ALL Allstate Corporation

Progressive Corp.’s (PGR) earnings per share for first quarter 2011 were 55 cents, beating the Zacks Consensus Estimate by 12 cents. Results were 11 cents ahead of year-ago earnings of 44 cents. Net income was $362.9 million, increasing 23% from the year-ago quarter.

The company recorded net premiums of $3.9 billion in the first quarter of 2011, up 3% from $3.8 billion in the year ago. Net premiums earned were $3.7 billion, up 5% from $3.5 billion in the year-ago period.

Net realized gains on securities were $99.7 million in the quarter under review, substantially ahead of $30.8 million recorded in the prior year quarter. The combined ratio − the percentage of premiums paid out as claims and expenses − improved 60 basis point over the prior year period to 90.3% in the quarter under review.

Progressive reports its results every month. During March, policies in force remained healthy, with the Personal Auto segment increasing 6% year over year and 0.7% sequentially. Special Lines increased 5% year over year and 0.7% over the preceding month.

In Personal Auto, Direct Auto reported a double-digit growth of 10% year over year, and grew 0.8% from last month. Agency Auto was up 4% year over year and 0.5% from the last month. However, Progressive’s Commercial Auto segment continued to drag results, reporting a decline of 1% year over year and growth of 0.1% from the preceding month.

Total expenses for the reported month increased 5% to $1.03 billion from $977 million in March 2010. The major components contributing to the increase in total expenses were a 4% year-over-year increase in losses and loss adjustment expenses and a 5% increase in policy acquisition costs coupled with a 12% increase in underwriting expenses.

Progressive has reported a book value per share of $9.64, up from $9.26 as of March 31, 2010 and $9.51 as of February 28, 2011.

Return on equity on a trailing 12-month basis was 18%, down from 20.8% in March 2010 but up from 17.9% in February 2011. The debt-to-total-capital ratio was 23.7% as of March 2011, down from 26% as of March 2010 and from 23.8% as of February 2011.

We maintain our Neutral recommendation on Progressive. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.

Headquartered in Mayfield Village, Ohio, The Progressive Corporation is one of the largest auto insurers in the country. It is a leading independent agency writer of private passenger auto coverage, market leader for the motorcycle product and is one of the leading companies in the commercial auto insurance market. It competes with Allstate Corporation (ALL).

 
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