1% year over year but declining 0.03% sequentially. Special Lines also increased 2% year over year and 0.5% over the preceding month.

In Personal Auto, Direct Auto reported growth of 3% year over year and 0.2% from the preceding month. Agency Auto slipped 0.7% year over year and 0.2% sequentially. After reporting growth over the past few quarters, Progressive’s Commercial Auto segment declined 0.1% both on a year over year and sequential basis.

Progressive’s total expenses for the reported month increased 3.6% to $1.58 billion from $1.52 billion in Jul 2012. The increase in expenses was driven by a 29% hike in underwriting expenses, 1.2% increase in policy acquisition costs and 0.1% increase in loss and loss adjustment expenses.

As of Jul 31, 2013, Progressive reported book value per share of $11.15, up from $10.49 as on Jul 31, 2012 and from $10.87 as on Jun 30, 2013.

Return on equity in Jul 2013 was 18.8%, up from 13.5% in Jul 2012 and 17.9% in Jun 2013. The debt-to-total-capital ratio was 23.5% as of Jul 31, 2013, improving from 24.5% as of Jul 31, 2012 and from 23.9% as of Jun 30, 2013.

Progressive carries a Zacks Rank #3 (Hold). Other property and casualty insurers, HCI Group Inc. (HCI), Everest re Group Ltd. (RE) and Berkshire Hathaway Inc. (BRK.A) (BRK.B)  carry a Zacks Rank #1 (Strong Buy) and look impressive.

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