Progressive Corp., the fourth-largest U.S. auto insurer, said profit dropped 16 percent as investment income declined for a 12th straight quarter.
Third-quarter net income decreased to $232.4 million, or 39 cents a share, from $277 million, or 46 cents, a year earlier, the Mayfield Village, Ohio-based company said today in a statement. Operating profit, which excludes some investment results, was about 36 cents a share, matching the average estimate of 19 analysts.
Investment income slipped to $107.4 million from $109 million in the third quarter of 2012. Net investment gains narrowed to $27.9 million from $171.9 million in last year’s third quarter, when the company sold some stock holdings at a profit.surveyed by Bloomberg.
“What we’ve seen is a pretty steady negative trend in investment income on a year-over-year basis,” said Meyer Shields, an analyst at Keefe Bruyette & Woods Inc., in an interview before results were announced. The last time investment income climbed on a year-over-year basis was in the third quarter of 2010.
Premium revenue increased 6.1 percent to $4.3 billion from $4.05 billion in the prior-year quarter. The number of individual auto customers climbed to 9.01 million, an increase of 1.7 percent from a year earlier. That compares with the 5.4 percent gain in the 12 months ended Sept. 30, 2012.
The third quarter combined ratio improved to 94.2, down from 95.9 for the third quarter last year.
Chief Executive Officer Glenn Renwick is seeking to attract more customers to a product, Snapshot, that tracks a person’s driving, a technology that helps the company set rates. The Federal Reserve has kept interest rates near zero since 2008 to bolster the economy, limiting insurers’ interest income from bond portfolios and increasing pressure to improve returns from underwriting policies.
Progressive fell 0.3 percent to $26.53 at 4 p.m. in New York trading. The company gained 26 percent this year, compared with the 29 percent jump of the 21-company Standard & Poor’s 500 Insurance Index. Renwick’s firm, which reports results monthly, had previously announced earnings for July and August.
Berkshire Hathaway Inc.’s Geico, the third-largest U.S. auto insurer, is competing against Progressive to sign up drivers through phone and Internet sales. Travelers Cos. has announced job cuts as CEO Jay Fishman works to lower prices. State Farm Mutual Automobile Insurance Co. and Allstate Corp, the two largest U.S. car insurers, have also been promoting direct sales after typically relying on agents.
Editors: Dan Kraut, Steven Crabill
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