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Progressive core loss ratio tops 80% again as severity bites

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Auto giant Progressive reported a core loss ratio of 80.2% for October, following the 81.7% it disclosed the preceding month, as it continued to struggle with spiking severity resulting from the supply-chain crisis.

It did, however, manage to report a slim underwriting profit with a combined ratio of 97.2% versus 100.1% the month before, and 4.6 points higher than the year-ago quarter when frequency benefits had not evaporated.

The company has now missed its 96% combined ratio target for five consecutive months and faces a challenge along with most major personal lines writers to show that it can rapidly respond through increased pricing.

Underwriting: The loss ratio rose by 6.5 points year-over-year, with no catastrophe losses reported. The personal auto insurer’s expense ratio declined by 1.9 points to 18.3%.

Growth: Policies-in-force growth slowed in personal auto to 7% from 8% in September to 22.9 million, suggesting that Progressive’s rapid move to push through corrective rate actions is impacting growth, which outpaced peers through the pandemic. Net premiums written increased by 14.5% to $4.35bn.

Earnings: Operating EPS was $0.23 versus $0.39 in the year-ago period, missing analyst consensus.

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Personal lines: The combined ratio increased by 7.5 points YoY to 98.9%, with net premiums written up 10.5% to $3.38bn.

Commercial lines: The combined ratio increased by 5.6 points to 93.5%, with net premiums written up 37.9% to $788.6mn

Property lines: The combined ratio decreased by 52.7 points to 79.6%, with net premiums written up 8.7% to $181.6mn

In a letter to shareholders earlier this month, Progressive CEO Tricia Griffith said that taking action to reach the company’s target profit margin “always takes precedence” over growing premiums.

“While it doesn’t feel great to not be able to welcome as many new customers as possible, it is necessary to get us well positioned for the future,” Griffith said in the letter.

“Our increase in rate level during 2021, addressing rising loss costs, and our slowing of advertising spend as we focus on regaining profitability in our auto product are also contributors to the lower growth rate.”

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