Progressive Corp., the fourth- largest U.S. auto insurer, said profit more than doubled as premium revenue climbed after the company raised rates for coverage.
But the insurer declined in New York trading as the results missed analysts’ estimates and growth in policies was slow.
Second-quarter net income climbed to $324.6 million, or 54 cents a share, from $118.6 million, or 19 cents, a year earlier, the Mayfield Village, Ohio-based company said today in a statement.
The insurer reported a 93.3 combined ratio for the second quarter, compared to 97.6 for the second quarter last year.
The insurer has begun benefiting from rate increases that pushed away some policyholders last year, James Shanahan, an analyst at Edward Jones & Co. said in a phone interview. Competitors including Allstate Corp. and Travelers Cos. raised prices after natural disaster costs and near record-low bond yields pressured profit.
The “bulk of the increases have been passed through to customers,” Shanahan said before earnings were released. Chief Executive Officer Glenn Renwick “thinks that the bulk of the attrition is passed,” Shanahan said.
Progressive added customers along with the Geico unit at Warren Buffett’s Berkshire Hathaway Inc. in recent years as drivers opted to buy coverage online, including purchases through mobile devices. State Farm Mutual Automobile Insurance Co., the largest provider of U.S. car coverage, and No. 2 Allstate rely more on agents for sales.
“Mobile is just on fire,” Renwick, 58, said in a presentation in May. “Mobile is a primary front door for us and that number is going up on a pretty marked basis.”
Progressive Corp. dropped in New York trading after posting the profit. Operating profit was about 40 cents a share, missing by a penny the average estimate of 19 analysts surveyed by Bloomberg.
CEO Renwick said the insurer has found it harder to add customers after raising prices to counter higher catastrophe costs and bond yields that were near record lows.
Allstate Corp., the second-largest U.S. auto insurer, and No. 3 Geico at Warren Buffett’s Berkshire Hathaway Inc. have been increasing advertising to win business.
“You go back just a few quarters and the policies-in-force growth was consistently 5 to 8 percent” at Progressive, Shanahan of Edward Jones & Co. said. Lately it’s been “very, very low, say 1 percent in personal auto.”
The number of individuals with auto policies climbed less than 1 percent in the 12 months ended June 30 to 8.98 million. The growth in the 12 months through the middle of last year was 6.5 percent.
Premium revenue increased 7 percent to $4.28 billion. Progressive had an underwriting profit margin of 6.7 cents on every dollar in premiums for the quarter, compared with 2.4 cents in the second quarter of 2012.
Progressive distinguishes itself from its competitors with a device that collects driving data and helps price policies based on a motorist’s habits. Buffett has said he doesn’t think the technology gives Renwick an edge over Geico.
Progressive said last month it entered a deal to license its intellectual property to United Services Automobile Association.
Editors: Dan Kraut, Dan Reichl
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