Progressive's October Earnings Improve, Premiums Grow

The Progressive Corporation (NYSE:PGR) reported earnings per share of 27 cents for October, skyrocketing 126% year over year.

Improvement in the top line coupled with lower expenses drove the bottom line.

Year to date, Progressive’s shares have surged 45.5%, outperforming the industry’s rally of 10.8%. This share price rise was courtesy of the company’s sustained strong results.

Numbers in October

Progressive recorded net premiums written of $2.8 billion in October, up 22% from $2.3 billion in the year-ago month. Net premiums earned were about $2.6 billion, up 16% from $2.2 billion in the year-ago month.

Net realized gains on securities in the quarter were $2.2 million, down 58%year over year.

Combined ratio — percentage of premiums paid out as claims and expenses — improved 460 basis points (bps) from the prior-year quarter to 92.5%.

Total operating revenues came in at $2.7 billion. The top line rallied 16% year over year owing to a 16% increase in premiums, 23% higher investment income, 22% improvement in fees and other revenues plus an 11% rise in service revenues.

Total expenses shot up 10.4% to $2.5 billion. This rise in expenses can be primarily attributed to 6.6% higher losses and loss adjustment expenses, 15.9% climb in policy acquisition costs and a 33% surge in other underwriting expenses.

In October, policies in force were impressive with the Personal Auto segment, having improved 11% year over year to nearly 11.6 million. Special Lines increased 2% from the prior-year month to 4.4 million.

In Progressive’s Personal Auto segment, Direct Auto expanded 12% to nearly 6 million while Agency Auto grew 11% to 5.6 million.

Progressive’s Commercial Auto segment rose 5% year over year to 0.6 million. The Property business had about 1.4 million policies in force in the reported month, up 19% year over year.

Progressive’s book value per share was $16.31 as of Oct 31, 2017, up 17.1% from $13.93 as of Oct 31, 2016.

Return on equity on a trailing 12-month basis was 20.3%, up 70 bps from 16.1% in October 2016. Debt-to-total-capital ratio improved 220 bps year over year to 25.9% as of Oct 31, 2017.

Zacks Rank and Other Insurers

Progressive carries a Zacks Rank #3 (Hold). Some better-ranked property and casualty insurers are Infinity Property and Casualty Corporation (NASDAQ:IPCC) , NMI Holdings Inc. (NASDAQ:NMIH) and First American Financial Corporation (NYSE:FAF) .

Infinity Property and Casualty provides personal automobile insurance products in the United States. The company’s average four-quarter surprise is 300.65% and it sports a Zacks Rank #1 (Strong Buy). Shares have gained 22% year to date, outperforming the industry’s rally. You can see the complete list of today’s Zacks #1 Rank stocks here.

NMI Holdings provides private mortgage guaranty insurance services in the United States. The company’s average four-quarter surprise is 11.72% and it flaunts a Zacks Rank of 1. Shares have soared 52.1% year to date, outperforming the industry’s rally.

First American Financial provides financial services. The company’s average four-quarter surprise is 12.74% and it carries a Zacks Rank #2 (Buy). Shares have surged 48.3% year to date, outperforming the industry’s rally.

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