Posted on 10 Jun 2009
The fourth-largest U.S. auto insurer, Progressive Corp., said profit fell 31 percent in May as claims costs rose. The firm cut about 280 jobs at its claims operation.
Monthly net income of $54.6 million, or 8 cents a share, compares with a profit of $79.3 million, or 12 cents, in the same period a year earlier, the Mayfield Village, Ohio-based company said in a statement today.
The job cuts, which amount to about 2 percent of the insurer’s claims department across the U.S., follow the elimination of 341 jobs announced in November 2007. The firm has fallen behind Geico Corp. at Warren Buffett’s Berkshire Hathaway Inc. in the past year as the two auto insurers compete for new policyholders.
“The reductions were primarily in management, increasing the ratio of claims representatives per manager to levels that reflect recent process improvements,” Progressive said in the statement. About $7.5 million in severance and other charges related to the cuts are included in May results.
The insurer earned a profit of 4.7 cents on every dollar it collected in premiums, compared with 7.6 cents in the same period a year earlier. Claims costs rose 4.3 percent to $776.3 million.