Progressive Beats Q1 Earnings by a Penny - Analyst Blog

Progressive Corp.'s PGR operating earnings for the first quarter of 2014 came in at 41 cents per share, beating the Zacks Consensus Estimate by a penny. However, earnings fell a penny short of the year-ago results.

Including net realized gains on securities (including net impairment losses), net income came in at $321.3 million or 54 cents per share, increasing from $308.6 million or 51 cents per share in the year-ago quarter.

Progressive recorded net premiums of $4.68 billion in the quarter under review, up 5% from $4.45 billion a year ago. Net premiums earned were $4.40 billion, up 5% from $4.18 billion in the year-ago quarter.

Net investment income improved 3% year over year to $103.3 million.

Total revenue in the quarter improved 5.3% to $4.59 billion, well above the Zacks Consensus Estimate of $4.29 billion.

On the other hand, total expense increased 6% to $4.23 billion in the reported quarter. The major components contributing to the increase in total expense were a 3% increase in policy acquisition costs, a 7% rise in losses and loss adjustment expenses and a 4% increase in other underwriting expenses.

Combined ratio − the percentage of premiums paid out as claims and expenses − improved 100 basis points (bps) from the prior-year quarter to 93.4%.

Numbers in March

Progressive publishes monthly financial reports. In the month of March, policies in force remained healthy, with the Personal Auto segment increasing 3% year over year to 13.28 million. Special Lines increased 1% year over year to 3.92 million.

In Progressive's Personal Auto segment, Direct Auto grew 7% year over year to 4.38 million. Agency Auto increased only 1% year over year to 4.91 million. Progressive's Commercial Auto segment declined 2% on a year-over-year basis.  

Progressive reported book value per share of $10.86 as on Mar 31, 2014, up from $10.72 as of Feb 28, 2014.

Return on equity on a trailing 12-month basis was 17.6%, compared with 17.9% in Feb 2014. The debt-to-total capital ratio was 22.4% as of Mar 31, 2014, improving from 22.6% as of Feb 28, 2014.

Zacks Rank

Progressive carries a Zacks Rank #3 (Hold). Some better-ranked insurers worth considering include Alleghany Corp. Y, AmTrust Financial Services, Inc. AFSI and Atlas Financial Holdings, Inc. AFH. All these stocks sport a Zacks Rank #1 (Strong Buy).