Q4 Earnings Beat at Progressive - Analyst Blog


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Progressive Corp. 's ( PGR ) earnings per share for the fourth quarter of 2013 were 50 cents, up nearly 22% from 41 cents reported in the year-ago quarter. The result also surpassed the Zacks Consensus Estimate of 42 cents. Net income improved 20% from the fourth quarter of 2012 to $299.8 million in the reported quarter.

Progressive recorded net premiums of $4.05 billion in the quarter under review, up 5% from $3.84 billion in the year-ago quarter. Net premiums earned were $4.34 billion, up 6% from $4.11 billion in the year-ago quarter.

Net realized gains on securities in the quarter were $77 million, up 24% from $62.1 million in the year-ago quarter. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 80 basis points (bps) from the prior-year quarter to 93.8%.

Numbers in December

Progressive publishes monthly financial reports. In the month of December, policies in force remained healthy, with the Personal Auto segment increasing 3% year over year to 9.066 million. Special Lines increased 1% year over year to 3.99 million.

In Progressive's Personal Auto segment, Direct Auto grew 6% year over year to 4.22 million. Agency Auto increased only 1% year over year to 4.84 million. Progressive's Commercial Auto segment declined 1% on a year-over-year basis.  

Total expense for the reported month increased 10.2% to $1.32 billion from $1.2 billion in Dec 2012. The major components contributing to the increase in total expense were 9.6% increase in losses and loss adjustment expenses; 22% surge in other underwriting expenses and 3.4% hike in policy acquisition costs.

Progressive reported book value per share of $10.39, down from $11.85 as of Nov 30, 2013.

Return on equity on a trailing 12-month basis was 19.0%, compared with 19.3% in Nov 2013. The debt-to-total capital ratio was 23.1% as of Dec 31, 2013, up from 20.8% as of Nov 30, 2013.

Dividend Update

During the fourth quarter, the board of Progressive approved a special dividend of $1.00 per share. This special dividend will be paid in addition to the company's annual variable dividend.

The special dividend will allow Progressive to return about $603 million to shareholders, supported by its sturdy balance sheet position and healthy cash flows.

Both the special and the annual dividends will be paid on Feb 7, 2014, to the shareholders of record as of Jan 29, 2014.

Progressive carries a Zacks Rank #3 (Hold). Some better-ranked insurers worth considering include ACE Ltd. ( ACE ), Aspen Insurance Holdings Ltd . ( AHL ) and Endurance Specialty Holdings Ltd . ( ENH ). All these sport a Zacks Rank #1 (Strong Buy).

ACE LIMITED (ACE): Free Stock Analysis Report

ASPEN INS HLDGS (AHL): Free Stock Analysis Report

ENDURANCE SPLTY (ENH): Free Stock Analysis Report

PROGRESSIVE COR (PGR): Free Stock Analysis Report

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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 Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
More Headlines for: ACE , AHL , ENH , PGR

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