Progressive Corp.’s (PGR) earnings per share for the fourth quarter of 2014 came in at 60 cents, 40% above the Zacks Consensus Estimate and up about 43% year over year.
Including net realized gain, net income came in at 63 cents, improving 26% year over year.
Progressive recorded net premiums written of $4.6 billion in the quarter under review, up 14% from $4.1 billion in the year-ago quarter. Net premiums earned were $4.9 billion, up 14% from $4.3 billion in the year-ago quarter.
Net realized gains on securities in the quarter were $26.2 million, down 66% from $77.0 million in the year-ago quarter. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 290 basis points (bps) from the prior-year quarter to 90.9%.
Numbers in December
Progressive publishes monthly financial reports. In the month of Dec 2014, policies in force remained healthy, with the Personal Auto segment increasing 2% from the comparable month in 2013 to 9.2 million. Special Lines increased 1% from Dec 2013 to 4 million.
In Progressive's Personal Auto segment, Direct Auto grew 7% from Dec 2013 to 4.5 million. Agency Auto however decreased 2% from the comparable year-ago month to 4.7 million.
Progressive’s Commercial Auto segment remained almost flat year over year at 0.5 million.
Revenues of $1.8 billion improved 31% year over year on higher premiums.
Total expense for the reported month increased 21% to $1.5 billion from $1.3 billion in Dec 2013. The major components contributing to the increase in total expense were a 27.5% increase in policy acquisition costs, 19% higher losses and loss adjustment expenses; and a 27% rise in other underwriting expenses.
Progressive reported book value per share of $11.79 on Dec 31, 2014, up from $10.39 as of Dec 31, 2013.
Return on equity on a trailing 12-month basis was 20.1% compared with 19% in Dec 2013, reflecting a 110 bps improvement. The debt-to-total capital ratio, however, deteriorated 70 bps year over year to 23.8% as of Dec 31, 2014.
Dividend Update
On Dec 19, 2014, the board of directors declared an annual dividend of 68.62 cents per share or $404.1 million, to be paid on Feb 13, 2015 to shareholders of record on Feb 4.
Acquisition
Last December, Progressive inked a deal to buy the majority stake in ARX Holding Corp., the parent company of American Strategic Insurance (ASI) and its affiliates, for a cash consideration $875 million. The transaction is expected to culminate by Apr 1, 2015.
Zacks Rank and Performance of Other P&C Insurers
Progressive carries a Zacks Rank #3 (Hold). Bottom lines at RLI Corp. (RLI), ACE Ltd. (ACE) and The Travelers Companies Inc. (TRV) have also outperformed their respective Zacks Consensus Estimate for the fourth quarter.
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