Progressive Insurance Sees Sagging Profits in First Quarter of 2012

Progressive Insurance saw year-over-year drops in monthly and quarterly profits at the start of 2012, according to financial data released by the company on Wednesday.

First-quarter profits for 2012 were 29 percent below last year’s—dropping from $362.9 million down to $257.6 million—despite the fact that the company managed to increase first-quarter premium revenue by 7 percent.

And March profits were down 44 percent this year compared with last year, going from $136.2 million down to to $76.3 million.

Last month’s results also represent a 28 percent drop in profits from February.

Progressive wrote about $1.33 billion worth of premiums in March.

The following factors contributed to Progressive’s lackluster year-over-year results for March:

— A 16 percent spike in loss and loss adjustment expenses, which cost Progressive an extra $123 million this March

— A $20 million increase in underwriting expenses

— A $3.9 million decline in investment income

— A $7.6 million drop in gains on securities

— An extra $4.3 million in policy acquisition costs

Company representatives stated that Progressive experienced “unfavorable developments” in commercial auto, bodily injury and property damage policies. The March report cited Florida’s personal injury protection coverage and “higher than expected” losses in commercial auto as significant sources of financial loss.

Also, costs to the company related to catastrophes around the U.S. were up this quarter at $16 million, compared with $10 million in the first quarter of 2011. Texas and Tennessee registered the largest percentage of losses at 40 percent and 20 percent, respectively, of states in the U.S., according to the report.

Progressive Still One of Largest U.S. Auto Insurers

The National Association of Insurance Commissioners (NAIC) ranks Progressive as the fourth-biggest underwriter of personal auto policies, based on total premium dollars written. The insurer has found success with its focus on direct-to-customer sales, in which customers purchase policies after getting cheap car insurance quotes online or over the phone instead of buying coverage through an agent.

Progressive has also enjoyed success with expansion of its Snapshot discount program, one of the industry’s first usage-based coverage programs.

Earlier this month, Washington Gov. Christine Gregoire signed HB 2361 into law, permitting insurers to protect their usage-based rating systems as trade secrets and keep them free from public inspection. After this development, Progressive is expected to introduce Snapshot in Washington, one of the few states that don’t yet have access to the program.

To research how Progressive performs when handling claims and in other areas, consumers can read 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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