Progressive Corp.’s PGR second-quarter 2016 earnings per share of 29 cents missed the Zacks Consensus Estimate by 9.4%. Earnings were down 46% year over year as higher expenses offset the increase in revenues.
Including net realized losses, net income per share was 33 cents, down 47% year over year.
Progressive recorded net premiums written of $5.9 billion in the quarter under review, up 13% from $5.2 billion in the year-ago quarter. Net premiums earned were about $5.6 billion, up 11% year over year from $5.0 billion.
Net realized gains on securities in the quarter were $32.3 million, down 58% year over year. Combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 430 basis points (bps) from the prior-year quarter to 96.8%.
PROGRESSIVE COR Price, Consensus and EPS Surprise
PROGRESSIVE COR Price, Consensus and EPS Surprise | PROGRESSIVE COR Quote
Numbers in June
Total revenue came in at $1.8 billion. Revenues improved 12% year over year on a 12% increase each in premium, fees and service revenues. However, a decline of 2% in investment income was a partial dampener.
Total expense increased 12.9% to $1.7 billion. The major contributors to the rise were 23% higher other underwriting expense, an 11.9% increase in losses and loss adjustment expenses, and a 7.7% increase in policy acquisition costs.
In Jun 2016, policies in force were healthy with the Personal Auto segment increasing 8% from Jun 2015 to 10 million. Special Lines increased 3% from the prior-year month to 4.3 million.
In Progressive's Personal Auto segment, Direct Auto grew 11% year over year to 5.3 million. Agency Auto increased 4% from the comparable year-ago month to 4.9 million.
Progressive’s Commercial Auto segment increased 11% year over year to 0.6 million. The Property business had about 1.2 million policies in force in the reported month, up 12% year over year.
Progressive reported book value per share of $13.47 on Jun 30, 2016, up 7.2% from $12.26 on Jun 30, 2015.
Return on equity on a trailing 12-month basis was 14.8%, which deteriorated 200 bps from 16.8% in Jun 2015. However, the debt-to-total capital ratio improved 170 bps year over year to 25.4% as of Jun 30, 2016.
Zacks Rank and Other Stocks to Consider
Progressive carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty insurers are MS&AD Insurance Group Holdings, Inc. MSADY, Third Point Reinsurance Ltd TPRE and Argo Group International Holdings, Ltd AGII. While MS&AD Insurance Group and Third Point Reinsurance sport a Zacks Rank #1 (Strong Buy), Argo Group International carries a Zacks Rank #2 (Buy).