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The Progressive Corp. Reports Operating Results (10-K)

March 01, 2011 | About:
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10qk

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The Progressive Corp. (PGR) filed Annual Report for the period ended 2010-12-31.

Progressive Corp. has a market cap of $13.81 billion; its shares were traded at around $20.83 with a P/E ratio of 12.9 and P/S ratio of 0.9. The dividend yield of Progressive Corp. stocks is 1.9%.Hedge Fund Gurus that owns PGR: Lee Ainslie of Maverick Capital, Manning & Napier Advisors, Inc, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Tom Russo of Gardner Russo & Gardner, Steven Cohen of SAC Capital Advisors, Paul Tudor Jones of The Tudor Group. Mutual Fund and Other Gurus that owns PGR: Todd Combs of Castle Point Capital Management, LLC, Chris Davis of Davis Selected Advisers, PRIMECAP Management, Murray Stahl of Horizon Asset Management, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Pioneer Investments, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

We offer a number of personal and commercial property-casualty insurance products primarily related to motor vehicles. Net premiums written were $14.5 billion in 2010, compared to $14.0 billion in 2009 and $13.6 billion in 2008. Our combined ratio, calculated on a basis consistent with accounting principles generally accepted in the United States of America (GAAP), was 92.4 in 2010, 91.6 in 2009, and 94.6 in 2008.

We ranked fourth in market share in the U.S. private passenger auto market for 2009 based on net premiums written and believe that we held that position for 2010. There are approximately 360 competitors in this market. Progressive and the other leading 14 private passenger auto insurers, each of which writes over $1.8 billion of premiums, comprise about 75% of this market. For 2009, the industry net premiums written for private passenger auto insurance in the United States was $156.5 billion, and our share of this market was approximately 7.8%, compared to $158.0 billion and 7.3% in 2008, respectively; comparable industry data is not available for 2010 at this time. All industry data, including ranking and market share, was obtained directly from data reported by either SNL Financial or A.M. Best Company, Inc. (A.M. Best), or was estimated using A.M. Best data as the primary source.

Insurance companies are generally required by insurance regulators to maintain sufficient surplus to support their writings. Although the ratio of writings to surplus that the regulators will allow is a function of a number of factors (including applicable law, the type of business being written, the adequacy of the insurers reserves, and the quality of the insurers assets), the annual net premiums that an insurer may write have historically been perceived to be limited to a specified multiple of the insurers total policyholders surplus, generally 3 to 1. Thus, the amount of an insurers surplus, in certain cases, may limit its ability to grow its business. At year-end 2010, we had net premiums written of $14,476.8 million and statutory surplus of $5,073.0 million. The combined premiums to surplus ratio for all Progressive insurance companies was 2.9 to 1. In addition, we have access to $2.2 billion in a non-insurance subsidiary, portions of which could be contributed to the capital of our insurance subsidiaries to support growth as needed. The NAIC also has developed a risk-based capital (RBC) program to enable regulators to take appropriate and timely regulatory actions relating to insurers that show signs of weak or deteriorating financial condition. RBC is a series of

Our approach to investment and capital management seeks to ensure that we have sufficient capital to support all of the insurance premiums that we can profitably write. Our portfolio is invested primarily in short-term and intermediate-term, investment-grade fixed-income securities. Our investment portfolio had a fair value of $15.5 billion at December 31, 2010, compared to $14.7 billion at December 31, 2009. Investment income is affected by the variability of cash flows to or from the portfolio, shifts in the type and quality of investments in the portfolio, changes in yield, and other factors. Total investment income (loss), including net realized gains (losses) on securities, before expenses and taxes, was $616.2 million in 2010, compared to $534.1 million in 2009 and $(807.4) million in 2008. For more detailed discussion, see Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

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