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Progressive's February Earnings and Revenues Increase Y/Y

Zacks Equity Research

The Progressive Corporation PGR reported earnings per share of 55 cents for February 2018, which rose 152% year over year, driven by an increase in the top line.

Year to date, shares of Progressive have rallied 17.8% against the industry’s decrease of 3.3%. Sustained solid operational results drove the outperformance.

February Results

Progressive’s net premiums written were $3.1 billion, up 15% from $2.7 billion in the year-ago month. Net premiums earned were $2.6 billion, up 18% from $2.2 billion reported in the year-ago period.

Net realized gain on securities was $109.9 million, rebounding from loss of $139.6 million incurred in the year-ago month.

Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 310 basis points (bps) year over year to 90.9%.

Total operating revenues came in at $2.7 billion. The top line improved 19% year over year owing to a 18% increase in premiums, a 51.8% surge in investment income, 27.4% growth in fees and other revenues plus a 31.3% rise in service revenues.

Total expenses shot up 22.3% to $2.4 billion. This increase can be primarily attributed to 23.3% higher losses and loss adjustment expenses, 19% rise in policy acquisition costs and other underwriting expenses each.

In February, policies in force were impressive in both Vehicle and Property businesses. In its vehicle business, Personal Auto segment improved 13% year over year to nearly 13.7 million. Special Lines inched up 0.2% from the year-earlier month to 4.4 million policies.

In Progressive’s Personal Auto segment, Agency Auto expanded 12% to 6.5 million while Direct Auto increased 14% to nearly 7.2 million.

Progressive’s Commercial Auto segment rose 8% year over year to 0.7 million. The Property business had about nearly 2 million policies in force in the reported month, up 23% year over year.

Progressive’s book value per share was $19.24 as of Feb 28, 2019, up nearly 16% from $16.59 as of Feb 28, 2017.

Return on equity in the trailing 12 months was 28.8%, up 840 bps from 20.4% in February 2017. Debt-to-total-capital ratio deteriorated 180 bps year over year to 27.3% as of Feb 28, 2018.

Zacks Rank and Other Key Insurers    

Progressive currently carries a Zacks Rank #2 (Buy). Some other top-ranked property and casualty insurance stocks include Arch Capital Group Ltd. ACGL, Berkshire Hathaway Inc. BRK.B and Cincinnati Financial Corporation CINF. Each stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Arch Capital Group provides property, casualty and mortgage insurance and reinsurance products worldwide. The company delivered positive surprise in all the last four reported quarters, with the average being 14.72%.

Berkshire Hathaway provides property and casualty insurance and reinsurance plus life, accident and health reinsurance besides operating railroad systems in North America. The company came up with positive surprise in three of the preceding four reported quarters, with the average beat being 4.31%.

Cincinnati Financial provides property casualty insurance products in the United States. The company came up with average four-quarter beat of 18.08%.

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