Progressive April Earnings Up As Revenues Rise, Shares Gain

Shares of Progressive Corp.’s (NYSE:PGR) gained 2.59% in the trading session after the company posted improved April results. Operating earnings per share of 33 cents surged nearly five times on a year-over-year basis on higher revenues. Including net realized gains, net income per share skyrocketed 262% year over year.

Year to date, Progressive shares have gained 16.06%, outperforming the Property and Casualty Insurance industry’s increase of 0.78%. The share price appreciation was driven by the company’s sustained strong results.

Numbers in April

Progressive recorded net premiums written of $2.7 billion in Apr 2017, up 16% from $2.3 billion in the year-ago month. Net premiums earned were about $2.4 billion, up 13% year over year from $2.1 billion.

Net realized gains on securities in the quarter were $9.5 million compared with $15.5 million in the year-ago month. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 950 basis points (bps) from the prior-year quarter to 88.9%.

Total operating revenue came in at $2.5 billion. The top line improved 13% year over year due to a 13% increase in premiums, 8% higher fees and other revenues, 19% rise in investment income and 14% growth in service revenues.

Total expense increased 2.7% to $2.2 billion. The rise in expenses can be primarily attributed to 0.2% higher losses and loss adjustment expenses, 10.4% rise in policy acquisition costs and 12% higher other underwriting expenses.

In Apr 2017, policies in force were impressive with the Personal Auto segment improving 8% year over year to 10.9 million. Special Lines inched up 3% from the prior-year month to 4.3 million.

In Progressive's Personal Auto segment, Direct Auto and Agency Auto climbed 8% each to 5.3 million and 5.6 million, respectively.

Progressive’s Commercial Auto segment grew 5% year over year to 0.6 million. The Property business had about 1.3 million policies in force in the reported month, up 19% year over year.

Progressive’s book value per share was $15.11 as of Apr 30, 2017, up 15% from $13.14 as of Apr 30, 2016.

Return on equity on a trailing 12-month basis was 19.2%, up 630 bps from 12.9% in Apr 2016. Debt-to-total capital ratio too deteriorated 490 bps year over year to 31% as of Apr 30, 2017.

Zacks Rank and Other Insurers

Progressive carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty (P&C) insurers are American Financial Group, Inc. (NYSE:AFG) , CNA Financial Corporation (NYSE:CNA) and Fidelity National Financial, Inc. (NYSE:FNF) .

American Financial Group primarily engages in P&C insurance with focus on specialized commercial products for businesses. The company had a positive earnings surprise of 23.36% in the last reported quarter. The company flaunts Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNA Financial offers commercial P&C insurance products primarily in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 12.45%. The company carries Zacks Rank #2 (Buy).

Fidelity National provides title insurance, and technology and transaction services to the real estate and mortgage industries in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 8.47%. The company carries Zacks Rank #2.

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