Progressive Insurance’s Financial Slide Steepens in Second Quarter

Progressive profits June 2010 to June 2012Progressive reported its second-quarter finances on Wednesday showing that the insurer is continuing a financial slide as profits shrink and expenses mount.

Second-quarter profits saw a 52 percent drop compared with the second quarter of last year, falling from $245.2 million to $118.6 million, the lowest quarterly profit in at least three years.

For the month, profits were down a steep 75 percent compared with June 2011, dropping from $53.1 million to $13.5 million.

That was despite the fact that June revenues increased 8.5 percent from last year, going from $1.18 billion to $1.28 billion. The revenue increase was floated mainly by the company’s writing more policies. That trend has held true, with the insurer’s written premiums so far this year amounting to a 7 percent increase over the same period last year.

Progressive saw a 6 percent bump in personal auto policies and 3 percent in commercial auto policies this month compared with last month.

Higher Quarterly Revenue Sunk by Higher Expenses, Poorer Investments

Total quarterly revenue has risen since late last year, when the insurer recorded $3.93 billion in revenue during the last quarter of 2011. In the first quarter of 2012, Progressive reported $4.06 billion in total revenue, followed by $4.11 billion in the second quarter.

But at the same time, total quarterly expenses increased. For the last quarter of 2011, expenses totaled $3.56 billion. The next quarter, it was $3.68 billion. This latest quarter, expenses totaled $3.95 billion.

Also, income from investments has steadily shrunk, falling from $118.5 million in the fourth quarter of 2011 to $114.7 million in the first quarter of 2012. In the latest quarter, the insurer recorded $112.5 million in investment income.

Catastrophe Losses Stem from Colorado Wildfires, Texas Hailstorms

Higher claims are what took the biggest bite out of the insurer’s increasing revenues. Second-quarter losses were up 10 percent ($281 million) from the previous quarter and up 14 percent ($382 million) from the second quarter of 2011.

The insurance provider was hit with $37 million in disaster-related losses in June. Texas, Colorado and Florida made up 75 percent of those total losses. Texas dealt with a spate of hailstorms last month.

So far this year, the insurer’s finances have been much lower compared with last year, with a net income of $376.2 million that is 38 percent less than the $608.1 million recorded during the same period in 2011.

Catastrophe losses totaled $107 million during the second quarter and $123 million for this year so far.

Progressive Ups Ante in Insurance Battle

Faced with falling profits, Progressive has not backed down in the high-stakes battle for positioning in the industry.

According to the latest data from the National Association of Insurance Commissioners, Progressive is the fourth-leading insurer in terms of market share, trailing State Farm, Allstate and GEICO.

Earlier this last week, Progressive fired the opening salvo in a new phase of promoting usage-based coverage to become the best car insurance provider in the country, offering its usage-based Snapshot program as a 30-day trial to policyholders regardless of who insures them. Such increasingly popular programs are meant to cut policyholders’ coverage costs by tailoring rates to their driving habits.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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