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Progressive Posts Lower Aug Earnings

Zacks Equity Research

Progressive Corp.’s (PGR) earnings per share (EPS) for Aug 2013 plunged 52% year over year to 11 cents from 23 cents reported in Aug 2012. Net income tanked 51% year over year to $69.1 million in the reported month.

Progressive recorded net premiums of $1.39 billion in the reported month, up 6% from $1.29 billion in the year-ago period. Net premiums earned were $1.32 billion, up 6% from $1.25 billion in the year-ago period.

Net realized gains on securities in Aug 2013 were $16.2 million, plunging 89% from $141.9 million in the year-ago month. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 110 basis points (bps) from Aug 2012 to 95.4% in the reported month.

Numbers in August

In the month under review, policies in force remained healthy with the Personal Auto segment increasing 1% year over year but declining 0.08% sequentially. Special Lines also increased 2% year over year and 0.1% over the preceding month.

In Personal Auto, Direct Auto reported growth of 3% year over year and 0.03% from the preceding month. Agency Auto slipped 0.7% year over year and 0.2% sequentially. Progressive’s Commercial Auto segment declined 0.2% year over year and 0.04% on a sequential basis.

Progressive’s total expenses for the reported month increased 6.5% to $1.3 billion from $1.2 billion in Aug 2012. The rise in expenses was driven by a 25% hike in other underwriting expense, as well as 4.3% hike in loss and loss adjustment expenses and 1.5% higher policy acquisition costs.

As of Aug 31, 2013, Progressive reported book value per share of $11.07, up from $10.63 as on Jul 31, 2012, but down from $11.15 as on Jul 30, 2013.

Return on equity in Aug 2013 was 17.7%, up from 14.9% in Aug 2012 but down from 18.8% in Jul 2013. The debt-to-total capital ratio was 23.7% as of Aug 31, 2013, improving from 24.3% as of Aug 31, 2012 but deteriorating from 23.5% as of Jul 30, 2013.

Progressive carries a Zacks Rank #3 (Hold). Other property and casualty insurers, EMC Insurance Group Inc. (EMCI), Everest Re Group Ltd. (RE), and Global Indemnity plc (GBLI)  carry a Zacks Rank #1 (Strong Buy) and look impressive.

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