Why Progressive’s Stock Price Rose on 3Q15 Earnings



Missing estimates

Progressive (PGR) reported its third-quarter earnings on October 16. The company missed Wall Street analysts’ EPS (earnings per share) estimates of $0.48, posting EPS of $0.47.

Progressive reported net income of $278 million for the quarter, down 6%, and a net premium written of $5.41 billion, up 14% over 3Q14. The company’s strong quarter follows its expansion into the housing insurance market with the purchase of ARX Holding. Its stock price rose by 2% on higher net premiums. The company has benefited from high growth in direct personal lines and commercial lines.

Progressive paid $875 million for a majority stake in ARX Holding in April. The company wanted to diversify its insurance offerings so it could compete with other insurers that offer bundled services. The company combines the results of ARX Holding in its “Property Business.”

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Insurance giant

Progressive, along with its insurance subsidiaries and mutual insurance company affiliate, provides personal auto insurance, commercial auto insurance, and truck insurance, principally for small businesses. It also provides other specialty property and casualty insurance and related services.

The company’s property and casualty insurance products protect customers against losses caused by collisions and any physical damage to their motor vehicles. These products also protect against uninsured and underinsured bodily injury as well as liability for personal injury or property damage arising out of insured vehicle use.

Progressive’s non-insurance subsidiaries and limited partnership investment affiliate support its insurance and investment operations.

Progressive achieved revenue growth of 6.7% in the last fiscal year. Here’s how some of its competitors compare:

  • American International Group (AIG)– -6.5%
  • Mercury General (MCY) – 6.8%
  • Ace (ACE) – -0.5%
  • Allstate (ALL) – 2.1%
  • Travelers Companies (TRV) – 3.7%

Together, these companies form 1.1% of the SPDR S&P 500 ETF (SPY).


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