ALL Allstate Corporation

Progressive Corp.’s (PGR) earnings per share for August 2011 were 4 cents, plummeting 60% from 10 cents in the year-ago period. Net income plunged 66% from the year-ago period to $66.5 million.

The company recorded net premiums of $1.21 billion during August 2011, up 5% from $1.15 billion in August 2010 but down 19% from $1.50 billion during July 2011. Net premiums earned were $1.15 billion, up 4% from $1.11 billion in the year-ago period but down 20% from $1.44 billion in the prior month.

Net realized losses on securities were $35.7 million during August 2011, wider than the loss of $13.8 million in August 2010, and a loss of $16.5 million in July 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − improved 240 basis points over the prior-year period to 93.1% in the month under review.

Progressive reports every month. During August, policies in force remained healthy, with the Personal Auto segment increasing 5% year over year and 0.3% sequentially. Special Lines also increased 5% year over year and 0.3% 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 and 0.2% from the last month. However, Progressive’s Commercial Auto segment continued to drag results, reporting declines of 1.1% year over year.

Total expenses for the reported month increased 8.6% to $1.14 billion from $1.05 billion in August 2010. The major components contributing to the increase in total expenses were a 10% increase in losses and loss adjustment expenses, a 5% increase in underwriting expenses and a 2% increase in policy acquisition costs.

Progressive reported a book value per share of $9.65, down from $9.86 as of August 31, 2010 and $9.91 as of July 31, 2011.

Return on equity on a trailing 12-month basis was 16.8%, down from 18.2% in August 2010 and 17.4% in July 2011. The debt-to-total-capital ratio was 28.7% as of August 2011, up from 23% as of August 2010 and 23.6% as of July 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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