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Progressive's Earnings Dip Y/Y

Zacks Equity Research

Progressive Corp.’s (PGR) earnings per share for November 2012 came in at 13 cents, plummeting nearly 37% from 20 cents in November 2011. Net income dipped 38% from September 2011 to $77.7 million.

Numbers in November

The company recorded net premiums of $1.13 billion in November 2012, up 5% from $1.07 billion in the year-ago period. Net premiums earned were $1.26 billion, up 9% from $1.16 billion in November 2011.

Net realized gains on securities in the quarter were $10.2 million, dropping 76% from $42.1 million in November 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 350 basis points from the prior-year quarter to 93.6% in November 2012.

During November, policies in force remained healthy, with the Personal Auto segment increasing 4% year over year but down 0.4% sequentially. Special Lines followed the same trend, increasing 4% year over year and declining 0.4% from the preceding month.

In Personal Auto, Direct Auto policies in force increased 4% year over year but inched down 0.3% from the preceding month. Agency Auto was up 3% year over year but down 0.5% from last month. Progressive’s Commercial Auto segment reported an increase of 2.1% year over year.

Total expenses for the reported month escalated 12.6% to $1.19 billion from $1.06 billion in November 2011. The major components contributing to the increase in total expenses were a 17.4% increase in losses and loss adjustment expenses, and a slight rise of 0.2% in policy acquisition costs. However, a 3% decline in other underwriting expenses was a partial offset.

Progressive reported book value per share of $10.08, up from $9.71 as of Nov 30, 2011 and $9.93 as of Oct 31, 2012.

Return on equity on a trailing 12-month basis was 17.9%, improving from 17.0% in November 2011 and 17.8% in November 2012. The debt-to-total-capital ratio was 25.3% as of Nov 30, 2012, down from 29.1% as of Nov 30, 2011 and from 25.6% as of Oct 31, 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. Allstate Corporation (ALL), which closely competes with Progressive, shares the same Zacks Rank.

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