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Progressive August Earnings Decrease, Revenues Increase


Progressive Corp.’s PGR operating earnings for Aug 2016 came in at 11 cents per share, down 31% from 16 cents earned in the year-ago month. Though revenues improved, a higher magnitude of expense increase weighed on the bottom line.

August Numbers

Progressive recorded $1.9 billion net premiums written, up 14% from $1.7 billion in the year-ago month. Net premiums earned of $1.8billion soared 13% from the year-ago comparable period.

Combined ratio, deteriorated 580 basis points (bps) from the prior-year month to 97.9%.

In August, policies in force were healthy, with the Personal Auto segment increasing 8% year over year to 10.3 million. Special Lines rose 3% year over year to 4.3 million.

In Progressive's Personal Auto segment, Direct Auto improved 10% year over year to 5.3 million policies and Agency Auto increased 5% to nearly 5 million. Progressive’s Commercial Auto segment showed a 12% improvement to 0.6 million policies on a year-over-year basis. The Property business had about 1.8 million policies in force in the reported month, up 11% year over year.

Total revenue grew 12% year over year to $1.8 billion, largely driven by higher premiums (up 13% year over year), fees revenues (10%), and service revenues (9%). However, 3% lower investment income limited the upside.

On the other hand, total expense increased 17.4% year over year to $2.2 billion in August. The major factors behind the rise in total expense were a 18.5% increase in losses and loss-adjustment expenses, a 11.8% increase in policy acquisition costs, and 3% higher other underwriting expenses.

Progressive reported book value per share of $13.83 on Aug 31, 2016, up 9% year over year.

Return on equity on a trailing 12-month basis was 16.1%, up 130 bps year over year. The debt-to-total capital ratio deteriorated 140 bps from the prior-year level to 28.2% as of Aug 31.

Zacks Rank and Stocks to Consider

Progressive carries a Zacks Rank #3 (Hold). Some better-ranked P&C insurers are Allied World Assurance Company Holdings, AG AWH, National Interstate Corporation NATL and NMI Holdings, Inc. NMIH. All these sport Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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