Progressive February Earnings Up on Higher Revenue

Insurance giant Progressive Corporation reported higher earnings on increased revenue in the month of February. The company posted earnings per share of 41 cents, up 78% year over year.

Progressive’s shares have increased by 9% over the last year, outperforming the industry, which is up 4.9%.

Net premiums written came in at $2.7 billion in the month of February, up 23% from $2.2 billion in the same period the previous year. Net premiums earned came in at $2.2 billion, up from $1.9 billion last February.

Combined ratio, the percentage of premiums paid out as expenses and claims, improved by 260 basis points to 87.8%.

Progressive’s total operating revenues came in at $2.3 billion, with the top line improved 18.9% year over year. The company’s improved top line was due to a 23.1% increase in investment income, an 18.9% gain in premiums, an 11.6% increase in service revenues and a 19.1% rise in fees and other revenues.

Expenses increased by 15.4% to almost $2 billion. The increase in expenses can be attributed to 14.4% higher losses, 19% rise in underwriting expenses and an 18.6% increase in policy acquisition costs.

Policies in force in the Personal Auto unit were up 14% year over year, reaching 12.1 million. In this segment, Direct Auto insurance increased 14% to nearly 6.3 million, while Agency Auto gained 13% to hit 5.5 million.

The company’s commercial auto insurance segment increased 8% year over year to hit 0.7 million. The Property segment had nearly 1.6 million policies in force in February, up 29% year over year.

As of February 28, 2018, Progressive’s book value per share was $16.59. That figure is up 14.5% from $14.49 the year prior.

February’s results come on the heels of an announcement that Progressive will launch a public offering of senior notes and serial preferred shares. The company announced on March 2 the pricing of an underwritten public offering of $600 million aggregate principal on Senior Notes due 2048. They also announced the pricing of an underwritten public offering of 500,000 serial preferred shares.

Investors have been bullish on Progressive’s stock. The company is the number four auto insurer in the United States, accounting for 9% of the total market. Along with their catchy commercials, Progressive has been focused on digital platforms, like Facebook, YouTube, Roku and Amazon, Inc.

Effective advertising has helped propel Progressive forward, but the company is also investing in technology. Its Snapshot mobile app, launched in 2016, helps reduce underwriting costs. The app tracks driving patterns and mileage, allowing the company to offer discounts for safe driving and collect data that can be used for risk management. Snapshot has collected data on more than 33 million trips since its launch.

Progressive is best known for its auto insurance policies, but the company has been expanding its footprint in recent years. Today, Progressive is number one in commercial auto insurance, RV insurance and motorcycle insurance. They have also moved into the homeowners’ insurance sector, which allows them to offer bundle plans that help consumers save money on premiums.

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Ben Myers