Tags: Progressive | Profit | Climbs | Sales | Investments

Progressive Profit Climbs 23 Percent on Sales, Investments

Thursday, 14 Apr 2011 11:22 AM

Progressive Corp., the fourth-largest U.S. auto insurer, said profit increased 23 percent on investment gains and rising policy sales to individuals through the Internet.

First-quarter net income climbed to $362.9 million, or 55 cents a share, from $295.6 million, or 44 cents, a year earlier, the Mayfield Village, Ohio-based company said today in a statement. Operating profit, which excludes some investment results, was 45 cents a share, based on a 35 percent tax rate, beating by 2 cents the average estimate of 19 analysts surveyed by Bloomberg.

Progressive, led by Chief Executive Officer Glenn Renwick, has gained sales along with Berkshire Hathaway Inc.’s Geico business as drivers shun agents and shop online. Auto insurers are benefiting from an improving U.S. job market that has boosted car sales and increased demand for coverage.

“There’s more new premium coming into the marketplace,” Amit Kumar, an analyst with Macquarie Group Ltd. who rates the company “neutral,” said before the earnings were announced. If the economy continues to improve, “more people buy expanded coverage instead of trying to just buy the basic coverage.”

Progressive slipped 21 cents to $21.20 at 9:44 a.m. in New York Stock Exchange composite trading. The insurer gained 7.8 percent in this year through yesterday on the New York Stock Exchange, compared with the 1.6 percent advance in the 24-company KBW Insurance Index.

Book Value

Book value, a measure of assets minus liabilities, rose to $9.64 a share, compared with $9.13 on Dec. 31, led by gains in the company’s portfolio of common stocks. Pretax realized investment gains advanced to $99.7 million from $30.8 million a year earlier.

Policy sales rose to $3.9 billion, or 3.2 percent, from $3.78 billion a year earlier. Progressive reports results on a monthly basis and had already disclosed figures from January and February.

Progressive’s total personal auto insurance policies climbed to 11.9 million on March 31, a 5.8 percent increase, from a year earlier. The gains were led by a 9.6 percent rise in the number of customers who signed up through direct channels such as the Internet and telephone.

Progressive and Geico “validate the whole direct-to-the-consumer model,” Renwick said in a March 3 call with analysts. “While we will be arch competitors always, we recognize that in some sense both of the models are producing very successful results.”

Economic Rebound

The U.S. economy added jobs for six consecutive months through March, with payrolls rising by 478,000 in the first quarter, according to Labor Department figures. The unemployment rate fell to a two-year low of 8.8 percent.

Auto sales ran at a seasonally adjusted annual rate of 13.1 million in the first quarter, the fastest pace since the three months ending June 2008, according to Autodata Corp.

“The new car replacement cycle is under way and they had some positive rate filings last year that are starting to work their way into higher premium prices this year,” said Mark Dwelle, an analyst at RBC Capital Markets, in an interview before the results were announced. He rates the stock “outperform” and doesn’t own any.

Progressive had an underwriting profit of 9.7 cents on every dollar it collected from customers, compared with 9.1 cents a year earlier.

State Farm Mutual Automobile Insurance Co. and Northbrook, Illinois-based Allstate Corp. are the top two sellers of personal auto insurance in the U.S., while Berkshire is the third-largest.

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Progressive Corp., the fourth-largest U.S. auto insurer, said profit increased 23 percent on investment gains and rising policy sales to individuals through the Internet. First-quarter net income climbed to $362.9 million, or 55 cents a share, from $295.6 million, or 44...
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Thursday, 14 Apr 2011 11:22 AM
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