Progressive Corp.’s PGR earnings per share for the first quarter of 2015 came in at 46 cents, 7% above the Zacks Consensus Estimate and up about 12% year over year on higher revenues.
Including net realized gain, net income came in at 50 cents, down 7% year over year.
Behind the Headlines
Progressive recorded net premiums written of $5.1 billion in the quarter under review, up 8% from $4.7 billion in the year-ago quarter. Net premiums earned were $4.7 billion, up 6% from $4.4 billion in the year-ago quarter.
Investment income increased 1.7% to $105.1 million.
Revenues of $4.8 billion improved 6% year over year and were almost in line with the Zacks Consensus Estimate.
Total expense for the reported quarter increased 5% to $4.5 billion. The major components contributing to the increase in total expense were a 3% increase in policy acquisition costs, 5% higher losses and loss adjustment expenses; and a 7% rise in other underwriting expenses.
Net realized gains on securities in the quarter were $33.0 million, down 72% from $119.4 million 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 93.4%.
Numbers in March
In the month of Mar 2015, policies in force remained healthy, with the Personal Auto segment increasing 2% from the comparable month in 2014 to 9.4 million. Special Lines increased 2% from Mar 2014 to 4 million.
In Progressive's Personal Auto segment, Direct Auto grew 7% from Mar 2014 to 4.7 million. Agency Auto however decreased 3% from the comparable year-ago month to 4.7 million.
Progressive’s Commercial Auto segment increased 3% to 0.5 million.
Balance Sheet Update
Progressive reported book value per share of $12.26 on Mar 31, 2015, up from $10.86 as of Mar 31, 2014.
Return on equity on a trailing 12-month basis was 19.6% compared with 17.6% in Mar 2014 reflecting a 200 bps improvement. The debt-to-total capital ratio, however, deteriorated 380 bps year over year to 26.2% as of Mar 31, 2015.
Acquisition
Progressive closed the buyout of the majority stake in ARX Holding Corp., the parent company of American Strategic Insurance and its affiliates, for a cash consideration $875 million.
Zacks Rank and Stocks to Consider
Progressive carries a Zacks Rank #3 (Hold). Better-ranked property and casualty insurers are Berkshire Hathaway Inc. BRK.B, Cincinnati Financial Corp. CINF and Fidelity National Financial, Inc. FNF. All these stocks sport a Zacks Rank #1 (Strong Buy).
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