ALL Allstate Corporation

Progressive Corp.’s (PGR) earnings per share for July 2011 were 8 cents, a plunge of 53% from 17 cents earned in the year ago period. Net income dipped 55% from the year-ago period to total $51.1 million.

The company recorded net premiums of $1.49 billion during July 2011, up 5% from $1.42 billion in July 2010 and up 29% from $1.16 billion during June 2011. Net premiums earned were $1.44 billion, up 5% from $1.37 billion in the year-ago period and up 26% from $1.14 billion in the prior month.

Net realized losses on securities were $16.5 million during July 2011, compared with gains of $20.8 million in July 2010, and gains of $1.8 million in June 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 350 basis points over the prior-year period to 95.4% in the month under review.

Progressive reports every month. During July, policies in force remained healthy, with the Personal Auto segment increasing 5% year over year and 0.2% sequentially. Special Lines increased 5% year over year and 0.9% over the preceding month.

In Personal Auto, Direct Auto reported a growth of 7% year over year and 0.4% from the preceding month. Agency Auto was up 3% year over year but declined 0.01% from the last month. However, Progressive’s Commercial Auto segment continued to drag results, reporting declines of 1.3% year over year.

Total expenses for the reported month increased 8.6% to $1.38 billion from $1.28 billion in July 2010. The major components contributing to the increase in total expenses were a 10.7% increase in losses and loss adjustment expenses, 3% increase in policy acquisition costs and a 1% increase in underwriting expenses.

Progressive reported a book value per share of $9.91, up from $9.78 as of July 31, 2010 and $9.88 as of June 30, 2011.

Return on equity on a trailing 12-month basis was 17.4%, down from 18.3% in July 2010 but up from 18.4% in June 2011. The debt-to-total-capital ratio was 23.6% as of July 2011, up from 23.1% as of July 2010 and flat with the last month.

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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