Progressive Corp., the fourth-largest U.S. car insurer, said second-quarter profit fell 9.6 percent as investment gains narrowed.
Net income dropped to $293.4 million, or 49 cents a share, from $324.6 million, or 54 cents, a year earlier, the Mayfield Village, Ohio-based company said today in a statement.
Innovations that helped Progressive in the past, such as allowing clients to do more business through smartphones, are no longer drawing as many policyholders, according to Paul Newsome, an analyst at Sandler O’Neill & Partners. Chief Executive Officer Glenn Renwick also faced resistance from potential customers to technology that allows the company to track driving behavior and offer better rates to the safest motorists.
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“The biggest issue is that they really haven’t had a major change in the last decade,” Newsome said in a phone interview before the results were released. “It’s really about 10 years ago when they had really rapid premium growth.’
Progressive’s stock fell 3.7 percent this year through yesterday to $25.19, compared with the 1.4 percent gain by the seven-company Standard & Poor’s 500 Property & Casualty Insurance Index. Renwick reports results monthly and had previously announced earnings for April and May.
Progressive increased advertising spending by a greater dollar amount than other U.S. property-casualty insurers last year as Renwick sought to attract customers, according to data compiled by SNL Financial. Spending climbed 13 percent to $595.4 million. The biggest advertiser is Geico, the second-largest U.S. auto insurer.
Progressive and Geico have focused on direct sales through the Internet, while State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer by sales, and No. 3 Allstate Corp. traditionally relied more on agents.
Our customers ‘‘bought online, they pay online, and they want to report their loss online,” Tricia Griffith, Progressive claims group president, said during an investor presentation in May. “This is the investment we will continue to make based on the fact that our customers have told us they need it.”
Distance traveled on U.S. roads increased by 1.8 percent in April, or 4.6 billion miles, from a year earlier according to the most recent monthly report from the Federal Highway Administration. A greater number of miles driven may result in an increase in auto claims.
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