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Progressive Posts First Gain in Net Income Since 2006

Posted on 13 Jul 2009

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Progressive Corp., the fourth-largest U.S. auto insurer, said quarterly net income rose for the first time since 2006 on increased premium revenue and profits from the sale of securities.

Second-quarter net income rose 16 percent $250.1 million, or 37 cents a share, from $215.5 million, or 32 cents, in the year-earlier period, snapping a streak of nine straight quarterly declines, the Mayfield Village, Ohio-based company said in a statement today. Profit excluding the investment gain was 36 cents a share, matching the average estimate of 12 analysts surveyed by Bloomberg.

Chief Executive Officer Glenn Renwick has been buying U.S. Treasuries and other securities with low returns to limit writedowns after a slump in more volatile holdings cost $1.45 billion before taxes in 2008. The insurer had an investment gain of $15.9 million before taxes, compared with a loss of $44.6 a year earlier.

“In retrospect it was very prudent,” to reposition the portfolio, Renwick told investors last month. “No one is saying the skies are clear and there are sunny days ahead, but it certainly doesn’t seem to be quite as bad as it was.”

The second quarter investment gain includes a $13.7 million profit in June. The insurer earned $43.7 million selling securities last month and wrote down holdings by $30 million, primarily on losses on structured debt. Book value per share, a measure of assets minus liabilities, gained 15 percent from March 31 to $7.24.