Progressive Corp.’s (NYSE:PGR) operating earnings for May 2016 came in at 11 cents per share, down 15.4% from 13 cents earned in the year-ago month. Increase in expenses offset revenue improvement and resulted in earnings decline.
May Numbers
Progressive recorded $1.7 billion net premiums written, up 11% from $1.6 billion in the year-ago month. Net premiums earned of $1.7 billion soared 11% from the year-ago comparable period.
Combined ratio, deteriorated 150 basis points (bps) from the prior-year month to 95.8%.
In May, policies in force were healthy, with the Personal Auto segment increasing 7% year over year to 10.2 million. Special Lines rose 3% year over year to 4.2 million.
In Progressive's Personal Auto segment, Direct Auto improved 11% year over year to 5.3 million policies and Agency Auto inched up 3% to 4.9 million. Progressive’s Commercial Auto segment showed an 11% improvement to 0.6 million policies on a year-over-year basis. The Property business had about 1.1 million policies in force in the reported month, up 3% year over year.
Total revenue grew 11% year over year to $1.5 billion, largely driven by higher service revenues (up 12% year over year), fees revenues (up 9%), premiums (up 11%) and investment income (up 1%).
On the other hand, total expense increased 12.6% year over year to $1.7 billion in May. The major factors behind the rise in total expense were a 10.2% increase in policy acquisition costs, 11% higher other underwriting expenses, and a 13.3% increase in losses and loss-adjustment expenses.
Progressive reported book value per share of $13.27 on May 31, up 5.3% year over year. Return on equity on a trailing 12-month basis was 13.1%, down 500 bps year over year. The debt-to-total capital ratio improved 120 bps from the prior-year level to 25.9% as of May 31, 2016.
Zacks Rank
Progressive carries a Zacks Rank #3 (Hold). Some better-ranked stocks are National General Holdings Corp. (NASDAQ:NGHC) , Cincinnati Financial Corp. (NASDAQ:CINF) and Markel Corp. (NYSE:MKL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
CINCINNATI FINL (CINF): Free Stock Analysis Report
PROGRESSIVE COR (PGR): Free Stock Analysis Report
MARKEL CORP (MKL): Free Stock Analysis Report
NATIONAL GNL HL (NGHC): Free Stock Analysis Report
Original post
Zacks Investment Research