Progressive Corp. Authorizes Dividend, Buyback, Debt Offering

Shares of auto insurance company The Progressive Corporation surged over 6% to close at $24.70 Thursday after the company announced its board had approved a recapitalization plan. The plan entails a buyback of up to 100 million shares, a quarterly dividend payout, and the sale of $1 billion in hybrid debt securities. The buyback, which will take place over the next two years, is in addition to a 2006 buyback authorization that has 8.3 million shares remaining. The company has already bought back $523 million of stock this year. The quarterly cash dividend of $2 per share, which will be payable on Sept. 14 to shareholders of record as of Aug. 31, is expected to return about $3 billion to shareholders. The debt securities offering will take place "in the near future," according to CFO Brian Domeck. Progressive has responded to growing competition by cutting rates as much as 14% in some regions, though it has maintained the commissions it pays to agents who sell its policies. Internet sales are growing rapidly, and the company's 54 auto-repair facilities are showing the potential to eventually drive growth.

Sources: Press release, MarketWatch, Reuters, Forbes, 24/7 Wall Street
Commentary: Progressive Jumps - The Downside To Slower Decision-Making • 1Q07 Insurance Earnings: What's Working, What's Not (Part I)
Stocks/ETFs to watch: The Progressive Corporation (PGR). Competitors: Allstate Corp. (ALL). ETFs: PowerShares Dynamic Insurance (PIC)

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