Progressive Beats Estimate - Analyst Blog

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Progressive Corp.'s ( PGR ) earnings per share for the first quarter of 2012 were 42 cents, down 24% from 55 cents in the year-ago quarter. Results, however, beat the Zacks Consensus Estimate of 39 cents. Net income dropped 29% from first quarter 2011 to $257.6 million in the quarter under review.

Lower net investment gains and higher expenses resulted in lower numbers during the quarter.

The company recorded net premiums of $4.16 billion in the quarter under review, up 7% from $3.90 billion in the year-ago quarter. Net premiums earned were $3.86 billion, up 5% from $3.66 billion in the year-ago quarter.

Net realized gains on securities in the quarter were $77.5 million, declining 22% from $99.7 million in the first quarter of 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 380 basis points over the prior-year quarter to 94.1% in the reported quarter.

Numbers in March

Progressive publishes monthly financial reports. During March, policies in force remained healthy, with the Personal Auto segment increasing 6% year overyear and 0.9% sequentially. Special Lines also increased 6% year over year and 1.3% from the preceding month.

In Personal Auto, Direct Auto reported a growth of 7% year over year and 0.8% from the preceding month. Agency Auto was up 5% year over year and 0.9% from the last month. Progressive's Commercial Auto segment reported an increase of 1% year over year.                                                                                                 

Total expenses for the reported month increased 14.5% to $1.18 billion from $1.03 billion in March 2011. The major components contributing to the increase in total expenses were a 16% increase in losses and loss adjustment expenses, 14% increase in other underwriting expenses and a 4% increase in policy acquisition costs.

Progressive reported book value per share of $10.23, up from $10.06 as of February 29, 2012 and $9.64 as of March 31, 2011.                                                                                                     

Return on equity on a trailing 12-month basis was 14.7%, down from 18% in March 2011 and 15.8% in February 2012. The debt-to-total-capital ratio was 25% as of March 2012, up from 23.7% as of March 2011 but slightly down from 25.4% as of February 2012.

We maintain our Neutral recommendation on Progressive. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the shares over the near term.

Headquartered in Mayfield Village, Ohio, Progressive Corporation is one of the largest auto insurers in the country. It is a leading independent agency writer of private passenger auto coverage, market leader for the motorcycle product and is one of the leading companies in the commercial auto insurance market. It competes with Allstate Corporation ( ALL ).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ALL , PGR

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