The Progressive Corp. (PGR, Financial) filed Quarterly Report for the period ended 2010-06-30.
The Progressive Corp. has a market cap of $13.19 billion; its shares were traded at around $19.68 with a P/E ratio of 12.9 and P/S ratio of 0.9. The dividend yield of The Progressive Corp. stocks is 0.8%.PGR is in the portfolios of Lee Ainslie of Maverick Capital, Chris Davis of Davis Selected Advisers, Manning & Napier Advisors, Inc, Brian Rogers of T Rowe Price Equity Income Fund, Wallace Weitz of Weitz Wallace R & Co, Murray Stahl of Horizon Asset Management, Tom Russo of Gardner Russo & Gardner, PRIMECAP Management, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Pioneer Investments, Steven Cohen of SAC Capital Advisors, David Dreman of Dreman Value Management, Jeremy Grantham of GMO LLC, George Soros of Soros Fund Management LLC.
Our 7.3% companywide underwriting profit margin for the second quarter 2010 exceeded our target of 4% and was only 0.1 point lower than in the second quarter 2009. All of the businesses contributed to these strong results. During the second quarter 2010, we experienced $58.4 million, or 1.6 points, of favorable prior accident year development, with $33.6 million of the development derived from adjustments made by our actuarial department and the remaining $24.8 million from all other development (e.g., claims settling for less than reserved). Nearly 80% of the development was in our Personal Lines business, with the balance in Commercial Auto. On a year-over-year basis, for the second quarter 2010, we experienced decreases of about 2% in both frequency and severity for our personal auto products.
In an effort to efficiently manage our capital position, on June 10, 2010 we commenced a Tender Offer to purchase up to $350 million of our $1 billion 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067. The tender offer expired July 8, 2010, at which time we repurchased $222.9 million principal amount of Debentures that were validly tendered pursuant to the Tender Offer.
The total cost of the Consent Solicitation (discussed below) and debt Tender Offer, including payments to the tendering Debenture holders and all associated fees, was $214.3 million, of which $2.0 million of expenses and fees were incurred in June. In July, we recognized a net gain of $8.5 million, bringing the total net gain on the debt extinguishment to approximately $6.5 million. In addition, during July 2010, we reclassified $5.8 million (pretax) from accumulated other comprehensive income (balance sheet) to net realized gains/losses on securities (income statement), reflecting the portion of the unrealized gain on forecasted transactions that was related to the Debentures that were extinguished pursuant to the Tender Offer. See Note 4 - Debt and Note 11 - Subsequent Event for additional information.
Progressives insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance of paying claims. For the six months ended June 30, 2010 and 2009, operations generated positive cash flows of $1,204.5 million and $928.1 million, respectively. During the second quarter 2010, we repurchased 3.3 million of our common shares at a total cost of $64.7 million (average cost of $19.52 per share). Year-to-date, we have repurchased 5.7 million common shares at a total cost of $107.3 million (average cost of $18.68 per share).
At all times during 2009 and the first six months of 2010, our total capital exceeded the sum of our regulatory capital layer plus our self-constructed extreme contingency load. At June 30, 2010, we held total capital (debt plus equity) of $8.5 billion at book value, compared to $7.9 billion at December 31, 2009 and $7.1 billion at June 30, 2009.
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The Progressive Corp. has a market cap of $13.19 billion; its shares were traded at around $19.68 with a P/E ratio of 12.9 and P/S ratio of 0.9. The dividend yield of The Progressive Corp. stocks is 0.8%.PGR is in the portfolios of Lee Ainslie of Maverick Capital, Chris Davis of Davis Selected Advisers, Manning & Napier Advisors, Inc, Brian Rogers of T Rowe Price Equity Income Fund, Wallace Weitz of Weitz Wallace R & Co, Murray Stahl of Horizon Asset Management, Tom Russo of Gardner Russo & Gardner, PRIMECAP Management, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Pioneer Investments, Steven Cohen of SAC Capital Advisors, David Dreman of Dreman Value Management, Jeremy Grantham of GMO LLC, George Soros of Soros Fund Management LLC.
Highlight of Business Operations:
Second quarter 2010 results reflect solid growth in both premiums written and policies in force. The Progressive Corporations insurance subsidiaries generated underwriting profitability of 7.3%, or $262.0 million. We generated net income of $211.9 million, or $.32 per share, for the second quarter 2010, compared to $250.1 million, or $.37 per share, for the same period last year. The difference in income primarily reflects $39.5 million of net realized losses on securities this quarter, compared to net realized gains of $15.9 million in the second quarter 2009. Our total capital position increased $93.5 million during the quarter, to $8.5 billion at June 30, 2010.Our 7.3% companywide underwriting profit margin for the second quarter 2010 exceeded our target of 4% and was only 0.1 point lower than in the second quarter 2009. All of the businesses contributed to these strong results. During the second quarter 2010, we experienced $58.4 million, or 1.6 points, of favorable prior accident year development, with $33.6 million of the development derived from adjustments made by our actuarial department and the remaining $24.8 million from all other development (e.g., claims settling for less than reserved). Nearly 80% of the development was in our Personal Lines business, with the balance in Commercial Auto. On a year-over-year basis, for the second quarter 2010, we experienced decreases of about 2% in both frequency and severity for our personal auto products.
In an effort to efficiently manage our capital position, on June 10, 2010 we commenced a Tender Offer to purchase up to $350 million of our $1 billion 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067. The tender offer expired July 8, 2010, at which time we repurchased $222.9 million principal amount of Debentures that were validly tendered pursuant to the Tender Offer.
The total cost of the Consent Solicitation (discussed below) and debt Tender Offer, including payments to the tendering Debenture holders and all associated fees, was $214.3 million, of which $2.0 million of expenses and fees were incurred in June. In July, we recognized a net gain of $8.5 million, bringing the total net gain on the debt extinguishment to approximately $6.5 million. In addition, during July 2010, we reclassified $5.8 million (pretax) from accumulated other comprehensive income (balance sheet) to net realized gains/losses on securities (income statement), reflecting the portion of the unrealized gain on forecasted transactions that was related to the Debentures that were extinguished pursuant to the Tender Offer. See Note 4 - Debt and Note 11 - Subsequent Event for additional information.
Progressives insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance of paying claims. For the six months ended June 30, 2010 and 2009, operations generated positive cash flows of $1,204.5 million and $928.1 million, respectively. During the second quarter 2010, we repurchased 3.3 million of our common shares at a total cost of $64.7 million (average cost of $19.52 per share). Year-to-date, we have repurchased 5.7 million common shares at a total cost of $107.3 million (average cost of $18.68 per share).
At all times during 2009 and the first six months of 2010, our total capital exceeded the sum of our regulatory capital layer plus our self-constructed extreme contingency load. At June 30, 2010, we held total capital (debt plus equity) of $8.5 billion at book value, compared to $7.9 billion at December 31, 2009 and $7.1 billion at June 30, 2009.
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