Could Test Driving Snapshot Power Progressive Higher?

Jul.12.12 | About: Progressive Corporation (PGR)

Large insurance company Progressive (PGR) reported second quarter earnings today. The company matched on revenue estimates but fell short on earnings per share, sending shares down 5%.

For the second quarter, Progressive reported they wrote $4.1 billion in insurance premiums, an increase of 8%. Net income was $118.6 million, a decrease of 52% from last year's second quarter. Insurance losses weighed heavy on net income, which was $245.2 million in last year's period. Earnings per share were reported as $0.19, greatly missing analysts' estimates of $0.27 and last year's $0.38 reported.

The good news was the revenue matched analysts' estimated amount of $4.13 billion. The company also saw higher amounts of policies. Automobile policies increased 6% over last year's second quarter amounts. Personal insurance lines also saw an increase of 6%. The commercial policy segment saw the number of covered customers increase 3%.

The thing from Progressive that I see impacting shares is the company's new Snapshot trial program. Progressive's Snapshot program helps safe drivers save on insurance premiums. According to Progressive's website, over 900,000 people have signed up for Snapshot.

A new program, being nationally televised, allows people to test drive the Snapshot program for 30 days. A free trial has people plug in the Snapshot device and record their driving record to see how much their insurance would be with Progressive. People can do this test drive all while still insured by another company. This seems to set up a win win for customers and for Progressive. It allows customers to see if the safer driver discounts apply to them and also allows Progressive to gain some new customers who recognize that they could be saving money. Next quarter should have clearer results of this pilot program.

In its 75th anniversary, Progressive has now missed on earnings per share in both reported quarters. The company has recorded earnings per share of $0.62, vs. last year's $0.94. Analysts are calling for the company to report $1.31 for the fiscal year.

Shares of Progressive have traded between $16.88 and $23.41 in the last fifty two weeks. With today's fall, shares are now trading at about the midpoint of that range. Could the company's Snapshot program and increased customer counts power shares higher? Progressive shares could be worth trading here as a bullish case for more subscribers.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.