10-QPeriod: Q1 FY2016

PROGRESSIVE CORP/OH/ Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 5, 2016For Securities:PGR

Summary

Progressive Corporation (PGR) reported a 14% increase in total revenues for the first quarter of 2016 compared to the same period in 2015, reaching $5.56 billion. This growth was primarily driven by a 14% rise in net premiums earned, which amounted to $5.32 billion. Despite the top-line growth, net income attributable to Progressive decreased by 13% to $258.2 million, largely due to a decline in underwriting profitability. The combined ratio for total underwriting operations increased from 92.7% to 94.6%, primarily influenced by higher catastrophe losses and unfavorable prior accident year loss reserve development. The company's investment portfolio remained substantial at $21.3 billion, contributing to investment income growth. Progressive also returned capital to shareholders through share repurchases and dividends. The company continued to expand its offerings, including a new coverage for Transportation Network Company (TNC) drivers and a pilot program with Uber, indicating a strategic focus on adapting to evolving market needs and customer demands.

Financial Highlights

38 data points
Beta

Revenue

$5.56B

Net Income

$258.20M

4.6% Net Margin

EPS (Diluted)

$0.44

Total Assets

$30.72B

Cash & Equivalents

$203.90M

Free Cash Flow

$764.50M

Financial Statements
Beta
Revenue$5.56B
Interest Expense$34.20M
Net Income$258.20M
EPS (Basic)$0.44
EPS (Diluted)$0.44
Shares Outstanding (Basic)583.20M
Shares Outstanding (Diluted)585.50M

Key Highlights

  • 1Total revenues increased by 14% to $5.56 billion, driven by a 14% increase in net premiums earned to $5.32 billion.
  • 2Net income attributable to Progressive decreased by 13% to $258.2 million due to lower underwriting profitability.
  • 3The combined ratio for total underwriting operations worsened, increasing from 92.7% to 94.6%.
  • 4Catastrophe losses increased significantly to $102.4 million from $9.4 million in the prior year period.
  • 5Unfavorable prior accident year loss reserve development negatively impacted results compared to favorable development in the prior year.
  • 6The investment portfolio was valued at $21.3 billion, with investment income up 13%.
  • 7Progressive returned $70.3 million to shareholders through share repurchases during the quarter.

Frequently Asked Questions

The primary driver of the decrease in net income was a decline in underwriting profitability. The combined ratio worsened from 92.7% to 94.6%, influenced by higher catastrophe losses and unfavorable prior accident year loss reserve development.

The investment portfolio was valued at $21.3 billion as of March 31, 2016. Investment income increased by 13% year-over-year, reflecting growth in average invested assets. The total portfolio generated a fully taxable equivalent (FTE) total return of 1.2% for the quarter.

Progressive is actively expanding its offerings. This includes new coverage for drivers of Transportation Network Companies (TNCs) like Uber and Lyft, and a pilot program with Uber for commercial auto coverage. The company is also focusing on increasing multi-product households and enhancing its digital capabilities for customers and agents.

Progressive is returning capital through share repurchases, having spent $70.3 million on share buybacks in the first quarter of 2016. They also paid an annual variable dividend in February 2016. The company believes it has sufficient capital resources to support its business needs and future requirements.