ALL Allstate Corporation

Progressive Corp.’s (PGR) earnings per share for January 2012 were 12 cents, down 28% year over year but flat with the last month. Net income for the month was $75 million, down 33% year over year and 2% over December 2011.

The company recorded net premiums of $1.46 billion during January 2012, up 6% from $1.38 billion in January 2011 and44% from $1.01 billion in December 2011. Net premiums earned were $1.46 billion, up 5% from $1.39 billion in the year-ago period but down 25.7% from $1.16 billion in the prior month.

Net realized gains on securities were $32.3 million during January 2012, reversing the loss of $8.1 million in January 2011 and $23.1 million in December 2011. The combined ratio − the percentage of premiums paid out as claims and expenses − deteriorated 270 basis points over the prior-year period to 94.9% in the month under review.

Progressive publishes monthly financial reports. During January, policies in force remained healthy, with the Personal Auto segment increasing 5% year over year and 45.6% sequentially. Special Lines also increased 5% year over year but dragged 0.1% from the preceding month.

In Personal Auto, Direct Auto reported a growth of 7% year over year and 1.1% from the preceding month. Agency Auto was up 4% year over year and 0.1% from the last month. After a long period, Progressive’s Commercial Auto segment posted an increase of 0.6% year over year.

Total expenses for the reported month increased 8.1% to $1.4 billion from $1.3 billion in January 2011. The major components contributing to the increase in total expenses were increases of 8.4% in losses and loss adjustment expenses, 9% in underwriting expenses and 3% in policy acquisition costs.

Progressive reported a book value per share of $9.78, up from $9.31 as of January 31, 2011 and up from $9.47 as of December 31, 2011.

Return on equity on a trailing 12-month basis was 15.9%, up from 17.7% in January 2011 and 16.5% in December 2011. The debt-to-total-capital ratio was 25.9% as of January 2012, up from 24.2% as of January 2011 but down from 29.6% in December 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 stock 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, a market leader for the motorcycle product and one of the leading companies in the commercial auto insurance market. It competes with Allstate Corporation (ALL).

 
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