10-QPeriod: Q3 FY2014

PROGRESSIVE CORP/OH/ Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 29, 2014For Securities:PGR

Summary

Progressive Corporation (PGR) reported solid financial results for the nine months ended September 30, 2014. Total revenues grew 5% year-over-year to $14.2 billion, driven by a 5% increase in net premiums earned to $13.5 billion. Net income for the period rose 5% to $910.8 million, translating to diluted earnings per share of $1.53. The company's underwriting operations showed improved profitability, with an underwriting margin of 7.1% for the nine months, up from 6.7% in the prior year, reflecting better loss ratios and expense management, particularly in Commercial Lines. From an investment perspective, the portfolio saw a total return of 3.3% for the nine months ended September 30, 2014, though this was lower than the 3.5% in the prior year, primarily due to softer equity market returns. The company maintained a strong capital position, with total capital of $9.1 billion at the end of the period, and continued to return capital to shareholders through share repurchases and dividends.

Financial Highlights

38 data points
Beta

Revenue

$4.77B

Net Income

$296.10M

6.2% Net Margin

EPS (Diluted)

$0.50

Total Assets

$25.93B

Cash & Equivalents

$90.60M

Free Cash Flow

$587.40M

Financial Statements
Beta
Revenue$4.77B
Interest Expense$30.70M
Net Income$296.10M
EPS (Basic)$0.50
EPS (Diluted)$0.50
Shares Outstanding (Basic)589.80M
Shares Outstanding (Diluted)593.70M

Key Highlights

  • 1Total revenues increased 5% to $14.2 billion for the nine months ended September 30, 2014.
  • 2Net premiums earned grew 5% to $13.5 billion for the nine months ended September 30, 2014.
  • 3Net income increased 5% to $910.8 million for the nine months ended September 30, 2014, with diluted EPS of $1.53.
  • 4Underwriting margin improved to 7.1% for the nine months ended September 30, 2014, up from 6.7% in the prior year.
  • 5The investment portfolio delivered a total return of 3.3% for the nine months ended September 30, 2014.
  • 6Total capital remained strong at $9.1 billion as of September 30, 2014.
  • 7Progressive repurchased $234.7 million of its common shares and paid $892.6 million in dividends during the first nine months of 2014.

Frequently Asked Questions

Progressive's underwriting performance improved. The underwriting margin for the nine months ended September 30, 2014, increased to 7.1% from 6.7% in the same period of the prior year. This improvement was driven by better loss ratios and expense management, particularly in the Commercial Lines segment, despite some unfavorable loss reserve development in the Direct Personal Lines business.

The investment portfolio generated a fully taxable equivalent (FTE) total return of 3.3% for the nine months ended September 30, 2014. While the fixed-income securities performed steadily, the overall return was lower than the prior year (3.5%) due to a decline in equity market returns. The company maintained a high-quality fixed-income portfolio with an average credit quality of AA-.

Progressive maintained a strong capital position with total capital of $9.1 billion at September 30, 2014. During the first nine months of 2014, the company actively returned capital to shareholders by repurchasing approximately $234.7 million of its common shares and paying $892.6 million in dividends, including an annual variable dividend and a special dividend.

Growth was driven by increases in net premiums written and earned across both Personal Lines and Commercial Lines. For Personal Lines, the Direct auto business showed strong growth in policies in force and new applications. In Commercial Lines, growth was supported by rate increases and the easing of some underwriting restrictions. Initiatives like the Snapshot usage-based insurance program and cross-selling efforts (bundling auto with other products) also contribute to growth and customer retention.