The Progressive Corporation reported net profits increased 6 percent in the first quarter, compared to the same year-ago period.

The Mayfield, Ohio-based company posted 2006 first quarter net profits of $436.6 million, compared to $412.7 million for the first quarter of 2005.

The combined ratio of 85.2 represented a .2 point rise from the same 2005 period.

Analysts noted profits remained strong, even while top line growth and pricing suffered.

Bear Stearns analyst David Small said the trend has been evident over the past several quarters. “Policy In Force growth rates for personal auto, and premium per policy, also declined, suggesting the company continues to lower price,” he wrote.

Mr. Small said management's assertion that frequency and severity trends were below historical averages should quell investor fears in these areas. “We have not been believers that a reversal of the declining trend for frequency and severity was imminent, and continue to believe that the industry will benefit from a secular decline in auto frequency,” he wrote.

Bank of America securities analyst Brian Meredith expressed concern that Progressive's improving frequency and severity gains were at odds with recently released industry-level data.

“We continue to expect margin compression throughout 2006,” Mr. Meredith wrote.

Continued reserve releases and capital management, however, could help bolster the share price. The company purchased 1.1 million shares in March, “marking a return to its aggressive capital management activities,” the analyst noted.

Special Reports /

Progressive Profit On Rise

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