Progressive Excess Bond Reliance

Progressive Corporation (PGR) announced Nov numbers. The press release was a masterful executive summary of all the good stuff. Readers are invited to click onto a deeper PDF document that has more stuff to read. The salient issue that they dance around was the decision to incur a gain of approximately $100 million on their bond portfolio. The gain is approximately a 225% increase over the comparable period last year. Essentially this means it’s a one shot deal.

What management neglects to comment on is that the bond gains are 73% of net income. Last year for the comparable period the gains only constituted 33% of net income. This is radically different and management is ignoring the point entirely.