Progressive Corp., the fourth- largest U.S. auto insurer, said profit climbed 20 percent in the fourth quarter as margins improved a year after Superstorm Sandy.

Fourth-quarter net income rose to $299.8 million, or 50 cents a share, from $249.1 million, or 41 cents, a year earlier, the Mayfield Village, Ohio-based company said today in a statement. Operating profit, which excludes some investment results, was about 41 cents a share, missing by one cent the average estimate of 17 analysts surveyed by Bloomberg.

The number of individual auto customers rose 3.1 percent in 2013 to 9.07 million. That compares with an increase of 3.5 percent in 2012. Agency policies were up 1 percent for the quarter while direct policies rose 6 percent.

Fourth-quarter premium revenue advanced 5.8 percent to $4.34 billion.

Chief Financial Officer Brian Domeck said in November that advertising spending in the second half of 2013 had been “significantly higher” than a year earlier.

The company’s combined ratio improved to 93.8 for the quarter, compared to 94.6 in 2012’s fourth quarter.

Progressive and Berkshire Hathaway Inc.’s Geico unit have been winning market share by selling lower-cost policies online or by phone. Chief Executive Officer Glenn Renwick has also focused on technology that tracks driver behavior to offer safer customers discounts on their premium.

“They’re so good at interpreting the data” when setting rates, Meyer Shields, an analyst at Keefe Bruyette & Woods Inc., said in a telephone interview before the earnings report. “It’s very hard for the market to match Progressive’s pricing.” Shields has the equivalent of a sell rating on Renwick’s company because of increased competition in the industry.

State Farm

Maintaining profit margins could make it harder for Progressive to add drivers shopping for low rates, said Mark Dwelle, an analyst at RBC Capital Markets.

“For investors that are satisfied with that, that’s fine,” Dwelle said in a telephone interview before the earnings report. “For investors who really wanted to see more growth, it’s been a little more disappointing.” He has the equivalent of a neutral rating on Renwick’s company.

Allstate, the second-largest U.S. auto insurer, bought Esurance in 2011 to boost online sales. Larger rival State Farm Mutual Automobile Insurance Co., owned by policyholders, has been selling its offices to free capital as it focuses on car insurance. Both had relied on agents for sales and lost customers in recent years to Progressive and Geico.

Renwick’s company slipped 3 cents to $25.90 at 9:32 a.m. in New York. Progressive advanced 13 percent in the past year through yesterday, compared with Allstate’s 19 percent rally. Full-year net income climbed 29 percent to $1.16 billion.

Progressive’s underwriting profit margin of 6.2 cents on every dollar in premiums for the quarter compared with 5.4 cents in the last three months of 2012. Sandy cost Progressive $103 million in the final period of 2012 after striking the U.S. East Coast.

Annual Dividend

Progressive said its annual dividend will be 49 cents a share, based on a formula tied to 2013 results. The dividend is payable Feb. 7 to shareholders of record as of Jan. 29. The company declared in December a special dividend of $1 a share. Book value, a measure of what the firm would be worth if liquidated, was $10.39 a share as of Dec. 31.

Investment income climbed to $111.9 million from $106.8 million in the fourth quarter of 2012. The insurer previously reported monthly results for October and November.

Renwick, 58, took on the additional role of chairman in November, days after the death of Peter Lewis, who previously led the board. Progressive repurchased $102 million of shares in December from a trust tied to the former chairman.

Progressive is scheduled to hold a conference call to address questions on Feb. 28.

–Editors: Dan Kraut, Steve Dickson