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Progressive’s (PGR) Q1 Earnings Lag, Revenues Top Estimates

Zacks

Progressive Corp.’s PGR first-quarter 2017 operating earnings per share of 67 cents missed the Zacks Consensus Estimate by 1.5%. Earnings, however, improved nearly 60% year over year.

Including net realized gains, net income per share was 73 cents, up about 65% year over year.

Behind the Headlines

Progressive recorded net premiums written of $6.5 billion in the quarter under review, up 12% from $5.8 billion in the year-ago quarter. Net premiums earned grew 13% year over year from $5.3 billion to $6.0 billion.

Net realized gains on securities were $51.9 million, up 198% year over year. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 290 basis points (bps) from the prior-year quarter to 91.7%.

Operating revenues improved 13% year over year to $6.3 billion in the quarter. The top-line growth was driven by a 13% increase in premiums, 8% higher fees and other revenues, 9% rise in investment income and 14% jump in service revenues. Revenues surpassed the Zacks Consensus Estimate of $6.2 billion.

Total expense increased 10% to $5.7 billion. The increase in expenses can be primarily attributed to 9% higher losses and loss adjustment expenses, 14% increase in policy acquisition costs and 12% higher other underwriting expenses.

Progressive Corporation (The) Price, Consensus and EPS Surprise

Progressive Corporation (The) Price, Consensus and EPS Surprise | Progressive Corporation (The) Quote


Numbers in March

In Mar 2017, policies in force were impressive with the Personal Auto segment improving 8% from Mar 2016 to 10.8 million. Special Lines inched up 3% from the prior-year month to 4.3 million.

In Progressive's Personal Auto segment, Direct Auto grew 8% year over year to 5.6 million. Agency Auto increased 7% from the comparable year-ago month to 5.2 million.

Progressive’s Commercial Auto segment grew 6% year over year to 0.6 million. The Property business had about 1.3 million policies in force in the reported month, up 17% year over year.

Progressive’s book value per share was $14.67 as of Mar 31 2017, up 13% from $12.97 as of Mar 31, 2016.

Return on equity on a trailing 12-month basis was 17.4%, up 330 bps from 14.2% in Dec 2016. Debt-to-total capital ratio too deteriorated 40 bps year over year to 26.7% as of Mar 31, 2017.

Zacks Rank and Stocks to Consider

Progressive carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here..

Investor interested in the insurance industry can also consider CNA Financial Corp. CNA, Cincinnati Financial Corp. CINF and Everest Re Group, Ltd. RE. Each of these stocks have the same Zacks Rank as Progressive Corp.

CNA Financial offers commercial property and casualty insurance products, primarily in the United States. The company is expected to release first-quarter results on May 1.

Cincinnati Financial deals in the property-casualty insurance business in the United States. The company is slated to release first-quarter results on Apr 26.

Everest Re Group offers reinsurance and insurance products. The company is set to release first-quarter results on Apr 24.

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