Progressive (Progressive (PGR)) reported second-quarter results on Wednesday that beat earnings expectations but missed revenue estimates by a hair. Shares fell about 8% as investors focused on a sharp drop in June profit and signs of margin pressure.
Adjusted earnings per share came in at $4.86, beating the analyst consensus of $4.77. Net premiums earned — the company's revenue measure — rose 6% year over year to $21.57 billion, just shy of the $21.60 billion analysts were looking for.
Net income for the quarter increased 4% from a year earlier to $3.31 billion, and earnings available to common shareholders rose 5% to $5.67 per share. Net premiums written climbed 5% to $21.08 billion. The insurer's combined ratio — a key measure of underwriting profitability — came in at 87.3, compared with 86.2 a year earlier. Anything below 100 means the company is making money on its insurance policies. Pretax net realized gains on securities jumped 56% to $604 million.
Progressive continues to grow its customer base. Total policies in force rose 7% year over year to 40.09 million as of June 30. Personal lines policies increased 8% to 38.86 million, led by 10% growth in direct auto policies and an 8% increase in agency auto policies. Commercial lines policies grew 3% to 1.23 million.
But the market's attention was on June. For the month, Progressive reported net income of $779 million, down 31% from a year earlier. Monthly earnings per share fell to $1.34 from $1.91, and the monthly combined ratio worsened to 90.0 from 86.6. That's still profitable, but the trend caught investors' eyes.
Progressive shares were down 8% at $210.90 at the time of publication Wednesday, according to market data. The stock fell as investors looked past the quarterly beat and focused on that 31% drop in June net income.
