I think Progressive’s improved underwriting deserves more weight in the reading of these results than the fall in quarterly net income. To readers who would treat the lower quarterly profit as evidence of weaker underwriting, I disagree. The published figures support a more precise conclusion: the combined ratio improved while net income fell.
September’s companywide combined ratio was 90.0, against 100.4 a year earlier. Monthly net income rose to $630m from $305m. For the third quarter, the combined ratio improved to 88.7, while net income fell 3% to $2.54bn. Those statements belong together. Neither should be used to erase the other.
The strongest case against my emphasis is straightforward. Net income matters, and the quarterly figure covers a longer period than September alone. Giving prominence to the monthly increase could leave readers with an incomplete account. A better combined ratio does not make the fall in quarterly net income disappear. Anyone insisting that the quarterly decline stays prominent has a fair point.
But the quarterly comparison also includes $170m of net realised losses on securities, against a $295m gain a year earlier. I would not use that difference to claim a complete explanation for the movement in net income. Our brief does not provide one. It does give a clear reason to resist treating the profit figure as a verdict on underwriting.
My position is that insurance results should be read through their separate measures before being compressed into a judgement. Here, the useful conclusion is specific. Underwriting improved on the reported combined ratios. September net income rose. Quarterly net income fell. I think an account that starts and ends with that fall gives readers too little of the insurance result.
What this draws on
Progressive's September combined ratio improves to 90.0 as monthly net income doubles to $630m
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