If February is any indicator of future performance, Progressive Corp. may be on its way to achieving a combined ratio well below 96—the number the insurer's chief executive says is necessary to remain profitable.
The Mayfield Village, Ohio-based auto insurer reported a combined ratio of 91.4 for February, a 0.2-point increase over the same period last year, but well within the target range CEO Glenn M. Renwick declared a few weeks ago to shareholders.
Yesterday, the company released its February results, which showed a drop in net income of 6 percent to $100 million compared to February 2012. Net premiums written increased 8 percent to $1.5 billion.
So far this year, Progressive's net income jumped 29 percent to $234 milliont to more than $3 billion, due to a total revenue increase of 8 percent. The company's combined ratio stands at 91.3 for the first two months of this year.
Renwick said during a conference call with financial analysts in late February that Progressive is beginning to see the benefits of rate increases it imposed in the middle of last year aimed at achieving a combined ratio of 96 or below. However, he cautioned that January was an unusual month as winter storms kept drivers off the road and “removed a whole weekend of driving.”
“We think we are priced at the right level going forward,” said Renwick. “We are starting to come into a little more of a mature place in our rate revision.”
According to a Securities and Exchange Commission filing, Progressive increased auto premium rates on its direct and agency business by 1 percent and 10 percent on its commercial-auto business.
After losing customers following Progressive's decision to increase rates during the second and third quarters, retentions are beginning to increase again. Other insurers taking rate has made the auto-insurance business more competitive, Renwick indicated, and helped to drive customers to the Progressive brand.
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