Progressive Misses on Q2 Earnings, Up Y/Y on Higher Premiums - Analyst Blog

Progressive Corp .'s ( PGR ) operating earnings for the second quarter of 2014 came in at 45 cents per share, falling short of the Zacks Consensus Estimate by a couple of cents. However, earnings improved about 10% year over year.

Including net realized gains on securities (including net impairment losses), net income came in at $293.4 million or 49 cents per share, comparing unfavorably with $324.6 million or 54 cents in the year-ago quarter.

Progressive recorded net premiums of $4.63 billion, up 5% from $4.39 billion a year ago. Net premiums earned were $4.51 billion, up 6% from $4.28 billion in the year-ago quarter.

Combined ratio − the percentage of premiums paid out as claims and expenses − improved 70 basis points (bps) from the prior-year quarter to 92.6%.

Numbers in June

Progressive publishes monthly financial reports. In the month of June, policies in force were healthy, with the Personal Auto segment increasing 3% year over year to 9.3 million. Special Lines increased 1% year over year to 4.1 million.

In Progressive's Personal Auto segment, Direct Auto grew 7% year over year to 4.4 million. Agency Auto remained almost flat year over year at 4.9 million. Progressive's Commercial Auto segment declined 2% on a year-over-year basis.

Total revenue improved 4.7% year over year to $1.47 billion, largely driven by higher premiums.

On the other hand, total expense increased 7.5% to $1.4 billion in June. The major components contributing to the increase in total expense were an 8.4% increase in losses and loss adjustment expenses, a 5% increase in other underwriting expenses and a 3.2% rise in policy acquisition costs.

Progressive reported book value per share of $11.48 on Jun 30, 2014, up 5.6% year over year.

Return on equity on a trailing 12-month basis was 20.7%, compared with 17.9% in Jun 2013. The debt-to-total capital ratio was 24.5% as of Jun 30, 2014, deteriorating from 24% as of Jun 30, 2013.

Zacks Rank

Progressive carries a Zacks Rank #2 (Buy). Investors interested in the property and casualty industry can also look at Arch Capital Group Ltd. ( ACGL ), AmTrust Financial Services, Inc . ( AFSI ) and W.R. Berkley Corp. ( WRB ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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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.

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

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