Higher Costs from Sandy Sink Progressive’s November Profits

Progressive reported a $47 million—or 37 percent—drop in November profits compared with the same month last year, dragged down by higher claim sizes than were originally predicted from Superstorm Sandy.

The drop in profits was despite a $62.6 million—or 5 percent—increase in revenues compared with November 2011.

According to Progressive’s latest financials, the auto insurance provider incurred $34 million in catastrophe losses last month, mostly due to New York- and New Jersey-based claims from Superstorm Sandy. In total, the disaster has cost Progressive almost $90 million, according to the insurer, putting its year-to-date catastrophe losses at $264 million, about $60 million more than the same time frame last year.

Progressive began tallying its Sandy-related losses early last month after the storm struck several states in the northeastern U.S. in late October. In its October financials, the insurance carrier reported that about 80 percent of its total losses at the time were in New Jersey and New York.

CFO Brian Domeck said that 10 percent of claim-related losses are in Pennsylvania and Connecticut, with the remaining 10 percent spread across other Sandy-impacted states. According to Domeck, about 6,000 insurance claims, the vast majority related to flooded vehicles, had already been filed with the insurer by Nov. 2, days after Superstorm Sandy dissipated.

“Flood claims for us are probably going to be, more often than not, total losses,” Domeck said in a conference call with investors at the time. “Salt water is not good for cars.”

In its report for the third quarter released last month, Progressive said that Sandy was a relative “surprise,” landing on a part of the year that would have been “the traditional end of hurricane season.”

Other car insurers have reported higher loss numbers. Allstate’s estimated catastrophe-related losses for October were $1.08 billion. But Progressive may be doing better because of it’s focus on strictly auto coverage, while most other major insurers have a greater emphasis on other types of property insurance.

Down Month Also Due to Poorer Investments

The 38 percent difference in profits was also partly due to November 2012 seeing worse performance on securities. The company gained $42.1 million on securities in November 2011, but November 2012 saw only $10.2 million in security gains, a 75 percent drop.

Still, the insurer continued a trend of writing more insurance policies, with total policies in force within its personal lines of auto insurance rising 4 percent from 8.5 million last November to 8.8 million last month.


To read about the experiences of current and former Progressive policyholders, readers can find user-submitted Progressive auto insurance reviews online.

 

About John Pirro
John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.

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