Progressive reported income dropped more than $900 million in the third quarter on more than $1 billion in investment losses, a result the Mayfield Village, Ohio-based company's chief executive called "frustrating and troubling."

In a letter to investors, part of its filing with the Securities and Exchange Commission, Glenn M. Renwick, president and chief executive officer, said, "Our net loss for the quarter was anything but acceptable, and a year-to-date net loss of $299.3 million is frustrating and troubling beyond my ability to articulate."

Progressive reported third-quarter net loss of $684 million down from the prior year's net income of $299 million. This translated into net loss per share of $1.03 compared to 42 cents per share a year ago.

Net premiums earned were down slightly by $45.6 million to $3.42 billion. However, revenues were down 40 percent, or $1.5 billion, to $2.2 billion on $1.37 billion in investment losses.

For the nine months, income dropped $1.18 billion to net loss of $229 million from the prior year's net income of $946 million. Earnings per share fell from $1.30 last year to loss per share of 34 cents.

Net premiums earned fell $247 million to $10.2 billion, while revenues fell $1.74 billion to $9.33 billion.

The results were affected by $1.39 billion in investment losses. The losses were primarily the result of write-downs of securities determined to have had other-than-temporary declines in market value, according to the filing. These were primarily preferred stock that felt the effects of the market issues from disruption in the mortgage and credit markets.

In his letter, Mr. Renwick said operating results "were quite acceptable," but the quarter "had plenty of downside with loss of capital and income."

"Not much can temper those results, but most importantly, the underwriting engine of the company has not incurred any constraints that would affect our ability to write business and grow to replace the losses from the quarter," he added.

Progressive reported its combined ratio for the third quarter climbed 1.4 points to 95.1 on $82.4 million in weather-related catastrophe losses. The combined ratio for the nine months rose 2.6 points to 94.4 on $152 million in catastrophe losses.

Mr. Renwick said Hurricanes Gustav and Ike losses totaled $62 million from approximately 13,000 claims, a significant portion of which he said were for damaged or lost boats, adding, "Some we will never find."

In the filing Progressive said on a quarter-over-quarter basis, new business applications dropped 4 percent, but renewal applications increased 5 percent. New business from independent agents and commercial auto business continue to be a challenge, especially with the economic downturn affecting small businesses.

Personal lines agency business was down 1 percent in the quarter, or $23 million, to $1.88 billion, while the direct business rose 7 percent, or $79.2 million, to $1.21 billion.

For the nine months, agency business was off 3 percent, or $199 million, to $5.66 billion. Direct business rose 3 percent, or $113 million, to $3.49 billion.

Commercial auto was off 6 percent for both the quarter and nine months, down $27 million to $410 million in the quarter, and down $89 million to $1.35 billion for nine months.

The company said the agency business includes more than 30,000 independent agencies representing Progressive, as well as brokers in New York and California. Agency auto applications grew 13 percent in the quarter.

The company will hold a conference call tomorrow at 9 a.m to discuss its results.

Special Reports /

Progressive CEO Calls 3Q 'Frustrating And Troubling'

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