10-QPeriod: Q3 FY2013

PROGRESSIVE CORP/OH/ Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 12, 2013For Securities:PGR

Summary

Progressive Corporation (PGR) reported its third-quarter and nine-month results for the period ending September 30, 2013. For the third quarter, net income decreased by 16% to $232.4 million, or $0.39 per share, compared to the same period last year, primarily due to lower net realized gains from investments. However, the company saw an improvement in its underwriting profitability, with an underwriting margin of 5.8% compared to 4.1% in the prior year, driven by higher average premiums and fewer catastrophe losses. Net premiums written grew by 5% year-over-year, with solid performance in the Personal Lines segment, particularly the Direct auto business. For the first nine months of the year, net income increased by 33% to $865.6 million, or $1.43 per share, reflecting strong operational performance and improved investment results compared to the prior year. The company's investment portfolio remained substantial at $18.0 billion, with a continued focus on high-quality, liquid securities. Progressive's capital position remained strong, with total capital of $8.8 billion, and the company continued to return capital to shareholders through debt repurchases and share buybacks.

Financial Highlights

35 data points
Beta

Revenue

$4.52B

Net Income

$232.40M

5.1% Net Margin

EPS (Diluted)

$0.39

Total Assets

$24.51B

Cash & Equivalents

$100.90M

Free Cash Flow

$574.70M

Financial Statements
Beta
Revenue$4.52B
Interest Expense$30.40M
Net Income$232.40M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)598.90M
Shares Outstanding (Diluted)603.50M

Key Highlights

  • 1Net income for the third quarter declined 16% to $232.4 million ($0.39/share) due to lower investment gains compared to the prior year.
  • 2Nine-month net income increased 33% to $865.6 million ($1.43/share), indicating strong overall performance for the year-to-date.
  • 3Total underwriting profit margin improved to 5.8% in Q3 2013 from 4.1% in Q3 2012, driven by rate increases and fewer catastrophe losses.
  • 4Net premiums written increased 5% year-over-year for the quarter, with Personal Lines showing a 6% increase.
  • 5The investment portfolio was valued at $18.0 billion, with a strategic allocation towards high-quality, liquid Group II securities.
  • 6The company's capital position remained robust, with total capital of $8.8 billion and a debt-to-total capital ratio of 22.8%.
  • 7Progressive continued to return capital to shareholders through debt repurchases ($54.1 million in Q3) and common share repurchases ($38.1 million in Q3).

Frequently Asked Questions

The primary driver for the decrease in net income during the third quarter of 2013 was a significant reduction in net realized gains from the investment portfolio, which fell to $27.9 million compared to $171.9 million in the same period of the prior year.

Progressive's underwriting performance improved notably in the third quarter of 2013. The underwriting profit margin increased to 5.8% from 4.1% in the prior year's third quarter. This improvement was attributed to higher average premiums resulting from prior rate changes and a reduction in catastrophe losses compared to the previous year.

As of September 30, 2013, Progressive's investment portfolio was valued at $18.0 billion. The portfolio was strategically allocated with 78% in Group II securities (short-term and other fixed-maturity securities) and 22% in Group I securities (common equities, preferred stocks, and non-investment-grade fixed maturities). The company maintains a strategy of investing in high-quality, liquid securities.

Yes, Progressive continued its capital return initiatives. During the third quarter of 2013, the company repurchased $54.1 million in principal amount of its debt securities and $38.1 million of its common shares. Dividends paid during the year included the annual variable dividend and a special dividend declared in the prior year.