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Progressive's August Earnings Decrease, Revenues Rise Y/Y

Zacks Equity Research

The Progressive Corporation PGR reported earnings per share of 30 cents for August 2019, down 36% year over year. Improvement in the top line was offset by higher expenses.

Year to date, shares of Progressive have rallied 20.5%, outperforming the industry’s 7.8% increase.

Numbers in August

Progressive recorded net premiums written of $2.9 billion in the month, up 13% from $2.6 billion in the year-earlier period. Net premiums earned were about $2.8 billion, up 14% from $2.5 billion recorded last August.

Net realized losses on securities were $33.7 million against the prior-year income of $76.4 million.

Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 110 basis points (bps) year over year to 93.4%.

Total operating revenues came in at $2.9 billion. The top line improved 13.7% year over year owing to a 13.5% increase in premiums, a 17.5% surge in investment income, 16.3% growth in fees and other revenues plus a 22.8% rise in service revenues.

Total expenses shot up 15% to $2.7 billion. This increase can be primarily attributed to 15.9% higher losses and loss adjustment expenses, 13.4% rise in policy acquisition costs and an 11.1% jump in other underwriting expenses.

In August, policies in force were impressive in both Vehicle and Property businesses. In its vehicle business, Personal Auto segment improved 11% year over year to nearly 14.5 million. Special Lines increased 3% from the year-earlier month to 4.6 million policies.

In Progressive’s Personal Auto segment, Agency Auto expanded 11% to 6.7 million while Direct Auto increased 12% to nearly 7.6 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.8 million. The Property business had about 2.1 million policies in force in the reported month, up 16% year over year.

Progressive’s book value per share was $23.05 as of Aug 31, 2019, up 20.2% from $19.17 as of Aug 31, 2018.

Return on equity in the trailing 12 months was 33.5%, up 740 bps from 26.1% in August 2018. Debt-to-total-capital ratio improved 90 bps year over year to 24% as of Aug 31, 2019.

Zacks Rank and Stocks to Consider    

Progressive currently carries a Zacks Rank #3 (Hold).

Some better-ranked property and casualty insurers include Alleghany Y, Hallmark Financial Services HALL and Donegal Group DGICA, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here..

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered 30.80% positive surprise in the last reported quarter.

Hallmark Financial underwrites, markets, distributes, and services property/casualty insurance products to businesses and individuals in the United States. The company delivered 20.22% positive surprise in the last reported quarter.

Donegal Group provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. The company delivered 160.00% positive surprise in the last reported quarter.

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