The Truth Behind Progressive Corp's Latest Earnings Report

Progressive Corp (NYSE:PGR) reported earnings-per-share of 35 cents for August 2018, rebounding from the year-ago loss of 2 cents. The figure was driven by an improved top line. Year-to-date, PGR stock has rallied 22.1%, outperforming the industry’s 9.5% increase.

This rise in Progressive stock was courtesy of the company’s consistent strong results.

PGR Stock and the Numbers in August

Progressive recorded net premiums written of $2.6 billion in the month, up 17% from $2.2 billion in the year-earlier period. Net premiums earned were about $2.5 billion, up 21% from $2 billion recorded last August.

Net realized income on securities in the quarter was $76.4 million against the prior-year loss of 11.7 million.

Combined ratio for PGR — percentage of premiums paid out as claims and expenses — improved 1150 basis points (bps) year over year to 92.3%. Meanwhile, total operating revenues came in at $2.6 billion. PGR’s top line improved 22.4% year-over-year owing to a 21.5% increase in premiums, a 51.2% surge in investment income, 33% growth in fees and other revenues, plus a 28.3% rise in service revenues.

Total expenses for Progressive shot up 8.5% to $2.3 billion. This increase can be primarily attributed to 3.7% higher losses and loss adjustment expenses, 23.2% rise in policy acquisition costs and a 28.3% jump in other underwriting expenses.

PGR stock investors should note that in August, policies in force were impressive in both the Vehicle and Property businesses. In its vehicle business, the Personal Auto segment improved 15% YOY to nearly 13 million. Special Lines inched up 1% from the year-earlier month to 4.4 million policies.

In Progressive’s Personal Auto segment, Agency Auto expanded 14% to 6.2 million, while Direct Auto increased 17% to nearly 6.8 million. Furthermore, Progressive’s Commercial Auto segment rose 9% YOY to 0.7 million. The Property business had about 1.8 million policies in force in the reported month, up 36% year over year.

Progressive stock’s book-value-per-share was $19.17 as of Aug. 31, 2018, up 20.6% from $15.9 as of Aug. 31, 2017.

Return on equity in the trailing 12 months was 26.1%, up 700 bps from 19.1% in August 2017. Debt-to-total-capital ratio improved 180 bps YOY to 24.9% as of Aug. 31, 2018.

Zacks Rank and Other Key Insurers

PGR stock sports a Zacks Rank #1 (Strong Buy). Investors interested in property and casualty insurance space might also consider some other top-ranked stocks like Alleghany Corporation (NYSE:Y), NMI Holdings (NASDAQ:NMIH) and Navigators Group (NASDAQ:NAVG), each sharing the solid Zacks Rank with Progressive. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company’s average four-quarter positive surprise is 17.61%.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company delivered an average four-quarter beat of 29.85%.
Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States as well as internationally. The company pulled off positive surprises in the trailing four quarters with an average earnings surprise of 19.54%.

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PGR Stock and the Numbers in August

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