Progressive (PGR) Q2 Earnings Miss Estimates, Improve Y/Y

Progressive Corp.’s (NYSE:PGR) second-quarter 2017 operating earnings per share of 59 cents missed the Zacks Consensus Estimate by nearly 1.7%. However, earnings more than doubled from 29 cents, earned in the year ago quarter.

Including net realized gains, the net income per share was 63 cents, up about 93% year over year.

Behind the Headlines

Progressive recorded net premiums written of $6.7 billion in the quarter under review, up 14% from $5.9 billion in the year-ago quarter. Also net premiums earned, grew 14% year over year from $5.6 billion to $6.3 billion.

Net realized gains on securities were $32.1 million, down 1% year over year. Combined ratio − the percentage of premiums paid out as claims and expenses − improved 360 basis points (bps) from the prior-year quarter to 93.2%.

Progressive Corporation (The) Price, Consensus and EPS Surprise

Progressive Corporation (The) Price, Consensus and EPS Surprise | Progressive Corporation (The) Quote

Numbers in June

Operating revenues improved 13% year over year to $2.1 billion in the quarter. The top line growth was driven by a 13% increase in premiums, 8% higher investment income, 7% rise in fees and other revenues, plus 36% jump in service revenues.

Total expense increased 12.4% to $1.9 billion. The rise in expenses can be primarily attributed to 12.9% higher losses and loss adjustment expenses, 12.2% increase in policy acquisition costs and 9% higher other underwriting expenses.

In Jun 2017, policies in force were impressive with the Personal Auto segment, improving 8% from Jun 2016 to 11 million. Special Lines inched up 2% from the prior-year month to 4.4 million.

In Progressive’s Personal Auto segment, both Direct Auto and Agency Auto grew 8% year over year to 5.3 million and 5.7 million, respectively.

Progressive’s Commercial Auto segment grew 4% year over year to 0.6 million. The Property business had about 1.3 million policies in force in the reported month, up 11% year over year.

Progressive’s book value per share was $15.48 as of Jun 30, 2017, up 14.9% from $13.47 as of Jun 30, 2016.

Return on equity on a trailing 12-month basis was 17.4%, up 410 bps from 14.8% in Jun 2016. Debt-to-total capital ratio deteriorated 190 bps year over year to 27.3% as of Jun 30, 2017.

Zacks Rank and Performance of Another Insurer

Progressive carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brown & Brown, Inc. (NYSE:BRO) reported second-quarter 2017 earnings of 49 cents per share that beat the Zacks Consensus Estimate by 4.3%.

Stocks to Consider

Investors interested in the insurance industry can also consider Everest Re Group, Ltd. (NYSE:RE) and Reinsurance Group of America, Inc. (NYSE:RGA) .

Everest Re Group offers reinsurance and insurance products. The company is set to release its second-quarter results on Jul 24.

Reinsurance Group is primarily engaged in life reinsurance and international life and disability insurance on a direct and reinsurance basis. The company is set to release its second-quarter results on Jul 27.

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