Progressive Policyholder Growth Slows; Policies Sold By Agents Dip

Auto insurer Progressive Corp. (PGR), which was adding plenty of new customers earlier this year, said the number of drivers with policies purchased through agents fell in September from a month earlier, marking the second decline in three months.

The decline was offset by an increase in the number of auto policyholders who bought their coverage from Progressive online or over the phone, but growth in that segment is also slowing from the torrid pace the company set earlier this year.

The decline in policyholders who bought coverage through the so-called agency channel signals a shift from early this year, when Progressive Chief Executive Glenn Renwick said his company felt it could keep its prices flat to draw in more customers at a time when competitors were raising rates.

"We have seen some companies taking their rates up a little more in the agency channel," Renwick said on a conference call with analysts in March. "We've been able to capitalize on having our product priced at a level that we feel comfortable with...and I think that's actually been a nice generator of some additional demand for us in the agency channel."

Progressive policyholders who bought their coverage through agents fell 0.1% in September from a month earlier to 4.47 million. That matches the policyholder count in July, which marked the first month this year that the so-called agency channel policies-in-force dropped from the prior month. The numbers aren't just reflective of new sales; they count all drivers who currently have Progressive policies purchased through agents.

Price isn't the only factor consumers consider when shopping for auto coverage, and the industry's rate changes are often difficult to pinpoint given the number of variables companies consider for each potential customer. But the change indicates the window of opportunity Renwick described in March has likely closed.

Meanwhile, the number of policyholders who came to the company through its direct channel--primarily the company's website--rose 0.4% to 3.57 million in September. It was the smallest increase in more than a year.

Renwick has also said his company was willing to miss its profit targets on its direct sales in the short-term by spending more on advertising, but only if the company was taking on good customers who would help them meet or exceed profit goals later.

If Progressive is attracting customers and comfortable with its prices, "we want to be able to take that opportunity to take as much of that new business as possible," Renwick said in March. "Frankly, we're pretty happy with our demand currently," he said at the time.

Progressive's latest policyholder figures were included in its release of third-quarter results Thursday. Profit of $261.6 million fell 3.1% from the same period a year earlier on fewer investment gains. But premium revenue rose 4.5% to $3.6 billion in the quarter and the company earned an underwriting profit of 7.1 cents for every dollar it collected in premiums. That was a slight decrease from a year earlier, but still ahead of Renwick's long-stated goal of earning at least a 4 cent profit margin over time.

Progressive shares fell 44 cents, or 2.1%, to $20.88 in recent trading. The Mayfield Village, Ohio-based company's shares have jumped about 16% this year, better than the 1.3% year-to-date increase for larger rival Allstate Corp. (ALL), based in Northbrook, Ill.

-By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com

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