To return value to its shareholders, the board of directors of The Progressive Corporation (PGR) has authorized the company to buy back upto 75 million shares. The company is still left with 12.5 million shares as of May 31 to be bought back under the board's June 2009 authorization.
Previously in June 2009, the board had approved a 50 million share repurchase program.
Progressive keeps aside a major part of its capital to meet regulatory requirements, business objectives and weather extreme contingencies. Excess capital kept aside for such purposes is used to either buy back shares, pay dividends or pursue acquisitions.
Progressive has been successfully maintaining excess capital for the past few quarters, giving the company the flexibility to authorize another share repurchase program. Total capitalization at March 31, 2011 was $8.3 billion. During the first quarter of 2011, Progressive spent $138.0 million to buy back 6.8 million shares.
Progressive reported first quarter earnings per share of 55 cents, beating the Zacks Consensus Estimate by 12 cents. Results were also 11 cents ahead of the year-ago earnings.
The Zacks Consensus Estimate for second quarter 2011 is 39 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $1.59 per share and $1.68 per share.
We maintain our Neutral recommendation on Progressive. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
Headquartered in Mayfield Village, Ohio, The 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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