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Progressive Advances as Insurer’s Profit Beats Estimates

Oct. 10 (Bloomberg) -- Progressive Corp., the fourth-largest U.S. auto insurer, posted the biggest gain in the 81-company Standard & Poor’s 500 Financials Index after profit climbed and underwriting results improved.

The insurer climbed 2.7 percent to $22.29 at 9:47 a.m. in New York. Third-quarter operating profit, which excludes some investment results, was 27 cents a share, beating by one cent the average estimate of 22 analysts surveyed by Bloomberg.

Progressive had an underwriting profit margin of 4.1 cents on every dollar in premiums for the quarter, compared with 2.4 cents in the second quarter, the Mayfield Village, Ohio-based company said today in a statement. The company targets a 4-cent profit for each premium dollar and aims to use the collection and analysis of data to beat its competitors in identifying the safest and riskiest clients.

“They are historically among the fastest to get rates through” when claims costs show the company should charge more, said Paul Newsome, an analyst at Sandler O’Neill & Partners, in an interview before results were announced.

The number of individual auto customers expanded 5.4 percent to about 8.87 million, led by clients who purchase through direct channels such as the internet or phone. Premium revenue increased 8.4 percent to $4.05 billion.

Net income increased 84 percent to $277 million, or 46 cents a share, from $150.7 million, or 24 cents, in the year-earlier period, aided by selling stocks from its portfolio. Chief Investment Officer William Cody has been adding municipal bonds and corporate debt.

Book Value

Book value, a measure of what he firm would be worth if liquidated, rose to $10.84 a share from $10.32 a share on June 30. Progressive’s stock advanced 11 percent this year through yesterday, compared with the 13 percent gain of the 24-company KBW Insurance Index.

The insurer has been increasing internet sales as it competes with larger rivals State Farm Mutual Automobile Insurance Co., Allstate Corp. and Berkshire Hathaway Inc.’s Geico unit. Progressive Chief Executive Officer Glen Renwick, 57, is seeking to improve underwriting margins through the firm’s Snapshot technology, which collects vehicle data and offers discounts to drivers with the best habits.

Miles traveled in July on U.S. roads fell by 0.3 percent, or 800 million miles, from a year earlier as gas prices climbed past $3.50 per gallon, according to the most recent monthly federal government report. Fewer miles driven may result in a lower frequency of collision claims for auto insurers.

Progressive is the first of the largest U.S. auto insurers to announce third-quarter results.

To contact the reporter on this story: Susanna Pak in New York at spak10bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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