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Progressive's (PGR) May Earnings and Revenues Increase Y/Y

Zacks Equity Research

The Progressive Corporation PGR reported earnings per share of 62 cents for May 2020, up nearly five-fold year over year on an improved top line.

Year to date, Progressive’s shares have gained 9.5% against the industry’s 18.8% decline. The rise was courtesy of the company’s consistently strong results.

Numbers in May

Progressive recorded net premiums written of $3.2 billion in the month, up 19% from $2.7 billion in the year-ago quarter. Net premiums earned were about $3 billion, up 10% from 2.7 billion last May.

Net realized gain on securities in the quarter was $210.6 million against loss of $204.3 million in the prior-year quarter.

Combined ratio — percentage of premiums paid out as claims and expenses — deteriorated 210 basis points (bps) year over year to 93.7%.

Total operating revenues came in at $4.5 billion, improving 9% year over year owing to a 9.5% increase in premiums and a 22.2% rise in service revenues. However, 5.2% lower investment income was a partial offset.

Total expenses rose 11.9% to $2.9 billion, primarily because of 7% higher losses and loss adjustment expense, and 13.1% jump in other underwriting expenses and policyholder credit expense in May 2020. The company incurred $510 million in policyholder credit expense in tandem with the plan to issue a credit to personal auto customers with a policy in force on May 31, 2020, in response to the reduction in auto accident frequency resulting from COVID-19 restrictions.

In May, policies in force were impressive in both Vehicle and Property business. In its vehicle business, Personal Auto segment improved 11% year over year to nearly 15.8 million. Special Lines increased 4.7% from the year-earlier month to 5 million policies.

In Progressive’s Personal Auto segment, Agency Auto expanded 7.23% to 9 million while Direct Auto increased 13% to nearly 8.4 million.

Progressive’s Commercial Auto segment rose 7% year over year to 0.8 million. The Property business had 2.3 million policies in force in the reported month, up 13% year over year.

Progressive’s book value per share was $26.60 as of May 31, 2020, up 26.2% from $21.08 as of May 31, 2019.

Return on equity in the trailing 12 months was 35%, up 330 basis points (bps) from 31.7% in May 2019. Debt-to-total-capital ratio improved 50 bps year over year to 25.1 as of May 31, 2020.

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

Stocks to Consider

Some better-ranked companies from the same space are National General Holdings Corp NGHC, Allstate Corporation ALL and Palomar Holdings Inc. PLMR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National General, a specialty personal lines insurance holding company, provides various insurance products and services in the United States, Bermuda, Luxembourg and Sweden. Its earnings beat estimates in two of the last four quarters and missed in the other two, the average positive surprise being 5.68%.

Allstate provides property and casualty, and other insurance products in the United States and Canada. The company surpassed estimates in each of the last four quarters, the average positive surprise being 18.45%.

Palomar provides specialty property insurance. Its earnings surpassed estimates in two of the last four quarters, the average positive surprise being 10.93%.

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