Progressive Corporation’s (PGR: 20.08 +0.24 +1.21%) second quarter 2010 earnings came in at 32 cents per share, down 3 cents from the Zacks Consensus Estimate of 35 cents. This also fell short by 5 cents from 37 cents per share recorded in the year-ago period. Net income for the quarter was $211.9 million, down 15% from $250.1 million reported in second-quarter 2009.Though premiums written and premiums earned improved during the quarter, results were affected by higher expenses.
The company recorded net premiums of $3,707.9 million during the second quarter of 2010, up 5% from $3,528.6 million in the second quarter of 2009 but down 2% from $3,777.5 million during first quarter 2010. Net premiums earned were $3,590.2 million, up 4% from $3,441.4 million in the year-ago period and 3% from $3,501.1 million in the prior quarter.
Net realized losses on securities were $39.5 million during second quarter 2010, a significant decline from a gain of $15.9 million in the prior-year quarter and $30.8 million in first quarter 2010. The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated slightly to 92.7% from 92.6% recorded in the year-ago quarter and 90.9% in the prior quarter.
Progressive reports results every month. During June, policies in force remained healthy, with the Personal Auto segment increasing 8% year over year and 1% from the prior month. Special Lines increased 4% year over year and 1% over the preceding month.
In Personal Auto, Direct Auto continued to report a double-digit growth of 15% year over year, but showed a slight improvement of 1% in policies in force from the last month. Agency Auto was up 3% year over year and 0.6% from last month. However, Progressive’s Commercial Auto segment continued to drag results, reporting a 2% year-over-year fall as a result of the economic downturn.
Total expenses for the reported month increased to $1.04 billion, up 3% from $1.01 billion in June 2009. The major components contributing to the increase in total expenses were losses and loss adjustment expenses increasing 1% year over year to $781.4 million, policy acquisition costs increasing 2% year over year to $104.8 million and other underwriting expenses surging 11% year over year to $138.5 million.
Progressive continues to actively manage its capital position. Reported book value per share was $9.44, up from $9.37 as of May 31, 2010, and $7.24 as of June 30, 2009.
Return on equity on a trailing 12-month basis was 18.7%, substantially up from -1.0% in June 2009 but down from +19.5% in May 2010. The debt-to-total-capital ratio was 25.7% as of June 2010, down from 30.6% as of June 2009 and 25.8% as of May 2010.
Progressive has a strong foothold in the industry. It continues to deliver strong risk-based capital ratios and steady operating performances. Also, it remains focused on customer retention.
| Analysts' Targets | |
| Credit Suisse | $22 |
| Hold | |
| Thursday, April 15, 2010 | |
| J.P. Morgan Securities | $22 |
| Market Underperformer | |
| Friday, March 26, 2010 | |
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