Progressive Corp., the first of the 10 biggest U.S. insurers to report third-quarter results, said last Wednesday that its profit fell 27 percent after it cut prices on auto policies.
Net income dropped to $299.2 million, or 42 cents a share, from $409.6 million, or 53 cents, in the same period a year earlier, the company said.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
After lowering rates to attract customers, CEO Glenn Renwick is reducing expenses by combining the unit that sells policies over the Internet with another offering coverage through agents. Premium revenue declined for the third consecutive quarter, dropping 2.3 percent to $3.46 billion, while the policy count increased 3.9 percent.
“The results that most people would like to see just haven’t materialized,” said Tom Kersting, an analyst with Edward Jones & Co. in St. Louis, before the earnings were released. Kersting has a “buy” rating on the stock.
Progressive, the third-largest auto insurer in the United States, is the second-worst performerin the 24-member Standard & Poor’s 500 Insurance Index – ahead of bond insurer Ambac Financial Group Inc. – after being the top gainer from 2001 to 2006. Progressive shares have fallen 17 percent this year in New York Stock Exchange composite trading.
The insurer said its claims-costs rose 7 percent to $772.9 million in September. Progressive retained 5.2 cents of each dollar after claims costs and expenses last month, down from 13.1 cents a year earlier. As he lowered rates to attract customers, Renwick has said he is willing to keep as few as 4 cents from every dollar.
State Farm Mutual Automobile Insurance Co., the largest U.S. auto insurer, has cut rates in 49 states this year, after lowering prices in 44 states last year by an average of 2.2 percent, said spokesman Dick Luedke. Berkshire Hathaway Inc. subsidiary Geico Corp., the No. 4 U.S. car insurer, said it is lowering prices in some areas of the country as well. Allstate Corp., the second- largest, said it’s not lowering rates.
