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Progressive Outshines Earnings Estimates

Zacks Equity Research

Progressive Corp.’s (PGR) earnings per share for the first quarter of 2013 were 51 cents, surging nearly 21% from 42 cents in the year-ago quarter. Results outpaced the Zacks Consensus Estimate of 44 cents. Net income shot up 20% from the first quarter of 2012 to $308.6 million in the quarter.

Progressive recorded net premiums of $4.4 billion in the quarter under review, up 7% from $4.2 billion in the year-ago quarter. Net premiums earned were $4.2 billion, up 8% from $3.9 billion in the year-ago quarter.

Net realized gains on securities in the quarter were $80.6 million, increasing 4% from net realized gains of $77.5 million in the year-ago quarter. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 170 basis points from the prior-year quarter to 92.4% in the reported quarter.

Numbers in March

Progressive publishes monthly financial reports. During March, policies in force remained healthy, with the Personal Auto segment increasing 1% year over year as well as sequentially. Though Special Lines increased 2% year over year, it remained flat sequentially.

In Personal Auto, Direct Auto grew 3% year over year and 1.3% from the preceding month. Agency Auto was flat year over year, although it improved 0.8% from last month. Progressive’s Commercial Auto segment reported an increase of 1% year over year.

Total expenses for the reported month increased 8.3% to $1.27 billion from $1.18 billion in Mar 2012. The major components contributing to the increase in total expenses were a 9% increase in losses and loss adjustment expenses and an 11% increase in other underwriting expenses.

Progressive reported book value per share of $10.59, up from $10.23 as of Mar 31, 2012 and $10.39 as of Feb 28, 2013.

Return on equity on a trailing 12-month basis was 16.4%, up from 16.2% in Mar 2012 and 16.1% in Feb 2013. The debt-to-total-capital ratio was 24.4% as of Mar 31, 2013 down from 25% as of Mar 31, 2012 and from 24.8% as of Feb 28, 2013.

Progressive carries a Zacks Rank #1 (Strong Buy). Insurers AXIS Capital Holdings Ltd. (AXS), Montpelier Re Holdings Ltd. (MRH) and Arch Capital Group Ltd. (ACGL), among others, also carry a Zacks Rank #1 and appear impressive.

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