10-QPeriod: Q1 FY2021

PROGRESSIVE CORP/OH/ Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 4, 2021For Securities:PGR

Summary

Progressive Corporation (PGR) reported strong financial results for the first quarter of 2021, driven by significant growth in net premiums written and a rebound in investment gains. Net income surged 114% year-over-year to $1.48 billion, or $2.51 per diluted share, largely due to favorable market conditions that boosted investment portfolio returns, particularly in equity securities, contrasting with losses in the prior year's quarter. The company also saw a 19% increase in total underwriting operations net premiums written, reaching $11.7 billion, and expanded its policies in force to 25.7 million companywide. The company's underwriting profit margin for the quarter was 10.7%, a decrease from 13.1% in the prior year, primarily due to higher catastrophe losses and increased claim severity in the Personal Lines segment, partially offset by improved performance in Commercial Lines. Despite the slight dip in underwriting margin, the overall financial performance demonstrates resilience and growth, supported by a well-managed investment portfolio and effective strategies across its insurance segments.

Financial Highlights

34 data points
Beta

Revenue

$11.45B

Net Income

$1.48B

12.9% Net Margin

EPS (Diluted)

$2.51

Total Assets

$65.41B

Cash & Equivalents

$122.90M

Free Cash Flow

$2.56B

Financial Statements
Beta
Revenue$11.45B
Interest Expense$56.40M
Net Income$1.48B
EPS (Basic)$2.52
EPS (Diluted)$2.51
Shares Outstanding (Basic)584.90M
Shares Outstanding (Diluted)586.90M

Key Highlights

  • 1Net income attributable to Progressive increased significantly by 114% to $1.48 billion for the three months ended March 31, 2021, compared to $692.7 million in the prior year.
  • 2Diluted earnings per common share rose to $2.51, a substantial increase from $1.17 in the first quarter of 2020.
  • 3Total revenues increased to $11.45 billion, up from $9.32 billion in the comparable period last year, driven by higher net premiums earned and investment gains.
  • 4Net premiums earned grew by 10% to $10.42 billion, reflecting strong performance across Personal, Commercial, and Property lines of business.
  • 5The investment portfolio generated significant net holding period gains on securities of $441.5 million, a stark contrast to net holding period losses of $868.8 million in the prior year's quarter, contributing substantially to the overall profit increase.
  • 6Policies in force reached 25.7 million companywide by the end of the quarter, an increase of 12% year-over-year, indicating successful customer acquisition and retention strategies.
  • 7The company's total capital (debt plus shareholders' equity) increased to $23.2 billion, demonstrating a strengthened financial position.

Frequently Asked Questions

The substantial increase in net income was primarily driven by a strong rebound in investment performance. The company reported significant net holding period gains on securities of $441.5 million in the first quarter of 2021, compared to net holding period losses of $868.8 million in the same period of 2020. This favorable swing in investment results, coupled with solid growth in net premiums earned, contributed to the 114% year-over-year increase in net income.

Progressive's insurance operations showed robust growth, with net premiums written increasing by 19% to $11.7 billion. The company also saw its total policies in force grow by 12% to 25.7 million companywide. While the overall underwriting profit margin decreased slightly to 10.7% from 13.1% in the prior year, this was influenced by higher catastrophe losses and increased claim severity. However, the Commercial Lines segment showed improved profitability with a 16.1% underwriting margin.

The report indicates that the investment portfolio generated positive returns in the first quarter of 2021, with fixed-income securities returning -0.9% and common stocks returning 12.5%. The company's asset allocation strategy aims to balance risk and return, with 84% of its portfolio in Group II securities (primarily fixed-maturity investments) and 15.6% in Group I securities (equities and other riskier assets). The weighted average credit quality of the fixed-income portfolio remained strong at AA-. Management expects the portfolio to continue to provide support for the company's operations, though market fluctuations, such as rising interest rates impacting fixed-income returns, are acknowledged.

Yes, Progressive has a pending acquisition of Protective Insurance Corporation for approximately $338 million, expected to close before the end of the third quarter of 2021. They also have a $500 million senior note maturing in August 2021, which they expect to fund with cash from operations or existing securities. The company continues to return capital to shareholders through dividends and share repurchases.