The Progressive Corp. (PGR, Financial) filed Quarterly Report for the period ended 2012-09-30.
Progressive Corporation has a market cap of $13.66 billion; its shares were traded at around $22.37 with a P/E ratio of 17.8 and P/S ratio of 0.9. The dividend yield of Progressive Corporation stocks is 1.8%. Progressive Corporation had an annual average earning growth of 6.6% over the past 10 years.
Our 4.1% companywide underwriting profit margin for the third quarter 2012 was consistent with our target of at least 4% and improved from our second quarter margin of 2.4%. On a companywide basis, we raised our auto rates an average of nearly 6% year-to-date through September in an effort to offset increasing claims costs as we focus on our 96 calendar year combined ratio target. On a quarter-over-prior-year quarter basis, our underwriting margin decreased 0.7 percentage points, reflecting a higher loss ratio. During the third quarter 2012, we experienced $29.2 million, or 0.7 points, of favorable prior accident year reserve development, compared to $72.5 million, or 1.9 points, of favorable reserve development in the third quarter last year. On a year-over-year basis, for the third quarter 2012, our personal auto business experienced an increase in incurred severity, while frequency declined slightly. We continue to monitor trends to be able to react quickly to significant changes.
At September 30, 2012, our total capital (debt plus equity) was $8.6 billion, compared to $8.2 billion at December 31, 2011, and our debt-to-total capital ratio decreased to 23.9% from 29.6% at year-end 2011. During the first nine months of 2012, we retired $350 million of our 6.375% Senior Notes at maturity in January, repurchased $30.9 million in principal amount of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the 6.70% Debentures), and repurchased 8.4 million of our common shares at a total cost of $170.1 million (average cost of $20.25 per share). In addition, in October, we declared a special dividend of $1.00 per share, which, based on the shares outstanding at September 30, 2012, will return about $605 million of capital to our shareholders. We continue to manage our investing and financing activities in order to maintain sufficient capital to support all of the insurance we can profitably underwrite and service.
The net unrealized gains in our fixed-income portfolio increased $179.1 million and $205.8 million since September 30, 2011 and December 31, 2011, respectively, reflecting a material narrowing of credit spreads (i.e., a decrease in the risk premium paid above the comparable Treasury rate) as well as somewhat lower interest rates for both periods. The net unrealized gains in our common stock portfolio increased $329.7 million and $123.1 million over the same time periods, reflecting positive returns in the broad equity market. The increase since year end is net of $136.5 million of realized gains, which were primarily generated from common stock sales during the third quarter 2012.
Approximately 8%, or $147.9 million, of our total municipal securities were insured general obligation ($108.8 million) or revenue bonds ($39.1 million), with an overall credit quality rating of AA- at September 30, 2012, excluding the benefit of credit insurance provided by municipal bond insurers. These securities had a net unrealized gain of $7.0 million at September 30, 2012, compared to $10.7 million and $9.2 million at September 30, 2011 and December 31, 2011, respectively. We buy and hold these securities based on our evaluation of the underlying credit without reliance on the municipal bond insurance. Our investment policy does not require us to liquidate securities should the insurance provided by the municipal bond insurers cease to exist.
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Progressive Corporation has a market cap of $13.66 billion; its shares were traded at around $22.37 with a P/E ratio of 17.8 and P/S ratio of 0.9. The dividend yield of Progressive Corporation stocks is 1.8%. Progressive Corporation had an annual average earning growth of 6.6% over the past 10 years.
Highlight of Business Operations:
During the third quarter 2012, The Progressive Corporations insurance subsidiaries generated net premiums written and policies in force growth of 10% and 5%, respectively, on a year-over-year basis. Underwriting profitability for the quarter was 4.1%, or $165.2 million, and our investment operations produced investment income of $109.0 million. We also recognized $171.9 million of net realized gains on securities during the quarter, primarily reflecting the liquidation of approximately $580 million, or about 25%, of our common stock portfolio. Overall, we reported net income of $277.0 million, or $.46 per share, for the third quarter 2012. Our total capital position (debt plus equity) increased $267.9 million during the quarter, to $8.6 billion at September 30, 2012.Our 4.1% companywide underwriting profit margin for the third quarter 2012 was consistent with our target of at least 4% and improved from our second quarter margin of 2.4%. On a companywide basis, we raised our auto rates an average of nearly 6% year-to-date through September in an effort to offset increasing claims costs as we focus on our 96 calendar year combined ratio target. On a quarter-over-prior-year quarter basis, our underwriting margin decreased 0.7 percentage points, reflecting a higher loss ratio. During the third quarter 2012, we experienced $29.2 million, or 0.7 points, of favorable prior accident year reserve development, compared to $72.5 million, or 1.9 points, of favorable reserve development in the third quarter last year. On a year-over-year basis, for the third quarter 2012, our personal auto business experienced an increase in incurred severity, while frequency declined slightly. We continue to monitor trends to be able to react quickly to significant changes.
At September 30, 2012, our total capital (debt plus equity) was $8.6 billion, compared to $8.2 billion at December 31, 2011, and our debt-to-total capital ratio decreased to 23.9% from 29.6% at year-end 2011. During the first nine months of 2012, we retired $350 million of our 6.375% Senior Notes at maturity in January, repurchased $30.9 million in principal amount of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the 6.70% Debentures), and repurchased 8.4 million of our common shares at a total cost of $170.1 million (average cost of $20.25 per share). In addition, in October, we declared a special dividend of $1.00 per share, which, based on the shares outstanding at September 30, 2012, will return about $605 million of capital to our shareholders. We continue to manage our investing and financing activities in order to maintain sufficient capital to support all of the insurance we can profitably underwrite and service.
The net unrealized gains in our fixed-income portfolio increased $179.1 million and $205.8 million since September 30, 2011 and December 31, 2011, respectively, reflecting a material narrowing of credit spreads (i.e., a decrease in the risk premium paid above the comparable Treasury rate) as well as somewhat lower interest rates for both periods. The net unrealized gains in our common stock portfolio increased $329.7 million and $123.1 million over the same time periods, reflecting positive returns in the broad equity market. The increase since year end is net of $136.5 million of realized gains, which were primarily generated from common stock sales during the third quarter 2012.
Approximately 8%, or $147.9 million, of our total municipal securities were insured general obligation ($108.8 million) or revenue bonds ($39.1 million), with an overall credit quality rating of AA- at September 30, 2012, excluding the benefit of credit insurance provided by municipal bond insurers. These securities had a net unrealized gain of $7.0 million at September 30, 2012, compared to $10.7 million and $9.2 million at September 30, 2011 and December 31, 2011, respectively. We buy and hold these securities based on our evaluation of the underlying credit without reliance on the municipal bond insurance. Our investment policy does not require us to liquidate securities should the insurance provided by the municipal bond insurers cease to exist.
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