Progressive Continues Trend of Rising Premiums, Falling Profits

The latest monthly financial report from Progressive shows that the major auto insurer has seen falling profits over the last three months compared with the same period last year.

Progressive reported Wednesday that May 2012 profits were down 41 percent from last May and down 28 percent from April 2012.

The insurer saw $43.9 million in profits for May 2012, down from the $74.1 million profit for May 2011.

Overall, profits for the first five months of 2012 took a 35 percent dive compared with last year, from $555 million to $362.7 million.

The insurer is seeing sagging profits despite the fact that it’s still continuing to write more premiums at a steady pace. In May, the company wrote about $1.22 billion in premiums, a 7 percent increase from the $1.13 billion written in May 2011. Before that, April and March saw 9 percent and 8 percent year-over-year increases in premiums, respectively.

And the insurance carrier reports that catastrophe losses last month were only about half the amount reported for May 2011, dropping to $24 million from $48 million the year before.

It appears that Progressive’s increases in revenues in May 2012 were mostly wiped out by a $136 million jump in losses, policy acquisition costs and other underwriting expenses compared with last year. Even though the insurer cut its monthly catastrophic losses in half, loss and loss adjustment expenses were still up $118 million—a 14 percent spike.

According to the company’s report on its first-quarter financial performance, the average personal auto insurance claim size is increasing, which may be eating at the company’s profits.

“Several of our largest states are running a little hot,” Progressive said in its report, going on to say that it has already begun to raise rates in order to maintain its profit margin.

Consumers taking a look at auto insurance comparisons will find that Progressive Corp. is one of the largest insurers in the U.S.

Based on total premiums written, the National Association of Insurance Commissioners (NAIC) ranks the provider as the fourth-biggest underwriter of personal auto policies, with 7.9 percent market share. The company is in a tight race with GEICO, which operates under the Berkshire Hathaway Group and holds 9.1 percent market share.

Progressive is prepping for its first Investor Relations Meeting of the year, to be held Thursday at 9 a.m. Eastern time. An overview of the company’s financial health and a question-and-answer session are planned for the meeting.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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