Progressive Corp.’s (PGR) earnings per share for January 2011 were 17 cents, up 6 cents from the year-ago earnings of 11 cents. Net income increased 58% from the year-ago period to total $112.6 million.
The company recorded net premiums of $1.4 billion during January 2011, up 3% from $1.3 billion in January 2010 and 48% from $1 billion during December 2010. Net premiums earned were $1.4 billion, up 5% from $1.3 billion in the year-ago period and up 25.5% from $1.1 billion in the prior month.
Net realized gains on securities were $32.3 million during January 2011, compared with net realized loss of $8.1 million in the prior-year period, a considerable improvement from $22.9 million in December 2010. The combined ratio − the percentage of premiums paid out as claims and expenses − improved 140 basis point over the prior year period to 92.2% in the month under review.
Progressive reports its results every month. During January, policies in force remained healthy, with the Personal Auto segment increasing 7% year over year and a decline of 0.1% sequentially. Special Lines increased 5% year over year but declined 0.2% over the preceding month.
In Personal Auto, Direct Auto reported a double-digit growth of 11% year over year, 0.8% from last month. Agency Auto was up 4% year over year and 0.3% from the last month. However, Progressive’s Commercial Auto segment continued to drag results, reporting declines of 0.4% year over year and 0.7% from the preceding month.
Total expenses for the reported month increased 3% to $1.3 billion from $1.2 billion in January 2010. The major components contributing to the increase in total expenses were a 3% year-over-year increase in losses and loss adjustment expenses, policy acquisition costs and underwriting expenses.
Progressive reported book value per share of $9.31, up from $8.77 as of January 31, 2010 and from $9.13 as of December 31, 2010.
Return on equity on a trailing 12-month basis was 17.7%, down from 20.3% in January 2010 but up from 17.1% in December 2010. The debt-to-total-capital ratio was 24.2% as of January 2011, down from 24.5% as of January 2010 and from 27% as of December 2010.
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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