10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ý Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2017

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________to__________             

Commission file number 1-9518

THE PROGRESSIVE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	34-0963169
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6300 Wilson Mills Road, Mayfield Village, Ohio	44143
(Address of principal executive offices)	(Zip Code)

(440) 461-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares, $1.00 Par Value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ý  Yes    ¨  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    ý  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ý  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ý  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to

Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    ý  No

The aggregate market value of the voting common shares held by non-affiliates of the registrant at June 30, 2017: $25,242,148,256

The number of the registrant’s Common Shares, $1.00 par value, outstanding as of January 31, 2018: 582,275,989

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 11, 2018, and the Annual Report to Shareholders of The Progressive Corporation and subsidiaries for the year ended December 31, 2017, included as Exhibit 13 to this Form 10-K, are incorporated by reference in Parts I, II, III, and IV hereof.

PART I

ITEM 1. BUSINESS

(a) General Development of Business

The Progressive insurance organization began business in 1937. The Progressive Corporation, an insurance holding company formed in 1965, currently has insurance and non-insurance subsidiaries and affiliates. Our insurance subsidiaries and affiliates provide personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Our vehicle insurance products protect our customers against losses due to physical damage to their motor vehicles, uninsured and underinsured bodily injury, and liability to others for personal injury or property damage arising out of the use of those vehicles. Our residential property insurance products protect our customers against losses due to damages to their structure or possessions within the structure, as well as liability for accidents occurring in the structure or on the property. Our non-insurance subsidiaries and affiliates generally support our insurance and investment operations. We operate our vehicle businesses throughout the United States and our Property business in most U.S. jurisdictions. In 2017, we ceased writing and servicing personal auto physical damage and auto property damage liability insurance in Australia.

The Progressive Corporation acquired a controlling interest in ARX Holding Corp. (“ARX”), the parent company of American Strategic Insurance and other insurance subsidiaries and affiliates (“ASI”) in April 2015, and we now write residential property insurance for homeowners, other property owners, and renters. As a result of this acquisition, we began reporting the Property business as a separate segment as of the acquisition date.

The Progressive Corporation and the other ARX stockholders and stock option holders are parties to a stockholders’ agreement, which addresses the parties’ respective rights and obligations. Among other provisions, the stockholders’ agreement allows, and in certain circumstances requires, The Progressive Corporation to acquire 100% of the outstanding equity of ARX by the second quarter of 2021. These provisions are described in Note 15 – Redeemable Noncontrolling Interest to our financial statements included in our 2017 Annual Report to Shareholders, which is filed as Exhibit 13 to this Form 10-K (the “Annual Report”). Until The Progressive Corporation owns 100% of the outstanding equity of ARX, the interests of the minority stockholders in ARX’s income and assets are reflected in our financial statements as noncontrolling interest.

(b) Financial Information About Segments

Incorporated by reference from Note 10 – Segment Information in our Annual Report.

(c) Narrative Description of Business

We had net premiums written of $27.1 billion in 2017, compared to $23.4 billion in 2016, and $20.6 billion in 2015. Our combined ratio, which we calculate by dividing the sum of our loss and loss adjustment expenses, policy acquisition costs, and other underwriting expenses, less fees and other revenues, by our net premiums earned, was 93.4 in 2017, 95.1 in 2016, and 92.5 in 2015.

Organization

Our operations are run by our executive team, which consists of our Chief Executive Officer and the heads of our major business areas that report to the CEO, including a Chief Financial Officer, Chief Investment Officer, Chief Legal Officer, Chief Information Officer, Chief Human Resource Officer, and Chief Marketing Officer, along with the Presidents of Personal Lines, Commercial Lines, Claims, and Customer Relationship Management. Our Property business is currently headed by the President and Chief Executive Officer of ARX, who reports to the ARX Board of Directors; Progressive appoints three of the five members of the ARX Board. 

Our insurance and claims organizations are generally managed on a state-by-state basis due to the nature of insurance, legal and regulatory requirements, and other local factors, and are supplemented by national operations and supported by our corporate functions. State-specific organizations typically report to a regional general manager, who then reports to the applicable group president. In California, we operate separate agency auto organizations with their own management and organizations under the Drive and ASI brands.

Personal Lines

Our Personal Lines segment writes insurance for personal autos and recreational and other vehicles, which we refer to as our special lines products. This business generally offers more than one program in a single state, with each program targeted to a specific distribution channel, market, or customer group. As of December 31, 2017, we wrote personal auto insurance in all 50 states and the District of Columbia, and we write the majority of our special lines products in all 50 states. The Personal Lines business accounted for 85% of total net premiums written in 2017 and 2016, and 86% in 2015.

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The Personal Lines segment consists of our personal auto insurance products, as well as our special lines products.

• Personal auto insurance represented approximately 93% of our total Personal Lines net premiums written in 2017, compared to 92% in both 2016 and 2015. We ranked fourth in market share in the U.S. private passenger auto market for 2016 based on net premiums written; although we believe that our market share grew in 2017, industry data regarding our ranking for 2017 is not yet available. There are approximately 300 competitors in this market. Progressive and the other leading 15 private passenger auto insurers, each of which writes over $2.0 billion of premiums annually, comprise about 80% of this market. All industry data, including ranking and market share, was obtained directly from data reported by either SNL Financial or A.M. Best Company, Inc. (“A.M. Best”), or was estimated using A.M. Best data as the primary source.

• Special lines products include insurance for motorcycles, ATVs, RVs, watercraft, snowmobiles, and similar items, and represented about 7% of our Personal Lines net premiums written for 2017, compared to 8% in both 2016 and 2015. Due to the nature of these products, we typically experience higher losses during the warmer weather months. Our competitors are specialty companies and large multi-line insurance carriers. Although industry figures are not available, based on our analysis of this market, we believe that we are one of the largest providers of specialty RV and boat insurance, and that we have been the market share leader for the motorcycle product since 1998.

Our Personal Lines products are sold through both the Agency and Direct channels.

• The Agency business includes business written by our network of more than 35,000 independent insurance agencies located throughout the United States, including brokerages in New York and California. These independent insurance agents and brokers have the ability to place business with Progressive for specified insurance coverages within prescribed underwriting guidelines, subject to compliance with company-mandated procedures. The agents and brokers do not have authority on behalf of Progressive to establish underwriting guidelines, develop rates, settle or adjust claims, or enter into other transactions or commitments. The Agency business also writes insurance through strategic alliance business relationships with other insurance companies, financial institutions, and national agencies. The total net premiums written through the Agency channel represented 51% of our Personal Lines volume in both 2017 and 2016, compared to 52% in 2015.

• The Direct business includes business written directly by us on the Internet, through mobile devices, and over the phone. The total net premiums written by the Direct business represented 49% of our Personal Lines volume in both 2017 and 2016, compared to 48% in 2015.

Our Personal Lines strategy is to be a competitively priced provider of a broad range of personal auto and special lines insurance products with distinctive service, distributed through whichever channel the customer prefers, and combined with property insurance and other products when appropriate to match our customers’ needs. Volume potential is driven by our price competitiveness, brand recognition, quality service, and the actions of our competitors, among other factors. See “Competitive Factors” below for further discussion.

We seek to refine our personal auto segmentation, underwriting models, and pricing over time. During 2017, we continued to roll out our next generation auto product, which began in mid-2016. This product version expands our use of prior claims information, adds billing and vehicle history segmentation, and expands our tiering mechanisms to afford more competitive rates for new business while providing more stable rates for our longer-tenured customers.

We also continue to invest to bring Snapshot^®, our usage-based insurance program, to more customers. Snapshot provides customers in both the Agency and Direct channels the opportunity to improve their auto insurance rates based on their personal driving behavior. We offer Snapshot through our traditional hardware-based version, which is available nationwide except for California and North Carolina due to the regulatory environment, as well as through our mobile-app version, which is available in 42 states and the District of Columbia. This mobile app improves the user experience while also reducing monitoring costs. In addition to the personal benefits for our customers, the data collected via the mobile app affords us a unique perspective on mobile device usage, vehicle operations, and accidents.

In addition, our Personal Lines business is focused on efforts to form deeper and longer-term relationships with our customers through our Destination Era strategy. In this program, we seek to leverage our Property business, as well as insurance and non-insurance products offered by unaffiliated third parties, to provide our customers access to a range of products addressing their diverse needs and, if the customer chooses, to “bundle” certain of the products together. Bundled products are an integral part of our consumer offerings and an important part of our strategic agenda. Customers who prefer to bundle represent a sizable segment of the insurance market, and our experience is that they tend to stay with us longer and generally have lower claims costs. Our Destination Era strategy involves a number of initiatives, including:

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• In our Agency channel, we offer customers the opportunity to bundle Progressive auto insurance with property insurance provided exclusively by ASI, which has begun to use the Progressive brand. Progressive and ASI now have dedicated, coordinated sales teams focusing on auto/home (and auto/renters) bundled growth in this channel.

• To further drive bundling in the Agency channel, we offer the Platinum program to those select agents who have the appropriate customers and who believe our bundled offering is a “must have” for their agency. This program combines home insurance from ASI and auto insurance from Progressive with compensation, coordinated policy periods, single event deductible, and other features that meet the needs and desires that our agents have expressed.

• In the Direct channel, we bundle Progressive auto with property products written by ASI, as well as homeowners and renters products provided by unaffiliated insurance carriers. We offer these bundles by providing a single destination to which consumers may come for both their auto and property insurance needs. In many cases, we may offer discounts to incentivize or reward this bundling.

• During 2017, we launched our HomeQuote Explorer^® (HQX) application, which brought a multi-carrier, direct-to-consumers online property offering to market in almost all states. Through HQX, consumers are able to quickly and easily quote and compare homeowners insurance online from ASI (under the Progressive brand) and other carriers.

• As we increase our penetration of the more complex, multi-product customers who are critical to our Destination Era success, we are further expanding the roster of products provided by unaffiliated companies that we make available through online and telephonic referrals, for which we receive commission. During 2017, we added mobile phone/portable electronics and home sharing coverages to our existing list of unaffiliated providers’ insurance products that already included life, health, and travel insurance.

• Our special lines products and umbrella insurance can be combined with any of the auto, home, or renters coverages that we offer, in either the Direct or Agency channel.

Commercial Lines

The Commercial Lines segment writes primary liability, physical damage, and other auto-related insurance for automobiles and trucks owned and/or operated predominately by small businesses as a part of the commercial auto market. We offer these products in 50 states; we do not currently write Commercial Lines products in the District of Columbia. This business represented 11% of our total net premiums written in 2017, 2016, and 2015. Our Commercial Lines customers on average insure approximately two vehicles. Even though we continue to write over 90% of our Commercial Lines business through the Agency channel, we are seeing more small business owners purchasing their insurance on a direct basis.

There are approximately 335 competitors in the total U.S. commercial auto market. We primarily compete with about 43 other large companies/groups, each with over $150 million of commercial auto premiums written annually. These leading commercial auto insurers comprise about 80% of this market. Our Commercial Lines business ranked number one in the commercial auto insurance market for 2016 based on net premiums written, and we believe that we continued to hold that position for 2017.

The Commercial Lines business operates in the following business market targets:

• Business auto – autos, vans, and pick-up trucks used by small businesses, such as retailing, farming, services, and private trucking,

• For-hire transportation – tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses and non-fleet long-haul operators,

• Contractor – vans, pick-up trucks, and dump trucks used by small businesses, such as artisans, heavy construction, and landscapers/snowplowers,

• For-hire specialty – dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses,

• Tow – tow trucks and wreckers used in towing services and gas/service station businesses, and

• For-hire livery – non-fleet (i.e., five or fewer vehicles) taxis, black-car services, and airport taxis.

Just as in the Personal Lines business, we also want to be the destination for small business owners’ insurance needs. To do this, we act as an agent for business customers to place general liability and business owners’ policies and workers’ compensation coverage written by unaffiliated insurers. We also refer some customers to other unaffiliated providers of such insurance, and are compensated for this. The products are generally offered throughout the continental United States.

Similar to Snapshot in the personal auto business, during 2017, the Commercial Lines business launched SmartHaul, a usage-based insurance program for motor carriers. SmartHaul allows owner operators to earn discounts up to 18% for agreeing to share their electronic logging device (ELD) generated data with Progressive. SmartHaul is available in 41 states and we expect that demand for this program will continue to grow.

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We provide commercial auto and claims service to an Uber Technologies subsidiary in Texas. We are learning alongside a leading technology platform in the sharing economy. We expect to expand into additional markets in 2018.

Property

ASI, one of the 20 largest homeowners carriers in the United States, specializes in residential property insurance, personal umbrella insurance, and primary and excess flood insurance. There are approximately 385 competitors in the homeowners insurance market nationwide. The top 20 carriers comprise about 75% of the market.

Our Property segment writes homeowners and renters insurance, primarily in the agency channel, in 41 states and the District of Columbia. ASI also acts as a participant in the “Write Your Own” program for the National Flood Insurance Program under which they write flood insurance in 43 states and the District of Columbia. Property policies are written on a 12-month basis.

Our Property business represented about 4% of our total net premiums written in 2017 and 2016, compared to 3% in 2015. We tend to see more business written during the second and third quarters based on the cyclical nature of property sales. Losses also tend to be higher during the warmer weather months when storms are more prevalent. For 2017, Texas and Florida comprised 54% of our Property business based on direct premiums written. As a property writer, ASI has exposure to losses from catastrophes, including hurricanes, and other severe storms. To help mitigate these risks, ASI enters into reinsurance arrangements. See the “Reinsurance” section below for further discussion of our reinsurance programs.

As discussed above, ASI’s Property business is an important component of our Destination Era strategy. During 2017, we began to transition ASI’s products to the Progressive brand. We expect that this branding will make it easier to sell the Progressive-branded auto and home bundle.

Other Indemnity

Our other indemnity businesses consist of managing our run-off businesses, including the run-off of our professional liability business. We did not have any professional liability policies in force as of December 31, 2017, although we continue to process claims on expired policies.

Service Businesses

Our service businesses, which represent less than 1% of our total revenues and do not have a material effect on our overall operations, primarily include:

• Commercial Automobile Insurance Procedures/Plans (CAIP) – We are the only servicing carrier on a nationwide basis for CAIP plans, which are state-supervised plans servicing the involuntary market in 43 states and the District of Columbia. As a service provider, we provide policy issuance and claims adjusting services and collect fee revenue that is earned on a pro rata basis over the terms of the related policies. Reimbursements to us from the CAIP plans are required by state laws and regulations, subject to contractual service standards. Any changes in our participation as a CAIP service provider would not materially affect our financial condition, results of operations, or cash flows.

• Commission-based businesses – We act as an agent for other insurance companies, as follows:

In our Direct business, we offer home, condominium, and renters insurance, among other products, written by unaffiliated insurance companies on a nationwide basis. We receive commissions for policies written under this program, all of which are used to offset the expenses associated with maintaining this program.

In our Commercial Lines business, we offer our customers the ability to package their auto coverage with other commercial coverages that are written by unaffiliated insurance companies or placed with additional companies through unaffiliated insurance agencies. This program offers general liability and business owners policies throughout the continental United States and workers’ compensation coverage in 44 states as of December 31, 2017. We receive commissions for the policies written under this program, all of which are used to offset the expenses associated with maintaining this program.

Reinsurance

We cede a portion of our direct premiums written to reinsurance plans. We participate in several mandatory state pools, including the Michigan Catastrophic Claims Association, Florida Hurricane Catastrophe Fund, and North Carolina Reinsurance Facility, as well as act as a servicing agent for state-mandated involuntary plans for commercial vehicles (CAIP plans) and as a participant in the “Write Your Own” program for federally regulated plans for flood (National Flood Insurance Program), all of which are governed by insurance regulations. We also have voluntary contractual arrangements that primarily relate to the

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Property business underwritten by insurance subsidiaries of ARX and our transportation network company business written by our Commercial Lines segment.

The reinsurance program in our Property business is designed to reduce overall risk while, to an extent, protecting capital from the costs associated with catastrophes and severe storms. This reinsurance program has two parts: an occurrence excess of loss program and an aggregate stop-loss agreement, from unaffiliated reinsurance companies, most of which are “A” rated or better by A.M. Best.

The occurrence excess of loss program supports the goal of maintaining adequate capital within ARX’s insurance subsidiaries while sustaining at least two one-in-one hundred year events in a single contract period. It contains several layers: privately-placed reinsurance, a catastrophe bond, and coverage obtained through the Florida Hurricane Catastrophe Fund, among other arrangements. The program includes layers that are purchased for multi-year periods, and layers as to which we have prepaid premiums for reinstatement of coverage after the first covered event to ensure coverage for the second event. ARX is responsible for all losses and loss adjustment expenses (LAE) that do not reach the reinsurance threshold of $50 million, and for the first $50 million in losses and LAE from each of the first and second events in the same contract period that exceed the threshold. Under certain circumstances, and if coverage has not been exhausted by the first two events, the reinsurance threshold for a third event may be reduced to $25 million. ASI may be responsible for additional losses if we experience more than two such events or if claims incurred exceed the maximum limits of the reinsurance coverage that is then in place. Coverage limits for a first event in Florida would exceed $1.5 billion, while coverage for a first event outside of Florida would exceed $1.0 billion; coverage for a second named storm (and, potentially, for subsequent covered events), would depend on a number of factors, including the severity and location of the earlier events in the contract period.

ARX also has an aggregate stop-loss reinsurance agreement (ASL), which was in effect during 2017 and renewed, under substantially the same terms, for 2018. The ASL covers all Property losses and allocated loss adjustment expenses (ALAE) except those from named storms (both hurricanes and tropical storms) and liability claims. As such, it provides protection for losses and ALAE incurred by our Property business in the ordinary course, including those resulting from other significant severe weather events, such as hail, tornadoes, etc. This agreement provides $200 million of coverage to the extent that ARX’s insurance subsidiaries’ net loss and LAE ratio for the full accident year exceeds 63%. The ASL reduces the likelihood that ARX will experience a net underwriting loss for reasons other than named storms and liability claims.

See Note 7 – Reinsurance in our Annual Report for further discussion.

Claims

We manage our vehicle claims handling on a companywide basis through approximately 200 stand-alone claims offices, 68 Service Centers, and nearly 3,000 network shops located throughout the United States. We are transitioning how we will use our Service Centers as part of our claims processing. The Service Center model has been part of our claims operating model for almost two decades. Over that time, the model has evolved in response to shifting customer preferences and fast-paced environmental change, the most recent of which is customer photo estimating. Under the revised claims operating model, we will rely less on the Service Center model and more on an expanded Network Shop model, with the goal of improving our operating efficiency without any loss to claims accuracy or customer service.

For our Property business, ASI handles property claims separately through a network primarily of independent claims adjusters.

Competitive Factors

The automobile insurance and other property-casualty insurance markets in which we operate are highly competitive. Property-casualty insurers generally compete on the basis of price, agent commission rates, consumer recognition and confidence, coverages offered and other product features, claims handling, financial stability, customer service, and geographic coverage. Vigorous competition is provided by large, well-capitalized national companies in both the Agency and Direct channels, and by smaller regional insurers. In the Agency channel, some of our competitors have broad distribution networks of employed or captive agents. With widely available comparative rating services, consumers can easily compare prices among competitors. Many competitors invest heavily in advertising and marketing efforts and/or expanding their online or mobile service offerings. Over the past decade, these changes have further intensified the competitive nature of the property-casualty insurance markets in which we operate.

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We rely heavily on technology to operate our business and on extensive data gathering and analysis to segment markets and price accurately according to risk potential. We have remained competitive by refining our risk measurement and price segmentation skills, closely managing expenses, and achieving operating efficiencies. High-quality customer service, fair and accurate claims adjusting, and strong brand recognition are also important factors in our competitive strategy. Competition in our insurance markets is affected by the pace of technological developments. An insurer’s ability to adapt to change, innovate, develop, and implement new applications and other technologies can affect its competitive position. In addition, our competitive position could be adversely impacted if we sustain security breaches or other “cyber attacks” on our systems or are unable to maintain uninterrupted access to our systems, business functions, and the systems of certain third-party providers. See Item 1A, Risk Factors, for more information.

In addition, there has been a proliferation of patents related to new ways in which technologies can affect competitive positions in the insurance industry. Some of our competitors have many more patents than we do. We hold a U.S. patent (expiring in 2021), and have a U.S. patent application pending, on the innovative approach to vehicle repair service used in our Service Centers, as described above, and two U.S. patents (expiring in 2028) on the Name Your Price^® functionality on our website. In addition, we hold two patents (expiring in 2019) related to our online policy self-service technology, a new usage-based insurance patent (expiring in 2024), a new multi-product quoting patent (expiring in 2032), two patents for the system we use for securing our e-signature transactions (expiring in 2025), and two patents for our loyalty call routing system (expiring in 2033).

We have a substantial amount of “know-how” developed from years of experience with usage-based insurance, and from analyzing the data from over 22 billion driving miles derived from usage-based devices. We believe this intellectual property provides us with a competitive advantage in the usage-based insurance market. 

State Insurance Licenses

Our insurance subsidiaries operate under licenses issued by various state insurance authorities. These licenses may be of perpetual duration or renewable periodically, provided the holder continues to meet applicable regulatory requirements. Our licenses govern the kinds of insurance coverages that may be written by our insurance subsidiaries in the issuing state. Such licenses are normally issued only after the filing of an appropriate application and the satisfaction of prescribed criteria. All licenses that are material to our subsidiaries’ businesses are in good standing.

Insurance Regulation 

Our insurance subsidiaries are generally subject to regulation and supervision by insurance departments of the jurisdictions in which they are domiciled or licensed to transact business. At least one of our insurance subsidiaries is licensed and subject to regulation in each of the 50 states and the District of Columbia. The nature and extent of such regulation and supervision varies from jurisdiction to jurisdiction. Generally, an insurance company is subject to a higher degree of regulation and supervision in its state of domicile. Our insurance subsidiaries and our mutual insurance company and our Lloyds company (together our mutual insurance company affiliates) are domiciled in the states of California, Delaware, Florida, Illinois, Indiana, Louisiana, Michigan, New Jersey, New York, Ohio, Texas, and Wisconsin. In addition, California and Florida treat certain of our subsidiaries as domestic insurers for certain purposes under their “commercial domicile” laws.

State insurance laws impose numerous requirements, conditions, and limitations on the operations of insurance companies. Insurance departments have broad regulatory powers relating to those operations. Regulated areas include, among others:

• Licensing of insurers and agents,

• Capital and surplus requirements,

• Statutory accounting principles specific to insurance companies and the content of required financial and other reports,

• Requirements for establishing insurance reserves,

• Investments,

• Acquisitions of insurers and transactions between insurers and their affiliates,

• Limitations on rates of return or profitability,

• Rating criteria, rate levels, and rate changes,

• Insolvencies of insurance companies,

• Assigned risk programs,

• Authority to exit a business, and

• Numerous requirements relating to other areas of insurance operations, including: required coverages, policy forms, underwriting standards, and claims handling.

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Insurance departments are authorized to conduct periodic and other examinations of regulated insurers’ financial condition and operations to monitor the financial stability of the insurers and to ensure adherence to statutory accounting principles and compliance with state insurance laws and regulations. In addition, in some states, the attorney general’s office may exercise certain supervisory authority over insurance companies and, from time to time, may investigate certain insurance company practices.

Insurance departments establish and monitor compliance with capital and surplus requirements. Although the ratio of written premiums to surplus that the regulators will allow is a function of a number of factors (including applicable law, the type of business being written, the adequacy of the insurer’s reserves, and the quality of the insurer’s assets), the annual net premiums that an insurer may write historically have been perceived to be limited to a specified multiple of the insurer’s total surplus, generally 3 to 1 for property and casualty insurance, which is the target for our vehicle businesses; our Property business maintains a lower premiums-to-surplus ratio. Thus, the amount of an insurer’s statutory surplus, in certain cases, may limit its ability to grow its business. At year-end 2017, we had net premiums written of $27.1 billion and statutory surplus of $9.7 billion. The combined premiums-to-surplus ratio for all of our insurance companies was 2.8 to 1. In addition, as of December 31, 2017, we had access to $1.6 billion of securities held in a non-insurance subsidiary, portions of which could be contributed to the capital of our insurance subsidiaries to support growth or for other purposes.

The National Association of Insurance Commissioners (NAIC) also has developed a risk-based capital (RBC) program to enable regulators to identify and take appropriate and timely regulatory actions relating to insurers that show signs of weak or deteriorating financial condition. RBC is determined by a series of dynamic surplus-related formulas that contain a variety of factors that are applied to financial balances based on the degree of certain risks, such as asset, credit, and underwriting risks. At December 31, 2017, our RBC ratios were in excess of minimum requirements with one exception. One subsidiary of ARX triggered a Company Action Level Event under the RBC program as a result of its combined ratio for 2017 exceeding the maximum amount allowed under a specific RBC test, due to the significant amount of hurricane losses incurred on this subsidiary during the year. In response to this event, concurrent with the filing of their annual statement, the insurance company will submit to the Florida insurance commissioner an RBC plan outlining the corrective actions the subsidiary has taken (i.e., contributed capital) and intends to take in an effort that would be expected to result in the elimination of the event. This matter is not expected to have a material adverse impact on the company’s consolidated results of operations or financial condition.

Insurance companies are generally required to file detailed annual and other reports with the insurance department of each jurisdiction in which they conduct business. These reports include:

• the insurer’s financial statements under statutory accounting principles,

• details concerning claims reserves held by the insurer,

• specific investments held by the insurer, and

• numerous other disclosures about the insurer’s financial condition and operations.

State insurance laws and insurance departments also regulate investments that insurers are permitted to make. Limitations are placed on the amounts an insurer may invest in a particular issuer, as well as the aggregate amount an insurer may invest in certain types of investments. Certain investments are prohibited.

Insurance holding company laws enacted in many jurisdictions authorize insurance departments to regulate acquisitions of insurers and certain other transactions and to require periodic disclosure of specified information. These laws impose prior approval requirements for certain transactions between insurers and their affiliates and generally regulate dividend and other distributions, including loans and cash advances, between insurers and their affiliates. See the “Dividends” discussion in Item 5(c) below for further information on these dividend limitations. The scope of insurance holding company regulation has expanded as states have adopted the revised model holding company act promulgated by the NAIC in 2010.

Under state insolvency and guaranty laws, insurers can be assessed or required to contribute to state guaranty funds to cover policyholder losses resulting from the insolvency of other insurers. Insurers are also required by many states, as a condition of doing business in the state, to provide coverage to certain risks that cannot find coverage in the voluntary market. These “assigned risk” plans generally specify the types of insurance and the level of coverage that must be offered to such involuntary risks, as well as the allowable premium. Many states also have involuntary market plans, which hire a limited number of servicing carriers to provide insurance to involuntary risks. These plans, through assessments, pass underwriting and administrative expenses on to insurers that write voluntary coverages in those states.

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Many states have laws and regulations that limit an insurer’s ability to exit a market. For example, certain states limit an insurer’s ability to cancel or non-renew policies. Certain states also prohibit an insurer from withdrawing one or more lines of business from the state, except pursuant to a plan that is approved by the state insurance department. The state insurance department may disapprove a plan that may lead to market disruption. Laws and regulations that limit the cancellation or non-renewal of policies, or that subject program withdrawals to prior approval requirements, may restrict an insurer’s ability to exit unprofitable markets or businesses.

As mentioned above, insurance departments have regulatory authority over many other aspects of an insurer’s insurance operations, including coverages, forms, rating criteria, and rate levels. The ability to implement changes to these items on a timely basis is critical to our ability to compete effectively in the marketplace. Rate regulation varies from “use and file,” to “file and use,” to prior approval.

Regulation of insurance constantly changes as real or perceived issues and developments arise. Some changes may be due to economic developments, such as changes in investment laws made to recognize new investment products or to respond to perceived investment risks, while others reflect concerns about consumer privacy, insurance availability, prices, allegations of discriminatory pricing, underwriting practices, and solvency. In recent years, legislation, regulatory measures, and voter initiatives have been introduced, and in some cases adopted, which deal with use of non-public consumer information, cybersecurity, use of credit information in underwriting and rating, insurance rate development, rate of return limitations, and the ability of insurers to cancel or non-renew insurance policies. In addition, from time to time, the United States Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. Since 2010, the Federal Insurance Office has been required to collect information about the insurance industry and monitor the industry for systemic risk.

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Statutory Accounting Principles

Our results are reported in accordance with accounting principles generally accepted in the United States of America (GAAP), which differ in certain respects from amounts reported under statutory accounting principles (SAP) prescribed by insurance regulatory authorities. Certain significant differences are described below:

Category	GAAP Accounting	SAP Accounting
Acquisition Expenses	Commissions, premium taxes, and other variable costs incurred in connection with the successful acquisition of new and renewal business are capitalized and amortized pro rata over the policy term as premiums are earned.	Commissions, premium taxes, and all other acquisition expenses are expensed as incurred.
Nonadmitted Assets	Premiums receivable are reported net of an allowance for doubtful accounts.	Premiums receivable over 90 days past due are “nonadmitted,” which means they are excluded from surplus. For premiums receivable less than 90 days past due, we also estimate a bad debt reserve.
	Furniture, equipment, application software, leasehold improvements, and prepaid expenses are capitalized and amortized over their useful lives or periods benefited.	Excluding computer equipment and operating software, the value of all other furniture, equipment, application software, leasehold improvements, and prepaid expenses, net of accumulated depreciation or amortization, is nonadmitted against surplus. Computer equipment and operating software are capitalized, subject to statutory limitations based on surplus, and depreciated over three years.
	Deferred tax assets are recorded based on estimated future tax effects attributable to temporary differences. A valuation allowance would be recorded for any tax benefits that are not expected to be realized.	The accounting for deferred tax assets is consistent with GAAP, except for deferred tax assets that do not meet statutory requirements for recognition, which are nonadmitted against surplus.
Reinsurance	Ceded reinsurance balances are shown as an asset on the balance sheet as “prepaid reinsurance premiums” and “reinsurance recoverables.”	Ceded unearned premiums are netted against the “unearned premiums” liability. Ceded unpaid loss and loss adjustment expense (LAE) amounts are netted against “loss and LAE reserves.” Only ceded paid loss and LAE are shown as a “reinsurance recoverables” asset.
Investment Valuation	Fixed-maturity securities, which are classified as available-for-sale, are reported at fair values.	Fixed-maturity securities are reported at amortized cost or the lower of amortized cost or fair value, depending on the NAIC designation of the security.
	Preferred stocks, both redeemable and nonredeemable, are reported at fair values.	Redeemable preferred stocks are reported at amortized cost or the lower of amortized cost or fair value, depending on the NAIC designation of the security. Nonredeemable preferred stocks are reported at fair value, consistent with GAAP.
Federal Income Taxes	The income tax provision includes both current and deferred income taxes.	For income statement reporting, the income tax provision only includes current tax expense. Deferred taxes are recorded directly to surplus. Deferred tax assets are subject to certain limitations on admissibility.
State Income Taxes	The income tax provision includes both current and deferred income taxes.	Current income taxes are recorded as a component of underwriting expenses. Deferred income taxes are not recorded.

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Investments

Our principal investment goals are to manage our portfolio on a total return basis to support all of the insurance premiums that we can profitably write and contribute to our comprehensive income. Our portfolio is invested primarily in short-term and intermediate-term, investment-grade fixed-income securities. Our investment portfolio had a fair value of $27.3 billion at December 31, 2017, compared to $23.5 billion at December 31, 2016. Investment income is affected by the variability of cash flows to or from the portfolio, shifts in the type and quality of investments in the portfolio, changes in yield, and other factors. For securities held in our investment portfolios, the total investment income, including net realized gains (losses) on securities, before expenses and taxes, was $662.3 million in 2017, compared to $589.7 million in 2016 and $567.3 million in 2015. For our investment portfolio, on a pretax total return basis (i.e., total investment income plus changes in unrealized gains/losses), investment income was $1,210.8 million, $791.0 million, and $242.9 million for the years ended December 31, 2017, 2016, and 2015, respectively. Outside of our investment portfolio, during 2017 and 2016, we recognized a $49.6 million and $59.7 million, respectively, of other-than-temporary impairment loss resulting from renewable energy tax credit investments entered into during the years. For more detailed discussion of our investment portfolio, see Note 2 – Investments, Note 3 – Fair Value, and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report.

Employees

The number of employees at December 31, 2017 was 33,656, all of whom were employed by subsidiaries of The Progressive Corporation, including 806 employees employed by ARX and its subsidiaries and affiliates.

Liability for Property-Casualty Losses and Loss Adjustment Expenses

The consolidated financial statements include the estimated liability for unpaid losses and loss adjustment expenses (LAE) of our insurance subsidiaries. Our objective is to ensure that total reserves (i.e., case reserves and incurred but not recorded reserves, or “IBNR”) are adequate to cover all loss costs, while sustaining minimal variation from the time reserves are initially established until losses are fully developed. The liabilities for losses and LAE are determined using actuarial and statistical procedures and represent undiscounted estimates of the ultimate net cost of all unpaid losses and LAE incurred through December 31 of each year. These estimates are subject to the effect of future trends on claims settlement, among other factors.

These estimates are continually reviewed and adjusted as experience develops and new information becomes known. Adjustments, if any, relating to accidents that occurred in prior years are reflected in the current year results of operations and are referred to as “development” of the prior year estimates. In establishing loss reserves, we take into account projected changes in claim severity caused by anticipated inflation and a number of factors that vary with the individual type of policy written. These severities are projected based on historical trends, adjusted for anticipated changes in underwriting standards, inflation, policy provisions, claims resolution practices, and general economic trends. These anticipated trends are reconsidered periodically based on actual development and are modified if necessary.

We have not entered into any loss reserve transfers or similar transactions having a material effect on earnings or reserves.

See Note 6 – Loss and Loss Adjustment Expense Reserves in the Annual Report for a detailed discussion of our loss reserving practices and a reconciliation of our loss and LAE reserve activity, along with incurred and paid claims development by accident year for our segments, based on definitions pursuant to statutory accounting principles. In addition, further information about our loss reserving practices can be found in our “Report on Loss Reserving Practices,” which was filed with the Securities and Exchange Commission (SEC) on Form 8-K on August 12, 2016.

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(d) Financial Information About Geographic Areas

We operate our businesses throughout the United States.

(e) Available Information

Our website is located at progressive.com. As soon as reasonably practicable, we make all documents that we file with, or furnish to, the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports, available free of charge via our website at progressive.com/investors. These reports are also available on the SEC’s website: http://www.sec.gov.

ITEM 1A. RISK FACTORS

Our business involves various risks and uncertainties, certain of which are discussed in this section. Management divides these risks into five broad categories in assessing how they may affect our financial condition, cash flows, and results of operations, as well as our ability to achieve our business objectives:

• Insurance Risks - risks associated with assuming, or indemnifying for, the losses or liabilities incurred by policyholders

• Operating Risks - risks stemming from external or internal events or circumstances that directly or indirectly may affect our insurance operations

• Market Risks - risks that may causechanges in the value of assets held in our investment portfolios

• Liquidity Risk - risk that our financial condition will be adversely affected by the inability to meet our short-term cash, collateral, or other financial obligations, and

• Credit and Other Financial Risks - risks that the other party to a transaction will fail to perform according to the terms of a contract, or that we will be unable to satisfy our obligations when due or obtain capital when necessary.

Although we have organized risks generally according to these categories in the discussion below, many of the risks may have ramifications in more than one category. For example, although presented as an Operating Risk below, governmental regulation of insurance companies also affects our underwriting, investing, and financing activities, which are addressed separately under Insurance Risks, Market Risks, and Credit and Other Financial Risks below. These categories, therefore, should be viewed as a starting point for understanding the significant risks facing us and not as a limitation on the potential impact of the matters discussed.

It also should be noted that our business and that of other insurers may be adversely affected by a downturn in general economic conditions and other forces beyond our control. Issues such as unemployment rates, the number of vehicles sold, home ownership trends, inflation or deflation, consumer confidence, and construction spending, among a host of other factors, will have a bearing on the amount of insurance that is purchased by consumers and small businesses and the costs that we incur. Also, to the extent that we have a concentration of business in one or more states or regions of the country, general economic conditions in those states or regions may have a greater impact on our business.

We cannot predict whether the risks and uncertainties discussed in this section, or other risks not presently known to us or that we currently believe to be immaterial, may develop into actual events and impact our businesses. If any one or more of them does so, the events could materially adversely affect our financial condition, cash flows, or results of operations, and the market prices of our common shares or debt securities could decline.

This information should be considered carefully together with the other information contained in this report and in the other reports and materials filed by us with the SEC, as well as news releases and other information we publicly disseminate from time to time.

I.     Insurance Risks

Our success depends on our ability to underwrite and price risks accurately and to charge adequate rates to policyholders.

Our financial condition, cash flows, and results of operations depend on our ability to underwrite and set rates accurately for a full spectrum of risks. A primary role of the pricing function is to ensure that rates are adequate to generate sufficient premiums to pay losses, loss adjustment expenses, and underwriting expenses, and to earn a profit.

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Pricing involves the acquisition and analysis of historical data regarding vehicle accidents, other insured events, and associated losses, and the projection of future trends for such accidents and events, loss costs, expenses, and inflation, among other factors, for each of our products in multiple risk tiers and many different markets. Our ability to price accurately is subject to a number of risks and uncertainties, including, without limitation:

• the availability of sufficient, reliable data

• our ability to conduct a complete and accurate analysis of available data

• uncertainties inherent in estimates and assumptions, generally

• our ability to timely recognize changes in trends and to predict both the severity and frequency of future losses with reasonable accuracy

• our ability to predict changes in operating expenses with reasonable accuracy

• our ability to reflect changes in reinsurance costs in a timely manner

• the development, selection, and application of appropriate rating formulae or other pricing methodologies

• our ability to innovate with new pricing strategies and the success of those strategies

• our ability to implement rate changes and obtain any required regulatory approvals on a timely basis

• our ability to predict policyholder retention accurately

• unanticipated court decisions, legislation, or regulatory actions

• the frequency and severity of catastrophe events

• our ability to understand the impact of ongoing changes in our claim settlement practices

• changing vehicle usage and driving patterns, which may be influenced by oil and gas prices among other factors, changes in residential occupancy patterns, and the emerging sharing economy

• advancements in vehicle or home technology or safety features, such as accident and loss prevention technologies or the development of autonomous or partially autonomous vehicles

• unexpected changes in the medical sector of the economy, including medical costs and systemic changes resulting from national or state health care laws or regulations

• unforeseen disruptive technologies and events, and

• unanticipated changes in auto repair costs, auto parts prices, used car prices, or construction requirements or labor and materials costs.

The realization of one or more of these risks may result in our pricing being based on inadequate or inaccurate data or inappropriate analyses, assumptions, or methodologies, and may cause us to estimate incorrectly future changes in the frequency or severity of claims. As a result, we could underprice risks, which would negatively affect our underwriting profit margins, or we could overprice risks, which could reduce our competitiveness and growth prospects. In either event, our financial condition, cash flows, and results of operations could be materially adversely affected. In addition, underpricing insurance policies over time could erode the capital position of one or more of our insurance subsidiaries, thereby constraining our ability to write new business.

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Our success depends on our ability to establish accurate loss reserves.

Our financial statements include loss reserves, which represent our best estimate as of the date of the financial statements of the amounts that our insurance subsidiaries ultimately will pay on claims that have been incurred, and the related costs of adjusting those claims. There is inherent uncertainty in the process of establishing property and casualty insurance loss reserves, which can arise from a number of factors, including:

• the availability of sufficient, reliable data

• the difficulty in predicting the rate and direction of changes in frequency and severity trends, including the effects of future inflation rates, for multiple products in multiple markets

• unexpected changes in medical costs, auto repair costs, or the costs of construction labor and materials

• unanticipated changes in governing statutes and regulations

• new or changing interpretations of insurance policy provisions and coverage-related issues by courts

• the effects of changes in our claims settlement practices

• our ability to recognize fraudulent or inflated claims

• the accuracy of our estimates regarding claims that have been incurred but not recorded as of the date of the financial statements

• the accuracy and adequacy of actuarial techniques and databases used in estimating loss reserves, and

• the accuracy and timeliness of our estimates of loss and loss adjustment expenses as determined for different categories of claims.

The ultimate paid losses and loss adjustment expenses may deviate, perhaps substantially, from point-in-time estimates of such losses and expenses, as reflected in the loss reserves included in our financial statements. Consequently, ultimate losses paid could materially exceed reported loss reserves and have a material adverse effect on our financial condition, cash flows, or results of operations. Further information on our loss reserves can be found in the “Liability for Property-Casualty Losses and Loss Adjustment Expenses” discussion of this report.

Our insurance operating results may be materially adversely affected by severe weather conditions or other catastrophe events.

Catastrophes can be caused by natural events, such as hurricanes, tornadoes, windstorms, floods, earthquakes, hailstorms, severe winter weather, and fires, or by other events, such as explosions, terrorist attacks, riots, and hazardous material releases. The frequency and severity of such events are inherently unpredictable. Moreover, changing climate conditions, whether due to an increase in average temperatures (global climate change) or other causes, may increase how often severe weather events and other natural disasters occur and how much insured damage they cause. Catastrophe losses may adversely affect the results of our Property segment more than they affect the results of our other businesses.

The extent of insured losses from a catastrophe is a function of both our total net insured exposure in the area affected by the event and the nature and severity of the event. We use catastrophe modeling tools to help estimate our exposure to such events. Those tools are based on historical data and other assumptions that limit their reliability and predictive value, and they may become even less reliable as climatic conditions change. As a result, our forecasting efforts may generate projections that prove to be materially inaccurate. An increase in the frequency or severity of catastrophes could materially adversely affect our financial condition, cash flows, and results of operations.

Our success will depend on our ability to continue to accurately predict our reinsurance needs, obtain sufficient reinsurance coverage for our Property and other businesses at reasonable cost, and collect under our reinsurance contracts.

Our Property business relies on reinsurance contracts, state reinsurance funding, and catastrophe bonds (collectively, “reinsurance arrangements”) to reduce its exposure to certain catastrophe events. We also use reinsurance contracts to reinsure portions of our Commercial Lines and umbrella insurance businesses. Reinsurance arrangements are often subject to a threshold below which reinsurance does not apply, so that we are responsible for all losses below the threshold from a covered event, and to an aggregate dollar coverage limit, so that our claims liabilities arising from a covered event may exceed our reinsurance coverage. In addition, although the reinsurer is liable to the insurer to the extent of the reinsurance coverage, the original insurer remains liable under the policies to the insured as the direct insurer on all risks reinsured. As a result, we are subject to the risk that reinsurers will be unable to pay, or will dispute, reinsurance claims. Further, the availability and cost of reinsurance are subject to prevailing reinsurance market conditions (which can be impacted by the occurrence of significant reinsured events, such as catastrophes). We may not be able to obtain reinsurance coverage in the future at commercially reasonable rates or at all. The unavailability and/or cost of reinsurance could adversely affect our business volume, profitability, or financial condition.

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II.     Operating Risks

We compete in property-casualty markets that are highly competitive.

We write insurance for personal autos and recreational vehicles, homeowners and renters, and commercial autos and trucks for small businesses. All of these markets are highly competitive. We face vigorous competition from large, well-capitalized national and international companies, as well as smaller regional insurers. Other companies, potentially including existing insurance companies, other well-financed companies seeking new opportunities, or new competitors with technological or other innovations, also may enter these markets in the future. Many of our competitors have substantial resources, experienced management, and strong marketing, underwriting, and pricing capabilities. The property and casualty insurance industry is a relatively mature industry, in which brand recognition, marketing skills, operational effectiveness, pricing, scale, and cost control are major competitive factors. If our competitors offer similar insurance products at lower prices, offer such insurance products bundled with other products or services that we do not offer, are permitted to offer their products under different legal and regulatory constraints than those that apply to us, or engage in other successful competitive initiatives, our ability to generate new business or to retain a sufficient number of our existing customers could be compromised. In addition, because auto insurance constitutes a significant portion of our overall business, we may be more sensitive than other insurers to, and more adversely affected by, trends that could decrease auto insurance rates or reduce demand for auto insurance over time, such as advances in autonomous vehicles and vehicle sharing arrangements.

Historically, the auto and property insurance markets have been described as cyclical, with periods of relatively strong profitability being followed by increased pricing competition among insurers. This price competition, which is sometimes referred to as a “soft market,” can adversely affect revenue and profitability levels. As insurers recognize this situation (which can occur at different times for different companies), the historical reaction has been for insurers to raise their rates (sometimes referred to as a “hard market”) in an attempt to restore profitability to acceptable levels. As more insurers react in this way, profit levels in the industry may increase to a point where some insurers begin to lower their rates, starting the cycle over again. In the past, this cycle has generally played out over a number of years. We cannot be certain whether and to what extent such cyclicality is currently impacting the auto or property insurance markets, nor can we predict whether it will do so in the future.

The highly competitive nature of the insurance marketplace could result in consolidation within the industry, or in the failure of one or more competitors. The concentration of premium volume in a reduced number of major competitors could significantly increase the level of competition in a manner that is not favorable to us. In addition, in the event of a failure of a major insurer or a state-sponsored catastrophe fund, our company and other insurance companies may be required by law to absorb the losses of the failed insurer or fund, resulting in a potentially significant increase in our costs. We might also be faced with an unexpected surge in new business from a failed insurer’s former policyholders. Such events could materially adversely affect our financial results, brand, and future business prospects.

Our success depends on our ability to innovate effectively and respond to our competitors’ initiatives.

Our ability to develop and implement innovative products and services that are accepted and valued by our customers and independent agents is critical to maintaining and enhancing our competitive position. Innovations must be implemented in compliance with applicable insurance regulations and may require extensive modifications to our systems and processes and extensive coordination with and reliance on the systems of third parties. As a result, if we do not handle these transitions effectively and bring such innovations to market with the requisite speed, the quality of our products, our relationships with our customers and agents, and our business prospects, may be materially adversely affected. In addition, innovations by competitors or other market participants may increase the level of competition in the industry. If we fail to respond appropriately to those innovations on a timely basis, our competitive position and results may be materially adversely affected.

We must effectively manage complexity as we develop and deliver high quality products and customer experiences.

Ongoing competitive, technological, regulatory, informational, and other developments result in significant levels of complexity in our products and in the systems and processes we use to run our business. These risks include our increasing reliance on third-party systems, the development of new modes of communication, changing insurance shopping trends, and the availability of very large volumes of data (i.e., Big Data) and the challenges relating to analyzing those data sets. Complexity may create barriers to innovation or the provision of high-quality products and customer and agent experiences, may require us to modify our business practices, to adopt new systems, or to upgrade or replace outdated systems, each at significant expense, and may lead to increased difficulty in executing our business strategies.

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Intellectual property rights could affect our competitiveness and our business operations.

There has been a proliferation of patents, both inside and outside the insurance industry, that significantly impacts our businesses. The existence of such patents, and other claimed intellectual property rights, may result in legal challenges to certain of our business practices by other insurance companies and non-insurance entities alleging that we are violating their rights.  Such legal challenges could result in costly legal proceedings, substantial monetary damages, or expensive changes in our business processes and practices. Similarly, we may seek or obtain patent protection for innovations developed by us.  However, we may not be able to obtain patents on these processes and practices, and defending our patents and other intellectual property rights against challenges, and enforcing and defending our rights, including if necessary through litigation, can be time consuming and expensive, and the results are inherently uncertain, which can further complicate business plans.

Our success depends on our ability to adjust claims accurately.

We must accurately evaluate and pay claims that are made under our insurance policies. Our failure to pay claims fairly, accurately, and in a timely manner, or to deploy claims resources appropriately and in a cost-effective manner, could result in unanticipated costs to us, lead to material litigation, undermine customer goodwill and our reputation in the marketplace, and impair our brand and, as a result, materially adversely affect our competitiveness, customer retention, financial results, prospects, and liquidity.

We must develop and maintain a brand that is recognized and trusted by consumers.

It is critical to our business that consumers recognize and trust the Progressive brand. We undertake distinctive advertising and marketing campaigns and other efforts to improve brand recognition, enhance perceptions of us, generate new business, and increase the retention of our current customers. We believe that improving the effectiveness of our advertising and marketing campaigns relative to those of our competitors is particularly important given the significance of brand and reputation in the marketplace and the continuing high level of advertising and marketing efforts and related expenditures within the insurance market. If our marketing campaigns are unsuccessful or are less effective than those of competitors, or if our reliance on a particular spokesperson or character is compromised, our business could be materially adversely affected.

Our brand also could be adversely affected by incidents that reflect negatively on us, whether due to our business practices, the conduct of our officers or employees, the actions of businesses with which we do business, including unaffiliated insurers whose products we offer or make available to our customers, or other causes. The negative impacts of these or other events may be aggravated as the perceptions of consumers and others are formed based on modern communication and social media tools over which we have no control.

Our ability to attract, develop, and retain talented employees, managers, and executives, and to maintain appropriate staffing levels, is critical to our success.

Our success depends on our ability to attract, develop, compensate, motivate, and retain talented employees, including executives, other key managers, and employees with strong technological, analytical, and other skills and know-how necessary for us to run our vehicle and property insurance businesses. Our loss of certain officers and key employees, or the failure to attract or develop talented employees, executives and managers with diverse backgrounds and experiences, could have a material adverse effect on our business.

In addition, we must forecast sales and claims volume and other factors in changing business environments (for multiple products and business units and in many geographic markets) with reasonable accuracy and adjust our hiring and training programs and employment levels accordingly. Our failure to recognize the need for such adjustments, or our failure or inability to react appropriately on a timely basis, could lead either to over-staffing or under-staffing in one or more business units or locations. In either such event, our financial results, customer relationships, employee morale, and brand could be materially adversely affected.

Our success also depends, in large part, on our ability to maintain and improve the staffing effectiveness and culture that we have developed over the years. Our ability to do so may be impaired as a result of litigation against us, other judicial decisions, legislation or regulations, or other factors in the employment marketplace, as well as our failure to recognize and respond to changing trends and other circumstances that affect our employees. In such events, the productivity of our workers and the efficiency of our operations could be adversely affected, which could lead to an erosion of our operating performance and margins.

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We are subject to a variety of complex laws and regulations.

Our insurance businesses operate in highly regulated environments. Our insurance subsidiaries are subject to regulation and supervision by state insurance departments in all 50 states and the District of Columbia, each of which has a unique and complex set of laws and regulations. In addition, certain federal laws impose additional requirements on businesses, including insurers, in a wide range of areas, such as the use of credit information, privacy, and the reimbursement of certain medical costs incurred by the government. Our insurance subsidiaries’ ability to implement business plans and remain competitive while complying with these laws and regulations, and to obtain necessary regulatory action in a timely manner, is and will continue to be critical to our success.

Most jurisdictions impose restrictions on, or require prior regulatory approval of, various actions by regulated insurers, which may adversely affect our insurance subsidiaries’ ability to operate, innovate, and obtain necessary rate adjustments in a timely manner. Our compliance efforts are further complicated by changes in laws or regulations applicable to insurance companies, or by judicial interpretations of those laws or regulations. Insurance laws and regulations may limit, among other things, an insurer’s ability to underwrite and price risks accurately, prevent the insurer from obtaining timely rate changes to respond to increased or decreased costs, restrict the ability to discontinue unprofitable businesses or exit unprofitable markets, prevent insurers from terminating policies under certain circumstances, dictate or limit the types of investments that an insurance company may hold, and impose specific requirements relating to information technology systems and related cybersecurity risks. Moreover, inconsistencies between requirements at the state and federal level may further complicate our compliance efforts, potentially resulting in additional costs for us. In addition, laws in certain jurisdictions mandate that insurance companies pay assessments in a number of circumstances, including assessments to pay claims upon the insolvency of other insurance companies or to cover losses in government-provided insurance programs for high risk auto and homeowners coverages. Compliance with laws and regulations often results in increased costs, which can be substantial, to our insurance subsidiaries. These costs, in turn, may adversely affect our profitability or our ability or desire to grow or operate our business in the applicable jurisdictions.

The actual or alleged failure to comply with this complex variety of laws and regulations by us or other companies in the insurance, financial services, or related industries, also could result in actions or investigations by regulators, state attorneys general, federal officials, or other law enforcement officials. Such actions and investigations, and any determination that we have not complied with an applicable law or regulation, could potentially lead to significant monetary payments, fines and penalties, adverse publicity and damage to our reputation in the marketplace, and in certain cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions. In addition, The Progressive Corporation and its subsidiaries could face individual and class action lawsuits by insureds and other parties for alleged violations of certain of these laws or regulations.

New federal or state legislation or regulations may be adopted in the future that could materially adversely affect our operations or ability to write business profitably in one or more jurisdictions.

For further information on these risks and uncertainties, see the “Insurance Regulation” discussion of this report.

Lawsuits challenging our business practices, and those of our competitors and other companies, are pending and more may be filed in the future.

The Progressive Corporation and/or its subsidiaries are named as defendants in class action and other lawsuits challenging various aspects of the subsidiaries’ business operations. These lawsuits have included cases alleging damages as a result of our subsidiaries’ methods used for evaluating and paying certain bodily injury, personal injury protection, and medical payment claims or for reimbursing medical costs incurred by Medicare/Medicaid beneficiaries; other claims handling procedures, including challenges relating to our network of repair facilities, our methods used for estimating physical damage to vehicles for repair purposes and for evaluating the actual cash value of total loss vehicles, our subrogation practices, and our handling of diminution of value claims; assessment of fees related to insufficient funds or reversed payments; interpretations of the provisions of our insurance policies; policy sales, implementation and renewal practices and procedures; and employment-related litigation, including claims relating to pay practices and fair employment practices, among other matters. Additional litigation may be filed against us in the future challenging similar or other of our business practices. In addition, lawsuits have been filed, and other lawsuits may be filed in the future, against our competitors and other businesses, and although we are not a party to such litigation, the results of those cases may create additional risks for, and/or impose additional costs and/or limitations on, our subsidiaries’ business operations.

Lawsuits against us often seek significant monetary damages and injunctive relief. The potential for injunctive relief can threaten our use of important business practices. Moreover, the resolution of individual or class action litigation in insurance or related fields may lead to a new layer of judicial regulation, resulting in material increases in our costs of doing business.

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Litigation is inherently unpredictable. Adverse court decisions or significant settlements of pending or future cases could have a material adverse effect on our financial condition, cash flows, and results of operations. For further information on the risks of pending litigation, see Note 12 – Litigation in the Annual Report.

Our business could be materially adversely affected by a security breach or other attack involving our computer systems or the systems of one or more of our vendors.

Our business requires that we develop and maintain large and complex computer systems to run our operations and to store the significant volume of data that we acquire, including the personal confidential information of our customers and employees and our intellectual property, trade secrets, and other sensitive business and financial information. All of these systems are subject to “cyber attacks” by sophisticated third parties with substantial computing resources and capabilities, and to unauthorized or illegitimate actions by employees, consultants, agents and other persons with legitimate access to our systems. Such attacks or actions may include attempts to:

• steal, corrupt, or destroy data, including our intellectual property, financial data, or the personal information of our customers or employees

• misappropriate funds

• disrupt or shut down our systems

• deny customers, agents, brokers, or others access to our systems, or

• infect our systems with viruses or malware.

Some of our systems rely on third-party vendors, through either a connection to, or an integration with, those third-parties’ systems. This approach may increase the risk of loss, corruption, or unauthorized publication of our information or the confidential information of our customers and employees or other cyber attack. Third-party risks may include, among other factors, the vendor’s lax security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions, where laws or security measures may be inadequate.

We undertake substantial efforts to protect our systems and sensitive or confidential information. These efforts include internal processes and technological defenses that are preventative or detective, and other controls designed to provide multiple layers of security protection. In addition, we seek to protect the security and confidentiality of information provided to our vendors under “cloud computing” or other arrangements through appropriate risk evaluation, security and financial due diligence, contracts designed to require high security and confidentiality standards, and review of third-party compliance with the required standards. While we expend significant resources on these defensive measures, our systems are being threatened on a regular basis, and there can be no assurance that we will be successful in preventing attacks or detecting and stopping them once they have begun.

Our business could be significantly damaged by a security breach, data loss or corruption, or cyber attack. In addition to the potentially high costs of investigating and stopping such an event and implementing necessary fixes, we could incur substantial liability if confidential customer or employee information is stolen. In addition, such an event could cause a significant disruption of our ability to conduct our insurance operations, adversely affect our competitive position if material trade secrets or other confidential information are stolen, and have severe ramifications on our reputation and brand, potentially causing customers to refrain from buying insurance from us or other businesses to refrain from doing business with us. We have elected to self-insure these risks at this time. Therefore, the occurrence of a security breach, data loss or corruption, or cyber attack, if sufficiently severe, could have a material adverse effect on our business results, prospects, and liquidity.

If we were not able to send or accept electronic payments, our business and financial results could be adversely affected.

We rely on access to various financial networks to process payments received from our customers. These include credit card and debit card networks and the Automated Clearing House (ACH) network. Our ability to participate in these networks is dependent on our compliance with applicable laws and regulations and with the complex rules of each network and any related industry supervisory groups. If we fail to comply with legal requirements or rules and best practices established by a network or industry group, including those related to data security, we could be assessed significant monetary fines and other penalties, including, in certain cases, the termination of our right to use the applicable network or system. Such fines and penalties, and any disruption in or termination of our ability to process customer payments electronically, could materially adversely affect our business and our brand.

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Our business depends on the secure and uninterrupted operation of our facilities, systems, and business functions and the operation of various third-party systems.

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted manner, necessary business functions. The shut-down or unavailability of one or more of our systems or facilities for any reason could significantly impair our ability to perform critical business functions on a timely basis. In addition, many of our critical business systems interface with and depend on third-party systems; an interruption of service from a third-party system for any reason could significantly impair our ability to perform critical business functions. If sustained or repeated, and if an alternate system, process, or vendor is not immediately available to us, such events could result in a deterioration of our ability to write and process policies, provide customer service, resolve claims in a timely manner, make payments when required, or perform other necessary business functions. Any such event could have a material adverse effect on our financial results and business prospects, as well as cause damage to our brand and customer goodwill.

We may be required to recognize impairments in the value of the goodwill or intangible assets recorded in our financial statements.

As a result of business acquisitions, we have recorded goodwill (generally representing the amount paid in excess of the fair value of the assets acquired) and certain intangible assets (at fair value at the time of acquisition). We review goodwill and intangible assets for impairment at least annually. Valuing these assets, and evaluating their recoverability, requires us to make estimates and assumptions related to future returns on equity, margins, growth rates, discount rates, and other matters, and our estimates may change over time, potentially resulting in write-downs of the assets. Goodwill and intangible assets impairment charges could result from declines in operating results, divestitures or sustained market declines, among other factors, and could materially affect our financial condition and results of operations in the period in which they are recognized.

III.     Market Risks

The performance of our fixed-income and equity investment portfolios is subject to a variety of investment risks.

Our investment portfolio consists principally of fixed-income securities and common equities. General economic conditions and other factors beyond our control can adversely affect the value of our investments and the amount and realization of investment income, or result in realized or unrealized investment losses.

Our fixed-income portfolio is actively managed by our investment group and includes short-term investments, fixed-maturity securities, and preferred stocks. The performance of the fixed-income portfolio is subject to a number of risks, including:

• Interest rate risk - the risk of adverse changes in the value of fixed-income securities as a result of increases in market interest rates.

• Investment credit risk - the risk that the value of certain investments may decrease due to a deterioration in the financial condition, operating performance or business prospects of, or the liquidity available to, one or more issuers of those securities or, in the case of asset-backed securities, due to the deterioration of the loans or other assets that underlie the securities.

• Concentration risk - the risk that the portfolio may be too heavily concentrated in the securities of one or more issuers, sectors, or industries, which could result in a significant decrease in the value of the portfolio in the event of a deterioration of the financial condition or performance of, or outlook for, those issuers, sectors, or industries.

• Prepayment or extension risk - applicable to certain securities in the portfolio, such as residential mortgage-backed securities and other bonds with call provisions, prepayment risk is the risk that, as interest rates change, the principal of such securities may be repaid earlier than anticipated, requiring that we reinvest the proceeds at less attractive rates. Extension risk is the risk that a security may not be redeemed when anticipated, adversely affecting the value of the security and preventing the reinvestment of the principal at higher market rates.

• Liquidity risk - discussed separately below.

In addition, the success of our investment strategies and asset allocations in the fixed-income portfolio may vary depending on the market environment. The fixed-income portfolio’s performance also may be adversely impacted if, among other factors: credit ratings assigned to such securities by nationally recognized statistical rating organizations are based on incomplete or inaccurate information or otherwise prove unwarranted; or our risk mitigation strategies are ineffective for the applicable market conditions.

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The common equity portfolio is primarily managed externally to track the Russell 1000 Index, with a small portion actively managed by an external investment advisor. Our equity investments are subject to general movements in the values of equity markets and to the changes in the prices of the securities we hold. An investment portfolio that is designed to track an index, such as the Russell 1000, or that follows a specific investment discipline, such as value investing, is not necessarily less risky than other equity investment strategies. Equity markets, sectors, industries, and individual securities may be subject to high volatility and to long periods of depressed or declining valuations, and are also subject to most of the same risks that affect our fixed-income portfolio, as discussed above. In addition, even though the Russell 1000 Index is broadly diversified, significant portions of the index may be concentrated in one or more sectors, reducing our ability to manage our concentration risk through sector diversification. The actively managed equity portfolio is also subject to risks arising from the investment decisions of the investment advisor.

If the fixed-income or equity portfolios, or both, were to suffer a substantial decrease in value, our financial position, and financial results could be materially adversely affected. Under these circumstances, our income from these investments could be materially reduced, and declines in the value of our securities could further reduce our reported earnings and capital levels. A decrease in value of an insurance subsidiary’s investment portfolio could also put the subsidiary at risk of failing to satisfy regulatory minimum capital requirements and could limit the subsidiary’s ability to write new business. In any such event, our business could be materially adversely affected and our financial flexibility could be substantially constrained.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report for additional discussion of the composition of our investment portfolio as of December 31, 2017, and of the market risks associated with our investment portfolio.

IV.    Liquidity Risk

The inability to access our cash accounts or to convert investments into cash on favorable terms when we desire to do so may materially and adversely affect our business.

We rely on our ability to access our cash accounts at banks and other financial institutions to operate our business. If we are unable to access the cash in those accounts as needed, whether due to our own systems difficulties, an institution-specific issue at the bank or financial institution (such as a cybersecurity breach), a broader disruption in banking, financial or wire transfer systems, or otherwise, our ability to pay insurance claims and other financial obligations when due and otherwise operate our business could be adversely affected. Likewise, our investment portfolios are subject to risks inherent in the nation’s and world’s capital markets. Any disruption in the functioning of those markets or in our ability to liquidate investments or specific categories of investments on favorable terms when desired, could impair our ability to pay claims or other financial obligations when due. Any such event or series of such events could result in significant operational difficulties, reputational harm and adverse actions by regulators and have a material adverse effect on our financial condition, cash flows, and results of operations.

V.     Credit and Other Financial Risks

Our financial condition may be adversely affected if one or more parties with which we enter into significant contracts or transact business under certain government programs become insolvent, experience other financial difficulties, or default in the performance of contractual or reimbursement obligations.

Our business is dependent on the performance by third parties of their responsibilities under various contractual or service arrangements and government programs. These include, for example: agreements with other insurance carriers to sell their products to our customers in bundled packages or otherwise, arrangements for transferring certain of our risks (including reinsurance arrangements used by us, our corporate insurance policies, and the performance of state reinsurance facilities/associations), and reimbursement obligations under various state or federal programs, such as the Michigan Catastrophic Claims Association or the National Flood Insurance Program. In addition, from time to time, we enter into significant financial transactions, such as derivative instruments, with major banks, other financial institutions, or security clearinghouses. If one or more of these parties were to default in the performance of their obligations under their respective contracts or programs or determine to abandon or terminate support for a system, product, obligation, or service that is significant to our business, we could suffer significant financial losses or other problems, which in turn could materially adversely affect our financial condition, cash flows, or results of operations and cause damage to our brand and reputation.

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Our insurance subsidiaries may be limited in the amount of dividends that they can pay, which in turn may limit our ability to repay indebtedness, make capital contributions to other subsidiaries or affiliates, pay dividends to shareholders, repurchase securities, or meet other obligations.

The Progressive Corporation is a holding company with no business operations of its own. Consequently, if its subsidiaries are unable to pay dividends or make other distributions, or are able to pay only limited amounts, The Progressive Corporation may be unable to make payments on its indebtedness, make capital contributions to or otherwise fund its subsidiaries or affiliates, pay dividends to its shareholders, or meet its other obligations. Each insurance subsidiary’s ability to pay dividends may be limited by one or more of the following factors:

• insurance regulatory authorities require insurance companies to maintain specified minimum levels of statutory capital and surplus

• insurance regulations restrict the amounts available for distribution based on either net income or surplus of the insurance company

• competitive pressures require our insurance subsidiaries to maintain high financial strength ratings, and

• in certain jurisdictions, prior approval must be obtained from regulatory authorities for the insurance subsidiaries to pay dividends or make other distributions to affiliated entities, including the parent holding company.

In addition, under the ARX stockholders’ agreement, ARX cannot pay a dividend without the consent of Progressive and other specified ARX stockholders. Further information on insurance laws and regulations that may limit the ability of our insurance subsidiaries to pay dividends can be found in Item 5(c), “Dividends,” of this report.

If we are unable to obtain capital when necessary to support our business, our financial condition and our ability to grow could be materially adversely affected.

We may need to acquire additional capital from time to time as a result of many factors. These could include increased regulatory requirements, losses in our insurance or investment operations, or significant growth in the insurance premiums that we write, among others. If we are unable to obtain capital at favorable rates when needed, whether due to our results, volatility or disruptions in debt and equity markets beyond our control, or other reasons, our financial condition could be materially adversely affected. In such an event, unless and until additional sources of capital are secured, we may be limited in our ability, or unable, to service our debt obligations, pay dividends, grow our business, pay our other obligations when due or engage in other corporate transactions. Such a deterioration of our financial condition could adversely affect the perception of our company by insurance regulators, potentially resulting in regulatory actions, and the price of our common shares or debt securities could fall significantly.

Our access to capital markets, ability to obtain or renew financing arrangements, obligations to post collateral under certain derivative contracts, and business operations are dependent on favorable evaluations and ratings by credit and other rating agencies.

Our credit and financial strength are evaluated and rated by various rating agencies, such as Standard & Poor’s, Moody’s Investors Service, Fitch Ratings, and A.M. Best. Downgrades in our credit ratings could adversely affect our ability to access the capital markets and/or lead to increased borrowing costs in the future (although the interest rates we pay on our current indebtedness would not be affected), as would adverse recommendations by equity analysts at the various brokerage houses and investment firms. Perceptions of our company by other businesses and consumers could also be significantly impaired. In addition, a downgrade could trigger contractual obligations in certain derivative transactions requiring us to post substantial amounts of additional collateral or allow a third party to liquidate the derivative transaction. Downgrades in the ratings of our insurance subsidiaries could likewise negatively impact our operations, potentially resulting in lower or negative premium growth. In any such event, our financial performance could be materially adversely affected.

Our annual dividend policy will result in a variable payment to shareholders each year, or no payment in some years, and the dividend program ultimately may be changed in the discretion of the Board of Directors.

We have previously announced our intention to pay a dividend to shareholders on an annual basis under a formula that multiplies our annual after-tax underwriting income by a percentage factor set by the Board of Directors (33-1/3% for 2017 and 2018) and then by the Gainshare factor (determined under our Gainsharing (annual cash incentive) plans for most of our employees and based on the operating performance of our insurance businesses). If our Gainshare factor for the year is zero or after-tax comprehensive income (which includes the change in unrealized investment gains and losses, among other items) is less than after-tax underwriting income, no dividend will be paid under our annual variable dividend policy.

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Because the dividend calculation is performance-based, the amount (if any) to be paid in any particular year may not be subject to accurate prediction and will likely vary, perhaps significantly, from the amounts paid in the preceding year(s). As a result, the amount paid may be inconsistent with some shareholders’ expectations. In addition, although we have announced our intent to repeat the annual variable dividend in 2018 (to be paid early in 2019), the dividend, if any, would not be declared by the Board until late 2018 or early 2019, and the Board retains the discretion, at any time, to alter our policy or not to pay the annual dividend for 2018 or future years. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in our performance or capital needs, changes in U.S. federal income tax laws, disruptions of national or international capital markets, or other events affecting our liquidity, financial position or prospects, as described above. Any such change could adversely affect investors’ perceptions of the company and the value of, or the total return of an investment in, our common shares.

Our investments in certain tax-advantaged projects may not generate the anticipated returns.

We may invest in certain projects that are entitled to tax-advantaged treatment under applicable federal or state law, including renewable energy development, historic property rehabilitation and affordable housing, and we may make other tax-advantaged investments from time to time. Our investments in these projects are designed to generate a return through the realization of tax credits and, in some cases, through other tax benefits and cash flows from the project. Certain of these investments are subject to the risk that previously recorded tax credits can be challenged or are subject to recapture by the applicable taxing authorities if specific requirements are not satisfied. Many of the factors that could lead to a challenge or recapture of tax credits are beyond our control. The inability to realize these tax credits and other tax benefits could have a material adverse impact on our financial condition.

We do not manage to short-term earnings expectations; our goal is to maximize the long-term value of the enterprise, which, at times, may adversely affect short-term results.

We believe that shareholder value will be increased in the long run if we meet or exceed the financial goals and policies that we establish each year. We do not manage our business to maximize short-term stock performance or the amount of the dividend that may be paid under our annual variable dividend policy or otherwise. We report earnings and other operating results on a monthly basis. We also do not provide earnings estimates to the market and do not comment on earnings estimates by analysts. As a result, our reported results for a particular period may vary, perhaps significantly, from investors’ expectations, which could result in significant volatility in the price of our common shares or debt securities. Our Property business may cause additional volatility in our consolidated results.

In addition, due to our focus on the long-term value of the enterprise, we may undertake business strategies and establish related financial goals for a specific year that are designed to enhance our longer-term performance, while understanding that such strategies may not always similarly benefit short-term results, such as our annual underwriting profit or earnings per share. Consequently, these strategies may adversely affect short-term performance or the amount of our variable dividend for a given year, and may result in additional volatility in the price of our common shares or debt securities.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

We currently do not have any unresolved comments from the SEC staff.

ITEM 2. PROPERTIES

All of our properties are owned or leased by subsidiaries of The Progressive Corporation, including ARX and its subsidiaries, and are used for office functions (corporate, claims, and business unit), as call centers, for training, for warehouse space, or as Service Centers.

We own 93 buildings located throughout the United States. Nearly two-thirds of our owned buildings are for our Service Centers, the majority of which are combined with a claims office. As we transition our claims processing away from the Service Centers, we plan to convert these owned facilities to additional claims office space to accommodate growth and maintain a local presence. Our owned facilities, which contain approximately 4.9 million square feet of space, are generally not segregated by industry segment. We own significant locations in Mayfield Village, Ohio and surrounding suburbs (including our corporate headquarters); Colorado Springs, Colorado; St. Petersburg, Florida; Tampa, Florida; and Tempe, Arizona.

We lease approximately 2.1 million square feet of space throughout the United States. These leases are generally short-term to medium-term leases of commercial space.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference from information with respect to executive officers of The Progressive Corporation and its subsidiaries set forth in Item 10 in Part III of this Form 10-K.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information

Progressive’s Common Shares, $1.00 par value, are traded on the New York Stock Exchange (NYSE) under the symbol PGR. The high and low prices set forth below are as reported on the NYSE.

Year	Quarter	High		Low		Close		Dividends Declared Per Share
2017	1	$	40.74	$	35.23	$	39.18	$	0
	2	45.03		38.61		44.09		0
	3	49.01		43.59		48.42		0
	4	57.18		47.89		56.32		1.1247
		$	57.18	$	35.23	$	56.32	$	1.1247
2016	1	$	35.27	$	29.32	$	35.14	$	0
	2	35.54		31.14		33.50		0
	3	34.29		30.54		31.50		0
	4	35.95		30.66		35.50		0.6808
		$	35.95	$	29.32	$	35.50	$	0.6808

The closing price of our common shares on January 31, 2018, was $54.10.

(b) Holders

We had 2,082 shareholders of record on December 31, 2017.

(c) Dividends

We maintain a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of the year. This annual variable dividend is based on a target percentage of after-tax underwriting income multiplied by a performance factor (“Gainshare factor”), which, beginning in 2017, is determined by reference to the Agency auto, Direct auto, special lines, Commercial Lines, and Property business units, with minor exclusions and adjustments, and subject to the limitations discussed below. The target percentage is determined by our Board of Directors on an annual basis and announced to shareholders and the public. In December 2016, the Board determined the target percentage for 2017 to be 33-1/3% of annual after-tax underwriting income, which is unchanged from the target percentage in both 2016 and 2015. In December 2017, the Board also determined this target will remain at 33-1/3% for 2018. Since the inception of our variable dividend, we have applied a tax rate of 35% to calculate the after-tax underwriting income. Beginning in 2018, we will apply a rate of 21% to calculate the after-tax underwriting income. 

The Gainshare factor can range from zero to two and is determined by comparing our operating performance for the specified business units for the year to certain predetermined profitability and growth objectives, as approved by the Compensation Committee of the Board. This Gainshare factor is also used in the annual cash incentive program currently in place for our employees (our “Gainsharing program”). If the Gainshare factor is zero or if our comprehensive income is less than after-tax underwriting income, no dividend would be payable under our annual variable dividend policy.

Although it is our intent to calculate an annual variable dividend based on the formula outlined above, the Board could decide to alter our policy, or not to pay the annual variable dividend for 2018 or future years, at any time prior to the declaration of the dividend for the year. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in our performance or capital needs, changes in U.S. federal income tax laws, disruptions of national or international capital markets, or other events affecting our liquidity, financial position or prospects, as described above. Any such change could adversely affect investors’ perceptions of the company and the value of, or the total return of an investment in, our common shares.

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Following is a summary of our shareholder dividends that were declared in the last three years:

(millions, except per share amounts)			Amount
Dividend Type	Declared	Paid	Per Share		Total1
Annual – Variable	December 2017	February 2018	$	1.1247	$	655.1
Annual – Variable	December 2016	February 2017	0.6808		395.4
Annual – Variable	December 2015	February 2016	0.8882		519.2

¹ Based on an estimate of shares outstanding as of the record date. For the dividends declared in December 2016 and 2015, we paid $395.4 million and $519.0 million, respectively.

Consolidated statutory surplus was $9.7 billion on December 31, 2017, and $8.6 billion on December 31, 2016. At December 31, 2017, $830.1 million of consolidated statutory surplus represented net admitted assets of Progressive’s insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum statutory surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the companies are licensed. Dividends from other funds may also be limited by regulation or subject to prior approval by regulators in certain states. Based on the dividend laws currently in effect, the insurance subsidiaries could pay aggregate dividends of $1,390.5 million in 2018 without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of previous dividends paid by the applicable subsidiary.

In connection with the acquisition of a controlling interest in ARX, The Progressive Corporation entered into a stockholders’ agreement with the other ARX stockholders. Among other provisions, the stockholders’ agreement prohibits ARX from taking a number of actions, including the payment of dividends, without the consent of The Progressive Corporation and two other stockholders.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information about securities authorized for issuance under our equity compensation plans.

(e) Performance Graph

See the Performance Graph section in our Annual Report.

(f) Recent Sales of Unregistered Securities

None.

(g) Share Repurchases

ISSUER PURCHASES OF EQUITY SECURITIES
2017 Calendar Month	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
October	1,259	$	48.78	848,155	24,151,845
November	5,635	48.81		853,790	24,146,210
December	2,056	53.28		855,846	24,144,154
Total	8,950	$	49.83

In May 2017, the Board approved an authorization to repurchase up to 25 million of our common shares; this Board authorization does not have an expiration date. Share repurchases under this authorization may be accomplished through open market purchases, through privately negotiated transactions, pursuant to our equity incentive plans, or otherwise, and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities

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Exchange Act of 1934. During the fourth quarter 2017, all repurchases were accomplished in conjunction with our incentive compensation plans at the then-current market prices; there were no open market purchases during the quarter.

Progressive’s financial policies state that we will repurchase shares to neutralize dilution from equity-based compensation in the year of issuance and as an option to effectively use underleveraged capital. See Note 9 – Employee Benefit Plans, “Incentive Compensation Plans” in our Annual Report, for a summary of our restricted equity grants.

ITEM 6.SELECTED FINANCIAL DATA

(millions - except per share amounts)

	For the years ended December 31,
	2017		2016		2015		2014		2013
Total revenues	$	26,839.0	$	23,441.4	$	20,853.8	$	19,391.4	$	18,170.9
Net income attributable to Progressive	1,592.2		1,031.0		1,267.6		1,281.0		1,165.4
Per share:
Net income attributable to Progressive	2.72		1.76		2.15		2.15		1.93
Dividends declared	1.1247		0.6808		0.8882		0.6862		1.4929
Comprehensive income attributable to Progressive	1,941.0		1,164.0		1,044.9		1,352.4		1,246.1
Total assets	38,701.2		33,427.5		29,819.3		25,787.6		24,408.2
Debt outstanding	3,306.3		3,148.2		2,707.9		2,164.7		1,860.9
Total shareholders’ equity	9,284.8		7,957.1		7,289.4		6,928.6		6,189.5
Redeemable noncontrolling interest	503.7		483.7		464.9		--		--

 See Note 15 – Redeemable Noncontrolling Interest in the Annual Report, for a discussion of the acquisition of a controlling interest in ARX on April 1, 2015.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Incorporated by reference from Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risk are incorporated by reference from section “IV. Results of Operations – Investments” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, as described in Item 7 above, and from the Quantitative Market Risk Disclosures section in our Annual Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of Progressive, along with the related Notes, Supplemental Information, and Report of the Independent Registered Public Accounting Firm, are incorporated by reference from our Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Progressive, under the direction of our Chief Executive Officer and our Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

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Our Chief Executive Officer and our Chief Financial Officer reviewed and evaluated Progressive’s disclosure controls and procedures as of the end of the period covered by this report. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer concluded that Progressive’s disclosure controls and procedures are effectively serving the stated purposes as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting and the attestation of the independent registered public accounting firm are incorporated by reference from our Annual Report.

We are not aware of any material change in Progressive’s internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to our directors is incorporated herein by reference from the section entitled “Item 1: Election of Directors” in The Progressive Corporation’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 11, 2018 (the “Proxy Statement”).

Information relating to executive officers of Progressive follows. Unless otherwise indicated, the executive officer has held the position(s) indicated for at least the last five years.

Name	Age	Offices Held and Last Five Years’ Business Experience
Susan Patricia Griffith	53	President and Chief Executive Officer since July 2016; Vice President from May 2015 to June 2016; Personal Lines Chief Operating Officer from April 2015 to June 2016; President of Customer Operations from April 2014 to March 2015; Claims Group President prior to April 2014
John P. Sauerland	53	Vice President since May 2015; Chief Financial Officer since April 2015; Personal Lines Group President prior to April 2015
John F. Auer	63	President, Chief Executive Officer, and Treasurer of ARX Holding Corp.
John A. Barbagallo	58	Commercial Lines President; Commercial Lines Group President, including Agency Operations prior to May 2015
Jeffrey W. Basch	59	Vice President and Chief Accounting Officer
Steven A. Broz	47	Chief Information Officer since February 2016; Claims Process General Manager from March 2015 to January 2016; Enterprise Project Management Office Leader prior to March 2015
Patrick K. Callahan	47	Personal Lines President since April 2015; Direct Acquisition Business Leader from March 2013 to March 2015; Special Lines General Manager prior to March 2013
M. Jeffrey Charney	58	Chief Marketing Officer
William M. Cody	55	Chief Investment Officer
Daniel P. Mascaro	54	Vice President, Secretary, and Chief Legal Officer beginning March 1, 2017; Claims Legal business leader from January 2013 to February 2017
John Murphy	48	Customer Relationship Management President since January 2016; Customer Relationship Management Business Leader from February 2015 to January 2016; Corporate Process Business Leader prior to February 2015
Lori Niederst	44	Chief Human Resource Officer since November 2016; Senior Human Resource Business Leader prior to November 2016
Michael D. Sieger	56	Claims President since January 2015; Claims Process General Manager prior to January 2015

Section 16(a) Beneficial Ownership Reporting Compliance. Incorporated by reference from the “Section 16(a) Beneficial Ownership Reporting Compliance” section of the Proxy Statement (which can be found in “Security Ownership of Certain Beneficial Owners and Management”).

Code of Ethics. Progressive has a Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and other senior financial officers. This Code of Ethics is available at: progressive.com/governance. We intend to continue to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, and waivers from, the provisions of the foregoing Code of Ethics by posting such information on our Internet website at: progressive.com/governance.

Shareholder-Proposed Candidate Procedures. There were no material changes during 2017 to Progressive’s procedures by which shareholder can recommend a director candidate during 2017. The description of those procedures is incorporated by reference from the “To Recommend a Candidate for our Board of Directors” section of the Proxy Statement (which can be found in “Procedures for Recommendations and Nominations of Directors and Shareholder Proposals”).

Audit Committee. Incorporated by reference from the “Audit Committee” section of the Proxy Statement.

Financial Expert. Incorporated by reference from the “Audit Committee Financial Experts” section of the Proxy Statement (which can be found in “Audit Committee”).

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ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from the sections of the Proxy Statement entitled “Compensation Discussion and Analysis,” “Executive Compensation,” “Other Board of Directors Information: Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report,” and “Compensation Programs and Risk Management.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding ownership of Common Shares by certain beneficial owners and management is incorporated by reference from the section of the Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management.”

The following information is set forth with respect to our equity compensation plans at December 31, 2017.

EQUITY COMPENSATION PLAN INFORMATION
Plan Category	Number of Securities to be Issued upon  Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders:
Employee Plans:
2015 Equity Incentive Plan	2,943,743	1,2	NA	8,474,076	3
2010 Equity Incentive Plan	2,915,105	1,2	NA	4,112,172	3
Subtotal Employee Plans	5,858,848		NA	12,586,248
Director Plans:
2017 Directors Equity Incentive Plan	53,284		NA	446,716
Equity compensation plans not approved by security holders:
None
Total	5,912,132		NA	13,032,964

NA = Not applicable because restricted stock unit awards do not have an exercise price.

¹ Reflects restricted stock unit awards, including reinvested dividend equivalents, under which, upon vesting, the holder has the right to receive common shares on a one-to-one basis.

² Performance-based restricted stock unit awards, including dividend equivalents, if applicable, of 550,923 and 962,856 units, are included under the 2010 Equity Incentive Plan and the 2015 Equity Incentive Plan, respectively, at their target value. Maximum potential payout for the performance awards outstanding under the 2010 Equity Incentive Plan and the 2015 Equity Incentive Plan were 1,346,404 and 2,246,393, respectively. For a description of the performance-based awards, including the performance measurement and vesting ranges, see Note 9 — Employee Benefit Plans in our Annual Report.

³ Gives effect to reservation of common shares subject to performance-based awards at maximum potential payout.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference from the section of the Proxy Statement entitled “Other Board of Directors Information,” subsections “Board of Directors Independence Determinations” and “Transactions with Related Parties.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference from the section of the Proxy Statement entitled “Other Independent Registered Public Accounting Firm Information.”

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Listing of Financial Statements

The following consolidated financial statements are included in our Annual Report and are incorporated by reference in Item 8:

• Report of Independent Registered Public Accounting Firm

• Consolidated Statements of Comprehensive Income - For the Years Ended December 31, 2017, 2016, and 2015

• Consolidated Balance Sheets - December 31, 2017 and 2016

• Consolidated Statements of Changes in Shareholders’ Equity - For the Years Ended December 31, 2017, 2016, and 2015

• Consolidated Statements of Cash Flows - For the Years Ended December 31, 2017, 2016, and 2015

• Notes to Consolidated Financial Statements

• Supplemental Information (Unaudited)

(a)(2) Listing of Financial Statement Schedules

The following financial statement schedules, Report of Independent Registered Public Accounting Firm and Consent of Independent Registered Public Accounting Firm are included in Item 15(c):

• Schedule I - Summary of Investments - Other than Investments in Related Parties

• Schedule II - Condensed Financial Information of Registrant

• Schedule III - Supplementary Insurance Information

• Schedule IV - Reinsurance

• Report of Independent Registered Public Accounting Firm on Financial Statement Schedules

• No other schedules are required to be filed herewith pursuant to Article 7 of Regulation S-X.

(a)(3) Listing of Exhibits

See exhibit index contained herein beginning at page 42. Management contracts and compensatory plans and arrangements are identified in the Exhibit Index as Exhibit Nos. 10.2 through 10.109.

(b) Exhibits

The exhibits in response to this portion of Item 15 are submitted concurrently with this report.

(c) Financial Statement Schedules

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SCHEDULE I — SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

	December 31, 2017
Type of Investment	Cost		Fair Value		Amount At Which Shown In The Balance Sheet
Available-for-sale
Fixed maturities:
Bonds:
United States Government and government agencies and authorities	$	6,688.8	$	6,645.9	$	6,645.9
States, municipalities, and political subdivisions	2,285.6		2,297.1		2,297.1
Public utilities	192.5		193.6		193.6
Corporate and other debt securities	4,804.7		4,804.1		4,804.1
Asset-backed securities	6,043.4		6,050.0		6,050.0
Redeemable preferred stocks	194.9		211.0		211.0
Total fixed maturities	20,209.9		20,201.7		20,201.7
Equity securities:
Common stocks:
Public utilities	106.8		177.5		177.5
Banks, trusts, and insurance companies	285.8		685.0		685.0
Industrial, miscellaneous, and all other	1,106.4		2,537.3		2,537.3
Nonredeemable preferred stocks	698.6		803.8		803.8
Total equity securities	2,197.6		4,203.6		4,203.6
Short-term investments	2,869.4		2,869.4		2,869.4
Total investments	$	25,276.9	$	27,274.7	$	27,274.7

Progressive did not have any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2017.

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SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2017		2016		2015
Revenues
Dividends from subsidiaries	$	867.3	$	375.5	$	852.5
Undistributed income (loss) from subsidiaries	866.3		741.9		500.0
Equity in net income of subsidiaries*	1,733.6		1,117.4		1,352.5
Intercompany investment income*	11.3		5.5		3.9
Gains (losses) on extinguishment of debt	0.2		1.6		(0.9		)
Total revenues	1,745.1		1,124.5		1,355.5
Expenses
Interest expense	151.1		140.4		136.1
Deferred compensation1	23.2		5.3		5.3
Other operating costs and expenses	4.6		4.2		5.4
Total expenses	178.9		149.9		146.8
Income before income taxes	1,566.2		974.6		1,208.7
Benefit for income taxes	26.0		56.4		58.9
Net income attributable to Progressive	1,592.2		1,031.0		1,267.6
Other comprehensive income (loss)	348.8		133.0		(222.7		)
Comprehensive income attributable to Progressive	$	1,941.0	$	1,164.0	$	1,044.9

* Eliminated in consolidation.

¹ See Note 4 – Employee Benefit Plans in these condensed financial statements.

See notes to condensed financial statements.

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SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CONDENSED BALANCE SHEETS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	December 31,
	2017		2016
Assets
Investment in affiliate	$	5.0	$	5.0
Investment in subsidiaries*	11,721.3		10,280.9
Receivable from investment subsidiary*	1,466.1		1,121.9
Intercompany receivable*	578.6		443.3
Net deferred income taxes	67.1		97.1
Other assets	167.3		137.3
Total assets	$	14,005.4	$	12,085.5
Liabilities and Shareholders’ Equity
Accounts payable, accrued expenses, and other liabilities	$	292.6	$	228.4
Dividend payable	655.1		395.4
Debt	3,269.2		3,020.9
Total liabilities	4,216.9		3,644.7
Redeemable noncontrolling interest (NCI)	503.7		483.7
Shareholders’ Equity
Common shares, $1.00 par value (authorized 900.0; issued 797.5 including treasury shares of 215.8 and 217.6)	581.7		579.9
Paid-in capital	1,389.2		1,303.4
Retained earnings	6,031.7		5,140.4
Total accumulated other comprehensive income attributable to Progressive	1,282.2		933.4
Total shareholders’ equity	9,284.8		7,957.1
Total liabilities, redeemable NCI, and shareholders’ equity	$	14,005.4	$	12,085.5

*Eliminated in consolidation.

See notes to condensed financial statements.

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SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CONDENSED STATEMENTS OF CASH FLOWS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2017			2016			2015
Cash Flows From Operating Activities:
Net income attributable to Progressive	$	1,592.2		$	1,031.0		$	1,267.6
Adjustments to reconcile net income attributable to Progressive to net cash provided by operating activities:
Undistributed (income) loss from subsidiaries	(866.3		)	(741.9		)	(500.0		)
Amortization of equity-based compensation	2.1			2.2			2.4
(Gains) losses on extinguishment of debt	(0.2		)	(1.6		)	0.9
Changes in:
Intercompany receivable	(71.3		)	(37.3		)	7.0
Accounts payable, accrued expenses, and other liabilities	53.6			24.2			(46.2		)
Income taxes	37.3			(5.0		)	12.3
Other, net	(22.6		)	(13.3		)	(3.1		)
Net cash provided by operating activities	724.8			258.3			740.9
Cash Flows From Investing Activities:
Additional investments in equity securities of consolidated subsidiaries	(86.7		)	(112.0		)	(40.2		)
Acquisition of an insurance company	(18.7		)	0			0
Acquisition of ARX	0			0			(890.1		)
(Paid to) received from investment subsidiary	(344.2		)	78.6			409.1
Net cash used in investing activities	(449.6		)	(33.4		)	(521.2		)
Cash Flows From Financing Activities:
Net proceeds from debt issuance	841.1			495.6			394.9
Reacquisitions of debt	(594.4		)	(18.2		)	(19.3		)
Dividends paid to shareholders	(395.4		)	(519.0		)	(403.6		)
Acquisition of treasury shares for restricted stock tax liabilities	(57.6		)	(25.1		)	(30.6		)
Acquisition of treasury shares acquired in open market	(4.9		)	(167.4		)	(177.9		)
Loan to ARX Holding Corp.1	(64.0		)	0			0
Tax benefit from vesting of equity-based compensation	0			9.2			16.8
Net cash used in financing activities	(275.2		)	(224.9		)	(219.7		)
Change in cash, cash equivalents, and restricted cash	0			0			0
Cash, cash equivalents, restricted cash - Beginning of year	0			0			0
Cash, cash equivalents, restricted cash - End of year	$	0		$	0		$	0

¹ Eliminated in consolidation. See Note 4 – Debt in our Annual Report.

See notes to condensed financial statements.

- 34 -

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements of The Progressive Corporation (parent company) should be read in conjunction with the consolidated financial statements and notes thereto in the Annual Report to Shareholders of The Progressive Corporation and its subsidiaries, which is included as Exhibit 13 to this Form 10-K.

Note 1. Statements of Cash Flows — For the purpose of the Statements of Cash Flows, cash includes only bank demand deposits. The Progressive Corporation does not hold any cash but has unrestricted access to funds maintained in a non-insurance, investment subsidiary to meet its holding company obligations; at year-end 2017 and 2016, $1.6 billion and $1.3 billion, respectively, of marketable securities were available in this subsidiary. Non-cash activity includes declared but unpaid dividends, the transfer of the previous 5% ownership interest in ARX to The Progressive Corporation from an investment subsidiary in 2015, and the change in redemption value of the redeemable NCI. For the years ended December 31, The Progressive Corporation paid the following:

(millions)	2017		2016		2015
Income taxes	$	669.7	$	450.2	$	625.0
Interest	142.2		134.2		128.2

Note 2. Income Taxes — The Progressive Corporation files a consolidated federal income tax return with all eligible subsidiaries and acts as an agent for the consolidated tax group when making payments to the Internal Revenue Service. Since The Progressive Corporation owns less than 80% of ARX’s outstanding stock, ARX and its subsidiaries are not eligible to file on a consolidated basis with The Progressive Corporation. The Progressive Corporation consolidated group’s net income taxes currently payable/recoverable are included in other liabilities/assets, respectively, in the accompanying Condensed Balance Sheets based on the balance at the end of the year. The Progressive Corporation and its eligible subsidiaries have adopted, pursuant to a written agreement, a method of allocating consolidated federal income taxes. Amounts allocated to the eligible subsidiaries under the written agreement are included in “Intercompany Receivable” in the accompanying Condensed Balance Sheets.

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. One of the provisions of the Tax Act reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Pursuant to current accounting guidance, all deferred tax assets and liabilities were revalued to recognize the tax rate that is expected to apply when the tax effects are ultimately recognized in future periods. The impact of revaluing the deferred tax assets and liabilities from 35% to 21% was a net increase to The Progressive Corporation’s income tax expense of $44.7 million.

Note 3. Debt — The information relating to debt is incorporated by reference from Note 4 – Debt in our Annual Report.

Note 4. Employee Benefit Plans — The information relating to incentive compensation plans and deferred compensation is incorporated by reference from Note 9 – Employee Benefit Plans in our Annual Report.

Note 5. Other Comprehensive Income — On the condensed Statements of Comprehensive Income, other comprehensive income represents activity of the subsidiaries of The Progressive Corporation and includes net unrealized gains (losses) on securities, net unrealized gains on forecasted transactions, and foreign currency translation adjustments.

Note 6. Dividends — The information relating to our dividend policy is incorporated by reference from Note 14 – Dividends in our Annual Report.

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SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

Segment	Deferred policy acquisition costs1		Future policy benefits, losses, claims, and loss expenses1		Unearned premiums1		Other policy claims and benefits payable1		Premium revenue			Net investment income1,2		Benefits, claims, losses, and settlement expenses			Amortization of deferred policy acquisition costs		Other operating expenses		Net premiums written
Year ended December 31, 2017:
Personal Lines									$	21,947.2				$	16,141.4		$	1,656.4	$	2,954.8	$	22,928.4
Commercial Lines									2,793.9					1,966.4			309.3		335.3		3,112.7
Property									988.8					700.2			159.2		190.4		1,091.0
Other indemnity									0					0			0		0.2		0
Total	$	780.5	$	13,086.9	$	8,903.5	$	0	$	25,729.9		$	539.2	$	18,808.0		$	2,124.9	$	3,480.7	$	27,132.1
Year ended December 31, 2016:
Personal Lines									$	19,188.2				$	14,591.1		$	1,446.6	$	2,549.2	$	19,819.5
Commercial Lines									2,421.3					1,741.0			266.7		285.4		2,598.3
Property									864.5					546.1			150.5		137.2		935.7
Other indemnity									0					1.4			0		0.2		0
Total	$	651.2	$	11,368.0	$	7,468.3	$	0	$	22,474.0		$	456.5	$	16,879.6		$	1,863.8	$	2,972.0	$	23,353.5
Year ended December 31, 2015:
Personal Lines									$	17,294.5				$	12,748.7		$	1,331.3	$	2,379.9	$	17,703.6
Commercial Lines									1,995.9					1,244.5			219.4		232.6		2,171.2
Property									609.1					349.0			101.1		98.8		689.6
Other indemnity									(0.4		)			(0.2		)	0		0.8		(0.4		)
Total	$	564.1	$	10,039.0	$	6,621.8	$	0	$	19,899.1		$	431.8	$	14,342.0		$	1,651.8	$	2,712.1	$	20,564.0

¹ Progressive does not allocate assets, liabilities, or investment income to operating segments.

² Excludes total net realized gains (losses) on securities.

- 36 -

SCHEDULE IV — REINSURANCE

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

Year Ended:	Gross Amount		Ceded to Other Companies		Assumed From Other Companies		Net Amount		Percentage of Amount Assumed to Net
December 31, 2017
Premiums earned:
Property and liability insurance	$	26,425.7	$	695.8	$	0	$	25,729.9	0	%
December 31, 2016
Premiums earned:
Property and liability insurance	$	23,111.2	$	637.2	$	0	$	22,474.0	0	%
December 31, 2015
Premiums earned:
Property and liability insurance	$	20,454.1	$	555.0	$	0	$	19,899.1	0	%

- 37 -

Report of Independent Registered Public Accounting Firm on Financial Statement Schedules

To the Board of Directors and Shareholders of The Progressive Corporation

Our audits of the consolidated financial statements referred to in our report dated February 27, 2018 appearing in the 2017 Annual Report to Shareholders of The Progressive Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

February 27, 2018

- 38 -

ITEM 16. FORM 10-K SUMMARY

We have elected not to include a summary of information as permitted under this item.

- 39 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	THE PROGRESSIVE CORPORATION
February 27, 2018	By:	/s/ Susan Patricia Griffith
		Susan Patricia Griffith
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Susan Patricia Griffith	Director, President and Chief Executive Officer	February 27, 2018
Susan Patricia Griffith
/s/ John P. Sauerland	Vice President and Chief Financial Officer	February 27, 2018
John P. Sauerland
/s/ Jeffrey W. Basch	Vice President and Chief Accounting Officer	February 27, 2018
Jeffrey W. Basch
*	Chairman of the Board	February 27, 2018
Glenn M. Renwick
*	Lead Independent Director	February 27, 2018
Lawton W. Fitt
*	Director	February 27, 2018
Philip Bleser
*	Director	February 27, 2018
Stuart B. Burgdoerfer
*	Director	February 27, 2018
Charles A. Davis
*	Director	February 27, 2018
Roger N. Farah
*	Director	February 27, 2018
Jeffrey D. Kelly
*	Director	February 27, 2018
Patrick H. Nettles, Ph.D.
*	Director	February 27, 2018
Bradley T. Sheares, Ph.D.
*	Director	February 27, 2018
Barbara R. Snyder

- 40 -

* Daniel P. Mascaro, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons.

By:	/s/ Daniel P. Mascaro	February 27, 2018
	Daniel P. Mascaro
	Attorney-in-fact

- 41 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
3(i)	3.1	Amended Articles of Incorporation of The Progressive Corporation (as amended May 16, 2016)	Quarterly Report on Form 10-Q (filed on August 3, 2016; Exhibit 3.1 therein)
3(ii)	3.2	Code of Regulations of The Progressive Corporation (as amended August 3, 2017)	Quarterly Report on Form 10-Q (filed on November 2, 2017; Exhibit 3 therein)
4	4.1	Form of 3.75% Senior Notes due 2021, issued in the aggregate principal amount of $500,000,000 under the 1993 Senior Indenture (see exhibit 4.8 below), as amended and supplemented	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 4.1 therein)
4	4.2	Form of 6 5/8% Senior Notes due 2029, issued in the aggregate principal amount of $300,000,000 under the 1993 Senior Indenture, as amended and supplemented	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 4.2 therein)
4	4.3	Form of 6.25% Senior Notes due 2032, issued in the aggregate principal amount of $400,000,000 under the 1993 Senior Indenture, as amended and supplemented	Filed herewith
4	4.4	Form of 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067, issued in the original aggregate principal amount of $1,000,000,000 under the Junior Subordinated Indenture (see exhibit 4.17 below), as amended and supplemented	Filed herewith
4	4.5	Form of 4.35% Senior Notes due 2044, issued in the aggregate principal amount of $350,000,000 under the 1993 Senior Indenture, as amended and supplemented	Current Report on Form 8-K (filed on April 25, 2014; Exhibit 4.2 therein)
4	4.6	Form of 3.70% Senior Notes due 2045, issued in the aggregate principal amount of $400,000,000 under the 1993 Senior Indenture, as amended and supplemented	Current Report on Form 8-K (filed on January 26, 2015; Exhibit 4.2 therein)
4	4.7	Form of 2.45% Senior Notes due 2027, issued in the aggregate principal amount of $500,000,000 under the 1993 Senior Indenture, as amended and supplemented	Current Report on Form 8-K (filed on August 25, 2016; Exhibit 4.2 therein)
4	4.8	Form 4.125% Senior Note Due 2047, issued in the aggregate principal amount of $ 850,000,000 under the 1993 Senior Indenture, as amended and supplemented	Current Report on Form 8-K (filed on April 6, 2017; Exhibit 4.2 therein)
4	4.9	Indenture dated as of September 15, 1993 between The Progressive Corporation and State Street Bank and Trust Company (successor in interest to The First National Bank of Boston), as Trustee (“1993 Senior Indenture”) (including table of contents and cross-reference sheet)	Registration Statement No. 333-48935 (filed on March 31, 1998; Exhibit 4.1 therein)

- 42 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
4	4.10	First Supplemental Indenture dated March 15, 1996 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company	Registration Statement No. 333-01745 (filed on March 15, 1996; Exhibit 4.2 therein)
4	4.11	Second Supplemental Indenture dated February 26, 1999 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company, as Trustee	Registration Statement No. 333-100674 (filed on October 22, 2002; Exhibit 4.3 therein)
4	4.12	Fourth Supplemental Indenture dated November 21, 2002 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company, as Trustee	Registration Statement No. 333-143824 (filed on June 18, 2007; Exhibit 4.5 therein)
4	4.13	Fifth Supplemental Indenture dated June 13, 2007 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, evidencing the designation of U.S. Bank National Association as successor Trustee under the 1993 Senior Indenture	Registration Statement No. 333-143824 (filed on June 18, 2007; Exhibit 4.6 therein)
4	4.14	Sixth Supplemental Indenture dated August 22, 2011 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, as Trustee	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 4.13 therein)
4	4.15	Seventh Supplemental Indenture dated April 25, 2014 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, as Trustee	Current Report on Form 8-K (filed on April 25, 2014; Exhibit 4.1 therein)
4	4.16	Eighth Supplemental Indenture dated January 26, 2015 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, as Trustee	Current Report on Form 8-K (filed on January 26, 2015; Exhibit 4.1 therein)
4	4.17	Ninth Supplemental Indenture dated August 25, 2016 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, as Trustee	Current Report on Form 8-K (filed on August 25, 2016; Exhibit 4.1 therein)
4	4.18	Tenth Supplemental Indenture dated April 6, 2017 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, as Trustee	Current Report on Form 8-K (filed on April 6, 2017; Exhibit 4.1 therein)
4	4.19	Junior Subordinated Indenture dated as of June 21, 2007 between The Progressive Corporation and The Bank of New York Trust Company, N.A., Trustee (“Junior Subordinated Indenture”) (including table of contents and cross-reference sheet)	Filed herewith

- 43 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
4	4.20	First Supplemental Indenture dated June 21, 2007 to the Junior Subordinated Indenture between The Progressive Corporation and The Bank of New York Trust Company, N.A., as Trustee	Filed herewith
4	4.21	Second Supplemental Indenture dated September 2, 2011, to the Junior Subordinated Indenture dated June 21, 2007, between The Progressive Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 4.19 therein)
4	4.22	Replacement Capital Covenant dated June 21, 2007, of The Progressive Corporation	Filed herewith
4	4.23	Termination of Replacement Capital Covenant, dated June 23, 2010	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 4.19 therein)
4	4.24	Form of Confirmation Letter-Discretionary Line of Credit from PNC Bank, National Association to The Progressive Corporation	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 4.1 therein)
4	4.25	Form of Discretionary Line of Credit Note dated from The Progressive Corporation to PNC Bank, National Association	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 4.2 therein)
4	4.26	The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
10(i)	10.1	Stock Purchase Agreement, dated as of December 15, 2014, among ARX Holding Corp., The Progressive Corporation and the selling shareholders identified therein, including Exhibit H, the form of Stockholders' Agreement to be executed at closing	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.1 therein)
10(iii)	10.2	The Progressive Corporation 2015 Gainsharing Plan	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.8 therein)
10(iii)	10.3	The Progressive Corporation 2016 Gainsharing Plan	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.5 therein)
10(iii)	10.4	The Progressive Corporation 2017 Gainsharing Plan	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.5 therein)
10(iii)	10.5	The Progressive Corporation 2018 Gainsharing Plan	Filed herewith
10(iii)	10.6	ARX Holding Corp 2017 Gainsharing Plan	Current Report on Form 8-K (filed on February 21, 2017; Exhibit 10.4 therein)
10(iii)	10.7	The Progressive Corporation 2007 Executive Bonus Plan	Filed herewith

- 44 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.8	The Progressive Corporation 2017 Executive Annual Incentive Plan	Current Report on Form 8-K (filed on February 21, 2017; Exhibit 10.2 therein)
10(iii)	10.9	The Progressive Corporation 2017 Executive Anual Incentive Plan Award Agreement (2018 Fiscal Year )	Filed Herewith
10(iii)	10.10	Form of Award Agreement under The Progressive Corporation 2017 Executive Annual Incentive Plan (2017 Fiscal Year)	Current Report on Form 8-K (filed on February 21, 2017; Exhibit 10.3 therein)
10(iii)	10.11	The Progressive Corporation 2003 Incentive Plan	Registration Statement No. 333-104646 (filed on April 21, 2003; Exhibit 4(a) therein)
10(iii)	10.12	First Amendment to The Progressive Corporation 2003 Incentive Plan	Filed herewith
10(iii)	10.13	Second Amendment to The Progressive Corporation 2003 Incentive Plan	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.12 therein)
10(iii)	10.14	Third Amendment to The Progressive Corporation 2003 Incentive Plan	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.10 therein)
10(iii)	10.15	Fourth Amendment to The Progressive Corporation 2003 Incentive Plan	Filed herewith
10(iii)	10.16	Form of The Progressive Corporation 2003 Incentive Plan Restricted Stock Award Agreement (Performance-Based Award) (for 2004 through February 2007)	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.16 therein)
10(iii)	10.17	Form of The Progressive Corporation 2003 Incentive Plan Restricted Stock Award Agreement (Performance-Based Award) (for March 2007 through February 2009)	Filed herewith
10(iii)	10.18	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2003 Incentive Plan	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.14 therein)
10(iii)	10.19	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards under The Progressive Corporation 2003 Incentive Plan	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.15 therein)
10(iii)	10.20	The Progressive Corporation 2010 Equity Incentive Plan	Registration Statement No. 333-172663 (filed on March 8, 2011; Exhibit 4.1 therein)
10(iii)	10.21	First Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Registration Statement No. 333-172663 (filed on March 8, 2011; Exhibit 4.2 therein)
10(iii)	10.22	Second Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Registration Statement No. 333-172663 (filed on March 8, 2011; Exhibit 4.3 therein)
10(iii)	10.23	Third Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Registration Statement No. 333-172663 (filed on March 8, 2011; Exhibit 4.4 therein)
10(iii)	10.24	Fourth Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.23 therein)
10(iii)	10.25	Fifth Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Filed herewith

- 45 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.26	Sixth Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Filed herewith
10(iii)	10.27	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2010 Equity Incentive Plan (for 2011 and 2012)	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.26 therein)
10(iii)	10.28	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2010 Equity Incentive Plan (for 2013)	Current Report on Form 8-K (filed on March 22, 2013; Exhibit 10.1 therein)
10(iii)	10.29	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2010 Equity Incentive Plan (for 2014)	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.30 therein)
10(iii)	10.30	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2010 Equity Incentive Plan (for 2015)	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 10.1 therein)
10(iii)	10.31	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Insurance Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2011 and 2012)	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.30 therein)
10(iii)	10.32	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Investment Performance) under The Progressive Corporation 2010 Equity Incentive Plan (for 2012)	Filed herewith
10(iii)	10.33	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Insurance Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2013)	Current Report on Form 8-K (filed on March 22, 2013; Exhibit 10.2 therein)
10(iii)	10.34	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Investment Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2013)	Current Report on Form 8-K (filed on March 22, 2013; Exhibit 10.3 therein)
10(iii)	10.35	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Insurance Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2014)	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.35 therein)
10(iii)	10.36	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Investment Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2014)	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.36 therein)
10(iii)	10.37	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Insurance Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2015)	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 10.2 therein)

- 46 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.38	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Investment Results) under The Progressive Corporation 2010 Equity Incentive Plan (for 2015)	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 10.3 therein)
10(iii)	10.39	The Progressive Corporation 2015 Equity Incentive Plan	Current Report on Form 8-K (filed on February 4, 2015; Exhibit 10.1 therein)
10(iii)	10.40	Restricted Stock Unit Award Agreement (2015 Performance-Based Award - Special Award) under the Progressive Corporation 2015 Equity Incentive Plan	Current Report on Form 8-K (filed on August 14, 2015; Exhibit 10.1 therein)
10(iii)	10.41	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2015 Equity Incentive Plan (for 2016)	Quarterly Report on Form 10-Q (filed on May 5, 2016 ; Exhibit 10.1)
10(iii)	10.42	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Performance versus Market) under The Progressive Corporation 2015 Equity Incentive Plan (for 2016)	Quarterly Report on Form 10-Q (filed on May 5, 2016; Exhibit 10.2 therein)
10(iii)	10.43	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Investment Results) under The Progressive Corporation 2015 Equity Incentive Plan (for 2016)	Quarterly Report on Form 10-Q (filed on May 5, 2016; Exhibit 10.3 therein)
10(iii)	10.44	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards (Robinsons) under The Progressive Corporation 2015 Equity Incentive Plan (for 2016)	Quarterly Report on Form 10-Q (filed on May 5, 2016; Exhibit 10.4 therein)
10(iii)	10.45	Employment Agreement, dated March 30, 2004, between ARX Holding Corp. and John F. Auer	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.37 therein)
10(iii)	10.46	The Progressive Corporation 2003 Directors Equity Incentive Plan	Registration Statement No. 333-104653 (filed on April 21, 2003; Exhibit 4(a) therein)
10(iii)	10.47	Amendment No. 1 to The Progressive Corporation 2003 Directors Equity Incentive Plan	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.39 therein)
10(iii)	10.48	Amendment No. 2 to The Progressive Corporation 2003 Directors Equity Incentive Plan	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.47 therein)
10(iii)	10.49	Amendment No. 3 to The Progressive Corporation 2003 Directors Equity Incentive Plan	Filed herewith
10(iii)	10.50	Form of Restricted Stock Award Agreement under The Progressive Corporation 2003 Directors Equity Incentive Plan (for 2004 and thereafter)	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.42 therein)
10(iii)	10.51	Form of Restricted Stock Award Agreement under The Progressive Corporation 2017 Directors Equity Incentive Plan (for 2017)	Current Report on Form 10-Q (filed on August 2, 2017; Exhibit 10.2 therein)
10(iii)	10.52	The Progressive Corporation 2017 Directors Equity Incentive Plan	Current Report on Form 8-K (filed on February 21, 2017; Exhibit 10.1 therein)

- 47 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.53	Form of Restricted Stock Unit Award Agreement for 2017 Time-Based Awards under The Progressive Corporation 2015 Equity Incentive Plan	Current Report on Form 8-K (filed on March 27, 2017; Exhibit 10.1 therein)
10(iii)	10.54	Form of Restricted Stock Unit Award Agreement for 2017 Performance-Based Awards (Performance versus Market) under The Progressive Corporation 2015 Incentive Plan	Current Report on Form 8-K (filed on March 27, 2017; Exhibit 10.2 therein)
10(iii)	10.55	Form of Restricted Stock Unit Award Agreement for 2017 Performance-Based Awards (Investment Results) under The Progressive Corporation 2015 Equity Incentive Plan	Current Report on Form 8-K (filed on March 27, 2017; Exhibit 10.3 therein)
10(iii)	10.56	Form of Restricted Stock Unit Award Agreement for 2017 Performance-Based Awards (Robinsons) under The Progressive Corporation 2015 Equity Incentive Plan	Current Report on Form 8-K (filed on March 27, 2017; Exhibit 10.4 therein)
10(iii)	10.57	The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.3 therein)
10(iii)	10.58	First Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.4 therein)
10(iii)	10.59	Second Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.5 therein)
10(iii)	10.60	Third Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.6 therein)
10(iii)	10.61	Fourth Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.7 therein)
10(iii)	10.62	The Progressive Corporation Executive Deferred Compensation Plan (2008 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.8 therein)
10(iii)	10.63	First Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2008 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.9 therein)
10(iii)	10.64	The Progressive Corporation Executive Deferred Compensation Plan (2010 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.10 therein)
10(iii)	10.65	First Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2010 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.11 therein)
10(iii)	10.66	Second Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2010 Amendment and Restatement)	Current Report on Form 8-K (filed on October 14, 2014; Exhibit 10 therein)

- 48 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.67	Third Amendment to the Progressive Corporation Executive Deferred Compensation Plan (2010 Amendment and Restatement)	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.53 therein)
10(iii)	10.68	Fourth Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2010 Amendment and Restatement)	Quarterly Report on Form 10-Q (filed on November 2, 2017; Exhibit 10 therein)
10(iii)	10.69	Form of The Progressive Corporation Executive Deferred Compensation Plan Deferral Agreement (for 2005 through 2009)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.12 therein)
10(iii)	10.70	Form of The Progressive Corporation Executive Deferred Compensation Plan Gainsharing/Bonus Deferral Agreement (for 2010 and thereafter)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.13 therein)
10(iii)	10.71	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Deferral Agreement (for 2004)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.14 therein)
10(iii)	10.72	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Deferral Agreement (for 2005)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.15 therein)
10(iii)	10.73	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Deferral Agreement (for 2006 through 2009)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.16 therein)
10(iii)	10.74	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Unit Deferral Agreement (for 2010 through 2014)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.17 therein)
10(iii)	10.75	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2003)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.18 therein)
10(iii)	10.76	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2004)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.19 therein)
10(iii)	10.77	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2005)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.20 therein)
10(iii)	10.78	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2006 through 2009)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.21 therein)
10(iii)	10.79	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Unit Deferral Agreement (for 2010 and thereafter)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.22 therein)

- 49 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.80	The Progressive Corporation Executive Deferred Compensation Trust (November 8, 2002 Amendment and Restatement)	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.23 therein)
10(iii)	10.81	First Amendment to Trust Agreement between Fidelity Management Trust Company and Progressive	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.24 therein)
10(iii)	10.82	Second Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.25 therein)
10(iii)	10.83	Third Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.26 therein)
10(iii)	10.84	Fourth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.27 therein)
10(iii)	10.85	Fifth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.28 therein)
10(iii)	10.86	Sixth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.29 therein)
10(iii)	10.87	Seventh Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Registration Statement No. 333-185704 (filed on December 27, 2012; Exhibit 4.30 therein)
10(iii)	10.88	Eighth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Annual Report on Form 10-K (filed on February 26, 2014; Exhibit 10.66 therein)
10(iii)	10.89	Ninth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 10.5 therein)
10(iii)	10.90	Tenth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Quarterly Report on Form 10-Q (filed on May 11, 2015; Exhibit 10.6 therein)
10(iii)	10.91	The Progressive Corporation Directors Deferral Plan (2008 Amendment and Restatement)	Filed herewith
10(iii)	10.92	The Progressive Corporation Directors Deferral Plan (2015 Amendment and Restatement)	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.77 therein)
10(iii)	10.93	The Progressive Corporation Directors Restricted Stock Deferral Plan	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.76 therein)
10(iii)	10.94	The Progressive Corporation Directors Restricted Stock Deferral Plan (2008 Amendment and Restatement)	Filed herewith
10(iii)	10.95	First Amendment to The Progressive Corporation Directors Restricted Stock Deferral Plan (2008 Amendment and Restatement)	Annual Report on Form 10-K (filed on February 26, 2014; Exhibit 10.69 therein)
10(iii)	10.96	Form of The Progressive Corporation Directors Restricted Stock Deferral Plan Deferral Agreement	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.76 therein)
10(iii)	10.97	Director Compensation Schedule for 2015 - 2016 Term	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.84 therein)

- 50 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)	10.98	Director Compensation Schedule for 2016 - 2017 Term	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.92 therein)
10(iii)	10.99	Director Compensation Schedule for 2017 - 2018 Term	Filed herewith
10(iii)	10.100	The Progressive Corporation Executive Separation Allowance Plan (2017 Amendment and Restatement)	Current Report on Form 8-K (filed on May 16, 2017; Exhibit 10 therein)
10(iii)	10.101	The Progressive Corporation Executive Separation Allowance Plan (2015 Amendment and Restatement)	Current Report on Form 8-K (filed on August 11, 2015; Exhibit 10.1 therein)
10(iii)	10.102	First Amendment to the Progressive Corporation Executive Separation Allowance Plan (2015 Amendment and Restatement)	Current Report on Form 8-K (filed on February 2, 2016; Exhibit 10 therein)
10(iii)	10.103	Second Amendment to the Progressive Corporation Executive Separation Allowance Plan (2015 Amendment and Restatement)	Quarterly Report on Form 10-Q (filed on August 3, 2016; Exhibit 10.1 therein)
10(iii)	10.104	Third Amendment to the Progressive Corporation Executive Separation Allowance Plan (2015 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.96 therein)
10(iii)	10.105	2014 Progressive Capital Management Bonus Plan	Annual Report on Form 10-K (filed on February 26, 2014; Exhibit 10.82 therein)
10(iii)	10.106	2015 Progressive Capital Management Bonus Plan	Annual Report on Form 10-K (filed on March 2, 2015; Exhibit 10.90 therein)
10(iii)	10.107	2016 Progressive Capital Management Bonus Plan	Annual Report on Form 10-K (filed on February 29, 2016; Exhibit 10.90 therein)
10(iii)	10.108	2017 Progressive Capital Management Annual Incentive Plan	Annual Report on Form 10-K (filed on March 1, 2017; Exhibit 10.100 therein)
10(iii)	10.109	2018 Progressive Capital Management Annual Incentive Plan	Filed herewith
11	11	Computation of Earnings Per Share	Filed herewith
13	13	The Progressive Corporation 2017 Annual Report to Shareholders	Filed herewith
21	21	Subsidiaries of The Progressive Corporation	Filed herewith
23	23	Consent of Independent Registered Public Accounting Firm	Filed herewith
24	24	Powers of Attorney	Filed herewith
31	31.1	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer, Susan Patricia Griffith	Filed herewith
31	31.2	Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer, John P. Sauerland	Filed herewith
32	32.1	Section 1350 Certification of the Principal Executive Officer, Susan Patricia Griffith	Furnished herewith
32	32.2	Section 1350 Certification of the Principal Financial Officer, John P. Sauerland	Furnished herewith

- 51 -

EXHIBIT INDEX
Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.	Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
99	99	Letter to Shareholders from Susan Patricia Griffith, President and Chief Executive Officer	Furnished herewith
101	101.INS	XBRL Instance Document	Filed herewith
101	101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101	101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101	101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

- 52 -

EX-4.3

Exhibit 4.3

(Face of Security)

Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”) to the Issuer or its agent for registration of transfer, exchange or payment, and such certificate is registered in the name of Cede & Co., or in such other name as requested by an authorized representative of DTC, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

REGISTERED NO. R-001 $400,000,000

CUSIP No. 743315 AL 7

THE PROGRESSIVE CORPORATION

6.25% SENIOR NOTE DUE 2032

THE PROGRESSIVE CORPORATION, an Ohio corporation (the “Issuer”), for value received, hereby promises to pay to CEDE & Co., c/o The Depository Trust Company, 55 Water Street, New York, New York 10041 or registered assigns, at the office or agency of the Issuer at the office of the Trustee in Boston, Massachusetts, the principal sum of FOUR HUNDRED MILLION DOLLARS ($400,000,000) on December 1, 2032, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest semiannually on June 1 and December 1 of each year, commencing on June 1, 2003, on said principal sum at said office or agency, in like coin or currency, at the rate per annum specified in the title of this Note, from the June 1 or the December 1, as the case may be, next preceding the date of this Note to which interest has been paid, unless the date hereof is a date to which interest has been paid, in which case from the date of this Note, or unless no interest has been paid on the Notes, in which case from November 21, 2002, until payment of said principal sum has been made or duly provided for; provided, that payment of interest may be made at the option of the Issuer by check mailed to the address of the person entitled thereto as such address shall appear on the Security Register. The interest so payable on any June 1 or December 1 will, subject to certain exceptions provided in the Indenture referred to on the reverse hereof, be paid to the person in whose name this Note is registered at the close of business on May 15 or November 15, as the case may be, next preceding such June 1 or December 1.

Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof.

IN WITNESS WHEREOF, The Progressive Corporation has caused this instrument to be signed by its duly authorized officers and has caused its corporate seal to be affixed hereto or imprinted hereon.

	THE PROGRESSIVE CORPORATION
[CORPORATE SEAL]		By:
		Stephen D. Peterson
		Treasurer

Attest:
	Charles E. Jarrett
	Secretary

Dated: November 21, 2002

	TRUSTEE’S CERTIFICATE OF AUTHENTICATION
	This is one of the Securities, of the series designated herein, referred to in the within-mentioned Indenture.
		STATE STREET BANK AND TRUST
		COMPANY, as Trustee
By:		Authorized Signatory

(Back of Security)

THE PROGRESSIVE CORPORATION

6.25% SENIOR NOTE DUE 2032

This Note is one of a duly authorized issue of debentures, notes, bonds or other evidences of indebtedness of the Issuer (hereinafter called the “Securities”) of the series hereinafter specified, all issued or to be issued under and pursuant to an indenture dated as of September 15, 1993, as heretofore supplemented and amended (herein called the “Indenture”), between the Issuer and State Street Bank and Trust Company, as Trustee (herein called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the Holders of the Securities. The Securities may be issued in one or more series, which different series may be issued in various aggregate principal amounts, may mature at different times, may bear interest (if any) at different rates, may be subject to different redemption provisions (if any), may be subject to different sinking, purchase or analogous funds (if any) and may otherwise vary as in the Indenture provided. This Note is one of a series designated as the 6.25% Senior Notes Due 2032 of the Issuer, limited in initial aggregate principal amount to $400,000,000, subject to the right of the Issuer to reopen such series.

In case an Event of Default, as defined in the Indenture, with respect to the 6.25% Senior Notes Due 2032 shall have occurred and be continuing, the principal hereof may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture contains provisions permitting the Issuer and the Trustee, with the consent of the Holders of not less than 66-2/3% in aggregate principal amount of the Securities at the time Outstanding (as defined in the Indenture) of all series to be affected (voting as one class), evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities of each such series; provided, however, that no such supplemental indenture shall (i) extend the final maturity of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of any interest thereon, or impair or affect the rights of any Holder to institute suit for the payment thereof, without the consent of the Holder of each Security so affected or (ii) reduce the aforesaid percentage of Securities, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holder of each Security so affected. It is also provided in the Indenture that, with respect to certain defaults or Events of Default regarding the Securities of any series, prior to any declaration accelerating the maturity of such Securities, the Holders of a majority in aggregate principal amount Outstanding of the Securities of such series may on behalf of the Holders of all the Securities of such series waive any such past default or Event of Default and its consequences. The preceding sentence shall not, however, apply to a default in the payment of the principal of or premium, if any, or interest on any of the Securities. Any such consent or waiver by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and any Note which may be issued in exchange or substitution herefor, irrespective of whether or not any notation thereof is made upon this Note or such other Note.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note in the manner, at the respective times, at the rate and in the coin or currency herein prescribed.

The Notes are issuable in registered form without coupons in denominations of $1,000 and any integral multiple of $1,000 at the office or agency of the Issuer at the office of the Trustee in Boston, Massachusetts, and in the manner and subject to the limitations provided in the Indenture, but without the payment of any service charge. Notes may be exchanged for a like aggregate principal amount of Notes of other authorized denominations.

The Notes of the series designated as the 6.25% Senior Notes due 2032 are subject to redemption upon not more than 60 or less than 30 days’ notice by mail, in whole at any time or in part from time to time at the option of the Issuer on any date (a “Redemption Date”), at a redemption price equal to the accrued and unpaid interest on the principal amount being redeemed to the redemption date plus the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the Remaining Scheduled Payments (as defined below) of the Notes to be redeemed, discounted to the redemption date, on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months), at rate equal to the Treasury Rate (defined below), plus 20 basis points.

‘‘Remaining Scheduled Payments’’ means, with respect to any redemption, the remaining scheduled payments of the principal and interest that would be due after the redemption date of a Note if such Note were not redeemed and were held until maturity. However, if the redemption date is not a scheduled interest payment date, the amount of the next succeeding scheduled interest payment on such Note will be reduced by the amount of interest accrued on such Note to such redemption date.

“Treasury Rate” means, with respect to any redemption, an annual rate equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue (as defined below), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for the redemption date. The semiannual equivalent yield to maturity will be computed as of the third business day immediately preceding the redemption date.

“Comparable Treasury Issue” means, with respect to any redemption, the United States Treasury security selected by Credit Suisse First Boston or an affiliate as having a maturity comparable to the remaining term of the Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Notes.

“Comparable Treasury Price” means, with respect to any redemption, the average of three Reference Treasury Dealer Quotations (as defined below) obtained by the Trustee for the redemption date.

“Reference Treasury Dealer” means, with respect to any redemption, Credit Suisse First Boston (so long as it continues to be a primary U.S. Government securities dealer) and any two other primary U.S. Government securities dealers chosen by the Issuer. If Credit Suisse First Boston ceases to be a primary U.S. Government securities dealer, the Issuer will appoint in its place another nationally recognized investment banking firm that is a primary U.S. Government securities dealer.

“Reference Treasury Dealer Quotation” means, with respect to any redemption, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by a Reference Treasury Dealer at 3:30 p.m., New York City time, on the third business day preceding the redemption date.

In the event of redemption of this Note in part only, a new Note or Notes of this series and of like tenor for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.

Upon due presentment for registration of transfer of this Note at the office or agency of the Issuer at the office of the Trustee in Boston, Massachusetts, a new Note or Notes of authorized denominations for an equal aggregate principal amount will be issued to the transferee in exchange therefor, subject to the limitations provided in the Indenture, without charge except for any tax or other governmental charge imposed in connection therewith.

The Issuer, the Trustee and any authorized agent of the Issuer or the Trustee may deem and treat the registered Holder hereof as the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment of, or on account of, the principal hereof and, subject to the provisions on the face hereof, interest hereon, and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by notice to the contrary.

No recourse under or upon any obligation, covenant or agreement of the Issuer in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, shareholder, officer or director, as such, of the Issuer or of any successor corporation, either directly or through the Issuer or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance hereof and as part of the consideration for the issue hereof.

Terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture.

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)

the within Note and all rights thereunder, hereby irrevocably constituting and appointing

attorney to transfer said Note on the books of the Issuer, with full power of substitution in the premises.

Dated
	NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular, without alteration or enlargement or any change whatever.

EX-4.4

Exhibit 4.4

FORM OF DEBENTURES

The Debentures are to be substantially in the following form and shall bear the following legend and shall include the Trustee’s certificate of authentication in the form required by Section 2.2 of the Indenture:

[If a Global Security:] [THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED

IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. ]

No. •	Principal Amount: $ •
Issue Date: •

THE PROGRESSIVE CORPORATION

6.70% FIXED-TO-FLOATING RATE

JUNIOR SUBORDINATED DEBENTURES DUE 2067

The Progressive Corporation, a corporation organized and existing under the laws of the State of Ohio (hereinafter called the “Issuer”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to • [ If Global Security: ] [ Cede & Co., ] or registered assigns, the principal sum of • dollars ($ • ) as may be revised from time to time on Schedule I hereto on June 15, 2037, or if such day is not a Business Day, the following Business Day (the “Scheduled Maturity Date”) or any subsequent Interest Payment Date (as defined in the First Supplemental Indenture) to the extent set forth in the First Supplemental Indenture. If that amount is not paid in full on the Scheduled Maturity Date or any subsequent Interest Payment Date, the remaining principal amount will be due and payable on the Final Maturity Date. The Final Maturity Date will be June 15, 2067, or if such day is not a Business Day, the following Business Day.

The Issuer further promises to pay interest on said principal sum from and including June 21, 2007, or from and including the most recent Interest Payment Date on which interest has been paid or duly provided for, until the principal thereof is paid or made available for payment semi-annually (subject to deferral as set forth herein) in arrears on June 15 and December 15 of each year, commencing on December 15, 2007 and ending on June 15, 2017, at the rate of 6.70% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months), and thereafter to pay interest on said outstanding principal sum quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, commencing on September 15, 2017 at a floating annual rate equal to Three-Month LIBOR (as defined in the First Supplemental Indenture) plus 2.0175% (computed on the basis of a 360-day year and the actual number of days elapsed in the 360-day year). Accrued interest that is not paid on the applicable Interest Payment Date, including interest deferred pursuant to Section 2.05 of the First Supplemental Indenture, will bear Additional Interest, to the extent permitted by law, at the interest rate in effect from time to time provided in Section 2.04(a) of the First Supplemental Indenture, from the relevant Interest Payment Date, compounded on each subsequent Interest Payment Date.

In the event that any Semi-Annual Interest Payment Date on which interest is payable on this Security is not a Business Day, then payment of the interest payable on such date will be made on the immediately succeeding day that is a Business Day (and, in the case of payments on or prior to June 15, 2017, without any interest or other payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. In the event that any Quarterly Interest Payment Date on which interest is payable on this Security is not a Business Day, then payment of the interest payable on such date shall be postponed to the immediately succeeding day that is a Business Day, provided that if such Business Day is in the immediately succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day, and interest will accrue to but excluding the date on which the interest is actually paid. A “Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) on or after June 15, 2017, a day that is not a London Banking Day. “London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date, as provided in the Indenture, will be paid to the Person in whose name this Security (or one or more predecessor securities) is registered at the close of business on the Regular Record Date for such interest installment, which shall be June 1 or December 1, as the case may be, immediately preceding such Interest Payment Date until June 15, 2017 (whether or not a Business Day), and shall be March 1, June 1, September 1 and December 1, as the case may be, immediately preceding the relevant Interest Payment Date after June 15, 2017. Any such interest installment not so punctually paid or duly provided for (other than interest deferred in accordance with the next paragraph) shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more predecessor securities) is registered at the close of business on a special record date for the payment of such Additional Interest on such date to be fixed by the Trustee (the “Special Record Date”), notice whereof shall be given to Holders of Securities of this series not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.

The Issuer shall have the right at any time or from time to time during the term of this Security to defer payment of interest on this Security for one or more consecutive Interest Periods (each a “Deferral Period”) that do not exceed ten years for the applicable Deferral Period, during which Deferral Periods the Issuer shall have the right, subject to Sections 2.05 and 2.06 of the First Supplemental Indenture, to make partial payments of interest on any Interest Payment Date, and at the end of which the Issuer shall pay all interest then accrued and unpaid; provided, however, that no Deferral Period shall extend beyond the Final Maturity Date or the earlier repayment or redemption in full of the Securities. Upon the termination of any Deferral Period and upon the payment of all deferred interest then due, the Issuer may elect to begin a new Deferral Period, subject to the above requirements. Except as provided in Section 2.06 of the First Supplemental Indenture, no interest shall be due and payable during a Deferral Period except at the end thereof.

So long as any Securities remain outstanding, if the Issuer has given notice of its election to defer interest payments on the Securities but the related Deferral Period has not yet commenced or a Deferral Period is continuing, the Issuer shall not, and shall not permit any Subsidiary to, (i) declare or pay any dividends or other distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Issuer’s capital stock, (ii) make any payment of principal of, or interest or premium, if any, on or repay, purchase or redeem any debt securities of the Issuer that rank upon the Issuer’s liquidation on a parity with this Security (including this Security, the “Pari Passu Securities”) or junior to this Security or (iii) make any guarantee payments regarding any guarantee issued by the Issuer of securities of any Subsidiary if the guarantee ranks upon the Issuer’s liquidation on a parity with or junior to this Security (other than (a) any purchase, redemption or other acquisition of shares of its capital stock by the Issuer in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more of its employees, officers, directors, consultants or independent contractors, (2) the satisfaction of the Issuer’s obligations pursuant to any contract entered into in the ordinary course of business prior to the beginning of the applicable Deferral Period, (3) a dividend reinvestment or shareholder purchase plan, or (4) the issuance of shares of the Issuer’s capital stock, or securities convertible into or exercisable for such shares, as consideration in an acquisition transaction entered into prior to the applicable Deferral Period, (b) any exchange, redemption or conversion of any class or series of the Issuer’s capital stock, or the capital stock of one of its Subsidiaries, for any other class or series of its capital stock, or of any class or series of its indebtedness for any class or series of its capital stock, (c) any purchase of fractional interests in shares of the Issuer’s capital stock pursuant to the conversion or exchange provisions of such shares or the securities being converted or exchanged, (d) any declaration of a dividend in connection with any shareholder rights plan, or the issuance of rights, stock or other property under any shareholder rights plan, or the redemption or purchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equally with or junior to such stock, (f) (1) any payment of current or deferred interest on Pari Passu Securities that is made pro rata to the amounts due on such Pari Passu Securities (including the this Security); provided that such payments are made in accordance with Section 2.06(c)(ii) of the First Supplemental Indenture to the extent it applies, and (2) any payments of principal or current or deferred interest on Pari Passu Securities that, if not made, would cause the Issuer to breach the terms of the instrument governing such Pari Passu Securities; or (g) any payment of principal in respect of Pari Passu Securities having the same scheduled maturity date as this Security, as required under a provision of such other Pari Passu Securities that is substantially the same as the provisions in Section 2.02(a) of the First Supplemental Indenture, and that is made on a pro rata basis among one or more series of Pari Passu Securities (including this Security) having such a provision. In addition, if any Deferral Period lasts longer than one year, the Issuer may not redeem or purchase any securities of the Issuer that on the Issuer’s bankruptcy or liquidation rank pari passu or junior to any of its Qualifying APM Securities the proceeds of which were used to settle deferred interest on the Debentures during the relevant Deferral Period until the first anniversary of the date on which all deferred interest on this Security has been paid. However, if the Issuer is involved in a Business Combination where immediately after its consummation more than 50% of the voting shares of the surviving entity of such Business Combination, or the Person to whom all or substantially all of the Issuer’s properties or assets are conveyed, transferred or leased in such Business Combination, is owned, directly or indirectly, by the shareholders of the other party to such Business Combination, then the immediately preceding sentence will not apply during the Deferral Period that is terminated on the next Interest Payment Date following the date of consummation of such Business Combination.

The Issuer shall give written notice of its election to commence or continue any Deferral Period to the Trustee and the Holders of all Securities then Outstanding at least one Business Day and not more than 60 Business Days before the next Interest Payment Date. Such notice shall be given to the Trustee and each Holder of this Security at such Holder’s address appearing in the Security Register by first-class mail, postage prepaid.

Payment of the principal of (and premium, if any) and interest on this Security will be made at the paying agency office or agency of the Issuer maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, at the option of the Issuer, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer in immediately available funds at such place and to such bank account number as may be designated by the Person entitled thereto as specified in the Securities Register in writing not less than ten days before the relevant Interest Payment Date.

The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such Holder’s behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee such Holder’s attorney-in-fact for any and all such purposes. Each Holder hereof, by such Holder’s acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions.

The Issuer and, by acceptance of this Security or a beneficial interest in this Security, each Holder hereof and any person acquiring a beneficial interest herein, agree that for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

[Corporate Seal]	THE PROGRESSIVE CORPORATION
Attest:	By:
Name:		Name:
Title:		Title:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

	THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
Dated:	By:
		Name: Title: Authorized Signatory

(FORM OF REVERSE OF DEBENTURES)

This Security is one of a duly authorized issue of securities of the Issuer (herein called the “Securities”), issued and to be issued in one or more series under the Junior Subordinated Indenture, dated as of June 21, 2007 (herein called the “Base Indenture”), between the Issuer and The Bank of New York Trust Company, N.A., as trustee (the “Trustee”), as amended and supplemented by the First Supplemental Indenture, dated as of June 21, 2007, between the Issuer and the Trustee (the “First Supplemental Indenture”, and together with the Base Indenture, the “Indenture”), to which Indenture and all other indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Issuer and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest, rank and in any other respect provided in the Indenture.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Securities shall be redeemable at the option of the Issuer in accordance with the terms of the Indenture. The Securities are redeemable in whole or in part at the option of the Issuer at any time after the date hereof. In the case of any redemption, the Redemption Price shall be equal to (1) in the case of any redemption on or after June 15, 2017, 100% of the principal amount of the Securities being redeemed plus accrued and unpaid interest to the Redemption Date or (2) in the case of any redemption prior to June 15, 2017, the greater of (i) 100% of the principal amount plus accrued and unpaid interest to the Redemption Date, and (ii) the Make-Whole Redemption Price. If the Securities are not redeemed in whole, the Issuer may not effect such redemption unless at least $25 million aggregate principal amount of the Securities, excluding any Securities held by the Issuer or any of its affiliates, remains outstanding after giving effect to such redemption.

Notwithstanding the foregoing, the Issuer may not redeem the Securities in part if the principal amount of the Securities has been accelerated pursuant to Section 5.1 of the Base Indenture (as amended by Section 2.07(a) of the First Supplemental Indenture) and such acceleration has not been rescinded. In addition, the Issuer may not redeem the Securities in part unless all accrued and unpaid interest, including deferred interest, has been paid in full on all Outstanding Securities for all Interest Periods terminating on or before the Redemption Date.

No sinking fund is provided for the Securities.

The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Issuer with certain conditions set forth in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the Issuer and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Issuer and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, (i) if an Event of Default (other than an Event of Default relating to certain insolvency events, as set forth in the Indenture) with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the entire principal amount and all accrued but unpaid interest of all the Securities to be due and payable immediately, by a notice in writing to the Issuer (and to the Trustee if given by Holders), and (ii) if an Event of Default relating to insolvency events as set forth in the Indenture occurs, the principal amount of the Securities shall automatically become due and payable; provided that in any such case the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article Eleven of the Indenture.

The Holder of this Security, by such Holder’s acceptance hereof, agrees that if a bankruptcy event of the Issuer shall occur prior to the redemption or repayment of such Securities, such Holder shall have no claim for, and thus no right to receive, any deferred interest pursuant to Section 2.05 that has not been paid pursuant to Sections 2.05 and 2.06 to the extent the amount of such interest exceeds the sum of (x) interest that relates to the earliest two years of the portion of the Deferral Period for which interest has not been paid and (y) an amount equal to such Holder’s pro rata share of the excess, if any, of the Preferred Shares Issuance Cap over the aggregate amount of net proceeds from the sale of Qualifying Non-Cumulative Preferred Shares and unconverted Mandatorily Convertible Preferred Shares that has been applied to fund deferred interest pursuant to the alternative payment mechanism set forth in Section 2.06; provided that each Holder is deemed to agree that to the extent the remaining claim exceeds the amount set forth in clause (x), the amount it receives in respect of such excess shall not exceed the amount it would have received had the claim for such excess ranked pari passu with the interests of the holders, if any, of Qualifying Non-Cumulative Preferred Shares.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Issuer maintained under Section 3.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee shall have the right to treat and shall treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary.

The Securities are issuable only in registered form without coupons in minimum denominations of $1,000 and any integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same.

The Issuer and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree to treat for United States Federal income tax purposes (i) the Securities as indebtedness of the Issuer, and (ii) the stated interest on the Securities as ordinary interest income that is includible in the Holder’s or beneficial owner’s gross income at the time the interest is paid or accrued in accordance with the Holder’s or beneficial owner’s regular method of tax accounting, and otherwise to treat the Securities as described in the final prospectus supplement provided to investors in connection with the offering of the Securities.

THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

This is one of the Securities referred to in the within mentioned Indenture.

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:

(Insert assignee’s social security or tax identification number)

(Insert address and zip code of assignee)

agent to transfer this Security on the books of the Securities Registrar. The agent may substitute another to act for him or her.

Dated:	Signature:
	Signature Guarantee:

(Sign exactly as your name appears on the other side of this Security)

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Securities Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

SCHEDULE I

SCHEDULE OF PRINCIPAL AMOUNT REDUCTIONS

Principal amount of Debentures outstanding represented by this Security as of , : .

Thereafter, the following decreases have been made:

Date of Repayment, Redemption or Purchase	Principal Amount Repaid, Redeemed or Purchased	Principal Amount Remaining	Notation Made by or on Behalf of the Trustee
	$	$

EX-4.19

Exhibit 4.19

THE PROGRESSIVE CORPORATION

AND

THE BANK OF NEW YORK TRUST COMPANY,

N.A., Trustee

Junior Subordinated Indenture

Dated as of June 21, 2007

CROSS-REFERENCE SHEET1*

Between

Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of June 21, 2007 between THE PROGRESSIVE CORPORATION and THE BANK OF NEW YORK TRUST COMPANY, N.A., Trustee:

Section of the Act	Section of Indenture
310(a)(1) and (2)	6.8
310(a)(3) and (4)	Inapplicable
310(a)(5)	6.8
310(b)	6.9(a), (b) and (d)
310(b)(1)	6.13
310(c)	Inapplicable
311(a)	6.12
311(b)	6.12
311(c)	Inapplicable
312(a)	4.1 and 4.2(a)
312(b)	4.2(a) and (b)(i) and (ii)
312(c)	4.2(c)
313(a)	4.4
313(b)(1)	Inapplicable
313(b)(2)	4.4
313(c)	4.4
313(d)	4.4
314(a)	4.3
314(b)	Inapplicable
314(c)(1) and (2)	11.5
314(c)(3)	Inapplicable
314(d)	Inapplicable
314(e)	11.5
314(f)	Inapplicable
315(a), (c) and (d)	6.1
315(b)	5.11
315(e)	5.12
316(a)(1)	5.9
316(a)(2)	Not required
316(a)(last sentence)	7.4
316(b)	5.7
317(a)	5.2
317(b)	3.4(a) and (b)

1 This Cross Reference Sheet is not part of the Indenture.

TABLE OF CONTENTS

			Page
ARTICLE ONE DEFINITIONS			1
	SECTION 1.1	Certain Terms Defined	1
ARTICLE TWO SECURITIES			5
	SECTION 2.1	Forms Generally	5
	SECTION 2.2	Form of Trustee’s Certificate of Authentication	6
	SECTION 2.3	Amount Unlimited; Issuable in Series	6
	SECTION 2.4	Authentication and Delivery of Securities	8
	SECTION 2.5	Execution of Securities	9
	SECTION 2.6	Certificate of Authentication	9
	SECTION 2.7	Denomination and Date of Securities; Payments of Interest	10
	SECTION 2.8	Registration, Transfer and Exchange	11
	SECTION 2.9	Mutilated, Defaced, Destroyed, Lost and Stolen Securities	14
	SECTION 2.10	Cancellation of Securities; Destruction Thereof	15
	SECTION 2.11	Temporary Securities	15
	SECTION 2.12	Global Securities	16
ARTICLE THREE COVENANTS OF THE ISSUER			16
	SECTION 3.1	Payment of Principal and Interest	16
	SECTION 3.2	Offices for Payments, etc.	17
	SECTION 3.3	Appointment to Fill a Vacancy in Office of Trustee	17
	SECTION 3.4	Paying Agents	17
	SECTION 3.5	Written Statement to Trustee	18
	SECTION 3.6	Existence	18
ARTICLE FOUR SECURITYHOLDERS’ LISTS AND REPORTS BY THE ISSUER AND THE TRUSTEE			18
	SECTION 4.1	Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders	18
	SECTION 4.2	Preservation and Disclosure of Securityholders’ Lists	18
	SECTION 4.3	Reports by the Issuer	20
	SECTION 4.4	Reports by the Trustee	20

TABLE OF CONTENTS

(continued)

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ARTICLE FIVE REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT			20
	SECTION 5.1	Event of Default Defined; Acceleration of Maturity; Waiver of Default	20
	SECTION 5.2	Collection of Indebtedness by Trustee; Trustee May Prove Debt	23
	SECTION 5.3	Application of Proceeds	25
	SECTION 5.4	Suits for Enforcement	26
	SECTION 5.5	Restoration of Rights on Abandonment of Proceedings	26
	SECTION 5.6	Limitations on Suits by Securityholders	26
	SECTION 5.7	Unconditional Right of Securityholders to Institute Certain Suits	27
	SECTION 5.8	Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default	27
	SECTION 5.9	Control by Securityholders	27
	SECTION 5.10	Waiver of Past Defaults	28
	SECTION 5.11	Trustee to Give Notice of Default, But May Withhold in Certain Circumstances	28
	SECTION 5.12	Right of Court to Require Filing of Undertaking to Pay Costs	28
ARTICLE SIX CONCERNING THE TRUSTEE			29
	SECTION 6.1	Duties and Responsibilities of the Trustee; During Default; Prior to Default	29
	SECTION 6.2	Certain Rights of the Trustee	30
	SECTION 6.3	Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof	31
	SECTION 6.4	Trustee and Agents May Hold Securities or Coupons; Collections, etc.	31
	SECTION 6.5	Moneys Held by Trustee	31
	SECTION 6.6	Compensation and Indemnification of Trustee and Its Prior Claim	32
	SECTION 6.7	Right of Trustee to Rely on Officers’ Certificate, etc.	32
	SECTION 6.8	Persons Eligible for Appointment as Trustee	32
	SECTION 6.9	Resignation and Removal; Appointment of Successor Trustee	33

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	SECTION 6.10	Acceptance of Appointment by Successor Trustee	34
	SECTION 6.11	Merger, Conversion, Consolidation or Succession to Business of Trustee	35
	SECTION 6.12	Preferential Collection of Claims Against the Issuer	35
ARTICLE SEVEN CONCERNING THE SECURITYHOLDERS			35
	SECTION 7.1	Evidence of Action Taken by Securityholders	35
	SECTION 7.2	Proof of Execution of Instruments and of Holding of Securities	36
	SECTION 7.3	Holders to Be Treated as Owners	36
	SECTION 7.4	Securities Owned by Issuer Deemed Not Outstanding	37
	SECTION 7.5	Right of Revocation of Action Taken	37
ARTICLE EIGHT SUPPLEMENTAL INDENTURES			38
	SECTION 8.1	Supplemental Indentures Without Consent of Securityholders	38
	SECTION 8.2	Supplemental Indentures With Consent of Securityholders	39
	SECTION 8.3	Effect of Supplemental Indenture	40
	SECTION 8.4	Documents to Be Given to Trustee	40
	SECTION 8.5	Notation on Securities in Respect of Supplemental Indentures	40
ARTICLE NINE CONSOLIDATION, MERGER, SALE OR CONVEYANCE			41
	SECTION 9.1	Issuer May Consolidate, etc., on Certain Terms	41
	SECTION 9.2	Successor Corporation Substituted	41
	SECTION 9.3	Opinion of Counsel to Trustee	41
	ARTICLE TEN SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS		42
	SECTION 10.1	Satisfaction and Discharge of Indenture; Defeasance	42
	SECTION 10.2	Application by Trustee of Funds Deposited for Payment of Securities	44
	SECTION 10.3	Repayment of Moneys Held by Paying Agent	44
	SECTION 10.4	Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years	44
	SECTION 10.5	Indemnity for U.S. Government Obligations	44

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ARTICLE ELEVEN MISCELLANEOUS PROVISIONS		45
SECTION 11.1	Incorporators, Shareholders, Officers and Directors of Issuer Exempt from Individual Liability	45
SECTION 11.2	Provisions of Indenture for the Sole Benefit of Parties and Securityholders	45
SECTION 11.3	Successors and Assigns of Issuer Bound by Indenture	45
SECTION 11.4	Notices and Demands on Issuer, Trustee and Securityholders	45
SECTION 11.5	Officers’ Certificates and Opinions of Counsel; Statements to Be Contained Therein	46
SECTION 11.6	Payments Due on Saturdays, Sundays and Holidays	47
SECTION 11.7	Conflict of Any Provision of Indenture with Trust Indenture Act of 1939	47
SECTION 11.8	New York Law to Govern	47
SECTION 11.9	Counterparts	47
SECTION 11.10	Effect of Headings	47
SECTION 11.11	Securities in Foreign Currencies	47
ARTICLE TWELVE REDEMPTION OF SECURITIES AND SINKING FUNDS		47
SECTION 12.1	Applicability of Article	47
SECTION 12.2	Notice of Redemption; Partial Redemptions	48
SECTION 12.3	Payment of Securities Called for Redemption	49
SECTION 12.4	Exclusion of Certain Securities from Eligibility for Selection for Redemption	49
SECTION 12.5	Mandatory and Optional Sinking Funds	50
ARTICLE THIRTEEN SUBORDINATION OF SECURITIES		51
SECTION 13.1	Securities Subordinate to Senior Debt	51
SECTION 13.2	Issuer Not to Pay if Senior Debt of Issuer is in Default	51
SECTION 13.3	Payment over of Proceeds upon Dissolution, Default, Etc., of the Issuer	52
SECTION 13.4	Subrogation to Rights of Holders of Senior Debt	53
SECTION 13.5	Reliance on Certificate of Liquidating Agent	53
SECTION 13.6	Payment Permitted if No Default	53

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SECTION 13.7	Trustee Not Charged with Knowledge of Prohibition	54
SECTION 13.8	Provisions are Solely to Define Relative Rights	54
SECTION 13.9	No Waiver of Subordination Provisions	54
SECTION 13.10	Trustee to Effectuate Subordination	54
SECTION 13.11	Rights of Trustee as Holder of Senior Debt	55
SECTION 13.12	Article Applicable to Paying Agents	55

This Junior Subordinated Indenture, dated as of June 21, 2007 (the “Indenture”), between THE PROGRESSIVE CORPORATION, an Ohio corporation (the “Issuer”), and THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee (the “Trustee”),

WITNESSETH:

WHEREAS, the Issuer has duly authorized the issue from time to time of its subordinated unsecured debentures, notes or other evidences of indebtedness to be issued in one or more series (the “Securities”) up to such principal amount or amounts as may from time to time be authorized in accordance with the terms of this Indenture and to provide, among other things, for the authentication, delivery and administration thereof; and

WHEREAS, the Issuer has duly authorized the execution and delivery of this Indenture; and

WHEREAS, all things necessary to make this Indenture a valid indenture and agreement according to its terms have been done;

NOW, THEREFORE:

In consideration of the premises and the purchases of the Securities by the Holders thereof, the Issuer and the Trustee mutually covenant and agree for the equal and proportionate benefit of the respective Holders from time to time of the Securities and of the Coupons, if any, appertaining thereto as follows:

ARTICLE ONE

DEFINITIONS

SECTION 1.1 Certain Terms Defined. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section. All other terms used in this Indenture that are defined in the Trust Indenture Act of 1939 or the definitions of which in the Securities Act of 1933 (“Securities Act”) are referred to in the Trust Indenture Act of 1939, including terms defined therein by reference to the Securities Act (except as herein otherwise expressly provided or unless the context otherwise clearly requires), shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as in force at the date of this Indenture. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles, and the term “generally accepted accounting principles” means such accounting principles as are generally accepted at the time of any computation in the United States of America. The words “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular.

“Authorized Newspaper” means The Wall Street Journal, The New York Times or other newspaper of general circulation throughout the United States of America.

“Board of Directors” means either the Board of Directors of the Issuer or any committee of such Board duly authorized to act hereunder.

“Business Day” means, with respect to any Security, a day that in the city (or in any of the cities, if more than one) in which amounts are payable, as specified in the form of such Security, is not a day on which banking institutions are authorized by law or regulation to close or a day on which transactions in the currency in which the Securities are payable are not conducted.

“Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or if any time after the execution and delivery of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act of 1939, then the body performing such duties on such date.

“Corporate Trust Office” means the office of the Trustee at which the corporate trust business of the Trustee, at any particular time, shall be principally administered, which office is, at the date as of which this Indenture is dated, located at 2 North La Salle, Chicago, IL 60602, Attn: Global Corporate Trust.

“Coupon” means any interest coupon appertaining to a Security.

“Event of Default” means any event or condition specified as such in Section 5.1.

“Foreign Currency” means a currency issued by the government of a country other than the United States.

“Global Security” means a Security that evidences all or part of a class of Securities, registered in the name of a depositary or its nominee as contemplated by Section 2.12.

“Holder,” “holder of Securities,” “Securityholder” or other similar terms mean (a) in the case of any Registered Security, the Person in whose name such Security is registered in the security register kept by the Issuer for that purpose in accordance with the terms hereof, and (b) in the case of any Unregistered Security, the bearer of such Security, or any Coupon appertaining thereto, as the case may be.

“Indenture” means this instrument as originally executed and delivered or, if amended or supplemented as herein provided, as so amended or supplemented or both, and shall include the forms and terms of particular series of Securities established as contemplated hereunder.

“Interest” means, when used with respect to non-interest-bearing Securities, interest payable after maturity.

“Issuer” means THE PROGRESSIVE CORPORATION, an Ohio corporation, and, subject to Article Nine, its successors and assigns.

“Officers’ Certificate” means a certificate signed by any two of the following officers of the Issuer: president, treasurer, any vice president, secretary or any assistant secretary and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 11.5.

“Opinion of Counsel” means an opinion in writing signed by legal counsel who may be an employee of or counsel to the Issuer or other counsel who shall be satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 11.5, if and to the extent required hereby.

“original issue date” of any Security (or portion thereof) means the earlier of (a) the date of such Security or (b) the date of any Security (or portion thereof) for which such Security was issued (directly or indirectly) on registration of transfer, exchange or substitution.

“Original Issue Discount Security” means any Security that provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.

“Outstanding,” when used with reference to Securities, subject to the provisions of Section 7.4, means, as of any particular time, all Securities authenticated and delivered by the Trustee under this Indenture, except:

(a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

(b) Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any paying agent (other than the Issuer) or shall have been set aside, segregated and held in trust by the Issuer for the holders of such Securities (if the Issuer shall act as its own paying agent), provided that if such Securities, or portions thereof, are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as herein provided, or provision satisfactory to the Trustee shall have been made for giving such notice; and

(c) Securities in substitution for which other Securities shall have been authenticated and delivered, or which shall have been paid, pursuant to the terms of Section 2.9 (except with respect to any such Security as to which proof satisfactory to the Trustee is presented that such Security is held by a person in whose hands such Security is a legal, valid and binding obligation of the Issuer).

In determining whether the holders of the requisite principal amount of Outstanding Securities of any or all series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the maturity thereof pursuant to Section 5.1.

“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“principal” whenever used with reference to the Securities or any Security or any portion thereof, shall be deemed to include “and premium, if any.”

“Registered Security” means any Security registered on the Security Register of the Issuer.

“Responsible Officer” when used with respect to the Trustee means any officer of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

“Security” or “Securities” has the meaning stated in the first recital of this Indenture, or, as the case may be, Securities that have been authenticated and delivered under this Indenture.

“Security Register” shall have the meaning set forth in Section 2.8.

“Senior Debt” means, with respect to the Issuer, the principal of and any premium and interest on, and any other payment, due pursuant to any of the following, whether incurred prior to, on or after the date of this Indenture: (i) all obligations of the Issuer for money borrowed (other than obligations pursuant to this Indenture); (ii) all obligations evidenced by notes, debentures (other than the Securities), bonds or other similar instruments issued by the Issuer, including obligations incurred in connection with the acquisition of property, assets or businesses and including all other debt securities issued by the Issuer to any trust or a trustee of such trust, or to a partnership or other affiliate that acts as a financing vehicle for the Issuer, in connection with the issuance of securities by such vehicles; (iii) all of the Issuer’s obligations under leases required or permitted to be capitalized under generally accepted accounting principles; (iv) all obligations of the Issuer issued or assumed as the deferred purchase price of property or services, including all obligations under master lease transactions pursuant to which the Issuer or any of its subsidiaries have agreed to be treated as owner of the subject property for federal income tax purposes (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) all obligations of the Issuer for the reimbursement on any letter of credit, banker’s acceptance, or security purchase facility or similar facilities for the Issuer’s account; (vi) all of the Issuer’s payment obligations under interest rate swap or similar agreements or foreign currency hedge, exchange or similar agreements at the time of determination, including any such obligations incurred solely to act as a hedge against increases in interest rates that may occur under the terms of other outstanding variable or floating rate indebtedness of the Issuer; (vii) all obligations of the types referred to in clauses (i) through (vi) above of other persons and all dividends of another Person the payment which, in either case, the Issuer has assumed or guaranteed or as to which it is responsible or liable as obligor, guarantor or otherwise, directly or indirectly, jointly or severally; (viii) all compensation and reimbursement obligations of the Issuer to the Trustee pursuant to this Indenture; and (ix) amendments, modifications, refinancings, replacements, renewals, extensions or refundings of any of the indebtedness referred to in clauses (i) through (viii) above.

An obligation that constitutes Senior Debt shall continue to be Senior Debt and entitled to the benefits of the subordination provisions hereof irrespective of any amendment, modification or waiver of any term of such obligation or extension or renewal of such obligation. Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not include (1) indebtedness incurred for the purchase of goods, materials or property, or for services obtained in the ordinary course of business or for other liabilities arising in the ordinary course of business, (2) any indebtedness which by its terms expressly provides that it is not superior in right of payment to the Securities or (3) any of Issuer’s indebtedness owed to a person who is the Issuer’s subsidiary or employee (except as required by law).

“Trust Indenture Act of 1939” (except as otherwise provided in Sections 8.1 and 8.2) means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was originally executed.

“Trustee” means the Person identified as “Trustee” in the first paragraph hereof and, subject to the provisions of Article Six, shall also include any successor trustee.

“Unregistered Security” means any Security other than a Registered Security.

“U.S. Government Obligations” means direct obligations of the United States of America, backed by its full faith and credit.

“vice president” when used with respect to the Issuer, means any vice president, whether or not designated by a number or a word or words added before or after the title of “vice president.”

“Yield to Maturity” means the yield to maturity on a series of securities, calculated at the time of issuance of such series, or, if applicable, at the most recent redetermination of interest on such series, and calculated in accordance with accepted financial practice.

ARTICLE TWO

SECURITIES

SECTION 2.1 Forms Generally. The Securities of each series and the Coupons, if any, to be attached thereto shall be substantially in such form (not inconsistent with this Indenture) as shall be established by or pursuant to a resolution of the Board of Directors or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have imprinted or otherwise reproduced thereon such legend or legends, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with any rules of any securities exchange or to conform to general usage, all as may be determined by the officers executing such Securities and Coupons, as evidenced by their execution of the Securities and Coupons.

The definitive Securities and Coupons shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities and Coupons, as evidenced by their execution of such Securities and Coupons.

SECTION 2.2 Form of Trustee’s Certificate of Authentication. The Trustee’s certificate of authentication on all Securities shall be in substantially the following form:

This is one of the Securities, of the series designated herein, referred to in the within-mentioned Indenture.

Trustee, as Trustee
By
	Authorized Signatory

SECTION 2.3 Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. There shall be established in or pursuant to a resolution of the Board of Directors and set forth in an Officers’ Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series,

(1) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities);

(2) any limit upon the aggregate principal amount of the Securities of the series that may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 2.8, 2.9, 2.11 or 12.3);

(3) the date or dates on which the principal of the Securities of the series is payable or the method by which such date or dates shall be determined;

(4) the rate or rates at which the Securities of the series shall bear interest, if any, or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the interest payment dates on which such interest shall be payable and the record dates for the determination of Holders to whom interest is payable and the person to whom any interest on a Registered Security shall be payable if other than the person in whose name the Security is registered on the record date;

(5) the place or places where the principal and any interest on Securities of the series shall be payable;

(6) the price or prices at which, the period or periods within which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Issuer, pursuant to any sinking fund or otherwise;

(7) the obligation, if any, of the Issuer to redeem, purchase or repay Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the price or prices at which and the period or periods within which and the terms and conditions upon which Securities of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligation;

(8) if other than denominations of U.S. $1,000 and any integral multiple thereof, in the case of Registered Securities, or U.S. $1,000 in the case of Unregistered Securities, the denominations in which Securities of the series shall be issuable;

(9) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the maturity thereof pursuant to Section 5.1 or provable in bankruptcy pursuant to Section 5.2;

(10) any authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series;

(11) if other than such coin or currency of the United States of America as at the time of payment is legal tender for payment of public or private debts, the coin or currency or units based on or relating to currencies in which payment of the principal of and interest, if any, on the securities of that series shall be payable;

(12) if the principal of or interest, if any, on the Securities of that series are to be payable, at the election of the Issuer or a Holder thereof, in a coin or currency or units based on or relating to currencies other than that in which the Securities are stated to be payable, the period or periods within which, and the terms and conditions upon which, such election may be made;

(13) if the amount of payments of principal of or interest, if any, on the Securities of the series may be determined with reference to an index, formula or other method based on a coin or currency or units based on or relating to currencies other than that in which the Securities are stated to be payable, the manner in which such amounts shall be determined;

(14) whether the Securities of the series will be issuable as Registered Securities or Unregistered Securities (with or without Coupons), or both, any restrictions applicable to the offer, sale or delivery of Unregistered Securities and, if other than as provided in Section 2.8, the terms upon which Unregistered Securities of any series may be exchanged for Registered Securities of such series and vice versa;

(15) whether and under what circumstances the Issuer will pay additional amounts on the Securities of the series held by a Person who is not a U.S. person in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether the Issuer will have the option to redeem such Securities rather than pay such additional amounts;

(16) if applicable, that any Securities shall be issuable in whole or in part in the form of one or more Global Securities, the form of any applicable legends to be borne by such Global Security and if the Securities of such series are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions not otherwise set forth herein, then the form and terms of such certificates, documents or conditions;

(17) the additions, modifications or deletions, if any, in the Events of Default or covenants of the Issuer set forth herein with respect to the Securities of such series;

(18) if applicable, that the subordination provisions of Article XIII shall apply to the Securities of the series or that any different subordination provisions, including a different definition of the term ‘Senior Debt’ shall apply to the Securities of such series; and

(19) any other terms of the series, including provisions for payment by wire transfers, if any, or modifications of the definition of Business Day (which terms shall not adversely affect the interests of the holders of the Securities).

All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to such resolution of the Board of Directors or in any such indenture supplemental hereto.

SECTION 2.4Authentication and Delivery of Securities. At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Securities of any series (having attached thereto appropriate Coupons, if any), executed by the Issuer to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver such Securities and Coupons, if any, to or upon the written order of the Issuer, signed by any two of the following officers of the Issuer: president, treasurer, any vice president, secretary or any assistant secretary, without any further action by the Issuer. In authenticating such Securities and Coupons, if any, and accepting the additional responsibilities under this Indenture in relation to such Securities and Coupons, if any, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon:

(1) a copy of any resolution or resolutions of the Board of Directors by or pursuant to which the form and terms of such series were established, in each case certified by the secretary or an assistant secretary of the Issuer;

(2) an executed supplemental indenture, if any;

(3) an Officers’ Certificate setting forth the form and terms of the Securities and Coupons, if any, as required pursuant to Section 2.3, and prepared in accordance with Section 11.5;

(4) an Opinion of Counsel, prepared in accordance with Section 11.5, which shall state:

(a) that the form or forms and terms of such Securities and Coupons, if any, have been established by or pursuant to a resolution of the Board of Directors or by a supplemental indenture as permitted by Sections 2.1 and 2.3 in conformity with the provisions of this Indenture;

(b) that such Securities and Coupons, if any, when authenticated and delivered by the Trustee and issued by the Issuer in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and binding obligations of the Issuer;

(c) that all laws and requirements in respect of the execution and delivery by the Issuer of the Securities and Coupons, if any, have been complied with in all material respects; and

(d) such other matters as the Trustee may reasonably request.

The Trustee shall have the right to decline to authenticate and deliver any Securities and Coupons, if any, under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Issuer or if the Trustee in good faith by its board of directors or board of trustees, executive committee, or a trust committee of directors, trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders.

SECTION 2.5 Execution of Securities. The Securities and, if applicable, each Coupon appertaining thereto, shall be signed on behalf of the Issuer by both (a) its president or its treasurer under its corporate seal and (b) attested by any of its vice presidents, its secretary or any of its assistant secretaries. Such signatures may be the manual or facsimile signatures of the present or any future such officers. The seal of the Issuer may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Securities. Typographical and other minor errors or defects in any such reproduction of the seal or any such signature shall not affect the validity or enforceability of any Security or Coupon that has been duly authenticated and delivered by the Trustee.

In case any officer of the Issuer who shall have signed any of the Securities or Coupons shall cease to be such officer before the Security or Coupon so signed (or the Security to which the Coupon so signed appertains) shall be authenticated and delivered by the Trustee or disposed of by the Issuer, such Security or Coupon nevertheless may be authenticated and delivered or disposed of as though the person who signed such Security or Coupon had not ceased to be such officer of the Issuer; and any Security or Coupon may be signed on behalf of the Issuer by such persons as, at the actual date of the execution of such Security or Coupon, shall be the proper officers of the Issuer, although at the date of the execution and delivery of this Indenture any such person was not such an officer.

SECTION 2.6 Certificate of Authentication. Only such Securities as shall bear thereon a certificate of authentication substantially in the form hereinbefore recited, executed by the Trustee by the manual signature of one of its authorized signatories, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the

Trustee upon any Security executed by the Issuer shall be conclusive evidence that the Security so authenticated has been duly authenticated and delivered hereunder and that the Holder is entitled to the benefits of this Indenture. No Coupon shall be entitled to the benefits of this Indenture or shall be valid or obligatory for any purpose until such certificate by the Trustee shall have become duly executed on the Security to which such Coupon appertains.

SECTION 2.7 Denomination and Date of Securities; Payments of Interest. The Securities shall be issuable as Registered Securities or Unregistered Securities in such denominations as shall be specified as contemplated by Section 2.3. In the absence of any such specification with respect to the Registered Securities of any series, the Registered Securities of such series shall be issuable in dominations of U.S. $1,000 and any integral multiple thereof. In the absence of any such specification with respect to the Unregistered Securities, Unregistered Securities shall be issued in the denomination of U.S. $1,000. The Securities shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plan as the officers of the Issuer executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.

Each Registered Security shall be dated the date of its authentication. Each Unregistered Security shall be dated as provided in the resolution or resolutions of the Board of Directors of the Issuer or the supplemental indenture referred to in Section 2.3. The Securities of each series shall bear interest, if any, from the date, and such interest shall be payable on the dates, established as contemplated by Section 2.3.

The person in whose name any Registered Security on the Security Register maintained by the Issuer pursuant to Section 2.8 of any series is registered at the close of business on any record date applicable to a particular series with respect to any interest payment date for such series shall be entitled to receive the interest, if any, payable on such interest payment date notwithstanding any transfer or exchange of such Registered Security subsequent to the record date and prior to such interest payment date, except if and to the extent the Issuer shall default in the payment of the interest due on such interest payment date for such series, in which case such defaulted interest shall be paid to the persons in whose names Outstanding Registered Securities for such series are registered at the close of business on a subsequent record date (which shall be not less than five Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Issuer to the holders of Registered Securities not less than 15 days preceding such subsequent record date. The term “record date” as used with respect to any interest payment date (except a date for payment of defaulted interest) shall mean the date specified as such in the terms of the Registered Securities of any particular series, or, if no such date is so specified, if such interest payment date is the first day of a calendar month, the fifteenth day of the next preceding calendar month or, if such interest payment date is the fifteenth day of a calendar month, the first day of such calendar month, whether or not such record date is a Business Day.

Any defaulted interest payable in respect of any Unregistered Security shall be payable pursuant to such procedures as are satisfactory to the Trustee and in such manner so that there is no discrimination as between the holders of Registered Securities and Unregistered Securities of the same series and notice of the payment date therefor shall be given by the Trustee in the name and at the expense of the Issuer by publication at least once in an Authorized Newspaper. In

case an Unregistered Security is surrendered in exchange for a Registered Security after the close of business on any record date for the payment of defaulted interest and before the opening of business on the proposed date of payment of such defaulted interest, the Coupon appertaining to such surrendered Unregistered Security and due for payment on such proposed date of payment will not be surrendered with such surrendered Unregistered Security and interest payable on such proposed date of payment will be made only to the holder of such Coupon on such proposed date.

SECTION 2.8 Registration, Transfer and Exchange. (a) The Issuer will keep or cause to be kept at each office or agency to be maintained for the purpose as provided in Section 3.2 a register or registers for each series of Registered Securities issued hereunder (collectively, the “Security Register”) in which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, or cause the registration of transfer of, Registered Securities as in this Article provided. Such register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. At all reasonable times such register or registers shall be open for inspection by the Trustee.

Upon due presentation for registration of transfer of any Registered Security of any series at any such office or agency to be maintained for the purpose as provided in Section 3.2, the Issuer shall execute and the Trustee shall authenticate and deliver in the name of the transferee or transferees a new Registered Security or Registered Securities of the same series in authorized denominations for a like aggregate principal amount.

Unregistered securities (except for any temporary Unregistered Securities) and Coupons (except for Coupons attached to any temporary Unregistered Securities) shall be transferable by delivery.

Any Registered Security or Registered Securities of any series may be exchanged for a Registered Security or Registered Securities of the same series in other authorized denominations, in an equal aggregate principal amount. Registered Securities of any series to be exchanged shall be surrendered at any office or agency maintained by the Issuer for the purpose as provided in Section 3.2, and the Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor the Registered Security or Registered Securities of the same series which the Securityholder making the exchange shall be entitled to receive, bearing numbers not contemporaneously outstanding.

If the Securities of any series are issued in both registered and unregistered form, except as otherwise specified pursuant to Section 2.3, at the option of the Holder thereof, Unregistered Securities of any series may be exchanged for Registered Securities of such series, maturity date and interest rate, in any authorized denominations and in a like aggregate principal amount, upon surrender of such Unregistered Securities to be exchanged at the office or agency of the Issuer that shall be maintained for such purpose in accordance with Section 3.2, with, in the case of Unregistered Securities that have Coupons attached, all unmatured Coupons and all matured Coupons in default thereto appertaining, and upon payment, if the Issuer shall so require, of the charges hereinafter provided. At the option of the Holder thereof, if Unregistered Securities of any series, maturity date, interest rate and original issue date are issued in more than one

authorized denomination, except as otherwise specified pursuant to Section 2.3, such Unregistered Securities may be exchanged for Unregistered Securities of such series, maturity date, interest rate and original issue date, in other authorized denominations and in a like aggregate principal amount, upon surrender of such Unregistered Securities to be exchanged at the office or agency of the Issuer that shall be maintained for such purpose in accordance with Section 3.2 or as specified pursuant to Section 2.3, with, in the case of Unregistered Securities that have Coupons attached, all unmatured Coupons and all matured Coupons in default thereto appertaining, and upon payment, if the Issuer shall so require, of the charges hereinafter provided. Unless otherwise specified pursuant to Section 2.3, Registered Securities of any series may not be exchanged for Unregistered Securities of such series. Whenever any Securities, and the Coupons appertaining thereto, if any, are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and deliver, the Securities, and the Coupons appertaining thereto, if any, which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, if an Unregistered Security of any series is surrendered at any such office or agency in exchange for a Registered Security of the same series after the close of business at such office or agency on any record date and before the opening of business at such office or agency on the applicable interest payment date, such Unregistered Security shall be surrendered without the Coupon, if any, relating to such interest payment date. All Securities and Coupons surrendered upon any exchange or transfer provided for in this Indenture shall be promptly canceled and disposed of by the Trustee and the Trustee will deliver a certificate of disposition thereof to the Issuer.

All Registered Securities presented for registration of transfer, exchange, redemption or payment shall (if so required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Issuer and the Trustee duly executed by, the Holder or his attorney duly authorized in writing.

The Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Securities and shall not be required to exchange or register a transfer of any Securities until such payment is made. No service charge shall be made for any such transaction.

The Issuer shall not be required to exchange or register a transfer of (a) any Securities of any series for a period of 15 days next preceding the first mailing of notice of redemption of Securities of such series to be redeemed, or (b) any Securities selected, called or being called for redemption except, in the case of any Security where public notice has been given that such Security is to be redeemed in part, the portion thereof not so to be redeemed and except that an Unregistered Security may be exchanged for a Registered Security of the same series being called for redemption.

All Securities issued upon any transfer or exchange of Securities shall be valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.

Notwithstanding anything herein or in the terms of any series of Securities to the contrary, neither the Issuer nor the Trustee (which shall rely on an Officers’ Certificate and an Opinion of Counsel) shall be required to exchange any Unregistered Security for a Registered

Security if such exchange would result in adverse Federal income tax consequences to the Issuer (including, without limitation, the inability of the Issuer to deduct from its income, as computed for Federal income tax purposes, the interest payable on the Unregistered Securities) under then applicable United States Federal income tax laws.

The provisions of clauses (1), (2), (3), (4) and (5) below shall apply only to Global Securities:

(1) Each Global Security that is a Registered Security authenticated under this Indenture shall be registered in the name of the depositary designated for such Global Security or a nominee thereof and delivered to such depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.

(2) Notwithstanding any other provision in this Indenture or the Securities, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the depositary for such Global Security or a nominee thereof unless (A) such depositary (i) has notified the Issuer that it is unwilling or unable to continue as depositary for such Global Security and a successor Depositary has not been appointed by the Issuer within 90 days of receipt by the Issuer of such notification or (ii) has ceased to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and a successor Depositary has not been appointed by the Issuer within 90 days after the Issuer became aware of such cessation or (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security.

(3) Subject to clause (2) above, any exchange of a Global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for a Global Security or any portion thereof shall be registered in such names as the Depositary for such Global Security shall direct.

(4) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the depositary for such Global Security or a nominee thereof.

(5) None of the Issuer, the Trustee nor any agent of the Issuer or the Trustee will have any responsibility or liability for the accuracy or completeness of the records relating to or payments made on account of beneficial ownership interests of a Global Security, for any act or omissions of a depositary or transactions between the depositary and beneficial owners, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

(b) Notwithstanding any other provisions of this Indenture or the Securities, transfers of a Global Security, in whole or in part, exchanges of interests in Global Securities or of other Securities as described in the following two paragraphs below shall be made only in accordance with this Section 2.8. Transfers and exchanges subject to this Section 2.8 shall also be subject to the other provisions of this Indenture that are not inconsistent with this Section 2.8.

(1) Except as provided in Section 2.8(a), a Global Security may not be transferred, in whole or in part, to any Person other than the depositary or a nominee thereof, and no such transfer to any such other Person may be registered; provided that this clause (1) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person. Nothing in this clause (1) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Security effected in accordance with the other provisions of this Section 2.8(b).

(2) Securities other than Global Securities may be exchanged (on transfer or otherwise) for Securities that are not Global Securities or for beneficial interests in a Global Security (if any is then Outstanding) only in accordance with such procedures, as may be from time to time adopted by the Issuer and the Trustee and as are consistent with the depositary’s applicable procedures.

SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case any temporary or definitive Security or any Coupon appertaining to any Security shall become mutilated, defaced or be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon the written request of any officer of the Issuer, the Trustee shall authenticate and deliver, a new Security of the same series, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and substitution for the Security so destroyed, lost or stolen, with Coupons corresponding to the Coupons appertaining to the Security so mutilated, defaced, destroyed, lost or stolen, or in exchange or substitution for the Security to which such mutilated, defaced, destroyed, lost or stolen Coupons appertained, with Coupons appertaining thereto corresponding to the Coupons so mutilated, defaced, destroyed, lost or stolen. In every case, the applicant for a substitute Security or Coupon shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as may be required by the Issuer, Trustee and said agent to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the destruction, loss or theft of such Security and of the ownership thereof.

Upon the issuance of any substitute Security or Coupon, the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) and the cost of any indemnity bond connected therewith. In case any Security or Coupon which has matured or is about to mature or has been called for redemption in full shall become mutilated or defaced or be destroyed, lost or stolen, the Issuer may, at its sole discretion, instead of issuing a substitute Security or Coupon, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Security or Coupon), if the applicant for such payment shall furnish to the Issuer and to the Trustee and any agent of the Issuer or the Trustee such security or indemnity as any of them may require to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence to their satisfaction of the destruction, loss or theft of such Security or Coupon and of the ownership thereof.

Every substitute Security or Coupon of any series issued pursuant to the provisions of this Section by virtue of the fact that any such Security or Coupon is destroyed, lost or stolen shall constitute an additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security or Coupon shall be enforceable at any time by anyone and shall be entitled to all the benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities or Coupons of such series duly authenticated and delivered hereunder. All Securities or Coupons shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced or destroyed, lost or stolen Securities or Coupons and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.

SECTION 2.10Cancellation of Securities; Destruction Thereof. All Securities and Coupons surrendered for payment, redemption, registration of transfer or exchange, or for credit against any payment in respect of a sinking or analogous fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee, shall be delivered to the Trustee for cancellation or, if surrendered to the Trustee, shall be canceled by it; and no Securities or Coupons shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Trustee shall destroy cancelled Securities and Coupons held by it and deliver a certificate of destruction to the Issuer or shall otherwise comply with its document retention policy and applicable law. If the Issuer shall acquire any of the Securities or Coupons, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Securities or Coupons unless and until the same are delivered to the Trustee for cancellation.

SECTION 2.11 Temporary Securities. Pending the preparation of definitive Securities for any series, the Issuer may execute and the Trustee shall authenticate and deliver temporary Securities for such series (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Trustee). Temporary Securities of any series shall be issuable as Registered Securities without Coupons, or as Unregistered Securities with or without Coupons attached thereto, of any authorized denomination, and substantially in the form of the definitive Securities of such series, but with such omissions, insertions and variations as may be appropriate for temporary Securities, all as may be determined by the Issuer with the concurrence of the Trustee. Temporary Securities may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Security shall be executed by the Issuer and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Securities. Without unreasonable delay, the Issuer shall execute and shall furnish definitive Securities of such series and thereupon temporary Securities of such series may be surrendered in exchange therefor without charge at each office or agency to be maintained by the Issuer for that purpose pursuant to Section 3.2, and in the case of Unregistered Securities, together with any unmatured Coupons and any matured Coupons in default appertaining thereto, at any office or agency maintained by the Issuer for such purpose as specified pursuant to Section 3.2, and the Trustee shall authenticate and deliver in exchange for such temporary Securities of such series a like aggregate principal amount of

definitive Securities of the same series in authorized denominations. Until so exchanged, the temporary Securities and any unmatured Coupons appertaining thereto of any series shall be entitled to the same benefits under this Indenture as definitive Securities and any unmatured Coupons appertaining thereto of such series. The provisions of this Section are subject to any restrictions or limitations on the issue and delivery of temporary Unregistered Securities of any series that may be established pursuant to Section 2.3 (including any provision that Unregistered Securities of such series initially be issued in the form of a single global Unregistered Security to be delivered to a depositary or agency of the Issuer located inside or outside the United States and the procedures pursuant to which definitive Unregistered Securities of such series would be issued in exchange for such temporary global Unregistered Security).

SECTION 2.12 Global Securities. Securities may be issued in the form of one or more Global Securities to be held by a securities depositary. If the Issuer determines at any time that Securities of a series shall no longer be represented by Global Security certificates, the Issuer shall inform the depositary of such determination. If participants of the depositary elect to withdraw their beneficial interests, the Issuer shall issue certificates in definitive form in exchange for such beneficial interests in the Global Security certificates. Any Global Security, or portion thereof, shall be exchangeable for Security certificates registered in the names directed by the depositary, as set forth more fully in Section 2.8. Global Securities shall bear customary legends stating that such Securities are Global Securities.

As long as the depositary or its nominee is the registered owner of a Global Security certificate, the depositary or its nominee, as the case may be, shall be considered the sole holder of the Global Security certificates and all Securities represented by such certificates for all purposes under this Indenture.

ARTICLE THREE

COVENANTS OF THE ISSUER

SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay or cause to be paid the principal of, and interest on, each of the Securities of such series at the place or places, at the respective times and in the manner provided in such Securities. Except as specified in Section 2.3, the interest on Securities with Coupons attached (together with any additional amounts payable pursuant to the terms of such Securities) shall be payable only upon presentation and surrender of the several Coupons for such interest installments as are evidenced thereby as they severally mature. Except as specified in Section 2.3, the interest on any temporary Unregistered Securities (together with any additional amounts payable pursuant to the terms of such Securities) shall be paid, as to the installments of interest evidenced by Coupons attached thereto, if any, only upon presentation and surrender thereof, and, as to the other installments of interest, if any, only upon presentation of such Securities for notation thereon of the payment of such interest. Each installment of interest on the Registered Securities of any series may be paid by mailing checks for such interest payable to or upon the written order of the holders of Registered Securities entitled thereto as they shall appear on the registry books of the Issuer.

SECTION 3.2 Offices for Payments, etc. So long as any of the Securities remain outstanding, the Issuer will maintain the following for each series: an office or agency (a) where the Registered Securities may be presented for payment, (b) where the Registered Securities may be presented for registration of transfer and for exchange as in this Indenture provided and (c) where notices and demands to or upon the Issuer in respect of the Registered Securities or of this Indenture may be served.

The Issuer will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. With respect to each series of Securities and Coupons whose terms are established pursuant to Section 2.3, the Issuer hereby designates the Corporate Trust Office as the initial office to be maintained by it for each such purpose. In case the Issuer shall fail to so designate or maintain any such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Corporate Trust Office.

SECTION 3.3 Appointment to Fill a Vacancy in Office of Trustee. The Issuer, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so that there shall at all times be a Trustee with respect to each series of Securities hereunder.

SECTION 3.4 Paying Agents. Whenever the Issuer shall appoint a paying agent other than the Trustee with respect to the Securities of any series, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section,

(a) that it will hold all sums received by it as such agent for (i) the payment of the principal of or interest on the Securities of such series (whether such sums have been paid to it by the Issuer or by any other obligor on the Securities of such series) in trust for the benefit of the holders of the Securities of such series or the Coupons appertaining thereto or (ii) the payment of any sums due the Trustee hereunder, and

(b) that it will give the Trustee notice of any failure by the Issuer (or by any other obligor on the Securities of such series) to make any payment of the principal of or interest on the Securities of such series when the same shall be due and payable.

The Issuer will, on or prior to each due date of the principal of or interest on the Securities of such series, deposit with the paying agent a sum sufficient to pay such principal or interest so becoming due, and (unless such paying agent is the Trustee) the Issuer will promptly notify the Trustee of any failure to take such action.

If the Issuer shall act as its own paying agent with respect to the Securities or the Coupons appertaining thereto of any series, it will, on or before each due date of the principal of or interest on the Securities or the Coupons appertaining thereto of such series, set aside, segregate and hold in trust for the benefit of the holders of the Securities or the Coupons appertaining thereto of such series a sum sufficient to pay such principal or interest so becoming due. The Issuer will promptly notify the Trustee of any failure to take such action.

Anything in this Section to the contrary notwithstanding, the Issuer may at any time, for the purpose of obtaining a satisfaction and discharge with respect to one or more or all series of Securities hereunder, or for any other reason, pay or cause to be paid to the Trustee all sums held in trust for any such series by the Issuer or any paying agent hereunder, as required by this Section, such sums to be held by the Trustee upon the trusts herein contained.

Anything in this Section to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section is subject to the provisions of Sections 10.3 and 10.4.

SECTION 3.5 Written Statement to Trustee. The Issuer will deliver to the Trustee on or before April 30 in each year (beginning with April 30, 2008) a brief certificate (which need not comply with Section 11.5) from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Issuer’s compliance with all conditions and covenants under this Indenture (such compliance to be determined without respect to any period of grace or requirement of notice provided under the Indenture).

SECTION 3.6 Existence. Subject to Article Nine, the Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and its material rights (charter and statutory) and franchises; provided, however, that the Issuer shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer.

ARTICLE FOUR

SECURITYHOLDERS’ LISTS AND REPORTS BY THE

ISSUER AND THE TRUSTEE

SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders. The Issuer covenants and agrees that it will furnish or cause to be furnished to the Trustee a list in such form as the Trustee may reasonably require of the names and addresses of the holders of the Securities of each series:

(a) semiannually and not more than 15 days after each record date for the payment of interest on such Securities, as hereinabove specified, as of such record date and on dates to be determined pursuant to Section 2.3 for non-interest-bearing securities in each year, and

(b) at such other times as the Trustee may request in writing, within 30 days after receipt by the Issuer of any such request as of a date not more than 15 days prior to the time such information is furnished, provided that if and so long as the Trustee shall be the Security registrar for such series and all of the Securities of such series are Registered Securities, such list shall not be required to be furnished. The Trustee, at the request of the Issuer, shall provide such list to the Issuer for so long as the Trustee shall be the Security registrar.

SECTION 4.2 Preservation and Disclosure of Securityholders’ Lists.

(a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of each series of Securities (i) contained in the most recent list furnished to it as provided in Section 4.1 and (ii) received or maintained by it in the capacity of Security registrar for such series, if so acting. The Trustee may destroy any list furnished to it as provided in Section 4.1 upon receipt of a new list so furnished.

(b) In case three or more holders of Securities (hereinafter referred to as “applicants”) apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Securities of a particular series (in which case the applicants must all hold Securities of such series) or with holders of all Securities with respect to their rights under this Indenture or under such Securities and such application is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business Days after the receipt of such application provide the Issuer with notice of such request and, at its election, either

(i) afford to such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section, or

(ii) inform such applicants as to the approximate number of holders of Securities of such series or all Securities, as the case may be, whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subsection (a) of this Section, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.

If the Trustee shall elect not to afford to such applicants access to such information, the Trustee, upon the written request of such applicants, shall mail to each Securityholder of such series or all Securities, as the case may be, whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of Securities of such series or all Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met, and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.

(c) Each and every holder of Securities and Coupons, by receiving and holding the same, agrees with the Issuer and the Trustee that neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Securities in accordance with the provisions of subsection (b) of this Section, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under such subsection (b).

SECTION 4.3 Reports by the Issuer. The Issuer covenants to file with the Trustee, within 15 days after the Issuer is required to file the same with the Commission, copies of the annual reports and of the information, documents, any other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Issuer may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, or if the Issuer is not required to file information, documents or reports pursuant to either of such Sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, or in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. The Issuer shall also comply with the provisions of Section 314(a) of the Trust Indenture Act of 1939.

SECTION 4.4 Reports by the Trustee. Any Trustee’s report required under Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted or filed, as the case may be, on or before July 15 in each year beginning July 15, 2008, as provided in Sections 313(b), 313(c) and 313(d) of the Trust Indenture Act of 1939, so long as any Securities are Outstanding hereunder, and shall be dated as of a date convenient to the Trustee no more than 60 days prior thereto.

ARTICLE FIVE

REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS

ON EVENT OF DEFAULT

SECTION 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of Default. Except as may be provided in any supplemental indenture applicable to any particular series of Securities, “Event of Default” with respect to Securities of any series wherever used herein, means each one of the following events which shall have occurred and be continuing (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of any installment of interest upon any of the Securities of such series as and when the same shall become due and payable, and continuance of such default for a period of 30 days, subject to any mandatory or optional deferral provisions applicable to installments of interest under the terms of the particular series of Securities; or

(b) default in the payment of all or any part of the principal on any of the Securities of such series as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or

(c) default in the payment of any sinking fund installment as and when the same shall become due and payable by the terms of the Securities of such series; or

(d) default in the performance, or breach, in any material respect of any covenant or warranty of the Issuer in respect of the Securities of such series (other than a covenant or warranty in respect of the Securities of such series, a default in the performance or breach of which is elsewhere in this Section specifically dealt with or which is not deemed to constitute an Event of Default under the terms of the particular series of Securities), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of all series affected thereby, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” hereunder; or

(e) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Issuer in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall appoint a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Issuer or for any substantial part of its property or ordering the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or

(f) the Issuer shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case commenced against the Issuer under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Issuer or for any substantial part of its property, or make any general assignment for the benefit of creditors; or

(g) any other Event of Default provided in the supplemental indenture or resolution of the Board of Directors under which such series of Securities is issued or in the form of Security for such series.

If an Event of Default with respect to a particular series of Securities described in clauses (a), (b), (c) or (d) above occurs and is continuing, then, and in each and every such case, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding hereunder (each such series voting as a separate class) by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the entire principal (or, if the Securities of such series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) of all Securities of such series and the interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default described in clause (e) or (f) occurs and is continuing, then and in each and every such case, either the Trustee or the Holders of not less than 25% in aggregate principal amount of all the

Securities then Outstanding hereunder (treated as one class), by notice in writing to the Issuer (and to the Trustee if given by Securityholders), may declare the entire principal (or, if any Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof) of all the Securities then Outstanding and interest accrued thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.

The foregoing provisions, however, are subject to the condition that if, at any time after the principal (or, if the Securities are Original Issue Discount Securities, such portion of the principal as may be specified in the terms thereof) of the Securities of any series (or of all the Securities, as the case may be) shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of such series (or of all the Securities, as the case may be) and the principal of any and all Securities of such series (or of all the Securities, as the case may be) which shall have become due otherwise than by acceleration (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest, at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the Securities of such series (or at the respective rates of interest or Yields to Maturity of all the Securities, as the case may be, to the date of such payment or deposit)) and such amount as shall be sufficient to cover reasonable compensation to the Trustee, its agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Trustee except as a result of negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6, and if any and all Events of Default under the Indenture, other than the nonpayment of the principal of Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein — then and in every such case the Holders of a majority in aggregate principal amount of all the Securities of such series, each series voting as a separate class (or of all the Securities, as the case may be, voting as a single class), then Outstanding, by written notice to the Issuer and to the Trustee, may waive all defaults with respect to such series (or with respect to all the Securities, as the case may be) and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.

For all purposes under this Indenture, if a portion of the principal of any Original Issue Discount Securities shall have been accelerated and declared due and payable pursuant to the provisions hereof, then, from and after such declaration, unless such declaration has been rescinded and annulled, the principal amount of such Original Issue Discount Securities shall be deemed, for all purposes hereunder, to be such portion of the principal thereof as shall be due and payable as a result of such acceleration, and payment of such portion of the principal thereof as shall be due and payable as a result of such acceleration, together with interest, if any, thereon and all other amounts then owing thereunder, shall constitute payment in full of such Original Issue Discount Securities.

SECTION 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt. The Issuer covenants that (a) in case default shall be made in the payment of any installment of interest on any of the Securities of any series when such interest shall have become due and payable (unless said installment of interest has been deferred in accordance with the terms of such series of Securities), and such default shall have continued for a period of 30 days or (b) in case default shall be made in the payment of all or any part of the principal of any of the Securities of any series when the same shall have become due and payable, whether upon maturity of the Securities of such series or upon any redemption or by declaration or otherwise—then upon demand of the Trustee, the Issuer will pay to the Trustee for the benefit of the holders of the Securities of such series the whole amount that then shall have become due and payable on all Securities of such series, and Coupons appertaining thereto, for principal or interest, as the case may be (with interest to the date of such payment upon the overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of original Issue Discount Securities) specified in the Securities of such series); and in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including agreed upon compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and any expenses and liabilities reasonably incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of its negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6.

Until such demand is made by the Trustee, the Issuer may pay the principal of and interest on the Securities of any series to the Holders, whether or not the principal of and interest on the Securities of such series be overdue.

In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceeding at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Issuer or other obligor upon such Securities and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Securities, wherever situated, the moneys adjudged or decreed to be payable.

In case there shall be pending proceedings relative to the Issuer or any other obligor upon the Securities under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) shall have been appointed for or taken possession of the Issuer or all or substantially all of its property or such other obligor, or in case of any other comparable judicial proceedings relative to the Issuer or other obligor upon the Securities of any series, or Coupons appertaining thereto, or to all or substantially all of property of the Issuer or such other obligor, the Trustee, irrespective of whether the principal of any Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise:

(a) to file and prove a claim or claims for the whole amount of principal and interest (or, if the Securities of any series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such series) owing and unpaid in respect of

the Securities of any series, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for agreed upon compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee, except as a result of negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6) and of the Securityholders allowed in any judicial proceedings relative to the Issuer or other obligor upon the Securities of any series, or to the property of the Issuer or such other obligor,

(b) unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Securities of any series in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and

(c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Securityholders and of the Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Securityholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover agreed upon compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other reasonable expenses and liabilities incurred, and all advances made, by the Trustee and each predecessor Trustee except as a result of negligence or bad faith and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or Coupons appertaining thereto of any series or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person.

All rights of action and of asserting claims under this Indenture, or under any of the Securities, or Coupons appertaining thereto, may be enforced by the Trustee without the possession of any of the Securities, or Coupons appertaining thereto, or the production thereof on any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements, compensation and all other amounts due pursuant to Section 6.6 to the Trustee, each predecessor Trustee and their respective agents and attorneys, shall be for the ratable benefit of the holders of the Securities, or Coupons appertaining thereto, in respect of which such action was taken.

In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the holders of the Securities in respect to which such action was taken, and it shall not be necessary to make any holders of such Securities parties to any such proceedings.

SECTION 5.3 Application of Proceeds. Any moneys collected by the Trustee pursuant to this Article in respect of any series shall be applied in the following order at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal or interest, upon presentation of the several Securities, and Coupons appertaining thereto, in respect of which monies have been collected and stamping (or otherwise noting) thereon the payment, or issuing Securities of such series in reduced principal amounts in exchange for the presented Securities of like series if only partially paid, or upon surrender thereof if fully paid:

FIRST: To the payment of costs and expenses applicable to such series in respect of which monies have been collected, including agreed upon compensation to the Trustee and each predecessor Trustee and their respective agents and attorneys and of all reasonable expenses and liabilities incurred, and all advances made, by the Trustee in the exercise of its rights or discharge of its duties hereunder and each predecessor Trustee except as a result of negligence or bad faith, and all other amounts due to the Trustee or any predecessor Trustee pursuant to Section 6.6;

SECOND: Subject to Article Thirteen, in case the principal of the Securities of such series in respect of which moneys have been collected shall not have become and be then due and payable, to the payment of interest on the Securities of such series in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in such Securities, such payments to be made ratably to the persons entitled thereto, without discrimination or preference;

THIRD: Subject to Article Thirteen, in case the principal of the Securities of such series in respect of which moneys have been collected shall have become and shall be then due and payable, to the payment of the whole amount then owing and unpaid upon all the Securities of such series for principal and interest, with interest upon the overdue principal, and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the same rate as the rate of interest or Yield to Maturity (in the case of Original Issue Discount Securities) specified in the securities of such series; and in case such moneys shall be insufficient to pay in full the whole amount so due and unpaid upon the Securities of such series, then to the payment of such principal and interest or Yield to Maturity, without preference or priority of principal over interest or Yield to Maturity, or of interest or Yield to Maturity over principal, or of any installment of interest over any other installment of interest, or of any Security of such series over any other Security of such series, ratably to the aggregate of such principal and accrued and unpaid interest or Yield to Maturity; and

FOURTH: Subject to Article Thirteen, to the payment of the remainder, if any, to the Issuer or any other person lawfully entitled thereto.

SECTION 5.4 Suits for Enforcement. In case an Event of Default has occurred, has not been waived and is continuing, the Trustee in its discretion may proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.

SECTION 5.5 Restoration of Rights on Abandonment of Proceedings. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Issuer and the Trustee shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Issuer, the Trustee and the Securityholders shall continue as though no such proceedings had been taken.

SECTION 5.6 Limitations on Suits by Securityholders. No holder of any Security of any series or of any Coupon appertaining thereto shall have any right by virtue or by availing of any provision of this Indenture or of any Securities to institute any action or proceedings at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture or any Security, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, or sequestrator (or other similar official) or for any other remedy hereunder or in respect of any Securitiy, unless such holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, and unless also the holders of not less than 25% in aggregate principal amount of the Securities of such series then Outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceeding and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 5.9; it being understood and intended, and being expressly covenanted by the holder of every Security or Coupon with every other Holder and the Trustee, that no one or more holders of Securities of any series or of any Coupon appertaining thereto shall have any right in any manner whatever by virtue or by availing themselves of any provision of this Indenture or of any Security to affect, disturb or prejudice the rights of any other such holder of Securities or Coupons, or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture or in respect of any Security, except in the manner herein provided and for the equal, ratable and common benefit of all holders of Securities of the applicable series or of any Coupon appertaining thereto. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

SECTION 5.7Unconditional Right of Securityholders to Institute Certain Suits. Notwithstanding any other provision in this Indenture and any provision of any Security, the right of any holder of any Security or Coupon to receive payment of the principal of and interest on such Security or Coupon on or after the respective due dates expressed in such Security or Coupon, or in any Coupon appertaining thereto, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 5.8 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. Except as provided in Section 2.9, no right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy, to the extent permitted by law, shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

No delay or omission of the Trustee or of any Securityholder to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to Section 5.6, every power and remedy given by this Indenture or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders.

SECTION 5.9 Control by Securityholders. The holders of a majority in aggregate principal amount of the Securities of each series affected (with each series voting as a separate class) at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Securities of such series by this Indenture; provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture and any applicable supplemental indenture and provided further that (subject to the provisions of Section 6.1) the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability or if the Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction would be unduly prejudicial to the interests of holders of the Securities of all series so affected not joining in the giving of said direction, it being understood that (subject to Section 6.1) the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders.

Nothing in this Indenture shall impair the right of the Trustee in its discretion to take any action deemed proper by the Trustee and which is not inconsistent with such direction or directions by Securityholders

SECTION 5.10 Waiver of Past Defaults. Prior to the declaration of the acceleration of the maturity of the Securities of any series as provided in Section 5.1, the holders of a majority in aggregate principal amount of the Securities of such series at the time Outstanding on behalf of the holders of all the Securities of such series may waive any past default or Event of Default described in Section 5.1 and its consequences except a default in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the holder of each Security affected. In the case of any such waiver, the Issuer, the Trustee and the holders of the Securities of such series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

Upon any such waiver, such default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured, and not to have occurred for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

SECTION 5.11 Trustee to Give Notice of Default, But May Withhold in Certain Circumstances. The Trustee, within 90 days after the occurrence of a default known to the Trustee with respect to the Securities of any series, shall provide notice thereof to the holders of Outstanding Securities of such series and Coupons appertaining thereto, if any, by mailing such notice to such Holders at their addresses as they shall appear in the registry books, unless such defaults shall have been cured before the giving of such notice (the term “default” or “defaults” for the purposes of this Section being hereby defined to mean any event or condition which is, or with notice or lapse of time or both would become, an Event of Default); provided that, except in the case of default in the payment of the principal of or interest on any of the Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Securityholders of such series; provided, further, that in the case of any default of the character specified in clause (d) of Section 5.1, no such notice to Holders shall be given until at least 60 days after the occurrence thereof.

SECTION 5.12 Right of Court to Require Filing of Undertaking to Pay Costs. The parties to this Indenture agree, and each holder of any Security or Coupon by his acceptance thereof shall be deemed to have agreed, that any court in its discretion may require, in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder or group of Securityholders of any series holding in the

aggregate more than 10% in aggregate principal amount of the Securities Outstanding of such series, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of or interest on any Security or Coupon on or after the due date expressed in such Security or Coupon.

ARTICLE SIX

CONCERNING THE TRUSTEE

SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default. With respect to the holders of any series of Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Securities of a particular series and after the curing or waiving of all Events of Default which may have occurred with respect to such series, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Securities of a series has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(a) prior to the occurrence of an Event of Default with respect to the Securities of any series and after the curing or waiving of all such Events of Default with respect to such series which may have occurred:

(i) the duties and obligations of the Trustee with respect to the Securities of any series shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii) in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture;

(b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders pursuant to Section 5.9 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee under, or by reason of exercising any trust or power conferred upon the Trustee, in accordance with the terms of this Indenture.

None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if there shall be reasonable ground for believing that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it.

SECTION 6.2 Certain Rights of the Trustee. In furtherance of and subject to the Trust Indenture Act of 1939, and subject to Section 6.1:

(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties;

(b) any request, direction, order or demand of the Issuer mentioned herein shall be sufficiently evidenced by an Officers’ Certificate or order of the Issuer (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Issuer;

(c) the Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action reasonably taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(d) the Trustee shall be under no obligation to exercise any of the trusts, rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby;

(e) the Trustee shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture;

(f) prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing so to do by the holders of not less than a majority in aggregate principal amount of the Securities of all series then Outstanding; provided that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity from the requesting Holder against such expenses or liabilities as a condition to proceeding;

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder.

(h) in no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action;

(i) the Trustee shall not be deemed to have notice of any default or Event of Default unless a Responsible Officer has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the particular Securities and this Indenture; and

(j) the rights, privileges, protections, immunities and benefits given to the Trustee hereunder, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its respective capacities hereunder, and each agent, custodian and other Person employed to act on behalf of the Trustee in any such capacity hereunder.

SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds Thereof.

The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Securities or Coupons. The Trustee shall not be accountable for the use or application by the Issuer of any of the Securities or of the proceeds thereof.

SECTION 6.4 Trustee and Agents May Hold Securities or Coupons; Collections, etc.The Trustee or any agent of the Issuer or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities or Coupons with the same rights it would have if it were not the Trustee or such agent and, subject to Sections 6.8 and 6.13, if operative, may otherwise deal with the Issuer and receive, collect, hold and retain collections from the Issuer with the same rights it would have if it were not the Trustee or such agent.

SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section 10.4 hereof, all moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or the Trustee shall be under any liability for interest on any moneys received by it hereunder.

SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim. The Issuer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, agreed upon compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Issuer covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Issuer also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts hereunder and its duties hereunder, including the reasonable costs and expenses of defending itself against or investigating any claim of liability in the premises. The obligations of the Issuer under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for reasonable expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Securities and Coupons upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Securities or Coupons, and the Securities and Coupons are hereby subordinated to such senior claim.

SECTION 6.7 Right of Trustee to Rely on Officers’ Certificate, etc. Subject to Sections 6.1 and 6.2, whenever in the administration of the trusts of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed), in the absence of negligence or bad faith on the part of the Trustee, may be deemed to be conclusively proved and established by an Officers’ Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof.

SECTION 6.8 Persons Eligible for Appointment as Trustee. The Trustee for each series of Securities hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $50,000,000, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by Federal, State or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.8, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.8, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.9.

No obligor upon the Securities or person directly or indirectly controlling, controlled by or under common control with such obligor shall serve as Trustee for any series of Securities.

The Trustee shall comply with Section 310(b) of the Trust Indenture Act of 1939.

The provisions of this Section 6.8 are in furtherance of and subject to Section 310(a) of the Trust Indenture Act of 1939.

SECTION 6.9 Resignation and Removal; Appointment of Successor Trustee.

(a) The Trustee, or any trustee or trustees hereafter appointed, at any time may resign with respect to one or more or all series of Securities by giving written notice of resignation to the Issuer. Upon receiving such notice of resignation, the Issuer shall promptly appoint a successor trustee or trustees with respect to the applicable series by written instrument in duplicate, executed by authority of the Board of Directors, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee or trustees. If no successor trustee shall have been so appointed with respect to any series and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Securityholder who has been a bona fide holder of a Security or Securities of the applicable series for at least six months may, subject to the provisions of Section 5.12, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court thereupon, after such notice, if any, as it may deem proper and prescribe, may appoint a successor trustee.

(b) In case at any time any of the following shall occur:

(i) the Trustee shall fail to comply with the provisions of Section 310(b) of the Trust Indenture Act of 1939 with respect to any series of Securities after written request therefor by the Issuer or by any Securityholder who has been a bona fide holder of a Security or Securities of such series for at least six months; or (ii) the Trustee shall cease to be eligible in accordance with the provisions of Section 6.8 and shall fail to resign after written request therefor by the Issuer or by any Securityholder; or (iii) the Trustee shall become incapable of acting with respect to any series of Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, the Issuer may remove the Trustee with respect to the applicable series of Securities and appoint a successor trustee for such series by written instrument, in duplicate, executed by order of the Board of Directors of the Issuer, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee, or, subject to the provisions of Section 7.1, any Securityholder who has been a bona fide holder of a Security or Securities of such series for at least six months, on behalf of himself and all others similarly situated, may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee with respect to such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor trustee.

(c) The holders of a majority in aggregate principal amount of the Securities of each series at the time Outstanding at any time may remove the Trustee with respect to securities of such series and appoint a successor trustee with respect to the Securities of such series by delivering to the Trustee so removed, to the successor trustee so appointed and to the Issuer the evidence provided for in Section 7.1 of the action in that regard taken by the Securityholders.

(d) Any resignation or removal of the Trustee with respect to any series and any appointment of a successor trustee with respect to such series pursuant to any of the provisions of this Section 6.9 shall become effective upon acceptance of appointment by the successor trustee as provided in Section 6.10.

SECTION 6.10 Acceptance of Appointment by Successor Trustee. Any successor trustee appointed as provided in Section 6.9 shall execute and deliver to the Issuer and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee with respect to all or any applicable series shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations with respect to such series of its predecessor hereunder, with like effect as if originally named as trustee for such series hereunder; but, nevertheless, on the written request of the Issuer or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act, subject to Section 10.4, shall pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Issuer shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act, nevertheless, shall retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Section 6.6.

If a successor trustee is appointed with respect to the Securities of one or more (but not all) series, the Issuer, the predecessor Trustee and each successor trustee with respect to the Securities of any applicable series shall execute and deliver an indenture supplemental hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of any series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such trustees as co-trustees of the same trust and that each such trustee shall be deemed to be trustee of a trust or trusts under separate indentures.

No successor trustee with respect to any series of Securities shall accept appointment as provided in this Section 6.10 unless at the time of such acceptance such successor trustee shall be qualified under Section 310(b) of the Trust Indenture Act of 1939 and eligible under the provisions of Section 6.8.

Upon acceptance of appointment by any successor trustee as provided in this Section 6.10, the Issuer shall mail notice thereof to the holders of Securities of each series affected, by first-class mail to such holders of Securities of any series for which such successor trustee is acting as trustee at their last addresses as they shall appear in the Security register. If the Issuer fails to mail such notice within ten days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of the Issuer.

SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business of Trustee. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, without the execution or filing of any paper; the giving of any notice or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding, provided, that such corporation shall be qualified under Section 310(b) of the Trust Indenture Act of 1939 and eligible under the provisions of Section 6.8.

In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Securities of any series shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and, in case at that time any of the Securities of any series shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificate shall have the full force that the Securities of such series or this Indenture have granted to such certificate; provided, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities of any series in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.

SECTION 6.12 Preferential Collection of Claims Against the Issuer. The Trustee shall comply with Section 311(a) of the Trust Indenture Act of 1939, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act of 1939.

Any Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act of 1939 to the extent indicated therein.

ARTICLE SEVEN

CONCERNING THE SECURITYHOLDERS

SECTION 7.1 Evidence of Action Taken by Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage in principal amount of the Securityholders of any or all series may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Securityholders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee. Proof of

execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Article.

SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.

Subject to Sections 6.1 and 6.2, the execution of any instrument by a Securityholder or his agent or proxy may be proved in the following manner:

The fact and date of the execution by any Holder of any instrument may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the person executing such instruments acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or other such officer. Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute sufficient proof of the authority of the person executing the same. The fact of the holding by any holder of an Unregistered Security of any series, and the identifying number of such Security and the date of his holding the same, may be proved by the production of such Security or by a certificate executed by any trust company, bank, banker or recognized securities dealer wherever situated satisfactory to the Trustee, if such certificate shall be deemed by the Trustee to be satisfactory. Each such certificate shall be dated and shall state that on the date thereof a Security of such series bearing a specified identifying number was deposited with or exhibited to such trust company, bank, banker or recognized securities dealer by the person named in such certificate. Any such certificate may be issued in respect of one or more Unregistered Securities of one or more series specified therein. The holding by the person named in any such certificate of any Unregistered Securities of any series specified therein shall be presumed to continue for a period of one year from the date of such certificate unless at the time of any determination of such holding (1) another certificate bearing a later date issued in respect of the same Securities shall be produced, or (2) the Security of such series specified in such certificate shall be produced by some other person, or (3) the Security of such series specified in such certificate shall have ceased to be Outstanding. Subject to Sections 6.1 and 6.2, the fact and date of the execution of any such instrument and the amount and numbers of Securities of any series held by the person so executing such instrument and the amount and numbers of any Security or Securities for such series may also be proven in accordance with such reasonable rules and regulations as may be prescribed by the Trustee for such series or in any other manner which the Trustee for such series may deem sufficient.

SECTION 7.3 Holders to Be Treated as Owners. The Issuer, the Trustee and any agent of the Issuer or the Trustee may deem and treat the person in whose name any Security shall be registered upon the Security register for such series as the absolute owner of such Security (whether or not such Security shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Security and for all other purposes; and neither the Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary. The Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the holder of any Unregistered Security and the holder of any Coupon as the absolute owner of such Unregistered Security or Coupon (whether or not such

Unregistered Security or Coupon shall be overdue) for the purpose of receiving payment thereof or on account thereof and for all other purposes and neither the Issuer, the Trustee, nor any agent of the Issuer or the Trustee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Security or Coupon.

SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Outstanding Securities of any or all series have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Issuer or any other obligor on the Securities with respect to which such determination is being made or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities with respect to which such determination is being made shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Issuer or any other obligor upon the Securities or any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer or any other obligor on the Securities. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Trustee in accordance with such advice. Upon request of the Trustee, the Issuer shall furnish to the Trustee promptly a written statement by two of its officers (which need not comply with Section 11.5) listing and identifying all Securities, if any, known by the Issuer to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 6.1 and 6.2, the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination.

SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.1, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action, any holder of a Security the serial number of which is shown by the evidence to be included among the serial numbers of the Securities the Holders of which have consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Security. Except as aforesaid, any such action taken by the holder of any Security shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Security and of any Securities issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Security. Any action taken by the Holders of the percentage in aggregate principal amount of the Securities of any or all series, as the case may be, specified in this Indenture in connection with such action shall be conclusively binding upon the Issuer, the Trustee and the holders of all the Securities affected by such action.

ARTICLE EIGHT

SUPPLEMENTAL INDENTURES

SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The Issuer, when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes:

(a) to convey, transfer, assign, mortgage or pledge to the Trustee as security for the Securities of one or more series any property or assets;

(b) to evidence the succession of another corporation to the Issuer, or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Issuer pursuant to Article Nine;

(c) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as its Board of Directors and the Trustee shall consider to be for the protection of the holders of Securities or Coupons, and, if the Issuer and Trustee so agree and provide in the supplemental indenture, to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Event of Default or may limit the remedies available to the Trustee upon such an Event of Default or may limit the right of the Holders of a majority in aggregate principal amount of the Outstanding Securities of such series to waive such an Event of Default;

(d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Board of Directors may deem necessary or desirable and which shall not adversely affect the interests of the holders of the Securities;

(e) to provide for the issuance of Securities of any series and related Coupons, if any, as permitted by Sections 2.1 and 2.3 hereof and to establish the form and term thereof;

(f) to evidence and provide for the acceptance of appointment hereunder by a successor trustee with respect to the Securities of one or more series, or of the Coupons appertaining to such Securities, and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of Section 6.10; and

(g) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect and maintain the qualification of this Indenture under the Trust Indenture Act of 1939, or under any similar Federal statute hereafter enacted, and to add to this Indenture such other provisions and make such other changes to this Indenture as may be expressly permitted by the Trust Indenture Act of 1939, or under any similar Federal statute hereafter enacted, excluding however, the provisions referred to in section 316(a)(2) of the Trust Indenture Act of 1939 or any corresponding provisions in any similar Federal statute hereafter enacted.

The Trustee is hereby authorized to join with the Issuer in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this Section may be executed without the consent of the holders of any of the Securities at the time Outstanding, notwithstanding any of the provisions of Section 8.2.

SECTION 8.2Supplemental Indentures With Consent of Securityholders. With the consent (evidenced as provided in Article Seven) of the Holders of not less than 66-2/3% in aggregate principal amount of the Securities at the time Outstanding of all series affected by such supplemental indenture (voting as one class), the Issuer, when authorized by a resolution of its Board of Directors, and the Trustee, from time to time and at any time, may enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Securities of each such series or the coupons appertaining to such Securities; provided, that no such supplemental indenture shall (a) extend the final maturity of any Security, or reduce the principal amount thereof or the method in which amounts of payments of principal or interest thereon are determined, or reduce the rate or extend the time of payment of interest thereon, or change the coin or currency or units based on or related to currencies of payment thereof, or reduce any amount payable on redemption thereof or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon an acceleration of the maturity thereof pursuant to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section 5.2, or impair or affect the right of any Securityholder to institute suit for the payment thereof or, if the Securities provide therefor, any right of repayment at the option of the Securityholder without the consent of the holder of each Security so affected, or (b) reduce the aforesaid percentage of Securities of any series, the consent of the Holders of which is required for any such supplemental indenture, without the consent of the holder of each Security so affected.

Upon the request of the Issuer, accompanied by a copy of a resolution of the Board of Directors certified by the secretary or an assistant secretary of the Issuer authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of

Securityholders as aforesaid and other documents, if any, required by Section 7.1, the Trustee shall join with the Issuer in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

It shall not be necessary for the consent of the Securityholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

Promptly after the execution by the Issuer and the Trustee of any supplemental indenture pursuant to the provisions of this Section 8.2, the Issuer shall mail or publish a notice thereof by first class mail to the holders of then Outstanding Securities of each series affected thereby at their addresses as they shall appear on the registry books of the Issuer, and in each case such notice shall set forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail or publish such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Issuer and the holders of Securities of each series affected thereby shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article Eight complies with the applicable provisions of this Indenture.

SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Trustee for such series as to any matter provided for by such supplemental indenture. If the Issuer or the Trustee shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Issuer, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding.

ARTICLE NINE

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. The Issuer covenants that it will not merge or consolidate with any other corporation or sell or convey all or substantially all of its assets to any Person, unless (i) either the Issuer shall be the continuing corporation, or the successor corporation or the Person which acquires by sale or conveyance substantially all the assets of the Issuer (if other than the Issuer) shall be a corporation organized under the laws of the United States of America or any State thereof and shall expressly assume the due and punctual payment of the principal of and interest on all the Securities and Coupons, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Issuer, by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation, and (ii) the Issuer or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in any material respect in the performance of any such covenant or condition.

SECTION 9.2 Successor Corporation Substituted. In case of any such consolidation, merger, sale or conveyance, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Issuer, with the same effect as if it had been named herein. Such successor corporation may cause to be signed, and may issue either in its own name or in the name of the Issuer prior to such succession any or all of the Securities issuable hereunder, together with any Coupons appertaining thereto, which theretofore shall not have been signed by the Issuer and delivered to the Trustee; and, upon the order of such successor corporation instead of the Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities, together with any Coupons appertaining thereto, which previously shall have been signed and delivered by the officers of the Issuer to the Trustee for authentication, and any Securities, together with any Coupons appertaining thereto, which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities, together with any Coupons appertaining thereto, so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities, together with any Coupons appertaining thereto, theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities and Coupons had been issued at the date of the execution hereof.

In case of any such consolidation, merger, sale, lease or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities and Coupons thereafter to be issued as may be appropriate.

In the event of any such sale or conveyance (other than a conveyance by way of lease), the Issuer or any successor corporation which shall theretofore have become such in the manner described in this Article shall be discharged from all obligations and covenants under this Indenture and the Securities and may be liquidated and dissolved.

SECTION 9.3 Opinion of Counsel to Trustee. The Trustee, subject to the provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel, prepared in accordance with Section 11.5, as conclusive evidence that any such consolidation, merger, sale, lease or conveyance, and any such assumption, and any such liquidation or dissolution, complies with the applicable provisions of this Indenture.

ARTICLE TEN

SATISFACTION AND DISCHARGE OF INDENTURE;

UNCLAIMED MONEYS

SECTION 10.1 Satisfaction and Discharge of Indenture; Defeasance.

(A) If at any time (a) the Issuer shall have paid or caused to be paid the principal of and interest on all the Securities of any series Outstanding hereunder and all unmatured Coupons appertaining thereto (other than Securities or Coupons which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9) as and when the same shall have become due and payable, or (b) the Issuer shall have delivered to the Trustee for cancellation all Securities of any series theretofore authenticated and all unmatured Coupons appertaining thereto (other than any Securities or Coupons of such series which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.9) or (c) (i) all the Securities of such series not theretofore delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be or may be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and (ii) the Issuer shall have irrevocably deposited or caused to be deposited with the Trustee as trust funds the entire amount in cash (other than moneys repaid by the Trustee or any paying agent to the Issuer in accordance with Section 10.4) or U.S. Government Obligations, maturing as to principal and interest in such amounts and at such times as will insure the availability of cash (without consideration of any reinvestment of such principal or interest), or a combination of U.S. Government Obligations and cash sufficient to pay at maturity or upon redemption all Securities of such series not theretofore delivered to the Trustee for cancellation, including principal and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Issuer shall also pay or cause to be paid all other sums payable hereunder by the Issuer with respect to Securities of such series and Coupons appertaining thereto, then this Indenture shall cease to be of further effect with respect to Securities of such series and Coupons appertaining thereto (except as to (i) rights of registration of transfer and exchange, and the Issuer’s right of optional redemption, (ii) substitution of Securities or Coupons for mutilated, defaced, destroyed, lost or stolen Securities or Coupons, (iii) rights of holders of Securities and Coupons appertaining thereto to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration) and remaining rights of the holders to receive mandatory sinking fund payments, if any, (iv) the rights, obligations, duties and immunities of the Trustee hereunder, including those under Section 6.6, (v) the rights of the Securityholders of such series as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them, and (vi) the obligations of the Issuer under Section 3.2), and the Trustee, on demand of the Issuer accompanied by an Officers’ Certificate and an Opinion of Counsel and at the cost and expense of the Issuer, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture with respect to such series; provided, that the rights of holders of the Securities and Coupons to receive amounts in respect of principal of and interest on the Securities and Coupons held by them shall not be delayed longer than required by then-applicable mandatory rules or policies of any securities exchange upon which the Securities are listed. Subject to Section 10.4, all money deposited with the Trustee pursuant to (ii) above shall be held in trust and applied by it, in accordance with the provisions of the Securities and this

Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, premium, if any, and interest for whose payment such money has been deposited with the Trustee. The Issuer agrees to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Trustee for any services thereafter reasonably and properly rendered by the Trustee in connection with this Indenture or the Securities and Coupons of such series.

(B) The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers’ Certificate or indenture supplemental hereto provided pursuant to Section 2.3. In addition to discharge of the Indenture pursuant to the next preceding paragraph, the Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Securities of a series and Coupons appertaining thereto on the 121st day after the date of the deposit referred to in subparagraph (a) below, and the provisions of this Indenture with respect to the Securities of such series and Coupons appertaining thereto shall no longer be in effect (except as to (i) rights of registration of transfer and exchange of Securities of such series, and of Coupons appertaining thereto, (ii) substitution of Securities and Coupons for mutilated, defaced, destroyed, lost or stolen Securities or Coupons, (iii) rights of holders of Securities and Coupons appertaining thereto to receive, from the trust fund described in subparagraph (a) below, payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration) and remaining rights of the holders to receive sinking fund payments, if any, (iv) the rights, obligation, duties and immunities of the Trustee hereunder, including those under Section 6.6, (v) the rights of the holders of Securities of such series and Coupons appertaining thereto as beneficiaries hereof with respect to the property so deposited with the Trustee payable to all or any of them and (vi) the obligations of the Issuer under Section 3.2), and the Trustee, at the expense of the Issuer, shall at the Issuer’s request, execute proper instruments acknowledging the same, if

(a) with reference to this provision, the Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Securities of such series and Coupons appertaining thereto (i) cash, or (ii) U.S. Government Obligations, maturing as to principal and interest at such times and in such amounts as will insure the availability of cash or (iii) a combination thereof, in an amount sufficient, in the opinion or a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay (A) the principal and interest on all Securities of such series and Coupons appertaining thereto on the date or dates that such principal or interest is due and payable and (B) any mandatory sinking fund payments on the dates or dates on which such payments are due and payable in accordance with the terms of the Indenture and the Securities of such series;

(b) such deposit will not result in a breach or violation of, or constitute a default under, any agreement or instrument to which the Issuer is a party or by which it is bound;

(c) the Issuer has delivered to the Trustee an opinion of independent legal counsel satisfactory to the Trustee to the effect that holders of the Securities of such series and Coupons appertaining thereto will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and

(d) the Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the defeasance contemplated by this provision have been complied with, and the Opinion of Counsel shall also state that such deposit does not violate applicable law.

SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities. Subject to Section 10.4, all moneys deposited with the Trustee pursuant to Section 10.1 shall be held in trust and applied by it to the payment, either directly or through any paying agent (including the Issuer acting as its own paying agent), to the Holders of the particular Securities of such series and of Coupons appertaining thereto for the payment or redemption of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal and interest; but such money need not be segregated from other funds except to the extent required by law.

SECTION 10.3Repayment of Moneys Held by Paying Agent. In connection with the satisfaction and discharge of this Indenture with respect to Securities of any series, all moneys then held by any paying agent under the provisions of this Indenture with respect to such series of Securities, upon demand of the Issuer, shall be repaid to it or paid to the Trustee and thereupon such paying agent shall be released from all further liability with respect to such moneys.

SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any paying agent for the payment of the principal of or interest on any Security of any series or for any other purpose and not applied but remaining unclaimed for two years after the date upon which such principal or interest shall have become due and payable, upon the written request of the Issuer and unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, shall be repaid to the Issuer by the Trustee for such series or such paying agent, and the holder of the Security of such series, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, shall thereafter look only to the Issuer for any payment which such Holder may be entitled to collect, and all liability of the Trustee or any paying agent with respect to such moneys shall thereupon cease; provided, the Trustee or such paying agent, before being required to make any such repayment with respect to moneys deposited with it for any payment or other purpose (a) in respect of Registered Securities of any series, at the expense of the Issuer, may mail by first class mail to Holders of such Securities at their addresses as they shall appear on the Security Register, and (b) in respect of Unregistered Securities of any series, at the expense of the Issuer may cause to be published once, in an Authorized Newspaper, notice, that such moneys remain and that, after a date specified therein, which shall not be less than thirty days from the date of such mailing or publication, any unclaimed balance of such money then remaining will be repaid to the Issuer.

SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 10.1 or the principal or interest received in respect of such obligations.

ARTICLE ELEVEN

MISCELLANEOUS PROVISIONS

SECTION 11.1Incorporators, Shareholders, Officers and Directors of Issuer Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, or in any Security or Coupon appertaining thereto, or because of any indebtedness evidenced thereby, shall be had against any incorporator, as such, or against any past, present or future shareholder, officer, director or employee, as such, of the Issuer or of any successor, either directly or through the Issuer or any successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of the Securities and any Coupons appertaining thereto by the Holders thereof and as part of the consideration for the issue of the Securities and any Coupons appertaining thereto.

SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Securityholders. Nothing in this Indenture or in the Securities and any Coupons appertaining thereto, expressed or implied, shall give or be construed to give to any person, firm or corporation, other than the parties hereto and their successors and the holders of the Securities or Coupons, any legal or equitable right, remedy or claim under this Indenture or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their respective successors and of the holders of the Securities.

SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All the covenants, stipulations, promises and agreements in this Indenture contained by or in behalf of the Issuer shall bind its successors and assigns, whether so expressed or not.

SECTION 11.4 Notices and Demands on Issuer, Trustee and Securityholders. Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Securities or Coupons to or on the Issuer may be given or served by being deposited postage prepaid, first-class mail (except as otherwise specifically provided herein) addressed (until another address of the Issuer is filed by the Issuer with the Trustee) to The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143, Attn: Treasurer. Any notice, direction, request or demand by the Issuer or any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made at the Corporate Trust Office.

Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each holder entitled thereto, at his last address as it appears in the registry books or as so filed. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given when mailed, whether or not the Holder receives the notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with

respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case, by reason of the suspension of or irregularities in regular mail service, it shall be impracticable to mail notice to the Issuer and Securityholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice.

SECTION 11.5 Officers’ Certificates and Opinions of Counsel; Statements to Be Contained Therein. Upon any application or demand by the Issuer to the Trustee to take any action under any of the provisions of this Indenture, the Issuer shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished.

Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based, (c) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.

Any certificate, statement or opinion of an officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters, information with respect to which is in the possession of the Issuer, upon the certificate, statement or opinion of or representations by an officer or officers of the Issuer, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.

Any certificate, statement or opinion of an officer of the Issuer or of counsel may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants in the employ of the Issuer, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous.

Any certificate or opinion of any independent firm of public accountants filed with the Trustee shall contain a statement that such firm is independent.

SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the date of maturity of interest on or principal of the Securities of any series or any Coupons appertaining thereto or the date fixed for redemption or repayment of any such Security or Coupon shall not be a Business Day, then payment of interest or principal need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the date of maturity or the date fixed for redemption, and no interest shall accrue for the period after such maturity date.

SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included herein by any of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, such required provision shall control.

SECTION 11.8 New York Law to Govern. This Indenture and each Security and Coupon shall be deemed to be a contract under the laws of the State of New York, and for all purposes shall be construed in accordance with the laws of such State, except as may otherwise be required by mandatory provisions of law.

SECTION 11.9 Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.

SECTION 11.10 Effect of Headings. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 11.11 Securities in Foreign Currencies. Whenever this Indenture provides for any action by, or the determination of any of the rights of, or any distribution to, holders of Securities denominated in United States dollars and in any other currency or currency unit, in the absence of any provision to the contrary in the form of such Security of any particular series, any amount in respect of any Security denominated in a currency or currency unit other than United States dollars shall be treated for any such action or distribution as that amount of United States dollars that could be obtained for such amount on such reasonable basis of exchange and as of such date as the Issuer may reasonably specify in a written notice to the Trustee or in the absence of such written notice, as the Trustee shall so determine.

ARTICLE TWELVE

REDEMPTION OF SECURITIES AND SINKING FUNDS

SECTION 12.1 Applicability of Article. The provisions of this Article shall be applicable to the Securities of any series which are redeemable before their maturity or to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 2.3 for Securities of such series.

SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of redemption to the holders of Securities of any series to be redeemed as a whole or in part at the option of the Issuer shall be given by mailing notice of such redemption by first class mail, postage prepaid at least 30 days and not more than 60 days prior to the date fixed for redemption to such holders of Securities of such series at their last addresses as they shall appear upon the Security Register. Any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives the notice. Failure to give notice by mail, or any defect in the notice to the holder of any Security of a series designated for redemption, as a whole or in part, shall not affect the validity of the proceedings for the redemption of any other Security of such series.

The notice of redemption to each such Holder shall specify the principal amount of each Security of such series held by such Holder to be redeemed, the date fixed for redemption, the redemption price, the place or places of payment, that payment will be made upon presentation and surrender of such Securities, and, in the case of Securities with Coupons attached thereto, of all Coupons appertaining thereto maturing after the date fixed for redemption, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest accrued to the date fixed for redemption will be paid as specified in such notice and that, on and after said date, interest thereon or on the portions thereof to be redeemed will cease to accrue. In case any Security of a series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Security, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof will be issued.

The notice of redemption of Securities of any series to be redeemed at the option of the Issuer shall be given by the Issuer or, at the Issuer’s request, by the Trustee in the name and at the expense of the Issuer.

On the redemption date specified in the notice of redemption given as provided in this Section, the Issuer will deposit with the Trustee or with one or more paying agents (or, if the Issuer is acting as its own paying agent, set aside, segregate and hold in trust as provided in Section 3.4) an amount of money sufficient to redeem on the redemption date all the Securities of such series so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption. If any or all of the outstanding Securities of a series are to be redeemed, the Issuer will deliver to the Trustee at least 70 days prior to the date fixed for redemption an Officers’ Certificate stating the date of redemption and the aggregate principal amount of Securities to be redeemed.

If less than all the Securities of a series are to be redeemed, the Trustee shall select, in such manner as at the time shall be required by law or, if no such legal requirement shall then exist, in such manner as it shall deem appropriate and fair, Securities of such series to be redeemed in whole or in part. Securities may be redeemed in part in multiples equal to the minimum authorized denomination for Securities of such series or any integral multiple thereof. The Trustee shall promptly notify the Issuer in writing of the Securities of such series selected for

redemption and, in the case of any Securities of such series selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities of any series shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed.

SECTION 12.3 Payment of Securities Called for Redemption. If notice of redemption has been given as above provided, the Securities or portions of Securities specified in such notice shall become due and payable on the date and at the place stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after said date (unless the Issuer shall default in the payment of such Securities at the redemption price, together with interest accrued to said date) interest on the Securities or portions of Securities so called for redemption shall cease to accrue and the unmatured Coupons, if any, appertaining thereto shall be void and, except as provided in Sections 6.5 and 10.4, such Securities shall cease from and after the date fixed for redemption to be entitled to any benefit or security under this Indenture, and the Holders thereof shall have no right in respect of such Securities except the right to receive the redemption price thereof and unpaid interest to the date fixed for redemption. On presentation and surrender of such Securities, together with all Coupons appertaining thereto maturing after the date fixed for redemption, at a place of payment specified in said notice, said Securities and Coupons or the specified portions thereof shall be paid and redeemed by the Issuer at the applicable redemption price, together with interest accrued thereon to the date fixed for redemption; provided that any semiannual payment of interest becoming due on the date fixed for redemption shall be payable in the case of Securities with Coupons attached thereto, to the bearers of the Coupons for such interest upon surrender thereof, and in the case of Registered Securities, to the holders of such Securities registered as such on the relevant record date subject to the terms and provisions of Section 2.4 hereof.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid or duly provided for, bear interest from the date fixed for redemption at the rate of interest or Yield to Maturity (in the case of an Original Issue Discount Security) borne by the Security.

If any Security with Coupons attached thereto is surrendered for redemption and is not accompanied by all such Coupons maturing after the date fixed for redemption, the surrender of such missing Coupon or Coupons may be waived by the Issuer and the Trustee, if there be furnished to each of them such security or indemnity as they may require to save each of them harmless.

Upon presentation of any Security redeemed in part only, the Issuer shall execute and the Trustee shall authenticate and deliver to or on the order of the Holder thereof, at the expense of the Issuer, a new Security or Securities of such series, together with all Coupons, if any, appertaining thereto, of authorized denominations, in principal amount equal to the unredeemed portion of the Security so presented.

SECTION 12.4Exclusion of Certain Securities from Eligibility for Selection for Redemption. Securities shall be excluded from eligibility for selection for redemption if they are identified by registration and certificate number in a written statement signed by an authorized

officer of the Issuer and delivered to the Trustee at least 40 days prior to the last date on which notice of redemption may be given as being owned of record and beneficially by, and not pledged or hypothecated by either (a) the Issuer or (b) an entity specifically identified in such written statement directly or indirectly controlling or controlled by or under direct or indirect common control with the Issuer.

SECTION 12.5Mandatory and Optional Sinking Funds. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a “mandatory sinking fund payment”, and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an “optional sinking fund payment.” The date on which a sinking fund payment is to be made is herein referred to as the “sinking fund payment date.”

In lieu of making all or any part of any mandatory sinking fund payment with respect to any series of Securities in cash, the Issuer at its option may (a) deliver to the Trustee Securities of such series theretofore purchased or otherwise acquired (except upon redemption pursuant to the mandatory sinking fund) by the Issuer or receive credit for Securities of such series (not previously so credited) theretofore purchased or otherwise acquired (except as aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant to Section 2.10,(b) receive credit for optional sinking fund payments (not previously so credited) made pursuant to this Section, or (c) receive credit for Securities of such series (not previously so credited) redeemed by the Issuer through any optional redemption provision contained in the terms of such series. Securities so delivered or credited shall be received or credited by the Trustee at the sinking fund redemption price specified in such Securities.

On or before the 60th day next preceding each sinking fund payment date for any series, the Issuer will deliver to the Trustee a written statement (which need not contain the statements required by Section 11.5) signed by an authorized officer of the Issuer (a) specifying the portion of the mandatory sinking fund payment to be satisfied by payment of cash and the portion to be satisfied by credit of Securities of such series, (b) if applicable, stating that none of the Securities of such series has theretofore been so credited, (c) stating that no defaults in the payment of interest or Events of Default with respect to such series have occurred (which have not been waived or cured) and are continuing and (d) stating whether or not the Issuer intends to exercise its right to make an optional sinking fund payment with respect to such series and, if so, specifying the amount of such optional sinking fund payment which the Issuer intends to pay on or before the next succeeding sinking fund payment date. Any Securities of such series to be credited and required to be delivered to the Trustee in order for the Issuer to be entitled to credit therefor as aforesaid which have not theretofore been delivered to the Trustee shall be delivered for cancellation pursuant to Section 2.10 to the Trustee with such written statement (or reasonably promptly thereafter if acceptable to the Trustee). Such written statement shall be irrevocable and upon its receipt by the Trustee the Issuer shall become unconditionally obligated to make all the cash payments or payments therein referred to, if any, on or before the next succeeding sinking fund payment date. Failure of the Issuer, on or before any such 60th day, to deliver such written statement and Securities specified in this paragraph, if any, shall not constitute a default, but shall constitute, on and as of such date, the irrevocable election of the Issuer (i) that the mandatory sinking fund payment for such series due on the next succeeding sinking fund payment date shall be paid entirely in cash without the option to deliver or credit Securities of such series in respect thereof and (ii) that the Issuer will make no optional sinking fund payment with respect to such series as provided in this Section.

If the sinking fund payment or payments (mandatory or optional or both) to be made in cash on the next succeeding sinking fund payment date plus any unused balance of any preceding sinking fund payments made in cash shall exceed $50,000 (or a lesser sum if the Issuer shall so request) with respect to the Securities of any particular series, such cash shall be applied on the next succeeding sinking fund payment date to the redemption of Securities of such series at the sinking fund redemption price, together with accrued interest to the date fixed for redemption. If such amount shall be $50,000 or less and the Issuer makes no such request, then it shall be carried over until a sum in excess of $50,000 is available. The Trustee shall select, in the manner provided in Section 12.2, for redemption on such sinking fund payment date a sufficient principal amount of Securities of such series to absorb said cash, as nearly as may be, and (if requested in writing by the Issuer) shall inform the Issuer of the serial numbers of the Securities of such series (or portions thereof) so selected. Except as aforesaid, any moneys in the sinking fund for such series at the time when any default or Event of Default shall occur, and any moneys thereafter paid into the sinking fund, during the continuance of such default or Event of Default, shall be deemed to have been collected under Article Five and held for the payment of all such Securities. In case such Event of Default shall have been waived as provided in Section 5.10 or the default cured on or before the 60th day preceding the sinking fund payment date in any year, such moneys shall thereafter be applied on the next succeeding sinking fund payment date in accordance with this Section to the redemption of such Securities.

ARTICLE THIRTEEN

SUBORDINATION OF SECURITIES

SECTION 13.1 Securities Subordinate to Senior Debt. The Issuer, for itself, its successors and assigns, covenants and agrees, and each Holder likewise covenants and agrees by his acceptance thereof, that the obligations of the Issuer to make any payment on account of the principal of and interest on each and all of the Securities shall be subordinate and junior, to the extent and in the manner hereinafter set forth, in right of payment and upon liquidation to the Issuer’s obligations to the holders of Senior Debt of the Issuer.

SECTION 13.2 Issuer Not to Pay if Senior Debt of Issuer is in Default. No payment on account of principal or interest on the Securities shall be made by the Issuer unless full payment of amounts then due for principal (and premium, if any), sinking funds, and interest on Senior Debt of the Issuer has been made or duly provided for in money or money’s worth in accordance with its terms. No payment on account of principal or interest on the Securities shall be made by the Issuer if, at the time of such payment or immediately after giving effect thereto, there shall have occurred an event of default with respect to any Senior Debt of the Issuer or in any instrument under which the same is outstanding, permitting the holders thereof (or a trustee on behalf of the holders thereof) to accelerate the maturity thereof, or an event that, with the giving of notice or the passage of time or both, would constitute such event of default, and such event of default shall not have been cured or waived.

SECTION 13.3 Payment over of Proceeds upon Dissolution, Default, Etc., of the Issuer.The Issuer agrees that upon (i) the occurrence of any Senior Debt event of default referred to in Section 13.2 above that shall not have been cured or waived or (ii) any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Issuer, whether voluntary or involuntary or in bankruptcy, insolvency, receivership, conservatorship or other proceedings, all principal (and premium, if any), sinking fund payments and interest due or to become due upon all Senior Debt of the Issuer shall first be paid in full, or payment thereof provided for in money or money’s worth in accordance with its terms, before any payment is made on account of the principal of or interest on the indebtedness evidenced by the Securities, and upon any such dissolution or winding up or liquidation or reorganization, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities (other than securities of the Issuer or any other Person provided for by a plan of reorganization or readjustment, the payment of which is subordinate, at least to the extent provided in this Section with respect to the Securities, to the payment in full of all Senior Debt, provided the rights of the Holders of the Senior Debt are not altered by such reorganization or readjustment), to which the Holders of the Securities would, except for the provisions hereof, be entitled, shall be paid by the Issuer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, or by the Holders or by the Trustee under this instrument if received by them or it, directly to the holders of Senior Debt of the Issuer (pro rata to each such holder on the basis of the respective amounts of Senior Debt held by such holder) or their representatives, to the extent necessary to pay all Senior Debt of the Issuer in full, in money or money’s worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Debt, before any payment or distribution is made to the Holders of the indebtedness evidenced by the Securities or to the Trustee or to any paying agent (subject, in the case of the Trustee or any paying agent, to the provisions of Section 6.5) under this instrument.

In the event that any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, including any such payment or distribution that may be payable or deliverable by reason of the payment of any other indebtedness of the Issuer being subordinated to the payment of the Securities, not permitted by the foregoing, shall be received by the Trustee or any Holder before all Senior Debt of the Issuer is paid in full, or provision is made for such payment, in accordance with its terms, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of such Senior Debt of the Issuer (pro rata to each such holder on the basis of the respective amounts of Senior Debt held by such holder) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt of the Issuer may have been issued, as their respective interests may appear, or to any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such distribution, for application to the payment of all Senior Debt of the Issuer remaining unpaid to the extent necessary to pay all such Senior Debt of the Issuer in full in accordance with its terms, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt of the Issuer.

The consolidation of the Issuer with, or the merger of the Issuer into, another corporation or the liquidation or dissolution of the Issuer following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in

Article Nine shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section if the corporation formed by such consolidation or into which the Issuer is merged or the Person that acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, as a part of such consolidation, merger, conveyance or transfer, shall comply with the conditions set forth in Article Nine.

SECTION 13.4 Subrogation to Rights of Holders of Senior Debt. Subject to the prior payment in full of all Senior Debt of the Issuer, the Holders shall be subrogated (equally and ratably with the holders of all indebtedness of the Issuer that by its express terms is subordinated to indebtedness of the Issuer to substantially the same extent as the Securities are subordinated and is entitled to like rights of subrogation) to the rights of the holders of such Senior Debt to receive payments or distributions of cash, property and securities applicable to the Senior Debt of the Issuer until the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions in respect of the Senior Debt of the Issuer of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Debt by Holders of the Securities or the Trustee, as between the Issuer, its creditors other than holders of Senior Debt of the Issuer and the Holders of the Securities, shall be deemed to be a payment or distribution by the Issuer to or on account of the Senior Debt of the Issuer; and no payments or distributions to the Trustee or the Holders of the Securities of cash, property or securities that are applied to the satisfaction of Senior Debt of the Issuer, as the case may be, by virtue of the subordination herein provided for, as between the Issuer, its creditors other than the holders of Senior Debt of the Issuer and the Holders of the Securities, shall be deemed to be a payment by the Issuer to or on account of the Securities.

SECTION 13.5Reliance on Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Issuer referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders shall be entitled to rely upon an order or decree made by any court of competent jurisdiction in which such dissolution or winding up or liquidation or reorganization or arrangement proceedings are pending or upon a certificate of the trustee in bankruptcy, receiver, conservator, assignee for the benefit of creditors or other person making such payment or distribution, delivered to the Trustee or to the Holders, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Debt, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent or to this Article.

SECTION 13.6Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture, or in any of the Securities, shall prevent (a) the Issuer, at any time except during the pendency of any dissolution, winding up, liquidation or reorganization or other similar proceedings referred to in Section 13.3 or under the conditions described in Section 13.2, from making payments at any time of principal of (or premium, if any) or interest on the Securities or (b) the application by the Trustee or any paying agent of any moneys deposited with it hereunder to the payment of or on account of the principal of (or premium, if any) or interest on Securities, if, at the time of such application, the Trustee or such paying agent, as the case may be, did not have the written notice provided for in Section 13.7 of any event prohibiting the making of such deposit or if, at the time of such deposit (whether or not in trust) by the Issuer with the Trustee or any paying agent (other than the Issuer), such payment would not have been prohibited by the provisions of this Article.

SECTION 13.7Trustee Not Charged with Knowledge of Prohibition. Anything in this Article or elsewhere in this Indenture contained to the contrary notwithstanding, the Trustee shall not at any time be charged with knowledge of the existence of any facts that would prohibit the making of any payment of moneys to or by the Trustee and, subject to the provisions of Section 6.1, shall be entitled to assume that no event of default or prohibition specified in Section 13.2 has happened, until the Trustee shall have received an Officers’ Certificate of the Issuer to that effect or notice in writing signed by or on behalf of the holders, or their representatives, of at least $10,000,000 in principal amount of Senior Debt of the Issuer who shall have been certified by the Issuer or otherwise established to the reasonable satisfaction of the Trustee to be such holders or representatives or from any trustee under any indenture pursuant to which such Senior Debt shall be outstanding.

SECTION 13.8 Provisions are Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders on the one hand, and the holders of the Senior Debt on the other. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Issuer, its creditors other than holders of Senior Debt and the Holders of the Securities, the obligation of the Issuer, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Debt, is intended to rank equally with all other general obligations of the Issuer), to pay to the Holders of the Securities the principal of (and premium, if any, on) and interest on the Securities as and when the same shall become due and payable in accordance with their terms; (b) affect the relative rights against the Issuer of the Holders of the Securities and creditors of the Issuer other than the holders of Senior Debt; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Debt, to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

SECTION 13.9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Debt of the Issuer to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Issuer with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.

SECTION 13.10 Trustee to Effectuate Subordination. Each Holder by his acceptance of a Security or Securities authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes.

The Trustee, however, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders or creditors if it in good faith mistakenly shall pay over or distribute to or on behalf of Holders of the Securities or the Issuer moneys or assets to which any holder of Senior Debt shall be entitled by virtue of this Article.

SECTION 13.11 Rights of Trustee as Holder of Senior Debt. The Trustee shall be entitled to all the rights set forth in this Article with respect to any Senior Debt that may at any time be held by it, to the same extent as any other holder of Senior Debt, as the case may be, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

SECTION 13.12 Article Applicable to Paying Agents. In case at any time any paying agent other than the Trustee shall have been appointed by the Issuer with respect to a series of Securities and be then acting hereunder, the term “Trustee” as used in this Article shall in such case (unless the context shall otherwise require) be construed as extending to, and including such paying agent within its meaning as fully for all intents and purposes as if such paying agent were named in this Article in addition to or in place of the Trustee; provided, however, that Sections 13.8 and 13.11 shall not apply to the Issuer or any Affiliate of the Issuer if it or such Affiliate acts as paying agent; and provided, further, that no paying agent (other than the Issuer or any Affiliate of the Issuer if it or such Affiliate acts as paying agent) shall be deemed to owe any fiduciary duty to the holders of Senior Debt or shall be liable to any such holder if it shall pay over or distribute to or on behalf of Holders of Securities or the Issuer or any other Person moneys or assets to which any holder of Senior Debt shall be entitled by virtue of this Article or otherwise.

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of June 21, 2007.

	THE PROGRESSIVE CORPORATION
[Corporate Seal]
	By:	/s/ Thomas A. King
		Name: Thomas A. King
		Title: Vice President and Treasurer

Attest:
By:	/s/ Charles E. Jarrett
Name:	Charles E. Jarrett
Title:	Vice President, Secretary and Chief Legal Officer

THE BANK OF NEW YORK TRUST COMPANY, N.A, as Trustee
By:	/s/ L. Garcia
Name:	L. Garcia
Title:	Authorized Signatory

STATE OF OHIO             )

) ss.:

COUNTY OF CUYAHOGA)

On this day of ________, 2007, before me personally came ____________ to me personally known, who, being by me duly sworn, did depose and say that he resides at _________________, Ohio; that he is an officer of THE PROGRESSIVE CORPORATION, one of the corporations described in and which executed the above instrument; that he knows the corporate seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.

Notary Public

[Notarial Seal]

STATE OF ILLINOIS     )

) ss.:

COUNTY OF COOK )

On this _________day of ___________, 2007 before me personally came Linda Garcia to me personally known, who, being by me duly sworn, did depose and say that he resides at _____________, ______________; that she is an authorized officer of The Bank of New York Trust Company, N.A., one of the corporations described in and which executed the above instrument, and that she signed her name thereto by like authority.

Notary Public

[Notarial Seal]

EX-4.20

Exhibit 4.20

FIRST SUPPLEMENTAL INDENTURE

between

THE PROGRESSIVE CORPORATION

and

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee

Supplemental to Junior Subordinated Indenture

dated as of June 21, 2007

TABLE OF CONTENTS

			Page
ARTICLE ONE		Definitions	1
	Section 1.01.	Definitions	1
ARTICLE TWO		General Terms and Conditions of the Debentures	10
	Section 2.01.	Designation, Principal Amount and Authorized Denominations	10
	Section 2.02.	Repayment	11
	Section 2.03.	Form	14
	Section 2.04.	Rate of Interest; Interest Payment Date	14
	Section 2.05.	Interest Deferral	15
	Section 2.06.	Alternative Payment Mechanism	16
	Section 2.07.	Events of Default	20
	Section 2.08.	Securities Registrar; Paying Agent; Delegation of Trustee Duties	23
	Section 2.09.	Limitation on Claims in the Event of Bankruptcy, Insolvency or Receivership	24
	Section 2.10.	Location of Payment	24
	Section 2.11.	No Sinking Fund	24
	Section 2.12.	Subordination	25
	Section 2.13.	Defeasance	25
ARTICLE THREE		Covenants	25
	Section 3.01.	Dividend and Other Payment Stoppages	25
	Section 3.02.	Additional Limitation on Deferral Over One Year	26
ARTICLE FOUR		Redemption of the Debentures	27
	Section 4.01.	Redemption Price	27
	Section 4.02.	Limitation on Partial Redemption	27
ARTICLE FIVE		Repayment of Debentures	27
	Section 5.01.	Repayments	27
	Section 5.02.	Selection of the Debentures to be Repaid	27
	Section 5.03.	Notice of Repayment	28
	Section 5.04.	Deposit of Repayment Amount	28
	Section 5.05.	Repayment of Debentures	29
ARTICLE SIX		Original Issue of Debentures	29
	Section 6.01.	Calculation of Original Issue Discount	29
ARTICLE SEVEN		Supplemental Indentures	29
	Section 7.01.	Supplemental Indentures Without Consent of Holders	29
ARTICLE EIGHT		Miscellaneous	30
	Section 8.01.	Effectiveness	30
	Section 8.02.	Successors and Assigns	30
	Section 8.03	Effect of Recitals	31
	Section 8.04.	Ratification of Indenture	31
	Section 8.05.	Governing Law	31
	Section 8.06.	Severability	31

FIRST SUPPLEMENTAL INDENTURE

First Supplemental Indenture, dated as of June 21, 2007 (the “First Supplemental Indenture”), between The Progressive Corporation, an Ohio corporation (the “Issuer”), having its principal office at 6300 Wilson Mills Road, Mayfield Village, Ohio 44143, and The Bank of New York Trust Company, N.A., a national banking association, as trustee (hereinafter called the “Trustee”).

RECITALS OF THE ISSUER

The Issuer and the Trustee entered into a Junior Subordinated Indenture, dated as of June 21, 2007 (the “Indenture”).

Section 8.1 of the Indenture provides that the Issuer and the Trustee, without the consent of any Holder, may enter into a supplemental indenture to establish the form or terms of Securities of any series as permitted by Section 2.3 thereof.

Pursuant to Section 2.3 of the Indenture, the Issuer desires to provide for the establishment of a series of Securities under the Indenture, and the form and terms thereof, as hereinafter set forth.

The Issuer has requested that the Trustee execute and deliver this First Supplemental Indenture. The Issuer has delivered to the Trustee an Opinion of Counsel and an Officers’ Certificate pursuant to Section 2.4 of the Indenture to the effect, among other things, that all conditions precedent provided for in the Indenture to the Trustee’s execution and delivery of this First Supplemental Indenture have been complied with. All acts and things necessary have been done and performed to make this First Supplemental Indenture enforceable in accordance with its terms, and the execution and delivery of this First Supplemental Indenture has been duly authorized in all respects.

NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Debentures (as herein defined) by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Debentures, as follows:

ARTICLE ONE

Definitions

Section 1.01. Definitions

For all purposes of this First Supplemental Indenture, except as otherwise expressly provided herein or unless the context otherwise requires:

(a) Terms defined in the Indenture have the same meanings when used in this First Supplemental Indenture unless otherwise defined herein.

(b) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular.

(c) The words “herein”, “hereof” and “hereunder” and other words of similar import refer to this First Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision, and any reference to an Article, Section or other subdivision refers to an Article, Section or other subdivision of this First Supplemental Indenture unless otherwise specified.

(d) Any reference herein to “interest” shall include any Additional Interest, except where the context requires otherwise.

In addition, the following terms used in this First Supplemental Indenture have the following respective meanings:

“Additional Interest” means the interest, if any, that shall accrue on any interest on the Debentures the payment of which has not been made on the applicable Interest Payment Date, compounded on each subsequent Interest Payment Date.

“Applicable Spread” means (i) with respect to a redemption of all outstanding Debentures in connection with a Tax Event, 0.50%, (ii) with respect to a redemption of all outstanding Debentures in connection with a Rating Agency Event, 0.50% and (iii) in all other cases, 0.25%.

“Business Day” means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed, (iii) a day on which the corporate trust office of the Trustee is closed for business or (iv) on or after June 15, 2017, a day that is not a London Banking Day.

“Business Combination” means any transaction that is subject to Section 9.1 of the Indenture.

“Calculation Agent” means, with respect to the Debentures, The Bank of New York Trust Company, N.A., or any other firm appointed by the Issuer, acting as calculation agent in respect of the Debentures.

“Commercially Reasonable Efforts” to sell Qualifying Capital Securities means commercially reasonable efforts to complete the offer and sale of Qualifying Capital Securities to Persons other than Subsidiaries in public offerings or private placements, provided that the Issuer shall not be considered to have made Commercially Reasonable Efforts to effect a sale of Qualifying Capital Securities if it determines not to pursue or complete such sale solely due to pricing, coupon, dividend rate or dilution considerations.

“Common Equity Issuance Cap” has the meaning specified in Section 2.06(a).

“Common Shares” means (i) the Issuer’s common shares, including common shares issued pursuant to any dividend reinvestment plan or the Issuer’s employee benefit plans, (ii) a security of the Issuer ranking upon the Issuer’s liquidation, dissolution or winding up junior to Qualifying Non-Cumulative Preferred Shares and pari passu with the common shares that tracks the performance of, or relates to the results of, a business, unit or division of the Issuer or its Subsidiaries, and (iii) any securities issued in exchange for the securities described in clause (i) or (ii) above in connection with a merger, consolidation, binding share exchange, business combination, recapitalization or other similar event.

“Current Stock Market Price” means, with respect to the Common Shares on any date, (i) the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date (a) as reported in composite transactions by the New York Stock Exchange or (b) if the Common Shares are not then listed on the New York Stock Exchange on such date, as reported by the principal U.S. securities exchange on which the Common Shares are traded or quoted or (ii) if the Common Shares are not listed on any U.S. securities exchange on such date, the last quoted bid price for the Common Shares in the over-the-counter market on such date as reported by the National Quotation Bureau or similar organization or (iii) if the Common Shares are not so quoted, the average of the mid-point of the last bid and ask prices for the Common Shares on such date from each of at least three nationally recognized independent investment banking firms selected by the Issuer for this purpose.

“Date of QCS Notice” has the meaning specified in Section 2.02(a).

“Debentures” has the meaning specified in Section 2.01(a).

“Deferral Period” means the period commencing on an Interest Payment Date with respect to which the Issuer elects to defer interest pursuant to Section 2.05 and ending on the earlier of (i) the tenth anniversary of that Interest Payment Date or (ii) the next Interest Payment Date on which the Issuer has paid all deferred interest and all other accrued interest on the Debentures.

“Depositary” means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, The Depository Trust Company (or any successor thereto).

“Eligible Proceeds” means, for each relevant Interest Payment Date, the net proceeds (after deducting underwriters’ or placement agents’ fees, commissions or discounts and other expenses relating to the issuance or sale) the Issuer has received during the 180-day period prior to such Interest Payment Date from the issuance or sale of Qualifying APM Securities (excluding sales of Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares in excess of the Preferred Shares Issuance Cap) to Persons that are not Subsidiaries.

“Final Maturity Date” has the meaning specified in Section 2.02(b).

“First Supplemental Indenture” means this instrument as originally executed or as it from time to time may be supplemented or amended by one or more agreements supplemental hereto.

“Fixed Rate Portion” has the meaning specified in Section 2.06(a).

“Global Security” means a Security evidencing all or part of a series of Debentures, issued to the Depositary or its nominee for such series, and registered in the name of such Depositary or its nominee.

“Indenture” has the meaning specified in the Recitals.

“Intent-Based Replacement Disclosure” has the meaning specified in the Replacement Capital Covenant.

“Interest Payment Dates” has the meaning specified in Section 2.04.

“Interest Period” means a Semi-Annual Interest Period or a Quarterly Interest Period, as the case may be.

“Issuer” has the meaning specified in the Recitals.

“LIBOR Determination Date” means the second London Banking Day immediately preceding the first day of the relevant Quarterly Interest Period.

“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.

“Make-Whole Redemption Price” means, with respect to a redemption of the Debentures in whole or in part, the present value of a principal payment on June 15, 2017 and scheduled payments of interest that would have accrued from the Redemption Date to June 15, 2017 on the Debentures being redeemed, discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Rate (as determined and provided to the Issuer by the Treasury Dealer) plus the Applicable Spread, plus accrued and unpaid interest to the Redemption Date.

“Mandatorily Convertible Preferred Shares” means Preferred Shares with (i) no prepayment obligation of the liquidation preference on the part of the Issuer, whether at the election of the holders or otherwise, and (ii) a requirement that the Preferred Shares mandatorily convert into Common Shares within three years from the date of its issuance at a conversion ratio within a range established at the time of issuance of such Preferred Shares.

“Market Disruption Event” means, with respect to the issuance or sale of Qualifying Capital Securities pursuant to Section 2.02 or Qualifying APM Securities pursuant to Section 2.06, the occurrence or existence of any of the following events or set of circumstances:

(i) Trading in securities generally, or in shares of the Issuer’s securities specifically, on the New York Stock Exchange or any other national securities exchange or in the over-the-counter market on which Qualifying APM Securities or Qualifying Capital Securities, as the case may be, are then listed or traded shall have been suspended or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or market by the United States Securities and Exchange Commission, by the relevant exchange or by any other regulatory agency or governmental body having jurisdiction such that trading shall have been materially disrupted;

(ii) The Issuer would be required to obtain the consent or approval of the Issuer’s shareholders or a regulatory body (including, without limitation, any securities exchange) or governmental authority to issue or sell Qualifying APM Securities pursuant to Section 2.06 or to issue Qualifying Capital Securities pursuant to Section 2.02, as the case may be, and such consent or approval has not yet been obtained notwithstanding the Issuer’s commercially reasonable efforts to obtain such consent or approval;

(iii) A banking moratorium shall have been declared by the federal or state authorities of the United States such that the issuance of, or market trading in, the Qualifying APM Securities or the Qualifying Capital Securities, as applicable, has been disrupted or ceased;

(iv) A material disruption shall have occurred in commercial banking or securities settlement or clearance services in the United States such that the issuance of, or market trading in, the Qualifying APM Securities or the Qualifying Capital Securities, as applicable, has been disrupted or ceased;

(v) The United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States, there shall have been a declaration of a national emergency or war by the United States or there shall have occurred any other national or international calamity or crisis such that, in any such case, the issuance of, or market trading in, the Qualifying APM Securities or the Qualifying Capital Securities, as applicable, has been disrupted or ceased;

(vi) There shall have occurred such a material adverse change in general domestic or international economic, political or financial conditions, including without limitation as a result of terrorist activities, or the effect of international conditions on the financial markets in the United States shall be such that the issuance of, or market trading in, Qualifying APM Securities or Qualifying Capital Securities, as applicable, shall have been materially disrupted;

(vii) An event occurs and is continuing as a result of which the offering document for such offer and sale of Qualifying APM Securities or Qualifying Capital Securities, as the case may be, in the reasonable judgment of the Issuer, would contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and either (x) the disclosure of that event at such time, in the reasonable judgment of the Issuer, is not otherwise required by law and would have a material adverse effect on the business of the Issuer or (y) the disclosure relates to a previously undisclosed proposed or pending material business transaction, provided that no single suspension period contemplated by this clause (vii) shall exceed 90 consecutive days and multiple suspension periods contemplated by this clause (vii) shall not exceed an aggregate of 180 days in any 360-day period; or

(viii) The Issuer reasonably believes that the offering document for such offer and sale of Qualifying APM Securities or Qualifying Capital Securities, as the case may be, would not be in compliance with a rule or regulation of the United States Securities and

Exchange Commission (for reasons other than those referred to in clause (vii) above), and the Issuer determines it is unable to comply with such rule or regulation or such compliance is unduly burdensome, provided that no single suspension period contemplated by this clause (viii) shall exceed 90 consecutive days and multiple suspension periods contemplated by this clause (viii) shall not exceed an aggregate of 180 days in any 360-day period.

“Pari Passu Securities” means debt securities of the Issuer that rank in right of payment upon liquidation on a parity with the Debentures, and includes the Debentures.

“Permitted Remedies” has the meaning specified in the Replacement Capital Covenant.

“Preferred Shares” means the preferred shares of the Issuer.

“Preferred Shares Issuance Cap” has the meaning specified in Section 2.06(a).

“Qualifying APM Securities” means Common Shares, Qualifying Non-Cumulative Preferred Shares, Qualifying Warrants and Mandatorily Convertible Preferred Shares, provided that the Issuer may amend this definition in accordance with Section 2.06(e).

“Qualifying Capital Securities” has the meaning specified in the Replacement Capital Covenant.

“Qualifying Non-Cumulative Preferred Shares” means the Issuer’s non-cumulative Preferred Shares that (w) rank pari passu with or junior to all of the Issuer’s other Preferred Shares, (x) are perpetual, (y) are subject to (a) a Qualifying Replacement Capital Covenant or (b) both (i) mandatory suspension of dividends in the event the Issuer breaches certain financial metrics specified in the offering documents relating to such Preferred Shares and (ii) Intent-Based Replacement Disclosure, and (z) as to which, in both clauses (a) and (b) the transaction documents for such Preferred Shares shall provide for no remedies as a consequence of non-payment of distributions other than Permitted Remedies.

“Qualifying Replacement Capital Covenant” has the meaning specified in the Replacement Capital Covenant.

“Qualifying Warrants” means any net share-settled warrants to purchase Common Shares (i) which have an exercise price at the time of issuance greater than the Current Shares Market Price and (ii) which the Issuer is not entitled to redeem for cash and the holders of which are not entitled to require the Issuer to purchase for cash in any circumstances.

“Quarterly Interest Payment Date” shall have the meaning specified in Section 2.04.

“Quarterly Interest Period” means the period beginning on and including June 15, 2017 and ending on but excluding the next Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next Interest Payment Date.

“Rating Agency Event” means that any nationally recognized statistical rating organization within the meaning of Section 3(a)(62) of the Securities Exchange Act of 1934 that then publishes a rating for the Issuer (a “rating agency”) amends, clarifies or changes the criteria it uses to assign equity credit to securities such as the Debentures, which amendment, clarification or change results in:

(i) the shortening of the length of time the Debentures are assigned a particular level of equity credit by that rating agency as compared to the length of time they would have been assigned that level of equity credit by that rating agency or its predecessor on the issue date of the Debentures, or

(ii) the lowering of the equity credit (including up to a lesser amount) assigned to the Debentures by that rating agency as compared to the equity credit assigned by that rating agency or its predecessor on the issue date of the Debentures.

“Redemption Date” has the meaning specified in Section 4.01.

“Redemption Price” has the meaning specified in Section 4.01.

“Regular Record Date” means (i) with respect to a Semi-Annual Interest Payment Date, June 1 or December 1, as the case may be, immediately preceding the relevant Semi-Annual Interest Payment Date, and (ii) with respect any Quarterly Interest Payment Date, March 1, June 1, September 1 and December 1, as the case may be, immediately preceding the relevant Quarterly Interest Payment Date.

“Repayment Date” means the Scheduled Maturity Date, each Quarterly Interest Payment Date thereafter until the Issuer shall have repaid or redeemed all of the Debentures and, to the extent that any principal is repaid thereon, the Final Maturity Date.

“Replacement Capital Covenant” means the Replacement Capital Covenant, dated as of June 21, 2007, by the Issuer, as the same may be amended or supplemented from time to time in accordance with the provisions thereof and Section 2.02(a)(vii) hereof.

“Responsible Officer of the Paying Agent” means, with respect to the Trustee in its capacity as Paying Agent, any officer within the corporate trust department (or any successor department, unit or division) who has direct responsibility for the administration of the Paying Agent functions of the Indenture.

“Reuters Page LIBOR01” means the display so designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service, or such other service as may be nominated by the Issuer as the information vendor, for the purpose of displaying rates or prices comparable to the London Interbank Offered Rate for U.S. dollar deposits).

“Scheduled Maturity Date” has the meaning specified in Section 2.02(a).

“Securities Registrar” means, with respect to the Debentures, The Bank of New York Trust Company, N.A., or any other firm appointed by the Issuer, acting as securities registrar for the Debentures.

“Securities Registrar Office” means the office of the applicable Securities Registrar at which at any particular time its corporate agency business shall principally be administered, which office at the date hereof is the Corporate Trust Office of the Trustee.

“Semi-Annual Interest Payment Date” has the meaning specified in Section 2.04.

“Semi-Annual Interest Period” means the period beginning on and including June 21, 2007 and ending on but excluding the first Interest Payment Date thereafter and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next Interest Payment Date until June 15, 2017.

“Share Cap Amount” has the meaning specified in Section 2.06(a).

“Shares Available for Issuance” has the meaning specified in Section 2.06(a).

“Subsidiary” means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Issuer. For the purposes of this definition, “voting stock” means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

“Tax Event” means the receipt by the Issuer of an opinion of counsel experienced in such matters to the effect that, as a result of any:

(i) amendment to or change (including any officially announced proposed change) in the laws or regulations of the United States or any political subdivision or taxing authority of or in the United States that is effective on or after June 21, 2007;

(ii) official administrative decision or judicial decision or administrative action or other official pronouncement interpreting or applying those laws or regulations that is announced on or after June 21, 2007; or

(iii) threatened challenge asserted in connection with an audit of the Issuer or any of its Subsidiaries, or a threatened challenge asserted in writing against the Issuer, any of its Subsidiaries or any tax payer that has raised capital through the issuance of securities that are substantially similar to the Debentures and which securities, as of their issue date, were rated investment grade by at least one nationally recognized statistical rating organization within the meaning of Rule 15c3-1 under the U.S. Securities Exchange Act of 1934, as amended,

there is more than an insubstantial increase in the risk that interest payable by the Issuer on the Debentures is not, or within 90 days of the date of such opinion will not be, deductible by the Issuer, in whole or in part, for United States federal income tax purposes.

“Three-Month LIBOR” means, with respect to any Quarterly Interest Period, the rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-month period commencing on the first day of that Quarterly Interest Period that appears on Reuters Page

LIBOR01 as of 11:00 a.m., London time, on the LIBOR Determination Date for that Quarterly Interest Period. If such rate does not appear on Reuters Page LIBOR01, Three-Month LIBOR will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Quarterly Interest Period and in a principal amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the Calculation Agent (after consultation with the Issuer), at approximately 11:00 a.m., London time, on the LIBOR Determination Date for that Quarterly Interest Period. The Calculation Agent will request the principal London office of each of these banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with respect to that Quarterly Interest Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of such quotations. If fewer than two quotations are provided, Three-Month LIBOR with respect to that Quarterly Interest Period will be the arithmetic mean (rounded upward if necessary to the nearest whole multiple of 0.00001%) of the rates quoted by three major banks in New York City selected by the Calculation Agent (after consultation with the Issuer), at approximately 11:00 a.m., New York City time, on the first day of that Quarterly Interest Period for loans in U.S. dollars to leading European banks for a three-month period commencing on the first day of that Quarterly Interest Period and in a principal amount of not less than $1,000,000. However, if fewer than three banks selected by the Calculation Agent to provide quotations are quoting as described above, Three-Month LIBOR for that Quarterly Interest Period will be the same as Three-Month LIBOR as determined for the previous Quarterly Interest Period or, in the case of the Quarterly Interest Period beginning on June 15, 2017, 5.360%. The establishment of Three-Month LIBOR for each Quarterly Interest Period by the Calculation Agent shall be final and binding (in the absence of manifest error).

“Trading Day” means a day on which Common Shares are traded on the New York Stock Exchange, or if not then listed on the New York Stock Exchange, a day on which Common Shares are traded or quoted on the principal U.S. securities exchange on which it is listed or quoted, or if not then listed or quoted on a U.S. securities exchange, a day on which Common Shares are quoted in the over-the-counter market.

“Treasury Dealer” means J.P. Morgan Securities Inc. and Goldman, Sachs & Co. (or their successors) or, if J.P. Morgan Securities Inc. and Goldman, Sachs & Co., (or their successors) refuse to act as Treasury Dealer for the purpose of determining the Make-Whole Redemption Price or ceases to be a primary U.S. government securities dealer, another nationally recognized investment banking firm that is a primary U.S. government securities dealer specified by the Issuer to act as Treasury Dealer for the purpose of determining the Make-Whole Redemption Price.

“Treasury Price” means, with respect to a Redemption Date, the bid-side price for the Treasury Security as of the third Trading Day preceding the Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York on that Trading Day and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities”, as determined by the Treasury Dealer, except that: (i) if that release (or any successor release) is not published or does not contain that price information on that Trading Day or (ii) if the Treasury Dealer determines that the price information is not reasonably reflective of the actual bid-side price of the Treasury Security prevailing at 3:30 p.m.,

New York City time, on that Trading Day, then Treasury Price will instead mean the bid-side price for the Treasury Security at or around 3:30 p.m., New York City time, on that Trading Day (expressed on a next Trading Day settlement basis) as determined by the Treasury Dealer through such alternative means as are commercially reasonable under the circumstances.

“Treasury Rate” means, with respect to a Redemption Date, the semi-annual equivalent yield to maturity of the Treasury Security that corresponds to the Treasury Price (calculated by the Treasury Dealer in accordance with standard market practice and computed as of the second Trading Day preceding the Redemption Date).

“Treasury Security” means the United States Treasury security that the Treasury Dealer determines would be appropriate to use, at the time of determination and in accordance with standard market practice, in pricing the Debentures being redeemed in a tender offer based on a spread to United States Treasury yields.

ARTICLE TWO

General Terms and Conditions of the Debentures

Section 2.01. Designation, Principal Amount and Authorized Denominations

(a) Designation

Pursuant to Section 2.3 of the Indenture, there is hereby established a series of Securities of the Issuer designated as the 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”), the principal amount of which to be issued shall be in accordance with Section 2.01(b) hereof and as set forth in any order executed by the Issuer for the authentication and delivery of Debentures pursuant to the Indenture, and the form and terms of which shall be as set forth hereinafter.

(b) Principal Amount; Additional Debentures

Debentures in an initial aggregate principal amount of $1,000,000,000, upon execution of this First Supplemental Indenture, shall be executed by the Issuer and delivered to the Trustee, and the Trustee shall thereupon authenticate and deliver said Debentures in accordance with an order executed by the Issuer. At any time and from time to time after the execution and delivery of this First Supplemental Indenture, without the consent of any Holders, the Issuer may execute and deliver additional Debentures to the Trustee for authentication, together with an order executed by the Issuer for the authentication and delivery of such additional Debentures, so long as such additional Debentures are fungible for U.S. tax purposes with the Debentures issued as of the date of this First Supplemental Indenture. Any additional Debentures so issued shall be governed by this First Supplemental Indenture and shall rank equally and ratably in right of payment with the Debentures issued on the date of this First Supplemental Indenture and, together with the Debentures issued as of the date of this First Supplemental Indenture, shall be treated as a single series of Debentures for all purposes.

(c) Authorized Denominations

The denominations in which Debentures shall be issuable is $1,000 principal amount and integral multiples thereof.

Section 2.02. Repayment

(a) Scheduled Maturity Date

(i) The principal amount of, and all accrued and unpaid interest on, the Debentures shall be payable in full on June 15, 2037 or, if such day is not a Business Day, the following Business Day (the “Scheduled Maturity Date”) to the extent of net proceeds received by the Issuer to the Date of QCS Notice from the issuance of Qualifying Capital Securities as contemplated by Section 2.02(a)(iv). In the event the Issuer has delivered an Officers’ Certificate to the Trustee pursuant to clause (v) of this Section 2.02(a) in connection with the Scheduled Maturity Date, (x) the principal amount of Debentures payable on the Scheduled Maturity Date, if any, shall be the principal amount set forth in the notice of repayment, if any, accompanying such Officers’ Certificate, (y) such principal amount of Debentures shall be repaid on the Scheduled Maturity Date pursuant to Article 5 hereof, and (z) subject to clause (ii) of this Section 2.02(a), the remaining Debentures shall remain outstanding and shall be payable on the immediately succeeding Quarterly Interest Payment Date to the extent of net proceeds received by the Issuer to the Date of QCS Notice, without duplication of prior amounts received, of the issuance of Qualifying Capital Securities as contemplated by Section 2.02(a)(iv), and to like extent on each Quarterly Interest Payment Date thereafter until the Debentures are paid in full, or such earlier date on which they are redeemed pursuant to Article 4 hereof or become due and payable pursuant to Section 5.1 of the Indenture.

(ii) In the event the Issuer has delivered an Officers’ Certificate to the Trustee pursuant to clause (v) of this Section 2.02(a) in connection with any Quarterly Interest Payment Date, (x) the principal amount of the Debentures payable on such Quarterly Interest Payment Date shall be the principal amount set forth in the notice of repayment, if any, accompanying such Officers’ Certificate, (y) such principal amount shall be repaid on such Quarterly Interest Payment Date pursuant to Article 5 hereof to the extent of net proceeds received by the Issuer to the Date of QCS Notice, without duplication of prior amounts received, of the issuance of Qualifying Capital Securities as contemplated by Section 2.02 (a)(iv), and (z) the remaining Debentures shall remain outstanding and shall be payable on the immediately succeeding Quarterly Interest Payment Date to the extent of net proceeds received by the Issuer to the Date of QCS Notice, without duplication of prior amounts received, of the issuance of Qualifying Capital Securities as contemplated by Section 2.02 (a)(iv), and on each Quarterly Interest Payment Date thereafter to like extent until the Debentures are paid in full, or such earlier date on which they are redeemed pursuant to Article 4 hereof or become due and payable pursuant to Section 5.1 of the Indenture.

(iii) The obligation of the Issuer to repay the Debentures pursuant to this Section 2.02(a) on any date prior to the Final Maturity Date shall be subject to (x) its obligations under Article Thirteen of the Indenture to the holders of Senior Indebtedness and (y) its obligations under Section 2.05 hereof with respect to the payment of deferred interest on the Debentures.

(iv) Until the Debentures are paid in full:

(A) the Issuer shall use Commercially Reasonable Efforts, subject to a Market Disruption Event, to raise sufficient net proceeds from the issuance of Qualifying Capital Securities during a 180-day period ending on the date, not more than 15 and not less than ten Business Days prior to the Scheduled Maturity Date, on which the Issuer delivers the notice required by clause (v) of this Section 2.02(a) and Section 5.01, to permit repayment of the Debentures in full on the Scheduled Maturity Date pursuant to clause (i) of this Section 2.02(a); and

(B) if the Issuer is unable for any reason to raise sufficient net proceeds from the issuance of Qualifying Capital Securities to permit repayment in full of the Debentures on the Scheduled Maturity Date or any subsequent Quarterly Interest Payment Date, the Issuer shall use Commercially Reasonable Efforts, subject to a Market Disruption Event, to raise sufficient net proceeds from the issuance of Qualifying Capital Securities during a 90-day period ending on the date, not more than 15 and not less than ten Business Days prior to the following Quarterly Interest Payment Date, on which the Issuer delivers the notice required by clause (v) of this Section 2.02(a) and Section 5.01, to permit repayment of the Debentures in full on such following Quarterly Interest Payment Date pursuant to clause (i) of this Section 2.02(a); and

(C) the Issuer shall apply any such net proceeds to the repayment of the Debentures as provided in clause (vi) of this Section 2.02(a).

For the avoidance of doubt, the Issuer is not obligated to sell any securities other than Qualifying Capital Securities to raise net proceeds for repayment of the Debentures pursuant to this Section 2.02(a), or to apply the proceeds of any such sale of other securities to repayment of the Debentures pursuant to this Section 2.02(a), and no Holder of Debentures may require the Issuer to issue any such other securities in satisfaction of its obligations under this Section 2.02(a).

(v) The Issuer, if it has not raised sufficient net proceeds from the issuance of Qualifying Capital Securities pursuant to clause (iv) above in connection with any Repayment Date, shall deliver an Officers’ Certificate to the Trustee (who shall forward such certificate to each Holder of the Debentures) no more than 15 and no less than ten Business Days prior to such Repayment Date (the date of such delivery, the “Date of QCS Notice”) stating the amount of net proceeds, if any, raised pursuant to clause (iv) above in connection with such Repayment Date. The Issuer shall be excused from its obligation to use Commercially Reasonable Efforts to sell Qualifying Capital Securities pursuant to clause (iv) above if such Officers’ Certificate further certifies that: (A) a Market Disruption Event was existing during the 180-day period preceding the date of such Officers’ Certificate or, in the case of any Repayment Date after the Scheduled Maturity Date, the 90-day period preceding the date of such Officers’ Certificate; and (B) either (x) the Market Disruption Event continued for the entire 180-day period or 90-day period, as the case may be, or (y) the Market Disruption Event continued for only part of the period but the Issuer was unable after Commercially Reasonable Efforts to raise

sufficient net proceeds during the rest of that period to permit repayment of the Debentures in full. Each Officers’ Certificate delivered pursuant to this clause (v), unless no principal amount of Debentures is to be repaid on the applicable Repayment Date, shall be accompanied by a notice of repayment pursuant to Section 5.01 setting forth the principal amount of the Debentures to be repaid on such Repayment Date, which amount shall be determined after giving effect to clause (vi) of this Section 2.02(a). In the event the Issuer fails to deliver an Officer’s Certificate to the Trustee in the manner described herein in connection with a Repayment Date, the Issuer shall be deemed to have confirmed that sufficient proceeds have been raised from an issuance of Qualifying Capital Securities, and all outstanding principal will be due on such Repayment Date.

(vi) Payments in respect of the Debentures on any Repayment Date will be applied, first, to deferred interest on the Debentures to the extent of Eligible Proceeds raised pursuant to Section 2.06; second, to pay current interest on the Debentures to the extent not paid from other sources; and third, to repay the outstanding principal amount of the Debentures, subject to a minimum principal amount of $5,000,000 to be repaid on any Repayment Date; provided that if the Issuer is obligated to sell Qualifying Capital Securities and apply the net proceeds therefrom to payments of principal of or interest on any Pari Passu Securities in addition to the Debentures, then on any date and for any period, the amount of net proceeds received by the Issuer from those sales and available for such payments shall be applied to the Debentures and those other Pari Passu Securities having the same scheduled maturity date as the Debentures pro rata in accordance with their respective outstanding principal amounts, and no such payments shall be made to any other such Pari Passu Securities having a later scheduled maturity date until the principal of and all accrued and unpaid interest on the Debentures have been paid in full, except to the extent permitted by Sections 3.01 and 2.06(c). If the Issuer raises less than $5,000,000 of net proceeds from the sale of Qualifying Capital Securities during the relevant 180-day or 90-day period, the Issuer will not be required to repay any Debentures on the Scheduled Maturity Date or the next Quarterly Interest Payment Date, as applicable. On the next Quarterly Interest Payment Date as of which the Issuer has raised at least $5,000,000 of net proceeds during the 180-day period (or, if shorter, the period beginning on the date on which the Issuer last repaid any principal amount of Debentures) ending on the date not more than 15 and not less than ten Business Days prior to such Quarterly Interest Payment Date, on which the Issuer delivers the notice required by clause (v) of this Section 2.02(a) and Section 5.01, the Issuer shall be required to repay a principal amount of the Debentures equal to the entire net proceeds from the sale of Qualifying Capital Securities during such 180-day or shorter period on such Quarterly Interest Payment Date.

(vii) The Issuer shall not amend the Replacement Capital Covenant to impose additional restrictions on the type or amount of Qualifying Capital Securities that the Issuer may include for purposes of determining whether or to what extent repayment, redemption or purchase of the Debentures is permitted under the Replacement Capital Covenant, except with the consent of Holders of a majority in principal amount of the Debentures. Except as aforesaid, the Issuer may amend or supplement the Replacement Capital Covenant in accordance with its terms and without the consent of the Holders of the Debentures.

(b) Final Maturity Date

The principal of, and all accrued and unpaid interest on, all outstanding Debentures shall be due and payable on June 15, 2067 or, if such date is not a Business Day, the following Business Day (the “Final Maturity Date”), regardless of the amount of Qualifying Capital Securities the Issuer may have issued and sold by that time.

Section 2.03. Form

The Debentures shall be substantially in the form of Exhibit A attached hereto and shall be issued in fully registered definitive form without interest coupons. Principal of and interest on the Debentures will be payable, the transfer of such Debentures will be registrable and such Debentures will be exchangeable for Debentures bearing identical terms and provisions, and notices and demands to or upon the Issuer in respect of the Debentures and the Indenture may be served, at the Corporate Trust Office of the Trustee, and the Issuer appoints the Trustee as its agent for the foregoing purposes, provided that payment of interest may be made at the option of the Issuer by check mailed to the Holders at such address as shall appear in the Securities Register or by wire transfer in immediately available funds to the bank account number of the Holders specified in writing by the Holders not less than ten days before the relevant Interest Payment Date and entered in the Securities Register by the Securities registrar. The Debentures may be presented for registration of transfer or exchange at the Securities Registrar Office.

The Debentures initially are issuable solely as Global Securities. The Debentures shall be physically transferred to all beneficial owners in definitive form in exchange for their beneficial interests in a Global Security if the Depositary with respect to such Global Securities notifies the Issuer that it is unwilling or unable to continue as Depositary for such Global Security or if it ceases to be a clearing agency registered under the Exchange Act, as the case may be, and a successor Depositary is not appointed by the Issuer within 90 days of such notice.

Section 2.04. Rate of Interest; Interest Payment Date

(a) Rate of Interest; Accrual

The Debentures shall bear interest from and including June 21, 2007, to but excluding, June 15, 2017 (or any earlier date on which the Debentures are redeemed pursuant to Article Four), at the rate of 6.70% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months. Commencing on and including June 15, 2017, the Debentures shall bear interest at an annual rate of Three-Month LIBOR plus 2.0175% (the “Floating Rate”), computed for each Quarterly Interest Period on the basis of a 360-day year and the actual number of days elapsed. Except as provided in Section 2.04(b), interest will accrue from and including each Interest Payment Date to, but excluding, the immediately succeeding Interest Payment Date. Accrued interest that is not paid on the applicable Interest Payment Date, including interest deferred pursuant to Section 2.05, will bear Additional Interest, to the extent permitted by law, at the interest rate in effect from time to time provided in this Section 2.04(a), from the relevant Interest Payment Date, compounded on each subsequent Interest Payment Date.

(b) Interest Payment Dates

Subject to the other provisions hereof, accrued interest on the Debentures shall be payable (i) semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2007 and ending on June 15, 2017, or if any such day is not a Business Day, the following Business Day (and no interest shall accrue as a result of such postponement) (each such date, a “Semi-Annual Interest Payment Date”), and (ii) thereafter, quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2017, or if any such day is not a Business Day, the following Business Day (each such date, a “Quarterly Interest Payment Date” and, together with Semi-Annual Interest Payment Dates, each, an “Interest Payment Date”), except that if such Business Day is in the immediately succeeding calendar month, such Quarterly Interest Payment Date shall be the immediately preceding Business Day (and interest shall accrue to but excluding the date that interest is actually paid).

(c) Interest Payment to Holders

Interest will be payable to the Persons in whose name the Debentures are registered at the close of business on the Regular Record Date immediately preceding the relevant Interest Payment Date, except that interest payable at maturity shall be paid to the Person to whom principal is paid.

Section 2.05. Interest Deferral

(a) Option to Defer Interest Payments

(i) Subject to other provisions hereof, the Issuer shall have the right, at any time and from time to time, to defer the payment of interest on the Debentures for one or more consecutive Interest Periods that do not exceed ten years for any single Deferral Period, provided that no Deferral Period shall extend beyond the Final Maturity Date or the earlier repayment or redemption in full of the Debentures. If the Issuer has paid all deferred interest on the Debentures, the Issuer shall have the right to elect to begin a new Deferral Period pursuant to this Section 2.05.

(ii) At the end of any Deferral Period, the Issuer shall pay all deferred interest on the Debentures (including Additional Interest thereon) to the Persons in whose names the Debentures are registered in the Securities Register at the close of business on the Regular Record Date with respect to the Interest Payment Date at the end of such Deferral Period.

(iii) The Issuer may elect to pay interest on any Interest Payment Date during any Deferral Period to the extent permitted by Section 2.05(b).

(b) Payment of Deferred Interest

Subject to a Market Disruption Event as described under Section 2.06(b), the Issuer will not pay any deferred interest on the Debentures from any source other than Eligible Proceeds prior to the Final Maturity Date, except at any time that the principal amount of the Debentures has been accelerated and such acceleration has not been rescinded or in the case of a Business Combination to the extent described below in Section 2.05(c). Notwithstanding the foregoing, the Issuer may pay current interest from any available funds.

(c) Business Combination Exception

If (i) the Issuer is involved in a Business Combination where immediately after its consummation more than 50% of the voting shares of the surviving entity of such Business Combination, or the Person to whom all or substantially all of the Issuer’s properties or assets are conveyed, transferred or leased in such Business Combination, is owned, directly or indirectly, by the shareholders of the other party to such Business Combination, and (ii) at the time the Business Combination is consummated a Deferral Period is continuing, then Section 2.05(b) shall not apply to any payment of deferred interest for such Deferral Period, if such Deferral Period is terminated on the next Interest Payment Date following the date of consummation of the Business Combination.

(d) Notice of Deferral

The Issuer shall give written notice of its election to commence or continue any Deferral Period to the Trustee and the Holders of the Debentures at least one Business Day and not more than 60 Business Days before the next Interest Payment Date. Such notice shall be given to the Trustee and each Holder of Debentures at such Holder’s address appearing in the Security Register by first-class mail, postage prepaid.

Section 2.06. Alternative Payment Mechanism

(a) Obligation to Issue Qualifying APM Securities

Immediately following the earlier of (i) the first Interest Payment Date following the commencement of a Deferral Period on which the Issuer pays any current interest on the Debentures (which the Issuer may do from any source of funds) or (ii) the fifth anniversary of the commencement of the Deferral Period, the Issuer, subject to the occurrence and continuation of a Market Disruption Event as described under Section 2.06(b) and subject to Section 2.05(b) and Section 2.06(c), shall issue one or more types of Qualifying APM Securities until the Issuer has raised an amount of Eligible Proceeds at least equal to the aggregate amount of accrued and unpaid deferred interest (including compounding interest thereon) on the Debentures. The Issuer shall apply such Eligible Proceeds on the next Interest Payment Date to the payment of deferred interest in accordance with this Section 2.06. The requirement set forth in this Section 2.06(a) shall be in effect until the end of such Deferral Period. Notwithstanding (and as a qualification to) the foregoing:

(i) the Issuer shall not be required to issue Common Shares or, if the definition of Qualifying APM Securities has been amended to eliminate Common Shares, Qualifying Warrants prior to the fifth anniversary of the commencement of a Deferral Period, to the extent that the number of Common Shares issued or issuable upon exercise of Qualifying Warrants to be applied for purposes of funding deferred interest hereunder, together with the number of Common Shares previously issued or issuable upon exercise of Qualifying Warrants previously issued during such Deferral Period, to the extent still outstanding, and applied for such purposes, would exceed an amount equal to 2% of the total number of issued and

outstanding Common Shares reported in the Issuer’s then most recent publicly available consolidated financial statements immediately prior to the date of such issuance (the “Common Equity Issuance Cap”); provided that the Common Equity Issuance Cap will cease to apply with respect to a Deferral Period following the fifth anniversary of the commencement of such Deferral Period, at which point the Issuer must pay any deferred interest, regardless of the time at which it was deferred, pursuant to this Section 2.06, subject to a Market Disruption Event and the Share Cap Amount; and provided, further, that if the Common Equity Issuance Cap is reached during a Deferral Period and the Issuer subsequently pays all deferred interest, the Common Equity Issuance Cap will cease to apply with respect to such Deferral Period at the termination of such Deferral Period and will not apply again unless and until the Issuer starts a new Deferral Period;

(ii) the Issuer shall not be permitted to issue Qualifying Non-Cumulative Preferred Shares or Mandatorily Convertible Preferred Shares to the extent that the net proceeds of any issuance of Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares, together with the net proceeds of all prior issuances of Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares during the current and all prior Deferral Periods, to the extent still outstanding, would exceed 25% of the aggregate principal amount of the Debentures (the “Preferred Share Issuance Cap”); and

(iii) notwithstanding the Common Equity Issuance Cap and the Preferred Share Issuance Cap, so long as there are outstanding Debentures, the Issuer shall not be permitted, subject to the provisions of the three immediately succeeding paragraphs, to sell Common Shares, Qualifying Warrants or Mandatorily Convertible Preferred Shares to pay deferred interest on the Debentures if the number of Common Shares to be issued (or which would be issuable upon exercise or conversion of such Qualifying Warrants or Mandatorily Convertible Preferred Shares) to pay such deferred interest would be in excess of an amount (the “Share Cap Amount”, subject to adjustment as provided in the second succeeding paragraph) equal to the greater of (a) 150,000,000 Common Shares plus the number of Common Shares that the Issuer repurchases or that are added to Shares Available for Issuance (as defined below) pursuant to the second paragraph below, in either case after the date of issuance of the Debentures (the “Fixed Rate Portion” of the Share Cap Amount, provided that the Fixed Rate Portion shall not exceed 250,000,000 shares), in the aggregate, during the period the Debentures are outstanding or (b) on any date on which the Issuer is otherwise obligated to sell Qualifying APM Securities pursuant to this Section 2.06, the Issuer’s then effective Shares Available for Issuance; provided that if the issued and outstanding Common Shares are changed into a different number of shares or a different class by reason of any share split, reverse share split, share dividend, reclassification, recapitalization, split-up, combination, exchange of shares or other similar transaction, the Fixed Rate Portion of the Share Cap Amount shall be correspondingly adjusted. If the Issuer issues additional Debentures, then the Share Cap Amount will be increased accordingly.

The Issuer’s “Shares Available for Issuance” shall be calculated as of any day in two steps. First, from the number of authorized and unissued Common Shares, the maximum number of Common Shares that can be issued under existing options, warrants, convertible securities, any equity-linked contracts, any equity compensation plans for directors,

officers or employees and other plans and agreements which require or permit the Issuer to issue a determinable number of Common Shares shall be deducted. After deduction of that number of Common Shares from authorized and unissued Common Shares, the remaining available Common Shares shall be allocated on a pro rata basis or on such other basis as the Issuer deems appropriate to the obligation to issue securities under this Section 2.06 and to any other similar commitment that is of an indeterminate nature and under which the Issuer is then required to issue Common Shares. If the Shares Available for Issuance are zero after the two steps described above, there shall be no obligation to obtain additional Common Shares other than the obligation to use commercially reasonable efforts to seek adoption of a shareholder vote at the Issuer’s next occurring annual shareholders’ meeting to increase the number of authorized Common Shares as described below.

The Issuer in any event shall use its commercially reasonable efforts to increase Shares Available for Issuance to at least 250,000,000 Common Shares by not later than five years after initial issuance of the Debentures. Once Shares Available for Issuance are at least 250,000,000 Common Shares, then the Share Cap Amount shall automatically be amended to mean 250,000,000 Common Shares minus the number of Common Shares, if any, sold prior to such date to settle deferred interest pursuant to this Section 2.06 and thereafter will not be determined in part by reference to Shares Available for Issuance. Promptly after each increase in the Share Cap Amount of 50,000,000 Common Shares, the Issuer will file a current report on Form 8-K with the Securities and Exchange Commission giving notice of such increase.

In addition to the Issuer’s obligation described in the preceding paragraph, if the Share Cap Amount has been reached and such amount is not sufficient to allow the Issuer to raise sufficient Eligible Proceeds to pay all deferred interest then accrued in full, the Issuer shall use its commercially reasonable efforts to increase the Share Cap Amount (which it may do in its discretion without the approval of any Holder) (1) only to the extent that the Issuer can do so and simultaneously satisfy its future fixed or contingent obligations under other securities and derivative instruments that provide for settlement or payment in Common Shares or (2) if the Issuer cannot increase the Share Cap Amount as contemplated in the preceding clause (1), by requesting the Issuer’s Board of Directors to adopt a resolution for shareholder vote at the next occurring annual shareholders meeting to increase the number of the Issuer’s authorized Common Shares for purposes of satisfying the Issuer’s obligations to pay deferred interest.

For the avoidance of doubt, (x) once the Issuer reaches the Common Equity Issuance Cap for a Deferral Period, the Issuer shall not be obligated to issue more Common Shares, or if the definition of Qualifying APM Securities has been amended to eliminate Common Shares, more Qualifying Warrants pursuant to this Section 2.06(a) prior to the fifth anniversary of the commencement of such Deferral Period even if the number of outstanding Common Shares subsequently increases, and (y) so long as the definition of Qualifying APM Securities has not been amended to eliminate Common Shares, the sale of Qualifying Warrants to pay deferred interest is an option that may be exercised at the Issuer’s sole discretion, subject to the Common Equity Issuance Cap and the Share Cap Amount, and the Issuer is not obligated to sell Qualifying Warrants or to apply the proceeds of any such sale to pay deferred interest on the Debentures, and no class of holders of the Issuer’s securities, or any other party, may require the Issuer to issue Qualifying Warrants in satisfaction of its obligations under this Section 2.06(a).

(b) Market Disruption Event

Section 2.06(a) shall not apply, with respect to any Interest Payment Date, if the Issuer shall have provided to the Trustee (which the Trustee will promptly forward upon receipt to each Holder of Debentures) no more than 15 and no less than ten Business Days prior to such Interest Payment Date an Officers’ Certificate stating that (i) a Market Disruption Event was existing after the immediately preceding Interest Payment Date and (ii) either (A) the Market Disruption Event continued for the entire period from the Business Day immediately following the preceding Interest Payment Date to the Business Day immediately preceding the date on which such Officers’ Certificate is provided or (B) the Market Disruption Event continued for only part of such period, but the Issuer was unable despite using commercially reasonable efforts to raise sufficient Eligible Proceeds during the rest of that period to pay all accrued and unpaid interest.

(c) Partial Payment of Deferred Interest

(i) If the Issuer has raised some but not all Eligible Proceeds necessary to pay all deferred interest on any Interest Payment Date pursuant to this Section 2.06, such Eligible Proceeds shall be applied to pay accrued and unpaid interest on the applicable Interest Payment Date in chronological order based on the date each payment was first deferred, subject to the Common Equity Issuance Cap, the Preferred Shares Issuance Cap and the Share Cap Amount, as applicable, and payment on each installment of deferred interest shall be distributed to Holders of the Debentures on a pro rata basis.

(ii) If the Issuer has other outstanding Pari Passu Securities under which the Issuer is obligated to sell securities that are Qualifying APM Securities and apply the Eligible Proceeds to the payment of deferred interest or distributions, then on any date and for any period the amount of Eligible Proceeds received by the Issuer from those sales and available for payment of the deferred interest and distributions shall be applied to the Debentures and those other Pari Passu Securities on a pro rata basis up to the Common Equity Issuance Cap or the Preferred Shares Issuance Cap and the Share Cap Amount (or comparable provisions in the instruments governing those other Pari Passu Securities) in proportion to the total amounts that are due on the Debentures and such other Pari Passu Securities.

(d) Qualifying Warrants

If the Issuer sells Qualifying Warrants to pay deferred interest to satisfy its obligations pursuant to this Section 2.06, the Issuer shall use commercially reasonable efforts, subject to the Common Equity Issuance Cap, to set the terms of such Qualifying Warrants so as to raise sufficient proceeds from their issuance to pay all deferred interest on the Debentures in accordance with this Section 2.06.

(e) Qualifying APM Securities Definition Change

The Issuer may, without the consent of any Holders of the Debentures, amend the definition of Qualifying APM Securities in Section 1.01 to eliminate Common Shares or Qualifying Warrants (but not both) and/or Mandatorily Convertible Preferred Shares from the definition of Qualifying APM Securities if, after the date of the first issuance of any Debentures,

an accounting standard or interpretive guidance of an existing accounting standard issued by an organization or regulator that has responsibility for establishing or interpreting accounting standards in the United States becomes effective such that there is more than an insubstantial risk that failure to eliminate Common Shares, Qualifying Warrants and/or Mandatorily Convertible Preferred Shares, as the case may be, from the definition would result in a reduction in the Issuer’s earnings per share as calculated in accordance with generally accepted accounting principles in the United States. The Issuer shall send written notice to the Trustee (who shall promptly forward such notice to each Holder of the Debentures) in advance of any such change in the definition of Qualifying APM Securities.

Section 2.07. Events of Default

(a) Solely for purposes of the Debentures, Section 5.1 (other than the last paragraph thereof) of the Indenture shall be deleted and replaced by the following (capitalized terms used in the following text that are not defined in the Indenture but are defined herein shall have the meanings ascribed to such terms herein):

SECTION 5.1. Events of Default Defined; Acceleration of Maturity; Waiver of Default.

“Event of Default”, wherever used herein with respect to the Debentures, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1) default in the payment of accrued interest in full on the Debentures on any Interest Payment Date (whether or not such Interest Payment Date commenced a Deferral Period) and the failure of the Issuer on or before the conclusion of a ten-year period following such Interest Payment Date to pay interest (including compounded interest) then accrued in full; or

(2) default in the payment of principal on the Debentures when due, whether on the Scheduled Maturity Date or the Final Maturity Date, upon redemption, upon a declaration of acceleration, or otherwise, except that the failure to use Commercially Reasonable Efforts to issue Qualifying Capital Securities pursuant to Section 2.02(a)(iv) shall not constitute an Event of Default; or

(3) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Issuer a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or

composition of or in respect of the Issuer under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days; or

(4) the commencement by the Issuer of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Issuer or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Issuer in furtherance of any such action.

If the Issuer gives a timely written notice of its election to commence or continue a Deferral Period on any Interest Payment Date (and, if such notice continues a Deferral Period, the Deferral Period has not continued for ten years), then no “default” or “Event of Default” shall be deemed to arise from the Issuer’s non-payment of interest on such Interest Payment Date.

If the Issuer fails to pay principal on the Debentures on the Scheduled Maturity Date or any subsequent Interest Payment Date as a result of the failure to raise sufficient proceeds from the issuance of Qualifying Capital Securities despite the Issuer’s Commercially Reasonable Efforts to do so pursuant to Section 2.02(a)(iv), such failure shall not constitute a “default” or “Event of Default” hereunder.

When the Trustee incurs expenses or renders services in connection with an Event of Default specified in clauses (3) and (4) set forth in this Section 5.01, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law.

If an Event of Default (other than an Event of Default specified in (3) or (4) above) with respect to the Debentures occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the outstanding Debentures may declare the principal amount of all of the Debentures and interest accrued but unpaid thereon, if any, to be due and payable immediately, by a notice in writing to the Issuer (and to the Trustee if given by the Holders), and upon any such declaration, such amount shall become immediately due and payable. If an Event of Default specified in (3) or (4) above occurs, the principal amount of all the Debentures (or, if any Debentures are Original Issue Discount Securities, such portion of the principal amount of such Debentures as may be specified by the terms thereof) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable.

At any time after such a declaration of acceleration with respect to the Debentures has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as provided in Article Five of the Indenture, the Holders of a majority in aggregate principal amount of the outstanding Debentures by written notice to the Issuer and the Trustee, may rescind and annul such declaration and its consequences if:

(x) the Issuer has paid or deposited with the Trustee a sum sufficient to pay:

(A) all Additional Interest on all Debentures,

(B) the principal of (and premium, if any, on) the Debentures which has become due otherwise than by such declaration of acceleration and all interest accrued thereon at the rate or rates prescribed therefor in the Debentures,

(C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in the Debentures, and

(D) all sums paid or advanced by the Trustee hereunder and the agreed upon compensation and reasonable expenses, disbursements and advances of the Trustee, its agents and counsel; and

(y) all Events of Default with respect to the Debentures, other than the non-payment of the principal of the Debentures which has become due solely by such declaration of acceleration, have been cured or waived as provided under Section 5.10 of the Indenture.

No such rescission shall affect any subsequent Event of Default or impair any right consequent thereon.

(b) The Trustee shall provide to the Holders of the Debentures such notices as it shall from time to time provide with respect to the Debentures under Section 5.11 of the Indenture. In addition, the Trustee shall provide to the Holders of the Debentures notice of any Event of Default or event that, with the giving of notice or lapse of time, or both, would become an Event of Default with respect to the Debentures within 90 days after the actual knowledge of a Responsible Officer of the Trustee of such Event of Default or other event. However, except in cases of a default or an Event of Default in payment on the Debentures, the Trustee will be protected in withholding the notice if one of its Responsible Officers determines that withholding of the notice is in the interest of such Holders.

(c) The Issuer’s failure to pay interest on the Debentures during a Deferral Period in accordance with Sections 2.05 and 2.06 of this First Supplemental Indenture shall constitute a default under the Indenture, but in no event shall constitute an Event of Default. Notwithstanding anything to the contrary in the Indenture or this First Supplemental Indenture, the Trustee shall have no obligation to exercise any remedies hereunder unless and except to the extent directed in writing to do so by the Holders of a majority in principal amount of the outstanding Debentures in accordance with and subject to the conditions set forth in Section 5.8 of the Indenture. The Trustee may conclusively assume that Sections 2.05 and 2.06 of this First Supplemental Indenture have been complied with unless the Issuer or the Holders of 25% in aggregate principal amount of the Debentures have given the Trustee written notice to the contrary.

(d) For the avoidance of doubt, and without prejudice to any other remedies that may be available to the Trustee or the Holders of the Debentures under the Indenture, no breach by the Issuer of any covenant or obligation under the Indenture or the terms of the Debentures or the terms of this First Supplemental Indenture, including the Issuer’s obligations under Section 2.02(a)(iv), Section 2.05 or Section 2.06, shall be an Event of Default with respect to the Debentures, other than those specified in this Section 2.07; and except as provided herein and in the Indenture with respect to Events of Default, and as provided in Section 2.07(c) above, the Trustee shall be under no duty or obligation to exercise any remedies or otherwise take any action in respect of any other default that may occur under or in respect of this First Supplemental Indenture or the Indenture.

Section 2.08. Securities Registrar; Paying Agent; Delegation of Trustee Duties

(a) The Issuer appoints the Trustee as Securities Registrar and Paying Agent with respect to the Debentures.

(b) Notwithstanding any provision contained herein, to the extent permitted by applicable law, the Trustee may delegate its duty to provide such notices and to perform such other duties as may be required to be provided or performed by the Trustee under the Indenture, and, to the extent such obligation has been so delegated, the Trustee shall not be responsible for monitoring the compliance of, nor be liable for the default or misconduct of, any such designee.

Section 2.09. Limitation on Claims in the Event of Bankruptcy, Insolvency or Receivership

Each Holder, by such Holder’s acceptance of the Debentures, agrees that if a bankruptcy event of the Issuer shall occur prior to the redemption or repayment of such Debentures, such Holder shall have no claim for, and thus no right to receive, any deferred interest pursuant to Section 2.05 that has not been paid pursuant to Sections 2.05 and 2.06 to the extent the amount of such interest exceeds the sum of (x) interest that relates to the earliest two years of the portion of the Deferral Period for which interest has not been paid and (y) an amount equal to such Holder’s pro rata share of the excess, if any, of the Preferred Shares Issuance Cap over the aggregate amount of net proceeds from the sale of Qualifying Non-Cumulative Preferred Shares and unconverted Mandatorily Convertible Preferred Shares that the Issuer has applied to pay deferred interest pursuant to the alternative payment mechanism set forth in Section 2.06; provided that each Holder is deemed to agree that to the extent the claim for deferred interest exceeds the amount set forth in clause (x), the amount it receives in respect of such excess shall not exceed the amount it would have received had the claim for such excess ranked pari passu with the interests of the holders, if any, of Qualifying Non-Cumulative Preferred Shares.

Section 2.10. Location of Payment

Solely for the purposes of the Debentures, the text of Section 3.1 of the Indenture following the first sentence thereof shall be deleted and replaced by the following (capitalized terms used in the following text that are not defined in the Indenture but are defined herein shall have the meanings ascribed to such terms herein):

Payment of the principal of (and premium, if any) and interest on the Debentures will be made at the Paying Agent office, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Issuer payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer in immediately available funds at such place and to such bank account number as may be designated by the Person entitled thereto as specified in the Securities Register in writing not less than ten days before the relevant Interest Payment Date. The office where the Debentures may be presented or surrendered for payment and the office where the Debentures may be surrendered for transfer or exchange and where notices and demands to or upon the Issuer in respect of the Debentures and the Indenture may be served shall be the Paying Agent office.

Section 2.11. No Sinking Fund

The Debentures shall not be subject to any sinking fund or analogous provisions.

Section 2.12. Subordination

The subordination provisions of Article Thirteen of the Indenture shall apply to the Debentures.

Section 2.13. Defeasance

The provisions of Section 10.1(B) of the Indenture (relating to discharge of the Indenture) shall apply to the Debentures.

ARTICLE THREE

Covenants

Section 3.01. Dividend and Other Payment Stoppages

So long as any Debentures remain outstanding, if the Issuer has given notice of its election to defer interest payments on the Debentures but the related Deferral Period has not yet commenced or a Deferral Period is continuing, the Issuer shall not, and shall not permit any Subsidiary to:

(a) declare or pay any dividends or other distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of capital stock of the Issuer;

(b) make any payment of principal of, or interest or premium, if any, on, or repay, purchase or redeem any of the Issuer’s debt securities that rank upon the Issuer’s liquidation on a parity with or junior to the Debentures; or

(c) make any guarantee payments regarding any guarantee issued by the Issuer of securities of any Subsidiary if the guarantee ranks upon the Issuer’s liquidation on a parity with or junior to the Debentures;

provided, however, the restrictions in clauses (a), (b) and (c) above do not apply to:

(i) any purchase, redemption or other acquisition of shares of its capital stock by the Issuer in connection with;

(A) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more of its employees, officers, directors, consultants or independent contractors;

(B) the satisfaction of the Issuer’s obligations pursuant to any contract entered into in the ordinary course of business prior to the beginning of the applicable Deferral Period;

(C) a dividend reinvestment or shareholder purchase plan; or

(D) the issuance of shares of the Issuer’s capital stock, or securities convertible into or exercisable for such shares, as consideration in an acquisition transaction, the definitive agreement for which is entered into prior to the applicable Deferral Period;

(ii) any exchange, redemption or conversion of any class or series of the Issuer’s capital stock, or shares of the capital stock of one of its Subsidiaries, for any other class or series of the Issuer’s capital stock, or of any class or series of the Issuer’s indebtedness for any class or series of the Issuer’s capital stock;

(iii) any purchase of fractional interests in shares of the Issuer’s capital stock pursuant to the conversion or exchange provisions of such shares or the securities being converted or exchanged;

(iv) any declaration of a dividend in connection with any shareholder rights plan, or the issuance of rights, stock or other property under any shareholder rights plan, or the redemption or purchase of rights pursuant thereto; or

(v) any dividend in the form of stock, warrants, options or other rights where the dividend stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equally with or junior to such stock;

(vi) (A) any payment of current or deferred interest on Pari Passu Securities that is made pro rata to the amounts due on such Pari Passu Securities; provided that such payments are made in accordance with Section 2.06(c)(ii) to the extent it applies, and (B) any payments of principal or current or deferred interest on Pari Passu Securities that, if not made, would cause the Issuer to breach the terms of the instrument governing such Pari Passu Securities; or

(vii) any payment of principal in respect of Pari Passu Securities having the same scheduled maturity date as the Debentures, as required under a provision of such other Pari Passu Securities that is substantially the same as the provisions in Section 2.02(a), and that is made on a pro rata basis among one or more series of Pari Passu Securities having such a provision and the Debentures.

Section 3.02. Additional Limitation on Deferral Over One Year

If any Deferral Period lasts longer than one year, the Issuer may not redeem or purchase any securities of the Issuer that on the Issuer’s bankruptcy or liquidation rank pari passu with or junior to any of its Qualifying APM Securities the proceeds of which were applied, pursuant to Section 2.06, to fund deferred interest on the Debentures during the relevant Deferral Period until the first anniversary of the date on which all deferred interest on the Debentures has been paid. However, if the Issuer is involved in a Business Combination where immediately after its consummation more than 50% of the voting shares of the surviving entity of such Business Combination, or the Person to whom all or substantially all of the Issuer’s properties or assets are conveyed, transferred or leased in such Business Combination, is owned, directly or indirectly, by the shareholders of the other party to such Business Combination, then the immediately preceding sentence shall not apply during the Deferral Period that is terminated on the next Interest Payment Date following the date of consummation of such Business Combination.

ARTICLE FOUR

Redemption of the Debentures

Section 4.01. Redemption Price

The Debentures shall be redeemable in accordance with Article Twelve of the Indenture. The Debentures are redeemable in whole or in part at the option of the Issuer at any time and from time to time after the date of this First Supplemental Indenture. In the case of any redemption, the Redemption Price shall be equal to (1) in the case of any redemption on or after June 15, 2017, 100% of the principal amount of the Debentures being redeemed plus accrued and unpaid interest to the Redemption Date or (2) in the case of any redemption prior to June 15, 2017, the greater of (i) 100% of the principal amount of the Debentures being redeemed plus accrued and unpaid interest to the Redemption Date and (ii) the Make-Whole Redemption Price (the price set forth in (1) or (2), as applicable, the “Redemption Price”). If a proposed redemption of Debentures is not to be for all of the Debentures in whole, the Issuer may not effect such redemption unless at least $25,000,000 aggregate principal amount of the Debentures, excluding any Debentures held by the Issuer or any of its affiliates, remains outstanding after giving effect to such redemption. The date on which Debentures are to be redeemed pursuant hereto is referred to as the “Redemption Date”.

Section 4.02. Limitation on Partial Redemption

Notwithstanding the foregoing, the Issuer may not redeem the Debentures in part if the principal amount of the Debentures has been accelerated pursuant to Section 5.1 of the Indenture (as amended by Section 2.07(a) hereof) and such acceleration has not been rescinded. In addition, the Issuer may not redeem the Debentures in part unless all accrued and unpaid interest, including deferred interest, has been paid in full on all Outstanding Debentures for all Interest Periods terminating on or before the Redemption Date.

ARTICLE FIVE

Repayment of Debentures

Section 5.01. Repayments

The Issuer, not more than 15 nor less than ten Business Days prior to each Repayment Date (unless a shorter notice shall be satisfactory to the Trustee), shall notify the Trustee of the principal amount of Debentures to be repaid on such date pursuant to Section 2.02(a).

Section 5.02. Selection of the Debentures to be Repaid

If less than all the Debentures are to be repaid on any Repayment Date (unless the Debentures are issued in the form of a Global Security), the particular Debentures to be repaid shall be selected not more than 60 days prior to such Repayment Date by the Trustee, from the Outstanding Debentures not previously repaid or called for redemption, by such method as then may be required by law or if no such legal requirement shall then exist, by lot or such other

method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Debentures, provided that the portion of the principal amount of any Debentures not repaid shall be in an authorized denomination (which shall not be less than the minimum authorized denomination).

The Trustee shall promptly notify the Issuer in writing of the Debentures selected for partial repayment and the principal amount thereof to be repaid. For all purposes hereof, unless the context otherwise requires, all provisions relating to the repayment of Debentures shall relate, in the case of any Debentures repaid or to be repaid only in part, to the portion of the principal amount of such Debentures which has been or is to be repaid.

Section 5.03. Notice of Repayment

Notice of repayment shall be given by first-class mail, postage prepaid, mailed not earlier than the 60th day, and not later than the 30th day, prior to the Repayment Date, to each Holder of Debentures to be repaid, at the address of such Holder as it appears in the Security Register.

Each notice of repayment shall identify the Debentures to be repaid (including the Debentures’ CUSIP number, if a CUSIP number has been assigned to the Debentures) and shall state:

(a) the Repayment Date;

(b) if less than all Outstanding Debentures are to be repaid, the identification (and, in the case of partiarepayment, the respective principal amounts) of the particular Debentures to be repaid;

(c) that on the Repayment Date, the principal amount of the Debentures to be repaid will become due and payable upon each such Debentures or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date; and

(d) the place or places where such Debentures are to be surrendered for payment of the principal amount thereof.

Notice of repayment shall be given by the Issuer or, if the Issuer timely notifies the Trustee, at the Issuer’s request, by the Trustee in the name and at the expense of the Issuer and shall be irrevocable. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or not the Holders receive such notice. In any case, a failure to give such notice by mail or any defect in the notice to any Holder of any Debentures designated for repayment as a whole or in part shall not affect the validity of the proceedings for the repayment of any other Debentures.

Section 5.04. Deposit of Repayment Amount

Prior to 11:00 a.m. New York City time on the Repayment Date specified in the notice of repayment given as provided in Section 5.03, the Issuer will deposit with the Trustee or with one or more Paying Agents (or if the Issuer is acting as its own Paying Agent, the Issuer will segregate and hold in trust as provided in Section 3.4 of the Indenture) an amount of money, in immediately available funds, sufficient to pay the principal amount of, and any accrued interest on, all the Debentures which are to be repaid on that date.

Section 5.05. Repayment of Debentures

If any notice of repayment has been given as provided in Section 5.03, the Debentures or portion of the Debentures with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice. On surrender of such Debentures at a place of payment in said notice specified, the said Debentures or the specified portions thereof shall be paid by the Issuer at their principal amount, together with accrued interest to but excluding the Repayment Date; provided that, except in the case of a repayment in full of all Outstanding Debentures, installments of interest due on or prior to the Repayment Date will be payable to the Holders of such Debentures, registered as such at the close of business on the relevant Regular Record Dates according to their terms and the provisions of Section 3.1 of the Indenture.

Upon surrender of any Debentures repaid in part only, the Issuer shall execute and the Trustee shall authenticate and make available for delivery to the Holders thereof, at the expense of the Issuer, a new Debenture, of authorized denominations, in aggregate principal amount equal to the portion of the Debentures not repaid and so presented and having the same Scheduled Maturity Date and other terms. If a Global Security is so surrendered, such new Debentures will be a new Global Security.

If any Debentures required to be repaid shall not be so repaid upon surrender thereof, the principal of such Debentures shall bear interest from the applicable Repayment Date until paid at the rate prescribed therefor in the Debentures.

ARTICLE SIX

Original Issue of Debentures

Section 6.01. Calculation of Original Issue Discount

If during any calendar year any original issue discount shall have accrued on the Debentures, the Issuer shall file with each Paying Agent (including the Trustee if it is a Paying Agent) promptly at the end of each calendar year (a) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on Outstanding Securities as of the end of such year and (b) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.

ARTICLE SEVEN

Supplemental Indentures

Section 7.01. Supplemental Indentures Without Consent of Holders

Solely for purposes of the Debentures, Section 8.1 of the Indenture shall be deleted and replaced with the following (capitalized terms used in the following text that are not defined in the Indenture but are defined herein shall have the meanings ascribed to such terms herein):

SECTION 8.1. Supplemental Indentures Without Consent of Holders

Without the consent of any Holders, the Issuer, when authorized by a resolution of the Board of Directors, and the Trustee, at any time and from time to time, may supplement or amend the Indenture and this First Supplemental Indenture for any of the following purposes:

(1) to evidence the succession of another Person to the Issuer and the assumption by any such successor of the covenants of the Issuer herein and in the Debentures; or

(2) to add to or modify the covenants of the Issuer for the benefit of the Holders of Debentures or to surrender any right or power herein conferred upon the Issuer; provided that no such amendment or modification may add Events of Default or acceleration events with respect to the Debentures; or

(3) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debentures; or

(4) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein or in any supplemental indenture, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of the Holders of Debentures in any material respect; or

(5) to make any changes to the Indenture or this First Supplemental Indenture in order to conform the Indenture and this First Supplemental Indenture to the final prospectus supplement provided to investors in connection with the offering of the Debentures.

ARTICLE EIGHT

Miscellaneous

Section 8.01. Effectiveness

This First Supplemental Indenture will become effective upon its execution and delivery.

Section 8.02. Successors and Assigns

All covenants and agreements in the Indenture, as supplemented and amended by this First Supplemental Indenture, by the Issuer shall bind its successors and assigns, whether so expressed or not.

Section 8.03 Effect of Recitals

The recitals contained herein and in the Debentures, except the Trustee’s certificates of authentication, shall be taken as the statements of the Issuer, and the Trustee does not assume any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this First Supplemental Indenture or of the Debentures. The Trustee shall not be accountable for the use or application by the Issuer of the Debentures or the proceeds thereof.

Section 8.04. Ratification of Indenture

The Indenture, as supplemented by this First Supplemental Indenture, is in all respects ratified and confirmed, and this First Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided.

Section 8.05. Governing Law

This First Supplemental Indenture and the Debentures shall be governed by and construed in accordance with the laws of the State of New York.

Section 8.06. Severability

If any provision of the Indenture, as supplemented and amended by this First Supplemental Indenture, shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable, the same shall not affect any other provision or provisions herein contained or render the same invalid, inoperative or unenforceable to any extent whatever.

* * *

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed as of the day and year first above written.

THE PROGRESSIVE CORPORATION
By:	/s/ Thomas A. King
Name: Title:	Thomas A. King Vice President and Treasurer
By:	/s/ Charles E. Jarrett
Name: Title:	Charles E. Jarrett Vice President, Secretary and Chief Legal Officer
THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:	/s/ L. Garcia
Name: Title:	Linda Garcia Vice President

EXHIBIT A

FORM OF DEBENTURES

The Debentures are to be substantially in the following form and shall bear the following legend and shall include the Trustee’s certificate of authentication in the form required by Section 2.2 of the Base Indenture:

[If a Global Security:] [THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

No. •	Principal Amount: $•
Issue Date: •	CUSIP: 743315 AM5

THE PROGRESSIVE CORPORATION

6.70% FIXED-TO-FLOATING RATE

JUNIOR SUBORDINATED DEBENTURES DUE 2067

The Progressive Corporation, a corporation organized and existing under the laws of the State of Ohio (hereinafter called the “Issuer”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to • [If Global Security:] [Cede & Co.,] or registered assigns, the principal sum of • dollars ($•) as may be revised from time to time on Schedule I hereto on June 15, 2037, or if such day is not a Business Day, the following Business Day (the “Scheduled Maturity Date”) or any subsequent Interest Payment Date (as defined in the First Supplemental Indenture) to the extent set forth in the First Supplemental Indenture. If that amount is not paid in full on the Scheduled Maturity Date or any subsequent Interest Payment Date, the remaining principal amount will be due and payable on the Final Maturity Date. The Final Maturity Date will be June 15, 2067, or if such day is not a Business Day, the following Business Day.

The Issuer further promises to pay interest on said principal sum from and including June 21, 2007, or from and including the most recent Interest Payment Date on which interest has been paid or duly provided for, until the principal thereof is paid or made available for payment semi-annually (subject to deferral as set forth herein) in arrears on June 15 and December 15 of each year, commencing on December 15, 2007 and ending on June 15, 2017, at the rate of 6.70% per annum (computed on the basis of a 360-day year consisting of twelve 30-day months), and thereafter to pay interest on said outstanding principal sum quarterly in arrears on March 15, June 15, September 15, and December 15 of each year, commencing on September 15, 2017 at a floating annual rate equal to Three-Month LIBOR (as defined in the First Supplemental Indenture) plus 2.0175% (computed on the basis of a 360-day year and the actual number of days elapsed in the 360-day year). Accrued interest that is not paid on the

applicable Interest Payment Date, including interest deferred pursuant to Section 2.05 of the First Supplemental Indenture, will bear Additional Interest, to the extent permitted by law, at the interest rate in effect from time to time provided in Section 2.04(a) of the First Supplemental Indenture, from the relevant Interest Payment Date, compounded on each subsequent Interest Payment Date.

In the event that any Semi-Annual Interest Payment Date on which interest is payable on this Security is not a Business Day, then payment of the interest payable on such date will be made on the immediately succeeding day that is a Business Day (and, in the case of payments on or prior to June 15, 2017, without any interest or other payment in respect of any such delay) with the same force and effect as if made on the date the payment was originally payable. In the event that any Quarterly Interest Payment Date on which interest is payable on this Security is not a Business Day, then payment of the interest payable on such date shall be postponed to the immediately succeeding day that is a Business Day, provided that if such Business Day is in the immediately succeeding calendar month, such Interest Payment Date shall be the immediately preceding Business Day, and interest will accrue to but excluding the date on which the interest is actually paid. A “Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or (iii) on or after June 15, 2017, a day that is not a London Banking Day. “London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date, as provided in the Indenture, will be paid to the Person in whose name this Security (or one or more predecessor securities) is registered at the close of business on the Regular Record Date for such interest installment, which shall be June 1 or December 1, as the case may be, immediately preceding such Interest Payment Date until June 15, 2017 (whether or not a Business Day), and shall be March 1, June 1, September 1 and December 1, as the case may be, immediately preceding the relevant Interest Payment Date after June 15, 2017. Any such interest installment not so punctually paid or duly provided for (other than interest deferred in accordance with the next paragraph) shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more predecessor securities) is registered at the close of business on a special record date for the payment of such Additional Interest on such date to be fixed by the Trustee (the “Special Record Date”), notice whereof shall be given to Holders of Securities of this series not less than ten days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.

The Issuer shall have the right at any time or from time to time during the term of this Security to defer payment of interest on this Security for one or more consecutive Interest Periods (each a “Deferral Period”) that do not exceed ten years for the applicable Deferral Period, during which Deferral Periods the Issuer shall have the right, subject to Sections 2.05 and 2.06 of the First Supplemental Indenture, to make partial payments of interest on any Interest Payment Date, and at the end of which the Issuer shall pay all interest then accrued and unpaid; provided, however, that no Deferral Period shall extend beyond the Final Maturity Date or the earlier repayment or redemption in full of the Securities. Upon the termination of any Deferral

Period and upon the payment of all deferred interest then due, the Issuer may elect to begin a new Deferral Period, subject to the above requirements. Except as provided in Section 2.06 of the First Supplemental Indenture, no interest shall be due and payable during a Deferral Period except at the end thereof.

So long as any Securities remain outstanding, if the Issuer has given notice of its election to defer interest payments on the Securities but the related Deferral Period has not yet commenced or a Deferral Period is continuing, the Issuer shall not, and shall not permit any Subsidiary to, (i) declare or pay any dividends or other distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any shares of the Issuer’s capital stock, (ii) make any payment of principal of, or interest or premium, if any, on or repay, purchase or redeem any debt securities of the Issuer that rank upon the Issuer’s liquidation on a parity with this Security (including this Security, the “Pari Passu Securities”) or junior to this Security or (iii) make any guarantee payments regarding any guarantee issued by the Issuer of securities of any Subsidiary if the guarantee ranks upon the Issuer’s liquidation on a parity with or junior to this Security (other than (a) any purchase, redemption or other acquisition of shares of its capital stock by the Issuer in connection with (1) any employment contract, benefit plan or other similar arrangement with or for the benefit of any one or more of its employees, officers, directors, consultants or independent contractors, (2) the satisfaction of the Issuer’s obligations pursuant to any contract entered into in the ordinary course of business prior to the beginning of the applicable Deferral Period, (3) a dividend reinvestment or shareholder purchase plan, or (4) the issuance of shares of the Issuer’s capital stock, or securities convertible into or exercisable for such shares, as consideration in an acquisition transaction entered into prior to the applicable Deferral Period, (b) any exchange, redemption or conversion of any class or series of the Issuer’s capital stock, or the capital stock of one of its Subsidiaries, for any other class or series of its capital stock, or of any class or series of its indebtedness for any class or series of its capital stock, (c) any purchase of fractional interests in shares of the Issuer’s capital stock pursuant to the conversion or exchange provisions of such shares or the securities being converted or exchanged, (d) any declaration of a dividend in connection with any shareholder rights plan, or the issuance of rights, stock or other property under any shareholder rights plan, or the redemption or purchase of rights pursuant thereto, (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks equally with or junior to such stock, (f) (1) any payment of current or deferred interest on Pari Passu Securities that is made pro rata to the amounts due on such Pari Passu Securities (including the this Security); provided that such payments are made in accordance with Section 2.06(c)(ii) of the First Supplemental Indenture to the extent it applies, and (2) any payments of principal or current or deferred interest on Pari Passu Securities that, if not made, would cause the Issuer to breach the terms of the instrument governing such Pari Passu Securities; or (g) any payment of principal in respect of Pari Passu Securities having the same scheduled maturity date as this Security, as required under a provision of such other Pari Passu Securities that is substantially the same as the provisions in Section 2.02(a) of the First Supplemental Indenture, and that is made on a pro rata basis among one or more series of Pari Passu Securities (including this Security) having such a provision. In addition, if any Deferral Period lasts longer than one year, the Issuer may not redeem or purchase any securities of the Issuer that on the Issuer’s bankruptcy or liquidation rank pari passu or junior to any of its Qualifying APM Securities the proceeds of which were used to settle deferred interest on the

Debentures during the relevant Deferral Period until the first anniversary of the date on which all deferred interest on this Security has been paid. However, if the Issuer is involved in a Business Combination where immediately after its consummation more than 50% of the voting shares of the surviving entity of such Business Combination, or the Person to whom all or substantially all of the Issuer’s properties or assets are conveyed, transferred or leased in such Business Combination, is owned, directly or indirectly, by the shareholders of the other party to such Business Combination, then the immediately preceding sentence will not apply during the Deferral Period that is terminated on the next Interest Payment Date following the date of consummation of such Business Combination.

The Issuer shall give written notice of its election to commence or continue any Deferral Period to the Trustee and the Holders of all Securities then Outstanding at least one Business Day and not more than 60 Business Days before the next Interest Payment Date. Such notice shall be given to the Trustee and each Holder of this Security at such Holder’s address appearing in the Security Register by first-class mail, postage prepaid.

Payment of the principal of (and premium, if any) and interest on this Security will be made at the paying agency office or agency of the Issuer maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, at the option of the Issuer, payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by wire transfer in immediately available funds at such place and to such bank account number as may be designated by the Person entitled thereto as specified in the Securities Register in writing not less than ten days before the relevant Interest Payment Date.

The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such Holder’s behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee such Holder’s attorney-in-fact for any and all such purposes. Each Holder hereof, by such Holder’s acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions.

The Issuer and, by acceptance of this Security or a beneficial interest in this Security, each Holder hereof and any person acquiring a beneficial interest herein, agree that for United States federal, state and local tax purposes, it is intended that this Security constitute indebtedness.

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

THE PROGRESSIVE CORPORATION

By:

Name:

Title:

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
By:
	Authorized Signatory

Dated: _____________________________

(FORM OF REVERSE OF DEBENTURES)

This Security is one of a duly authorized issue of securities of the Issuer (herein called the “Securities”), issued and to be issued in one or more series under the Junior Subordinated Indenture, dated as of June 21, 2007 (herein called the “BaseIndenture”), between the Issuer and The Bank of New York Trust Company, N.A., as trustee (the “Trustee”), as amended and supplemented by the First Supplemental Indenture, dated as of June 21, 2007, between the Issuer and the Trustee (the “First Supplemental Indenture”, and together with the Base Indenture, the “Indenture”), to which Indenture and all other indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Issuer and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest, rank and in any other respect provided in the Indenture.

All terms used in this Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

The Securities shall be redeemable at the option of the Issuer in accordance with the terms of the Indenture. The Securities are redeemable in whole or in part at the option of the Issuer at any time after the date hereof. In the case of any redemption, the Redemption Price shall be equal to (1) in the case of any redemption on or after June 15, 2017, 100% of the principal amount of the Securities being redeemed plus accrued and unpaid interest to the Redemption Date or (2) in the case of any redemption prior to June 15, 2017, the greater of (i) 100% of the principal amount plus accrued and unpaid interest to the Redemption Date, and (ii) the Make-Whole Redemption Price. If the Securities are not redeemed in whole, the Issuer may not effect such redemption unless at least $25 million aggregate principal amount of the Securities, excluding any Securities held by the Issuer or any of its affiliates, remains outstanding after giving effect to such redemption.

Notwithstanding the foregoing, the Issuer may not redeem the Securities in part if the principal amount of the Securities has been accelerated pursuant to Section 5.1 of the Base Indenture (as amended by Section 2.07(a) of the First Supplemental Indenture) and such acceleration has not been rescinded. In addition, the Issuer may not redeem the Securities in part unless all accrued and unpaid interest, including deferred interest, has been paid in full on all Outstanding Securities for all Interest Periods terminating on or before the Redemption Date.

No sinking fund is provided for the Securities.

The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Issuer with certain conditions set forth in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the Issuer and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Issuer and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the

Outstanding Securities to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Securities, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, (i) if an Event of Default (other than an Event of Default relating to certain insolvency events, as set forth in the Indenture) with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities may declare the entire principal amount and all accrued but unpaid interest of all the Securities to be due and payable immediately, by a notice in writing to the Issuer (and to the Trustee if given by Holders), and (ii) if an Event of Default relating to insolvency events as set forth in the Indenture occurs, the principal amount of the Securities shall automatically become due and payable; provided that in any such case the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article Eleven of the Base Indenture.

The Holder of this Security, by such Holder’s acceptance hereof, agrees that if a bankruptcy event of the Issuer shall occur prior to the redemption or repayment of such Securities, such Holder shall have no claim for, and thus no right to receive, any deferred interest pursuant to Section 2.05 of the First Supplemental Indenture that has not been paid pursuant to Sections 2.05 and 2.06 of the First Supplemental Indenture to the extent the amount of such interest exceeds the sum of (x) interest that relates to the earliest two years of the portion of the Deferral Period for which interest has not been paid and (y) an amount equal to such Holder’s pro rata share of the excess, if any, of the Preferred Shares Issuance Cap over the aggregate amount of net proceeds from the sale of Qualifying Non-Cumulative Preferred Shares and unconverted Mandatorily Convertible Preferred Shares that has been applied to fund deferred interest pursuant to the alternative payment mechanism set forth in Section 2.06 of the First Supplemental Indenture; provided that each Holder is deemed to agree that to the extent the remaining claim exceeds the amount set forth in clause (x), the amount it receives in respect of such excess shall not exceed the amount it would have received had the claim for such excess ranked pari passu with the interests of the holders, if any, of Qualifying Non-Cumulative Preferred Shares.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Issuer maintained under Section 3.2 of the Base Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized

denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee shall have the right to treat and shall treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuer, the Trustee nor any such agent shall be affected by notice to the contrary.

The Securities are issuable only in registered form without coupons in minimum denominations of $1,000 and any integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same.

The Issuer and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree to treat for United States Federal income tax purposes (i) the Securities as indebtedness of the Issuer, and (ii) the stated interest on the Securities as ordinary interest income that is includible in the Holder’s or beneficial owner’s gross income at the time the interest is paid or accrued in accordance with the Holder’s or beneficial owner’s regular method of tax accounting, and otherwise to treat the Securities as described in the final prospectus supplement provided to investors in connection with the offering of the Securities.

THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

This is one of the Securities referred to in the within mentioned Indenture.

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers this Security to:

(Insert assignee’s social security or tax identification number)

(Insert address and zip code of assignee)

agent to transfer this Security on the books of the Securities Registrar. The agent may substitute another to act for him or her.

Dated:	Signature:
	Signature Guarantee:

(Sign exactly as your name appears on the other side of this Security)

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Securities Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

SCHEDULE I

SCHEDULE OF PRINCIPAL AMOUNT REDUCTIONS

Principal amount of Debentures outstanding represented by this Security as of , : $ .

Thereafter, the following decreases have been made:

Date of Repayment, Redemption or Purchase	Principal Amount Repaid, Redeemed or Purchased	Principal Amount Remaining	Notation Made by or on Behalf of the Trustee
	$	$

EX-4.22

Exhibit 4.22

REPLACEMENT CAPITAL COVENANT

REPLACEMENT CAPITAL COVENANT, dated as of June 21, 2007 (this “Replacement Capital Covenant”), by The Progressive Corporation, an Ohio corporation (together with its successors and assigns, the “Corporation”), in favor of and for the benefit of each Covered Debtholder (as defined below).

RECITALS

A. On the date hereof, the Corporation is issuing $1,000,000,000 aggregate principal amount of its 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”).

B. This Replacement Capital Covenant is the “Replacement Capital Covenant” referred to in the Corporation’s Prospectus Supplement, dated June 18, 2007, to the Corporation’s prospectus, dated June 18, 2007, included in the registration statement on Form S-3 (File No. 333-143824), relating to the Debentures.

C. The Corporation is entering into and disclosing the content of this Replacement Capital Covenant in the manner provided below with the intent that the covenants provided for in this Replacement Capital Covenant be enforceable by each Covered Debtholder and that the Corporation be estopped from disregarding the covenants in this Replacement Capital Covenant, in each case to the fullest extent permitted by applicable law.

D. The Corporation acknowledges that reliance by each Covered Debtholder upon the covenants in this Replacement Capital Covenant is reasonable and foreseeable by the Corporation and that, were the Corporation to disregard its covenants in this Replacement Capital Covenant, each Covered Debtholder would have sustained an injury as a result of its reliance on such covenants.

NOW, THEREFORE, the Corporation hereby covenants and agrees as follows in favor of and for the benefit of each Covered Debtholder.

SECTION 1. Definitions

Capitalized terms used in this Replacement Capital Covenant (including the Recitals) have the meanings set forth in Schedule I hereto.

SECTION 2. Limitations on Repayment, Redemption and Purchase of Debentures

The Corporation hereby promises and covenants to and for the benefit of each Covered Debtholder that the Corporation shall not repay, redeem or purchase, nor shall any Subsidiary of the Corporation purchase, any of the Debentures prior to the Termination Date except to the extent that the principal amount repaid or the applicable redemption or purchase price does not exceed the sum of the Applicable Percentages of the following amounts:

(i) the aggregate amount of net cash proceeds received by the Corporation and its Subsidiaries since the most recent Measurement Date (without double counting proceeds received in any prior Measurement Period) from the sale of Replacement Capital Securities, plus

(ii) (A) the aggregate amount of net cash proceeds received by the Corporation and its Subsidiaries from the sale of Common Shares and Qualifying Warrants and (B) the Current Stock Market Price of any Common Shares that the Corporation and its Subsidiaries have issued (determined as of the date of issuance) in connection with the conversion of any convertible or exchangeable securities, other than securities for which the Corporation or any of its Subsidiaries has received equity credit from any NRSRO, in each case since the most recent Measurement Date (without double counting proceeds received in any prior Measurement Period),

in each case to Persons other than the Corporation and its Subsidiaries. For purposes of this Replacement Capital Covenant, the terms “repay” and “repayment” include the defeasance by the Corporation of the Debentures as well as the satisfaction and discharge of its obligations under the Indenture with respect to the Debentures.

SECTION 3. Covered Debt

(a) The Corporation represents and warrants that the Initial Covered Debt is Eligible Debt.

(b) On or during the 30-day period immediately preceding any Redesignation Date with respect to the Covered Debt then in effect, the Corporation shall identify the series of Eligible Debt that will become the Covered Debt on and after such Redesignation Date in accordance with the following procedures:

(i) the Corporation shall identify each series of its then-outstanding long-term indebtedness for money borrowed that is Eligible Debt;

(ii) if only one series of the Corporation’s then outstanding long-term indebtedness for money borrowed is Eligible Debt, such series shall become the Covered Debt commencing on the related Redesignation Date;

(iii) if the Corporation has more than one outstanding series of long-term indebtedness for money borrowed that is Eligible Debt, then the Corporation shall identify the series that has the latest occurring final maturity date as of the date the Corporation is applying the procedures in this Section 3(b) and such series shall become the Covered Debt on the related Redesignation Date;

(iv) the series of outstanding long-term indebtedness for money borrowed that is determined to be Covered Debt pursuant to clause (ii) or (iii) above shall be the Covered Debt for purposes of this Replacement Capital Covenant for the period commencing on the related Redesignation Date and continuing to but excluding the Redesignation Date as of which a new series of outstanding long-term indebtedness for money borrowed is next determined to be the Covered Debt pursuant to the procedures set forth in this Section 3(b); and

(v) in connection with such identification of a new series of Covered Debt, the Corporation shall, as provided for in Section 3(c), give a notice and file with the Commission a current report on Form 8-K including or incorporating by reference this Replacement Capital Covenant as an exhibit within the time frame provided for in Section 3(c).

(c) Notice. In order to give effect to the intent of the Corporation described in Recital C, the Corporation covenants that (i) simultaneously with the execution of this Replacement Capital Covenant or as soon as practicable after the date hereof, it shall (x) give notice to the Holders of the Initial Covered Debt, in the manner provided in the indenture relating to the Initial Covered Debt, of this Replacement Capital Covenant and the rights granted to such Holders hereunder and (y) file a copy of this Replacement Capital Covenant with the Commission as an exhibit to a Form 8-K under the Securities Exchange Act; (ii) so long as the Corporation is a reporting company under the Securities Exchange Act, the Corporation shall include in each annual report filed with the Commission on Form 10-K under the Securities Exchange Act a description of the covenant set forth in Section 2 and identify the series of long-term indebtedness for borrowed money that is Covered Debt as of the date such Form 10-K is filed with the Commission; (iii) if a series of the Corporation’s long-term indebtedness for money borrowed (1) becomes Covered Debt or (2) ceases to be Covered Debt, the Corporation shall give notice of such occurrence within 30 days to the holders of such long-term indebtedness for money borrowed in the manner provided for in the indenture, fiscal agency agreement or other instrument under which such long-term indebtedness for money borrowed was issued and report such change in a current report on Form 8-K including or incorporating by reference this Replacement Capital Covenant, and in the Corporation’s next annual report on Form 10-K, as applicable; (iv) if, and only if, the Corporation ceases to be a reporting company under the Securities Exchange Act, the Corporation shall (x) post on its website the information otherwise required to be included in Securities Exchange Act filings pursuant to clauses (ii) and (iii) of this Section 3(c) and (y) cause a notice of the execution of this Replacement Capital Covenant to be posted on the Bloomberg screen for the Covered Debt or any successor Bloomberg screen and each similar third-party vendor’s screen the Corporation reasonably believes is appropriate (each an “Investor Screen”) and cause a hyperlink to a definitive copy of this Replacement Capital Covenant to be included on the Investor Screen for each series of Covered Debt, in each case to the extent permitted by Bloomberg or such similar third-party vendor, as the case may be; and (v) promptly upon request by any Holder of Covered Debt, the Corporation shall provide such Holder with a copy of this Replacement Capital Covenant as executed.

(d) The Corporation agrees that, if at any time the Covered Debt is held by a trust (for example, where the Covered Debt is part of an issuance of trust preferred securities), a holder of the securities issued by such trust may enforce (including by instituting legal proceedings) this Replacement Capital Covenant directly against the Corporation as though such holder owned Covered Debt directly, and such holder shall be deemed to be a holder of “Covered Debt” for purposes of this Replacement Capital Covenant for so long as the indebtedness held by such trust remains Covered Debt hereunder.

SECTION 4. Termination, Amendment and Waiver

(a) The obligations of the Corporation pursuant to this Replacement Capital Covenant shall remain in full force and effect until the earliest date (the “Termination Date”) to occur of (i) the date, if any, on which the Holders of a majority in principal amount of the then-effective series of Covered Debt consent or agree in writing to the termination of this Replacement Capital Covenant and the obligations of the Corporation hereunder, (ii) the date on which the Corporation ceases to have any series of outstanding Eligible Senior Debt or Eligible Subordinated Debt (in each case without giving effect to the rating requirement in clause (b) of the definition of each such term), (iii) June 15, 2047 or, if earlier, the date on which the Debentures are otherwise repaid, redeemed or purchased in full in accordance with this Replacement Capital Covenant, and (iv) the date on which the Debentures become accelerated due to the occurrence of an event of default. From and after the Termination Date, the obligations of the Corporation pursuant to this Replacement Capital Covenant shall be of no further force and effect.

(b) This Replacement Capital Covenant may be amended or supplemented from time to time by a written instrument signed by the Corporation with the consent of the Holders of a majority in principal amount of the then-effective series of Covered Debt, provided that this Replacement Capital Covenant may be amended or supplemented from time to time by a written instrument signed only by the Corporation (and without the consent of any Covered Debtholder) if (i) such amendment or supplement eliminates Common Shares, Qualifying Warrants, Mandatorily Convertible Preferred Shares and/or Debt Exchangeable for Common Equity as a Replacement Capital Security and, in the case of this clause (i), after the date of this Replacement Capital Covenant, an accounting standard or interpretive guidance of an existing accounting standard issued by an organization or regulator that has responsibility for establishing or interpreting accounting standards in the United States becomes effective such that there is more than an insubstantial risk that failure to eliminate Common Shares, Qualifying Warrants, Mandatorily Convertible Preferred Shares and/or Debt Exchangeable for Common Equity as a Replacement Capital Security would result in a reduction in the Corporation’s earnings per share as calculated in accordance with generally accepted accounting principles in the United States, (ii) such amendment or supplement is not adverse to the Holders of the then-effective series of Covered Debt and an officer of the Corporation has delivered to the Holders of the then-effective series of Covered Debt in the manner provided for in the indenture, fiscal agency agreement or other instrument with respect to such Covered Debt a written certificate stating that, in his or her determination, such amendment or supplement is not adverse to the Holders of the then-effective series of Covered Debt, or (iii) the effect of such amendment or supplement is solely to impose additional restrictions on, or eliminate (subject to clause (i) in the circumstances where it applies) certain of, the types of securities qualifying as Replacement Capital Securities, and an officer of the Corporation has delivered to the Holders of the then-effective series of Covered Debt in the manner provided for in the indenture, fiscal agency agreement or other instrument with respect to such Covered Debt a written certificate to that effect.

(c) For purposes of Sections 4(a) and 4(b), the Holders whose consent or agreement is required to terminate, amend or supplement the obligations of the Corporation under this Replacement Capital Covenant shall be the Holders of the then-effective Covered Debt as of a record date established by the Corporation that is not more than 30 days prior to the date on which the Corporation proposes that such termination, amendment or supplement becomes effective.

SECTION 5. Miscellaneous

(a) This Replacement Capital Covenant shall be governed by and construed in accordance with the laws of the State of New York.

(b) This Replacement Capital Covenant shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of the Covered Debtholders as they exist from time-to-time (it being understood and agreed by the Corporation that any Person who is a Covered Debtholder shall retain its status as a Covered Debtholder for so long as the series of long-term indebtedness for borrowed money owned by such Person is Covered Debt and if such Person initiates an action, claim or proceeding to enforce its rights under this Replacement Capital Covenant after the Corporation has violated its covenants in Section 2 and before the series of long-term indebtedness for money borrowed held by such Person is no longer Covered Debt, such Person’s rights under this Replacement Capital Covenant shall not terminate by reason of such series of long-term indebtedness for money borrowed no longer being Covered Debt).

(c) All demands, notices, requests and other communications to the Corporation under this Replacement Capital Covenant shall be deemed to have been duly given and made if in writing and (i) if served by personal delivery upon the Corporation, on the day so delivered (or, if such day is not a Business Day, the next succeeding Business Day), or (ii) if delivered by registered post or certified mail, return receipt requested, or sent to the Corporation by a national or international courier service, on the date of receipt by the Corporation (or, if such date of receipt is not a Business Day, the next succeeding Business Day), and in each case to the Corporation at the address set forth below, or at such other address as the Corporation may thereafter notify to Covered Debtholders or post on its website as the address for notices under this Replacement Capital Covenant:

The Progressive Corporation

6300 Wilson Mills Road

Mayfield Village, Ohio 44143

Attention: Treasurer

IN WITNESS WHEREOF, the Corporation has caused this Replacement Capital Covenant to be executed by its duly authorized officer, as of the day and year first above written.

THE PROGRESSIVE CORPORATION
By:	/s/ Jeffrey W. Basch
	Name:	Jeffrey W. Basch
	Title:	Vice President and Chief Accounting Officer

SCHEDULE I

DEFINITIONS

“Alternative Payment Mechanism” means, with respect to any Qualifying Capital Securities, provisions in the related transaction documents permitting the Corporation, in its sole discretion, to defer or skip in whole or in part payment of Distributions on such Qualifying Capital Securities for one or more consecutive Distribution Periods not to exceed ten years and requiring the Corporation to issue (or use Commercially Reasonable Efforts to issue) one or more types of APM Qualifying Securities raising eligible proceeds at least equal to the deferred Distributions on such Qualifying Capital Securities and apply the proceeds to pay unpaid Distributions on such Qualifying Capital Securities, commencing on the earlier of (x) the first Distribution Date after commencement of a deferral period on which the Corporation pays current Distributions on such Qualifying Capital Securities and (y) the fifth anniversary of the commencement of such deferral period, and that:

(i) define “eligible proceeds” to mean, for purposes of such Alternative Payment Mechanism, the net proceeds (after underwriters’ or placement agents’ fees, commissions or discounts and other expenses relating to the issuance or sale of the relevant securities, where applicable, and including the fair market value of property received by the Corporation or any of its Subsidiaries as consideration for such APM Qualifying Securities) that the Corporation has received during the 180 days prior to the related Distribution Date from the issuance of APM Qualifying Securities, up to the Preferred Cap in the case of APM Qualifying Securities that are Qualifying Non-Cumulative Preferred Shares or Mandatorily Convertible Preferred Shares;

(ii) permit the Corporation to pay current Distributions on any Distribution Date out of any source of funds but (x) require the Corporation to pay deferred Distributions only out of eligible proceeds and (y) prohibit the Corporation from paying deferred Distributions out of any source of funds other than eligible proceeds;

(iii) if deferral of Distributions continues for more than one year (or such shorter period as provided for in the terms of such securities), require the Corporation and its Subsidiaries not to repay, redeem or purchase any of its securities ranking junior to or pari passu with any APM Qualifying Securities on a bankruptcy or liquidation of the Corporation the proceeds of which were used to settle deferred interest during the relevant deferral period until at least one year after all deferred Distributions have been paid (a “Repurchase Restriction”), other than the following (none of which shall be restricted or prohibited by a Repurchase Restriction):

(A) purchases of such securities by the Corporation’s Subsidiaries in connection with the distribution thereof or market-making or other secondary-market activities;

(B) purchases, redemptions or other acquisitions of Common Shares in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of employees, officers, directors or consultants; or

(C) purchases of Common Shares pursuant to a contractually binding requirement to buy Common Shares entered into prior to the beginning of the related deferral period, including under a contractually binding stock repurchase plan;

(iv) may include a provision that, notwithstanding the Common Cap and the Preferred Cap, for purposes of paying deferred Distributions, limits the Corporation’s ability to sell Common Shares, Qualifying Warrants or Mandatorily Convertible Preferred Shares above the Share Cap;

(v) in the case of Qualifying Capital Securities other than Qualifying Non-Cumulative Preferred Shares, include a Bankruptcy Claim Limitation Provision;

(vi) permit the Corporation, at its option, to provide that if it is involved in a merger, consolidation, amalgamation, binding share exchange or conveyance, transfer or lease of assets substantially as an entirety to any other person or a similar transaction (a “Business Combination”) where immediately after the consummation of the Business Combination more than 50% of the voting stock of the surviving entity of the Business Combination or the Person to whom all or substantially all of the Corporation’s assets have been transferred, conveyed or leased is owned, directly or indirectly, by the shareholders of the other party to the Business Combination, then clauses (i) through (iii) of this definition will not apply to any deferral period that is terminated on the next Distribution Date following the date of the Business Combination;

(vii) limit the obligation of the Corporation to issue (or use Commercially Reasonable Efforts to issue) APM Qualifying Securities that are Common Shares and Qualifying Warrants to settle deferred Distributions pursuant to the Alternative Payment Mechanism either (A) during the first five years of any deferral period or (B) before an anniversary of the commencement of any deferral period that is not earlier than the fifth such anniversary and not later than the ninth such anniversary (as designated in the terms of such Qualifying Capital Securities) with respect to deferred Distributions attributable to the first five years of such deferral period, either:

(X) to an aggregate amount of such securities, the net proceeds from the issuance of which is equal to 2% of the product of the average of the Current Stock Market Price of the Common Shares on the ten consecutive trading days ending on the fourth trading day immediately preceding the date of issuance multiplied by the total number of issued and outstanding Common Shares as of the date of the Corporation’s most recent publicly available consolidated financial statements; or

(Y) to a number of Common Shares and Qualifying Warrants, in the aggregate, not in excess of 2% of the outstanding number of Common Shares (such limitation set forth in (X) or (Y), the “Common Cap”); and

(viii) limit the right of the Corporation to issue APM Qualifying Securities that are Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares to settle deferred Distributions pursuant to the Alternative Payment Mechanism to an aggregate amount of Qualifying Non-Cumulative Preferred Shares and still-outstanding Mandatorily Convertible Preferred Shares, the net proceeds from the issuance of which with respect to all deferral periods is equal to 25% of the liquidation or principal amount of such Qualifying Capital Securities (the “Preferred Cap”);

provided (and it being understood) that:

(A) the Corporation shall not be obligated to issue (or use Commercially Reasonable Efforts to issue) APM Qualifying Securities for so long as a Market Disruption Event has occurred and is continuing;

(B) if, due to a Market Disruption Event or otherwise, the Corporation is able to raise and apply some, but not all, of the eligible proceeds necessary to pay all deferred Distributions on any Distribution Date, the Corporation will apply any available eligible proceeds to pay accrued and unpaid Distributions on the applicable Distribution Date in chronological order subject to the Common Cap, Preferred Cap and Share Cap, as applicable; and

(C) if the Corporation has outstanding more than one class or series of securities under which it is obligated to sell a type of APM Qualifying Securities and apply some part of the proceeds to the payment of deferred Distributions, then on any date and for any period the amount of net proceeds received by the Corporation from those sales and available for payment of deferred Distributions on such securities shall be applied to such securities on a pro rata basis up to the Common Cap, the Preferred Cap and the Share Cap, as applicable, in proportion to the total amounts that are due on such securities.

“APM Qualifying Securities” means, with respect to an Alternative Payment Mechanism, or any Mandatory Trigger Provision, one or more of the following (as designated in the transaction documents for any Qualifying Capital Securities that include an Alternative Payment Mechanism or a Mandatory Trigger Provision, as applicable):

(i).    Common Shares

(ii).    Qualifying Warrants;

(iii).    Qualifying Non-Cumulative Preferred Shares; or

(iv).    Mandatorily Convertible Preferred Shares;

provided (and it being understood) that (i) if the APM Qualifying Securities for any Alternative Payment Mechanism or Mandatory Trigger Provision include both Common Shares and Qualifying Warrants, such Alternative Payment Mechanism or Mandatory Trigger Provision may permit, but need not require, the Corporation to issue Qualifying Warrants and (ii) such Alternative Payment Mechanism or Mandatory Trigger Provision may permit, but need not require, the Corporation to issue Mandatorily Convertible Preferred Shares.

“Applicable Percentage” means:

(i) in the case of any Common Shares or Qualifying Warrants, (a) 133% with respect to any repayment, redemption or purchase prior to June 15, 2017, (b) 200% with respect to any repayment, redemption or purchase on or after June 15, 2017 and prior to June 15, 2037 and (c) 400% with respect to any repayment, redemption or purchase on or after June 15, 2037;

(ii) in the case of any Mandatorily Convertible Preferred Shares, Debt Exchangeable for Common Equity, Debt Exchangeable for Preferred Equity or any Qualifying Capital Securities described in clause (i) of the definition of such term, (a) 100% with respect to any repayment, redemption or purchase prior to June 15, 2037 and (b) 300% with respect to any repayment, redemption or purchase on or after June 15, 2037;

(iii) in the case of any Qualifying Capital Securities described in clause (ii) of the definition of such term, (a) 100% with respect to any repayment, redemption or purchase prior to June 15, 2037 and (b) 200% with respect to any repayment, redemption or purchase on or after June 15, 2037; and

(iv) in the case of any Qualifying Capital Securities described in clause (iii) of the definition of such term, 100%.

“Bankruptcy Claim Limitation Provision” means, with respect to any Qualifying Capital Securities that have an Alternative Payment Mechanism or a Mandatory Trigger Provision, provisions that, upon any liquidation, dissolution, winding up or reorganization or in connection with any insolvency, receivership or proceeding under any bankruptcy

law with respect to the issuer, limit the claim of the holders of such securities to Distributions that accumulate during (A) any deferral period, in the case of securities that have an Alternative Payment Mechanism or (B) any period in which the issuer fails to satisfy one or more financial tests set forth in the terms of such securities or related transaction agreements, in the case of securities that have a Mandatory Trigger Provision, to:

(i) in the case of Qualifying Capital Securities that have an Alternative Payment Mechanism or Mandatory Trigger Provision with respect to which the APM Qualifying Securities do not include Qualifying Non-Cumulative Preferred Shares or Mandatorily Convertible Preferred Shares, 25% of the stated or principal amount of such Qualifying Capital Securities then outstanding; and

(ii) in the case of any other Qualifying Capital Securities, an amount not in excess of the sum of (x) the first two years of accumulated and unpaid Distributions and (y) an amount equal to the excess, if any, of the Preferred Cap over the aggregate amount of net proceeds from the sale of Qualifying Non-Cumulative Preferred Shares and Mandatorily Convertible Preferred Shares that is still outstanding that the issuer has applied to pay such Distributions pursuant to the Alternative Payment Mechanism or the Mandatory Trigger Provision; provided that the holders of such Qualifying Capital Securities are deemed to agree that, to the extent the remaining claim exceeds the amount set forth in clause (x), the amount they receive in respect of such excess shall not exceed the amount they would have received the claim for such excess ranked pari passu with the interests of the holders, if any, of Qualifying Non-Cumulative Preferred Shares.

“Business Combination” has the meaning specified in clause (vi) of the definition of Alternative Payment Mechanism.

“Business Day” means each day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed.

“Commercially Reasonable Efforts” means, for purposes of selling APM Qualifying Securities, commercially reasonable efforts to complete the offer and sale of APM Qualifying Securities to third parties that are not Subsidiaries of the Corporation in public offerings or private placements. The Corporation shall not be considered to have made Commercially Reasonable Efforts to effect a sale of APM Qualifying Securities if it determines not to pursue or complete such sale due to pricing, coupon, dividend rate or dilution considerations.

“Commission” means the United States Securities and Exchange Commission.

“Common Cap” has the meaning specified in clause (vii) of the definition of Alternative Payment Mechanism.

“Common Shares” means (i) common shares of the Corporation, including common shares issued pursuant to any dividend reinvestment plan or employee benefit plan of the Corporation, (ii) a security of the Corporation, ranking upon the Corporation’s liquidation, dissolution or winding up junior to its Qualifying Non-Cumulative Preferred Shares and pari passu with its Common Shares, that tracks the performance of, or relates to the results of, a business, unit or division of the Corporation, and (iii) any securities issued in exchange for the securities described in clause (i) or (ii) above in connection with a Business Combination.

“Corporation” has the meaning specified in the introduction to this instrument.

“Covered Debt” means (a) at the date of this Replacement Capital Covenant and continuing to but excluding the first Redesignation Date, the Initial Covered Debt and (b) thereafter, commencing with each Redesignation Date and continuing to but excluding the next succeeding Redesignation Date, the Eligible Debt identified pursuant to Section 3(b) as the Covered Debt for such period.

“Covered Debtholder” means each Person to the extent that that Person holds (whether as a Holder or a beneficial owner holding through a participant in a clearing agency) long-term indebtedness for money borrowed of the Corporation during the period that such long-term indebtedness for money borrowed is Covered Debt.

“Current Stock Market Price” means, with respect to the Common Shares on any date, (i) the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions by the New York Stock Exchange or, (ii) if the Common Shares are not then listed on the New York Stock Exchange, as reported by the principal U.S. securities exchange on which the Common Shares are traded or quoted on the relevant date or, (iii) if the Common Shares are not listed on any U.S. securities exchange on the relevant date, the last quoted bid price for the Common Shares in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization, or (iv) if the Common Shares are not so quoted, the average of the mid-point of the last bid and ask prices for the Common Shares on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Corporation for this purpose.

“Debentures” has the meaning specified in Recital A.

“Debt Exchangeable for Common Equity” means a security or combination of securities (together in this definition, “such securities”) that:

(i) gives the holder a beneficial interest in (a) subordinated debt securities of the Corporation that are not redeemable prior to the settlement date of a related stock purchase contract and (b) a fractional interest in the related stock purchase contract for a Common Share that will be settled in three years or less, with the number of Common Shares purchasable pursuant to such stock purchase contract to be within a range established at the time of issuance of such subordinated debt securities and having customary anti-dilution provisions;

(ii) provides that the holders directly or indirectly grant the Corporation a security interest in such subordinated debt securities and their proceeds (including any substitute collateral permitted under the transaction documents) to secure the holders’ direct or indirect obligation to purchase Common Shares pursuant to such stock purchase contracts;

(iii) includes a remarketing feature pursuant to which such subordinated debt securities are remarketed to new investors commencing not later than the last Distribution Date that is at least one month prior to the settlement date of the stock purchase contract; and

(iv) provides for the proceeds raised in the remarketing to be used to purchase Common Shares under the stock purchase contracts and, if there has not been a successful remarketing by the settlement date of the stock purchase contract, provides that the stock purchase contracts will be settled by the Corporation exercising its remedies as a secured party with respect to the subordinated debt securities or other collateral directly or indirectly pledged by holders in the Debt Exchangeable for Common Equity.

“Debt Exchangeable for Preferred Equity” means a security or combination of securities (together in this definition, “such securities”) that:

(i) gives the holder a beneficial interest in (a) subordinated debt securities of the Corporation or one of its Subsidiaries (in this definition, the “issuer”) that include a provision permitting the issuer to defer Distributions in whole or in part on such securities for one or more Distribution Periods of up to at least seven years without any remedies other than Permitted Remedies and that are the most junior subordinated debt of the issuer (or rank pari passu with the most junior subordinated debt of the issuer) and (b) an interest in a stock purchase contract that obligates the holder to acquire a beneficial interest in the Company’s Qualifying Non-Cumulative Preferred Shares;

(ii) provides that the holders directly or indirectly grant to the Corporation a security interest in such subordinated debt securities and their proceeds (including any substitute collateral permitted under the transaction documents) to secure the investors’ direct or indirect obligation to purchase Qualifying Non-Cumulative Preferred Shares pursuant to such stock purchase contracts;

(iii) includes a remarketing feature pursuant to which such subordinated debt securities are remarketed to new investors commencing not later than the first Distribution Date that is at least five years after the date of issuance of such securities or earlier in the event of an early settlement event based on (a) the dissolution of the issuer of such Debt Exchangeable for Preferred Equity or (b) one or more financial tests set forth in the terms of the instrument governing such Debt Exchangeable for Preferred Equity;

(iv) provides for the proceeds raised in the remarketing to be used to purchase Qualifying Non-Cumulative Preferred Shares under the stock purchase contracts and, if there has not been a successful remarketing by the first Distribution Date that is six years after the date of issuance of such securities, provides that the stock purchase contracts will be settled by the Corporation exercising its rights as a secured creditor with respect to the subordinated debt securities or other collateral directly or indirectly pledged by investors in the Debt Exchangeable for Preferred Equity;

(v) includes a Qualifying Replacement Capital Covenant that will apply to such securities and to any Qualifying Non-Cumulative Preferred Shares issued pursuant to the stock purchase contracts; provided that such Qualifying Replacement Capital Covenant will not include Debt Exchangeable for Common Equity or Debt Exchangeable for Preferred Equity as “Replacement Capital Securities”; and

(vi) if applicable, after the issuance of such Qualifying Non-Cumulative Preferred Shares, provides the holders with a beneficial interest in such Qualifying Non-Cumulative Preferred Shares.

“Distribution Date” means, as to any Qualifying Capital Securities, Debt Exchangeable for Common Equity or Debt Exchangeable for Preferred Equity, the dates on which Distributions on such securities are scheduled to be made.

“Distribution Period” means, as to any Qualifying Capital Securities, Debt Exchangeable for Common Equity or Debt Exchangeable for Preferred Equity, each period from and including a Distribution Date for such securities to but excluding the next succeeding Distribution Date for such securities.

“Distribution Rate Step-Up” means, as to any Qualifying Capital Securities, Debt Exchangeable for Common Equity or Debt Exchangeable for Preferred Equity, that the rate at which Distributions accrue or are paid on such securities increases over time (including by an increase in the fixed rate of Distributions in the case of securities that accrue and pay Distributions at a fixed rate or by an increase in the margin above the applicable index in the case of securities that accrue and pay Distributions based upon a margin above an index, but not including an increase in the rate of Distributions merely because the index used in calculating such rate increases).

“Distributions” means, as to any Qualifying Capital Securities, Debt Exchangeable for Common Equity or Debt Exchangeable for Preferred Equity, dividends, interest or other income distributions to the holders thereof that are not Subsidiaries of the Corporation.

“Eligible Debt” means, at any time, Eligible Subordinated Debt or, if no Eligible Subordinated Debt is then outstanding, Eligible Senior Debt.

“Eligible Senior Debt” means, at any time in respect of any issuer, each series of outstanding unsecured long-term indebtedness for money borrowed of such issuer that (a) upon a bankruptcy, liquidation, dissolution or winding up of the issuer, ranks most senior among the issuer’s then outstanding classes of unsecured indebtedness for money borrowed, (b) is then assigned a rating by at least one NRSRO (provided that this clause (b) shall apply on a Redesignation Date only if on such date the issuer has outstanding senior long-term indebtedness for money borrowed that satisfies the requirements of clauses (a), (c) and (d) that is then assigned a rating by at least one NRSRO), (c) has an outstanding principal amount of not less than $100,000,000, and (d) was issued through or with the assistance of a commercial or investment banking firm or firms acting as underwriters, initial purchasers or placement or distribution agents. For purposes of this definition as applied to securities with a CUSIP number, each issuance of long-term indebtedness for money borrowed that has (or, if such indebtedness is held by a trust or other intermediate entity established directly or indirectly by the issuer, the securities of such intermediate entity that have) a separate CUSIP number shall be deemed to be a series of the issuer’s long-term indebtedness for money borrowed that is separate from each other series of such indebtedness.

“Eligible Subordinated Debt” means, at any time in respect of any issuer, each series of the issuer’s then-outstanding unsecured long-term indebtedness for money borrowed that (a) upon a bankruptcy, liquidation, dissolution or winding up of the issuer, ranks subordinate to the issuer’s then outstanding series of unsecured indebtedness for money borrowed that ranks most senior and ranks senior to the Debentures, (b) is then assigned a rating by at least one NRSRO (provided that this clause (b) shall apply on a Redesignation Date only if on such date the issuer has outstanding subordinated long-term indebtedness for money borrowed that satisfies the requirements in clauses (a), (c) and (d) that is then assigned a rating by at least one NRSRO), (c) has an outstanding principal amount of not less than $100,000,000, and (d) was issued through or with the assistance of a commercial or investment banking firm or firms acting as underwriters, initial purchasers or placement or distribution agents. For purposes of this definition as applied to securities with a CUSIP number, each issuance of long-term indebtedness for money borrowed that has (or, if such indebtedness is held by a trust or other intermediate entity established directly or indirectly by the issuer, the securities of such intermediate entity that have) a separate CUSIP number shall be deemed to be a series of the issuer’s long-term indebtedness for money borrowed that is separate from each other series of such indebtedness.

“Holder” means, as to the Covered Debt then in effect, each holder of such Covered Debt as reflected on the securities register maintained by or on behalf of the Corporation with respect to such Covered Debt.

“Indenture” means the Junior Subordinated Indenture, dated June 21, 2007, between the Corporation and The Bank of New York Trust Company, N.A., as Trustee, as amended and supplemented by a First Supplemental Indenture, dated June 21, 2007.

“Initial Covered Debt” means the Corporation’s 6.25% Senior Notes due December 1, 2032, which have CUSIP No. 743315AL7.

“Intent-Based Replacement Disclosure” means, as to any Qualifying Non-Cumulative Preferred Shares or Qualifying Capital Securities, that the issuer has publicly stated its intention, either in the prospectus or other offering document under which such securities were initially offered for sale or in filings with the Commission made by the issuer under the Securities Exchange Act prior to or contemporaneously with the issuance of such securities, that the issuer and its subsidiaries, to the extent such securities provide the issuer with equity credit for purposes of rating by an NRSRO, will repay, redeem or purchase such securities only with the proceeds of replacement capital securities that have terms and provisions at the time of repayment, redemption or purchase that are as or more equity-like than the securities then being repaid, redeemed or purchased, raised within 180 days prior to the applicable repayment, redemption or purchase date.

“Mandatorily Convertible Preferred Shares” means cumulative preferred shares with (a) no prepayment obligation on the part of the issuer thereof, whether at the election of the holders or otherwise, and (b) a requirement that such preferred shares convert into common shares of the issuer within three years from the date of its issuance at a conversion ratio within a range established at the time of issuance of such preferred shares and having customary anti-dilution provisions.

“Mandatory Trigger Provision” means, as to any Qualifying Capital Securities, provisions in the terms thereof or of the related transaction agreements that:

(i) require the issuer of such securities to make payment of Distributions on such securities only pursuant to the issue and sale of APM Qualifying Securities within two years of a failure of the issuer to satisfy one or more financial tests set forth in the terms of such securities or related transaction agreements, in an amount such that the net proceeds of such sale are at least equal to the amount of unpaid Distributions on such securities (including without limitation all deferred and accumulated amounts) and require the application of the net proceeds of such sale to pay such unpaid Distributions, provided that (a) if the Mandatory Trigger Provision does not require the issuance and sale within one year of such failure, the amount of Common Shares and/or Qualifying Warrants the net proceeds of which the issuer must apply to pay such Distributions pursuant to such provision may not exceed the Common Cap and (b) the amount of Qualifying Non-Cumulative Preferred Shares and still outstanding Mandatorily Convertible Preferred Shares the net proceeds of which the issuer may apply to pay such Distributions pursuant to such provision may not exceed the Preferred Cap;

(ii) if the provisions described in clause (i) above do not require such issuance and sale within one year of such failure, include a Repurchase Restriction;

(iii) prohibit the issuer of such securities from redeeming or purchasing any of its securities ranking upon the Corporation’s liquidation, dissolution or winding up junior to or pari passu with any APM Qualifying Securities the proceeds of which were used to settle deferred interest during the relevant Deferral Period prior to the date six months after the issuer applies the net proceeds of the sales described in (i) to pay such deferred Distributions in full; and

(iv) include a Bankruptcy Claim Limitation Provision;

provided (and it being understood) that:

(A) the issuer will not be obligated to issue (or use Commercially Reasonable Efforts to issue) APM Qualifying Securities for so long as a Market Disruption Event has occurred and is continuing;

(B) if, due to a Market Disruption Event or otherwise, the issuer is able to raise and apply some, but not all, of the eligible proceeds necessary to pay all deferred Distributions on any Distribution Date, the issuer will apply any available eligible proceeds to pay accrued and unpaid Distributions on the applicable Distribution Date in chronological order subject to the Common Cap, Preferred Cap and Share Cap, as applicable; and

(C) if the issuer has outstanding more than one class or series of securities under which it is obligated to sell a type of APM Qualifying Securities and applies some part of the proceeds to the payment of deferred Distributions, then on any date and for any period the amount of net proceeds received by the issuer from those sales and available for payment of deferred Distributions on such securities shall be applied to such securities on a pro rata basis up to the Common Cap and the Preferred Cap, as applicable, in proportion to the total amounts that are due on such securities.

No remedy other than Permitted Remedies will arise by the terms of such securities or related transaction agreements in favor of the holders of such Qualifying Capital Securities as a result of the issuer’s failure to pay Distributions because of the Mandatory Trigger Provision until Distributions have been deferred for one or more Distribution Periods that total together at least ten years.

“Market Disruption Event” means the occurrence or existence of any of the following events or sets of circumstances:

(i) trading in securities generally, or shares of the Corporation’s securities specifically, on the New York Stock Exchange or any other national securities exchange, or in the over-the-counter market on which APM Qualifying Securities are then listed or traded shall have been suspended or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or market by the Commission, the relevant exchange or by any other regulatory body or governmental agency having jurisdiction such that trading shall have been materially disrupted;

(ii) the Corporation would be required to obtain the consent or approval of the Corporation’s shareholders or a regulatory body (including, without limitation, any securities exchange) or governmental authority to issue or sell APM Qualifying Securities pursuant to the Alternative Payment Mechanism and that consent or approval has not yet been obtained notwithstanding the Corporation’s Commercially Reasonable Efforts to obtain that consent or approval;

(iii) a banking moratorium shall have been declared by the federal or state authorities of the United States such that the issuance of, or market trading in, the APM Qualifying Securities has been disrupted or ceased;

(iv) a material disruption shall have occurred in commercial banking or securities settlement or clearance services in the United States such that the issuance of, or market trading in, the APM Qualifying Securities has been disrupted or ceased;

(v) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States, there shall have been a declaration of a national emergency or war by the United States or there shall have occurred any other national or international calamity or crisis such that the issuance of, or market trading in, the APM Qualifying Securities has been disrupted or ceased;

(vi) there shall have occurred such a material adverse change in general domestic or international economic, political or financial conditions, including without limitation as a result of terrorist activities, or the effect of international conditions on the financial markets in the United States shall be such that the issuance of, or market trading in, the APM Qualifying Securities has been materially disrupted;

(vii) an event occurs and is continuing as a result of which the offering document for the offer and sale of APM Qualifying Securities would, in the reasonable judgment of the Corporation, contain an untrue statement of a material fact or omit to state a material fact required to be stated in that offering document or necessary to make the statements in that offering document not misleading and either (a) the disclosure of that event at such time, in the reasonable judgment of the Corporation, is not otherwise required by law and would have a material adverse effect on the Corporation or (b) the disclosure relates to a previously undisclosed proposed or pending material business transaction, provided that no single suspension period described in this clause (vii) shall exceed 90 consecutive days and multiple suspension periods described in this clause (vii) shall not exceed an aggregate of 180 days in any 360-day period; or

(viii) the Corporation reasonably believes that the offering document for the offer and the sale of APM Qualifying Securities would not be in compliance with a rule or regulation of the Commission (for reasons other than those described in clause (vii) above) and the Corporation determines that it is unable to comply with such rule or regulation or such compliance is unduly burdensome, provided that no single suspension period described in this clause (viii) shall exceed 90 consecutive days and multiple suspension periods described in this clause (viii) shall not exceed an aggregate of 180 days in any 360-day period.

The definition of “Market Disruption Event” as used in any Replacement Capital Securities may include less than all of the paragraphs outlined above, as determined by the Corporation at the time of issuance of such securities, and in the case of clauses (i), (ii) and (iii) above, as applicable to a circumstance where the Corporation would otherwise endeavor to issue preferred shares, shall be limited to circumstances affecting markets where the Corporation’s preferred shares traded or where a listing for their trading is being sought.

“Measurement Date” means (a) with respect to any repayment, redemption or purchase of the Debentures on or prior to the Scheduled Maturity Date, the date that is 180 days prior to delivery of notice of such repayment or redemption or the date of such purchase; and (b) with respect to any repayment, redemption or purchase of the Debentures after the Scheduled Maturity Date, the date that is 90 days prior to the date of such repayment, redemption or purchase, except that, if during the 90-day (or any shorter) period preceding the date that is 90 days prior to the date of such repayment, redemption or purchase, the Corporation or its Subsidiaries issued Replacement Capital Securities to Persons other than the Corporation and its Subsidiaries but no repayment, redemption or purchase was made pursuant to Section 2 in connection therewith, the date upon which such 90-day (or shorter) period prior to the date of such repayment, redemption or purchase began.

“Measurement Period” means, with respect to any date on which notice of repayment or redemption is delivered with respect to the Debentures or on which the Corporation purchases, or any Subsidiary of the Corporation purchases, any Debentures, the period beginning on the Measurement Date with respect to such notice or purchase date and ending on such notice or purchase date, as the case may be. Measurement Periods cannot run concurrently.

“No Payment Provision” means a provision or provisions in the transaction documents for securities (referred to in this definition as “such securities”) that include the following:

(i) an Alternative Payment Mechanism; and

(ii) an Optional Deferral Provision modified and supplemented from the general definition of that term to provide that the issuer of such securities may, in its sole discretion, defer in whole or in part payment of Distributions on such securities for one or more consecutive Distribution Periods of up to five years or, if a Market Disruption Event has occurred and is continuing, ten years, without any remedy other than Permitted Remedies and the obligations (and limitations on obligations) described in the definition of “Alternative Payment Mechanism” applying.

“Non-Cumulative” means, with respect to any Qualifying Capital Securities, that the issuer may elect not to make any number of periodic Distributions without any remedy arising under the terms of the securities or related agreements in favor of the holders, other than one or more Permitted Remedies.

“NRSRO” means a nationally recognized statistical rating organization within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.

“Optional Deferral Provision” means, as to any Qualifying Capital Securities, a provision in the terms thereof or of the related transaction agreements to the effect that:

(a) (i) the issuer of such Qualifying Capital Securities may, in its sole discretion, defer in whole or in part payment of Distributions on such securities for one or more consecutive Distribution Periods of up to five years or, if a Market Disruption Event is continuing, ten years, without any remedy other than Permitted Remedies and (ii) such Qualifying Capital Securities are subject to an Alternative Payment Mechanism (provided that such Alternative Payment Mechanism need not apply during the first five years of any deferral period and need not include a Common Cap, Preferred Cap, Share Cap, Bankruptcy Claims Limitation Provision or Repurchase Restriction); or

(b) the issuer of such Qualifying Capital Securities may, in its sole discretion, defer or skip in whole or in part payment of Distributions on such securities for one or more consecutive Distribution Periods of up to ten years without any remedy other than Permitted Remedies.

“Permitted Remedies” means, with respect to any securities, one or more of the following remedies:

(a) rights in favor of the holders of such securities permitting such holders to elect one or more directors of the issuer (including any such rights required by the listing requirements of any stock or securities exchange on which such securities may be listed or traded); and

(b) complete or partial prohibitions on the issuer paying Distributions on or repurchasing common shares or other securities that rank pari passu with or junior as to Distributions to such securities for so long as distributions on such securities, including unpaid distributions, remain unpaid.

“Person” means any individual, corporation, partnership, joint venture, trust, limited liability company or corporation, unincorporated organization or government or any agency or political subdivision thereof.

“Preferred Cap” has the meaning specified in clause (viii) of the definition of Alternative Payment Mechanism.

“Qualifying Capital Securities” means securities or combinations of securities (other than Common Shares, Qualifying Warrants, Mandatorily Convertible Preferred Shares, Debt Exchangeable for Common Equity and Debt Exchangeable for Preferred Equity) that, in the determination of the Corporation’s Board of Directors reasonably construing the definitions and other terms of this Replacement Capital Covenant, meet one of the following criteria:

(i) in connection with any repayment, redemption or purchase of Debentures prior to June 15, 2017:

(A) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon the liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 60 years and (3) either:

(x) (I) are subject to a Qualifying Replacement Capital Covenant and (II) have a No Payment Provision or are Non-Cumulative, or

(y) (I) have a Mandatory Trigger Provision and are subject to Intent-Based Replacement Disclosure and (II) have an Optional Deferral Provision or a No Payment Provision;

(B) preferred shares issued by the Corporation or its Subsidiaries that (1) are Non-Cumulative, (2) have no prepayment obligation on the part of the issuer thereof, whether at the election of the holders or otherwise, (3) have no maturity or a maturity of at least 60 years and (4) either:

(x) are subject to a Qualifying Replacement Capital Covenant, or

(y) have a Mandatory Trigger Provision and are subject to Intent-Based Replacement Disclosure; or

(C) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu or junior to the Debentures upon the liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 40 years, (3) are subject to a Qualifying Replacement Capital Covenant and (4) have an Optional Deferral Provision and a Mandatory Trigger Provision; or

(ii) in connection with any repayment, redemption or purchase of Debentures at any time on or after June 15, 2017 but prior to June 15, 2037:

(A) securities described under clause (i) of this definition that would be Qualifying Capital Securities prior to June 15, 2017;

(B) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 60 years, (3) are subject to a Qualifying Replacement Capital Covenant and (4) have an Optional Deferral Provision;

(C) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 60 years, (3) are Non-Cumulative or have a No Payment Provision and (4) are subject to Intent-Based Replacement Disclosure;

(D) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 40 years, (3) are Non-Cumulative or have a No Payment Provision and (d) are subject to a Qualifying Replacement Capital Covenant;

(E) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 40 years, (3) have an Optional Deferral Provision and a Mandatory Trigger Provision and (4) are subject to Intent-Based Replacement Disclosure;

(F) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding-up of the Corporation, (2) have no maturity or a maturity of at least 25 years, (3) are subject to a Qualifying Replacement Capital Covenant and (4) have an Optional Deferral Provision and a Mandatory Trigger Provision;

(G) cumulative preferred shares issued by the Corporation or its Subsidiaries that (1) have no prepayment obligation on the part of the issuer thereof, whether at the election of the holders or otherwise, (2) have no maturity or a maturity of at least 60 years and (3) are subject to a Qualifying Replacement Capital Covenant; or

(H) securities issued by the Corporation or its Subsidiaries that rank (i) senior to the Debentures and securities that are pari passu with the Debentures but (ii) junior to all other debt securities of the Corporation (other than (x) the Debentures and securities that are pari passu with the Debentures and (y) securities that are pari passu with such Qualifying Capital Securities) upon its liquidation, dissolution or winding-up, and (2) either:

(x) have no maturity or a maturity of at least 60 years and either (I) are (a) Non-Cumulative or subject to a No Payment Provision and (b) subject to a Qualifying Replacement Capital Covenant or (II) have a Mandatory Trigger Provision and an Optional Deferral Provision and are subject to Intent-Based Replacement Disclosure, or

(y) have no maturity or a maturity of at least 40 years, are subject to a Qualifying Replacement Capital Covenant and have a Mandatory Trigger Provision and an Optional Deferral Provision; or

(iii) in connection with any repayment, redemption or purchase of Debentures at any time on or after June 15, 2037:

(A) securities described under clause (ii) of this definition that would be Qualifying Capital Securities on or after June 15, 2017 but prior to June 15, 2037;

(B) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding up of the Corporation, (2) have an Optional Deferral Provision and (3) either:

(x) have no maturity or a maturity of at least 60 years and are subject to Intent-Based Replacement Disclosure, or

(y) have no maturity or a maturity of at least 40 years and are subject to a Qualifying Replacement Capital Covenant;

(C) securities issued by the Corporation or its Subsidiaries that (1) rank pari passu with or junior to the Debentures upon a liquidation, dissolution or winding up of the Corporation, (2) have no maturity or a maturity of at least 40 years and are subject to Intent-Based Replacement Disclosure and (3) are Non-Cumulative or have a No Payment Provision;

(D) securities issued by the Corporation or its Subsidiaries that rank (1) senior to the Debentures and securities that are pari passu with the Debentures but junior to all other debt securities of the Corporation (other than (x) the Debentures and securities that are pari passu with the Debentures and (y) securities that are pari passu with such Qualifying Capital Securities) upon its liquidation, dissolution or winding-up, and (2) either:

(x) have no maturity or a maturity of at least 60 years and either (i) have an Optional Deferral Provision and are subject to a Qualifying Replacement Capital Covenant or (ii) (a) are Non-Cumulative or have a No Payment Provision and (b) are subject to Intent-Based Replacement Disclosure, or

(y) have no maturity or a maturity of at least 40 years and either (i) (a) are Non-Cumulative or have a No Payment Provision and (b) are subject to a Qualifying Replacement Capital Covenant or (ii) are subject to Intent-Based Replacement Disclosure and have a Mandatory Trigger Provision and an Optional Deferral Provision; or

(E) cumulative preferred shares issued by the Corporation or its Subsidiaries that either (1) have no maturity or a maturity of at least 60 years and are subject to Intent-Based Replacement Disclosure or (2) have a maturity of at least 40 years and are subject to a Qualifying Replacement Capital Covenant.

Notwithstanding the foregoing, no securities or combination of securities will be included in Qualifying Capital Securities if such securities (i) applying the tests set forth above, are required to include Intent-Based Replacement Disclosure and (ii) include a Distribution Rate Step-Up.

“Qualifying Non-Cumulative Preferred Shares” means non-cumulative preferred shares of the Corporation that rank pari passu with or junior to all other preferred shares of the Corporation, are perpetual and are subject to (a) a Qualifying Replacement Capital Covenant or (b) both (i) mandatory suspension of dividends in the event the Corporation breaches certain financial metrics specified in the offering documents relating to such preferred shares and (ii) Intent-Based Replacement Disclosure, provided that with respect to both clauses (a) and (b) the transaction documents shall provide for no remedies as a consequence of non-payment of Distributions other than Permitted Remedies.

“Qualifying Replacement Capital Covenant” means a replacement capital covenant that is substantially similar to this Replacement Capital Covenant or a replacement capital covenant, as identified by the Corporation’s Board of Directors acting in good faith and in its reasonable discretion and reasonably construing the definitions and other terms of this Replacement Capital Covenant, (i) entered into by a company that at the time it enters into such replacement capital covenant is a reporting company under the Securities Exchange Act and (ii) that restricts the related issuer from repaying, redeeming or purchasing, and its Subsidiaries from purchasing, identified securities, except to the extent of the applicable percentage of the net proceeds from the issuance of specified replacement capital securities that have terms and provisions at the time of repayment, redemption or purchase that are as or more equity-like than the securities then being repaid, redeemed or purchased within the 180-day period prior to the applicable repayment, redemption or purchase date; provided that the term of such replacement capital covenant shall be determined at the time of issuance of the related Replacement Capital Securities taking into account the other characteristics of such securities.

“Qualifying Warrants” means any net share-settled warrants to purchase the Common Shares that (i) have an exercise price greater than the Current Stock Market Price of the Common Shares, and (ii) the Corporation is not entitled to redeem for cash and the holders of which are not entitled to require the Corporation to purchase for cash in any circumstances.

“Redesignation Date” means, as to the Covered Debt in effect at any time, the earliest of (a) the date that is two years prior to the final maturity date of such Covered Debt, (b) if the Corporation elects to redeem, or the Corporation or a Subsidiary of the Corporation elects to repurchase, such Covered Debt either in whole or in part with the consequence that after giving effect to such redemption or repurchase the outstanding principal amount of such Covered Debt is less than $100,000,000, the applicable redemption or repurchase date and (c) if such Covered Debt is not Eligible Subordinated Debt of the Corporation, the date on which the Corporation issues long-term indebtedness for money borrowed that is Eligible Subordinated Debt.

“Replacement Capital Covenant” has the meaning specified in the introduction to this instrument.

“Replacement Capital Securities” means Mandatorily Convertible Preferred Shares, Debt Exchangeable for Common Equity, Debt Exchangeable for Preferred Equity and Qualifying Capital Securities.

“Repurchase Restriction” has the meaning specified in clause (iii) of the definition of Alternative Payment Mechanism.

“Scheduled Maturity Date” has the meaning specified in the Supplemental Indenture.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Share Cap” means, with respect to any Qualifying Capital Securities, a limit on the total number of Common Shares that may be issued by the Corporation pursuant to the Alternative Payment Mechanism with respect to such Qualifying Capital Securities or on the total number of Common Shares underlying all Qualifying Warrants and Mandatorily Convertible Preferred Shares that may be issued by the Corporation pursuant to such Alternative Payment Mechanism, provided that the product of such Share Cap and the Market Value of the Common Shares as of the date of issuance of such Qualifying Capital Securities shall not represent a lower proportion of the aggregate principal or liquidation amount, as applicable, of such Qualifying Capital Securities than the product of the Share Cap applicable to the Debentures and the Current Stock Market Price of the Common Shares as of the date of issuance of such Debentures represents of the aggregate principal amount of such Debentures at the time of issuance.

“Subsidiary” means, at any time, any Person the shares of stock or other ownership interests of which having ordinary voting power to elect a majority of the board of directors or other managers of such Person are at the time owned, or the management or policies of which are otherwise at the time controlled, directly or indirectly through one or more intermediaries (including other Subsidiaries) or both, by another Person (and as of the date of this Replacement Capital Covenant includes Progressive County Mutual Insurance Company, a mutual company affiliate of the Corporation).

“Supplemental Indenture” means the First Supplemental Indenture, dated as of June 21, 2007, between the Corporation and The Bank of New York Trust Company, N.A., as Trustee, to the Indenture.

“Termination Date” has the meaning specified in Section 4(a).

EX-10.5

Exhibit 10.5

THE PROGRESSIVE CORPORATION

2018 GAINSHARING PLAN

1.The Plan. The Progressive Corporation and its wholly-owned and majority-owned subsidiaries and down-stream affiliates (collectively, "Progressive" or the "Company") have adopted The Progressive Corporation 2018 Gainsharing Plan (the "Plan") as part of their overall compensation program. The Plan is performance-based, is not a form of commission compensation, and is administered under the direction of the Compensation Committee of the Board of Directors of The Progressive Corporation (the “Committee”). Payment under the Plan, if any, is based on Company performance as defined by the Plan, not individual employee performance. Plan years will coincide with Progressive’s fiscal years.

2.Participants. Plan participants for each Plan year shall include all officers and regular employees of Progressive, unless determined otherwise by the Committee. Temporary employees are not eligible to participate in the Plan. The Gainsharing opportunity, if any, for those executive officers who participate in The Progressive Corporation 2017 Executive Annual Incentive Plan or a successor plan (the “Executive Plan”) will be provided by the Executive Plan, although participants in that plan may also participate in this Plan if and to the extent determined by the Committee. Throughout this Plan, references to “executive officers” refer to executive officers within the meaning of any Securities and Exchange Commission (“SEC”) or New York Stock Exchange rule applicable to the Company.

3.Gainsharing Formula. Subject to the terms of the Plan, Annual Gainsharing Payments will be determined by application of the following formula:

Annual Gainsharing = Paid Eligible Earnings x Target Percentage x Performance Factor

Payment

4.Paid Eligible Earnings. Paid Eligible Earnings for any Plan year shall mean and include the following: regular, Earned Time Benefit pay (excluding the payout of unused Earned Time Benefit pay at termination), sick pay, holiday pay, funeral pay, overtime pay, military make-up pay, shift differential, and retroactive payments of any of the foregoing items, in each case received by the participant during the Plan year for work or services performed as an officer or employee of Progressive.

For purposes of the Plan, and notwithstanding the foregoing, Paid Eligible Earnings shall exclude all other types of compensation, including, without limitation: any short-term or long-term disability payments made to the participant; the earnings replacement component of any workers’ compensation benefit or award; any amounts paid pursuant to a judgment in, or settlement related to, any action, suit or proceeding, whether in law or equity, to any extent arising from or relating to a participant’s employment with the Company, or work or services performed for or on behalf of the Company; any amount paid under a separation allowance (or severance) plan; any bonus, Gainsharing or other incentive compensation award (whether denominated, or payable, in cash or equity), including, without limitation, payments from any discretionary cash fund; any dividend payments or dividend equivalent amounts; any unused Earned Time Benefit; and any other payment required by applicable law to be paid to a participant by the Company and intended to replace all or any portion of wages or earnings during a period of unemployment, whether due to illness, disability or otherwise (including, but not limited to, payments made pursuant to any statute, rule or regulation of a governmental authority relating to leave on account of maternity, paternity, parental status or responsibility, or sickness).

5.Target Percentages. Target Percentages vary by position. Target Percentages for Plan participants typically are as follows:

POSITION	TARGET %
Senior Executives and Executive Level Managers	60 - 150%
Business Leaders	35 - 60%
Directors and Senior Directors	20 - 35%
Middle Managers and Senior Managers	15 - 20%
Senior Professionals and Entry Level Managers	8 - 20%
Administrative Support and Entry Level Professionals	0 - 8%

Target Percentages will be established within the above ranges by, and may be changed with the approval of, the Chief Human Resource Officer; provided that the Chief Human Resource Officer may establish appropriate procedures to evaluate the need for, and if appropriate, implement individual exceptions to, the foregoing ranges. Target Percentages may be changed from year to year by the Chief Human Resource Officer. The Chief Human Resource Officer may consult with the Chief Executive Officer on any of the foregoing decisions. Notwithstanding anything herein to the contrary, only the Committee may establish or modify the Target Percentages for the Company’s executive officers.

If a participant’s Target Percentage changes during a Plan year, the Target Percentages used to calculate such participant’s Annual Gainsharing Payment hereunder shall be weighted appropriately to reflect such participant’s tenure in each such position during the Plan year.

6. The Performance Factor.

A.Core Business Defined

The Performance Factor shall be determined by the performance of the Core Business during the Plan year, pursuant to the procedures and calculations described below. The “Core Business” shall be comprised of the following:

• The Agency Auto business unit, consisting of the auto business produced by independent agents or brokers, including Strategic Alliances Agency auto, but excluding all Agency special lines businesses;

• The Direct Auto business unit, consisting of the personal auto business produced by phone, over the Internet, or via a mobile device, but excluding all Direct special lines businesses;

• The special lines business unit, which shall consist of special lines businesses and the manufactured homes business, in each case generated by agents and brokers or directly by phone, over the Internet, or via a mobile device;

• The Commercial Lines business unit; and

• The Property business unit, excluding the manufactured homes business.

Each of the Agency Auto, Direct Auto, special lines, Commercial Lines and Property business units is referred to herein as a “Business Unit” or “Unit.” Notwithstanding the foregoing descriptions, for all purposes under this Plan, the following are excluded from the Core Business results (both growth and profitability): results of the Professional Liability business, the Midland Financial Group, Inc. and other businesses in run-off; results of Property Plus Insurance Agency; results of the CAIP Servicing Group; flood insurance policies, renters insurance policies, umbrella policies and related expenses; business owners’ policies and related expenses; and any results of any Commercial Lines product or program pursuant to which the Company insures any transportation network company or other entity engaged in a ride, cartage, or vehicle sharing business, operation, platform, or program or in a business based on matching and/or sharing time, use and/or assets by and among people and/or businesses.

B.Matrices

For purposes of computing a performance score for the Core Business, operating performance results for each Business Unit are evaluated using a performance matrix for the Plan year. Each matrix assigns performance scores to various combinations of profitability and growth outcomes for the applicable Business Unit. Those scores are then weighted and combined to produce a Performance Factor as described in 6.D. below.

For 2018, and for each Plan year thereafter until otherwise determined by the Committee, each Business Unit will be evaluated, and separate Gainsharing matrices will be established by the Committee for the following:

• Agency Auto;

• Direct Auto;

• Special lines;

• Commercial Lines; and

• Property.

C.Performance Measures

Growth. The growth measure for the Plan year under all matrices will be based on policies in force (“PIFs”).

For all matrices, growth will be measured by the percentage change in average PIFs for the Plan year compared to the average PIFs of the immediately preceding fiscal year. Average PIFs for the Plan year and for the immediately preceding fiscal year will be determined by adding the fiscal-month-end number of PIFs for each month during such year and dividing the total by twelve.

Assigned risk business will not be included in determining the growth of any Business Unit.

Profitability. For all Business Unit matrices, the measurement of profitability will be the combined ratio (calculated in accordance with U.S. generally accepted accounting principles) (the “GAAP Combined Ratio”) for the Plan year for the applicable Unit.

Assigned risk business will be included in determining the GAAP Combined Ratio for the applicable Business Unit. The net operating expense of Corporate Products (e.g., self-insurance) shall be apportioned among the appropriate Business Units in accordance with the respective amount(s) of net earned premiums generated by each such Business Unit and will be reflected in the calculation of the GAAP Combined Ratio for such Business Units.

D.Calculation of Performance Factor

Performance Scores

Using the actual performance results and the Gainsharing matrix for each Business Unit, the GAAP Combined Ratio for each such Unit will be matched with the growth levels achieved by such Unit, to determine the performance score for each such Unit. The performance score for each Business Unit, which will be used to calculate the Performance Factor as described further below, can vary from 0 to 2.0.

Performance Factor

The resulting performance scores for each of the Agency Auto, Direct Auto, special lines, Commercial Lines and Property Business Units will then be multiplied by a weighting factor, which shall be a fraction or decimal equivalent, determined by dividing the net earned premiums generated by such Business Unit during the Plan year by the net earned premiums generated by all of the Business Units comprising the Core Business in the aggregate. The sum of these weighted performance scores will be the Performance Factor for the Plan year.

E.Limitations

The final Performance Factor cannot exceed 2.0.

7.Payment Procedures; Deferral. Subject to Paragraphs 9 and 16 below, no later than December 31 of each Plan year, each participant will receive an initial payment in respect of his or her Annual Gainsharing Payment for that Plan year, if any, equal to 75% of an amount calculated on the basis of Paid Eligible Earnings for the first 24 pay periods of the Plan year, estimated earnings for the remainder of the Plan year, and an estimated performance factor determined using the performance data for each Business Unit through the first 11 months of the Plan year (estimated, if necessary), the applicable Gainsharing matrix and the calculations described above. Subject to Paragraphs 9 and 16 below, no later than February 28 of the following year, each participant will receive the amount equal to (x) his or her Annual Gainsharing Payment, if any, for such Plan year, based on his or her Paid Eligible Earnings and performance data for the entire Plan year, minus (y) the amount of the initial payment received by such participant pursuant to the immediately preceding sentence.

Any Plan participant who is then eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan ("Deferral Plan") may elect to defer all or a portion of the Annual Gainsharing Payment otherwise payable to him/her under this Plan, subject to and in accordance with the terms of the Deferral Plan. If a Plan participant has made such an election under the Deferral Plan, then to the extent of such election, the Annual Gainsharing Payment will, instead of being paid to such participant as described in the immediately preceding paragraph, be credited to such participant’s account under the Deferral Plan in accordance with the terms of the Deferral Plan.

8.Other Plans. If, for any Plan year, an employee has been selected to participate in both this Plan and another cash incentive plan offered by the Company, then with respect to such employee, the Gainsharing formula set forth in Paragraph 3 hereof shall be appropriately adjusted by applying a weighting factor to reflect the proportion of the employee’s total annual incentive opportunity that is being provided by this Plan. The Committee shall have full authority to determine the incentive plan or plans in which any employee will participate during any plan year and, if an employee is selected to participate in more than one plan, the weighting factor that will apply to each such plan. Notwithstanding Section 3, if, for any Plan year, an employee has been selected to participate in both this Plan and the commission or any other cash incentive plan for employees of Property Plus Insurace Agency (“PPIA Plans;” and such employee being referred to as a “PPIA Employee”), then such PPIA Employee’s Annual Gainsharing Payment shall be reduced, potentially to zero, by any and all amounts earned by such PPIA Employee under the PPIA Plans with respect to the Plan year. Notwithstanding Section 7, the Company may choose to delay all or a portion of any Annual Gainsharing Payment to a PPIA Employee to allow the Company to calculate the reduction under this Section 8 for the full Plan Year.

9.Qualification Date; Leave of Absence; Withholding. Unless otherwise determined by the Committee, and except as expressly provided herein, in order to be entitled to receive an Annual Gainsharing Payment for any Plan year, the participant must be an active officer or regular employee of the Company on November 30 of the Plan year (“Qualification Date”). An individual (i) who is hired on or after December 1 of any Plan year or (ii) whose employment terminates for any reason prior to the Qualification Date is not entitled to an Annual Gainsharing Payment for that Plan year. Annual Gainsharing Payments are not earned until paid.

Any participant who is on a leave of absence covered by the Family and Medical Leave Act of 1993, as amended (or equivalent state or local law), the Americans with Disabilities Act of 1991, as amended (or equivalent state or local law), personal leave of absence with the approval of the Company, military leave or short or long-term disability (provided that, in the case of a long-term disability, the participant is still an employee of the Company) on the Qualification Date with respect to any Plan year will be entitled to receive an Annual Gainsharing Payment for such Plan year, calculated as provided in Paragraphs 3 through 6 above, based on the amount of Paid Eligible Earnings received by such participant during the Plan year and paid in the manner and at the times as are described in Paragraph 7 above but subject to Paragraph 16 below.

All payments made hereunder will be net of any legally required deductions and/or withholdings for federal, state and local taxes and other items.

10.Non-Transferability. The right to any Annual Gainsharing Payment hereunder may not be sold, transferred, assigned or encumbered by any participant. Nothing herein shall prevent any participant's interest hereunder from being subject to involuntary attachment, levy or other legal process.

11.Administration. The Plan shall be administered by or under the direction of the Committee. The Committee shall have the authority to adopt, amend, revise and repeal such rules, guidelines, procedures and practices governing the Plan as it shall, from time to time, in its sole discretion, deem advisable.

The Committee shall have full authority to determine the manner in which the Plan will operate, to interpret the provisions of the Plan and to make all determinations hereunder. All such interpretations and determinations shall be final and binding on Progressive, all Plan participants and all other parties. No such interpretation or determination shall be relied on as a precedent for any similar action or decision.

Unless otherwise determined by the Committee, all of the authority of the Committee hereunder (including, without limitation, the authority to administer the Plan, select the persons entitled to participate herein, interpret the provisions thereof, waive any of the requirements specified herein and make determinations hereunder and to select, approve, establish, change or modify the Business Units and the Gainsharing formulae, weighting factors, performance targets and Target Percentages) may be exercised by the Chief Executive Officer and/or the Chief Human Resource Officer; provided, however, that only the Committee may take such actions or make such determinations with respect to the Company’s executive officers. In the event of a dispute or conflict, the determination of the Committee will govern.

12.Miscellaneous.

A. Recoupment. Progressive shall have the right to recoup any Annual Gainsharing Payment (or an appropriate portion thereof, as hereinafter provided) with respect to any Plan year paid to a participant hereunder who was an executive officer of Progressive at any time during such Plan year, if: (i) the Annual Gainsharing Payment was predicated upon the achievement during such Plan year of certain financial or operating results (which includes, for purposes hereof, the Performance Factor described in Section 6); (ii) such financial or operating results were incorrect and were subsequently the subject of a restatement by Progressive within three (3) years after the date on which such Annual Gainsharing Payment was paid to the participant; and (iii) a lower payment would have been made to the participant if the restated financial or operating results had been known at the time the payment was made. Such recoupment right shall be available to Progressive whether or not the participant in question was at fault or responsible in any way in causing such restatement. In such circumstances, Progressive will have the right to recover from each such participant for such Plan year, and each such participant will refund to Progressive, the amount by which the Annual Gainsharing Payment paid to such participant for the Plan year in question exceeded the lower payment that would have been made based on the restated results, without interest; provided, however, that Progressive will not seek to recover such amounts unless the amount due would exceed the lesser of five percent (5%) of the Annual Gainsharing Payment previously paid or twenty-thousand dollars ($20,000). Such recovery, at the Committee’s discretion, may be made by lump sum payment, installment payments, credits against future bonus payments, or other appropriate mechanism.

B. Further Rights. Notwithstanding the foregoing subsection A., if any participant that was an executive officer at any time during such Plan year engaged in fraud or other misconduct (as determined by the Committee or the Board, in their respective sole discretion) resulting, in whole or in part, in a restatement of the financial or operating results used hereunder to determine the Annual Gainsharing Payments for a specific Plan year, Progressive will further have the right to recover from such participant, and the participant will refund to Progressive upon demand, an amount equal to the entire Annual Gainsharing Payment paid to such participant for such Plan year plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from the date that such bonus was paid to the participant. Progressive shall further have the right to recover from such participant Progressive’s

costs and expenses incurred in connection with recovering such Annual Gainsharing Payment from the participant, including, without limitation, reasonable attorneys’ fees. There shall be no time limit on the Company’s right to recover such amounts under this subsection B., except as otherwise provided by applicable law.

C. Rights Not Exclusive. The rights contained in the foregoing subsections A. and B. shall be in addition to, and shall not limit, any other rights or remedies that the Company may have under any applicable law or regulation.

D. Compliance with Law and Exchange Requirements. The Annual Gainsharing Payments determined and paid pursuant to the Plan shall be subject to all applicable laws and regulations. Without limiting the foregoing, and notwithstanding anything to the contrary contained in this Plan, if the SEC adopts final rules under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that require, as a condition to the Company’s continued listing on a national securities exchange (“Exchange”), that the Company develop and implement a policy requiring the recovery of erroneously awarded compensation, and such regulations are applicable to any participant awarded Annual Gainsharing Payments pursuant to the Plan, then the Annual Gainsharing Payment paid to such participant shall be subject to recoupment by the Company pursuant to the terms of the rules of the SEC and any applicable Exchange and any policy of the Company adopted in response to such rules.

13.Termination; Amendment. The Plan may be terminated, amended or revised, in whole or in part, at any time and from time to time by the Committee, in its sole discretion.

14.Unfunded Obligations. The Plan will be unfunded and all payments due under the Plan shall be made from Progressive's general assets.

15.No Employment Rights. Nothing in the Plan shall be construed as conferring upon any person the right to remain a participant in the Plan or to remain employed by Progressive, nor shall the Plan limit Progressive's right to discipline or discharge any of its officers or employees or change any of their job titles, duties or compensation.

16.Misconduct; Set-Off Rights. No Participant shall have the right to receive any portion of any Annual Gainsharing Payment if, prior to such payment being made, Participant’s employment is terminated as a result of any action or inaction that, under Progressive’s employment practices or policies as then in effect, constitutes grounds for immediate termination of employment, as determined by Progressive (or, in the case of an executive officer, the Committee) in its sole discretion. Progressive shall have the unrestricted right to set off against or recover out of any Annual Gainsharing Payment or other sums owed to any participant under the Plan any amounts owed by such participant to Progressive.

17.Prior Plans. This Plan supersedes all prior plans, agreements, understandings and arrangements regarding bonuses or other cash incentive compensation payable to participants by, or due from, Progressive (other than the PPIA Plans, “stand-up” bonuses provided to employees of ARX Holding Corp. and its downstream subsidiaries and affiliates (“ARX”) and commissions provided to ARX employees involved in agency operations). Without limiting the generality of the foregoing, this Plan supersedes and replaces The Progressive Corporation 2017 Gainsharing Plan and ARX Holding Corp. 2017 Gainsharing Plan (the "Prior Plans”), which are and shall be deemed to have terminated on the last day of the Company’s 2017 fiscal year (the "Prior Plan Termination Date"); provided, however, that any bonuses or other sums earned and payable under the Prior Plans with respect to any Plan year ended on or prior to the Prior Plan Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.

18.Effective Date. This Plan is adopted, and is to be effective, as of the first day of Progressive’s 2018 fiscal year. This Plan shall be effective for the 2018 Plan year and for each Plan year thereafter unless and until terminated by the Committee.

19.Governing Law. This Plan shall be interpreted and construed in accordance with the laws of the State of Ohio.

EX-10.7

Exhibit 10.7

THE PROGRESSIVE CORPORATION

2007 EXECUTIVE BONUS PLAN

1. The Plan. The Progressive Corporation and its subsidiaries (“Progressive”) have designed an executive compensation program consisting of three components: salary, annual bonus and equity-based incentives. These components have been structured to reflect the market for executive compensation and to promote both the achievement of corporate goals and performance that is in the long-term interest of shareholders. The annual bonus component of this program is performance-based and focuses on current results.

This 2007 Executive Bonus Plan (the “Plan”) provides, in whole or in part, the annual bonus component of Progressive’s executive compensation program for Plan participants.

2. Administration. The Plan shall be administered by or under the direction of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of The Progressive Corporation. The Committee will have the authority to adopt, amend, revise and repeal such rules, guidelines, procedures and practices governing the Plan as it, from time to time, in its sole discretion deems advisable. The Committee will have full authority to determine the manner in which the Plan will operate, to interpret the provisions of the Plan and to make all determinations hereunder. All such interpretations and determinations will be final and binding on Progressive, all Plan participants and all other parties. No such interpretation or determination may be relied on as a precedent for any similar action or decision. The Plan will be administered by the Committee in accordance with the requirements of Section 162(m) of the Internal Revenue Code, as amended, and the rules and regulations promulgated thereunder (the “Code”).

3. Participants; Plan Years. Executive officers of Progressive may be selected by the Committee to participate in the Plan for one or more Plan years. Plan participants may also be eligible to participate in other Progressive bonus or Gainsharing plans, as determined by the Committee. Plan years shall coincide with Progressive’s fiscal years.

4. Formula; Maximum Bonus. Subject to the following sentence, the amount of the annual bonus earned by any participant under the Plan for any Plan year (“Annual Bonus”) will be determined by application of the following formula:

Annual Bonus = Paid Salary x Target Percentage x Performance Factor

The Annual Bonus payable to any participant with respect to any Plan year shall not exceed $5,000,000.

5. Paid Salary. The salary rate of each Plan participant for any Plan year shall be established by the Committee no later than ninety (90) days after commencement of such Plan year. For purposes of the Plan, “Paid Salary” shall include regular, used Earned

Time Benefit, sick, holiday and funeral pay, and retroactive payments of any of the foregoing items, received by the participant during the Plan year for work or services performed by the participant as an officer or employee of Progressive, but shall exclude all other types of compensation, including, without limitation: any short-term or long-term disability payments, discretionary or other bonus or incentive payments, any dividend payments, unused Earned Time Benefit, and the earnings replacement component of any workers’ compensation award.

6. Target Percentages. The Target Percentages for the participants in the Plan shall be determined by the Committee, but will not exceed 200% for any participant. Target Percentages may vary among Plan participants and may be changed from year to year by the Committee.

7. The Performance Factor

A. General

The Performance Factor shall consist of one or more of the following components: a Core Business Component, one or more Business Unit Components, an Investment Component or a Net Promoter Score Component (the “Bonus Components” or 45“Components”). An appropriate combination of Bonus Components will be designated for each participant, and the designated Bonus Components will be weighted, based on such participant’s assigned responsibilities, as determined by the Committee.

The relative weighting of the Bonus Components may vary among Plan participants and may be changed from year to year by the Committee.

For purposes of computing the Performance Factor for any Plan year, a performance score will be calculated for each of the designated Bonus Components, based on the performance of the business(es), product(s) or function(s) being measured by that Component, as described below. The performance score will equal 1.0 if specified performance objectives are achieved, and can vary from 0 to 2.0, based on actual performance versus the pre-established objectives. The performance score achieved for each of the designated Bonus Components will then be multiplied by the applicable weighting factor to produce a weighted performance score for that Component. The sum of the weighted performance scores for the applicable Bonus Components will equal the Performance Factor, which can likewise vary from 0 to 2.0. The Performance Factor cannot exceed 2.0, regardless of results.

Actual performance results achieved for any Plan year, which will be used to calculate the performance score achieved for each of the applicable Bonus Components, must be certified by the Committee prior to payment of the Annual Bonus.

B. Core Business Component

The Core Business Component measures the overall operating performance of Progressive’s Core Business for the Plan year for which an Annual Bonus payment is to be made. The Core Business will consist of the Drive (Agency) business unit, the Direct business unit, the Commercial Auto business unit, the Special Lines business unit and/or such other business unit(s) (as described below), if any, as shall be designated and defined by the Committee for the Plan year (the “Core Business Units”). The performance score for this Component is based on the operating performance results for the Core Business Units for the Plan year in question.

In the discretion of the Committee, the performance score for the Core Business may be determined either by the performance of the Core Business considered as a whole or by the weighted performance results of the individual Core Business Units.

1. Performance Score Determined by Weighted Operating Results of Core Business Units

Each Plan year, one or more separate performance matrices for each Core Business Unit will be established by or under the direction of the Committee. Each such performance matrix will assign a performance score to various combinations of profitability and growth outcomes for the applicable Core Business Unit (or an applicable portion of a Core Business Unit), based on the following performance criteria, as determined by the Committee:

•profitability will be measured by one of the following, as designated by the Committee:

•combined ratio

•weighted combined ratio

•variation in combined ratio from a targeted combined ratio

•cohort combined ratio (the expected lifetime combined ratio for a group of policies commencing during a specified time period)

•return on equity, or

•return on revenue, and

•growthwill be measured by changes from year to year or during a Plan year in one of the following, as designated by the Committee:

•policies in force

•vehicles insured

•net earned premiums

•earned premium per policy or per vehicle

•earned car years, or

•net written premiums.

The Committee may select different performance criteria for the various Core Business Units in a single Plan year, and the performance criteria may be changed from year to year by the Committee.

Profitability and growth will be separately determined for each of the Core Business Units (or the applicable portion of a Core Business Unit), using the performance criteria designated by the Committee for the Plan year, and will then be matched using the applicable performance matrix, to determine a performance score for each Core Business Unit (or the applicable portion of a Core Business Unit). Where more than one performance matrix is used for a particular business unit, the performance scores from each portion of such business unit, as determined by the separate performance matrix, will then be combined based on a weighting factor approved by the Committee to determine the performance score for the entire business unit.

The resulting performance scores for each Core Business Unit will then be multiplied by a weighting factor (based on the percentage of the total net earned premiums of the Core Business generated by such Core Business Unit during the Plan year or such other factor(s) as shall be approved by the Committee), the weighted performance scores will be combined and the sum of the weighted performance scores will be the performance score for the Core Business Component.

2. Performance Score Determined by Core Business as a Whole (Single Matrix)

In the discretion of the Committee, the performance score for the overall Core Business for a Plan year may be measured using a single performance matrix, established by or under the direction of the Committee. The performance matrix will assign a performance score to various combinations of profitability and growth outcomes for the Core Business as a whole, based on the performance criteria described above, as selected by the Committee. Profitability and growth for the Core Business Units will be calculated on an aggregate basis for the applicable Plan year, and will then be matched using the performance matrix to determine a performance score for the Core Business for such Plan year.

C. Business Unit Component

The Business Unit Component measures the performance of one or more designated business units (as described below) in terms of any one or more of the following criteria selected by the Committee:

•profitabilitywill be measured by one of the following, as designated by the Committee:

•combined ratio

•weighted combined ratio

•variation in combined ratio from a targeted combined ratio

•cohort combined ratio ( the expected lifetime combined ratio for a group of policies commencing during a specified time period)

•return on equity, or

•return on revenue; and

•growth will be measured by changes from year to year or during a Plan year in one of the following, as designated by the Committee:

•policies in force

•vehicles insured

•net earned premiums

•earned premium per policy or per vehicle

•earned car years, or

•net written premiums.

A business unit may consist of a distribution channel, business group, product, class or type of business (e.g., designated types of policies written in a distribution channel or by a business group), function, process or other business category, such as new or renewal business.

The Committee may designate one or more Business Unit Components for an individual Plan participant for any Plan year and, for each such Component, will determine the applicable criteria by which performance of the unit (or an applicable portion of the business unit) will be measured, the goals to be achieved and the performance scores that will result from various levels of performance, and the relative weighting thereof. The applicable performance criteria, related goals and resulting performance scores may be set forth in one or more performance matrices, or other format approved by the Committee, for such business unit. Business Unit Components, performance criteria, goals, resulting performance scores and relative weightings may vary among participants and may be changed from year to year by the Committee.

D. Investment Component

The Investment Component compares the investment performance of one or more segments of Progressive’s investment portfolio (each, a “Portfolio”) against the performance of selected groups of comparable investment funds, investment managers, indexes or other benchmarks (“Investment Benchmarks”) over such period or periods as shall be determined by the Committee. Such Investment Benchmarks may be risk-adjusted in accordance with such formula or other method as may be approved by the Committee. Investment results are marked to market and adjusted to include the benefit of any state premium tax abatements attributable to the Portfolio, in order to calculate total return, which is then compared against the designated Investment Benchmarks to produce a performance score, pursuant to a formula or other criteria determined by the Committee, for each Portfolio.

The applicable Portfolio or Portfolios will be identified, and the related Investment Benchmarks will be determined, by the Committee and may be changed from year to year by the Committee.

In the event that any participant’s Annual Bonus is to be determined by the performance of two or more Portfolios, the performance scores for each of the Portfolios will be weighted, based on the average amounts invested from time to time in each of such Portfolios during the Plan year or other applicable period, and the weighted performance scores for the applicable Portfolios will be then combined to produce the performance score for the Investment Component. Investment expense is not included in determining such performance score.

E. Net Promoter Score Component

The Net Promoter Score (NPS) Component measures NPS (a survey-based measure of customer satisfaction and loyalty) for the Core Business as a whole or for a business unit (or portion thereof) against objectives, as determined by the Committee. The Committee may determine the applicable criteria by which NPS performance will be measured, the goals to be achieved, the methods to determine NPS performance, the performance scores that will result from various levels of performance and the relative weighting among the NPS results achieved by different business units, if appropriate. NPS performance criteria and goals, and relative weightings, may vary among participants and may be changed from year to year by the Committee.

8. Timing of Payment; Deferral. The Annual Bonus for any Plan year will be paid to participants as soon as practicable after the Committee has certified performance results for the Plan year, but no later than March 15 of the immediately following year. The provisions of this Paragraph shall be subject to Paragraph 9 hereof.

Any Plan participant who is eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) may elect to defer all or a portion of his or her Annual Bonus otherwise payable under this Plan, subject to and in accordance with the terms of the Deferral Plan.

9. Qualification Date; Leave of Absence; Tax Withholding. Unless otherwise determined by the Committee, in order to be entitled to receive an Annual Bonus for any Plan year, the participant must be employed by Progressive on November 30th of the Plan year (“Qualification Date”).

Any participant who is on a leave of absence covered by the Family and Medical Leave Act of 1993, personal leave of absence with the approval of Progressive, military leave or short or long-term disability on the Qualification Date with respect to any Plan year will be entitled to receive an Annual Bonus payment for such Plan year, calculated as provided in Paragraphs 4 through 7 above and based on the amount of Paid Earnings received by such participant during the Plan year.

Annual Bonus payments made to participants will be net of any legally required deductions for federal, state and local taxes and other items.

10. Non-Assignability. The right to any of the Annual Bonuses hereunder may not be sold, transferred, assigned or encumbered by any participant. Nothing herein shall prevent any participant’s interest hereunder from being subject to involuntary attachment, levy or other legal process.

11. Termination and Amendment. The Plan may be terminated, amended or revised, in whole or in part, at any time and from time to time by the Committee, in its sole discretion; provided that the Committee may not increase the amount of compensation payable hereunder to any participant above the amount that would otherwise be payable upon attainment of the applicable performance goals, or accelerate the payment of any portion of the Annual Bonus due to any participant under the Plan, without discounting the amount of such payment in accordance with Section 162(m) of the Code, and further provided that any amendment or revision of the Plan required to be approved by shareholders pursuant to Section 162(m) of the Code will not be effective until approved by The Progressive Corporation’s shareholders in accordance with the requirements of Section 162(m).

12. Unfunded Obligations. The Plan will be unfunded and all payments due under the Plan will be made from Progressive’s general assets.

13. No Employment Rights. Nothing in the Plan shall be construed as conferring upon any person the right to remain a participant in the Plan or to remain employed by Progressive, nor shall the Plan limit Progressive’s right to discipline or discharge any of its officers or employees or change any of their job titles, positions, duties or compensation.

14. Recoupment.

A. Progressive shall have the right to recoup any Annual Bonus paid to a participant hereunder (or an appropriate portion thereof, as hereinafter provided) with respect to any Plan year, if: (i) the Annual Bonus payment was predicated upon the achievement during such Plan year of certain financial or operating results (which includes, for purposes hereof, all of the performance criteria that are available to the Committee under Paragraph 7 above); (ii) such financial or operating results were incorrect and were subsequently the subject of a restatement by Progressive within three (3) years after the date on which such Annual Bonus was paid to the participant; and (iii) a lower payment would have been made to the participant if the restated financial or operating results had been known at the time the payment was made. Such recoupment right shall be available to Progressive whether or not the participant in question was at fault or responsible in any way in causing such restatement. In such circumstances, Progressive will have the right to recover from each participant for such Plan year, and each such participant will refund to Progressive, the amount by which the Annual Bonus paid to such participant for the Plan year in question exceeded the lower payment that would have been made based on the restated results, without interest; provided, however, that Progressive will not seek to recover such amounts unless the amount due would exceed the lesser of five percent (5%) of the Annual Bonus previously paid or twenty-thousand dollars ($20,000). Such recovery, at the Committee’s discretion, may be made by lump sum payment, installment payments, credits against future bonus payments, or other appropriate mechanism.

B. Notwithstanding the foregoing subsection A., if any participant engaged in fraud or other misconduct (as determined by the Committee or the Board, in their respective sole discretion) resulting, in whole or in part, in a restatement of the financial or operating results used hereunder to determine the Annual Bonuses for a specific Plan year, Progressive will further have the right to recover from such participant, and the participant will refund to Progressive upon demand, an amount equal to the entire Annual Bonus paid to such participant for such Plan year plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from the date that such bonus was paid to the participant. Progressive shall further have the right to recover from such participant Progressive’s costs and expenses incurred in connection with recovering such Annual Bonus from the participant, including, without limitation, reasonable attorneys fees. There shall be no time limit on the Company’s right to recover such amounts under this subsection B., except as otherwise provided by applicable law.

C. The rights contained in this Section shall be in addition to, and shall not limit, any other rights or remedies that the Company may have under any applicable law or regulation.

15. Right to Set Off. Progressive shall have the unrestricted right to set off against or recover out of any bonuses or other sums owed to any participant under the Plan any amounts owed by such participant to Progressive, including, without limitation, any amounts owed by such participant under Section 14 above.

16. Shareholder Approval. The Plan is subject to approval by the holders of The Progressive Corporation’s Common Shares, $1.00 par value (“shareholders”) in accordance with the requirements of Section 162(m) of the Code, and no Annual Bonus will be paid hereunder unless the Plan has been so approved. If shareholders do not approve the Plan at the Annual Meeting of Shareholders in April 2007, this Plan shall automatically terminate and be of no further force or effect.

17. Prior Plans. If this Plan is approved by shareholders as provided in Paragraph 16 above, this Plan shall supersede and replace The Progressive Corporation 2004 Executive Bonus Plan, as heretofore in effect (the “Prior Plan”), which is and shall be deemed to be terminated as of December 29, 2006 (the “Termination Date”); provided, that any bonuses or other sums earned under the Prior Plan with respect to any period ended on or prior to the Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.

18. Effective Date. This Plan is adopted and, subject to the provisions of Paragraph 16 hereof, is to be effective, as of December 30, 2006, which is the commencement of Progressive’s 2007 fiscal year. Subject to the provisions of Paragraph 16, this Plan shall be effective for the 2007 Plan year (which coincides with Progressive’s 2007 fiscal year) and for each Plan year thereafter unless and until terminated by the Committee.

18. Ohio Law. This Plan shall be interpreted and construed in accordance with the laws of the State of Ohio.

EX-10.9

Exhibit 10.9

THE PROGRESSIVE CORPORATION

2017 EXECUTIVE ANNUAL INCENTIVE PLAN

Award Agreement (2018 Fiscal Year)

This Award Agreement (2018 Fiscal Year), dated <Grant Date> (the “Agreement”), describes the Award granted to <Participant> (“Participant”) pursuant to The Progressive Corporation 2017 Executive Annual Incentive Plan (the “Plan”) with respect to the fiscal year of The Progressive Corporation (the “Company”) ending December 31, 2018 (the “Fiscal Year”). Capitalized terms used in this Agreement are used as defined in the Plan.

1. Award. The Award is an Award under the Plan and subject to all of the terms and conditions of the Plan. The Award is not a Qualified Performance-Based Award and is not subject to the terms and conditions of the Plan applicable to Qualified Performance-Based Awards. The Award is performance-based, is not based on Participant performance, and is not a form of commission compensation.

2. Annual Incentive Payment. Subject to the terms of the Plan and this Agreement, the annual incentive payment, if any, payable to Participant pursuant to this Award with respect to the Fiscal Year (the “Annual Incentive Payment”) will be determined by application of the following formula:

Annual Incentive Payment = Paid Eligible Earnings x Target Percentage x

Performance Factor

3. Definitions. For purposes of this Agreement, the following terms will have the following meanings:

a. "Paid Eligible Earnings" shall mean and include the following amounts received by Participant from the Company or one of its Subsidiaries during the Fiscal Year: regular salary, Earned Time Benefit pay (excluding the payout of unused Earned Time Benefit pay at termination), sick pay, holiday pay, funeral pay, overtime pay, military make-up pay, shift differential, and retroactive payments of any of the foregoing items, in each case received by the participant during the Fiscal Year for work or services performed as an officer or employee of Progressive. For purposes of this Agreement, and notwithstanding the foregoing, Paid Eligible Earnings shall exclude all other types of compensation, including, without limitation: any short-term or long-term disability payments made to the participant; the earnings replacement component of any workers’ compensation benefit or award; any amounts paid pursuant to a judgment in, or settlement related to, any action, suit or proceeding, whether in law or equity, to any extent arising from or relating to Participant’s employment with the Company, or work or services performed for or on behalf of the Company; any amount paid under a separation allowance (or severance) plan; any bonus, Gainsharing or other incentive compensation award (whether denominated, or payable, in cash or equity), including, without limitation, payments from any discretionary cash fund; any dividend payments or dividend equivalent amounts; any unused Earned Time Benefit; and any other payment required by applicable law to be paid to Participant by the Company and intended to replace all or any portion of wages or earnings during a period of unemployment, whether due to illness, disability or otherwise (including, but not limited to, payments made pursuant to any statute, rule or regulation

of a governmental authority relating to leave on account of maternity, paternity, parental status or responsibility, or sickness).

b. “Target Percentage” shall mean <%>.

c. “Performance Factor” shall be determined by the Committee in the manner described in Section 4; provided, however, that the Performance Factor will not exceed 2.0.

4. The Performance Factor. The Performance Factor shall be determined by the performance of the Core Business during the Fiscal Year, pursuant to the procedures and calculations described below.

a. Core Business Defined. The “Core Business” shall be comprised of the following business units of the Company and its consolidated entities (each a “Business Unit” or “Unit”):

• The Agency Auto Business Unit, consisting of the auto business produced by agents or brokers, including Strategic Alliances Agency Auto, but excluding all Agency special lines businesses;

• the Direct Auto Business Unit, consisting of the personal auto business produced by phone, over the Internet, or via a mobile device, but excluding all Direct special lines businesses;

• the special lines Business Unit, which shall consist of special lines businesses and the manufactured homes business, in each case generated by agents and brokers or directly by phone, over the Internet, or via a mobile device;

• The Commercial Lines Business Unit; and

• The Property Business Unit, excluding the manufactured homes business.

Notwithstanding the foregoing descriptions, for all purposes hereunder, the following are excluded from the Core Business results (both growth and profitability): results of the Professional Liability business, the Midland Financial Group, Inc. and other businesses in run-off; results of Property Plus Insurance Agency; results of the CAIP Servicing Group; flood insurance policies, renters insurance policies, umbrella policies and related expenses; business owners’ policies and related expenses; and any results of any Commercial Lines product or program pursuant to which the Company insures any transportation network company or other entity engaged in a ride, cartage, or vehicle sharing business, operation, platform, or program or in a business based on matching and/or sharing time, use and/or assets by and among people and/or businesses.

b. Matrices. For purposes of computing a performance score for the Core Business, operating performance results for each Business Unit are evaluated using a performance matrix for the Fiscal Year. Each matrix assigns performance scores to various combinations of profitability and growth outcomes for the applicable Business Unit. These scores are then weighted and combined to produce the Performance Factor as described in Paragraph 4.d.ii. below. Each Business Unit will be evaluated, and the Committee has established performance matrices for the Fiscal Year for each of the Business Units.

c. Performance Measures. Each matrix will include the following Performance Measures: growth in policies in force (“PIFs”) and combined ratio, or profitability, as described below.

i. Growth. The growth measure for the Fiscal Year under all matrices will be based on policies in force ("PIFs"). For all matrices, growth will be measured by the percentage change in average PIFs for the Fiscal Year compared to the average PIFs of the immediately preceding fiscal year. Average PIFs for the Fiscal Year and for the immediately preceding fiscal year will be determined by adding the fiscal-month-end number of PIFs for each month during such year and dividing the total by twelve. Assigned risk business will not be included in determining the growth of any Business Unit.

ii. Profitability. For all Business Unit matrices, the measurement of profitability will be the combined ratio (calculated in accordance with U.S. generally accepted accounting principles) (the "GAAP Combined Ratio") for the Fiscal Year for the applicable Unit. Assigned risk business will be included in determining the GAAP Combined Ratio for the applicable Business Unit. The net operating expense of Corporate Products (e.g., self-insurance) shall be apportioned among the appropriate Business Units in accordance with the respective amount(s) of net earned premiums generated by each such Business Unit and will be reflected in the calculation of the GAAP Combined Ratio for such Business Units.

d. Calculation of Performance Factor.

i. Performance Scores. Using the actual performance results and the performance matrix for each Business Unit, the GAAP Combined Ratio for each such Unit will be matched with the growth levels achieved by such Unit, to determine the performance score for each such Unit. The performance score for each Business Unit, which will be used to calculate the Performance Factor as described further below, can vary from 0 to 2.0.

ii. Performance Factor. The resulting performance scores for each of the Business Units will then be multiplied by a weighting factor, which shall be a fraction or decimal equivalent, determined by dividing the net earned premiums generated by such Business Unit during the Fiscal Year by the net earned premiums generated by all of the Business Units comprising the Core Business in the aggregate. Subject to paragraph 3(c) of this Agreement, the sum of these weighted performance scores will be the Performance Factor for the Fiscal Year.

iii. Committee Discretion. Notwithstanding anything to the contrary contained in this Agreement, at or prior to the time of payment, the Committee, in its sole discretion, may reduce the amount of any Annual Incentive Payment that otherwise would payable according to this Agreement, or eliminate the Award in full. The Committee, in its sole discretion, may treat Participant differently than other Plan participants for these purposes. Any such determination by the Committee shall be final and binding on Participant and Participant’s estate and beneficiaries. Under no circumstances shall the Committee have discretion to increase the amount of the Annual Incentive Payment above the amount that would have been paid based on this Paragraph 4 (excluding adjustments required by Section 3(d) of the Plan).

5. Payment Qualification Date; Leave of Absence. Section 5, and other applicable Sections, of the Plan will govern the payment of the Annual Incentive Payment and the limitations and exceptions thereto. The following additional terms shall apply to this Award:

a. Qualification Date. Unless otherwise determined by the Committee, and except as expressly provided herein, in order to be entitled to receive an Annual Incentive Payment, the Participant must be an active officer or regular employee of the Company or one of its Subsidiaries on November 30 of the Fiscal Year (“Qualification Date”). If Participant’s employment terminates for any reason prior to the Qualification Date, Participant will not be entitled to an Annual Incentive Payment. Annual Incentive Payments are not earned until paid.

b. Leave of Absence. If Participant is on a leave of absence covered by the Family and Medical Leave Act of 1993, as amended (or equivalent state or local law), the Americans with Disabilities Act of 1991, as amended (or equivalent state or local law), personal leave of absence with the approval of the Company, military leave or short or long-term disability (provided that, in the case of a long-term disability, Participant is still an employee of the Company) on the Qualification Date, Participant will be entitled to receive an Annual Incentive Payment, calculated as provided in Paragraphs 3 and 4 above, based on the amount of Paid Eligible Earnings received by Participant during the Fiscal Year but subject to the terms of the Plan.

6. Deferral of Annual Incentive Payment. If then eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan ("Deferral Plan"), Participant may elect to defer all or a portion of the Annual Incentive Payment otherwise payable to him/her under this Agreement, subject to and in accordance with the terms of the Deferral Plan. If Participant has made such an election under the Deferral Plan, then to the extent of such election, the Annual Incentive Payment will, instead of being paid to Participant, be credited to Participant’s account under the Deferral Plan in accordance with the terms of the Deferral Plan.

7. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and cancels any other agreement, representation or communication, whether oral or in writing, between the parties relating to the Award, provided that the Agreement shall be at all times subject to the Plan.

8. Amendment. The Committee may amend the terms of this Award to the fullest extent permitted by Section 7 of the Plan.

9. Acknowledgments. Participant: (a) acknowledges receiving a copy of the Plan, and represents that he or she is familiar with all of the material provisions of the Plan; (b) accepts this Agreement and the Award subject to all provisions of the Plan and this Agreement; and (c) agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee relating to the Plan, this Agreement or the Award.

Participant evidences his or her agreement with the terms and conditions of this Agreement, and his or her intention to be bound by this Agreement, by accepting the Award pursuant to the procedures adopted by the Company. Upon such acceptance by Participant, this Agreement will be immediately binding and enforceable against Participant and the Company.

THE PROGRESSIVE CORPORATION

By: _____________________

Daniel P. Mascaro

Vice President & Secretary

__________________________________

[Participant’s Name]

Date:

EX-10.12

Exhibit 10.12

FIRST AMENDMENT

TO

THE PROGRESSIVE CORPORATION

2003 INCENTIVE PLAN

WHEREAS, The Progressive Corporation 2003 Incentive Plan (the “Plan”) is currently in effect; and

WHEREAS, it is deemed desirable to amend the Plan;

NOW, THEREFORE, the Plan is hereby amended in the respects, and as of the effective dates, hereinafter set forth:

A. Amendment Subject to Shareholder Approval

1. Subject to subparagraph A.2. below, the definition of the term “Performance Goals”, as set forth in Section 1(c) of the Plan, is hereby amended and restated in its entirety to provide as follows:

““Performance Goals” means the performance goals established by the Committee with respect to any Award, which shall be based on one or more of the following measures:

• Profitability, which will be measured by one of the following, as designated by the Committee:

• combined ratio

• weighted combined ratio

• variation in combined ratio from a targeted combined ratio

• cohort combined ratio (the expected lifetime combined ratio for a group of policies commencing during a specified time period)

• return on equity, or

• return on revenue; and

• Growth,which will be measured by changes from year to year or during a Plan year in one of the following, as designated by the Committee:

• policies in force

• vehicles insured

• net earned premiums

• earned premium per policy or per vehicle

• earned car years, or

• net written premiums.

Performance goals may be measured on a company-wide, subsidiary or business unit basis, or any combination thereof. Performance goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure.”

2. The amendment included in Paragraph A.1. above is subject to approval by the holders of The Progressive Corporation’s Common Shares, $1.00 par value (“shareholders”) in accordance with the requirements of Section 162(m) of the Code. If shareholders do not approve such amendment at the

Annual Meeting of Shareholders in April 2007, Paragraph A.1 only of this First Amendment shall automatically terminate and be of no further force or effect.

B. Amendments Not Requiring Shareholder Approval

1. For all Awards (as defined in the Plan) to be made after February 2007, Section 5(b)(8) of the Plan is hereby amended and restated in its entirety to provide as follows:

“Except as provided in this Section 5(b)(8), Section 5(b)(7) or Section 5(b)(9), the Participant shall have, with respect to the shares of Restricted Stock awarded, all of the rights of a shareholder of the Company, including the right to vote the Stock and the right to receive any dividends. However, notwithstanding the preceding provisions of this Section 5(b)(8), each Participant’s rights to receive cash dividends on shares of Restricted Stock awarded on or after March 1, 2007 (“Restricted Cash Dividends”) shall be subject to all the terms and conditions regarding vesting and forfeitability that apply to the shares of Restricted Stock to which such Restricted Cash Dividends relate, as set forth in this Plan and the applicable Award Agreement, and each Participant will be paid such Restricted Cash Dividends only if the Restricted Stock to which the Restricted Cash Dividends relate vests, and all restrictions with respect thereto lapse. In addition, the following provisions shall apply with respect to such Restricted Cash Dividends:

(a) All Restricted Cash Dividends shall accrue interest in accordance with Section 5(b)(8)(D) below for the period beginning on the date such Restricted Cash Dividends otherwise would have been paid, but for the provisions of this Section 5(b)(8), and ending on the payment date described below.

(b) All Restricted Cash Dividends, together with interest calculated in accordance with Section 5(b)(8)(D) below, shall be paid within sixty (60) days following the date the shares of Restricted Stock to which the Restricted Cash Dividends relate vests, and any restrictions with respect thereto lapse. The payment shall be made in cash and will be subject to and reduced by any taxes required to be withheld. To the extent required by Section 409A of the Code, each payment to a Participant who is a “specified employee”, as defined in Section 409A of the Code, shall be delayed for six months following the date such payment otherwise would have been made under the provisions of this Section 5(b)(8).

(c) All Restricted Cash Dividends and interest accrued thereon pursuant to Section 5(b)(8)(D) below, shall be recorded as a liability on the books of the Company. All payments of Restricted Cash Dividends, and interest accrued thereon pursuant to Section 5(b)(8)(D) below, shall be made from the Company’s general funds and in no event shall any Participant or other person have any proprietary rights of any nature with respect to any funds, securities or other property owned by the Company or have any claims or rights to any payment hereunder that are superior to any claims or rights of any general creditor of the Company.

(d) Interest shall accrue on all Restricted Cash Dividends at a rate equal to the one month U.S. Dollar LIBOR, as in effect from time to time, compounded monthly. Under no circumstances may the interest rate applied hereunder exceed a rate that is 120% of the applicable federal long-term rate (monthly) (as determined by the Internal Revenue Service pursuant to Section 1274(d) of the Code).

(e) If any shares of Restricted Stock are forfeited in accordance with the terms of this Plan and the related Restricted Stock Award Agreement, then any Restricted Cash Dividends relating to such shares, and interest accrued thereon, shall also be forfeited.

Stock dividends issued with respect to Restricted Stock shall be treated as additional shares of Restricted Stock that are subject to the same restrictions and other terms and conditions that apply to the shares with respect to which such dividends are issued.

To the extent any provision of this Section 5(b)(8) is subject to Section 409A of the Code, the provision will be construed and interpreted to the maximum extent reasonably possible to comply with Section 409A. Notwithstanding the foregoing, dividends on shares of Restricted Stock awarded to Participants on or after March 1, 2007, shall not be subject to the vesting and forfeitability conditions that apply to the shares of Restricted Stock to which such dividends relate, and such dividends shall be paid in cash to the Participants at the time that cash dividends are paid generally to shareholders of the Company, to the extent that such dividends would otherwise be treated as deferred compensation in excess of the applicable limitation under Section 409A of the Code or other applicable federal law limitations on the amount of deferrals under non-qualified deferred compensation plans.”

2. For all Awards to be made after February 2008, Section 5(b)(13)(D)(i) of the Plan is hereby amended and restated in its entirety to provide as follows:

“(i) Qualified Retirement– any termination of a Participant’s employment with the Company or its Subsidiaries or Affiliates for any reason (other than death, Disability or an involuntary termination for Cause) if, at or immediately prior to the date of such termination, the Participant satisfies both of the following conditions:

(a) the Participant is 55 year of age or older; and

(b) the Participant has completed at least fifteen (15) years of service as an employee of the Company or its Subsidiaries or Affiliates.”

3. For all Awards to be made after February 2007, Section 7(c) of the Plan is hereby amended and restated in its entirety to provide as follows:

“(c) Definition of Potential Change in Control. For purposes of Section 7(a), a “Potential Change in Control” means the acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or a Subsidiary or any Company employee benefit plan (including any trustee of such plan acting as such trustee)) of securities of the Company representing five percent or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.”

4. For all Awards to be made after February 2007, a new Subsection (k) is hereby added to Section 10, as follows:

“(k)(i) If (A) Performance-Based Restricted Stock vests hereunder on the basis of the achievement of certain financial or operating results (which includes, for purposes hereof, all of the Performance Goals that are available to the Committee under this Plan), (B) those financial or operating results were incorrect and were subsequently the subject of a restatement by Progressive within three (3) years after the date of vesting, and (C) the vesting event would not have occurred if the actual financial or operating results had been known at the time, then the Company shall have the right of recoupment from any executive officer who received shares of Stock upon such vesting or who elected to defer such shares at vesting; provided, however, that the Company will not have this right of recoupment if the Committee determines that, notwithstanding such restatement, such Performance-Based Restricted Stock would have nonetheless vested thereafter based on the Company’s actual operating or financial results.

The Company will have this right of recoupment whether or not the executive officer in question was at fault or responsible in any way in causing such restatement In such circumstances, the Company will have the right to recover from each executive officer, and each such executive officer will refund to the Company, at the Company’s discretion, either (X) a number of Shares equal to the number of Shares of Performance-Based Restricted Stock which vested, or which such Participant elected to defer, upon the vesting thereof based on the incorrect operating or financial results, or (Y) the dollar equivalent of such number of Shares as of the date of such vesting, without interest. Such recovery, at the Committee’s discretion, may be made by lump sum payment, installment payments, credits against unvested Awards made hereunder, credits against future bonus or other incentive payments or awards, or other appropriate mechanism.

(ii) If any Participant engaged in fraud or other misconduct (as determined by the Committee or the Board, in their respective sole discretion) resulting, in whole or in part, in a restatement of the financial or operating results used to determine the vesting of Performance-Based Restricted Stock hereunder, the Company will have the right to recoup from such Participant, and the Participant will transfer or pay to the Company upon demand, in the Company’s discretion, either (A) a number of shares of Stock equal to the number of Shares of Performance-Based Restricted Stock which vested, or which such Participant elected to defer, upon the vesting thereof based on the incorrect operating or financial results, or (B) the dollar equivalent to such number of shares determined as of the date of such vesting, plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from such vesting date. The Company further shall have the right to terminate and cancel any and all Awards previously made to such Participant at any time hereunder that are then unvested, and to recover from such Participant the Company’s costs and expenses incurred in connection with recovering such Shares or funds from Participant and enforcing its rights under this subsection (ii), including, without limitation, reasonable attorneys fees. There shall be no time limit on the Company’s right to recover such amounts under this subsection (ii), except as otherwise provided by applicable law.

(iii) The rights contained in this subsection (k) shall be in addition to, and shall not limit, any other rights or remedies that the Company may have under this Plan or under any applicable law or regulation.

EX-10.15

Exhibit 10.15

FOURTH AMENDMENT

TO

THE PROGRESSIVE CORPORATION

2003 INCENTIVE PLAN

The Progressive Corporation 2003 Incentive Plan, as heretofore amended (the “Plan”), is hereby amended as follows:

1. The second sentence of the first paragraph of Section 2 of the Plan is hereby deleted, and the following is substituted in its place:

“The Committee shall consist of not less than two directors of the Company, all of whom shall be Non-Employee Directors and Outside Directors.”

2. Except as expressly modified hereby, the terms of the Plan shall be unchanged.

This Amendment will be effective as of April 20, 2012.

/s/ Charles E. Jarrett

Charles E. Jarrett

Secretary

EX-10.17

Exhibit 10.17

RESTRICTED STOCK AWARD AGREEMENT

(<Year of Grant> Performance-Based Award)

This Agreement (“Agreement”) is made this <Grant Date> by and between <Participant Name> (“Participant”) and The Progressive Corporation (the “Company”).

1.Award of Restricted Stock. The Company hereby grants to Participant an award (the “Award”) of restricted stock (the “Restricted Stock”) consisting of <# of Shares> of the Company’s Common Shares, $1 Par Value (“Common Shares”), pursuant and subject to The Progressive Corporation 2003 Incentive Plan, as amended by the First Amendment to The Progressive Corporation 2003 Incentive Plan (collectively, the “Plan”).

2.Condition to Participant’s Rights under this Agreement. This Agreement shall not become effective, and Participant shall have no rights with respect to the Award or the Restricted Stock, unless and until the Participant has fully executed this Agreement and delivered it to the Company (in the Company’s discretion, such execution and delivery may be accomplished through electronic means).

3. Restrictions; Vesting. The Restricted Stock shall be subject to the restrictions and other terms and conditions set forth in the Plan, which are hereby incorporated herein by reference, and in this Agreement. Subject to the terms and conditions of the Plan and this Agreement, Participant’s rights in and to the shares of Restricted Stock shall vest on the date <Performance-Based Goals>.

The shares of Restricted Stock awarded under this Agreement shall vest in accordance with the foregoing unless, prior thereto, the Award and the applicable shares of Restricted Stock are forfeited or have become subject to accelerated vesting under the terms and conditions of the Plan. Until the shares of Restricted Stock vest, Participant shall not sell, transfer, pledge, assign or otherwise encumber such shares of Restricted Stock or any interest therein.

4. Expiration of Award. Notwithstanding anything to the contrary in this Agreement, if Participant’s rights in and to the shares of Restricted Stock granted hereunder have not vested in accordance with Section 3 of this Agreement on or before <Expiration Date>, this Award shall expire on that date. Upon such expiration, the Common Shares issued pursuant to this Agreement shall automatically be forfeited, and Participant shall have no further rights with respect thereto.

5.Manner In Which Shares Will Be Held. All shares of Restricted Stock awarded to Participant hereunder shall be issued in book-entry form and held by the Company, or its designee, in such form, and as such, no stock certificates evidencing such shares will be issued or held with respect to such Restricted Stock. Certain terms, conditions and restrictions applicable to such Restricted Stock will be noted in the records of the Company’s transfer agent and in the book-entry system. At the Company’s discretion, and subject to the provisions of this Paragraph 5, stock certificates evidencing the shares of Restricted Stock awarded under this Agreement may be issued and registered in the name of Participant. In such event, such certificates shall be delivered to and held in custody by the Company, or its designee, until the restrictions thereon shall have lapsed or any conditions to the vesting of such Award, or a portion thereof, have been satisfied, and such certificates shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award.

Participant hereby irrevocably authorizes the Company and the Compensation Committee of the Board of Directors (the “Committee”) to take any and all appropriate action with respect to the evidence of Participant’s Restricted Stock, including, without limitation, issuing certificates for such Restricted Stock, issuing such Restricted Stock in book-entry form, transferring any previously issued certificates into book-entry form, transferring any Restricted Stock (whether held in certificate or book-entry form) into unrestricted form at vesting, or canceling any Restricted Stock (whether held in certificate or book-entry form) as and when required by this Agreement or the Plan, or undertaking any other action which may be done lawfully by the Company or the Committee in the administration of the Plan and this Agreement. Participant specifically acknowledges and agrees that such certificates and/or book-entry evidence of Participant’s Restricted Stock may be transferred or cancelled pursuant to this Agreement and the Plan without requiring that a Stock Power be executed and delivered by Participant or requiring any other action on the part of Participant, and Participant authorizes the Company to undertake each such action without such Stock Powers.

Participant hereby further irrevocably appoints the Secretary of the Company and any employee of the Company who may be designated by the Secretary, and each of them, my true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to execute and deliver each and every document (including, without limitation, any such Stock Powers) which may be necessary or appropriate in connection with the issuance, transfer, cancellation or other action taken in connection with the Restricted Stock awarded hereunder pursuant to this Agreement or the Plan. The rights granted by Participant under this paragraph shall automatically expire as to shares of Restricted Stock awarded hereunder upon the transfer of such shares into unrestricted form at vesting or upon the cancellation of such shares at any time, as applicable, pursuant to this Agreement and the Plan.

6. Rights of Shareholder; Restrictions on Cash Dividends. Except as otherwise provided in this Agreement or the Plan, Participant shall have, with respect to the shares of Restricted Stock awarded hereunder, all of the rights of a shareholder of the Company, including the right to vote the shares; provided, however, that notwithstanding the foregoing, Participant’s rights to receive cash dividends on the shares of Restricted Stock awarded hereunder (“Restricted Cash Dividends”) shall be subject to all the terms and conditions regarding vesting and forfeitability that apply to the shares of Restricted Stock to which such Restricted Cash Dividends relate, as set forth in the Plan and this Agreement, and Participant will be paid such Restricted Cash Dividends only if the Restricted Stock to which the Restricted Cash Dividends relate vests, and all restrictions with respect thereto lapse. In addition, such Restricted Cash Dividends shall be subject to the terms and conditions set forth in Section 5(b)(8) of the Plan.

7. Shares Non-Transferable. No shares of Restricted Stock shall be transferable by Participant other than by will or by the laws of descent and distribution. In the event any Award is transferred or assigned pursuant to a court order, such transfer or assignment shall be without liability to the Company, and the Company shall have the right to offset against such Award any expenses (including attorneys’ fees) incurred by the Company in connection with such transfer or assignment.

8.Executive Deferred Compensation Plan. If Participant is eligible, and has made the appropriate election, to defer the Restricted Stock awarded hereunder into The Progressive Corporation Executive Deferred Compensation Plan (the “Deferral Plan”), upon vesting, the shares of Restricted Stock awarded hereunder shall be considered to be deferred pursuant to the Deferral Plan, subject to and in accordance with the terms and conditions of the Deferral Plan and any deferral agreement entered into by Participant thereunder.

9. Termination of Employment. Except as otherwise provided in the Plan or as determined by the Committee, if Participant’s employment with the Company is terminated for any reason other than death, Disability or Qualified Retirement, all Restricted Stock held by Participant which is unvested or subject to restriction at the time of such termination shall be automatically forfeited.

10. Taxes. No later than the date as of which an amount first becomes includable in the gross income of Participant for federal income tax purposes with respect to shares of Restricted Stock awarded under this Agreement, Participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, all federal, state or local taxes or other items of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company and its Subsidiaries and Affiliates, to the extent permitted by law, shall have the right to deduct any such taxes from any payment of any kind otherwise due to Participant. At vesting, shares of Restricted Stock awarded hereunder will be valued at Fair Market Value, as defined in the Plan.

Participant must satisfy the minimum statutory tax withholding obligations resulting from the vesting of shares of Restricted Stock (“Minimum Withholding Obligations”) either (a) by surrendering to Company shares of Restricted Stock which are then vesting in an amount sufficient to satisfy the Minimum Withholding Obligations, (b) by surrendering to the Company other unrestricted Common Shares of the Company owned by Participant in an amount sufficient to satisfy the Minimum Withholding Obligations, or (c) by paying the appropriate amount in cash or, if acceptable to the Company, by check or other instrument. Unless Participant advises the Company of his or her election to use an alternative payment method, Participant shall be deemed to have elected to surrender to the Company shares of Restricted Stock which are then vesting in an amount sufficient to satisfy the Minimum Withholding Obligations. If Participant requests that the Company withhold taxes in addition to the Minimum Withholding Obligations, such additional withholding must be satisfied by Participant either (x) by paying the appropriate amount in cash or, if acceptable to the Company, by check or other instrument, or (y) provided that Participant has obtained the approval of either the Company or the Committee (as required under rules adopted by the Committee) prior to the date of vesting, by surrendering unrestricted Common Shares which are not part of the Restricted Stock then vesting and which have then been owned by Participant in unrestricted for more than six (6) months.

Under no circumstances will Participant be entitled to satisfy any such additional withholding by surrendering shares of Restricted Stock which are then vesting or other Common Shares which have then been owned by Participant in unrestricted form for six months or less. In addition, under no circumstances will Participant be entitled to satisfy any Minimum Withholding Obligations or additional withholding hereunder by surrendering shares of Restricted Stock which are not then vesting or any Restricted Stock which Participant has elected to defer under Paragraph 8 hereof. All payments, surrenders of shares, elections or requests for approval hereunder must be made by Participant in accordance with such procedures as may be adopted by the Company in connection therewith, and subject to such rules as have been or may hereafter be adopted by the Committee with respect thereto.

11. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and cancels any other agreement, representation or communication, whether oral or in writing, between the parties hereto relating to subject matter hereof, provided that the Agreement shall be at all times subject to the Plan as provided above.

12. Amendment.The Committee, in its sole discretion, may hereafter amend the terms of this Award, but no such amendment shall be made which would impair the rights of Participant, without Participant’s consent.

13. Definitions. Unless otherwise defined in this Agreement, each capitalized term in this Agreement shall have the meaning given to it in the Plan.

14.Acknowledgments.Participant hereby: (i) acknowledges receiving a copy of the Plan Description relating to the Plan, and represents that he or she is familiar with all of the material provisions of the Plan, as set forth in such Plan Description; (ii) accepts this Agreement and the Restricted Stock awarded pursuant hereto subject to all provisions of the Plan and this Agreement; and (iii) agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee relating to the Plan, this Agreement or the Restricted Stock awarded hereunder.

Participant evidences his or her agreement with the terms and conditions of this Agreement, and his or her intention to be bound hereby, by electronically accepting the Award granted hereunder pursuant to the procedures adopted by the Company. Upon such acceptance by Participant, this Agreement will be immediately binding and enforceable against Participant and the Company.

THE PROGRESSIVE CORPORATION
By:	/s/ Charles E. Jarrett
Vice President & Secretary

EX-10.25

Exhibit 10.25

FIFTH AMENDMENT

TO

THE PROGRESSIVE CORPORATION

2010 EQUITY INCENTIVE PLAN

The Progressive Corporation 2010 Equity Incentive Plan, as previously amended (the “Plan”), is hereby amended as follows:

1. The second sentence of Section 2(a) of the Plan is hereby deleted, and the following is substituted in its place:

“The Committee shall consist of not less than two directors of the Company, all of whom shall be Non-Employee Directors and Outside Directors.”

2. Except as expressly modified hereby, the terms of the Plan shall be unchanged.

This Amendment will be effective as of April 20, 2012.

/s/ Charles E. Jarrett

Charles E. Jarrett

Secretary

EX-10.26

Exhibit 10.26

SIXTH AMENDMENT

TO

THE PROGRESSIVE CORPORATION

2010 EQUITY INCENTIVE PLAN

WHEREAS, The Progressive Corporation 2010 Equity Incentive Plan, as previously amended (the “Plan”), is currently in effect; and

WHEREAS, it is deemed desirable to amend the Plan;

NOW, THEREFORE, the Plan is hereby amended as follows:

1. Section 10(d) of the Plan is hereby deleted and the following is substituted in its place:

“(d) If the Committee determines that the Participant has engaged or is engaging in any Disqualifying Activity, then:

(i) if the Vesting Date of any Award Installment under an Award then held by the Participant is scheduled to occur after the date of Committee’s determination that the Participant has engaged in a Disqualifying Activity (or with respect to vested Stock Options and Stock Appreciation Rights, such Award Installment has not been exercised by the Participant), then each such Award Installment shall terminate immediately upon the date of the Committee’s determination, and all related shares of Stock, Units, Stock Options or Stock Appreciation Rights shall be forfeited automatically at that time; and

(ii) if the Vesting Date of any Award Installment occurred (or with respect to vested Stock Options and Stock Appreciation Rights, such Award Installment was exercised by the Participant) after the Disqualification Date but prior to the date of the Committee’s determination with respect thereto, such Award Installment shall be deemed to have automatically terminated and forfeited as of the Disqualification Date. Accordingly, promptly upon the Company’s demand, the Participant shall transfer or pay to the Company all shares of Stock (or, if such Stock has been sold or otherwise transferred by the Participant, an equivalent number of shares of Stock or, at the Company’s election, the value thereof as of the applicable Vesting Date or exercise date) or other proceeds received or deferred by the Participant in connection with such vesting (or exercise) event(s), and the Participant will be entitled to no consideration in connection therewith. If such shares of Stock or other proceeds are not transferred or paid to the Company promptly upon such demand, then the Company will have the right to recover from the Participant all such shares or other proceeds, plus the costs and expenses incurred by the Company in recovering such shares or other proceeds from the Participant and enforcing its rights hereunder, including, without limitation, reasonable attorneys fees and court costs, and plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from the applicable Vesting Date (or exercise date).

Any determination by the Committee hereunder, which may act upon the recommendation of the Chief Executive Officer or other senior officer of the Company, that the Participant has engaged or is engaging in any Disqualifying Activity, and as to the Disqualification Date, shall be final and conclusive.”

2. In Section 7(b)(iv), the phrase “at the time and to the extent such Award would have become vested” is hereby revised to delete the words “at the time and”; vesting events for Time-Based Awards that are required by that section will be processed on or before the earlier of sixty (60) days after the Participant’s death and the scheduled vesting date.

3. With respect to Awards of Restricted Stock Units to be made after February 2013, the following shall apply:

A. A new Section10A shall be inserted into the Plan, as follows:

“SECTION 10A. Special Provisions Relating to Awards of Restricted Stock Units Made after February 2013.

With respect to each Award of Restricted Stock Units made after February 2013, but subject to all other applicable provisions of this Plan and the Award Agreement relating to such Awards:

(a) In Section 1(b):

(i) The definition of “Qualified Retirement” is hereby modified to delete the words “death or” from the parenthetical preceding clause (a) therein; and

(ii) The following definition is hereby inserted:

“Qualified Retirement Eligibility Date” means the first day of the calendar month in which the Participant is scheduled to satisfy the age and years of-service requirements for a Qualified Retirement.”

(b) In the first sentence of Section 5(b)(vi), the phrase “except as provided in Section 10” is hereby modified to read as follows: “except as provided in Sections 10 and 10A hereof”.

(c) Upon the occurrence of a Participant’s Qualified Retirement Eligibility Date, the provisions of Section 6(b)(v) (relating to the termination of a Participant’s employment by reason of death) shall not apply to such Award; and

(d) With respect to Awards of Time-Based Restricted Stock Units:

(i) If a Participant’s Qualified Retirement Eligibility Date occurs after the grant date for such an Award but prior to the Vesting Date for an Award Installment specified in the applicable Award Agreement, then upon the Participant’s Qualified Retirement Eligibility Date (or such date promptly thereafter as may be specified in the applicable Award Agreement), fifty percent (50%) of each such Award Installment shall vest and be free of applicable restrictions; the remaining fifty percent (50%) of each such Award Installment shall not vest at such time, but shall remain subject to the vesting schedule as set forth in the Award Agreement unless earlier forfeited in accordance with the Plan;

(ii) If the Participant’s Qualified Retirement Eligibility Date has occurred prior to the grant date for an Award, then fifty percent (50%) of each Award Installment under such Award shall vest and be free of applicable restrictions on the date promptly after the grant date that is specified in the applicable Award Agreement (the “Specified Date”); the remaining fifty percent (50%) of each such Award Installment shall not vest at such time, but shall remain subject to the vesting schedule as set forth in the Award Agreement unless earlier forfeited in accordance with the Plan; and

(iii) Section 10 (relating to Qualified Retirement) shall not apply to such Time-Based Awards, except as provided in this Subsection (d)(iii). Due to administrative reasons, the vesting event occurring upon the grant of a Time-Based Award under Subsection (d)(ii) above, or that would otherwise occur with respect to a Time-Based Award promptly after its grant under Subsection (d)(i) above, is expected to occur shortly thereafter on the Specified Date. If a Participant’s employment terminates in a Qualified Retirement after the grant date of a Time-Based Award but prior to the related Specified Date, the provisions of Section 10 hereof will apply to such Time-Based Award (but not to any other Awards of Restricted Stock Units made after February 2013 that are then outstanding).

(iv) Except as provided in the preceding Subsection (d)(iii), after a Participant’s Qualified Retirement Eligibility Date, all Awards of Time-Based Restricted Stock Units made after February 2013 (or portions thereof) that are unvested or subject to restriction at the time of the Participant’s termination of employment for any reason, including death, shall thereupon be forfeited automatically.”

B. Section 6(b)(v) is hereby amended as follows:

(a) The phrase “at the time and to the extent such Award would have become vested” is hereby revised to delete the words “at the time and”; vesting events for Time-Based Awards that are required under that section will be processed on or before the earlier of sixty (60) days after the Participant’s death and the scheduled vesting date; and

(b) The following new sentence is hereby inserted at the end of the existing provision:

“Notwithstanding the foregoing, as further provided in Section 10A hereof, with respect to Awards of Restricted Stock Units made after February 2013, this subsection shall no longer apply to any such Award upon the occurrence of a Participant’s Qualified Retirement Eligibility Date.”

This Amendment will be effective as of December 7, 2012.

/s/ Charles E. Jarrett

Charles E. Jarrett

Secretary

EX-10.32

Exhibit 10.32

RESTRICTED STOCK UNIT AWARD AGREEMENT

(2012 Performance-Based Award – Investment Results)

This Agreement (“Agreement”) is made this <Grant Date> by and between< Participant Name> (“Participant”) and The Progressive Corporation (the “Company”).

1. Definitions. Unless otherwise defined in this Agreement, each capitalized term in this Agreement shall have the meaning given to it in The Progressive Corporation 2010 Equity Incentive Plan, as amended (collectively, the “Plan”). References herein to performance results of the Company mean the applicable results achieved by the Subsidiaries and Affiliate of the Company.

2.Award of Restricted Stock Units.The Company grants to Participant an award (the “Award”) of performance-based restricted stock units (“Restricted Stock Units” or “Units”), pursuant and subject to the Plan. The Award is based on an initial award value of <# of Units> Units (the “Initial Award Value”). The number of Restricted Stock Units that are ultimately earned pursuant to the Award (if any) will be determined based on the Initial Award Value and the procedures and calculations set forth in this Agreement. The maximum potential Award is a number of Units equal to two (2) times the Initial Award Value (the “Maximum Award Value”).

3. Condition to Participant’s Rights under this Agreement.This Agreement shall not become effective, and Participant shall have no rights with respect to the Award or any Restricted Stock Units, unless and until Participant has fully executed this Agreement and delivered it to the Company. In the Company’s sole discretion, such execution and delivery may be accomplished through electronic means.

4.Restrictions; Vesting. Subject to the terms and conditions of the Plan and this Agreement, Participant’s rights in and to Restricted Stock Units shall vest, if at all, as follows:

I. Investment Performance Criteria. Provided that at the Company’s 2012 Annual Meeting of Shareholders, the Company’s shareholders approve the Fourth Amendment to the Plan, the following shall control the vesting of Units under this Agreement:

a. Evaluation Period. The “Evaluation Period” shall be the three-year period comprised of the calendar years 2012, 2013 and 2014.

b. Certification. The Award shall vest (if at all) only if, to the extent, and when the Compensation Committee of the Board of Directors (the “Committee”) certifies:

i. the Performance Ranking of, and Performance Factor for, the Company’s Fixed-Income Portfolio (as each of those terms are defined in Subparagraph c. below); and

ii. the corresponding number of Restricted Stock Units (if any) that have vested as a result of such performance.

If the Committee certifies the vesting of a number of Units that is less than the Maximum Award Value, then with respect to all other Units that could have been earned under this Agreement, the Award will terminate and be forfeited automatically.

c. Number of Units Vesting. The number of Restricted Stock Units (if any) that vest in connection with the Award will be determined by application of the following formula:

Number of Units Vesting = Initial Award Value x Performance Factor

i. The Performance Factor will be determined after the expiration of the Evaluation Period based on the fully taxable equivalent total return of the Company’s fixed-income investment portfolio (the “Fixed-Income Portfolio” or “Portfolio”), in comparison to the total returns of the group of comparable investment firms identified by Rogers Casey (the “Investment Benchmark”), each calculated for the three calendar years comprising the Evaluation Period. After the end of the Evaluation Period, Rogers Casey will determine the firms that are included in the Investment Benchmark in accordance with the criteria specified on Exhibit I hereto. Rogers Casey will also supply to the Company the monthly total return data for each of the Investment Benchmark firms for the three-year period ending on the last day of the Evaluation Period.

Investment results for the Fixed-Income Portfolio will be marked to market, including the benefit of any state premium tax abatements for municipal securities held in the Portfolio that are realized by the Company during the Evaluation Period, in order to calculate the Portfolio’s fully taxable equivalent total return, compounded on a monthly basis, for the Evaluation Period. The investment performance achieved by the Fixed-Income Portfolio for the Evaluation Period will then be compared against the total returns of the firms included in the Investment Benchmark for the same period, also compounded on a monthly basis, as determined by the Company from the monthly performance data supplied by Rogers Casey for each firm in the Investment Benchmark, to determine where the Fixed-Income Portfolio’s performance falls on a percentile basis when compared to the firms in the Investment Benchmark, as further described in Exhibit II hereto (“Performance Ranking”).

The Portfolio’s Performance Ranking will be used to determine a performance score of between 0.00 and 2.00 for the Evaluation Period, based on the following schedule:

Score = 0.00 Rank at or below	Score = 1.00 Rank equal to	Score = 2.00 Rank at orabove
25th Percentile	50th Percentile	75th Percentile

A Performance Ranking between the values identified in the schedule will be interpolated on a straight-line basis to generate the Performance Factor, as further described on Exhibit II.

ii. The Company will work with Rogers Casey to ensure, to the extent practicable, that the list of firms comprising the Investment Benchmark and all data necessary to calculate the Performance Ranking and the Performance Factor are received by March 1st of the year immediately following the Evaluation Period. In all events, distributions under this Agreement must be

made on or before March 15th of the year immediately following the Evaluation Period.

iii. In the event that Rogers Casey (or its successors or assigns) ceases to provide or publish the information required to calculate the Performance Factor, or modifies the information in such a way as to render the comparisons required by this Agreement to be not meaningful, in the Committee’s sole judgment, the determinations required above shall be made using such comparable Company and other investment data as may be available from another recognized provider of investment industry data as the Committee may approve in its sole discretion.

II. Alternative Performance Criteria. If the Company’s shareholders do not approve the Fourth Amendment to the Plan at the 2012 Annual Meeting of Shareholders, the following shall control the vesting of Units under this Agreement:

a. Growth Evaluation Period. The “Growth Evaluation Period” shall be the three-year period comprised of the years 2012, 2013 and 2014.

b. Certification. The Award shall vest (if at all) only if, to the extent, and when the Compensation Committee of the Board of Directors (the “Committee”) certifies:

i. the extent to which the Company’s performance results have satisfied the performance criteria set forth in both Subparagraphs c. and d. below; and

ii. the corresponding number of Restricted Stock Units (if any) that have vested as a result of such performance.

Such certification shall occur as soon as practicable after the end of the Growth Evaluation Period, but in any event must occur (if at all) on or before January 31, 2017 (the “Expiration Date”). If the Committee certifies the vesting of a number of Units that is less than the Maximum Award Value, the Award will terminate and be forfeited automatically with respect to all other Units that could have been earned under this Agreement.

c. Profitability Requirement. The Award shall not vest unless the Company has achieved a combined ratio of 96 or less, determined in accordance with GAAP, for the twelve (12) consecutive fiscal months immediately preceding the date of the certification described in Subparagraph b. above (the “Profitability Requirement”).

d. Number of Units Vesting. Provided that the Profitability Requirement has been satisfied, the number of Restricted Stock Units (if any) that vest in connection with the Award will be determined as follows:

i. The Company’s compounded annual rate of growth in “Written Premiums” (defined below) for the Growth Evaluation Period for the Company’s Private Passenger Auto and Commercial Auto businesses (“Company Growth Rate”) will be compared to the compounded annual rate of growth of the Private Passenger Auto and Commercial Auto markets as a whole for the Growth

Evaluation Period (“Market Growth Rate”), in each case determined as provided below. If the Company Growth Rate exceeds the Market Growth Rate, the applicable calculation required by the following table will determine the number of Restricted Stock Units vesting:

Performance vs. Market	Determination of the Number of Units Vesting
If the Company Growth Rate exceeds the Market Growth Rate by 3 percentage points or more	Initial Award Value x 2.00 (i.e., the Maximum Award Value)
If the Company Growth Rate exceeds the Market Growth Rate by more than 2 but less than 3 percentage points	Initial Award Value x (1.00 + (Company Growth Rate – Market Growth Rate – 2.00)) Example: Company Growth Rate = 2.50%; Market Growth Rate = 0.10%; Number of Units vesting will equal Initial Award Value x (1.00 + (2.50 - 0.10 - 2.00)) = Initial Award Value x 1.40
If the Company Growth Rate exceeds the Market Growth Rate by exactly 2 percentage points	Initial Award Value
If the Company Growth Rate exceeds the Market Growth Rate by less than 2 percentage points	Initial Award Value x ((Company Growth Rate – Market Growth Rate) / 2.00) Example: Company Growth Rate = 2.50%; Market Growth Rate = 1.10%; Number of Units vesting will equal Initial Award Value x ((2.50 – 1.10) / 2.00) = Initial Award Value x 0.70

ii. If the Company Growth Rate is equal to or less than the Market Growth Rate, or if the Profitability Requirement has not been satisfied with respect to the Award prior to the Expiration Date, none of the Award shall vest, and the Award shall be forfeited in its entirety.

iii. For purposes of these determinations:

A. Subject to the provisions of Subparagraphs B., C. and D. below:

1. “Written Premiums” shall mean premiums written directly during the applicable time period for the specified types of business, without taking into account reinsurance;

2. The Company Growth Rate will be the compounded annual rate of growth in Written Premiums during the Growth Evaluation Period, determined by comparing (a) the annual aggregate Written Premiums of the Company in its Private Passenger Auto and Commercial Auto businesses for 2014, as reported by A.M. Best in its annual report currently known as the “A2 Report,” with (b) such Written Premiums of the Company for 2011 as reported in A.M. Best’s A2 Report; and

3. The Market Growth Rate will be the compounded annual rate of growth in Written Premiums during the Growth Evaluation Period, determined by comparing (a) the aggregate Written Premiums of the U.S. Private Passenger Auto market and the Commercial Auto market for 2014, as reported in A.M. Best’s A2 Report, with (b) such Written Premiums for 2011 as reported in A.M. Best’s A2 Report, but excluding (in each case) the applicable Written Premiums of the Company;

B. If 2014 is a 53-week year under the Company’s fiscal calendar, then in determining the Company Growth Rate as set forth in Subparagraph A. above, the aggregate Written Premiums for such year will be reduced by an amount equal to twenty percent (20%) of the Written Premiums of the Company in fiscal December 2014 in its Private Passenger Auto and Commercial Auto businesses, as determined from the Company’s records;

C. In making the calculations required under this Agreement, the Company Growth Rate and the Market Growth Rate shall each be rounded to the nearest thousandth of a whole percentage point and (if applicable) the number of Restricted Stock Units vesting shall be rounded to the nearest thousandth of a whole Unit (or, in each case, as otherwise reasonably determined by the Company); and

D. In the event that A.M. Best ceases to publish the A2 Report, or modifies the A2 Report in such a way as to render the comparisons required by this Agreement to be not meaningful, in the Committee’s sole judgment, the determinations required above shall be made using such comparable Company and industrywide data as may be then available from A.M. Best in any successor or replacement report or publication, or such comparable data as may be available from another nationally recognized provider of insurance industry data, in each case as the Committee may approve in its sole discretion.

III. Notwithstanding anything to the contrary contained in this Agreement, at or prior to the time of vesting, the Committee, in its sole discretion, may reduce the number of Restricted Stock Units that otherwise would vest according to this Agreement, or eliminate the Award in full. The Committee, in its sole discretion, may treat individual participants differently for these purposes. Any such determination by the Committee shall be final and binding on the Participant. Under no circumstances shall the Committee have discretion to increase the award to any Participant in excess of the number of Units that would have been awarded at vesting based on this Paragraph 4 (excluding adjustments required by Section 3(c) of the Plan).

IV. The Award shall vest in accordance with and subject to the foregoing except to the extent that, prior to the Committee’s certification of the Award, the Award has been forfeited under the terms and conditions of the Plan.

5. Dividend Equivalents. Subject to this Paragraph 5, Participant shall be credited with Dividend Equivalents with respect to the outstanding Award prior to the applicable vesting date. All Dividend Equivalents so credited will be deemed to be reinvested in Restricted Stock Units on the date

that the applicable dividend or distribution is made to the Company’s shareholders, based on the Initial Award Value and any Units resulting from prior reinvestments of Dividend Equivalents, in the number of Units determined by dividing the value of the Dividend Equivalents by the Fair Market Value of the Company’s Stock on such date (rounded to the nearest thousandth of a whole Unit or as otherwise reasonably determined by the Company); provided, however, that if Dividend Equivalents cannot be reinvested in Units due to the operation of Section 3(a) of the Plan, such Dividend Equivalents will be credited to Participant as a cash value based on the Initial Award Value and any Units resulting from prior reinvestments of Dividend Equivalents, which cash value shall be held by the Company (without interest) subject to this Agreement. The Units and, if applicable, cash value resulting from the reinvestment of such Dividend Equivalents shall be subject to the same terms and conditions, and shall vest or be forfeited (if applicable) at the same time, upon the same conditions, and in the same proportion, as the Initial Award Value set forth in this Award.

6.Units Non-Transferable. No Restricted Stock Units (and no Dividend Equivalents credited hereunder) shall be transferable by Participant other than by will or by the laws of descent and distribution, and then only in accordance with the Plan. In the event any Award is transferred or assigned pursuant to a court order, such transfer or assignment shall be without liability to the Company, and the Company shall have the right to offset against such Award any expenses (including attorneys’ fees) incurred by the Company in connection with such transfer or assignment.

7. Deferral of Award. If Participant is eligible, and has made the appropriate election, to defer the Award into The Progressive Corporation Executive Deferred Compensation Plan (the “Deferral Plan”), at the time of vesting, the Restricted Stock Units that would otherwise vest under this Agreement shall be considered to be deferred pursuant to the Deferral Plan, subject to and in accordance with the terms and conditions of the Deferral Plan and any related deferral agreement.

8. Termination of Employment. Except as otherwise provided in the Plan or in this Paragraph 8, or as determined by the Committee, if Participant’s employment with the Company is terminated for any reason other than death or Qualified Retirement, the Award and all Restricted Stock Units held by Participant that are unvested or subject to restriction at the time of such termination shall be forfeited automatically.

a. If the vesting of Units hereunder is determined under Subparagraph 4.I. (Investment Performance Criteria) hereof, in the event that any such termination of employment occurs, for any reason other than death or for Cause, after the end of the Evaluation Period but prior to the Committee’s certification of results for the Evaluation Period, the Award shall not be forfeited at the time of Participant’s termination, and Participant shall be eligible to participate in the vesting of Restricted Stock Units under this Agreement only to the extent certified by the Committee, subject to the provisions of the Plan; and

b. If the vesting of Units hereunder is determined under Subparagraph 4.II. (Alternative Performance Criteria) hereof, in the event that any such termination of employment occurs, for any reason other than death or for Cause, after the end of the Growth Evaluation Period but prior to the “first opportunity to certify results” (defined below), the Award shall not be forfeited at the time of Participant’s termination, and:

i. if Participant has not satisfied the requirements for a Qualified Retirement, Participant shall be eligible to participate in the vesting of Restricted Stock Units under this Agreement only to the extent certified by the Committee at the time of such first opportunity to certify results, but if certification does not occur upon such first opportunity to certify results, the Award shall be forfeited automatically;

ii. if Participant has satisfied the requirements for a Qualified Retirement, Participant shall be eligible to participate in the vesting of Restricted Stock Units under this Agreement only to the extent certified by the Committee at the time of such first opportunity to certify results, but if certification does not occur upon such first opportunity to certify results, then pursuant to Section 10 of the Plan, fifty percent (50%) of such Award shall remain in effect and fifty percent (50%) of the Award shall be forfeited (or in certain cases, if the applicable requirements are satisfied, all of such Award shall remain in effect), and the portion that remains in effect shall thereafter vest, if at all, in accordance with this Agreement, but subject at all times to Section 10 of the Plan;

provided, however, in either case, that if, prior to certification by the Committee, the Committee determines that Participant is engaging in, or has engaged in, a Disqualifying Activity, the Award and all applicable Restricted Stock Units that are then unvested or subject to restriction shall be forfeited automatically as of the Disqualification Date determined by the Committee. Any determination by the Committee that the Participant is engaging in, or has engaged in, any Disqualifying Activity, and of the Disqualification Date, shall be final and conclusive on Participant.

For purposes of this Paragraph 8.b., the phrase “first opportunity to certify results” means the date which is the earlier to occur of: (i) the last day of the calendar month immediately following the month in which A.M. Best publishes the A2 Report (or, if applicable, the calendar month immediately following the month in which the successor or replacement report or data described in Subparagraph 4.II.d.iii.D. above is published) for the third year of the Growth Evaluation Period, or (ii) a meeting of the Compensation Committee is held at which such report or data is reviewed (whether or not a certification occurs) or a written action is executed by the Committee in lieu of such a meeting.

9. Distribution at Vesting.Subject to the provisions of the Plan and this Agreement, upon vesting of all or part of the Award, the Company shall distribute to Participant one share of the Company’s Stock in exchange for each such vested Restricted Stock Unit, and the remaining Restricted Stock Units (if any) shall be cancelled. Unless determined otherwise by the Company at any time prior to the applicable distribution, each fractional Restricted Stock Unit shall vest and be settled in an equal fraction of a share of the Company’s Stock.

10. Taxes. No later than the date as of which an amount relating to the Award first becomes taxable, Participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state and local taxes and other items of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company and its Subsidiaries and Affiliate, to the extent permitted by law, shall have the right to deduct any such taxes from any payment of any kind otherwise due to Participant. At vesting, Restricted Stock Units awarded under this Agreement will be valued at the Fair Market Value of the Company’s Stock on such date.

Participant must satisfy the minimum statutory tax withholding obligations resulting from the vesting of Restricted Stock Units (“Minimum Withholding Obligations”) either (a) by surrendering to the Company Restricted Stock Units that are then vesting with a value sufficient to satisfy the Minimum Withholding Obligations, or (b) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by check or other instrument. Unless Participant advises the Company of his or her election to use an alternative payment method, Participant shall be deemed to have elected to

surrender to the Company Restricted Stock Units that are then vesting with a value sufficient to satisfy the Minimum Withholding Obligations. If Participant requests that the Company withhold taxes in addition to the Minimum Withholding Obligations, such additional withholding must be satisfied by Participant either (x) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by check or other instrument, or (y) provided that Participant has obtained the approval of either the Company or the Committee (as required under rules adopted by the Committee) prior to the date of vesting, by surrendering unrestricted shares of the Company’s Stock that are not being distributed to Participant as a result of the vesting event and that have then been owned by Participant in unrestricted form for more than six (6) months.

Under no circumstances will Participant be entitled to satisfy any such additional withholding by surrendering Restricted Stock Units, shares of the Company’s Stock that are being distributed to Participant as a result of the vesting event, or other shares of Stock that have then been owned by Participant in unrestricted form for six (6) months or less. In addition, under no circumstances will Participant be entitled to satisfy any Minimum Withholding Obligations or additional withholding by surrendering Restricted Stock Units that are not then vesting or any Restricted Stock Units that Participant has elected to defer under Paragraph 7 above. All payments, surrenders of Units or shares, elections or requests for approval must be made by Participant in accordance with such procedures as may be adopted by the Company in connection therewith, and subject to such rules as have been or may be adopted by the Committee.

11. Non-Solicitation. In consideration of the Award made to Participant under this Agreement, for a period of twelve (12) months immediately following Participant’s Separation Date (defined below), Participant shall not directly or indirectly recruit or solicit for hire, or hire, or assist in any manner in the recruitment, solicitation for hire or hiring, of any employee or officer of the Company or any of its Subsidiaries, or in any way induce any such employee or officer to terminate his or her employment with the Company or any of its Subsidiaries. For purposes of this Paragraph, “Separation Date” means the date on which Participant’s employment with the Company or its Subsidiaries is terminated for any reason.

12. Recoupment.If the Securities and Exchange Commission adopts final rules under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that require, as a condition to the Company’s continued listing on a national securities exchange, that the Company develop and implement a policy requiring the recovery of erroneously awarded compensation, and such regulations are applicable to Participant and the Award granted pursuant to this Agreement, then the following shall apply:

In the event that the Company is required to prepare a restatement of one or more of its financial statements due to the material noncompliance of the Company with any financial reporting requirement under the federal securities laws, the Company will be entitled to recover from Participant, and Participant will promptly upon written demand return to the Company (whether or not Participant remains an employee of the Company at the time of such restatement or thereafter), the amount of any Award granted hereunder that (i) was paid or distributed to Participant (or any assignee or transferee permitted under Paragraph 6 above) during the three year period preceding the date on which the Company is required to prepare such restatement, and (ii) is in excess of what would have been paid or distributed to Participant (or any such assignee or transferee) under the restatement, or such other amount as may be required by the rules of the Securities and Exchange Commission or, if applicable, the New York Stock Exchange.

The provisions of this Paragraph 12 are in addition to the rights of the Company as set forth in Section 14(h) of the Plan.

13. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and cancels any other agreement, representation or communication, whether oral or in writing, between the parties relating to the Award, provided that the Agreement shall be at all times subject to the Plan.

14.Amendment. The Committee, in its sole discretion, may amend the terms of this Award, but no such amendment shall be made that would impair the rights of Participant, without Participant’s consent.

15. Acknowledgments.Participant: (a) acknowledges receiving a copy of the Plan Description relating to the Plan, and represents that he or she is familiar with all of the material provisions of the Plan, as set forth in such Plan Description; (b) accepts this Agreement and the Award subject to all provisions of the Plan and this Agreement; and (c) agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee relating to the Plan, this Agreement or the Award.

Participant evidences his or her agreement with the terms and conditions of this Agreement, and his or her intention to be bound by this Agreement, by electronically accepting the Award pursuant to the procedures adopted by the Company. Upon such acceptance by Participant, this Agreement will be immediately binding and enforceable against Participant and the Company.

THE PROGRESSIVE CORPORATION
By:	/s/ Charles E. Jarrett
		Vice President & Secretary

EXHIBIT I

INVESTMENT BENCHMARK CRITERIA

After the end of the Evaluation Period, Rogers Casey will determine the firms comprising the Investment Benchmark for the Plan year from its records and will supply to the Company the monthly total returns and any other relevant data for each of those firms for the Evaluation Period.

A firm will be included in the Investment Benchmark if Rogers Casey is able to determine from its records that:

1. The firm has provided monthly data regarding its holdings and investment return, as necessary to determine or calculate such firm’s monthly total return, and to evaluate such firm’s compliance with each of the criteria set forth below, for the entire Evaluation Period; and

2. At all times during the Evaluation Period, the information provided by the firm shows, or Rogers Casey is able to calculate, that such firm’s investment portfolio satisfies each of the following criteria:

Duration:	Effective Duration between 1.5 years and 5.0 years
Credit Quality Average	= A, or = AA, or = AAA, or = AAA+
Convexity (%)	>= -1
Sector Allocation:	U.S. High-Yield Corporate Debt <= 10%
Sector Allocation:	Mortgages <= 60%
Sector Allocation:	U.S. Investment-Grade Corporate Debt <= 60%
Sector Allocation:	CMBS <= 60%
Sector Allocation:	ABS <= 60%
Sector Allocation:	Emerging Markets Debt <= 5%

3. The Company will have no discretion to alter the Investment Benchmark list after it is finalized by Rogers Casey.

EXHIBIT II

DETERMINATION OF PERFORMANCE RANKING AND PERFORMANCE FACTOR

Once all the total returns are calculated, the data is sorted in descending order from highest to lowest total return. From here, the process to compute the Performance Factor is as follows:

INTERPOLATED VALUES FOR SETTING TOP AND BOTTOM 25% LEVELS

The top 25% and bottom 25% total return rankings are computed based on the total number of firms in the Investment Benchmark, excluding the PCM Fixed-Income Portfolio return. For example, if there were 279 participants, the return required to earn a 2.00 portfolio performance factor would be determined by interpolating between the sixty-ninth and seventieth firm’s returns, since 25% of 279 = 69.75. The same procedure would be used to determine the 0.00 portfolio performance factor.

The total returns, computed by Investment Accounting, for the interpolated positions are calculated as follows (continuing to use an example of 279 survey firms):

Interpolated Value = Firm 69 return – ((Firm 69 Return – Firm 70 Return)*0.75)

Firm 69 = 18.35%

Firm 70 = 18.23%

Firm 69.75 (Interpolated Value) = 18.35% – ((18.35% – 18.23%)*0.75) = 18.26%.

In this case, the PCM Performance Factor will equal 2.00 if its total return equals the interpolated value for Firm 69.75 or 18.26%. A similar calculation is then used to determine the bottom 25% group and interpolated value for a 0.00 performance score.

Once the two groups are computed, top and bottom 25%, the remainder of the performance scores are calculated as follows:

Performance score variance = (2.00) / Number of positions from first participant after the top 25% ranking to the 1st participant in the bottom 25% ranking. In the case of 279 participants, the number of positions to divide the 2.00 performance factors by would be 142.

The calculation for the performance score variance from 2.00 – 0.00 would be:

2.00 / 142 = .014085 per position for 279 firms

In the case of a tie in total returns between firms, each firm will have the same performance score, one step under the next higher position. The next lowest position would then be stepped down by a factor based on the number of participants who tie. In the case of a tie between two firms, the step down will be twice the performance score variance to maintain the proper stepping to the 0.00 performance score level.

Example: If firms 70 and 71 each had the same total return in the 279 firm example, then firms 70 and 71 would each have a Performance Factor of 1.985915, which is 2.00 – .014085. The number 72 position in this example would have a performance score of 1.957746, which is the required step down from 70 to 72.

In addition, if the returns are tied between the interpolated value set for the 2.00 performance score and any position below the 2.00 level, those lower positions will also be set to a 2.00 performance score. The step down factor in the performance score will work similarly as noted in the example above. For the last 25% group, all firms with total returns equaling the last interpolated total return value would have the same performance score as the last interpolated value (.014085), and all others in the last 25% group would have a 0.00 Portfolio Performance Factor.

Once all the performance scores have been created, from 2.00 to 0.00, PCM’s return is compared to the rankings to determine its Performance Factor. If the PCM return is not in the top or bottom 25% and does not match the return of any participant, then PCM’s Performance Factor is an interpolated value between the firms with the next highest and next lowest returns.

The interpolation computation for the Performance Factor based on PCM’s return is as follows:

Performance score of firm below PCM return + (PCM’s Return – Return below PCM) / (Return above PCM – Return below PCM) * (Performance score of firm above PCM – Performance score of firm below PCM)

Assuming the following data, using the 279 firm example:

Firm	Performance score	Total return
Firm above PCM	0.90	13.61
PCM		13.39
Firm below PCM	0.89	13.34

The calculation of PCM’s Performance Factor is:

0.89 + (13.39-13.34) / (13.61-13.34) * (0.90-0.89) = 0.89

The final performance score is rounded to the nearest one-hundredth, if necessary.

EX-10.49

Exhibit 10.49

AMENDMENT NO. 3

TO

THE PROGRESSIVE CORPORATION

2003 DIRECTORS EQUITY INCENTIVE PLAN

The Progressive Corporation 2003 Directors Equity Incentive Plan, as previously amended (the “Plan”), is hereby mended as follows:

1. The second sentence of the first paragraph of Section 2 of the Plan is hereby deleted, and the following is substituted in its place:

“The Committee shall consist of not less than two directors of the Company, all of whom shall be Non-Employee Directors.”

2. Except as expressly modified hereby, the terms of the Plan shall be unchanged.

This Amendment will be effective as of April 20, 2012.

/s/ Charles E. Jarrett

Charles E. Jarrett

Secretary

EX-10.91

Exhibit 10.91

THE PROGRESSIVE CORPORATION

DIRECTORS DEFERRAL PLAN

(2008 Amendment and Restatement)

1. Purposes of the Plan.

The purposes of this Plan are to attract and retain qualified Directors and to provide incentives to these Directors through the ability to defer their receipt of Fees and by providing Directors with the opportunity to participate in the Company’s growth.

2. Definitions.

(a) “Board” means the Board of Directors of the Company.

(b) “ Change in Control” means a change in the ownership of the Company, a change in effective control of the Company or a change in the ownership of a substantial portion of the Company’s assets, each as determined in accordance with Section 409A of the Code.

(c) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated pursuant thereto.

(d) “Common Shares” means units equivalent in value and dividend rights to Common Shares, $1.00 par value, of the Company.

(e) “Company” means The Progressive Corporation.

(f) “Deferred Account” means the account established by the Company for each Director who elects to defer the Fees payable to him as a Director.

(g) “Director” means any director of the Company who is not an employee of the Company.

(h) “Election Agreement” means the written election to defer Fees signed by the Director and in the form provided by the Chief Financial Officer of the Company.

(i) “Fees” means any fees payable in cash to a Director by reason of his or her serving on the Board and includes both “Retainer Fees” and “Meeting and Service Fees.” “Retainer Fees” means those Fees which are payable in cash to a Director by reason of his or her serving on the Board (without regard to attendance at meetings). “Meeting and Service Fees” means those Fees which are payable in cash to a Director (i) by reason of his or her attendance at meetings of the Board or any committee thereof, or (ii) for participation in meetings of the Company’s management, or other Board-related activities, for which such Director is entitled to receive compensation, as determined in the sole discretion of the Chairman of the Board.

(j) “Market Price” means the average of the high and low price at which a share of the Company’s Common Stock, $1.00 par value, is traded on the NYSE on a given date.

(k) “Member” means any Director who has at any time deferred the receipt of Fees in accordance with this Plan.

(l) “Plan” means The Progressive Corporation Directors Deferral Plan (2008 Amendment and Restatement), as set forth herein and as it may be amended from time to time.

(m) “Term” means the duration of the term for which a Director is elected.

(n) “Year” means the calendar year.

(o) Whenever appropriate, words used herein in the singular may be read as the plural and the plural may be read as the singular.

(p) Masculine pronouns used herein shall be deemed to refer to both women and men.

3. Election to Defer Fees.

(a) Eligibility.

A Director may elect to defer receipt of all or a portion of his Fees for any Year in accordance with Paragraph 3(b) hereof.

(b) Time of Election.

A Director desiring to defer all or a portion of his Fees for the upcoming Year must submit an Election Agreement to the Chief Financial Officer of the Company no later than the last day of the Year prior to the Year for which the election is to be effective.

Any Director who was not a Director during the previous Year may make an election to defer all or a portion of the Fees for the Year in which the Director is elected to the Board by delivering an Election Agreement to the Chief Financial Officer of the Company within thirty (30) days of such election to the Board. A Director fulfilling the above requirements shall be considered a “Member” for purposes of this Plan.

(c) Duration and Nature of Election.

Subject to the following sentence, a Member’s election to defer Fees shall continue in effect from Year to Year unless modified or revoked by the Member through written notice to the Chief Financial Officer of the Company prior to the beginning of the Year for which the revocation or modification is to apply. Modifications or revocations shall not apply retroactively, and once a Member has made, or is deemed to have made, an election to defer all or a portion of his Fees for a given Year, such election may not be modified or revoked.

4. The Amount and Date of Deferral.

The Election Agreement of the Member shall indicate the amount of Fees to be deferred and the date to which the Fees are to be deferred. The deferral of Retainer Fees shall be subject to Paragraph 7 hereof; the deferral of Meeting and Service Fees shall be to the earlier of (1) the date selected by the Member in an Election Agreement, which date shall not be earlier than six months and one day after the date on which such Fees are credited to the Member’s Deferred Account or (2) the date of the death of the Member. Subject to the preceding sentence, a Member may (i) select a lump-sum distribution or a series of distributions or installments and (ii) choose the date on which the lump sum shall be paid or the installments shall commence. The installments may not be more frequent than quarterly and may not consist of more than forty (40) quarterly or ten (10) annual installments. All payments will be made on or promptly after the first business day of a calendar quarter. In the case of the death of the Member, distribution of the deferred Fees shall be made in accordance with Paragraph 8.

5. Deferral Accounts.

(a) Accounts.

The Company shall establish and preserve one or more accounts for each Member. A Member shall designate on the Election Agreement whether to have the account valued on the basis of the Common Shares of the Company in accordance with Paragraph 5(b) hereof or on the basis of cash in accordance with Paragraph 5(c) hereof. A Member may defer a portion of his Fees into each type of account. The Company may establish separate accounts for a Member to properly account for amounts deferred under the two alternatives or during different years. An account valued on the basis of the Company’s Common Shares shall be known as a “Stock Account” and an account valued on the basis of cash shall be known as a “Cash Account.” Amounts held in a Stock Account may not be transferred to a Cash Account and vice versa.

(b) Stock Account.

Each Member’s Stock Account shall be credited as follows:

(i) Fees. On the last day of each calendar quarter, the Stock Account shall be credited with the number of Common Shares (whole or fractional, rounded to the nearest thousandth of a share) determined by dividing (A) the sum of the Fees that the Member elects to defer (or that he or she is deemed to have elected to defer under Paragraph 7 hereof) to his or her Stock Account that otherwise would have been paid to him or her during the quarter, by (B) the Market Price of the Company’s Common Shares, $1.00 par value, on the last business day of such quarter.

(ii)Dividends. Except as provided in the final sentence of Paragraph 6

hereof, on the date on which a dividend is paid on (or any other distribution is made on account of) the Company’s Common Shares, $1.00 par value, the Stock Account shall be credited with the number of Common Shares (whole or fractional, rounded to the nearest thousandth of a share) determined by dividing (A) the dollar amount that the Member would have received with respect to the number of Common Shares held in his or her Stock Account on the applicable record date if such Common Shares had been actual shares of the Company’s Common Shares, $1.00 par value, by (B) the Market Price of the Company’s Common Shares, $1.00 par value, on the date on which such dividend is paid.

(c) Cash Account.

If a Member elects to have a portion of his Fees deferred into a Cash Account, there will be credited to his Cash Account, on the last day of each quarter, an amount equal to the sum of (i) the Fees he elects to defer to his Cash Account which otherwise would have been paid to him during the quarter and (ii) interest on the balance in the Cash Account on the first day of such quarter at a rate based on the rate of interest offered by National City Bank, Cleveland, Ohio, on the last business day of such quarter on new three-month certificates of deposit.

(d) Claims of General Creditors.

All compensation deferred and amounts credited to the Cash and Stock Accounts under this Plan shall remain a part of the general assets of the Company. Accordingly, the compensation deferred under this Plan is subject to the claims of the Company’s general creditors.

6.Payment of Accounts.

The accounts established and maintained for each Member shall be distributed in a lump sum or installments. The selection of the distribution date(s) and the method of distribution are to be indicated on the Election Agreement to be submitted by the Member.

A Member may elect to change the distribution date(s) and method of distribution set forth in an Election Agreement governing fees deferred in past years. Each such change must be made in writing and on such forms as the Company shall specify. Each such change must be delivered to the Company at least one (1) year prior to the distribution date being changed and shall delay the payment or commencement of the distribution for a period of at least five (5) years following the date such distribution otherwise would have been made or would have commenced. In the case of a distribution to be made in installments, the provisions of this paragraph shall apply to each installment payment as if each such installment payment were a separate distribution.

Changes in the method of and time for payment of the amount of an account may be effected as to Fees deferred for future Years by notifying the Chief Financial Officer in writing prior to the beginning of the Year for which the modification is to apply in accordance with Paragraph 3 above.

Notwithstanding the foregoing, if a Change in Control occurs, each Member’s entire account balance shall be distributed to such Member within thirty (30) days following the Change in Control.

With respect to all distributions to be made under the Plan, the following rules shall apply:

(i) All distributions, whether from a Stock Account or a Cash Account, shall be paid in cash subject to withholding or deduction by the Company of any taxes, contributions, payments and assessments which the Company is now or may hereafter be required or authorized by law to withhold or deduct from distributions;

(ii) The amount of the distribution from the Stock Account shall be valued based on the Market Price of the Company’s Common Shares, $1.00 par value, on the last business day of the calendar quarter immediately preceding the distribution date; and

(iii) The amount of the distribution from the Cash Account shall be valued based on the value of the Cash Account on the last business day of the calendar quarter immediately preceding the distribution date.

In the event a Member elects to receive installment payments, the following rules shall apply:

(i) The balance of the Stock Account shall be credited, pursuant to Paragraph 5(b) above, with additional Common Shares upon the payment of dividends until the Stock Account is completely distributed;

(ii) The balance of the Cash Account shall be credited, pursuant to Paragraph 5(c) above, with interest quarterly until the Cash Account is completely distributed; and

(iii) The amount of each installment shall be determined by dividing the value of the Stock Account, the Cash Account, or both, by the number of installments remaining to be paid to the Member.

Notwithstanding anything to the contrary contained herein, if:

(a) a Member would otherwise be entitled to have an amount equal to a dividend (or other distribution) credited to his or her Stock Account under Paragraph 5(b) hereof in respect of Common Shares held in such Stock Account on the record date for such dividend (or other distribution);

(b) the cash equivalent of such Common Shares (or a portion of such Common Shares) was distributed hereunder to the Member after the record date but before the payment date for such dividend (or other distribution); and

(c) such distribution from the Stock Account was either a lump sum distribution or the final payment of an installment distribution hereunder,

then the amount equal to such dividend (or other distribution) in respect of the Common Shares that were so distributed shall not be credited to the Member’s Stock Account, and such amount shall be distributed to the Member in cash as soon as practicable after the payment date for such dividend.

7. Minimum Deferral.

Retainer Fees shall be deferred as provided in this Paragraph 7. Absent the filing by a Director of an Election Agreement deferring into a Stock Account all Retainer Fees which are payable to such Director until a date which is on or after the Retainer Fee Minimum Deferral Date (as herein defined), the Director shall be deemed to have filed an election deferring such Fees until the Retainer Fee Minimum Deferral Date, electing to have such Fees deposited to a Stock Account and indicating that such Fees shall be distributed in a lump sum on the first day of the calendar quarter immediately following the Retainer Fee Minimum Deferral Date. For purposes hereof, the Retainer Fee Minimum Deferral Date shall be the later of (a) the date which is six (6) months and one day after the date upon which the Retainer Fees are credited to a Stock Account or (b) the date of the expiration of the Director’s then current Term.

8. Death of Member.

A Member may, in the Election Agreement described in Paragraph 3 above, provide that, in the event of his death prior to the date or dates on which his account balance is distributable, the account balance shall be distributed to his estate or designated beneficiary in a single distribution. This election shall be made at the time of the election contemplated by Paragraph 3 above. If no such election is made, the account balance shall be distributed to the estate of the deceased Member in a single distribution as soon as administratively feasible following the Member’s death.

9. Valuation of Accounts.

Each account shall be valued as of the last day of each calendar quarter until payment of the account in full to the Member in accordance with Paragraph 6. Each Member shall receive a statement of his accounts not less than annually.

10. Capital Changes.

In the event of any change in the number of outstanding Common Shares, $1.00 par value, of the Company by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or a similar corporate change, the Board shall determine, in its sole discretion, the extent to which such change equitably requires an adjustment in the number of Common Shares held in the Stock Accounts and such adjustment shall be made by the Company and shall be conclusive and binding on all Members of the Plan.

11.Deferred Vesting of Common Shares.

Retainer Fees credited to a Member’s Stock Account (whether as a result of filing an election under Paragraph 3(b) or a deemed election under Paragraph 7) shall not vest upon their being credited to the Member’s Stock Account, but shall become vested only upon the expiration of the Term of such Director to which the Fees relate or upon such Director’s earlier death, resignation due to disability or removal without cause. If a Director ceases to be a Director for any reason other than death, resignation due to disability or removal without cause, the Director shall forfeit all Retainer Fees credited to his Stock Account during his unexpired Term, along with any dividends attributable thereto, and the Member’s Stock Account shall be reduced accordingly.

12. Administration.

This Plan shall be administered by the Board or by an appropriate Committee of Directors selected by the Board. The Board or the appropriate Committee shall have the sole right and authority to interpret and construe the provisions of this Plan, and its decisions on any matter or dispute arising under the Plan shall be binding and conclusive upon the Members. If a Member is part of the Board or Committee that administers this Plan, he shall not participate in any deliberations or actions of the Board or such Committee relating exclusively to his membership or participation in this Plan.

13. Termination.

Notwithstanding any other provision of the Plan, the Board may terminate the Plan at any time for any reason without any liability to any Member, beneficiary or other person for any such termination or for any other action taken pursuant to this Paragraph 13. Following termination of the Plan, and notwithstanding the provisions of any Election

EX-10.94

Exhibit 10.94

THE PROGRESSIVE CORPORATION

DIRECTORS RESTRICTED STOCK DEFERRAL PLAN

(2008 Amendment and Restatement)

WHEREAS, The Progressive Corporation (“Company”) maintains The Progressive Corporation Directors Restricted Stock Deferral Plan pursuant to a plan document dated February 1, 2004, and one amendment thereto; and

WHEREAS, it is desired to amend and restate the Plan;

NOW, THEREFORE, effective January 1, 2008, the Plan is hereby amended and restated in its entirety to provide as follows:

ARTICLE I

PURPOSE; PARTICIPATION

1.1 Purpose. The purpose of this plan, which shall be known as The Progressive Corporation Directors Restricted Stock Deferral Plan (the “Plan”) is to provide directors of the Company who are not employees of the Company or its subsidiaries with an opportunity to defer the receipt of Common Shares with respect to Eligible Restricted Stock Awards.

ARTICLE II

DEFINITIONS

For purposes of this Plan, the following terms shall have the following meanings:

“Board” means the Board of Directors of the Company.

EX-10.99

Exhibit 10.99

THE PROGRESSIVE CORPORATION

DIRECTOR COMPENSATION

	2017-2018 Compensation
Chairman of the Board	$470,000
Lead Independent Director	$50,000 additional
Audit Committee Chair	$295,000
Audit Committee Member	$270,000
Compensation Committee Chair	$285,000
Compensation Committee Member	$260,000
Investment Committee Chair	$285,000
Investment Committee Member	$260,000
Additional Committee Chair*	$20,000 additional
Additional Committee Member*	$15,000 additional

*Excludes Executive Committee

EX-10.109

Exhibit 10.109

2018 PROGRESSIVE CAPITAL

MANAGEMENT ANNUAL INCENTIVE PLAN

1. The Plan. The Progressive Corporation and its subsidiaries (collectively "Progressive" or the “Company”) have adopted the 2018 Progressive Capital Management Annual Incentive Plan (the “Plan”) as part of their compensation program for the Company’s investment professionals for the Company’s 2018 fiscal year (the “Plan year”). The Plan is performance-based, is not a form of commission compensation, and is administered under the direction of the Compensation Committee of the Board of Directors of The Progressive Corporation (the “Compensation Committee” or “Committee”). Payment under the Plan, if any, is based on Company performance as defined by the Plan, not individual employee performance. References in this Plan to the Company’s portfolio mean the respective portfolios of the Company’s subsidiaries and affiliates that are actively managed by Progressive Capital Management Corp., and references in this Plan to the Company’s investment results mean the investment results of those portfolios only.

The Company’s investment professionals invest the funds of the Company in accordance with investment guidelines approved from time to time by the Investment and Capital Committee of the Board of Directors. Those guidelines address such matters as minimum average credit quality and the duration of the portfolio, as well as limitations on the extent to which the portfolio can be concentrated in individual issuers. Compliance with the guidelines is routinely monitored and variations therefrom must be reported to, and approved by, the Investment and Capital Committee.

2. Participants. Progressive employees who are assigned primarily to the Company’s capital management function, including the Company’s Chief Investment Officer (“CIO”), are eligible to be selected for participation in the Plan. Eligible employees in addition to the CIO will be selected by the CIO in consultation with the Chief Executive Officer (“CEO”) or Chief Human Resource Officer (“CHRO”) (the “Designated Executives”) to participate in the Plan. Participants may also participate in other Gainsharing, bonus or incentive compensation plans maintained by Progressive, if so determined by the Designated Executives (or in the case of the CIO or any other executive officer, by the Compensation Committee). Other eligible employees of the Company may be selected for participation in the Plan for or at any time during the Plan year by the Designated Executives. In such cases, the Designated Executives will determine the new participant’s Target Percentage (described below) and other terms of participation (except with respect to the CIO or any other executive officer, as to whom all determinations must be made by the Committee). Throughout this Plan, references to “executive officers” refer to executive officers of The Progressive Corporation within the meaning of any Securities and Exchange Commission (“SEC”) or New York Stock Exchange rule applicable to the Company.

3.Annual Incentive Payment Determination.

A. Annual Incentive Payment. Each participant may earn an annual cash bonus (the “Annual Incentive Payment”), subject to the terms of this Plan. The amount of the Annual Incentive Payment earned by any participant will be determined by application of the following formula:

Annual Incentive Payment = Paid Eligible Earnings x Target Percentage x Performance Factor

B. Paid Eligible Earnings. Paid Eligible Earnings for the Plan year shall mean and include the following: regular, Earned Time Benefit pay (excluding the payout of unused Earned Time Benefit pay at termination), sick pay, holiday pay, funeral pay, military make-up pay, overtime pay, shift differential, and retroactive payments of any of the foregoing items, in each case received by the participant during the Plan year for work or services performed as an officer or employee of Progressive.

For purposes of the Plan, and notwithstanding the foregoing, Paid Eligible Earnings shall exclude all other types of compensation, including, without limitation: any short-term or long-term disability payments made to the participant; the earnings replacement component of any worker's compensation benefit or award; any amounts paid pursuant to a judgment in, or settlement related to, any action, suit or proceeding, whether in law or equity, to any extent arising from or relating to a participant’s employment with the Company, or work or services performed for or on behalf of the Company; any amount paid under a separation allowance (or severance) plan; any bonus (including PCM Bonus Plan bonus or PCM Annual Incentive Plan payment), Gainsharing or other incentive compensation award (whether denominated, or payable, in cash or equity), including, without limitation, payments from any discretionary cash fund; any dividend payments or dividend equivalent amounts; any unused Earned Time Benefit; and any other payment required by applicable law to be paid to a participant by the Company and intended to replace all or any portion of wages or earnings during a period of unemployment, whether due to illness, disability or otherwise (including, but not limited to, payments made pursuant to any statute, rule or regulation of a governmental authority relating to leave on account of maternity, paternity, parental status or responsibility, or sickness).

C.Target Percentage. The Target Percentages for participants in the Plan shall be determined by or under the direction of the Committee, but will not exceed 125% for any participant. Target Percentages may vary among Plan participants and may be changed from year to year by or under the direction of the Designated Executives (or in the case of the CIO or any other executive officer, by the Compensation Committee).

D.Performance Factor. The Performance Factor will be determined by the Committee after the expiration of the Plan year based on the performance of the Company’s fixed-income investment portfolio (the “Fixed-Income Portfolio” or “Portfolio”), and such other factors and information relating to the performance of the Company’s investment professionals as the Committee shall determine.

First, an indicated performance factor will be determined based on the fully taxable equivalent total return of the Fixed-Income Portfolio, in comparison to the total returns of the group of comparable investment firms identified by the Independent Data Source (the “Investment Benchmark”), over the one- and three-year periods ending on December 31 of the Plan year, as described below. For purposes of this Agreement, the “Independent Data Source” shall be a third party independent data source determined by the Committee. After the end of the Plan year, the Independent Data Source will determine the firms that are included in the Investment Benchmark in accordance with the criteria specified on Exhibit I hereto. The Independent Data Source will also provide to the Company the monthly total return data for each of the Investment Benchmark firms for the three-year period ending on December 31 of the Plan year.

Investment results for the Fixed-Income Portfolio will be marked to market, including the benefit of any state premium tax abatements for municipal securities held in the Portfolio that are realized by the Company during the Plan year, in order to calculate the Portfolio’s fully taxable equivalent total return for the one-year (2018) and three-year period (2015-2018) periods, in each case compounded on a monthly basis. The investment performance achieved by the Fixed-Income Portfolio for the one- and three-year periods (each, a “comparison period”) will then be compared against the total returns of the firms included in the Investment Benchmark for the same periods, also compounded on a monthly basis, as determined by the Company from the monthly performance data supplied by the Independent Data Source for each firm in the Investment Benchmark, to determine, for each comparison period, where the Fixed Income Portfolio’s performance falls on a percentile basis when compared to the firms in the Investment Benchmark, as further described on Exhibit II (“Performance Ranking”).

The Portfolio’s Performance Ranking will be used to determine a performance score of between 0 and 2.0 for each comparison period, based on the following schedule:

Comparison Period	Score = 0 Rank at or below	Score = 1.0 Rank equal to	Score = 2.0 Rank at or above
One year	15th Percentile	50th Percentile	85th Percentile
Three year	25th Percentile	50th Percentile	75th Percentile

A Performance Ranking between the values identified in the schedule will be interpolated on a straight-line basis to generate the applicable performance score, as further described on Exhibit II. Once these performance scores are determined, an overall indicated performance factor will be determined by averaging the performance scores for the one- and three-year comparison periods.

The overall indicated performance factor will be reported to the Compensation Committee after the expiration of the Plan year, together with such supporting documentation as the Committee may require. The Committee may consider such additional information as it deems necessary or appropriate in its discretion. Such information may include, without limitation:

• the primary investment factors that are responsible for favorable or unfavorable results relative to the peer group, such as the Company’s duration and yield curve position and the extent of its exposure to sectors of the fixed-income markets, including corporate bonds, residential mortgage-backed securities, commercial mortgage-backed securities, other asset-backed securities, government bonds, preferred stocks and non-investment-grade bonds;

• the Company’s holdings within each sector relative to the general market composition of each sector;

• the extent to which material investment decisions may have been driven by Company strategic or capital considerations; and

• the impact on investment results of significant portfolio cash flows driven by Company operations, strategic decisions or capital transactions.

In addition, the Committee may choose to consult with others, including, without limitation, management, the Board’s Investment and Capital Committee, other Board members, and outside compensation and investment professionals, in evaluating the performance of the Company’s investment professionals for the year. The Committee will then determine the Performance Factor, which may vary among participants; provided that under no circumstances may the Performance Factor for any participant exceed 2.0 for the year.

E.In the event that the Independent Data Source (or its successor or assigns) discontinues providing the data that is necessary to make the calculations required by this Plan, or modifies the information in such a way as to render the comparisons required by this Plan to be not meaningful, in the Committee’s sole judgment, the determinations required above shall be made using investment return data for comparable firms satisfying the criteria set forth on Exhibit I as may be available from another recognized provider of investment industry data as the Committee may approve in its sole discretion.

4. Payment Procedures; Deferral. The Annual Incentive Payments will be determined and paid to Plan participants as soon as practicable after the Performance Factor has been determined by the Committee, but no later than March 15th following the Plan year.

Any Plan participant who is then eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan ("Deferral Plan") may elect to defer all or any portion of his or her Annual Incentive Payment otherwise payable under this Plan, subject to and in accordance with the terms of the Deferral Plan. If a Plan participant has made such an election under the Deferral Plan, then to the extent of such

election, the Annual Incentive Payment will, instead of being paid to such participant as described in the immediately preceding paragraph, be credited to such participant’s account under the Deferral Plan in accordance with the terms of the Deferral Plan.

5. Qualification Date; Leave of Absence; Withholding. Unless otherwise determined by the Committee, and except as otherwise expressly provided herein, in order to be entitled to receive an Annual Incentive Payment for the Plan year, the participant must be an active officer or regular employee of Progressive on November 30 of the Plan year (“Qualification Date”). An individual who (i) is hired on or after December 1 of any Plan year, or (ii) whose employment terminates for any reason prior to the Qualification Date is not entitled to an Annual Incentive Payment for that Plan year. Annual Incentive Payments are not earned until paid.

Any participant who is on a leave of absence covered by the Family and Medical Leave Act of 1993, as amended (or equivalent state or local law), the American with Disabilities Act of 1991, as amended (or equivalent state or local law), personal leave approved by the Company, military leave or short- or long-term disability (provided that, in the case of a long-term disability, the participant is still an employee of the Company) on the Qualification Date relating to the Plan year will be entitled to receive an Annual Incentive Payment for the Plan year based on the Paid Eligible Earnings received by the participant during the Plan year.

Any person whose employment with Progressive terminates during the Plan year as a result of a transfer of employment from Progressive to ARX, and who remains employed by ARX continuously from the date of such termination through the Qualification Date, shall be entitled to receive an Annual Incentive Payment for the portion of the Plan year during which the person was an employee of Progressive, based on the amount of Paid Eligible Earnings received by such participant during the Plan year and paid in the manner and at the times as are described in Paragraph 4 above but subject to Paragraph 13 below. For purposes of this paragraph only, (i) “Progressive” means The Progressive Corporation and its subsidiaries, other than ARX Holding Corp. and its subsidiaries, and (ii) “ARX” means ARX Holding Corp. and its subsidiaries and the other entities which it controls.

Annual Incentive Payments made to participants will be net of any legally required deductions and/or withholdings for federal, state and local taxes and other items.

6. Other Plans. Participants may be selected to participate in this Plan and in one or more other incentive plans offered by the Company. In the case of the CIO or any other executive officer, all determinations with respect to such incentive plans and the executive’s participation therein shall be made by the Compensation Committee. In all other cases, the Designated Executives shall have full authority to determine the incentive plan or plans in which any employee shall participate during the Plan year and the weighting factor (if any) that will apply to each such plan.

7. Non-Transferability. The right to any Annual Incentive Payments hereunder may not be sold, transferred, assigned or encumbered by any participant. Nothing herein shall prevent any participant's interest hereunder from being subject to involuntary attachment, levy or other legal process.

8. Administration. The Plan will be administered by or under the direction of the Committee. The Committee will have the authority to adopt, alter, amend, modify and repeal such rules, guidelines, procedures and practices governing the Plan as it, from time to time, in its sole discretion deems advisable.

The Committee will have full authority to determine the manner in which the Plan will operate, to interpret the provisions of the Plan and to make all determinations thereunder. All such interpretations and determinations will be final and binding on Progressive, all Plan participants and all other parties. No such interpretation or determination may be relied on as a precedent for any similar action or decision.

Unless otherwise determined by the Committee, all of the authority of the Committee hereunder (including, without limitation, the authority to administer the Plan, select the persons entitled to participate herein, interpret the provisions hereof, waive any of the requirements specified herein and make determinations

hereunder and to establish, approve, change or modify Investment Benchmarks, Performance Targets and Target Percentages) may be exercised by the Designated Officers. If one or more of the Designated Officers is unavailable or unable to participate, or if such position is vacant, the Chief Financial Officer may act instead of such officer.

Notwithstanding anything in this Plan to the contrary: (a) all determinations made under this Plan with respect to the CIO or any other individual deemed to be an executive officer of the Company must be made only by the Compensation Committee; and (b) only the Committee may make the determination of the Performance Factor required by Section 3.D. above.

9. Miscellaneous.

A. Recoupment. Progressive shall have the right to recoup any Annual Incentive Payment (or an appropriate portion thereof, as hereinafter provided) with respect to any Plan year paid to a participant hereunder who was an executive officer of Progressive at any time during such Plan year, if: (i) the Annual Incentive Payment was predicated upon the achievement during such Plan year of certain financial or operating results (which includes, for purposes hereof, the performance of the Fixed-Income Portfolio); (ii) such financial or operating results were incorrect and were subsequently the subject of a restatement by Progressive within three (3) years after the date on which such Annual Incentive Payment was paid to the participant; and (iii) a lower payment would have been made to the participant if the restated financial or operating results had been known at the time the payment was made. Such recoupment right shall be available to Progressive whether or not the participant in question was at fault or responsible in any way in causing such restatement. In such circumstances, Progressive will have the right to recover from each participant for such Plan year, and each such participant will refund to Progressive, the amount by which the Annual Incentive Payment paid to such participant for the Plan year in question exceeded the lower payment that would have been made based on the restated results, without interest; provided, however, that Progressive will not seek to recover such amounts unless the amount due would exceed the lesser of five percent (5%) of the Annual Incentive Payment previously paid or twenty-thousand dollars ($20,000). Such recovery, at the Committee’s discretion, may be made by lump sum payment, installment payments, credits against future bonus payments, or other appropriate mechanism.

B. Further Rights. Notwithstanding the foregoing subsection A., if any participant that was an executive officer at any time during such Plan year engaged in fraud or other misconduct (as determined by the Committee or the Board, in their respective sole discretion) resulting, in whole or in part, in a restatement of the financial or operating results used hereunder to determine the Annual Incentive Payments for a specific Plan year, Progressive will further have the right to recover from such participant, and the participant will refund to Progressive upon demand, an amount equal to the entire Annual Incentive Payment paid to such participant for such Plan year plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from the date that such bonus was paid to the participant. Progressive shall further have the right to recover from such participant Progressive’s costs and expenses incurred in connection with recovering such Annual Incentive Payment from the participant, including, without limitation, reasonable attorneys’ fees. There shall be no time limit on the Company’s right to recover such amounts under this subsection B., except as otherwise provided by applicable law.

C. Rights Not Exclusive. The rights contained in the foregoing subsections A. and B. shall be in addition to, and shall not limit, any other rights or remedies that the Company may have under any applicable law or regulation.

D. Compliance with Law and Exchange Requirements. The Annual Incentive Payments determined and paid pursuant to the Plan shall be subject to all applicable laws and regulations. Without limiting the foregoing, and notwithstanding anything to the contrary contained in this Plan, if the SEC adopts final rules under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that require, as a condition to the Company’s continued listing on a national securities exchange (“Exchange”), that the Company

develop and implement a policy requiring the recovery of erroneously awarded compensation, and such regulations are applicable to any participant awarded an Annual Incentive Payment pursuant to the Plan, then the Annual Incentive Payment paid to such participant shall be subject to recoupment by the Company pursuant to the terms of the rules of the SEC and any applicable Exchange and any policy of the Company adopted in response to such rules.

10. Termination; Amendments. The Plan may be terminated, amended or revised, in whole or in part, at any time and from time to time by the Committee, in its sole discretion.

11. Unfunded Obligations. The Plan will be unfunded and all payments due under the Plan will be made from Progressive's general assets.

12. No Employment Rights. Nothing in the Plan shall be construed as conferring upon any person the right to remain a participant in the Plan or to remain employed by Progressive, nor shall the Plan limit Progressive's right to discipline or discharge any of its officers or employees or change any of their job titles, duties or compensation.

13. Misconduct; Set-off Rights. No participant shall have the right to receive any Annual Incentive Payment if, prior to such payment being made, participant’s employment is terminated as a result of any action or inaction that, under Progressive’s employment practices or policies as then in effect, constitutes grounds for immediate termination of employment, as determined by Progressive (or, in the case of an executive officer, the Committee) in its sole discretion. Progressive shall have the unrestricted right to set off against or recover out of any bonuses or other sums owed to any participant under the Plan any amounts owed by such participant to Progressive.

14. Prior Plans. This Plan supersedes all prior plans, agreements, understandings and arrangements regarding bonuses or other cash incentive compensation payable or due to any participant from Progressive with respect to the performance of Progressive’s investment portfolio. Without limiting the generality of the foregoing, this Plan supersedes and replaces the 2017 Progressive Capital Management Annual Incentive Plan (the "Prior Plan”), which is and shall be deemed to have terminated on the last day of the Company’s 2017 fiscal year (the "Prior Plan Termination Date"); provided, however, that any bonuses or other sums earned and payable under the Prior Plan with respect to any Plan year ended on or prior to the Prior Plan Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.

15. Effective Date. This Plan is adopted, and is effective, as of the first day of the Company’s 2018 fiscal year and will be effective for the 2018 Plan year (which coincides with Progressive’s 2018 fiscal year, except that investment returns are calculated on a calendar year basis).

16. Governing Law. This Plan shall be interpreted and construed in accordance with the laws of the State of Ohio.

EXHIBIT I

INVESTMENT BENCHMARK CRITERIA

After the end of the Plan year, the Independent Data Source will determine the firms comprising the Investment Benchmark for the Plan year from its records and will supply to the Company the monthly total returns and any other relevant data for each of those firms for the three-year period ending on December 31 of the Plan year.

A firm will be included in the Investment Benchmark if the Independent Data Source is able to determine from its records that:

1. The firm has provided monthly data regarding its holdings and investment return, as necessary to determine or calculate such firm’s monthly total return, and to evaluate such firm’s compliance with each of the criteria set forth below, for the entire three-year period ending on December 31 of the Plan year; and

2. At all times during the three-year period ending on December 31 of the Plan year, the information provided by the firm shows, or the Independent Data Source is able to calculate, that such firm’s investment portfolio satisfies each of the following criteria:

Duration: Effective Duration between 1.5 years and 5.0 years

Credit Quality Average= A, or = AA, or = AAA, or = AAA+

Convexity (%) >= -1

Sector Allocation: U.S. High Yield Corporate Debt <= 10%

Sector Allocation: Mortgages <= 60%

Sector Allocation: U.S. Investment Grade Corporate Debt <= 60%

Sector Allocation: CMBS <= 60%

Sector Allocation: ABS <= 60%

Sector Allocation: Emerging Markets Debt <= 5%

3. The Company will have no discretion to alter the Investment Benchmark list after it is finalized by the Independent Data Source.

EXHIBIT II

DETERMINATION OF PERFORMANCE RANKING AND PERFORMANCE SCORES

Once all the total returns are calculated, the data is sorted in descending order from highest to lowest total return. From here, the process to compute the Performance Factor is as follows (this Exhibit shows the procedures and related calculations for the 1-year comparison period required by the Plan; the calculations for the 3-year comparison period would follow the same procedures, except that necessary adjustments would be made to determine the top and bottom 25% levels and the performance score variances between those levels):

INTERPOLATED VALUES FOR SETTING TOP AND BOTTOM 15% LEVELS

The top 15% and bottom 15% total return rankings are computed based on the total number of firms in the Investment Benchmark, excluding the PCM Fixed-Income Portfolio return. For example, if there were 279 participants, the return required to earn a 2.0 portfolio performance factor would be determined by interpolating between the forty-first and forty-second firm’s returns, since 15% of 279 = 41.85. The same procedure would be used to determine the 0.0 portfolio performance factor.

The total returns, computed by Investment Accounting, for the interpolated positions are calculated as follows (continuing to use an example of 279 survey firms):

Interpolated Value = Firm 41 return - ((Firm 41 Return - Firm 42 Return)*0.85)

Firm 41 = 18.35%

Firm 42 = 18.23%

Firm 41.85 (Interpolated Value) = 18.35% - ((18.35%-18.23%)*0.85) = 18.25%.

In this case, the PCM Performance Factor will equal 2.0 if its total return equals the interpolated value for Firm 41.85 of 18.25%. A similar calculation is then used to determine the bottom 15% group and interpolated value for a 0.0 performance score.

Once the two groups are computed, top and bottom 15%, the remainder of the performance scores are calculated as follows:

Performance score variance = (2.00) / Number of positions from first participant after the top 15% ranking to the 1^st participant in the bottom 15% ranking. In the case of 279 participants, the number of positions to divide the 2.00 performance factors by would be 198.

The calculation for the performance score variance from 2.00 - 0.00 would be:

2.00 / 198 = .010101 per position for 279 firms

In the case of a tie in total returns between firms, each firm will have the same performance score, one step under the next higher position. The next lowest position would then be stepped down by a factor based on the number of participants who tie. In the case of a tie between two firms, the step down will be twice the performance score variance to maintain the proper stepping to the 0.00 performance score level.

Example: If firms 42 and 43 each had the same total return in the 279 firm example, then firms 42 and 43 would each have a Performance Factor of 1.989899, which is 2.00 - .0010101. The number 44 position in this example would have a performance score of 1.969697, which is the required step down from 42 to 44.

In addition, if the returns are tied between the interpolated value set for the 2.00 performance score and any position below the 2.00 level, those lower positions will also be set to a 2.00 performance score. The step down factor in the performance score will work similarly as noted in the example above. For the last 15% group, all firms with total returns equaling the last interpolated total return value would have the same performance score as the last interpolated value (.0101012), and all others in the last 15% group would have a 0.00 Portfolio Performance Factor.

Once all the performance scores have been created, from 2.00 to 0.00, PCM’s return is compared to the rankings to determine its Performance Factor. If the PCM return is not in the top or bottom 15% and does not match the return of any participant, then PCM’s Performance Factor is an interpolated value between the firms with the next highest and next lowest returns.

The interpolation computation for the Performance Factor based on PCM’s return is as follows:

Performance score of firm below PCM return + (PCM’s Return - Return below PCM) / (Return above PCM - Return below PCM) * (Performance score of firm above PCM -Performance score of firm below PCM)

Assuming the following data, using the 279 firm example:

Firm	Performance score	Total return
Firm above PCM	.90	13.61
PCM		13.39
Firm below PCM	.89	13.34

The calculation of PCM’s Performance Factor is:

0.89 + (13.39-13.34) / (13.61-13.34) * (0.90-0.89) = 0.89

The final performance score is rounded to the nearest one-hundredth, if necessary.

EX-11

Exhibit 11

THE PROGRESSIVE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(millions - except per share amounts)
	Years Ended December 31,
	2017		2016		2015
Net income attributable to Progressive	$	1,592.2	$	1,031.0	$	1,267.6
Computation of Per Share Earnings Attributable to Progressive
Average shares outstanding - Basic	580.8		581.7		585.5
Net effect of dilutive stock-based compensation	4.9		3.3		3.7
Total equivalent shares - Diluted	585.7		585.0		589.2
Basic: Earnings per share	$	2.74	$	1.77	$	2.16
Diluted: Earnings per share	$	2.72	$	1.76	$	2.15

EX-13

Exhibit 13

THE PROGRESSIVE CORPORATION

2017 ANNUAL REPORT TO SHAREHOLDERS

App.-A-1

The Progressive Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31,

(millions—except per share amounts)	2017			2016			2015
Revenues
Net premiums earned	$	25,729.9		$	22,474.0		$	19,899.1
Investment income	563.1			478.9			454.6
Net realized gains (losses) on securities:
Net impairment losses recognized in earnings	(64.5		)	(86.8		)	(23.8		)
Net realized gains (losses) on securities	114.1			137.9			136.5
Total net realized gains (losses) on securities	49.6			51.1			112.7
Fees and other revenues	370.6			332.5			302.0
Service revenues	126.8			103.3			86.3
Other gains (losses)	(1.0		)	1.6			(0.9		)
Total revenues	26,839.0			23,441.4			20,853.8
Expenses
Losses and loss adjustment expenses	18,808.0			16,879.6			14,342.0
Policy acquisition costs	2,124.9			1,863.8			1,651.8
Other underwriting expenses	3,480.7			2,972.0			2,712.1
Investment expenses	23.9			22.4			22.8
Service expenses	109.5			92.0			77.5
Interest expense	153.1			140.9			136.0
Total expenses	24,700.1			21,970.7			18,942.2
Net Income
Income before income taxes	2,138.9			1,470.7			1,911.6
Provision for income taxes	540.8			413.5			611.1
Net income	1,598.1			1,057.2			1,300.5
Net (income) loss attributable to noncontrolling interest (NCI)	(5.9		)	(26.2		)	(32.9		)
Net income attributable to Progressive	$	1,592.2		$	1,031.0		$	1,267.6
Other Comprehensive Income (Loss)
Changes in:
Total net unrealized gains on securities	$	355.4		$	130.6		$	(212.9	)
Net unrealized losses on forecasted transactions	(5.4		)	(1.2		)	(9.7		)
Foreign currency translation adjustment	1.1			0.4			(1.2		)
Other comprehensive income (loss)	351.1			129.8			(223.8		)
Other comprehensive (income) loss attributable to NCI	(2.3		)	3.2			1.1
Comprehensive income attributable to Progressive	$	1,941.0		$	1,164.0		$	1,044.9
Computation of Per Share Earnings Attributable to Progressive
Average shares outstanding — Basic	580.8			581.7			585.5
Net effect of dilutive stock-based compensation	4.9			3.3			3.7
Total average equivalent shares — Diluted	585.7			585.0			589.2
Basic: Earnings per share	$	2.74		$	1.77		$	2.16
Diluted: Earnings per share	$	2.72		$	1.76		$	2.15

See notes to consolidated financial statements.

App.-A-2

The Progressive Corporation and Subsidiaries

Consolidated Balance Sheets

December 31,

(millions)	2017			2016
Assets
Investments – Available-for-sale, at fair value:
Fixed maturities (amortized cost: $20,209.9 and $16,287.1)	$	20,201.7		$	16,243.8
Equity securities:
Nonredeemable preferred stocks (cost: $698.6 and $734.2)	803.8			853.5
Common equities (cost: $1,499.0 and $1,437.5)	3,399.8			2,812.4
Short-term investments (amortized cost: $2,869.4 and $3,572.9)	2,869.4			3,572.9
Total investments	27,274.7			23,482.6
Cash and cash equivalents	265.0			211.5
Restricted cash	10.3			14.9
Total cash, cash equivalents, and restricted cash	275.3			226.4
Accrued investment income	119.7			103.9
Premiums receivable, net of allowance for doubtful accounts of $210.9 and $186.8	5,422.5			4,509.2
Reinsurance recoverables, including $103.3 and $83.8 on paid losses and loss adjustment expenses	2,273.4			1,884.8
Prepaid reinsurance premiums	203.3			170.5
Deferred acquisition costs	780.5			651.2
Property and equipment, net of accumulated depreciation of $940.6 and $845.8	1,119.6			1,177.1
Goodwill	452.7			449.4
Intangible assets, net of accumulated amortization of $175.7 and $109.5	366.6			432.8
Other assets	412.9			339.6
Total assets	$	38,701.2		$	33,427.5
Liabilities
Unearned premiums	$	8,903.5		$	7,468.3
Loss and loss adjustment expense reserves	13,086.9			11,368.0
Net deferred income taxes	135.0			111.3
Dividends payable	655.1			395.4
Accounts payable, accrued expenses, and other liabilities1	2,825.9			2,495.5
Debt2	3,306.3			3,148.2
Total liabilities	28,912.7			24,986.7
Redeemable noncontrolling interest (NCI)3	503.7			483.7
Shareholders’ Equity
Common shares, $1.00 par value (authorized 900.0; issued 797.5 including treasury shares of 215.8 and 217.6)	581.7			579.9
Paid-in capital	1,389.2			1,303.4
Retained earnings	6,031.7			5,140.4
Accumulated other comprehensive income:
Net unrealized gains (losses) on securities	1,295.0			939.6
Net unrealized losses on forecasted transactions	(14.8		)	(9.4		)
Foreign currency translation adjustment	0			(1.1		)
Accumulated other comprehensive (income) loss attributable to NCI	2.0			4.3
Total accumulated other comprehensive income attributable to Progressive	1,282.2			933.4
Total shareholders’ equity	9,284.8			7,957.1
Total liabilities, redeemable NCI, and shareholders’ equity	$	38,701.2		$	33,427.5

¹ See Note 12 – Litigation and Note 13 – Commitments and Contingencies for further discussion.

² Consists of both short-term and long-term debt. See Note 4 – Debt for further discussion.

³ See Note 15 – Redeemable Noncontrolling Interest for further discussion.

See notes to consolidated financial statements.

App.-A-3

The Progressive Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the years ended December 31,

(millions — except per share amounts)	2017			2016			2015
Common Shares, $1.00 Par Value
Balance, Beginning of year	$	579.9		$	583.6		$	587.8
Treasury shares purchased	(1.5		)	(6.1		)	(7.3		)
Net restricted equity awards issued/vested	3.3			2.4			3.1
Balance, End of year	$	581.7		$	579.9		$	583.6
Paid-In Capital
Balance, Beginning of year	$	1,303.4		$	1,218.8		$	1,184.3
Tax benefit from vesting of equity-based compensation	0			9.2			16.8
Treasury shares purchased	(3.4		)	(13.4		)	(15.2		)
Net restricted equity awards issued/vested	(3.3		)	(2.4		)	(3.1		)
Amortization of equity-based compensation	92.9			80.9			64.5
Reinvested dividends on restricted stock units	8.0			6.1			5.7
Adjustment to carrying amount of redeemable noncontrolling interest	(8.4		)	4.2			(34.2		)
Balance, End of year	$	1,389.2		$	1,303.4		$	1,218.8
Retained Earnings
Balance, Beginning of year	$	5,140.4		$	4,686.6		$	4,133.4
Net income attributable to Progressive	1,592.2			1,031.0			1,267.6
Treasury shares purchased	(57.6		)	(173.0		)	(186.0		)
Cash dividends declared on common shares ($1.1247, $0.6808, and $0.8882 per share)	(654.2		)	(394.7		)	(520.5		)
Reinvested dividends on restricted stock units	(8.0		)	(6.1		)	(5.7		)
Other, net	18.9			(3.4		)	(2.2		)
Balance, End of year	$	6,031.7		$	5,140.4		$	4,686.6
Accumulated Other Comprehensive Income Attributable to Progressive
Balance, Beginning of year	$	933.4		$	800.4		$	1,023.1
Attributable to noncontrolling interest	(2.3		)	3.2			1.1
Other comprehensive income (loss)	351.1			129.8			(223.8		)
Balance, End of year	$	1,282.2		$	933.4		$	800.4
Total Shareholders’ Equity	$	9,284.8		$	7,957.1		$	7,289.4

There are 20.0 million Serial Preferred Shares authorized; no such shares are issued or outstanding.

There are 5.0 million Voting Preference Shares authorized; no such shares have been issued.

See notes to consolidated financial statements.

App.-A-4

The Progressive Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31,

(millions)	2017			2016			2015
Cash Flows From Operating Activities
Net income	$	1,598.1		$	1,057.2		$	1,300.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	169.9			137.4			103.7
Amortization of intangible assets	66.2			62.1			46.8
Net amortization of fixed-income securities	86.2			77.2			98.4
Amortization of equity-based compensation	95.4			85.2			66.2
Net realized (gains) losses on securities	(49.6		)	(51.1		)	(112.7		)
Net (gains) losses on disposition of property and equipment	7.2			6.6			2.0
Other (gains) losses	1.0			(1.6		)	0.9
Net loss on exchange transaction	0			4.5			0
Changes in:
Premiums receivable	(913.2		)	(518.5		)	(421.1		)
Reinsurance recoverables	(388.6		)	(388.2		)	(202.6		)
Prepaid reinsurance premiums	(32.8		)	48.8			32.5
Deferred acquisition costs	(129.3		)	(103.8		)	(42.3		)
Income taxes	(172.6		)	(55.7		)	(107.2		)
Unearned premiums	1,434.9			830.7			632.4
Loss and loss adjustment expense reserves	1,718.8			1,323.2			917.7
Accounts payable, accrued expenses, and other liabilities	400.0			308.9			37.9
Other, net	(134.8		)	(90.2		)	(60.2		)
Net cash provided by operating activities	3,756.8			2,732.7			2,292.9
Cash Flows From Investing Activities
Purchases:
Fixed maturities	(14,587.8		)	(11,610.6		)	(9,311.1		)
Equity securities	(255.6		)	(434.2		)	(647.1		)
Sales:
Fixed maturities	5,382.5			5,694.9			4,913.5
Equity securities	252.9			484.6			402.4
Maturities, paydowns, calls, and other:
Fixed maturities	5,215.8			4,907.4			3,579.5
Equity securities	50.0			0			12.0
Net sales (purchases) of short-term investments	727.6			(1,357.2		)	20.5
Net unsettled security transactions	(33.6		)	50.9			(8.2		)
Purchases of property and equipment	(155.7		)	(215.0		)	(130.7		)
Sales of property and equipment	15.3			6.2			10.6
Acquisition of an insurance company, net of cash acquired	(18.1		)	0			0
Net cash disposed in exchange transaction1	0			(7.7		)	0
Acquisition of ARX Holding Corp., net of cash acquired	0			0			(752.7		)
Acquisition of additional shares of ARX Holding Corp.	0			0			(12.6		)
Net cash used in investing activities	(3,406.7		)	(2,480.7		)	(1,923.9		)
Cash Flows From Financing Activities
Proceeds from exercise of equity options	0.5			0			0.2
Net proceeds from debt issuance	841.1			495.6			382.0
Payments of debt	(49.0		)	(25.5		)	(20.4		)
Redemption/reacquisition of subordinated debt	(635.6		)	(18.2		)	(19.3		)
Dividends paid to shareholders	(395.4		)	(519.0		)	(403.6		)
Acquisition of treasury shares for restricted stock tax liabilities	(57.6		)	(25.1		)	(30.6		)
Acquisition of treasury shares acquired in open market	(4.9		)	(167.4		)	(177.9		)
Tax benefit from vesting of equity-based compensation	0			9.2			16.8
Net cash used in financing activities	(300.9		)	(250.4		)	(252.8		)
Effect of exchange rate changes on cash	(0.3		)	0.4			(0.2		)
Increase in cash, cash equivalents, and restricted cash	48.9			2.0			116.0
Cash, cash equivalents, and restricted cash - Beginning of year	226.4			224.4			108.4
Cash, cash equivalents, and restricted cash - End of year	$	275.3		$	226.4		$	224.4

¹See Note 1 – Reporting and Accounting Policies for further information.

See notes to consolidated financial statements.

App.-A-5

The Progressive Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2017, 2016, and 2015

1.  REPORTING AND ACCOUNTING POLICIES

Nature of OperationsThe Progressive insurance organization began business in 1937. The Progressive Corporation, an insurance holding company, was formed in 1965. The financial results of The Progressive Corporation include its subsidiaries and affiliates (references to “subsidiaries” in these notes include affiliates as well). Our insurance subsidiaries (collectively the Progressive Group of Insurance Companies) provide personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles, which we refer to as our special lines products, through both an independent insurance agency channel and a direct channel. Our Commercial Lines segment writes primary liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses through both the independent agency and direct channels. Our Property segment writes residential property insurance for homeowners, other property owners, and renters, primarily through the independent insurance agency channel. We operate our businesses throughout the United States.

Basis of Consolidation and Reporting The accompanying consolidated financial statements include the accounts of The Progressive Corporation and ARX Holding Corp. (ARX), and their respective wholly owned insurance and non-insurance subsidiaries and affiliates, in which Progressive or ARX has a controlling financial interest. The Progressive Corporation owned 69.0% of the outstanding capital stock of ARX at December 31, 2017 and 69.2% at December 31, 2016 and 2015. The decrease reflects ARX employee stock options that were exercised during 2017. All intercompany accounts and transactions are eliminated in consolidation.

EstimatesWe are required to make estimates and assumptions when preparing our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact (e.g., losses are paid), results may, and will likely, differ from those estimates.

InvestmentsOur fixed-maturity securities, equity securities, and short-term investments are accounted for on an available-for-sale basis. See Note 2 – Investments for details regarding the composition of our investment portfolio.

Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes, reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.

Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are generally accounted for under the retrospective method. The retrospective method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception of the investment holding period, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The prospective method is used primarily for interest-only securities, non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure or where there is a greater risk of non-performance and where it is possible the initial investment may not be substantially recovered. The prospective method requires a calculation of expected future repayments and resets the yield to allow for future period adjustments; no current period impact to investment income or the security’s cost is made based on the cash flow update. Prepayment assumptions are updated quarterly.

Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments, and are reported at fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in the current period.

Short-term investments may include Eurodollar deposits, commercial paper, repurchase transactions, and other securities expected to mature within one year. From time to time, we may also invest in municipal bonds that have maturity dates that are longer than one year, but have either liquidity facilities or mandatory put features within one year.

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Trading securities are securities bought principally for the purpose of sale in the near term. We do not hold any trading securities. To the extent we have trading securities, changes in fair value would be recognized in income in the current period. Derivative instruments, which may be used for trading purposes or classified as trading derivatives due to the characteristics of the transaction, are discussed below.

Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements, and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:

• Changes in fair value of an asset or liability (fair value hedge),

• Foreign currency of an investment in a foreign operation (foreign currency hedge), or

• Variable cash flows of a forecasted transaction (cash flow hedge).

We did not have any derivatives outstanding at December 31, 2017 and 2016. To the extent we have derivatives held for general investment purposes, these derivative instruments are recognized as either assets or liabilities and measured at fair value, with changes in fair value recognized in income as a component of net realized gains (losses) on securities during the period of change.

Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:

• Fair value hedge:  changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of change while the hedge is in effect.

• Foreign currency hedge:  changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.

• Cash flow hedge:  changes in fair value of the hedge would be reported as a component of accumulated other comprehensive income and subsequently amortized into earnings over the life of the hedged transaction.

If a hedge is deemed to become ineffective or discontinued, the following accounting treatment would be applied:

• Fair value hedge:  the derivative instrument would continue to be adjusted through income, while the adjustment in the change in value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive income.

• Foreign currency hedge:  changes in the value of the hedged item would continue to be reflected as a change in translation adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income for the current period.

• Cash flow hedge:  changes in fair value of the derivative instrument would be reported in income for the current period.

For all derivative positions, net cash requirements are limited to changes in fair values, which may vary as a result of changes in interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same counterparty under a master netting arrangement.

Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio’s value in the near term. We regularly monitor our portfolio for price changes, which might indicate potential impairments, and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to: (i) fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors, (ii) market-related factors, such as interest rates or equity market declines, or (iii) credit-related losses, where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security.

We analyze our debt securities that are in a loss position to determine if we intend to sell, or if it is more likely than not that we will be required to sell, the security prior to recovery and, if so, we write down the security to its current fair value, with the entire amount of the write-down recorded to earnings. To the extent that it is more likely than not that we will hold the debt security until recovery (which could be maturity), we determine if any of the decline in value is due to a credit loss (i.e., where the present value of future cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we recognize that portion of the impairment as a component of net realized gains (losses) in the comprehensive income statement, with the difference (i.e., non-credit related impairment) recognized as part of our net unrealized gains (losses) in

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accumulated other comprehensive income. When an equity security (common equity and nonredeemable preferred stock) in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the comprehensive income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in unrealized gains (losses) as part of accumulated other comprehensive income.

Investment income consists of interest, dividends, and accretion net of amortization. In addition to the discussion above for asset-backed securities, interest is recognized on an accrual basis using the effective yield method. Depending on the nature of the equity instruments, dividends are recorded at either the ex-dividend date or on an accrual basis.

Realized gains (losses) on securities are computed based on the first-in first-out method and include write-downs on available-for-sale securities considered to have other-than-temporary declines in fair value (excluding non-credit related impairments), as well as holding period valuation changes on derivatives, trading securities, and hybrid instruments (e.g., securities with embedded options, where the option is a feature of the overall change in the value of the instrument).

Insurance Premiums and Receivables  Insurance premiums written are earned into income on a pro rata basis over the period of risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that are applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts and offer a variety of payment plans. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk.

For our vehicle businesses, we perform a policy level evaluation to determine the extent to which the premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for doubtful accounts based on prior experience.

For our Property business, we do not establish an allowance for doubtful accounts since the risk of uncollectibility is relatively low. If premiums are unpaid by the policy due date, we provide advance notice of cancellation in accordance with each state’s requirements and, if the premiums remain unpaid after receipt of notice, cancel the policy and write off any remaining balance.

Deferred Acquisition CostsDeferred acquisition costs include commissions, premium taxes, and other variable underwriting and direct sales costs incurred in connection with the successful acquisition or renewal of insurance contracts. These acquisition costs, net of ceding allowances, are deferred and amortized over the policy period in which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these costs. Management believes that these costs will be fully recoverable in the near term.

We do not defer any advertising costs. Total advertising costs, which are expensed as incurred, for the years ended

December 31, were:

(millions)	Advertising Costs
2017	$	1,005.4
2016	756.2
2015	748.3

Loss and Loss Adjustment Expense ReservesLoss reserves represent the estimated liability on claims reported to us, plus reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are reflected in income in the current period. Such loss and loss adjustment expense reserves are susceptible to change in the near term.

Reinsurance  Our reinsurance transactions include premiums ceded to “Regulated” plans and “Non-Regulated” plans. The  Regulated plans in which we participate are governed by insurance regulations and include state-provided reinsurance facilities (Michigan Catastrophic Claims Association, Florida Hurricane Catastrophe Fund, North Carolina Reinsurance Facility), as well as state-mandated involuntary plans for commercial vehicles (Commercial Automobile Insurance Procedures/Plans – “CAIP”) and federally regulated plans for flood (National Flood Insurance Program – “NFIP”); we act as a servicing agent for CAIP and as a participant in the “Write Your Own” program for the NFIP. The Non-Regulated plans are voluntary contractual arrangements and primarily relate to our Property business and transportation network company business written by our Commercial Lines segment. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written. See Note 7 – Reinsurance for further discussion.

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Income Taxes  The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. The principal items giving rise to such differences are investment securities (e.g., net unrealized gains (losses), write-downs on securities determined to be other-than-temporarily impaired), loss and loss adjustment expense reserves, unearned premiums reserves, deferred acquisition costs, property and equipment, intangible assets, and non-deductible accruals. We review our deferred tax assets regularly for recoverability. The effects of any changes in the tax rate are recorded to our provision for income taxes, including any changes on items initially recognized in accumulated other comprehensive income. See Note 5 – Income Taxes for further discussion.

Property and Equipment  Property and equipment are recorded at cost, less accumulated depreciation, and include capitalized software developed or acquired for internal use. Depreciation is recognized over the estimated useful lives of the assets using accelerated methods for computer equipment and laptops and the straight-line method for all other fixed assets. We evaluate impairment whenever events or circumstances warrant such a review and write-off the impaired assets if appropriate. Land and buildings comprised 66% and 65% of total property and equipment at December 31, 2017 and 2016, respectively.

The useful lives for property and equipment at December 31, 2017, were:

	Useful Lives
Computer equipment and laptops	3 years
Software licenses (internal use)	1-5 years
Capitalized software	3-10 years
Buildings, improvements, and integrated components	7-40 years
All other property and equipment	3-15 years

At December 31, 2017 and 2016, included in other assets in the consolidated balance sheets is $5.3 million and $8.7 million, respectively, of “held for sale” property, which represents the fair value of this property less the estimated costs to sell.

Total capitalized interest, which primarily relates to capitalized software projects, for the years ended December 31, was:

(millions)	Capitalized Interest
2017	$	2.8
2016	2.9
2015	2.4

Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the estimated fair value of the assets and liabilities acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Substantially all of the goodwill recorded as of December 31, 2017 and 2016, relates to the April 1, 2015 acquisition of a controlling interest in ARX.

Intangible assets primarily arose through the acquisition of ARX and mainly represent the future premiums that will be recognized from the policies and agency relationships that existed at the acquisition date. The majority of the intangible assets have finite lives, which, at December 31, 2017, had a remaining life range from 2 to 11 years. See Note 16 – Goodwill and Intangible Assets for further discussion.

We evaluate our goodwill for impairment at least annually using a qualitative approach. If events or changes in circumstances indicate that the carrying value of goodwill or intangible assets may not be recoverable, we will evaluate such items for impairment using a quantitative approach.

Guaranty Fund Assessments  We are subject to state guaranty fund assessments, which provide for the payment of covered claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal determination of insolvency has occurred, and we have written the premiums on which the assessments will be based. Assessments that are available for recoupment from policyholders are capitalized when incurred; all other assessments are expensed.

Fees and Other Revenues  Fees and other revenues primarily represent fees collected from policyholders relating to installment charges in accordance with our bill plans, as well as late payment and insufficient funds fees. Other revenues may include revenue from ceding commissions in excess of acquisition costs, the sale of tax credits, referral fees, rental income, and other

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revenue transactions. Fees and other revenues are generally earned when collected, except for excess ceding commissions, which are earned over the policy period.

Service Revenues and ExpensesOur service businesses provide insurance-related services. Service revenues and expenses from our commission-based businesses are recorded in the period in which they are earned or incurred. Service revenues generated from processing business for involuntary CAIP plans are earned on a pro rata basis over the term of the related policies. Service expenses related to these CAIP plans are expensed as incurred.

Equity-Based Compensation  We issue time-based and performance-based restricted stock unit awards to key members of management (including members of ARX and its subsidiaries in 2017) as our form of equity compensation, and time-based restricted stock awards to non-employee directors. Collectively, we refer to these awards as “restricted equity awards.” Compensation expense for time-based restricted equity awards with installment vesting is recognized over each respective vesting period. For performance-based restricted equity awards, compensation expense is recognized over the respective estimated vesting periods. Dividend equivalent units are credited to outstanding restricted stock unit awards, both time-based and performance-based, at the time a dividend is paid to shareholders.

We record an estimate for expected forfeitures of restricted equity awards based on our historical forfeiture rates. In addition, we shorten the vesting periods of certain time-based restricted equity awards based on the “qualified retirement” provisions in our equity compensation plans, under which (among other provisions) if the participant satisfies certain age and years-of-service requirements, the vesting and distribution of 50% of outstanding time-based restricted equity awards accelerates upon reaching eligibility for a qualified retirement and shortly after the grant date for each subsequent award.

ARX has nonqualified and incentive stock options outstanding that were issued prior to April 2015 as a form of equity compensation to certain of the officers and employees of ARX and its subsidiaries. These outstanding stock options are subject to the put/call features contained in the current stockholders’ agreement, pursuant to which The Progressive Corporation has the right, and can be required, to purchase a portion or all the shares underlying these awards in 2018 and 2021. The vested stock options, and the shares issuable upon exercise of the stock options, are also subject to repurchase by ARX if the holder’s employment terminates. See Note 15 – Redeemable Noncontrolling Interest for further discussion. These stock options, which are treated for accounting purposes as liability awards, are expensed over the respective vesting periods based on the Black-Scholes value determined at period end.

The total compensation expense recognized for equity-based compensation, both our equity and liability awards, for the years ended December 31, was:

(millions)	2017		2016		2015
Pretax expense	$	95.4	$	85.2	$	66.2
Tax benefit1	33.4		29.8		23.2

¹Reflected at the 35% corporate federal tax rate; the revaluation to the 21% rate is reflected in the total revaluation adjustment recorded at December 31, 2017 (see Note 5 – Income Taxes for further discussion).

Earnings Per Share  Net income attributable to Progressive is used in our calculation of the per share amounts. Basic earnings per share is computed using the weighted average number of common shares outstanding during the reporting period, excluding unvested time-based and performance-based restricted equity awards that are subject to forfeiture. Diluted earnings per share includes common stock equivalents assumed outstanding during the period. Our common stock equivalents include the incremental shares assumed to be issued for:

• earned but unvested time-based restricted equity awards, and

• certain unvested performance-based restricted equity awards that satisfied contingency conditions for common stock equivalents during the period.

Supplemental Cash Flow InformationCash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments of funds held in bank demand deposit accounts on ARX’s subsidiaries, which are primarily collateralized by U.S. Treasury notes. The amount of reverse repurchase commitments held by ARX’s subsidiaries at December 31, 2017, 2016, and 2015, were $247.2 million, $150.0 million, and $174.8 million, respectively. Restricted cash on our consolidated balance sheets at December 31, 2017 and 2016, represents cash that is restricted to pay flood claims under the National Flood Insurance Program’s “Write Your Own” program, for which American Strategic Insurance and other subsidiaries of ARX (ASI) are administrators. Non-cash activity includes declared but unpaid dividends.

The cash transferred in the exchange transaction, which occurred in June 2016, was revised to correct the reclassification of a

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non-cash transaction; there was no overall impact on the increase in cash, cash equivalents, and restricted cash that was reported in our consolidated statement of cash flows for the year ended December 31, 2016. See Note 16 – Goodwill and Intangible Assets for further discussion of the exchange transaction.

For the years ended December 31, we paid the following:

(millions)	2017		2016		2015
Income taxes	$	715.6	$	459.4	$	701.8
Interest	146.3		139.2		132.0

New Accounting Standards

Issued

In January 2018, the Financial Accounting Standards Board (FASB) proposed an Accounting Standards Update (ASU), which would provide targeted improvements to the new lease accounting guidance issued by the FASB in February 2016 (the “2016 ASU”). The 2016 ASU, which eliminates the off-balance-sheet accounting for leases, will require lessees to report their operating leases as both an asset and liability on the statement of financial position and to disclose key information about leasing arrangements in the financial statement footnotes. Under the 2016 ASU, there will be no change to the recognition of lease expense in our results of operations. The ASU will be effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2018 (2019 for calendar-year companies). Under the proposed guidance, companies would have the option to apply the new lease requirements either as of the effective date (i.e., January 1, 2019), with comparative information presented in accordance with the previous standard, or on a modified restrospective basis, which would restate all financial statement information as of the beginning of the earliest period presented and is the transition method under the 2016 ASU. Based on our lease portfolio at December 31, 2017, and in accordance with the accounting elections available in the ASU, we would have recorded an increase to assets and liabilities of approximately $140 million, and there would have been no impact on our results of operations or cash flows. Therefore, we do not expect this standard to have a material impact on our financial condition.

In March 2017, the FASB issued an ASU related to premium amortization on purchased callable debt securities. The intent of the standard is to shorten the amortization period for certain purchased callable debt securities held at a premium. Under the ASU, the premium is required to be amortized to the earliest call date. The ASU more closely aligns interest income recorded on bonds held at a premium with the economics of the underlying instrument. The ASU, which is required to be applied on a modified retrospective basis, is effective for fiscal years beginning after December 15, 2018 (2019 for calendar-year companies), and interim periods within those fiscal years. Since we have historically used a yield-to-worst scenario for our securities that were purchased at a premium, and the first call on a premium security most often produces the lowest and most conservative yield, we do not expect this standard to have a significant impact on our financial condition, cash flows, or results of operations.

In January 2017, the FASB issued an ASU, which eliminates the requirement to determine the implied value of goodwill in measuring an impairment loss. Upon adoption, the measurement of a goodwill impairment will represent the excess of the reporting unit’s carrying value over fair value, limited to the carrying value of goodwill. This ASU is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 (2020 for calendar-year companies), with early adoption permitted. We do not expect this standard to have a material impact on our financial position or results of operations.

In June 2016, the FASB issued an ASU intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. Additionally, this update will modify the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities and will result in the creation of an allowance for credit losses as a contra asset account. The ASU will require cumulative-effect changes to retained earnings in the period of adoption, if any occur, and will also require prospective changes on previously recorded impairments. This ASU is effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2019 (2020 for calendar-year companies), with early adoption permissible (including interim periods within that fiscal year) beginning after December 15, 2018 (2019 for calendar-year companies). While the ASU creates additional accounting complexities related to the recognition of the impairment losses, and subsequent recoveries, through an allowance for credit losses account, we do not expect that the ASU will have a material impact on our current method of evaluating securities for credit losses or the timing or recognition of the amounts of the impairment losses.

In January 2016, the FASB released an ASU intended to improve the recognition and measurement of financial instruments. The new guidance will require the changes in fair value of equity securities to be recognized as a component of net income. The

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ASU is effective for fiscal years beginning after December 15, 2017 (2018 for calendar-year companies) and requires the prospective method of adoption with a cumulative-effect adjustment recorded to beginning retained earnings upon adoption. In January 2018, we recorded a cumulative-effect adjustment of $1.3 billion, which is net of taxes at the 35% tax rate. The cumulative-effect adjustment represents the amount of after-tax net unrealized gains on equity securities that was recorded as part of accumulated other comprehensive income at December 31, 2017. This ASU will have no impact on comprehensive income.

Adopted

For the year ended December 31, 2017, we adopted the ASU related to the statement of cash flows and the classification and presentation of changes in restricted cash. This update requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts described as restricted cash. This ASU, which is required to be applied on a retrospective basis, is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We elected to early adopt this ASU. Since this standard only affected classification and presentation, there was no impact on our results of operations, financial condition, or cash flows.

On January 1, 2017, we adopted the ASU to simplify the accounting for employee share-based payment transactions. There were several provisions that could be adopted under this ASU. We did not elect to make any changes to our method of recording forfeitures and are continuing to withhold taxes at the minimum statutory tax rate. We did elect, on a retrospective basis, to disclose the payment of cash to a taxing authority for which we withheld shares for this purpose as a financing activity. Lastly, during the year ended December 31, 2017, we recognized $25.1 million of excess tax benefits as an income tax benefit in our consolidated statements of comprehensive income; this provision was adopted on a prospective basis.

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2.  INVESTMENTS

Our securities are reported at fair value, with the changes in fair value of these securities (other than hybrid securities and derivative instruments) reported as a component of accumulated other comprehensive income, net of deferred income taxes. The changes in fair value of the hybrid securities and derivative instruments are recorded as a component of net realized gains (losses) on securities.

The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio. The net holding period gains (losses) represent the

amounts realized on our hybrid securities only (see discussion below).

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)			Fair Value		% of Total Fair Value
December 31, 2017
Fixed maturities:
U.S. government obligations	$	6,688.8	$	1.1	$	(44.0	)	$	0		$	6,645.9	24.4	%
State and local government obligations	2,285.6		20.7		(9.3		)	0.1			2,297.1		8.4
Foreign government obligations	0		0		0			0			0		0
Corporate debt securities	4,997.2		14.8		(14.4		)	0.1			4,997.7		18.3
Residential mortgage-backed securities	828.8		11.3		(3.4		)	0			836.7		3.1
Commercial mortgage-backed securities	2,760.1		11.8		(13.3		)	0			2,758.6		10.1
Other asset-backed securities	2,454.5		4.5		(4.5		)	0.2			2,454.7		9.0
Redeemable preferred stocks	194.9		17.8		(1.5		)	(0.2		)	211.0		0.8
Total fixed maturities	20,209.9		82.0		(90.4		)	0.2			20,201.7		74.1
Equity securities:
Nonredeemable preferred stocks	698.6		114.0		(8.8		)	0			803.8		2.9
Common equities	1,499.0		1,901.0		(0.2		)	0			3,399.8		12.5
Short-term investments	2,869.4		0		0			0			2,869.4		10.5
Total portfolio1,2	$	25,276.9	$	2,097.0	$	(99.4	)	$	0.2		$	27,274.7	100.0	%

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($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)		Fair Value		% of Total Fair Value
December 31, 2016
Fixed maturities:
U.S. government obligations	$	2,899.2	$	0	$	(29.1	)	$	0	$	2,870.1	12.2	%
State and local government obligations	2,509.5		13.8		(20.7		)	0		2,502.6		10.7
Foreign government obligations	24.5		0		0			0		24.5		0.1
Corporate debt securities	4,557.8		17.3		(24.3		)	0.1		4,550.9		19.4
Residential mortgage-backed securities	1,489.7		23.7		(15.6		)	1.5		1,499.3		6.4
Commercial mortgage-backed securities	2,266.9		12.0		(25.5		)	0		2,253.4		9.6
Other asset-backed securities	2,350.7		4.6		(4.4		)	0.2		2,351.1		10.0
Redeemable preferred stocks	188.8		5.1		(2.0		)	0		191.9		0.8
Total fixed maturities	16,287.1		76.5		(121.6		)	1.8		16,243.8		69.2
Equity securities:
Nonredeemable preferred stocks	734.2		135.4		(16.1		)	0		853.5		3.6
Common equities	1,437.5		1,377.0		(2.1		)	0		2,812.4		12.0
Short-term investments	3,572.9		0		0			0		3,572.9		15.2
Total portfolio1,2	$	22,031.7	$	1,588.9	$	(139.8	)	$	1.8	$	23,482.6	100.0	%

¹ Our portfolio reflects the effect of unsettled security transactions and collateral on any open derivative positions; at December 31, 2017, $5.8 million was included in “other assets,” compared to $27.8 million in “other liabilities” at December 31, 2016.

² The total fair value of the portfolio at December 31, 2017 and 2016 included $1.6 billion and $1.3 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

The increase in fixed-maturity securities, primarily U.S. government obligations, and decrease in short-term investments since December 31, 2016, was due to a decision to slightly lengthen the average maturity of the portfolio late in the fourth quarter 2017 in response to the rising interest rate environment.

At December 31, 2017, bonds and certificates of deposit in the principal amount of $222.6 million were on deposit to meet state insurance regulatory and/or rating agency requirements. We did not hold any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2017 or 2016. At December 31, 2017, we did not hold any debt securities that were non-income producing during the preceding 12 months.

Short-Term Investments Our short-term investments may include commercial paper and other investments that are expected to mature or are redeemable within one year. We did not hold any treasury bills issued by the Australian government at December 31, 2017 or 2016.

We did not have any open repurchase or reverse repurchase transactions in our short-term investment portfolio at December 31, 2017 or 2016. To the extent we had any repurchase and reverse repurchase transactions with the same counterparty and subject to an enforceable master netting arrangement, we could elect to offset these transactions. Consistent with past practice, we have elected not to offset these transactions and, therefore, report these transactions on a gross basis on our balance sheets.

Hybrid Securities Included in our fixed maturities are hybrid securities, which are reported at fair value at December 31:

(millions)	2017		2016
State and local government obligations	$	6.1	$	0
Corporate debt securities	99.8		40.1
Residential mortgage-backed securities	0		170.5
Other asset-backed securities	6.7		8.9
Redeemable preferred stocks	30.3		0
Total hybrid securities	$	142.9	$	219.5

App.-A-14

Certain securities in our portfolio are accounted for as hybrid securities because they contain embedded derivatives that are not deemed to be clearly and closely related to the host investments. Since the embedded derivative does not have an observable intrinsic value (e.g., change-in-control put options, debt-to-equity conversion, or any other feature unrelated to the credit quality or risk of default of the issuer that could impact the amount or timing of our expected future cash flows), we have elected to record the change in fair value of the entire security through income as a realized gain or loss.

Fixed Maturities  The composition of fixed maturities by maturity at December 31, 2017, was:

(millions)	Cost		Fair Value
Less than one year	$	3,964.1	$	3,980.0
One to five years	12,706.5		12,671.3
Five to ten years	3,294.4		3,306.9
Ten years or greater	244.9		243.5
Total	$	20,209.9	$	20,201.7

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities that do not have a single maturity date are reported based upon expected average maturity. Contractual maturities may differ from expected maturities because the issuers of the securities may have the right to call or prepay obligations.

Gross Unrealized Losses  As of December 31, 2017, we had $99.2 million of gross unrealized losses in our fixed-income securities (i.e., fixed-maturity securities and nonredeemable preferred stocks) and $0.2 million in our common equities. We currently do not intend to sell the fixed-income securities and determined that it is more likely that we will not be required to sell these securities for the period of time necessary to recover their cost bases. A review of our fixed-income securities indicated that the issuers were current with respect to their interest obligations and that there was no evidence of deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity. For common equities, 96% of our common stock portfolio was indexed to the Russell 1000; as such, this portfolio may contain securities in a loss position for an extended period of time, subject to possible write-downs, as described below. We may retain these securities as long as the portfolio and index correlation remain similar. To the extent there is issuer-specific deterioration, we may write-down the securities of that issuer. The remaining 4% of our common stocks were part of a managed equity strategy selected and administered by an external investment advisor. If our review of loss position securities were to indicate there was a fundamental, or market, impairment on these securities that was determined to be other-than-temporary, we would recognize a write-down in accordance with our stated policy.

The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)							No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair  Value		Unrealized Losses
December 31, 2017
Fixed maturities:
U.S. government obligations	58	$	5,817.0	$	(44.0	)	41	$	4,869.3	$	(34.6	)	17	$	947.7	$	(9.4	)
State and local government obligations	358	1,200.3		(9.3		)	230	737.6		(4.4		)	128	462.7		(4.9		)
Corporate debt securities	222	2,979.4		(14.4		)	171	2,072.9		(9.1		)	51	906.5		(5.3		)
Residential mortgage-backed securities	201	300.9		(3.4		)	30	75.1		(0.2		)	171	225.8		(3.2		)
Commercial mortgage-backed securities	105	1,682.3		(13.3		)	63	1,221.2		(5.9		)	42	461.1		(7.4		)
Other asset-backed securities	197	1,837.3		(4.5		)	134	1,377.8		(3.3		)	63	459.5		(1.2		)
Redeemable preferred stocks	2	21.8		(1.5		)	1	10.8		(0.1		)	1	11.0		(1.4		)
Total fixed maturities	1,143	13,839.0		(90.4		)	670	10,364.7		(57.6		)	473	3,474.3		(32.8		)
Equity securities:
Nonredeemable preferred stocks	4	127.8		(8.8		)	1	56.5		(0.5		)	3	71.3		(8.3		)
Common equities	19	13.4		(0.2		)	18	13.4		(0.2		)	1	0		0
Total equity securities	23	141.2		(9.0		)	19	69.9		(0.7		)	4	71.3		(8.3		)
Total portfolio	1,166	$	13,980.2	$	(99.4	)	689	$	10,434.6	$	(58.3	)	477	$	3,545.6	$	(41.1	)

App.-A-15

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)							No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair Value		Unrealized Losses
December 31, 2016
Fixed maturities:
U.S. government obligations	30	$	2,774.0	$	(29.1	)	30	$	2,774.0	$	(29.1	)	0	$	0	$	0
State and local government obligations	618	1,497.9		(20.7		)	584	1,404.3		(19.6		)	34	93.6		(1.1		)
Corporate debt securities	184	2,615.1		(24.3		)	175	2,559.9		(24.0		)	9	55.2		(0.3		)
Residential mortgage-backed securities	233	953.7		(15.6		)	117	209.7		(1.7		)	116	744.0		(13.9		)
Commercial mortgage-backed securities	111	1,347.3		(25.5		)	85	1,061.2		(22.9		)	26	286.1		(2.6		)
Other asset-backed securities	103	1,605.2		(4.4		)	89	1,423.3		(3.9		)	14	181.9		(0.5		)
Redeemable preferred stocks	2	31.0		(2.0		)	0	0		0			2	31.0		(2.0		)
Total fixed maturities	1,281	10,824.2		(121.6		)	1,080	9,432.4		(101.2		)	201	1,391.8		(20.4		)
Equity securities:
Nonredeemable preferred stocks	13	329.6		(16.1		)	8	175.2		(3.8		)	5	154.4		(12.3		)
Common equities	75	22.1		(2.1		)	69	19.7		(1.7		)	6	2.4		(0.4		)
Total equity securities	88	351.7		(18.2		)	77	194.9		(5.5		)	11	156.8		(12.7		)
Total portfolio	1,369	$	11,175.9	$	(139.8	)	1,157	$	9,627.3	$	(106.7	)	212	$	1,548.6	$	(33.1	)

During 2017, the number of securities in our fixed-maturity portfolio with unrealized losses decreased, primarily the result of a narrowing of credit spreads during the year. We had no material decreases in valuation as a result of credit rating downgrades during the year. All of the fixed-maturity securities in an unrealized loss position at December 31, 2017 in the table above are current with respect to required principal and interest payments.

Since December 31, 2016, our nonredeemable preferred stocks with unrealized losses decreased to four securities, averaging approximately 6% of their total cost. The decrease in the number of securities was the result of valuation increases in the portfolio. We reviewed these securities and concluded that the unrealized losses are market-related adjustments to the values, which were determined not to be other-than-temporary; we expect to recover our initial investments on these securities. The number of issuers with unrealized losses in our common stock portfolio decreased during 2017. A review of the securities in a loss position did not uncover fundamental issues with the issuers that would indicate other-than-temporary impairments existed. Additionally, consensus analyst expectations for recovery in the next 12 months would put the fair values at or above our current book values. Lastly, we determined, as of the balance sheet date, that it was not likely these securities would be sold prior to that recovery.

Other-Than-Temporary Impairment (OTTI)  The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined (i.e., unadjusted for valuation changes subsequent to the original write-down):

	December 31,
(millions)	2017			2016
Fixed maturities:
Residential mortgage-backed securities	$	(19.7	)	$	(43.3	)
Commercial mortgage-backed securities	(0.3		)	(0.6		)
Total fixed maturities	$	(20.0	)	$	(43.9	)

App.-A-16

The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2017, 2016, and 2015, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Total
Total at December 31, 2016	$	11.1		$	0.4		$	11.5
Credit losses for which an OTTI was not previously recognized	0			0.4			0.4
Reductions for securities sold/matured	(10.9		)	(0.3		)	(11.2		)
Change in recoveries of future cash flows expected to be collected1	(0.2		)	0			(0.2		)
Total at December 31, 2017	$	0		$	0.5		$	0.5

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed		Total
Total at December 31, 2015	$	12.4		$	0.4	$	12.8
Credit losses for which an OTTI was not previously recognized	0			0		0
Reductions for securities sold/matured	0			0		0
Change in recoveries of future cash flows expected to be collected1	(1.3		)	0		(1.3		)
Total at December 31, 2016	$	11.1		$	0.4	$	11.5

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed		Total
Total at December 31, 2014	$	12.7		$	0.4	$	13.1
Credit losses for which an OTTI was not previously recognized	0			0		0
Reductions for securities sold/matured	(1.4		)	0		(1.4		)
Change in recoveries of future cash flows expected to be collected1	1.1			0		1.1
Total at December 31, 2015	$	12.4		$	0.4	$	12.8

¹ Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

Although we determined it is more likely that we will not be required to sell the securities prior to the recovery of their respective cost bases (which could be maturity), we are required to measure the amount of potential credit losses on the securities that were in an unrealized loss position. In that process, we considered a number of factors and inputs related to the individual securities. The methodology and significant inputs used to measure the amount of credit losses in our portfolio included: current performance indicators on the business model or underlying assets (e.g., delinquency rates, foreclosure rates, and default rates); credit support (via current levels of subordination); historical credit ratings; and updated cash flow expectations based upon these performance indicators. In order to determine the amount of credit loss, if any, the net present value of the cash flows expected (i.e., expected recovery value) was calculated using the current book yield for each security, and was compared to its current amortized value. In the event that the net present value was below the amortized value, a credit loss would be deemed to exist, and the security would be written down. During the period ended December 31, 2017, we recorded a credit impairment write-down of $0.4 million. We did not have any credit impairment write-downs for the periods ended December 31, 2016 or 2015.

App.-A-17

Realized Gains (Losses)  The components of net realized gains (losses) for the years ended December 31, were:

(millions)	2017			2016			2015
Gross realized gains on security sales
Fixed maturities:
U.S. government obligations	$	6.2		$	24.6		$	17.5
State and local government obligations	10.5			16.0			7.8
Corporate and other debt securities	20.3			43.3			31.2
Residential mortgage-backed securities	23.8			2.5			4.9
Commercial mortgage-backed securities	4.9			13.3			15.7
Other asset-backed securities	0.3			0			0
Redeemable preferred stocks	8.5			20.9			0.1
Total fixed maturities	74.5			120.6			77.2
Equity securities:
Nonredeemable preferred stocks	58.4			11.9			65.3
Common equities	43.0			61.3			50.4
Short-term investments	0			0.1			0
Subtotal gross realized gains on security sales	175.9			193.9			192.9
Gross realized losses on security sales
Fixed maturities:
U.S. government obligations	(28.7		)	(2.4		)	(0.9		)
State and local government obligations	(0.1		)	(1.6		)	(0.3		)
Corporate and other debt securities	(5.1		)	(2.5		)	(5.0		)
Residential mortgage-backed securities	(0.4		)	(0.2		)	(0.8		)
Commercial mortgage-backed securities	(5.3		)	(5.6		)	(1.3		)
Other asset-backed securities	(0.4		)	0			0
Redeemable preferred stocks	(6.4		)	(6.6		)	0
Total fixed maturities	(46.4		)	(18.9		)	(8.3		)
Equity securities:
Nonredeemable preferred stocks	(5.9		)	(5.3		)	(3.2		)
Common equities	(12.2		)	(15.7		)	(38.4		)
Short-term investments	(0.2		)	(0.1		)	0
Subtotal gross realized losses on security sales	(64.7		)	(40.0		)	(49.9		)
Net realized gains (losses) on security sales
Fixed maturities:
U.S. government obligations	(22.5		)	22.2			16.6
State and local government obligations	10.4			14.4			7.5
Corporate and other debt securities	15.2			40.8			26.2
Residential mortgage-backed securities	23.4			2.3			4.1
Commercial mortgage-backed securities	(0.4		)	7.7			14.4
Other asset-backed securities	(0.1		)	0			0
Redeemable preferred stocks	2.1			14.3			0.1
Total fixed maturities	28.1			101.7			68.9
Equity securities:
Nonredeemable preferred stocks	52.5			6.6			62.1
Common equities	30.8			45.6			12.0
Short-term investments	(0.2		)	0			0
Subtotal net realized gains (losses) on security sales	111.2			153.9			143.0
Other-than-temporary impairment losses
Fixed maturities:
Commercial mortgage-backed securities	(0.4		)	0			0
Redeemable preferred stocks	0			(25.3		)	0
Total fixed maturities	(0.4		)	(25.3		)	0
Equity securities:
Common equities	(11.2		)	(0.3		)	(8.7		)
Subtotal investment other-than-temporary impairment losses	(11.6		)	(25.6		)	(8.7		)
Other asset impairment	(49.6		)	(59.7		)	0
Subtotal other-than-temporary impairment losses	(61.2		)	(85.3		)	(8.7		)
Other gains (losses)
Hybrid securities	(1.6		)	2.1			(1.3		)
Derivative instruments	0			(20.0		)	(20.7		)
Litigation settlements	1.2			0.4			0.4
Subtotal other gains (losses)	(0.4		)	(17.5		)	(21.6		)
Total net realized gains (losses) on securities	$	49.6		$	51.1		$	112.7

App.-A-18

Gross realized gains and losses were predominantly the result of sales transactions in our fixed-income portfolio related to

movements in credit spreads and interest rates and sales from our equity portfolios. In addition, gains and losses reflect recoveries from litigation settlements related to investments and holding period valuation changes on hybrids and derivatives. Also included are write-downs for securities determined to be other-than-temporarily impaired. The other asset impairment relates to renewable energy investments, which are reflected in “other assets” on the balance sheet, under which the future pretax cash flows are expected to be less than the carrying value of the assets.

Net Investment Income  The components of net investment income for the years ended December 31, were:

(millions)	2017			2016			2015
Fixed maturities:
U.S. government obligations	$	72.7		$	18.2		$	28.3
State and local government obligations	51.5			52.3			60.7
Foreign government obligations	0.3			0.4			0.4
Corporate debt securities	125.2			110.7			102.4
Residential mortgage-backed securities	34.7			47.3			54.3
Commercial mortgage-backed securities	79.6			81.6			74.6
Other asset-backed securities	47.1			28.0			22.0
Redeemable preferred stocks	11.8			14.9			15.0
Total fixed maturities	422.9			353.4			357.7
Equity securities:
Nonredeemable preferred stocks	44.1			48.6			43.7
Common equities	58.3			57.2			51.0
Short-term investments	37.8			19.7			2.2
Investment income	563.1			478.9			454.6
Investment expenses	(23.9		)	(22.4		)	(22.8		)
Net investment income	$	539.2		$	456.5		$	431.8

The amount of investment income we recognize varies from year to year based on the average assets during the year and the book yields of the securities in our portfolio. In addition to proceeds from debt offerings in each of the last three years, the increase in investment income in both 2017 and 2016, as compared to their prior respective years, reflects an increase in average assets of the portfolio due to the strong underwriting growth and profitability. During 2017, an additional increase was due to a slight increase in overall portfolio yield on new cash and portfolio turnover from our decision to lengthen our portfolio’s duration during the year. The increase in income in 2016 over 2015 also reflects a slight offset due to a lower portfolio yield as a result of the sharp decline in interest rates (which was prevalent during most of 2016), affecting investment yields on new cash and portfolio turnover, as well as our decision to shorten our portfolio duration early in 2016 and invest in a higher amount of short-term paper, which had lower overall yields.

Trading Securities  At December 31, 2017 and 2016, we did not hold any trading securities and we did not have any net realized gains (losses) on trading securities for the years ended December 31, 2017, 2016, and 2015.

Derivative Instruments  For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as a net derivative asset and a component of the available-for-sale portfolio, the inception-to-date holding period (realized) gain on the derivative position at period end would have to exceed any upfront cash received. On the other hand, a net derivative liability would include any inception-to-date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to their immaterial effect on our financial condition, cash flows, and results of operations.

App.-A-19

The following table shows the status of our derivative instruments at December 31, 2017 and 2016, and for the years ended December 31, 2017, 2016, and 2015:

(millions)								Balance Sheet2					Comprehensive Income Statement
	Notional Value1								Assets (Liabilities) Fair Value				Pretax Net Realized Gains (Losses)
													Years ended
	December 31,								December 31,				December 31,
Derivatives designated as:	2017		2016		2015		Purpose	Classification	2017		2016		2017		2016			2015
Hedging instruments
Closed:
Ineffective cash flow hedge	$	31	$	370	$	18	Manage interest rate risk	NA	$	0	$	0	$	0	$	(1.3	)	$	0.2
Non-hedging instruments
Assets:
Interest rate swaps	0		0		750		Manage portfolio duration	Investments - fixed maturities	0		0		0		0			(23.4		)
Closed:
Interest rate swaps	0		750		0		Manage portfolio duration	NA	0		0		0		(19.0		)	0
U.S. Treasury Note futures	0		135		691		Manage portfolio duration	NA	0		0		0		0.3			2.5
Total	NA		NA		NA				$	0	$	0	$	0	$	(20.0	)	$	(20.7	)

¹ The amounts represent the value held at year end for open positions and the maximum amount held during the year for closed positions.

² To the extent we held both derivative assets and liabilities with the same counterparty that were subject to an enforceable master netting arrangement, we reported them on a gross basis on our balance sheets, consistent with our historical presentation.

NA = Not Applicable

CASH FLOW HEDGES

During March 2017, we entered into a forecasted debt issuance hedge, against a possible rise in interest rates, in conjunction with the $850 million of 4.125% Senior Notes due 2047 issued in April 2017. Upon issuance, we closed the hedge and recognized, as part of accumulated other comprehensive income, a pretax loss of $8.0 million in April 2017.

During the third quarter 2016, we entered into a $350 million forecasted transaction to hedge against a possible rise in interest rates in anticipation of a debt offering under which we issued $500 million of 2.45% Senior Notes due 2027. When the contract was closed, the $1.4 million loss on the derivative was immediately recognized as a realized loss.

The $31 million in 2017, the $18 million in 2015, and the remaining $20 million in 2016, out of the $370 million disclosed in the table above, of our ineffective cash flow hedge resulted from the repurchase of a portion of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067, and we reclassified the unrealized gain on forecasted transactions to net realized gains on securities. The portion repurchased in 2017 resulted in an immaterial gain.

During 2017, we reclassified $0.3 million from accumulated other comprehensive income to interest expense on our closed debt issuance cash flow hedges, compared to $1.9 million during 2016 and $1.8 million during 2015.

See Note 4 – Debt for further discussion.

INTEREST RATE SWAPS and U.S. TREASURY FUTURES

We use interest rate swaps and treasury futures contracts from time to time to manage the fixed-income portfolio duration. We did not hold any interest rate swap positions at December 31, 2017 or 2016. At December 31, 2015, we held interest rate swap positions for which we were paying a fixed rate and receiving a variable rate, effectively shortening the duration of our fixed-income portfolio. As of December 31, 2015, the balance of the cash collateral that we had received from the applicable

App.-A-20

counterparty on our then open positions was $4.9 million. We did not open any U.S. treasury futures during 2017. We opened and closed treasury futures during 2016 and 2015; no positions were outstanding at either year end. 

3. FAIR VALUE

We have categorized our financial instruments, based on the degree of subjectivity inherent in the method by which they are valued, into a fair value hierarchy of three levels, as follows:

• Level 1:  Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. government obligations, which are continually priced on a daily basis, active exchange-traded equity securities, and certain short-term securities).

• Level 2:  Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i) quoted prices for similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active, (iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3:  Inputs that are unobservable. Unobservable inputs reflect our subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

Determining the fair value of the investment portfolio is the responsibility of management. As part of the responsibility, we evaluate whether a market is distressed or inactive in determining the fair value for our portfolio. We review certain market level inputs to evaluate whether sufficient activity, volume, and new issuances exist to create an active market. Based on this evaluation, we concluded that there was sufficient activity related to the sectors and securities for which we obtained valuations.

App.-A-21

The composition of the investment portfolio by major security type and our outstanding debt was:

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2017
Fixed maturities:
U.S. government obligations	$	6,645.9	$	0	$	0	$	6,645.9	$	6,688.8
State and local government obligations	0		2,297.1		0		2,297.1		2,285.6
Foreign government obligations	0		0		0		0		0
Corporate debt securities	0		4,997.7		0		4,997.7		4,997.2
Subtotal	6,645.9		7,294.8		0		13,940.7		13,971.6
Asset-backed securities:
Residential mortgage-backed	0		836.7		0		836.7		828.8
Commercial mortgage-backed	0		2,758.6		0		2,758.6		2,760.1
Other asset-backed	0		2,454.7		0		2,454.7		2,454.5
Subtotal asset-backed securities	0		6,050.0		0		6,050.0		6,043.4
Redeemable preferred stocks:
Financials	0		64.1		0		64.1		61.3
Utilities	0		11.4		0		11.4		10.1
Industrials	0		135.5		0		135.5		123.5
Subtotal redeemable preferred stocks	0		211.0		0		211.0		194.9
Total fixed maturities	6,645.9		13,555.8		0		20,201.7		20,209.9
Equity securities:
Nonredeemable preferred stocks:
Financials	80.6		718.2		0		798.8		693.6
Industrials	0		0		5.0		5.0		5.0
Subtotal nonredeemable preferred stocks	80.6		718.2		5.0		803.8		698.6
Common equities:
Common stocks	3,399.5		0		0		3,399.5		1,498.7
Other risk investments	0		0		0.3		0.3		0.3
Subtotal common equities	3,399.5		0		0.3		3,399.8		1,499.0
Total fixed maturities and equity securities	10,126.0		14,274.0		5.3		24,405.3		22,407.5
Short-term investments	1,824.4		1,045.0		0		2,869.4		2,869.4
Total portfolio	$	11,950.4	$	15,319.0	$	5.3	$	27,274.7	$	25,276.9
Debt	$	0	$	3,606.5	$	37.1	$	3,643.6	$	3,306.3

App.-A-22

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2016
Fixed maturities:
U.S. government obligations	$	2,870.1	$	0	$	0	$	2,870.1	$	2,899.2
State and local government obligations	0		2,502.6		0		2,502.6		2,509.5
Foreign government obligations	24.5		0		0		24.5		24.5
Corporate debt securities	0		4,550.9		0		4,550.9		4,557.8
Subtotal	2,894.6		7,053.5		0		9,948.1		9,991.0
Asset-backed securities:
Residential mortgage-backed	0		1,499.3		0		1,499.3		1,489.7
Commercial mortgage-backed	0		2,253.1		0.3		2,253.4		2,266.9
Other asset-backed	0		2,351.1		0		2,351.1		2,350.7
Subtotal asset-backed securities	0		6,103.5		0.3		6,103.8		6,107.3
Redeemable preferred stocks:
Financials	0		59.5		0		59.5		59.8
Utilities	0		30.9		0		30.9		30.5
Industrials	0		101.5		0		101.5		98.5
Subtotal redeemable preferred stocks	0		191.9		0		191.9		188.8
Total fixed maturities	2,894.6		13,348.9		0.3		16,243.8		16,287.1
Equity securities:
Nonredeemable preferred stocks:
Financials	138.1		715.4		0		853.5		734.2
Industrials	0		0		0		0		0
Subtotal nonredeemable preferred stocks	138.1		715.4		0		853.5		734.2
Common equities:
Common stocks	2,812.0		0		0		2,812.0		1,437.1
Other risk investments	0		0		0.4		0.4		0.4
Subtotal common equities	2,812.0		0		0.4		2,812.4		1,437.5
Total fixed maturities and equity securities	5,844.7		14,064.3		0.7		19,909.7		18,458.8
Short-term investments	3,009.3		563.6		0		3,572.9		3,572.9
Total portfolio	$	8,854.0	$	14,627.9	$	0.7	$	23,482.6	$	22,031.7
Debt	$	0	$	3,188.5	$	127.3	$	3,315.8	$	3,148.2

Our portfolio valuations, excluding short-term investments, classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources, including: pricing vendors, dealers/market makers, and exchange-quoted prices. During 2017 and 2016, we did not have any transfers between Level 1 and Level 2.

Our short-term security holdings classified as Level 1 are highly liquid, actively marketed, and have a very short duration, primarily 90 days or less to redemption. These securities are held at their original cost, adjusted for any accretion of discount, since that value very closely approximates what an active market participant would be willing to pay for such securities. The remainder of our short-term securities are classified as Level 2 and are not priced externally since these securities continually trade at par value. These securities are classified as Level 2 since they are primarily longer-dated auction securities issued by municipalities that contain a redemption put feature back to the auction pool with a redemption period typically less than seven days. The auction pool is created by a liquidity provider and if the auction is not available at the end of the seven days, we have the right to put the security back to the issuer at par.

App.-A-23

At December 31, 2017, vendor-quoted prices represented 66% of our Level 1 classifications (excluding short-term investments), compared to 52% at December 31, 2016. The securities quoted by vendors in Level 1 primarily represent our holdings in U.S. Treasury Notes, which are frequently traded and the quotes are considered similar to exchange-traded quotes. The balance of our Level 1 pricing comes from quotes obtained directly from trades made on active exchanges.

At December 31, 2017, vendor-quoted prices comprised 98% of our Level 2 classifications (excluding short-term investments), while dealer-quoted prices represented 2%, compared to 99% and 1% at December 31, 2016, respectively. In our process for selecting a source (e.g., dealer, pricing service) to provide pricing for securities in our portfolio, we reviewed documentation from the sources that detailed the pricing techniques and methodologies used by these sources and determined if their policies adequately considered market activity, either based on specific transactions for the particular security type or based on modeling of securities with similar credit quality, duration, yield, and structure that were recently transacted. Once a source is chosen, we continue to monitor any changes or modifications to their processes by reviewing their documentation on internal controls for pricing and market reviews. We review quality control measures of our sources as they become available to determine if any significant changes have occurred from period to period that might indicate issues or concerns regarding their evaluation or market coverage.

As part of our pricing procedures, we obtain quotes from more than one source to help us fully evaluate the market price of securities. However, our internal pricing policy is to use a consistent source for individual securities in order to maintain the integrity of our valuation process. Quotes obtained from the sources are not considered binding offers to transact. Under our policy, when a review of the valuation received from our selected source appears to be outside of what is considered market level activity (which is defined as trading at spreads or yields significantly different than those of comparable securities or outside the general sector level movement without a reasonable explanation), we may use an alternate source’s price. To the extent we determine that it may be prudent to substitute one source’s price for another, we will contact the initial source to obtain an understanding of the factors that may be contributing to the significant price variance, which often leads the source to adjust their pricing input data for future pricing.

To allow us to determine if our initial source is providing a price that is outside of a reasonable range, we review our portfolio pricing on a weekly basis. We frequently challenge prices from our sources when a price provided does not match our expectations based on our evaluation of market trends and activity. Initially, we perform a review of our portfolio by sector to identify securities whose prices appear outside of a reasonable range. We then perform a more detailed review of fair values for securities disclosed as Level 2. We review dealer bids and quotes for these and/or similar securities to determine the market level context for our valuations. We then evaluate inputs relevant for each class of securities disclosed in the preceding hierarchy tables.

For our structured debt securities, including commercial, residential, and asset-backed securities, we evaluate available market-related data for these and similar securities related to collateral, delinquencies, and defaults for historical trends and reasonably estimable projections, as well as historical prepayment rates and current prepayment assumptions and cash flow estimates. We further stratify each class of our structured debt securities into more finite sectors (e.g., planned amortization class, first pay, second pay, senior, subordinated, etc.) and use duration, credit quality, and coupon to determine if the fair value is appropriate.

For our corporate debt and preferred stock (redeemable and nonredeemable) portfolios, as well as the notes and debentures issued by The Progressive Corporation (see Note 4 – Debt), we review securities by duration, coupon, and credit quality, as well as changes in interest rate and credit spread movements within that stratification. The review also includes recent trades, including: volume traded at various levels that establish a market, issuer specific fundamentals, and industry specific economic news as it comes to light.

For our municipal securities (e.g., general obligations, revenue, and housing), we stratify the portfolio to evaluate securities by type, coupon, credit quality, and duration to review price changes relative to credit spread and interest rate changes. Additionally, we look to economic data as it relates to geographic location as an indication of price-to-call or maturity predictors. For municipal housing securities, we look to changes in cash flow projections, both historical and reasonably estimable projections, to understand yield changes and their effect on valuation.

Lastly, for our short-term securities, we look at acquisition price relative to the coupon or yield. Since our short-term securities are typically 90 days or less to maturity, with the majority listed in Level 2 being seven days or less to redemption, we believe that acquisition price is the best estimate of fair value.

We also review data assumptions as supplied by our sources to determine if that data is relevant to current market conditions. In addition, we independently review each sector for transaction volumes, new issuances, and changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for our market valuations.

App.-A-24

During each valuation period, we create internal estimations of portfolio valuation (performance returns), based on current market-related activity (i.e., interest rate and credit spread movements and other credit-related factors) within each major sector of our portfolio. We compare our internally generated portfolio results with those generated based on quotes we received externally and research material valuation differences. We compare our results to index returns for each major sector adjusting for duration and credit quality differences to better understand our portfolio’s results. Additionally, we review on a monthly basis our external sales transactions and compare the actual final market sales price to a previous market valuation price. This review provides us further validation that our pricing sources are providing market level prices, since we are able to explain significant price changes (i.e., greater than 2%) as known events occur in the marketplace and affect a particular security’s price at sale.

This analysis provides us with additional comfort regarding each source’s process, the quality of its review, and its willingness to improve its analysis based on feedback from clients. We believe this effort helps ensure that we are reporting the most representative fair values for our securities.

Except as described below, our Level 3 securities are also priced externally; however, due to several factors (e.g., nature of the securities, level of inactivity, and lack of similar securities trading to obtain observable market level inputs), these valuations are more subjective in nature. Certain private equity investments and fixed-income investments included in the Level 3 category are valued using external pricing supplemented by internal review and analysis.

After all the valuations are received and our review is complete, if the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected security valuations to Level 3. At December 31, 2017, we did not have any securities in our fixed-maturity portfolio listed as Level 3. At December 31, 2016, the security in our fixed-maturity portfolio listed as Level 3 was thinly held with little liquidity and based on these factors, it was difficult to independently verify the observable market inputs that were used to generate the external valuation we received. Despite the lack of sufficient observable market information for our Level 3 security, we believe the valuation received, in conjunction with our procedures for evaluating third-party prices, supports the fair value reported in the financial statement.

At December 31, 2017, we held one private nonredeemable preferred security with a value of $5.0 million that was priced internally. The security was purchased during the third quarter 2017 and the value at December 31, 2017 equals the cost at acquisition. A review of their latest available financial statements did not reveal any significant changes that would impact the security’s fair value. We did not hold any internally-priced securities at December 31, 2016.

We review the prices from our external sources for reasonableness using internally developed assumptions to derive prices for the securities, which are then compared to the prices we received. During 2017 or 2016, there were no material assets or liabilities measured at fair value on a nonrecurring basis. Based on our review, all the prices received from external sources remain unadjusted.

The following tables provide a summary of changes in fair value associated with Level 3 assets for the years ended December 31, 2017 and 2016:

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2016		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at Dec. 31, 2017
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0.3	$	(0.3	)	$	0	$	0	$	0	$	0	$	0	$	0
Total fixed maturities	0.3		(0.3		)	0		0		0		0		0		0
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		0			5.0		0		0		0		0		5.0
Common equities:
Other risk investments	0.4		(0.1		)	0		0		0		0		0		0.3
Total Level 3 securities	$	0.7	$	(0.4	)	$	5.0	$	0	$	0	$	0	$	0	$	5.3

App.-A-25

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2015		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at Dec. 31, 2016
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	9.9	$	(9.6	)	$	0	$	0	$	0	$	0	$	0	$	0.3
Total fixed maturities	9.9		(9.6		)	0		0		0		0		0		0.3
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		0			0		0		0		0		0		0
Common equities:
Other risk investments	0.3		0			0		0		0		0.1		0		0.4
Total Level 3 securities	$	10.2	$	(9.6	)	$	0	$	0	$	0	$	0.1	$	0	$	0.7

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at December 31:

	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2017		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0	NA	NA	NA
Total fixed maturities	0
Equity securities:
Nonredeemable preferred stocks:
Industrials1	5.0		Internal price	Unadjusted purchase price	3.9
Subtotal Level 3 securities	5.0
Third-party pricing exemption securities2	0.3
Total Level 3 securities	$	5.3

¹ The security was internally-priced since it is privately held and it was valued at December 31, 2017 using the purchase price.

² The fair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

App.-A-26

	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2016		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0.3	External vendor	Prepayment rate1	0
Total fixed maturities	0.3
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		NA	NA	NA
Subtotal Level 3 securities	0.3
Third-party pricing exemption securities2	0.4
Total Level 3 securities	$	0.7

¹ Assumes that one security has 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.

² Thefair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

Due to the relative size of the Level 3 securities’ fair values compared to the total portfolio’s fair value, any changes in pricing methodology would not have a significant change in valuation that would materially impact net or comprehensive income.

4.  DEBT

Debt at December 31, consisted of:

	2017				2016
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)	$	498.8	$	520.7	$	498.4	$	528.8
2.45% Senior Notes due 2027 (issued: $500.0, August 2016)	496.1		477.9		495.8		464.6
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)	296.1		382.3		295.9		380.1
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)	395.3		516.9		395.2		499.0
4.35% Senior Notes due 2044 (issued: $350.0, April 2014)	346.5		388.7		346.4		362.3
3.70% Senior Notes due 2045 (issued: $400.0, January 2015)	395.2		402.9		395.1		372.5
4.125% Senior Notes due 2047 (issued: $850.0, April 2017)	841.2		917.1		0		0
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued: $1,000.0, June 2007; outstanding: $0 and $594.6)	0		0		594.1		581.2
Other debt instruments	37.1		37.1		127.3		127.3
Total	$	3,306.3	$	3,643.6	$	3,148.2	$	3,315.8

The other debt instruments reported in the table above represent ARX indebtedness and consist of:

	December 31, 2017			December 31, 2016
Type of debt instrument	Number of Instruments	Carrying Value		Number of Instruments	Carrying Value		Stated Maturity Date(s)
Term loans	2	$	37.1	2	$	62.1	December 2018 and 2019
Junior subordinated notes	0	0		2	41.2		NA
Senior notes	0	0		4	24.0		NA
Total		$	37.1		$	127.3

NA - Not applicable as the notes were redeemed during 2017.

App.-A-27

Aggregate required principal payments on debt outstanding at December 31, 2017, are as follows:

(millions)
Year	Payments
2018	$	25.0
2019	12.1
2020	0
2021	500.0
2022	0
Thereafter	2,800.0
Total	$	3,337.1

The Progressive Corporation Debt

Excluding the other debt instruments, all of the outstanding debt was issued by The Progressive Corporation, the ultimate holding company. The holding company debt includes amounts that were borrowed and contributed to the capital of its insurance subsidiaries or used, or made available for use, for other business purposes. Fair values for these debt instruments are obtained from external sources. There are no restrictive financial covenants or credit rating triggers on The Progressive Corporation debt.

Interest on all debt issued by The Progressive Corporation is payable semiannually at the stated rates. All principal on the Senior Notes is due at the maturity stated in the tables above. The Senior Notes are redeemable, in whole or in part, at any time; however, the redemption price will equal the greater of the principal amount of the Senior Notes or a “make whole” amount calculated by reference to the present values of remaining scheduled principal and interest payments under the Senior Notes.

The Progressive Corporation issued $850 million of 4.125% Senior Notes due 2047 (the “4.125% Senior Notes”) in April 2017, and $500 million of our 2.45% Senior Notes due 2027 (the “2.45% Senior Notes”) in August 2016, in underwritten public offerings. We received proceeds, after deducting underwriter’s discounts, commissions and other issuance costs, of approximately $841.1 million and $495.6 million, respectively, and paid approximately $1.5 million and $0.9 million of costs related to the issuance of the 4.125% Senior Notes and 2.45% Senior Notes, respectively.

During 2017, we redeemed our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “6.70% Debentures”), at par, in the aggregate principal amount of $563.7 million. During 2017 and 2016, prior to the redemption, we repurchased, in the open market, $30.9 million and $19.8 million, respectively, in aggregate principal amount of our 6.70% Debentures. Since the carrying value of the debt we repurchased differed from the amount paid to extinguish the debt, we recognized a gain of $0.2 million during 2017 and $1.6 million during 2016.

Prior to issuance of our debt securities, we entered into forecasted transactions to hedge against possible rises in interest rates. When the contracts were closed upon issuance of the applicable debt securities, we recognized unrealized gains (losses) as part of accumulated other comprehensive income for all of the Senior Notes, except for the 2.45% Senior Notes. Upon issuance of the 2.45% Senior Notes, we recognized a realized loss of $1.4 million (See Note 2 – Investments for further discussion). The following table shows the original gain (loss) recognized at debt issuance and the unamortized balance at December 31, 2017, on a pretax basis:

(millions)	Unrealized Gain (Loss) at Debt Issuance			Unamortized Balance at December 31, 2017
3.75% Senior Notes	$	(5.1	)	$	(2.1	)
6 5/8% Senior Notes	(4.2		)	(2.7		)
6.25% Senior Notes	5.1			3.6
4.35% Senior Notes	(1.6		)	(1.5		)
3.70% Senior Notes	(12.9		)	(12.2		)
4.125% Senior Notes	(8.0		)	(7.9		)

These unrealized gains (losses) are being amortized as adjustments to interest expense over the life of the related Senior Notes.

App.-A-28

ARX Debt (i.e., Other debt instruments)

The other debt instruments were issued by ARX, prior to The Progressive Corporation acquiring a controlling interest in 2015. ARX, not The Progressive Corporation or any of its other subsidiaries, is responsible for the other debt, which includes amounts that were borrowed and contributed to the capital of ARX’s insurance subsidiaries or used, or made available for use, for other business purposes.

In estimating the fair values of the other debt instruments, it was determined that the fair values of these notes are equal to the carrying value, based on the current rates offered for debt of similar maturities and interest rates.

During 2017, ARX redeemed its junior subordinated notes and senior notes, in their entirety, in the aggregate principal amount of $65.2 million, with proceeds from a 5-year, fixed-rate loan made by The Progressive Corporation to fund the redemptions; this intercompany transaction is eliminated in consolidation.

Monthly interest and principal payments are made on the term loans, with interest calculated based on the 30-day LIBOR plus 2.25%. Principal payments of $25.0 million are required to be paid during the next twelve months on these term loans. The term loans are secured by 100% of the outstanding common stock of three subsidiaries of ARX.

The term loans require ARX and its subsidiaries to maintain specified debt leverage and fixed charge coverage ratios, as well as maintain a minimum risk-based capital ratio and minimum financial strength and credit ratings, as provided by A.M. Best Company, Inc. As of December 31, 2017, ARX did not maintain the specified fixed charge coverage ratio or the minimum risk-based capital ratio on one of the subsidiaries that is pledged as collateral on the term loans. Subsequent to year-end, ARX received a waiver from the bank in regards to both of these items.

The Progressive Corporation Line of Credit

During 2017, The Progressive Corporation entered into a new line of credit with PNC Bank, National Association (PNC) in the maximum principal amount of $250 million. This line of credit replaced a previous line of credit with a maximum principal amount of $100 million that expired in April 2017. Subject to the terms and conditions of the line of credit documents, advances under the line of credit (if any) will bear interest at a variable rate equal to the higher of PNC’s Prime Rate or the sum of the Federal Funds Open Rate plus 50 basis points. Each advance must be repaid on the 30th day after the advance or, if earlier, on April 30, 2018, the expiration date of the Line of Credit. Prepayments are permitted without penalty. The Line of Credit is uncommitted and, as such, all advances are subject to PNC’s discretion. We had no borrowings under either line of credit in 2017 or 2016.

5.  INCOME TAXES

The components of our income tax provision were as follows:

(millions)	2017			2016			2015
Current tax provision
Federal	$	680.9		$	469.6		$	655.3
State	12.8			12.7			14.7
Deferred tax expense (benefit)
Federal	(149.4		)	(66.3		)	(47.7		)
State	(3.5		)	(2.5		)	(11.2		)
Total income tax provision	$	540.8		$	413.5		$	611.1

App.-A-29

The provision for income taxes in the accompanying consolidated statements of comprehensive income differed from the statutory rate as follows:

($ in millions)	2017					2016					2015
Income before income taxes	$	2,138.9				$	1,470.7				$	1,911.6
Tax at statutory federal rate	$	748.6		35	%	$	514.8		35	%	$	669.1		35	%
Tax effect of:
Net deferred tax liability revaluation1	(99.5		)	(5	)	0			0		0			0
Tax credits	(52.4		)	(2	)	(62.2		)	(4	)	(1.9		)	0
Stock-based compensation2	(25.1		)	(1	)	0			0		0			0
Dividends received deduction	(20.7		)	(1	)	(22.6		)	(2	)	(19.8		)	(1	)
Exempt interest income	(16.9		)	(1	)	(15.7		)	(1	)	(17.8		)	(1	)
Tax-deductible dividends	(9.7		)	0		(6.1		)	0		(7.9		)	0
Nondeductible compensation expense3	10.1			0		0.5			0		0.3			0
State income taxes, net of federal taxes	6.0			0		6.6			0		2.3			0
Other items, net	0.4			0		(1.8		)	0		0.6			0
Non-taxable gain4	0			0		0			0		(13.8		)	(1	)
Total income tax provision	$	540.8		25	%	$	413.5		28	%	$	611.1		32	%

¹ Pursuant to the recently enacted legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”); see further discussion below.

² Represents excess tax benefits associated with share-based payments awards. Prior to 2017, these excess tax benefits were recorded directly to additional paid-in capital under the then existing accounting guidance.

³ Increase in 2017 primarily reflects changes in compensation that qualifies for deduction under the Tax Act.

⁴ Represents the tax effect of holding period gains on the 5% interest in ARX we owned prior to acquisition of a controlling interest on April 1, 2015.

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. One of the provisions of the Tax Act reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Pursuant to current accounting guidance, all deferred tax assets and liabilities were revalued to recognize the tax rate that is expected to apply when the tax effects are ultimately recognized in future periods. The impact of revaluing the deferred tax assets and liabilities from 35% to 21% was a net reduction to income tax expense of $99.5 million, as disclosed in the table above. This revaluation adjustment included a $275.7 million reduction related to the deferred tax liability associated with the net unrealized gains on our investment portfolio, which was originally recorded as a component of other comprehensive income and not through the tax provision. The remaining $176.2 million, which increased the tax provision, was associated with our other deferred tax assets and liabilities identified in the table below.

As of December 31, 2017, the company had not fully completed its accounting for the tax effects of the enactment of the Tax Act with regard to the following:              

• The company recorded a provisional tax amount of  $4.5 million related to deductibility of compensation expense for certain covered executives due to uncertainty surrounding the appropriate tax treatment of outstanding performance-based awards. This amount may change when the Internal Revenue Service (IRS) issues additional guidance.

• The company did not record any amounts related to the changes in loss reserve discounting required by the Tax Act. These changes require the IRS to publish new discount factors based on loss payment patterns and interest rates determined under the Tax Act, and the IRS has not yet published this information. We are unable to make a reasonable estimate at this time; however, the ultimate adjustment is not expected to have any net impact on the current year balance sheet or income statement.

App.-A-30

Deferred income taxes reflect the effect for financial statement reporting purposes of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. The following table shows the components of the net deferred tax liability at December 31, 2017 and 2016. As noted above, the federal deferred tax assets and liabilities at December 31, 2017, have been revalued to reflect the new 21% federal corporate income tax rate under the Tax Act.

(millions)	2017			2016
Federal deferred tax assets:
Unearned premiums reserve	$	368.9		$	515.6
Non-deductible accruals	166.0			259.9
Loss and loss adjustment expense reserves	48.4			76.5
Hedges on forecasted transactions	4.8			5.1
Investment basis differences	0			31.3
Other	7.3			8.9
Federal deferred tax liabilities:
Net unrealized gains on securities	(419.5		)	(507.2		)
Deferred acquisition costs	(163.9		)	(227.9		)
Property and equipment	(75.5		)	(120.2		)
Intangible assets	(66.6		)	(145.3		)
Prepaid expenses	(7.1		)	(9.2		)
Investment basis differences	(5.5		)	0
Deferred gain on extinguishment of debt	(0.4		)	(1.5		)
Other	(6.1		)	(7.7		)
Net federal deferred tax liability	(149.2		)	(121.7		)
Net state deferred tax asset	14.2			10.4
Net deferred tax liability	$	(135.0	)	$	(111.3	)

Although realization of the deferred tax assets is not assured, management believes that it is more likely than not that the deferred tax assets will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes and, therefore, no valuation allowance was needed at December 31, 2017 or 2016.

At December 31, 2017 and 2016, we had $23.8 million and $41.2 million, respectively, of net taxes payable (included in other liabilities on the balance sheet).

The Progressive Corporation and its wholly-owned subsidiaries file a consolidated income tax return. This group has been a participant in the Compliance Assurance Program (CAP) since 2007. Under CAP, the IRS begins its examination process for the tax year before the tax return is filed, by examining significant transactions and events as they occur. The goal of the CAP program is to expedite the exam process and to reduce the level of uncertainty regarding a taxpayer’s tax filing positions.

All federal income tax years prior to 2014 are closed to examination for both Progressive and ARX. The IRS exams for 2014-2016 for Progressive have been completed and the returns were accepted as filed. We consider these years to be effectively settled. The 2017 tax year remains open to examination.

ARX and its wholly owned subsidiaries file their own consolidated income tax return since we owned less than 80% of their outstanding stock at December 31, 2017. This group was last examined by the IRS for the 2011 and 2012 tax years, which we consider to be effectively settled. The statute of limitations has expired for the 2013 tax year, while the 2014-2017 tax years remain open to examination.

The statute of limitations for state income tax purposes generally remains open for three to four years from the return filing date, depending upon the jurisdiction. There has been no significant state income tax audit activity.

We recognize interest and penalties, if any, as a component of income tax expense. For the years ended December 31, 2017, 2016, and 2015, $0.2 million, less than $0.1 million, and $0.1 million, respectively, of interest and penalties expense has been recorded in the tax provision. We have not recorded any unrecognized tax benefits, or any related interest and penalties, as of December 31, 2017 and 2016.

App.-A-31

6.  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

We write personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services throughout the United States. As a property-casualty insurance company, we are exposed to hurricanes or other catastrophes. To help mitigate this risk, we maintain excess of loss and aggregate stop-loss reinsurance coverage on our Property business. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, we believe that, based on historical experience, such an event would not be so material as to disrupt the overall normal operations of Progressive. We are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

As we are primarily an insurer of motor vehicles and residential property, we have limited exposure to environmental, asbestos, and general liability claims. We have established reserves for such exposures, in amounts that we believe to be adequate based on information currently known. These claims are not expected to have a material effect on our liquidity, financial condition, cash flows, or results of operations.

Loss and Loss Adjustment Expense Reserves

Loss and loss adjustment expense (LAE) reserves represent our best estimate of our ultimate liability for losses and LAE relating to events that occurred prior to the end of any given accounting period but have not yet been paid. For our vehicle businesses, which represent about 98% of our total carried reserves, Progressive’s actuarial staff reviews over 400 subsets of business data, which are at a combined state, product, and line coverage level (the “products”), to calculate the needed loss and LAE reserves. We begin our review of a set of data by producing multiple estimates of needed reserves, using both paid and incurred data, to determine if a reserve change is required. In the event of a wide variation among results generated by the different projections, our actuarial group will further analyze the data using additional quantitative analysis. Each review develops a point estimate for a relatively small subset of the business, which allows us to establish meaningful reserve levels for that subset. We believe our comprehensive process of reviewing at a subsegment level provides us more meaningful estimates of our aggregate loss reserves.

The actuarial staff completes separate projections of needed case and incurred but not recorded (IBNR) reserves. Since a large majority of the parties involved in an accident report their claims within a short time period after the occurrence, we do not carry a significant amount of IBNR reserves for older accident years. Based on the methodology we use to estimate case reserves for our vehicle businesses, we do not have expected development on reported claims included in our IBNR reserves. We do, however, include anticipated salvage and subrogation recoveries in our IBNR reserves, which could result in negative carried IBNR reserves, primarily in our physical damage reserves.

Changes in historical data may reduce the predictiveness of our projected future loss costs. Internal considerations that are process-related, which generally result from changes in our claims organization’s activities, include claim closure rates, the number of claims that are closed without payment, and the level of the claims representatives’ estimates of the needed case reserve for each claim. These changes and their effect on the historical data are studied at the state level versus on a larger, less indicative, countrywide basis. External items considered include the litigation atmosphere, state-by-state changes in medical costs, and the availability of services to resolve claims. These also are better understood at the state level versus at a more macro, countrywide level. The actuarial staff takes these changes into consideration when making their assumptions to determine needed reserve levels.

Similar to our vehicle businesses, our actuarial staff analyzes loss and LAE property data on an accident period basis. Many of the methodologies and key parameters reviewed are similar. Unlike our vehicle businesses, primarily due to the low levels of reserves, data is reviewed at a macro level and a range of reserves are generated to determine a reasonable range. In addition, for our Property business, since claims adjusters primarily establish the case reserves, the actuarial staff includes expected development on case reserves as a component of the overall IBNR reserves.

App.-A-32

Activity in the loss and loss adjustment expense reserves is summarized as follows:

(millions)	2017		2016			2015
Balance at January 1	$	11,368.0	$	10,039.0		$	8,857.4
Less reinsurance recoverables on unpaid losses	1,801.0		1,442.7			1,185.9
Net balance at January 1	9,567.0		8,596.3			7,671.5
Net loss and loss adjustment reserves (disposed) acquired1	0		(2.5		)	222.4
Total beginning reserves	9,567.0		8,593.8			7,893.9
Incurred related to:
Current year	18,782.1		16,967.1			14,657.1
Prior years	25.9		(87.5		)	(315.1		)
Total incurred	18,808.0		16,879.6			14,342.0
Paid related to:
Current year	12,201.5		11,149.0			9,577.3
Prior years	5,256.7		4,757.4			4,062.3
Total paid	17,458.2		15,906.4			13,639.6
Net balance at December 31	10,916.8		9,567.0			8,596.3
Plus reinsurance recoverables on unpaid losses	2,170.1		1,801.0			1,442.7
Balance at December 31	$	13,086.9	$	11,368.0		$	10,039.0

¹ During 2016, $2.5 million net reserves were disposed by ARX in an exchange transaction (see Note 16 – Goodwill and Intangible Assets for further discussion). During 2015, $222.4 million net reserves were acquired in the ARX acquisition.

We experienced unfavorable reserve development of $25.9 million in 2017, and favorable development of $87.5 million in 2016 and $315.1 million in 2015, which is reflected as “Incurred related to prior years” in the table above.

2017

• Approximately $64 million of unfavorable prior year reserve development was attributable to accident years 2016 and 2015. This unfavorable development was offset by $38 million of favorable development attributable to accident year 2014 and prior accident years.

• Our personal auto products incurred $70 million of unfavorable loss and LAE reserve development, primarily in the Agency business, in part reflecting an increase in costs related to property damage and higher LAE costs, primarily due to an increase in incentive compensation and defense counsel spend.

• Our Property business experienced $37 million in favorable development primarily due to lower severity and frequency than anticipated for accident year 2016 and development of losses eligible to be ceded under our catastrophe bond reinsurance program.

• Our commercial auto products had less than $1 million of unfavorable reserve development.

2016

• Approximately $56 million of the favorable prior year reserve development was attributable to accident year 2015, and approximately $51 million of favorable development was attributable to accident years 2013 and prior. This favorable development was partially offset by $19 million of unfavorable development attributable to accident year 2014.

• Our Personal Lines and Property businesses incurred $54 million and $52 million, respectively, of favorable loss and LAE reserve development, partially offset by the unfavorable loss and LAE development in Commercial Lines. In our Property business, both the severity and frequency of late reported claims was less than anticipated.

• Our personal auto product developed favorably $40 million, almost evenly split between Direct and Agency.

• Our personal auto business incurred favorable case development, primarily in bodily injury due to a lower than anticipated severity.

• Our personal auto and Commercial Lines businesses incurred unfavorable IBNR loss reserve development, primarily due to a higher severity and frequency of late reported claims than anticipated for accident year 2015, due in part to storms in late December 2015, resulting in a greater number of claims being reported in January 2016 than anticipated.

App.-A-33

• In addition, our Commercial Lines business experienced unfavorable case reserve development for accident year 2014, primarily due to a higher severity than anticipated on our largest limits, while case reserve development for accident years 2015 and 2013 and prior was favorable.

2015

• Approximately $239 million of the favorable prior year reserve development was primarily attributable to accident year 2014.

• Favorable reserve development occurred in all segments; our combined Agency auto business and Direct auto business experienced approximately $217 million of total development, with the remainder split between our Commercial Lines and Property businesses.

• In our personal auto and Commercial Lines businesses, we incurred favorable case loss reserve development, primarily in bodily injury and uninsured motorist bodily injury coverages, due to lower than anticipated severity.

• Our Property business development was favorable due to lower than anticipated severity and frequency across all products, primarily in accident years 2014 and 2013.

Incurred and Paid Claims Development by Accident Year

The tables below present our incurred and paid claims development by accident year for the last five years, which generally represents the maximum development period for claims in any of our segments. The tables below include inception-to-date information for companies acquired and wholly exclude companies disposed of, rather than including information from the date of acquisition, or until the date of disposition. We believe that the most meaningful presentation of claims development is through the retrospective approach by presenting all relevant historical information for all periods presented.

We have elected to present our incurred and paid claims development consistent with our GAAP reportable segments (see Note 10 – Segment Information for a discussion of our segment reporting), with a further disaggregation of our Personal Lines and Commercial Lines claims development between liability and physical damage, since the loss patterns are significantly different between them. The other business primarily includes reserves for our run-off products, which are not considered material, and, therefore, we are not including separate claims development tables.

The following tables show incurred and paid claims development, net of reinsurance, by accident year. Only 2017 is audited; all prior years are considered required supplementary information and, therefore, are unaudited. Expected development on our case reserves is excluded from the IBNR reserves on our vehicle businesses, as discussed above. For the Property business, the IBNR reserves include expected case development based on the methodology used in establishing the case reserves for that segment. The cumulative number of incurred claims are based on accident coverages (e.g., bodily injury, collision, comprehensive, personal injury protection, property damage) related to opened claims. Coverage counts related to claims closed without payment are excluded from the cumulative number of incurred claims.

App.-A-34

Personal Lines - Agency - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	3,506.0	$	3,520.9	$	3,518.2	$	3,528.0	$	3,484.2	$	0	696,624
2014			3,702.1		3,627.7		3,633.2		3,654.4		50.9		701,787
2015					3,774.9		3,773.8		3,798.8		59.2		704,990
2016							4,082.9		4,130.0		158.7		738,563
2017									4,474.8		679.6		765,553
							Total		$	19,542.2
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,684.0	$	2,794.1	$	3,173.1	$	3,362.9	$	3,437.6
2014			1,809.0		2,868.1		3,284.5		3,482.3
2015					1,793.1		2,976.0		3,416.5
2016							1,941.6		3,231.5
2017									2,074.0
							Total		$	15,641.9
	All outstanding liabilities before 2013, net of reinsurance1								55.2
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	3,955.5

¹ Required supplementary information (unaudited)

Personal Lines - Agency - Physical Damage
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	2,014.0	$	2,001.4	$	2,000.1	$	1,999.4	$	2,001.1	$	0		1,347,920
2014			2,107.5		2,090.3		2,089.9		2,088.0		(3.3		)	1,374,666
2015					2,136.8		2,137.2		2,134.4		(2.6		)	1,336,268
2016							2,423.4		2,398.9		(12.1		)	1,398,371
2017									2,635.5		(101.8		)	1,496,298
							Total		$	11,257.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,952.7	$	2,003.9	$	2,002.0	$	2,001.3	$	2,000.8
2014			2,078.8		2,091.6		2,090.6		2,090.7
2015					2,106.2		2,138.1		2,134.4
2016							2,391.0		2,406.9
2017									2,599.8
							Total		$	11,232.6
	All outstanding liabilities before 2013, net of reinsurance1								0.9
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	26.2

¹ Required supplementary information (unaudited)

App.-A-35

Personal Lines - Direct - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	2,619.4	$	2,621.8	$	2,615.8	$	2,649.8	$	2,612.9	$	0	550,166
2014			2,946.8		2,887.4		2,898.1		2,913.6		38.2		592,185
2015					3,330.5		3,328.3		3,354.2		48.6		659,102
2016							3,819.0		3,843.9		143.0		733,195
2017									4,209.5		598.6		761,280
							Total		$	16,934.1
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,252.0	$	2,085.1	$	2,375.5	$	2,521.3	$	2,577.8
2014			1,413.0		2,278.0		2,624.2		2,780.0
2015					1,545.2		2,615.0		3,021.0
2016							1,780.6		2,991.1
2017									1,912.6
							Total		$	13,282.5
	All outstanding liabilities before 2013, net of reinsurance1								33.5
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	3,685.1

¹ Required supplementary information (unaudited)

Personal Lines - Direct - Physical Damage
($ in millions)												As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance												December 31, 2017
	For the years ended December 31,											Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	1,653.7	$	1,635.6	$	1,634.6	$	1,633.4	$	1,635.0		$	0		1,367,341
2014			1,889.3		1,862.2		1,861.7		1,859.2			(3.2		)	1,471,016
2015					2,110.7		2,097.7		2,093.5			(3.0		)	1,539,790
2016							2,521.0		2,475.4			(14.3		)	1,675,405
2017									2,750.6			(145.3		)	1,779,665
							Total		$	10,813.7
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,612.9	$	1,638.2	$	1,636.2	$	1,635.3	$	1,635.0
2014			1,874.6		1,864.1		1,862.7		1,861.8
2015					2,094.7		2,100.1		2,094.7
2016							2,505.0		2,485.8
2017									2,742.1
							Total		$	10,819.4
	All outstanding liabilities before 2013, net of reinsurance1								0.1
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	(5.6	)

¹ Required supplementary information (unaudited)

App.-A-36

Commercial Lines - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	864.2	$	864.6	$	865.4	$	865.0	$	840.8	$	0	78,075
2014			822.5		795.4		820.3		823.0		15.9		74,724
2015					897.6		911.1		914.8		23.7		77,807
2016							1,185.8		1,204.8		63.1		92,196
2017									1,374.1		219.2		94,992
							Total		$	5,157.5
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	233.3	$	509.4	$	659.1	$	752.5	$	802.6
2014			234.0		438.7		610.0		715.3
2015					238.4		501.5		675.0
2016							298.6		639.9
2017									325.8
							Total		$	3,158.6
	All outstanding liabilities before 2013, net of reinsurance1								28.5
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	2,027.4

¹ Required supplementary information (unaudited)

Commercial Lines - Physical Damage
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	256.2	$	254.2	$	254.5	$	253.7	$	254.2	$	0		62,673
2014			240.3		239.7		238.6		238.0		(0.5		)	59,622
2015					274.4		274.1		273.5		(0.1		)	62,593
2016							379.6		379.8		(0.9		)	74,217
2017									415.4		(5.7		)	77,767
							Total		$	1,560.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	239.4	$	253.1	$	253.9	$	253.7	$	253.8
2014			224.6		238.3		237.7		237.9
2015					248.5		271.9		272.0
2016							336.7		376.9
2017									369.0
							Total		$	1,509.6
	All outstanding liabilities before 2013, net of reinsurance1								0.4
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	51.7

¹ Required supplementary information (unaudited)

App.-A-37

Property Business
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	307.3	$	283.3	$	254.3	$	254.1	$	253.9	$	2.5	30,600
2014			415.5		389.1		379.7		376.3		3.6		40,984
2015					460.0		416.5		403.6		11.5		41,957
2016							568.6		541.2		24.8		53,323
2017									672.8		99.7		64,487
							Total		$	2,247.8
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	185.1	$	234.2	$	244.9	$	249.5	$	250.5
2014			269.2		351.5		365.9		370.3
2015					280.3		372.8		383.5
2016							415.2		498.2
2017									506.7
							Total		$	2,009.2
	All outstanding liabilities before 2013, net of reinsurance1								7.2
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	245.8

¹ Required supplementary information (unaudited)

App.-A-38

The following table reconciles the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses:

(millions)	2017			2016
Net outstanding liabilities
Personal Lines
Agency, Liability	$	3,955.5		$	3,555.9
Agency, Physical Damage	26.2			30.1
Direct, Liability	3,685.1			3,219.1
Direct, Physical Damage	(5.6		)	11.2
Commercial Lines
Liability	2,027.4			1,675.3
Physical Damage	51.7			46.6
Property	245.8			224.7
Other business	43.7			37.1
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	10,029.8			8,800.0
Reinsurance recoverable on unpaid claims
Personal Lines
Agency, Liability	769.8			724.5
Agency, Physical Damage	0			0
Direct, Liability	838.1			724.3
Direct, Physical Damage	0			0
Commercial Lines
Liability	105.1			59.5
Physical Damage	0.1			0
Property	243.8			132.7
Other business	200.9			154.9
Total reinsurance recoverable on unpaid claims	$	2,157.8		$	1,795.9
Unallocated claims adjustment expense related to:
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	887.0			767.0
Reinsurance recoverable on unpaid claims	12.3			5.1
Total gross liability for unpaid claims and claim adjustment expense	$	13,086.9		$	11,368.0

The following table shows the average historical claims duration as of December 31, 2017:

(Required Supplementary Information - Unaudited)
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance	Years
	1	2	3	4	5
Personal Lines
Agency, Liability	47.6%	30.8%	11.3%	5.4%	2.1%
Agency, Physical Damage	98.9%	1.3%	(0.1)%	0%	0%
Direct, Liability	46.7%	31.3%	11.7%	5.5%	2.2%
Direct, Physical Damage	100.1%	0%	(0.2)%	(0.1)%	0%
Commercial Lines
Liability	25.8%	28.7%	19.2%	11.9%	6.0%
Physical Damage	90.9%	7.9%	0%	0%	0%
Property	73.7%	19.5%	3.5%	1.4%	0.4%

App.-A-39

7.  REINSURANCE

The effect of reinsurance on premiums written and earned for the years ended December 31, was as follows:

	2017						2016						2015
(millions)	Written			Earned			Written			Earned			Written			Earned
Direct premiums	$	27,860.7		$	26,425.7		$	23,941.9		$	23,111.2		$	21,086.5		$	20,454.1
Ceded premiums:
Regulated plans	(505.9		)	(479.6		)	(439.4		)	(425.1		)	(358.0		)	(362.6		)
Non-Regulated plans	(222.7		)	(216.2		)	(149.0		)	(212.1		)	(164.5		)	(192.4		)
Total ceded premiums	(728.6		)	(695.8		)	(588.4		)	(637.2		)	(522.5		)	(555.0		)
Net premiums	$	27,132.1		$	25,729.9		$	23,353.5		$	22,474.0		$	20,564.0		$	19,899.1

The Regulated plans primarily include the following:

• Federal reinsurance plan

• National Flood Insurance Program (NFIP)

• State-provided reinsurance facilities

• Michigan Catastrophic Claims Association (MCCA)

• North Carolina Reinsurance Facility (NCRF)

• Florida Hurricane Catastrophe Fund (FHCF)

• State-mandated involuntary plans

• Commercial Automobile Insurance Procedures/Plans (CAIP)

The Non-Regulated plans primarily include amounts ceded on Property business under catastrophic and aggregate stop-loss reinsurance agreements, as well as amounts ceded on transportation network company (TNC) business under a quota-share reinsurance agreement.

The increase in ceded written premiums for 2017 was primarily driven by growth in the Regulated plans, a full year of ceded premiums on the reinsurance coverage on the TNC business, and the aggregate stop-loss agreement that was effective January 1, 2017. For 2016, the increase reflected the beginning of reinsurance coverage on the TNC pilot program and a full year of ceded premiums on catastrophe reinsurance held by ASI, partially offset by ASI’s termination of a quota-share contract, which reduced ceded earned premium in 2016.

Losses and loss adjustment expenses were net of losses ceded of $1,094.2 million in 2017, $764.4 million in 2016, and $457.3 million in 2015. The increase in losses and loss adjustment expenses ceded in 2017 and 2016, compared to the prior years, was primarily driven by the impact of catastrophic flooding events on the business serviced by ASI and other subsidiaries of ARX as part of its participation in the NFIP. For 2017, ASI also ceded additional losses and loss adjustment expenses due to the hurricanes and other severe storms that were reinsured by ASI.

App.-A-40

Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:

	Prepaid Reinsurance Premiums								Reinsurance Recoverables
($ in millions)	2017				2016				2017				2016
Regulated plans:
MCCA	$	44.3	22	%	$	36.5	21	%	$	1,611.5	71	%	$	1,452.7	77	%
CAIP	50.0		25		40.2		24		218.0		10		170.6		9
NCRF	31.5		15		27.5		16		74.2		3		67.0		4
NFIP	53.8		26		49.1		29		148.8		7		78.5		4
Other	0.3		0		0.1		0		8.2		0		3.5		0
Total Regulated plans	179.9		88		153.4		90		2,060.7		91		1,772.3		94
Non-Regulated plans:
Property	9.1		5		3.2		2		138.6		6		62.9		3
Other	14.3		7		13.9		8		74.1		3		49.6		3
Total Non-Regulated plans	23.4		12		17.1		10		212.7		9		112.5		6
Total	$	203.3	100	%	$	170.5	100	%	$	2,273.4	100	%	$	1,884.8	100	%

The increase in reinsurance recoverables during 2017 reflects both new claims and development under the MCCA program, catastrophic flooding on business under the NFIP, and recoverables under the other catastrophe reinsurance programs covering hurricanes and other severe storms. In addition, part of the increase reflects business growth and reserve development in our TNC business, which is covered by a quota-share reinsurance agreement.

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to us. Our exposure to losses from the failure of Regulated plans is minimal, since these plans are funded by the federal government or by mechanisms supported by insurance companies in applicable states. We evaluate the financial condition of our other reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies.

8.  STATUTORY FINANCIAL INFORMATION

Consolidated statutory surplus was $9,664.4 million and $8,560.0 million at December 31, 2017 and 2016, respectively. Statutory net income was $1,416.2 million, $1,022.3 million, and $1,333.1 million for the years ended December 31, 2017, 2016, and 2015, respectively.

At December 31, 2017, $830.1 million of consolidated statutory surplus represented net admitted assets of our insurance subsidiaries and affiliates that are required to meet minimum statutory surplus requirements in such entities’ states of domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum statutory surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the companies are licensed.

During 2017, the insurance subsidiaries paid aggregate cash dividends of $872.8 million to their parent company. Based on the dividend laws in effect at December 31, 2017, the insurance subsidiaries could pay aggregate dividends of $1,390.5 million in 2018 without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of previous dividends paid by the applicable subsidiary.

9.  EMPLOYEE BENEFIT PLANS

Beginning July 1, 2017, employees of ARX and its subsidiaries were included in the benefit plans described below. References in this Note 9 to Progressive refer to The Progressive Corporation and its subsidiaries, including ARX and its subsidiaries. Prior to July 1, 2017, ARX maintained employee benefit plans that were separate from the plans that covered employees of The Progressive Corporation’s other subsidiaries.

Retirement Plans  Progressive has a defined contribution pension plan (401(k) Plan) that covers employees who have been employed with the company for at least 30 days. Under Progressive’s 401(k) Plan, we match up to a maximum of 6% of an

App.-A-41

employee’s eligible compensation contributed to the plan. Employee and company matching contributions are invested, at the direction of the employee, in a number of investment options available under the plan, including various mutual funds, a self-directed brokerage option, and a Progressive common stock fund. Progressive’s common stock fund is an employee stock ownership program (ESOP) within the 401(k) Plan. At December 31, 2017, the ESOP held 24.6 million of our common shares, all of which are included in shares outstanding. Dividends on these shares are reinvested in common shares or paid out in cash, at the election of the participant, and the related tax benefit is recorded as part of our tax provision.

Previously, ARX employees were covered by separate qualified defined contribution plans. Matching contributions to these plans for the year ended December 31, 2017, 2016, and 2015 (including the contributions made subsequent to The Progressive Corporation acquiring a controlling interest in ARX) were $97.3 million, $86.8 million, and $79.1 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Postemployment BenefitsProgressive provides various postemployment benefits to former or inactive employees who meet eligibility requirements, and to their beneficiaries and covered dependents. Postemployment benefits include salary continuation and disability-related benefits, including workers’ compensation and, if elected, continuation of health-care benefits for specified limited periods. The liability for these benefits was $19.5 million and $21.7 million at December 31, 2017 and 2016, respectively.

Incentive Compensation Plans – EmployeesProgressive’s incentive compensation programs include both non-equity incentive plans (cash) and equity incentive plans. Progressive’s cash incentive compensation includes an annual cash incentive program for a limited number of senior executives and Progressive’s Gainsharing program for other employees, and for 2017, a separate gainsharing program for ARX employees; the structures of these programs are similar in nature. Progressive’s equity incentive compensation plans provide for the granting of restricted stock awards and restricted stock unit awards (collectively, “restricted equity awards”) to key members of management. Since 2010, Progressive has only issued restricted stock units as the form of equity compensation.

In addition, ARX provides periodic cash bonuses to its employees and, prior to 2017, annual cash bonuses to its employees. ARX also has an equity compensation plan under which it has granted stock option awards, exercisable for shares of ARX common stock, to certain of its key employees. These stock option awards include both nonqualified and incentive stock options; all such stock options are subject to the put and call provisions of the ARX stockholders’ agreement (See Note 15 – Redeemable Noncontrolling Interest for further discussion). As a result of these provisions, and the determination that the ultimate settlement of these awards would be in cash, the ARX stock options are treated as liability awards for accounting purposes.

The amounts charged to income for Progressive and ARX incentive compensation plans for the years ended December 31, were:

	2017				2016				2015
(millions)	Pretax		After Tax		Pretax		After Tax		Pretax		After Tax
Non-equity incentive plans – cash	$	461.3	$	299.8	$	386.8	$	251.4	$	337.7	$	219.5
Equity incentive plans:
Equity awards	92.9		60.4		80.9		52.6		64.5		41.9
Liability awards	2.5		1.6		4.3		2.8		1.7		1.1

The increase in expense for the equity awards during 2017 primarily reflects an increase in management’s expectation of the percentage of certain performance-based awards that will ultimately vest (discussed below). The after-tax amounts are determined using the 35% corporate federal tax rate; the revaluation to the 21% rate is reflected in the total revaluation adjustment recorded at December 31, 2017 (see Note 5 – Income Taxes for further discussion).

Progressive’s 2003 Incentive Plan has expired, and no new awards may be made under this plan; all awards granted prior to the plan’s expiration have vested, been forfeited, or expired, prior to December 31, 2015. Progressive’s 2010 Equity Incentive Plan and 2015 Equity Incentive Plan, which provide for the granting of equity-based compensation to officers and other key employees, originally authorized awards for up to 18.0 million shares and up to 13.0 million shares, respectively.

The restricted equity awards are issued as either time-based or performance-based awards. All restricted stock units are settled at or after vesting in Progressive common shares from existing treasury shares on a one-to-one basis. The time-based awards vest in equal installments upon the lapse of specified periods of time, typically three, four, and five years.

App.-A-42

The performance-based awards were granted to approximately 45 Progressive executives and senior managers (including certain ARX managers) in 2017 in addition to their time-based awards, if applicable, to provide additional incentive to achieve pre-established profitability and growth targets, relative investment performance, or specific growth measures.

Vesting of performance-based awards is contingent upon the achievement of predetermined performance goals within specified time periods. The targets for the performance-based awards, as well as the number of units that ultimately may vest, vary by grant. All performance-based awards include a specified number of units that will vest if performance meets a specified target and minimum performance goals. If at least the minimum performance goals are achieved, the range at which an award can vest is determined by the type of measurement goals included in the award, as follows:

Performance Measurement	Year(s) of Grant	Vesting range (as a percentage of target)
Growth of our personal and commercial auto businesses, compared to market	2013-2017	0-250%
	2012	0-200%
Investment results relative to peer group	2012-2017	0-200%
Growth in percentage of auto policies bundled with other specified types of policies	2015	0% or 100-200%
Unit growth in a particular customer segment	2016-2017	0% or 85-150%

Generally, time-based and performance-based equity awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant. Performance-based equity awards that contain variable vesting criteria are expensed based on management’s expectation of the percentage of the award, if any, that will ultimately vest. These estimates can change periodically throughout the measurement period.

A summary of all employee restricted equity award activity during the years ended December 31, follows:

	2017				2016				2015
Restricted Equity Awards	Number of Shares1		Weighted Average Grant Date Fair Value		Number of Shares1		Weighted Average Grant Date Fair Value		Number of Shares1		Weighted Average Grant Date Fair Value
Beginning of year	6,951,373		$	26.18	7,725,227		$	23.37	9,051,564		$	21.27
Add (deduct):
Granted2	2,383,475		32.01		1,870,660		31.54		2,489,976		25.20
Vested	(3,220,671	)	22.53		(2,422,700	)	21.50		(3,682,644	)	19.53
Forfeited	(255,329	)	28.03		(221,814	)	24.64		(133,669	)	21.63
End of year3,4	5,858,848		$	30.47	6,951,373		$	26.18	7,725,227		$	23.37

¹ Includes restricted stock units; 2015 also includes restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares funded from existing treasury shares. All performance-based awards are included at their target amounts.

² We reinvest dividend equivalents on restricted stock units. For 2017, 2016, and 2015, the number of units “granted” shown in the table above includes 157,396, 165,045, and 196,947 of dividend equivalent units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

³ At December 31, 2017, the number of shares included 1,513,779 performance-based units at their target amounts. We expect 3,244,111 units to vest based upon our current estimates of the likelihood of achieving the pre-determined performance goals applicable to each award.

⁴ At December 31, 2017, the total unrecognized compensation cost related to unvested equity awards was $87.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.2 years.

The aggregate fair value of the restricted equity awards that vested during the years ended December 31, 2017, 2016, and 2015, was $130.5 million, $77.0 million, and $105.4 million, respectively, based on the actual stock price on the applicable vesting date.

As a result of the put and call rights described in Note 15 – Redeemable Noncontrolling Interest, all outstanding stock options awarded to ARX employees prior to April 1, 2015, are treated as liability awards for accounting purposes; however, the awards maintain the specific features per the original award agreements. The value of each option is based upon our good faith estimate of the fair market value as of the end of the reporting period and the pro rata expense is recognized.

App.-A-43

A summary of all ARX employee stock option activity since acquisition, follows:

	2017				2016			2015
Options Outstanding	Number of Shares		Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Beginning of year	24,995		$	526.46	24,995	$	526.46	NA		NA
At acquisition date 4/1/2015	NA		NA		NA	NA		26,000		$	513.72
Add (deduct):
Exercised1	(2,445	)	174.65		0	0		(1,005	)	197.01
End of year	22,550		$	564.60	24,995	$	526.46	24,995		$	526.46
Exercisable, end of year	17,950		$	517.75	16,995	$	438.77	12,995		$	386.69

NA = Not Applicable

¹ At the time of exercise in 2017 and 2015, the value earned by the option holders was $2.9 million and $1.1 million, respectively.

	2017				2016				2015
Non-Vested Options Outstanding	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Beginning of year	8,000		$	712.74	12,000		$	677.81	NA		NA
At acquisition date 4/1/2015	NA		NA		NA		NA		14,800		$	675.55
Add (deduct):
Vested	(3,400	)	665.79		(4,000	)	607.95		(2,800	)	665.85
End of year1	4,600		$	747.45	8,000		$	712.74	12,000		$	677.81

NA = Not Applicable

¹ At December 31, 2017, 2016, and 2015, the remaining unrecognized compensation cost related to unvested options was $0.7 million, $1.6 million, and $2.9 million, respectively, and the remaining weighted average vesting period on the unvested awards was 1.01 years, 1.36 years, and 1.72 years, respectively.

Incentive Compensation Plans – Directors  Progressive’s 2003 Directors Equity Incentive Plan, has expired and no new awards may be made under this plan; in 2017, shareholders approved the Progressive 2017 Directors Equity Incentive Plan and it provides for the granting of equity-based awards, including restricted stock awards, to non-employee directors, and originally authorized awards for up to 0.5 million shares.

Beginning in 2016, The Progressive Corporation permits each non-employee director to indicate a preference to receive either 100% of their compensation in the form of a restricted stock award or 60% in the form of a restricted stock award and 40% in the form of cash. If the director does not state a preference, it is presumed that he or she preferred to receive 100% of their compensation in the form of restricted stock. After considering such preferences, the Board’s Compensation Committee determines the awards (restricted stock, or restricted stock and cash) for each non-employee director. Prior to 2016, The Progressive Corporation granted restricted stock awards as the sole form of compensation to non-employee directors.

The restricted stock awards are issued as time-based awards. The vesting period (i.e., requisite service period) is typically 11 months from the date of each grant. To the extent a director is newly appointed during the year, or a director’s committee assignments change, the vesting period may be shorter. Both the restricted stock awards and cash, if elected, are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant.

A summary of all directors’ restricted stock activity during the years ended December 31, follows:

	2017				2016				2015
Restricted Stock	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Beginning of year	55,839		$	33.24	89,427		$	27.23	81,579		$	25.45
Add (deduct):
Granted	53,284		40.54		55,839		33.24		89,427		27.23
Vested	(55,839	)	33.24		(89,427	)	27.23		(81,579	)	25.45
End of year	53,284		$	40.54	55,839		$	33.24	89,427		$	27.23

App.-A-44

The aggregate fair value of the restricted stock vested, during the years ended December 31, 2017, 2016, and 2015, was $2.2 million, $3.0 million, and $2.2 million, respectively, based on the actual stock price at time of vesting.

Deferred CompensationThe Progressive Corporation Executive Deferred Compensation Plan (Deferral Plan) permits eligible Progressive executives to defer receipt of some or all of their annual incentive payments and all of their annual equity awards. Deferred cash compensation is deemed invested in one or more investment funds, including Progressive common shares, offered under the Deferral Plan and elected by the participant. All Deferral Plan distributions attributable to deferred cash compensation will be paid in cash.

For all equity awards granted in or after March 2005, and deferred pursuant to the Deferral Plan, the deferred amounts are deemed invested in our common shares and are ineligible for transfer to other investment funds in the Deferral Plan; distributions of these deferred awards will be made in Progressive common shares. For all restricted stock awards granted prior to that date, the deferred amounts are eligible to be transferred to any of the investment funds in the Deferral Plan; distributions of these deferred awards will be made in cash. We reserved 11.1 million of our common shares for issuance under the Deferral Plan.

An irrevocable grantor trust has been established to provide a source of funds to assist us in meeting our liabilities under the Deferral Plan. The Deferral Plan Irrevocable Grantor Trust account held the following assets at December 31:

(millions)	2017		2016
Progressive common shares1	$	128.2	$	122.2
Other investment funds2	167.0		136.9
Total	$	295.2	$	259.1

¹Included 4.4 million and 4.7 million common shares as of December 31, 2017 and 2016, respectively, to be distributed in common shares.

² Amount is included in other assets on the balance sheet.

10.  SEGMENT INFORMATION

We write personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles (our special lines products). The Personal Lines segment is comprised of both the Agency and Direct businesses. The Agency business includes business written by our network of more than 35,000 independent insurance agencies, including brokerages in New York and California, and strategic alliance business relationships (other insurance companies, financial institutions, and national agencies). The Direct business includes business written directly by us online, by phone, or on mobile devices. We operate our personal auto businesses throughout the United States. In 2017, we ceased writing and servicing personal auto physical damage and auto property damage liability insurance in Australia.

Our Commercial Lines segment writes primary liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses in the business auto, for-hire transportation, contractor, for-hire specialty, tow, and for-hire livery markets. This segment operates throughout the United States and is distributed through both the independent agency and direct channels.

Our Property segment writes residential property insurance for homeowners, other property owners, and renters primarily through the independent agency channel in 41 states and the District of Columbia as of December 31, 2017. Our Property business primarily consists of the operations of ASI and other insurance subsidiaries. ASI also acts as a participant in the “Write Your Own” program for the National Flood Insurance Program and, as such, writes flood insurance in 43 states and the District of Columbia.

Our other indemnity businesses manage our run-off businesses.

Our service businesses provide insurance-related services, including processing CAIP business, and serving as an agent for homeowners, general liability, and workers’ compensation insurance, among other products, through our programs with ASI and unaffiliated insurance companies.

All segment revenues are generated from external customers and we do not have a reliance on any major customer. All intercompany transactions, including those between Progressive and ASI, are eliminated in consolidation.

App.-A-45

We evaluate profitability based on pretax underwriting profit (loss) for the Personal Lines, Commercial Lines, and Property segments and for the other indemnity businesses. Pretax underwriting profit (loss) is calculated as net premiums earned plus fees and other revenues, less: (i) losses and loss adjustment expenses; (ii) policy acquisition costs; and (iii) other underwriting expenses. Service business pretax profit (loss) is the difference between service business revenues and service business expenses.

Expense allocations are based on certain assumptions and estimates primarily related to revenue and volume; stated segment operating results would change if different methods were applied. We do not allocate assets or income taxes to operating segments. In addition, we do not separately identify depreciation expense by segment, and such allocation would be impractical. Companywide depreciation expense was $169.9 million in 2017, $137.4 million in 2016, and $103.7 million in 2015. The accounting policies of the operating segments are the same as those described in Note 1 – Reporting and Accounting Policies.

Following are the operating results for the years ended December 31:

	2017						2016					2015
(millions)	Revenues			Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues			Pretax Profit (Loss)
Personal Lines
Agency	$	11,177.6		$	839.6		$	9,791.7	$	492.8		$	9,108.6		$	713.2
Direct	10,769.6			683.7			9,396.5		412.2			8,185.9			403.4
Total Personal Lines1	21,947.2			1,523.3			19,188.2		905.0			17,294.5			1,116.6
Commercial Lines	2,793.9			214.1			2,421.3		155.2			1,995.9			318.3
Property2	988.8			(50.3		)	864.5		32.5			609.1			61.3
Other indemnity3	0			(0.2		)	0		(1.6		)	(0.4		)	(1.0		)
Total underwriting operations	25,729.9			1,686.9			22,474.0		1,091.1			19,899.1			1,495.2
Fees and other revenues4	370.6			NA			332.5		NA			302.0			NA
Service businesses	126.8			17.3			103.3		11.3			86.3			8.8
Investments5	612.7			588.8			530.0		507.6			567.3			544.5
Other gains (losses)	(1.0		)	(1.0		)	1.6		1.6			(0.9		)	(0.9		)
Interest expense	NA			(153.1		)	NA		(140.9		)	NA			(136.0		)
Consolidated total	$	26,839.0		$	2,138.9		$	23,441.4	$	1,470.7		$	20,853.8		$	1,911.6

NA = Not Applicable

¹ Personal auto insurance accounted for 93% of the total Personal Lines segment net premiums earned in 2017, compared to 92% in 2016 and 2015; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

² We began reporting our Property business as a segment on April 1, 2015, upon acquisition of a controlling interest in ARX; therefore, the year ended 2015 only includes results for nine months and is not comparable to results reported for 2017 or 2016. During 2017, 2016, and 2015, pretax profit (loss) also includes $66.2 million, $62.1 million, and $46.8 million, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Although this expense is included in our Property segment, it is not reported in the consolidated results of ARX and, therefore, will not affect the value of the net income attributable to the noncontrolling interest.

³ Our professional liability group recognized $0.4 million of reinstatement premiums paid to our reinsurers pursuant to their reinsurance contracts during 2015. This premium reduction was reflected in our companywide total results.

⁴ Pretax profit (loss) for fees and other revenues are allocated to operating segments.

⁵ Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

App.-A-46

Our management uses underwriting margin and combined ratio as primary measures of underwriting profitability. Underwriting profitability is calculated by subtracting losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses from the total of net premiums earned and fees and other revenues. The underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from underwriting operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for our underwriting operations for the years ended December 31:

	2017			2016			2015
	Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio
Personal Lines
Agency	7.5	%	92.5	5.0	%	95.0	7.8	%	92.2
Direct	6.3		93.7	4.4		95.6	4.9		95.1
Total Personal Lines	6.9		93.1	4.7		95.3	6.5		93.5
Commercial Lines	7.7		92.3	6.4		93.6	15.9		84.1
Property1	(5.1	)	105.1	3.8		96.2	10.1		89.9
Total underwriting operations	6.6		93.4	4.9		95.1	7.5		92.5

¹We began reporting our Property business as a segment on April 1, 2015, when we acquired a controlling interest in ARX; therefore, the year ended 2015 only includes results for nine months and is not comparable to results reported for 2017 or 2016. Included in 2017, 2016, and 2015 is 6.7 points, 7.2 points, and 7.7 points, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX.

11.  OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss), including reclassification adjustments by income statement line item, for the years ended December 31, were as follows:

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2016	$	1,439.5		$	(506.1	)	$	933.4		$	939.6		$	(9.4	)	$	(1.1	)	$	4.3
Other comprehensive income (loss) before reclassifications:
Investment securities	636.9			(224.0		)	412.9			412.9			0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	0			0			0			0			0			0			0
Forecasted transactions	(8.0		)	2.8			(5.2		)	0			(5.2		)	0			0
Foreign currency translation adjustment	0.4			(0.1		)	0.3			0			0			0.3			0
Loss attributable to noncontrolling interest (NCI)	(3.5		)	1.2			(2.3		)	0			0			0			(2.3		)
Total other comprehensive income (loss) before reclassifications	625.8			(220.1		)	405.7			412.9			(5.2		)	0.3			(2.3		)
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(14.9		)	5.3			(9.6		)	(9.6		)	0			0			0
Net realized gains (losses) on securities	103.3			(36.2		)	67.1			67.1			0			0			0
Other gains (losses)1	(1.2		)	0.4			(0.8		)	0			0			(0.8		)	0
Interest expense	0.3			(0.1		)	0.2			0			0.2			0			0
Total reclassification adjustment for amounts realized in net income	87.5			(30.6		)	56.9			57.5			0.2			(0.8		)	0
Total other comprehensive income (loss)	538.3			(189.5		)	348.8			355.4			(5.4		)	1.1			(2.3		)
Total at December 31, 2017	$	1,977.8		$	(695.6	)	$	1,282.2		$	1,295.0		$	(14.8	)	$	0		$	2.0

¹During 2017, we ceased writing insurance in Australia resulting in a loss of $1.2 million relating to the foreign currency translation adjustment. The loss is netted against a gain on extinguishment of debt (see Note 4 – Debt) in other gains (losses) on our consolidated statements of comprehensive income for the year end December 31, 2017.

App.-A-47

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2015	$	1,234.5		$	(434.1	)	$	800.4		$	809.0		$	(8.2	)	$	(1.5	)	$	1.1
Other comprehensive income (loss) before reclassifications:
Investment securities	320.5			(112.6		)	207.9			207.9			0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	(0.1		)	0.1			0			0			0			0			0
Forecasted transactions	0			0			0			0			0			0			0
Foreign currency translation adjustment	0.6			(0.2		)	0.4			0			0			0.4			0
Loss attributable to noncontrolling interest (NCI)	5.1			(1.9		)	3.2			0			0			0			3.2
Total other comprehensive income (loss) before reclassifications	326.1			(114.6		)	211.5			207.9			0			0.4			3.2
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(27.1		)	9.5			(17.6		)	(17.6		)	0			0			0
Net realized gains (losses) on securities	146.3			(51.4		)	94.9			94.9			0			0			0
Other gains (losses)	0			0			0			0			0			0			0
Interest expense	1.9			(0.7		)	1.2			0			1.2			0			0
Total reclassification adjustment for amounts realized in net income	121.1			(42.6		)	78.5			77.3			1.2			0			0
Total other comprehensive income (loss)	205.0			(72.0		)	133.0			130.6			(1.2		)	0.4			3.2
Total at December 31, 2016	$	1,439.5		$	(506.1	)	$	933.4		$	939.6		$	(9.4	)	$	(1.1	)	$	4.3

App.-A-48

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2014	$	1,574.0		$	(550.9	)	$	1,023.1		$	1,021.9		$	1.5		$	(0.3	)	$	0
Other comprehensive income (loss) before reclassifications:
Investment securities	(198.7		)	67.5			(131.2		)	(131.2		)	0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	0			0			0			0			0			0			0
Forecasted transactions	(12.9		)	4.5			(8.4		)	0			(8.4		)	0			0
Foreign currency translation adjustment	(1.8		)	0.6			(1.2		)	0			0			(1.2		)	0
Loss attributable to noncontrolling interest (NCI)	1.6			(0.5		)	1.1			0			0			0			1.1
Total other comprehensive income (loss) before reclassifications	(211.8		)	72.1			(139.7		)	(131.2		)	(8.4		)	(1.2		)	1.1
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(23.8		)	8.4			(15.4		)	(15.4		)	0			0			0
Net realized gains (losses) on securities	149.7			(52.5		)	97.2			97.1			0.1			0			0
Other gains (losses)	0			0			0			0			0			0			0
Interest expense	1.8			(0.6		)	1.2			0			1.2			0			0
Total reclassification adjustment for amounts realized in net income	127.7			(44.7		)	83.0			81.7			1.3			0			0
Total other comprehensive income (loss)	(339.5		)	116.8			(222.7		)	(212.9		)	(9.7		)	(1.2		)	1.1
Total at December 31, 2015	$	1,234.5		$	(434.1	)	$	800.4		$	809.0		$	(8.2	)	$	(1.5	)	$	1.1

In an effort to manage interest rate risk, we entered into forecasted transactions on each of The Progressive Corporation’s outstanding debt issuances. We expect to reclassify $1.0 million (pretax) into interest expense during the next 12 months, related to net unrealized losses on forecasted transactions (see Note 4 – Debt for further discussion).

12.  LITIGATION

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies written by our insurance subsidiaries in the ordinary course of business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, The Progressive Corporation and/or its insurance and other subsidiaries have been named as defendants in a number of class action or individual lawsuits that challenge certain of the operations of the subsidiaries. Other insurance companies face many of these same issues.

We describe litigation contingencies for which a loss is probable. In addition, we establish accruals for these lawsuits when we can reasonably estimate potential loss exposure, which may include a range of loss, and we will disclose such amount or range of loss if material. As to lawsuits for which the loss is considered probable but not estimable, we do not establish an accrual. Nevertheless, we continue to evaluate this pending litigation to determine if any losses not deemed probable and estimable become so, at which point we would establish an accrual at our best estimate of the loss or range of loss.

We also describe litigation contingencies for which a loss is reasonably possible (but not probable). When disclosing reasonably possible litigation contingencies, we will disclose the amount or range of possible loss, if we are able to make that determination and if material. We review all reasonably possible losses on an ongoing basis to determine whether the likelihood of incurring a loss has become probable, or whether the circumstances have changed such that we may now reasonably estimate a range of loss.

We may also be exposed to litigation contingencies that are remote. Remote litigation contingencies are those for which the likelihood of a loss is slight at period end. We do not disclose, or establish accruals for, remote litigation contingencies, but we

App.-A-49

evaluate these contingencies on an ongoing basis to determine whether the likelihood of a loss has increased.

Each year, certain of our pending litigation matters are brought to conclusion and/or settlement. Many of these concluded matters involve the same or similar fact patterns as the matters described below. For cases that have settled, but for which settlement is not complete, an accrual is established at our best estimate of the loss exposure. We regularly review these and other accruals to ensure they are adequate, and that there is not the possibility of material losses in excess of our accruals.

Settlements that are complete are fully reflected in our financial statements. The amounts accrued and/or paid for settlements during the periods presented were not material to our consolidated financial condition, cash flows, or results of operations.

The pending lawsuits summarized below are in various stages of development, and the outcomes are uncertain at this time. At period end, except to the extent an immaterial accrual has been established, we do not consider the losses from these pending cases to be both probable and estimable, and we are unable to estimate a range of loss at this time. It is not possible to determine loss exposure for a number of reasons, including, without limitation, one or more of the following: liability appears to be remote; putative class action lawsuits generally pose immaterial exposure until a class is actually certified, which, historically, has not been granted by the courts in the vast majority of our cases in which class certification has been sought; class definitions are often indefinite and preclude detailed exposure analysis; and complaints rarely state an amount sought as relief, and when such amount is stated, it is often a function of pleading requirements and may be unrelated to the potential exposure.

We plan to contest these suits vigorously, but may pursue settlement negotiations in some cases, if appropriate. In the event that any one or more of these cases results in a substantial judgment against, or settlement by, us or if our accruals (if any) prove to be inadequate, the resulting liability could have a material adverse effect on our consolidated financial condition, cash flows, and/or results of operations. Based on information currently known, we do not believe that the outcome of any pending cases described below will have a material impact on our consolidated financial condition, cash flows, and/or results of operations.

At December 31, 2017, pending lawsuits as described above that challenge certain of the operations of our subsidiaries included:

Lawsuits seeking class/collective action status:

• alleging we sell or charge insureds for illusory coverage or coverage lower than amounts allowed by law for personal injury protection (PIP) coverage and pay related claims at levels lower than allowed by law.

• challenging how physical damage claims are handled, adjusted and ultimately paid, including how we value total loss claims, the payment of fees and taxes associated with total losses, and the payment of diminution damages.

• challenging our practice in Florida of adjusting PIP payments.

• challenging our assessment of fees.

• challenging our adjustment of medical bills submitted by insureds in medical claims.

• challenging the manner in which we grant a discount for anti-theft devices.

• challenging our claim settlement practices where the tortfeasor and the injured party are both Progressive insureds.

• challenging general claim practices, such as those relating to subrogation, rental reimbursement, and setting off certain claim payments based on other coverages and payments.

• challenging our payment and reimbursement practices to Medicare Advantage Plans on first party medical, PIP, and bodily injury claims.

• alleging we improperly sell secondary PIP coverage to Medicare and Medicaid beneficiaries in New Jersey.

• challenging our rating practices.

Lawsuits certified or conditionally certified as class/collective actions:

• alleging that we undervalued total loss claims through the use of certain valuation tools.

• alleging that we fail to provide proper uninsured motorist coverage.

• challenging our practice in Florida of adjusting PIP payments.

• alleging that we fail to pay overtime to certain employees who we classify as exempt from overtime pay requirements.

Individual lawsuits:

• challenging the estimation of physical damage and payment practices for physical damage repairs, and allegations of tortious interference with contract and insurance industry antitrust practice asserted by body shops outside our network program.

• challenging, on a representative basis, certain of our pay practices.

App.-A-50

13.  COMMITMENTS AND CONTINGENCIES

We have certain noncancelable operating lease commitments with lease terms greater than one year for property and computer equipment. The minimum commitments under these agreements at December 31, 2017, were as follows:

(millions)	Commitments
2018	$	53.6
2019	44.2
2020	28.5
2021	16.9
2022	8.0
Thereafter	1.1
Total	$	152.3

Some of the leases have options to renew at the end of the lease periods. The expense we incurred for the leases disclosed above, as well as other operating leases that may be cancelable or have terms less than one year, was:

(millions)	Expense
2017	$	77.2
2016	72.9
2015	66.6

We also have certain noncancelable purchase obligations. The minimum commitment under these agreements at December 31, 2017, was $546.3 million.

The insurance operations of ARX have several multiple-layer property catastrophe excess of loss reinsurance contracts with various reinsurers with terms ranging from one to three years. The minimum commitment under these contracts was $90.7 million at December 31, 2017.

14. DIVIDENDS

We maintain a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of the year. This annual variable dividend is based on a target percentage of after-tax underwriting income multiplied by a performance factor (Gainshare factor), which, beginning in 2017, is determined by reference to the Agency auto, Direct auto, special lines, Commercial Lines, and Property business units, with minor exclusions and adjustments, and subject to the limitations discussed below. The target percentage is determined by our Board of Directors on an annual basis and announced to shareholders and the public. In December 2016, the Board determined the target percentage for 2017 to be 33-1/3% of annual after-tax underwriting income, which is unchanged from the target percentage in both 2016 and 2015. Since the inception of our variable dividend, we have applied a tax rate of 35% to calculate the after-tax underwriting income. Beginning in 2018, we will apply a rate of 21% to calculate the after-tax underwriting income.

The Gainshare factor can range from zero to two and is determined by comparing our operating performance for the specified business units for the year to certain predetermined profitability and growth objectives approved by the Compensation Committee of the Board. This Gainshare factor is also used in the annual cash incentive program currently in place for our employees (our “Gainsharing program”). For 2017, the Gainshare factor was 1.79, compared to 1.67 in 2016 and 1.60 in 2015.

Our annual dividend program will result in a variable payment to shareholders each year, subject to certain limitations. If the Gainshare factor is zero or if our comprehensive income is less than after-tax underwriting income, no dividend would be payable under our annual variable dividend policy. In addition, the ultimate decision on whether or not a dividend will be paid is in the discretion of the Board of Directors. The Board could decide to alter our policy, or not to pay the annual variable dividend, at any time prior to the declaration of the dividend for the year. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in our performance or capital needs, changes in the U.S. federal income tax laws, disruptions of national or international capital markets, or other events affecting our business, liquidity, or financial position.

App.-A-51

Following is a summary of our shareholder dividends that were declared in the last three years:

(millions, except per share amounts)			Amount
Dividend Type	Declared	Paid	Per Share		Total1
Annual – Variable	December 2017	February 2018	$	1.1247	$	655.1
Annual – Variable	December 2016	February 2017	0.6808		395.4
Annual – Variable	December 2015	February 2016	0.8882		519.2

¹ Based on an estimate of shares outstanding as of the record date. For the dividends declared in December 2016 and 2015, we paid $395.4 million and $519.0 million, respectively.

15. REDEEMABLE NONCONTROLLING INTEREST

In connection with the April 2015 acquisition of a controlling interest in ARX, The Progressive Corporation entered into a stockholders’ agreement with the other ARX stockholders. As part of the stockholders’ agreement, the minority ARX shareholders have the right to “put” their ARX shares to Progressive in two installments, one in early 2018 and one in early 2021, and Progressive has the ability to “call” a portion of the outstanding shares shortly thereafter. If these rights are exercised in full when available, our ownership stake in ARX capital stock will exceed 80% in 2018 and will reach 100% in 2021. The purchase prices for shares to be purchased by Progressive pursuant to these put or call rights will be determined by adding (A) the price per share paid at the closing on April 1, 2015, to (B) the product of the change in the fully diluted net tangible book value per share of ARX between December 31, 2014 and December 31, 2017 (for the 2018 put or call purchases) or December 31, 2020 (for the 2021 put or call purchases) times a multiple of between 1.0 and 2.0. The multiple will be determined based on the growth and profitability of ARX’s business over the applicable time period, pursuant to criteria included in the stockholders’ agreement. Among other provisions, the stockholders’ agreement also prohibits ARX from taking a number of actions, including the payment of dividends, without the consent of The Progressive Corporation and two other stockholders.

Since these securities are redeemable upon the occurrence of an event that is not solely within the control of Progressive, we have recorded the redeemable noncontrolling interest (NCI) as mezzanine equity on our consolidated balance sheets, which represents the minority shares at the current estimated purchase price pursuant to the put and call provisions of the stockholders’ agreement. The estimated purchase price is based, in part, on the change in tangible net book value of ARX from December 31, 2014 to the balance sheet dates.

The redeemable noncontrolling interest was initially recorded at a fair value of $411.5 million, representing the minority shares at the net acquisition price adjusted for the fair value of the put and call rights. The value of the put and call rights on the acquisition date was based on an internally developed modified binomial model. Subsequent changes to the redeemable noncontrolling interest are based on the maximum redemption value at the end of the reporting period, as determined in accordance with the stockholders’ agreement.

In addition to these minority shares, at December 31, 2017, ARX employees hold options to purchase 22,550 ARX shares. These options and any shares issued upon exercise are subject to the stockholders’ agreement, including the right to “put” these shares to Progressive, as described above. Until the options are exercised, the underlying obligation of approximately $32.5 million is not recorded as part of redeemable NCI.

The changes in the components of redeemable NCI during the year ended December 31, 2017, 2016, and 2015, were:

(millions)	December 31, 2017		December 31, 2016			December 31, 2015
Balance, Beginning of period	$	483.7	$	464.9		$	0
Fair value at date of acquisition	0		0			411.5
Net income attributable to NCI	5.9		26.2			32.9
Other comprehensive income (loss) attributable to NCI	2.3		(3.2		)	(1.1		)
Exercise of employee stock options	3.4		0			0
Purchase of shares from NCI	0		0			(12.6		)
Change in redemption value of NCI	8.4		(4.2		)	34.2
Balance, End of period	$	503.7	$	483.7		$	464.9

App.-A-52

16. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill recorded at December 31, 2017 and 2016 was $452.7 million and $449.4 million, respectively. No accumulated goodwill impairment losses exist.

During 2017 and 2016, the carrying amount of goodwill increased $3.3 million and $1.8 million, respectively. In 2017, we acquired a small excess and surplus lines insurance company to provide us flexibility in our Commercial Lines business. In 2016, ARX entered into an exchange transaction with a third party, whereby ARX acquired 100% of the equity interest in a residential property insurance company and disposed of 100% of the equity interest in a commercial property insurance company.

Intangible Assets

The following table is a summary of the net carrying amount of other intangible assets as of December 31, 2017 and 2016:

(millions)	December 31, 2017		December 31, 2016
Intangible assets subject to amortization	$	354.2	$	420.4
Indefinite-lived intangible assets1	12.4		12.4
Total	$	366.6	$	432.8

¹Indefinite-lived intangible assets are comprised of state insurance and agent licenses. State insurance licenses were previously subject to amortization under superseded accounting guidance and have $0.6 million of accumulated amortization for both periods presented.

Intangible assets subject to amortization consisted of the following:

(millions)	December 31, 2017						December 31, 2016
Category	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Policies in force	$	256.2	$	100.7	$	155.5	$	256.2	$	64.1	$	192.1
Agency relationships	159.2		31.3		127.9		159.2		19.9		139.3
Software rights	79.1		29.4		49.7		79.1		18.8		60.3
Trade name	34.8		13.7		21.1		34.8		6.1		28.7
Total	$	529.3	$	175.1	$	354.2	$	529.3	$	108.9	$	420.4

Amortization expense was $66.2 million, $62.1 million, and $46.8 million for the years ended December 31, 2017, 2016, and 2015, respectively.

During 2017, we revised our estimate of the economic useful life of our trade name intangible asset from an original life of 10 years to a remaining life of 2 years. The decrease in the useful life represents the estimated length of time that it is expected to take to transition the branding of our Property business from the ASI trade name to “Progressive Home.” As of December 31, 2017, the remaining average life of all of our intangible assets was 4.9 years.

The estimated aggregate amortization on these intangible assets for each of the next five years as of December 31, 2017, is as follows:

(millions)
Year	Amortization Expense
2018	$	71.9
2019	66.4
2020	56.9
2021	56.6
2022	29.2

App.-A-53

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of The Progressive Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of The Progressive Corporation and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017 including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

App.-A-54

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

February 27, 2018

We have served as the Company’s auditor since 1984.

App.-A-55

Management’s Report on Internal Control over Financial Reporting

Progressive’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control structure was designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control – Integrated Framework (2013), management concluded that our internal control over financial reporting was effective as of December 31, 2017.

During the fourth quarter 2017, there were no changes in our internal control over financial reporting identified in the internal control review process that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PricewaterhouseCoopers LLP, an independent registered public accounting firm that audited the financial statements included in this Annual Report, has audited, and issued an attestation report on the effectiveness of, our internal control over financial reporting as of December 31, 2017; such report appears herein.

CEO and CFO Certifications

Susan Patricia Griffith, President and Chief Executive Officer of The Progressive Corporation, and John P. Sauerland, Vice President and Chief Financial Officer of The Progressive Corporation, have issued the certifications required by Sections 302 and 906 of The Sarbanes-Oxley Act of 2002 and applicable SEC regulations with respect to Progressive’s 2017 Annual Report on Form 10-K, including the financial statements provided in this Report. Among other matters required to be included in those certifications, Mrs. Griffith and Mr. Sauerland have each certified that, to the best of their knowledge, the financial statements, and other financial information included in the Annual Report on Form 10-K, fairly present in all material respects the financial condition, results of operations, and cash flows of Progressive as of, and for, the periods presented. See Exhibits 31 and 32 to Progressive’s Annual Report on Form 10-K for the complete Sections 302 and 906 certifications, respectively.

App.-A-56

The Progressive Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our consolidated financial statements and the related notes, together with the supplemental information, should be read in conjunction with the following discussion and analysis of our consolidated financial condition and results of operations.

I. OVERVIEW

The Progressive Corporation is a holding company that does not have any revenue producing operations, physical property, or employees of its own. The Progressive Corporation wholly owns insurance and non-insurance subsidiaries and owns a controlling interest in ARX Holding Corp. (“ARX”), the parent company of American Strategic Insurance and other insurance subsidiaries and affiliates (“ASI”). The Progressive Group of Insurance Companies consists of our insurance subsidiaries and affiliates. The Progressive Group of Insurance Companies, together with our holding company, its other subsidiaries, and affiliates, comprise what we refer to as Progressive.

We have been offering insurance to consumers since 1937. Based on 2016 premiums written, Progressive was the fourth largest private passenger auto insurer in the country and was the number one writer of commercial auto insurance. Our insurance companies offer personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services throughout the United States. Our Personal Lines segment writes insurance for personal autos and recreational vehicles, which we refer to as our special lines products, through more than 35,000 independent insurance agencies and directly to consumers online, on mobile devices, and over the phone. Our Commercial Lines segment offers insurance for cars and trucks owned and/or operated predominantly by small businesses through both the independent agency and direct channels. Our Property segment writes residential property insurance for homeowners, other property owners, and renters in both the independent agency channel and the direct channel. Our underwriting operations, combined with our service and investment operations, make up the consolidated group.

The Progressive Corporation receives cash through subsidiary dividends, security sales, borrowings, and other transactions, and uses these funds to contribute to its subsidiaries (e.g., to support growth), to make payments to shareholders and debt holders (e.g., dividends and interest, respectively), and to repurchase its common shares and debt, as well as for acquisitions and other business purposes that might arise.

During the year, The Progressive Corporation received cash from the following sources:

• Subsidiary dividends - received $780.6 million of dividends, net of capital contributions, from our insurance and non-insurance subsidiaries, and

• Debt issuance - issued $850 million of 4.125% Senior Notes due 2047 to fund the redemption, in full, of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “6.70% Debentures”), discussed below, and for other general corporate purposes.

Consistent with our policy to deploy underleveraged capital for share repurchases and shareholder dividends, during 2017 The Progressive Corporation took the following actions:

• Dividends - declared a $1.1247 per share annual variable dividend, which returned $654.9 million of capital to our shareholders in February 2018;

• Redeemed $563.7 million, and, prior to redemption, repurchased $30.9 million in the open market, in principal amount of our 6.70% Debentures; and

• Repurchased 1.5 million of our common shares at a total cost of $62.5 million, primarily to neutralize dilution from equity-based compensation in the year of issuance as stated in our financial policies.

We ended 2017 with $12.6 billion of total capital (debt and equity). We continue to manage our investing and financing activities in order to maintain sufficient capital to support all the insurance we can profitably write, constrained only by our ability to provide high-quality customer service, and deploying underleveraged capital to shareholders.

A. Operating Results

We experienced strong growth across all segments in 2017. We ended the year with $27.1 billion of net premiums written, $3.8 billion more than we wrote in 2016, which set a new company record for the increase in premiums during a single year. Our companywide policies in force grew 10% year-over-year to end the year with a total of 18.2 million policies. At the same time, we produced a 6.6% underwriting profit margin, which exceeded our profitability objective by 2.6 points, and saw retention improve in Personal Lines as we made progress on our Destination Era strategy.

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On a year-over-year basis, net and comprehensive income attributable to Progressive were up 54% and 67%, respectively. Net income was $1.6 billion, or $2.72 per share, in 2017. Pretax underwriting profitability for the year was up 55%, reflecting lower than anticipated frequency throughout the year, as well as higher earned premium per policy on both our personal and commercial auto products, in each case compared to the prior year.

Investment income (e.g., interest and dividends) increased 18% on a year-over-year basis, primarily reflecting an increase in average assets. Realized gains were down 3%. Included in impairment losses for the year were $49.6 million of “other asset” impairments, relating to renewable energy tax credit investments. As a result of these investments, we also recorded $48.7 million of federal tax benefits in our income tax provision during 2017, which represented all of the expected tax benefits from these investments. Our income tax provision also included a net benefit of $99.5 million related to the revaluation of our deferred tax assets and liabilities to the new corporate tax rate of 21%, which is discussed in more detail below.

Comprehensive income was $1.9 billion, an increase of $0.8 billion from last year. A significant return on our common stock portfolio was the primary reason for the increase we recognized in unrealized gains compared to last year.

B. Insurance Operations

For 2017, our companywide underwriting profit margin was 6.6%. Our Personal and Commercial Lines operating segments were profitable with underwriting margins of 6.9% and 7.7%, respectively, while our Property segment had an underwriting loss of 5.1% for the year. The Property business reported a loss for the year including 6.7 points of amortization expense, predominately related to the acquisition of ARX in 2015, being included in the segments results. Despite being impacted by the hurricanes during the year, our special lines products also had a profitable year, contributing a 0.1 point favorable impact on our total Personal Lines combined ratio points.

During the year, on a companywide basis, we recognized 3.2 loss ratio points related to catastrophe losses, compared to 2.5 points in 2016. The combined ratios for our vehicle businesses and Property business were unfavorably impacted by 2.1 points and 30.3 points, respectively, as a result of these catastrophe losses. About 40% of the companywide catastrophe losses in 2017 were due to Hurricane Harvey in Texas and Hurricane Irma, primarily in Florida. According to data collected by the Insurance Services Office (ISO), a national aggregator of carrier data, 2017 property losses from severe convective storms were 104% higher than the prior 20-year inflation-adjusted average, with industry results weighted to match ASI’s state premium mix.

For the year, our companywide prior accident year development was minimal at 0.1 points of unfavorable impact on our combined ratio, compared to 2016 when we recognized 0.4 points of favorable development. Our overall incurred severity in our personal auto businesses increased about 3%, while frequency decreased about 3%, compared to the prior year.

On a year-over-year basis, companywide net premiums written and earned increased 16% and 14%, respectively. Changes in net premiums written are a function of new business applications, premium per policy, and retention.

During 2017, total new personal auto applications increased 18% on a year-over-year basis, including a 21% increase in our Agency auto business and a 16% increase in our Direct auto business, reflecting our improved competitive position in the marketplace from our latest auto product model and an increase in advertising spend. We continue to see growth in our bundled auto and home customers (i.e., Robinsons) in both the Agency and Direct channels. Increasing the number of Robinsons we write is critical to achieving success in our Destination Era strategy.

For our Commercial Lines business, new applications increased 1% for the year, but there was a significant shift in sales activity between the first half of the year and the second. During the second half of 2016, we imposed underwriting restrictions and raised rates, which significantly impacted the amount of new business that we generated. We began to lift the underwriting restrictions at the end of the first quarter 2017 and started seeing an increase in new business applications during the second half of 2017.

Our Property business includes home, condo, and dwelling insurance written by ASI, as well as renters business written by both ASI and Progressive. During 2017, the decision was made to transition ASI’s products to the Progressive brand over the next few years. Although the majority of the Property business is written through the agency channel, in mid-2017, Progressive launched HomeQuote Explorer^® (HQX), a new online quoting platform, allowing the Property business to expand in the direct channel. HQX presents Progressive-branded (i.e., ASI) home/condo quotes in a comparative shopping experience alongside quotes from unaffiliated property carriers for online shoppers in select states. Prior to HQX, Progressive-branded quotes were only available to direct consumers who quoted over the phone.

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New applications in our Property business increased 48%, compared to the same period last year. The growth in the Property business was largely attributable to state expansion and more competitive product offerings, as well as growth in both the number of Platinum agents and the business written through those agencies. In addition, the Property business saw growth of about 50% in new applications received through the direct channel as a result of HQX, albeit on a smaller base.

During 2017, on a year-over-year basis, written premium per policy increased 6% for our Agency and 5% for our Direct personal auto businesses, primarily reflecting rate increases taken during the year and a shift in business mix. Written premium per policy for our special lines products increased 4%, compared to last year. Commercial Lines experienced a 12% increase in written premium per policy, which resulted from rate actions taken in late 2016 and early 2017. For the Property business, written premium per policy decreased 5%, primarily reflecting a relative increase in the renters business, which has lower premiums per policy.

To grow policies in force, it is critical that we retain our customers for longer periods. Consequently, increasing retention is one of our most important priorities, and our efforts to increase our share of multi-product households continue to be a key initiative to support that goal. Policy life expectancy, which is our actuarial estimate of the average length of time that a policy will remain in force before cancellation or lapse in coverage, is one measure of customer retention in our vehicle businesses. We have seen our policy life expectancy increase in Personal Lines, with our trailing 12-month total auto policy life expectancy up 7% over last year and special lines up 1%. Our Agency auto and Direct auto policy life expectancy were up 8% and 4%, respectively. These increases reflect our Destination Era initiatives, where we are seeing an increase in customers who bundle their auto coverage with other products, which tends to translate to longer relationships with these customers. For Commercial Lines, our policy life expectancy decreased 4% during the year, primarily reflecting the impact of the rate actions.

C. Investments

The fair value of our investment portfolio was $27.3 billion at December 31, 2017. Our asset allocation strategy is to maintain 0-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in our Group II securities (the securities allocated to Group I and II are defined below under Results of Operations – Investments). At December 31, 2017, 17% of our portfolio was allocated to Group I securities and 83% to Group II securities, compared to 18% and 82%, respectively, at December 31, 2016.

Our investment income generated a pretax book yield of 2.4% for 2017, compared to 2.3% for 2016. Our investment portfolio produced a fully taxable equivalent (FTE) total return of 5.2% for 2017, compared to 4.0% for 2016. Our fixed-income and common stock portfolios had FTE total returns of 3.0% and 21.8%, respectively, for 2017, and 2.9% and 12.8%, for 2016.

At December 31, 2017, the fixed-income portfolio had a weighted average credit quality of AA- and a duration of 2.5 years, compared to A+ and 2.2 years at December 31, 2016. During the year, our portfolio duration was maintained between 2.2 and 2.3 years from the first quarter through the third quarter. We lengthened our portfolio duration modestly during the fourth quarter in response to higher interest rates. We maintain our fixed-income portfolio strategy of investing in high-quality, liquid securities. We remain confident in our preference for shorter duration positioning during times of low interest rates as a means to limit any decline in portfolio value from an increase in rates, and we expect long-term benefits from any return to more substantial yields.

D. Tax Reform

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), was signed into law and is generally effective beginning January 1, 2018. The following summarizes the aspects of the Tax Act that have, or are expected to have in the future, a material impact to Progressive.

The Tax Act reduces the corporate federal income tax rate to 21%, from the 35% rate that has been in effect since 1994. We expect our effective tax rate, unadjusted for tax credits, to drop from our historical rate of 32-33% to approximately 20%. This change will provide a material benefit to net income on a going-forward basis. As we detail in our financial policies, we invest capital, in this case in the form of increased income, in expanding business operations when, in our view, future opportunities meet our financial objectives. As our business grows, we need incremental capital to satisfy state insurance regulatory requirements around premiums-to-surplus ratios. We do not expect our financial policies to change as a result of tax reform, but will continually monitor our policies in light of the competitive and regulatory environment.

We were required under generally accepted accounting principles to revalue all of our deferred tax assets and liabilities using the new rate. The net effect of this revaluation, which was recorded in the fourth quarter of 2017, was a reduction to income tax expense of $99.5 million, which is the primary driver of our lower effective tax rate for 2017. The decrease in the tax rate will improve our net income and cash flows in future periods compared to 2017 and prior periods.

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Our insurance companies pay an additional tax on income generated from tax-exempt investments (i.e., state and local government bonds). This additional tax is commonly known as “proration.” Prior to the Tax Act, the proration adjustment for tax-exempt investments was 15%, which meant that we paid taxes on 15% of the otherwise non-taxable amount. The Tax Act increased this percentage to 25%. However, when combining the increase in the proration adjustment percentage with the lower federal tax rate, we expect that the effective tax rate on the income generated from state and local government bonds held in the investment portfolios of our insurance companies will remain the same.

The Tax Act also made changes to the corporate dividends received deduction. Generally, corporations are able to deduct a percentage of the dividend income that they receive from other U.S. companies. Prior to the Tax Act, we were able to deduct 70% of the dividend income we received from companies in which we had less than a twenty percent ownership stake. The Tax Act reduced the dividends received deduction percentage on these dividends to 50%. Even though we will be deducting less of the dividends received, we will also be applying a lower corporate tax rate to the remaining dividend income. Therefore, we expect the effective tax rate for dividend income that is eligible for the deduction and is earned by our non-insurance subsidiaries to remain unchanged.

The proration adjustment discussed above also applies to the non-taxable portion of dividends received by insurance companies from equity investments. For dividend income that is eligible for the dividends received deduction and is earned by our insurance subsidiaries, we expect the associated effective tax rate to decrease by about 1.05%, with the decrease in the federal tax rate being offset by the decrease in the deduction percentage and the increase in the proration adjustment.

Insurance companies are required to discount their loss and loss adjustment expense (LAE) reserves for tax purposes, and the Tax Act makes several changes to those loss discounting rules. Prior to enactment of the Tax Act, the discounting was based on an interest rate determined by the Internal Revenue Service (IRS) and by loss payment patterns either published by the IRS or based on the company’s own loss payment experience. In general, the Tax Act increases the interest rate, extends the loss payment patterns, and no longer allows companies to use their own loss payment experience. These new rules must be applied to the year-end 2017 loss and LAE reserves and the resulting increase in the discount must be brought into taxable income ratably over the next eight years beginning in 2018. The IRS has not yet published the new interest rate or the new loss payment patterns that must be applied to make this determination. Based on the uncertainty surrounding the payment patterns and the interest rates, we are not able to estimate the magnitude this change would have had on our December 31, 2017 reserves and, therefore, have not reflected any adjustments in the tax provision for 2017. However, we believe that if we had been able to calculate the adjustment, there would have been no net impact to our results of operations or financial condition for 2017 because the adjustment would have resulted in an increase to the deferred tax asset associated with loss reserves that would have been fully offset by a deferred tax liability for the tax to be paid over the eight-year transition period.

Section 162(m) of the Internal Revenue Code contains provisions limiting the deductibility of executive compensation to $1 million per year, per covered employee. Prior to enactment of the Tax Act, covered employees included the chief executive officer and certain other highly compensated officers (excluding the chief financial officer), and such determination was made independently for each year. In addition, performance-based compensation was excluded from the $1 million limitation. The Tax Act made significant changes to Section 162(m). First, the definition of covered employee was modified to include the chief financial officer and to provide that once an employee is identified as a covered employee for a tax year (beginning with the 2017 tax year), that employee will remain a covered employee in perpetuity. The Tax Act also repeals the exception for performance-based compensation, with transition rules for written, binding contracts in effect on November 2, 2017. There is still uncertainty around the application of the transition rules as they apply both to the deductibility of performance-based awards and amounts held in our nonqualified deferred compensation plans for these covered employees. Due to these uncertainties, in the fourth quarter of 2017, we wrote off the deferred tax asset related to our performance-based awards to our covered employees and recognized $4.5 million of additional tax expense after the deferred tax revaluation discussed above. We expect that additional guidance will be issued by the IRS on the applicability of the transition rules to existing plans and agreements, and we will reconsider our position once such guidance has been issued.

Prior to the Tax Act, qualifying property and purchased computer software were eligible for 50% bonus depreciation (i.e., immediate expensing) in 2017, with that percentage decreasing in future years. The Tax Act allows 100% bonus depreciation for qualifying property placed in service after September 27, 2017 and before the end of 2022. The impact of this tax provision will depend on the amount of qualifying property and computer software that we purchase in future periods.

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II.  FINANCIAL CONDITION

A. Liquidity and Capital Resources

For the last several years, The Progressive Corporation has funded its operations through dividends it receives from its subsidiaries and through the issuance of long-term debt. It received dividends from its subsidiaries, net of capital contributions, of $780.6 million in 2017, and $1.9 billion for the three-year period ended December 31, 2017. Regulatory restrictions on subsidiary dividends are described in Note 8 – Statutory Financial Information.

During the last three years, we issued $1.75 billion of senior notes to take advantage of attractive terms in the market and provide additional financial flexibility. A portion of the net proceeds of these issuances were used to redeem our 6.70% Debentures, discussed below. The remainder of the net proceeds were used for other general corporate purposes. The covenants on The Progressive Corporation’s existing debt securities do not include any rating or credit triggers that would require an adjustment of the interest rate or an acceleration of principal payments in the event that our debt securities are downgraded by a rating agency. During the last three years, we did not borrow under our uncommitted line of credit or engage in other short-term borrowings to fund our operations or for liquidity purposes.

During 2017, we redeemed our 6.70% Debentures, at par, in the aggregate principal amount of $563.7 million. Prior to the redemption, over the last three years, we repurchased, in the open market, a portion of the 6.70% Debentures for a total cost of $68.2 million, when management believed the securities were attractively priced and there was adequate capital available for such purpose. In addition, since the ARX acquisition in April 2015, $136.1 million of principal amount of outstanding ARX debt securities were repaid. See Note 4 – Debt and the Liquidity and Capital Resources section below for a further discussion of our debt activity.

Our debt-to-total capital (debt plus shareholders’ equity, which does not include redeemable noncontrolling interest) ratios at December 31, 2017, 2016, and 2015 were 26.3%, 28.3%, and 27.1%, respectively, and were consistent with our financial policy of maintaining a ratio of less than 30%, which we target to meet annually.

Over the last three years, we also continued our practice of repurchasing our common shares and paying dividends to our shareholders in accordance with our financial policies. In May 2017, the Board of Directors approved a new authorization to repurchase up to 25 million common shares. This authorization canceled and replaced the Board’s prior share repurchase authorization. As of December 31, 2017, we had 24.1 million shares remaining under our 2017 Board repurchase authorization. The following table shows our share repurchase activity during the last three years:

(millions, except per share amounts)	2017		2016		2015
Total number of shares purchased	1.5		6.1		7.3
Total cost	$	62.5	$	192.5	$	208.5
Average price paid per share	$	41.62	$	31.59	$	28.41

We maintain a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of the year. See Note 14 – Dividends for a further discussion of our annual variable dividend policy and its limitations. Under this policy, we declared dividends in each of the last three years. Following is a summary of our shareholder dividends that were declared in the last three years:

(millions, except per share amounts)			Amount
Dividend Type	Declared	Paid	Per Share		Total Paid1
Annual – Variable	December 2017	February 2018	$	1.1247	$	654.9
Annual – Variable	December 2016	February 2017	$	0.6808	$	395.4
Annual – Variable	December 2015	February 2016	$	0.8882	$	519.0

¹ Amounts paid may differ from the year-end dividend accrual since our accrual was based on an estimate of shares outstanding as of the record date.

For the three years ended December 31, 2017, operations generated positive cash flows of about $8.8 billion, and cash flows are expected to remain positive in both the short-term and reasonably foreseeable future. In 2017, operating cash flows increased $1.0 billion, compared to 2016, primarily due to an increase in premiums collected in excess of paid losses due to the growth during the year. As of December 31, 2017, we held $9.5 billion in short-term investments and U.S. Treasury securities. Based on our portfolio allocation and investment strategies, we believe that we have sufficient readily available marketable securities to cover our claims payments in the event our cash flow from operations were to be negative. See Item 1A, “Risk

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Factors,” in our Form 10-K filed with the Securities and Exchange Commission (SEC) for a discussion of certain matters that may affect our portfolios and capital position.

Progressive’s insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance of paying claims. As primarily an auto insurer, our claims liabilities are generally short in duration. Typically, at any point in time, approximately 50% of our outstanding loss and LAE reserves are paid within the following twelve months and less than 20% are still outstanding after three years. See Note 6 – Loss and Loss Adjustment Expense Reserves for further information on the timing of claims payments.

Insurance companies are required to satisfy regulatory surplus and premiums written to surplus ratio requirements. As of December 31, 2017, our consolidated statutory surplus was $9.7 billion, compared to $8.6 billion at December 31, 2016. Our net premiums written-to-surplus ratio was 2.8 to 1 at year-end 2017, compared to 2.7 to 1 at year-end 2016 and 2015. At year-end 2017, we also had access to $1.6 billion of securities held in a non-insurance subsidiary, portions of which could be contributed to the capital of our insurance subsidiaries to support growth or for other purposes. We used $655 million of available funds to pay the annual variable dividend in February 2018.

Insurance companies are also required to satisfy risk-based capital ratios. Our insurance subsidiaries’ risk-based capital ratios are in excess of applicable minimum regulatory requirements in all material respects. These ratios are determined by a series of dynamic surplus-related calculations required by the laws of various states that contain a variety of factors that are applied to financial balances based on the degree of certain risks (e.g., asset, credit, and underwriting). Nonetheless, the payment of dividends by our insurance subsidiaries are subject to certain limitations. See Note 8 – Statutory Financial Information for additional information on insurance subsidiary dividends and Note 15 – Redeemable Noncontrolling Interest for information on the dividend restriction under the ARX stockholders’ agreement.

In connection with the April 2015 acquisition of a controlling interest in ARX, The Progressive Corporation entered into a stockholders’ agreement with the other ARX stockholders. As part of the stockholders’ agreement, the minority ARX shareholders have the right to “put” their ARX shares to Progressive in two installments, one in early 2018 and one in early 2021, and Progressive has the ability to “call” a portion of the outstanding shares shortly thereafter. If these rights are exercised in full when available, our ownership stake in ARX capital stock will exceed 80% in 2018 and will reach 100% in 2021. At December 31, 2017, Progressive owned 69% of ARX’s capital stock and recorded $503.7 million of redeemable noncontrolling interest, which represented its liability to acquire the remaining 31% of ARX. Based on these put or call rights, Progressive would be required to pay approximately $180 million during the second quarter 2018 if its ownership of ARX’s capital stock increased to 80%, and approximately $310 million if all rights were exercised in full. See Note 15 – Redeemable Noncontrolling Interest for further information, including the calculation of the purchase prices.

We seek to deploy our capital in a prudent manner and use multiple data sources and modeling tools to estimate the frequency, severity, and correlation of identified exposures, including, but not limited to, catastrophic and other insured losses, natural disasters, and other significant business interruptions, to estimate our potential capital needs. Management views our capital position as consisting of three layers, each with a specific size and purpose:

• The first layer of capital, which we refer to as “regulatory capital,” is the amount of capital we need to satisfy state insurance regulatory requirements and support our objective of writing all the business we can write and service, consistent with our underwriting discipline of achieving a combined ratio of 96 or better. This capital is held by our various insurance entities.

• The second layer of capital we call “extreme contingency.” While our regulatory capital is, by definition, a cushion for absorbing financial consequences of adverse events, such as loss reserve development, litigation, weather catastrophes, and investment market corrections, we view that as a base and hold additional capital for even more extreme conditions. The modeling used to quantify capital needs for these conditions is extensive, including tens of thousands of simulations, representing our best estimates of such contingencies based on historical experience. This capital is held either at a non-insurance subsidiary of the holding company or in our insurance entities, where it is potentially eligible for a dividend up to the holding company.

• The third layer is capital in excess of the sum of the first two layers and provides maximum flexibility to repurchase stock or other securities, satisfy acquisition-related commitments, and pay dividends to shareholders, among other purposes. This capital is largely held at a non-insurance subsidiary of the holding company.

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At all times during the last two years, our total capital exceeded the sum of our regulatory capital layer plus our self-constructed extreme contingency layer. At December 31, 2017, we held total capital (debt plus shareholders’ equity) of $12.6 billion, compared to $11.1 billion at December 31, 2016.

Based upon our capital planning and forecasting efforts, we believe that we have sufficient capital resources and cash flows from operations to support our current business, scheduled principal and interest payments on our debt, our contractual obligations (including obligations to purchase ARX capital stock), and other expected capital requirements for the foreseeable future. Nevertheless, as our premiums grow, our need for additional regulatory capital also grows. We likely will need to raise additional capital in the next 12 months to support our anticipated premium growth. It is possible that a capital-raising transaction involving debt securities could cause our debt-to-total capital ratio to exceed 30% for a period of time. We are currently considering our capital-raising options; however, we do not currently expect to issue additional common shares to raise capital.

B. Commitments, Contingencies and Other Off-Balance-Sheet Arrangements

Contractual Obligations

A summary of our noncancelable contractual obligations as of December 31, 2017, follows:

	Payments due by period
(millions)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt	$	3,337.1	$	25.0	$	12.1	$	500.0	$	2,800.0
Interest payments on debt1	2,640.8		141.9		282.2		263.1		1,953.6
Operating leases	152.3		53.6		72.7		24.9		1.1
Purchase obligations	546.3		434.3		103.4		5.5		3.1
Catastrophe excess of loss reinsurance contracts2	90.7		72.0		18.7		0		0
Loss and loss adjustment expense reserves	13,087.7		6,630.1		4,165.3		1,123.7		1,168.6
Total	$	19,854.9	$	7,356.9	$	4,654.4	$	1,917.2	$	5,926.4

¹ Amounts include variable rate interest on the ARX debt for which we assumed the rates in effect as of December 31, 2017, would be applied to all relevant future periods. See Note 4 – Debt for further discussion on the interest rates and maturity dates.

² The insurance operations of ARX have several multiple-layer property catastrophe excess of loss reinsurance contracts with various reinsurers with terms ranging from one to three years.

Purchase obligations represent our noncancelable commitments for goods and services (e.g., software licenses, maintenance on information technology equipment, and media placements). Unlike many other forms of contractual obligations, loss and LAE reserves do not have definitive due dates and the ultimate payment dates are subject to a number of variables and uncertainties. As a result, the total loss and LAE reserve payments to be made by period, as shown above, are estimates based on our recent payment patterns. To further understand our claims payments, see Note 6 – Loss and Loss Adjustment Expense Reserves. The majority of the loss and LAE reserves in our Property business are paid in less than one year.

During the last three years, the only other significant new contractual commitments we entered outside the ordinary course of business were the issuance of $850 million of our 4.125% Senior Notes due 2047, $500 million of our 2.45% Senior Notes due 2027, and $400 million of our 3.70% Senior Notes due 2045 and the put and call rights included in the ARX stockholders’ agreement, as discussed in more detail in Note 15 – Redeemable Noncontrolling Interest.

Off-Balance-Sheet Arrangements

During the last two years, our off-balance-sheet leverage included derivative positions (as disclosed in Note 2 – Investments), operating leases, and purchase obligations (disclosed in the table above and Note 13 – Commitments and Contingencies). We did not have any open derivative positions at December 31, 2017 and 2016. We did not have any U.S. Treasury futures contracts during 2017. During 2016 and 2015, we opened and closed, within the same year, U.S. Treasury futures contracts as a means to manage the overall duration of our fixed-income portfolio and recorded net realized gains of $0.3 million and $2.5 million, respectively.

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III.  RESULTS OF OPERATIONS – UNDERWRITING

A. Segment Overview

We report our underwriting operations in three segments: Personal Lines, Commercial Lines, and Property. As a component of our Personal Lines segment, we report our Agency and Direct business results to provide further understanding of our products by distribution channel. Our other indemnity business represents our run-off businesses.

The following table shows the composition of our companywide net premiums written, by segment, for the years ended December 31:

	2017		2016		2015
Personal Lines
Agency	43	%	43	%	45	%
Direct	42		42		41
Total Personal Lines1	85		85		86
Commercial Lines	11		11		11
Property2	4		4		3
Total underwriting operations	100	%	100	%	100	%

¹Personal auto represented 93% of our total Personal Lines net premiums written in 2017, and 92% in 2016 and 2015; our special lines products accounted for the balance.

²We began reporting our Property business as a segment on April 1, 2015, upon acquisition of a controlling interest in ARX; Property business written prior to that date was negligible.

Our Personal Lines segment writes both personal auto and special line products (e.g., motorcycles, watercraft, and RVs). We currently write our Personal Lines products in all 50 states. We also offer our personal auto product (not special lines products) in the District of Columbia. Our personal auto policies are primarily written for 6-month terms, while the special lines products are written for 12-month terms.

Our Commercial Lines business writes primary liability, physical damage, and other auto-related insurance for automobiles and trucks owned and/or operated predominantly by small businesses. While we continue to write over 90% of our Commercial Lines business through the independent agency channel, the amount of business written through the direct channel continued to grow over the prior year. We write Commercial Lines business in all 50 states and most of our policies in this business are written for 12-month terms.

Our Property business writes residential property insurance (single family homes, condominium unit owners, rental coverage, etc.) for homeowners, other property owners, and renters. Our Property business primarily consists of the operations of the ARX organization. ARX wholly owns or controls the insurance companies that we refer to in the aggregate as “ASI.” Over the next few years, we will be transitioning from the ASI brand to the Progressive brand. We write the majority of our Property business through the independent agency channel; however, we continue to expand the distribution of our Property product offerings in the direct channel. As of December 31, 2017, ASI wrote residential property insurance in 41 states and the District of Columbia and flood insurance in 43 states and the District of Columbia. ASI and Progressive also wrote renters insurance in 41 states and the District of Columbia. Florida and Texas represented 48%, 54%, and 57% of the net premiums written in the Property business in 2017, 2016, and 2015, respectively. Property policies are written on a 12-month term.

B. Profitability

Profitability for our underwriting operations is defined by pretax underwriting profit, which is calculated as net premiums earned plus fees and other revenues less losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses. We also use underwriting margin, which is underwriting profit or loss expressed as a percentage of net premiums

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earned, to analyze our results. For the three years ended December 31, our underwriting profitability results were as follows:

	2017					2016					2015
	Underwriting Profit (Loss)					Underwriting Profit (Loss)					Underwriting Profit (Loss)
($ in millions)	$			Margin		$			Margin		$			Margin
Personal Lines
Agency	$	839.6		7.5	%	$	492.8		5.0	%	$	713.2		7.8	%
Direct	683.7			6.3		412.2			4.4		403.4			4.9
Total Personal Lines	1,523.3			6.9		905.0			4.7		1,116.6			6.5
Commercial Lines	214.1			7.7		155.2			6.4		318.3			15.9
Property1	(50.3		)	(5.1	)	32.5			3.8		61.3			10.1
Other indemnity2	(0.2		)	NM		(1.6		)	NM		(1.0		)	NM
Total underwriting operations	$	1,686.9		6.6	%	$	1,091.1		4.9	%	$	1,495.2		7.5	%

¹ We began reporting our Property business as a segment on April 1, 2015, when we acquired a controlling interest in ARX. For the years ended December 31, 2017, 2016, and 2015, amounts include $66.2 million, $62.1 million, and $46.8 million, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Although this expense is included in our Property segment, it is not reported in the consolidated results of ARX and, therefore, does not affect the value of the noncontrolling interest and will not affect amounts payable pursuant to the put and call rights under the ARX stockholders’ agreement.

² Underwriting margins for our other indemnity businesses are not meaningful (NM) due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

Our underwriting profit for 2017 was favorably impacted by lower than anticipated personal and commercial auto claims frequency throughout the year, as well as higher earned premium per policy on both our Personal Lines and Commercial Lines businesses, reflecting rate increases taken during 2016 and into 2017. These favorable impacts were partially offset by significant catastrophe losses during 2017.

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Further underwriting results for our Personal Lines business, including results by distribution channel, the Commercial Lines business, the Property business, and our underwriting operations in total, as defined in Note 10 – Segment Information, were as follows:

Underwriting Performance1	2017	2016	2015
Personal Lines – Agency
Loss & loss adjustment expense ratio	73.0	75.3	72.6
Underwriting expense ratio	19.5	19.7	19.6
Combined ratio	92.5	95.0	92.2
Personal Lines – Direct
Loss & loss adjustment expense ratio	74.1	76.8	75.0
Underwriting expense ratio	19.6	18.8	20.1
Combined ratio	93.7	95.6	95.1
Total Personal Lines
Loss & loss adjustment expense ratio	73.6	76.1	73.7
Underwriting expense ratio	19.5	19.2	19.8
Combined ratio	93.1	95.3	93.5
Commercial Lines
Loss & loss adjustment expense ratio	70.3	71.9	62.4
Underwriting expense ratio	22.0	21.7	21.7
Combined ratio	92.3	93.6	84.1
Property
Loss & loss adjustment expense ratio	70.8	63.2	57.3
Underwriting expense ratio2	34.3	33.0	32.6
Combined ratio2	105.1	96.2	89.9
Total Underwriting Operations3
Loss & loss adjustment expense ratio	73.1	75.1	72.1
Underwriting expense ratio	20.3	20.0	20.4
Combined ratio	93.4	95.1	92.5
Accident year – Loss & loss adjustment expense ratio4	73.0	75.5	73.7

¹ Ratios are expressed as a percentage of net premiums earned; fees and other revenues are deducted from underwriting expenses in the ratio calculations.

² Included in 2017, 2016, and 2015, are 6.7 points, 7.2 points, and 7.7 points, respectively, of amortization expense predominately associated with our acquisition of a controlling interest in ARX. Excluding this expense, the Property business would have reported expense ratios of 27.6, 25.8, and 24.9, and combined ratios of 98.4, 89.0, and 82.2 for 2017, 2016, and 2015, respectively.

³ Combined ratios for the other indemnity businesses are not presented separately due to the low level of premiums earned by, and the variability of loss costs in, such businesses. For the years ended December 31, 2017, 2016, and 2015, these businesses generated an underwriting loss of $0.2 million, $1.6 million, and $1.0 million, respectively.

⁴ The accident year ratios include only the losses that occurred during the period noted. As a result, accident period results will change over time, either favorably or unfavorably, as we revise our estimates of loss costs when payments are made or reserves for that accident period are reviewed.

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Losses and Loss Adjustment Expenses (LAE)

(millions)	2017		2016		2015
Change in net loss and LAE reserves	$	1,349.8	$	973.2	$	702.4
Paid losses and LAE	17,458.2		15,906.4		13,639.6
Total incurred losses and LAE	$	18,808.0	$	16,879.6	$	14,342.0

Claims costs, our most significant expense, represent payments made, and estimated future payments to be made, to or on behalf of our policyholders, including expenses needed to adjust or settle claims. Claims costs are a function of loss severity and frequency and, for our vehicle businesses, are influenced by inflation and driving patterns, among other factors, some of which are discussed below. In our Property business, claim severity is primarily a function of construction costs and the age of the structure. Accordingly, anticipated changes in these factors are taken into account when we establish premium rates and loss reserves. Loss reserves are estimates of future costs and our reserves are adjusted as underlying assumptions change and information develops. See Critical Accounting Policies for a discussion of the effect of changing estimates.

Our total loss and loss adjustment expense ratio decreased 2.0 points in 2017 and increased 3.0 points in 2016, compared to the prior year. Our accident year loss and LAE ratio, which excludes the impact of prior accident year reserve development during each calendar year, decreased 2.5 points in 2017 and increased 1.8 points in 2016. Several factors that contributed to the year-over-year changes are discussed below and include catastrophe losses, changes in severity and frequency, and prior accident year reserve development. The increase in catastrophe losses for the year were more than offset by lower auto frequency.

We experienced severe weather conditions in several areas of the country during each of the last three years. Hail storms, tornadoes, wind, and flooding contributed to catastrophe losses each year, as well as relatively significant hurricane activity in 2017. The following table shows catastrophe losses incurred for the years ended December 31:

($ in millions)	2017			2016			2015
Vehicle businesses	$	531.2		$	381.1		$	152.6
Property business, net of reinsurance (excluding ASL)	303.5			170.7			101.9
Reinsurance recoverable on ASL1	(4.2		)	—			—
Property business, net	299.3			170.7			101.9
Total catastrophe losses incurred	$	830.5		$	551.8		$	254.5
Increase to combined ratio	3.2		pts.	2.5		pts.	1.3		pts.

¹Represents the reinsurance recoverable recorded on the losses under our aggregate stop-loss agreement (ASL); including allocated loss adjustment expense costs, the balance in our reinsurance recoverable on the ASL at December 31, 2017, was $4.6 million.

The catastrophe losses in 2017 were primarily due to severe storms in Colorado, Florida, Minnesota, and Texas, including Hurricanes Harvey and Irma. We have responded, and will continue to respond, promptly to catastrophic events when they occur in order to provide exemplary claims service to our customers.

We do not have catastrophe-specific reinsurance for our vehicle businesses, but we reinsure most of our Property business against various risks, including, but not limited to, catastrophic losses.

In general, the loss and LAE from a single catastrophic event has to exceed $50 million before we are covered by our property catastrophe excess of loss reinsurance. In addition, during 2017 our Property business was covered by an aggregate stop-loss reinsurance agreement, which covered all 2017 accident year losses and allocated loss adjustment expenses (ALAE), except those from named storms and liability claims, and provided $200 million of coverage if ASI’s applicable loss and ALAE ratio for the full year exceeded 63%. The aggregate stop-loss agreement has been renewed for 2018, under substantially the same terms. Certain of our property catastrophe excess of loss agreements expire in the second quarter 2018; the remainder were written for multi-year terms. For those that are expiring, our intent is to replace them with agreements providing similar coverage, if then available in the market on reasonable terms.

Pursuant to the excess of loss reinsurance coverages, our Property business losses from Hurricane Irma were limited to $50 million. On a gross basis, including losses and LAE, the Property business had losses from Hurricane Irma of $162.3 million. Our Property business losses and LAE from Hurricane Harvey did not exceed the $50 million threshold.

The aggregate severe thunderstorm activity in our Property business during 2017 was $257.9 million, including loss and LAE, which caused the applicable loss and LAE ratio under the aggregate stop-loss agreement to exceed the 63% threshold. As a

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result, we recorded a $4.6 million reinsurance recoverable under that agreement, as discussed in the table, along with the related footnote, above.

The following discussion of our severity and frequency trends in our personal auto businesses excludes comprehensive coverage because of its inherent volatility, as it is typically linked to catastrophic losses generally resulting from adverse weather. For our commercial auto products, the reported frequency and severity trends include comprehensive coverage. Comprehensive coverage insures against damage to a customer’s vehicle due to various causes other than collision, such as windstorm, hail, theft, falling objects, and glass breakage.

Total personal auto incurred severity (i.e., average cost per claim, including both paid losses and the change in case reserves) on a calendar-year basis was up over the prior-year periods in the 1% to 4% range for the last three years.

• 2017 - Severity increased about 5% for our property damage coverage, about 4% for our personal injury protection (PIP) coverage, and 2% for our bodily injury coverage, while collision coverage was flat.

• 2016 - Severity increased about 5% for our PIP coverage, about 3% for our property damage coverage, about 4% for collision coverage, and 2% for our bodily injury coverage.

• 2015 - Severity increased about 1% for our PIP coverage, about 3% for our property damage coverage, and about 4% for collision coverage, while severity in our bodily injury coverage was down about 2%.

On a calendar-year basis, our commercial auto products incurred severity increased 7% in 2017, compared to a 17% increase in 2016, and a 6% increase in 2015. Almost a quarter of the severity increase in 2017 reflects a shift in the mix of business to for-hire trucking, which has higher average severity than the business auto and contractor market tiers.

It is a challenge to estimate future severity, especially for bodily injury and PIP claims, but we continue to monitor changes in the underlying costs, such as medical costs, health care reform, and jury verdicts, along with regulatory changes and other factors that may affect severity.

Our incurred frequency of personal auto accidents, on a calendar-year basis, was down about 3% in 2017, flat in 2016, and up about 2% in 2015, compared to the prior-year periods.

• 2017 - Frequency decreased about 5% for our PIP coverage, about 4% for our collision coverage, about 3% for our property damage coverage, and 2% for our bodily injury coverage.

• 2016 - Our collision coverage had a decrease in frequency of about 1%. Our property damage coverage frequency was relatively flat, while our PIP and bodily injury coverages had an increase in frequency of about 1% and 3%, respectively.

• 2015 - Our property damage and collision coverages had an increase in frequency of about 1% and approximately 2%-3% for our bodily injury and PIP coverages.

On a year-over-year basis, incurred frequency in our Commercial Lines business saw a decrease of about 3% for 2017, an increase of about 4% for 2016, and was relatively flat in 2015. The 2017 frequency decrease was consistent with our expectations, as we imposed underwriting restrictions during the second half of 2016 and the first quarter of 2017 in higher frequency segments to manage profitability.

We closely monitor the changes in frequency, but the degree or direction of near-term frequency change is not something that we are able to predict with any certainty. We analyze trends to distinguish changes in our experience from external factors, such as changes in the number of vehicles per household, miles driven, gasoline prices, greater vehicle safety, and unemployment rates, versus those resulting from shifts in the mix of our business, to allow us to reserve more accurately for our loss exposure.

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The table below presents the actuarial adjustments implemented and the loss reserve development experienced in the years ended December 31:

($ in millions)	2017			2016			2015
ACTUARIAL ADJUSTMENTS
Reserve decrease (increase)
Prior accident years	$	138.5		$	142.6		$	95.1
Current accident year	(19.8		)	(6.2		)	97.0
Calendar year actuarial adjustments	$	118.7		$	136.4		$	192.1
PRIOR ACCIDENT YEARS DEVELOPMENT
Favorable (unfavorable)
Actuarial adjustments	$	138.5		$	142.6		$	95.1
All other development	(164.4		)	(55.1		)	220.0
Total development	$	(25.9	)	$	87.5		$	315.1
(Increase) decrease to calendar year combined ratio	(0.1		) pts.	0.4		pts.	1.6		pts.

Total development consists of both actuarial adjustments and “all other development.” The actuarial adjustments represent the net changes made by our actuarial staff to both current and prior accident year reserves based on regularly scheduled reviews. Through these reviews, our actuaries identify and measure variances in the projected frequency and severity trends, which allow them to adjust the reserves to reflect the current cost trends. For our Property business, 100% of the outstanding reserves are reviewed monthly and, as such, include any development on catastrophe losses as part of the actuarial adjustments. For the vehicle businesses, only a subset of our reserves is reviewed monthly as part of the actuarial adjustment process. Catastrophe losses for the vehicle businesses would be reflected in the all other development, discussed below, to the extent they related to prior year reserves. We report these actuarial adjustments separately for the current and prior accident years to reflect these adjustments as part of the total prior accident years’ development.

“All other development” represents claims settling for more or less than reserved, emergence of unrecorded claims at rates different than anticipated in our incurred but not recorded (IBNR) reserves, and changes in reserve estimates on specific claims. Although we believe the development from both the actuarial adjustments and “all other development” generally results from the same factors, we are unable to quantify the portion of the reserve development that might be applicable to any one or more of those underlying factors.

Our objective is to establish case and IBNR reserves that are adequate to cover all loss costs, while incurring minimal variation from the date that the reserves are initially established until losses are fully developed. As reflected in the table above, we experienced unfavorable prior year development during 2017 and favorable development during both 2016 and 2015. For 2017, we incurred unfavorable reserve development in our personal Agency auto business, which was partially offset by favorable development in our Property business. For 2016, we incurred favorable reserve development in both our Personal Lines and Property businesses, which was partially offset by unfavorable IBNR loss reserve development in our Commercial Lines business due to higher severity and frequency of late reported claims than anticipated for accident year 2015. The favorable development incurred in 2015 occurred in all our segments. See Note 6 – Loss and Loss Adjustment Expense Reserves for a more detailed discussion of the factors impacting our prior accident year development.

We continue to focus on our loss reserve analysis, attempting to enhance accuracy and to further our understanding of our loss costs. A detailed discussion of our loss reserving practices, primarily related to our vehicle businesses, can be found in our Report on Loss Reserving Practices, which was filed in a Form 8-K on August 12, 2016.

Because we are primarily an insurer of motor vehicles and residential property insurance, our exposure as an insurer of environmental, asbestos, and general liability claims is limited. We have established reserves for these exposures, in amounts that we believe to be adequate based on information currently known. These exposures have not had and are not expected to have a material effect on our liquidity, financial condition, cash flows, or results of operations.

Underwriting Expenses

Our underwriting expense ratio (i.e., policy acquisition costs and other underwriting expenses, less fees and other revenues, expressed as a percentage of net premiums earned) was lower in 2016, compared to both 2017 and 2015, primarily reflecting the decrease in advertising spending that we took in the second half of 2016 to help us achieve our profitability goal in 2016.

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C. Growth

For our underwriting operations, we analyze growth in terms of both premiums and policies. Net premiums written represent the premiums from policies written during the period less any premiums ceded to reinsurers. Net premiums earned, which are a function of the premiums written in the current and prior periods, are earned as revenue over the life of the policy using a daily earnings convention. Policies in force, our preferred measure of growth since it removes the variability due to rate changes or mix shifts, represents all policies under which coverage was in effect as of the end of the period specified.

For the years ended December 31,	2017				2016				2015
($ in millions)	$		% Growth		$		% Growth		$		% Growth
NET PREMIUMS WRITTEN
Personal Lines
Agency	$	11,685.4	16	%	$	10,107.6	10	%	$	9,230.1	1	%
Direct	11,243.0		16		9,711.9		15		8,473.5		11
Total Personal Lines	22,928.4		16		19,819.5		12		17,703.6		6
Commercial Lines	3,112.7		20		2,598.3		20		2,171.2		15
Property	1,091.0		17		935.7		NA		689.6		NA
Total underwriting operations1	$	27,132.1	16	%	$	23,353.5	14	%	$	20,564.0	10	%
NET PREMIUMS EARNED
Personal Lines
Agency	$	11,177.6	14	%	$	9,791.7	7	%	$	9,108.6	0	%
Direct	10,769.6		15		9,396.5		15		8,185.9		10
Total Personal Lines	21,947.2		14		19,188.2		11		17,294.5		4
Commercial Lines	2,793.9		15		2,421.3		21		1,995.9		9
Property	988.8		14		864.5		NA		609.1		NA
Total underwriting operations1	$	25,729.9	14	%	$	22,474.0	13	%	$	19,899.1	8	%
December 31,	2017				2016				2015
(thousands)	#		% Growth		#		% Growth		#		% Growth
POLICIES IN FORCE
Agency auto	5,670.7		12	%	5,045.4		7	%	4,737.1		0	%
Direct auto	6,039.1		13		5,348.3		9		4,916.2		9
Total auto	11,709.8		13		10,393.7		8		9,653.3		5
Special lines2	4,365.7		2		4,263.1		4		4,111.4		2
Personal Lines - total	16,075.5		10	%	14,656.8		6	%	13,764.7		4	%
Commercial Lines	646.8		6	%	607.9		9	%	555.8		8	%
Property	1,461.7		22	%	1,201.9		12	%	1,076.5		NA

NA= not applicable since we began reporting our Property business as a segment on April 1, 2015, upon acquisition of a controlling interest in ARX; Property business written prior to that date was negligible.

¹ For 2015, total underwriting operations include negative $0.4 million written and earned premiums from reinstatement premiums paid to the reinsurers of our professional liability group business pursuant to reinsurance contracts.

² Includes insurance for motorcycles, watercraft, RVs, and similar items.

At year-end 2017, we had approximately 1.7 million more policies in force than the year-ended 2016. The increase reflects both an increase in new applications (i.e., policies sold) and lengthening retention. For the Property business, the significant increase in policies in force is primarily attributable to state expansion in each year, as well as more competitive product offerings and growth in our auto/home bundled offerings.

Although new policies are necessary to maintain a growing book of business, we continue to recognize the importance of retaining our current customers as a critical component of our continued growth. As shown in the tables below, we measure retention by policy life expectancy. We disclose our changes in policy life expectancy using a trailing 12-month period, since we believe this measure is indicative of recent experience, mitigates the effects of month-to-month variability, and addresses seasonality. We also review our customer retention for our personal auto products using a trailing 3-month period. Although

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using a trailing 3-month measure does not address seasonality and can reflect more volatility, this measure is more responsive to current experience and can be an indicator of how our retention rates are moving.

To analyze growth, we review new policies, rate levels, and the retention characteristics of our segments.

D. Personal Lines

The following table shows our year-over-year changes for our Personal Lines business:

	Growth Over Prior Year
	2017		2016		2015
APPLICATIONS
New	15	%	12	%	7	%
Renewal	7	%	5	%	1	%
WRITTEN PREMIUM PER POLICY - AUTO	5	%	5	%	4	%
RETENTION MEASURES - AUTO
Policy life expectancy
Trailing 3-months	12	%	3	%	5	%
Trailing 12-months	7	%	5	%	(1	)%

In our Personal Lines business, the increase in both new and renewal applications primarily reflected increases in our personal auto products, which we attribute to our competitive product offerings and position in the marketplace that, in part, reflects our increase in advertising spend during 2017. Rate increases taken in our auto businesses during 2016 and into 2017, in addition to a shift in business mix, contributed to the increase we experienced in written premium per policy for 2017. For the year ended December 31, 2017, written premium per policy increased about 4% for new auto business and 6% for renewal auto business, compared to 2016.

We report our Agency and Direct business results separately as components of our Personal Lines segment to provide further understanding of our products by distribution channel.

The Agency Business

	Growth Over Prior Year
	2017		2016		2015
Auto: new applications	21	%	18	%	2	%
renewal applications	7	%	2	%	(4	)%
written premium per policy	6	%	5	%	4	%
Auto retention measures:
policy life expectancy - trailing 3-months	14	%	5	%	5	%
trailing 12-months	8	%	7	%	(2	)%

The Agency business includes business written by more than 35,000 independent insurance agencies that represent Progressive, as well as brokerages in New York and California. During 2017, we generated new Agency auto application growth in 37 states, including eight of our top 10 largest Agency states. The new policy growth resulted from increases in demand from agents, as indicated by a solid increase in our quote volume, as well as better meeting the needs of end consumers, as evidenced by a year-over-year increase of about 10% in our rate of conversion (i.e., converting a quote to a sale). We had double-digit new auto application growth on a year-over-year basis in each of our consumer segments (e.g., inconsistently insured, consistently insured and maybe a renter, homeowners who do not bundle auto and home, and homeowners who bundle auto and home), with our bundled home and auto customers, the consumer segment we refer to as “Robinsons,” growing five times more than the other consumer segments combined, albeit on a smaller base.

Written premium per policy for new and renewal Agency auto business increased 5% and 6%, respectively, during 2017, compared to last year, primarily reflecting rate increases taken during 2016 and into 2017. We continued to see our retention metrics improve.

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The Direct Business

	Growth Over Prior Year
	2017		2016		2015
Auto: new applications	16	%	9	%	13	%
renewal applications	9	%	10	%	5	%
written premium per policy	5	%	5	%	4	%
Auto retention measures:
policy life expectancy - trailing 3-months	10	%	1	%	5	%
trailing 12-months	4	%	4	%	0	%

The Direct business includes business written directly by Progressive on the Internet, through mobile devices, and over the phone. During the current year, we generated new Direct auto application growth in 44 states and the District of Columbia, including all of our top 10 largest Direct states, reflecting an increase in our Direct auto quotes and rate of conversion by about 11% and 5%, respectively.

New and renewal applications increased on a year-over-year basis during 2017, primarily reflecting our competitiveness in the marketplace and a 30% increase in advertising spend, following the reduction we took in the second half of 2016 to help meet our profitability goal. Similar to the Agency business, we grew our new Direct auto applications double digits across all consumer segments and, with the marketing investments that targeted auto/home bundlers, we grew our Direct Robinsons applications more than three times as fast as our other consumer segments, albeit on a smaller base.

Written premium per policy for new and renewal Direct auto business increased 4% and 6%, respectively, during 2017, compared to last year, primarily reflecting rate increases taken during 2016 and into 2017. Our policies in force increased in all our consumer segments and, like in the Agency channel, experienced the strongest growth in our bundled auto/home customers.

E. Commercial Lines

	Growth Over Prior Year
	2017		2016		2015
New applications	1	%	11	%	15	%
Renewal applications	8	%	7	%	0	%
Written premium per policy	12	%	10	%	8	%
Policy life expectancy - trailing 12-months	(4	)%	6	%	13	%

Our Commercial Lines business operates in the business auto, for-hire transportation, contractor, for-hire specialty, tow, and for-hire livery markets and is primarily written in the agency channel. Commercial Lines was able to grow new applications 1% year-over-year in 2017, despite experiencing negative growth during the first half of the year. During 2017, we lifted underwriting restrictions imposed during the second half of 2016 and into 2017 to address certain business markets not meeting profitability targets. During the second half of 2017, our year-over-year new application growth was 17%. The strong new business application growth we generated in 2016 led to solid growth in renewal applications during 2017. These applications primarily consisted of 12-month policies that have started to renew in 2017. During the second half of 2016 and into 2017, we also increased rates and experienced shifts in business mix, which contributed to the increase in our written premium per policy during the year. The decrease in policy life expectancy during 2017 was primarily attributable to the rate increases taken during 2016 and into 2017.

F. Property

	Growth Over Prior Year
	2017		20161
New applications	48	%	17	%
Renewal applications	16	%	7	%
Written premium per policy	(5	)%	(7	)%

¹Property business prior to the April 1, 2015, acquisition of a controlling interest in ARX was negligible. 2016 new and renewal application growth was calculated using application counts from the last nine months of 2016, for comparability to application counts from 2015. Written premium per policy growth reflects 12 months of activity for 2016, compared to nine months for 2015.

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Our Property business writes residential property insurance for homeowners, other property owners, and renters in the agency and direct channels. The significant growth in new applications is largely attributable to state expansion that occurred during 2016 and 2017 in both Property business written by ASI and Progressive’s renters business, more competitive product offerings, as well as momentum in growing Robinsons through our Platinum agency offering. Written premium per policy decreased in 2017, reflecting a relative increase in the renters business, which has lower premiums per policy.

G. Litigation

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies issued by the subsidiaries in the ordinary course of business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, various Progressive entities are named as defendants in a number of alleged class action or individual lawsuits arising out of the operations of the insurance subsidiaries. These cases include those alleging damages as a result of our practices in evaluating or paying medical or injury claims or benefits, including, but not limited to, personal injury protection, medical payments, uninsured motorist/underinsured motorist (UM/UIM), and bodily injury benefits; labor rates paid to auto body repair shops; and cases challenging other aspects of our claims or marketing practices or other business operations. Other insurance companies face many of these same issues. During the last three years, we have settled several class action and individual lawsuits. These settlements did not have a material effect on our financial condition, cash flows, or results of operations. See Note 12 – Litigation for a more detailed discussion.

H. Income Taxes

A deferred tax asset or liability is a tax benefit or expense that is expected to be realized in a future tax return. At both December 31, 2017 and 2016, we reported net deferred tax liabilities. We determined that we did not need a valuation allowance on our gross deferred tax assets for either year. Although realization of the gross deferred tax assets is not assured, management believes it is more likely than not that the gross deferred tax assets will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes.

At December 31, 2017 and 2016, we had net current income taxes payable of $23.8 million and $41.2 million, respectively, which were reported as part of “other liabilities.”

Our effective tax rate was 25% for 2017, compared to 28% and 32% for 2016 and 2015, respectively. The decrease in the effective rate during 2017, compared to 2016, primarily reflects the recognition of $99.5 million of federal tax benefits from the revaluation of our net deferred tax liabilities to the new federal corporate income tax rate of 21%, from the previous rate of 35%, under the legislation commonly known as the Tax Cuts and Jobs Act of 2017 (see “Tax Reform” under the Overview section of this Management’s Discussion and Analysis for further information). The decrease in the effective rate in both 2017 and 2016, compared to 2015, also reflects $48.7 million and $58.7 million, respectively, of federal tax benefits resulting from our investments in renewable energy; all of the expected tax benefits from these investments were recorded in our income tax provision during 2017 and 2016, respectively.

Consistent with prior years, we had no uncertain tax positions.

See Note 5 – Income Taxes for further information.

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IV.   RESULTS OF OPERATIONS – INVESTMENTS

A. Portfolio Summary

At year-end 2017, the fair value of our investment portfolio was $27.3 billion, approximately 16% greater than at year-end 2016, reflecting operating and investment returns and our debt issuance, which together more than offset our use of capital during the year, including share repurchases, debt servicing and repurchases, and shareholder dividends. Our investment income (interest and dividends) increased18% in 2017 and 5% in 2016, as compared to the prior years, reflecting higher average assets in both periods. In 2017, we recognized $99.2 million in net realized gains on securities held in our investment portfolios, compared to $110.8 million and $112.7 million in 2016 and 2015, respectively. During 2017 and 2016, we also recorded write-downs of $49.6 million and $59.7 million, respectively, related to an “other asset” impairment on three renewable energy tax credit fund investments.

B. Investment Results

We report total return to reflect more accurately our management philosophy governing the portfolio and our evaluation of investment results. The fully taxable equivalent (FTE) total return includes recurring investment income, adjusted to a fully taxable amount for certain securities that receive preferential tax treatment (e.g., municipal securities), net realized gains (losses) on securities, and changes in unrealized gains (losses) on investments.

The following summarizes investment results for the years ended December 31:

	2017		2016		2015
Pretax recurring investment book yield	2.4	%	2.3	%	2.4	%
Weighted average FTE book yield	2.6	%	2.6	%	2.7	%
FTE total return:
Fixed-income securities	3.0	%	2.9	%	1.7	%
Common stocks	21.8	%	12.8	%	0.8	%
Total portfolio	5.2	%	4.0	%	1.6	%

The higher fixed-income returns in both 2017 and 2016, as compared to the prior year, reflected a narrowing of credit spreads (additional yield on non-treasury bonds relative to treasury securities similar in maturity), which resulted in increased valuations in both years, despite the rise in benchmark treasury rates. The higher common stock return in both 2017 and 2016, as compared to the prior year, reflected a higher overall equity market return in both years.

A further break-down of our FTE total returns for our portfolio, including the net gains (losses) on our derivative positions, for the years ended December 31, follows:

	2017		2016		2015
Fixed-income securities:
U.S. Treasury Notes	1.2	%	(0.5	)%	0	%
Municipal bonds	4.9	%	2.3	%	4.2	%
Corporate bonds	3.0	%	4.6	%	2.7	%
Residential mortgage-backed securities	4.7	%	3.5	%	1.9	%
Commercial mortgage-backed securities	4.0	%	3.9	%	1.7	%
Other asset-backed securities	1.8	%	1.8	%	0.8	%
Preferred stocks	12.9	%	11.0	%	0.4	%
Common stocks:
Indexed	22.7	%	12.4	%	1.8	%
Actively managed	7.8	%	20.8	%	(7.0	)%

App.-A-74

C. Portfolio Allocation

The composition of the investment portfolio at December 31, was:

($ in millions)	Fair Value		% of Total Portfolio		Duration (years)	Rating1
2017
Fixed maturities	$	20,201.7	74.1	%	2.8	AA-
Nonredeemable preferred stocks	803.8		2.9		3.3	BBB-
Short-term investments	2,869.4		10.5		<0.1	AA-
Total fixed-income securities	23,874.9		87.5		2.5	AA-
Common equities	3,399.8		12.5		na	na
Total portfolio2,3	$	27,274.7	100.0	%	2.5	AA-
2016
Fixed maturities	$	16,243.8	69.2	%	2.6	A+
Nonredeemable preferred stocks	853.5		3.6		3.1	BBB-
Short-term investments	3,572.9		15.2		0.2	AA-
Total fixed-income securities	20,670.2		88.0		2.2	A+
Common equities	2,812.4		12.0		na	na
Total portfolio2,3	$	23,482.6	100.0	%	2.2	A+
na = not applicable

¹ Represents ratings at December 31, 2017 and 2016. Credit quality ratings are assigned by nationally recognized statistical rating organizations. To calculate the weighted average credit quality ratings, we weight individual securities based on fair value and assign a numeric score of 0-5, with non-investment-grade and non-rated securities assigned a score of 0-1. To the extent the weighted average of the ratings falls between AAA and AA+, we would assign an internal rating of AAA-.

² Our portfolio reflects the effect of unsettled security transactions and collateral on open derivative positions; at December 31, 2017, $5.8 million was included in “other assets,” compared to $27.8 million in “other liabilities” at December 31, 2016.

³ The total fair value of the portfolio at December 31, 2017 and 2016, included $1.6 billion and $1.3 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

Our asset allocation strategy is to maintain 0-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in Group II securities.

We define Group I securities to include:

• common equities,

• nonredeemable preferred stocks,

• redeemable preferred stocks, except for 50% of investment-grade redeemable preferred stocks with cumulative dividends, which are included in Group II, and

• all other non-investment-grade fixed-maturity securities.

Group II securities include:

• short-term securities, and

• all other fixed-maturity securities, including 50% of investment-grade redeemable preferred stocks with cumulative dividends.

We believe this asset allocation strategy allows us to appropriately assess the risks associated with these securities for capital purposes and is in line with the treatment by our regulators.

App.-A-75

The following tables show the composition of our Group I and Group II securities at December 31, 2017 and 2016:

	2017				2016
($ in millions)	Fair Value		% of Total Portfolio		Fair Value		% of Total Portfolio
Group I securities:
Non-investment-grade fixed maturities	$	404.8	1.5	%	$	356.2	1.5	%
Redeemable preferred stocks1	147.4		0.5		135.3		0.6
Nonredeemable preferred stocks	803.8		2.9		853.5		3.6
Common equities	3,399.8		12.5		2,812.4		12.0
Total Group I securities	4,755.8		17.4		4,157.4		17.7
Group II securities:
Other fixed maturities2	19,649.5		72.1		15,752.3		67.1
Short-term investments	2,869.4		10.5		3,572.9		15.2
Total Group II securities	22,518.9		82.6		19,325.2		82.3
Total portfolio	$	27,274.7	100.0	%	$	23,482.6	100.0	%

¹ Includes non-investment-grade redeemable preferred stocks of $83.8 million and $78.7 million at December 31, 2017 and 2016, respectively.

² Includes investment-grade redeemable preferred stocks, with cumulative dividends, of $63.6 million at December 31, 2017 and $56.6 million at December 31, 2016.

To determine the allocation between Group I and Group II, we use the credit ratings from models provided by the National Association of Insurance Commissioners (NAIC) for classifying our residential and commercial mortgage-backed securities, excluding interest-only securities, and the credit ratings from nationally recognized statistical rating organizations (NRSROs) for all other debt securities. NAIC ratings are based on a model that considers the book price of our securities when assessing the probability of future losses in assigning a credit rating. As a result, NAIC ratings can vary from credit ratings issued by NRSROs. Management believes NAIC ratings more accurately reflect our risk profile when determining the asset allocation between Group I and II securities.

Unrealized Gains and Losses

As of December 31, 2017, our portfolio had pretax net unrealized gains, recorded as part of accumulated other comprehensive income, of $1,997.6 million, compared to $1,449.1 million at December 31, 2016.

During the year, the net unrealized gains in our fixed-income portfolio increased$22.6 million, the result of a tightening in credit spreads in our non-treasury securities, partially offset by sales of securities with net realized gains in our nonredeemable preferred stock, residential mortgage-backed, and corporate portfolios. The net unrealized gains in our common stock portfolio increased$525.9 million during 2017, reflecting changes in the broad equity market during the year, adjusting for net gains recognized on security sales.

See Note 2 – Investments for further details on our gross unrealized gains and losses.

App.-A-76

Other-Than-Temporary Impairment (OTTI)

Realized losses may include write-downs of securities determined to have had other-than-temporary declines in fair value. The write-down activity recorded in the comprehensive income statements for the years ended December 31, was as follows:

(millions)	Total Write-downs		Write-downs on Securities Sold			Write-downs on Securities Held at Period End
2017
Commercial mortgage-backed securities	$	0.4	$	0		$	0.4
Common equities	14.5		(3.3		)	11.2
Total investment portfolio	14.9		(3.3		)	11.6
Other assets1	49.6		0			49.6
Total write-downs	$	64.5	$	(3.3	)	$	61.2
2016
Redeemable preferred stocks2	$	25.4	$	(0.1	)	$	25.3
Common equities	1.7		(1.4		)	0.3
Total investment portfolio	27.1		(1.5		)	25.6
Other assets1	59.7		0			59.7
Total write-downs	$	86.8	$	(1.5	)	$	85.3
2015
Common equities	$	23.8	$	(15.1	)	$	8.7

¹ Reflects impairments of renewable energy investments under which the future pretax cash flows are expected to be less than the carrying value of the assets.

² Reflects a change in our intent to hold the securities to a recovery of their respective cost bases.

See Critical Accounting Policies, Other-Than-Temporary Impairment, for a complete discussion on our analysis regarding our treatment of OTTI.

Fixed-Income Securities

The fixed-income portfolio is managed internally and includes fixed-maturity securities, short-term investments, and nonredeemable preferred stocks. The fixed-maturity securities and short-term investments, as reported on the balance sheets at December 31, were comprised of the following:

	2017				2016
($ in millions)	Fair Value		% of Total		Fair Value		% of Total
Investment-grade fixed maturities	$	22,039.9	95.5	%	$	18,933.3	95.5	%
Non-investment-grade fixed maturities1	1,031.2		4.5		883.4		4.5
Total	$	23,071.1	100.0	%	$	19,816.7	100.0	%

¹Non-investment-grade fixed-maturity securities are non-rated or have a credit quality rating of an equivalent BB+ or lower, classified by ratings from NRSROs. The non-investment-grade securities based upon NAIC ratings and our Group I modeling were $488.6 million and $434.9 million at December 31, 2017 and 2016, respectively.

A primary exposure for the fixed-income portfolio is interest rate risk, which includes the change in value resulting from movements in the underlying market rates of debt securities held. We manage this risk by maintaining the portfolio’s duration (a measure of the portfolio’s exposure to changes in interest rates) between 1.5 and 5 years. The duration of the fixed-income portfolio was 2.5 years at December 31, 2017, compared to 2.2 years at December 31, 2016, reflecting our preference for shorter duration positioning during times of low interest rates. We lengthened our portfolio duration modestly during the fourth quarter in response to higher interest rates. The distribution of duration and convexity (i.e., a measure of the speed at which the duration of a security is expected to change based on a rise or fall in interest rates) is monitored on a regular basis.

App.-A-77

The duration distribution of our fixed-income portfolio, represented by the interest rate sensitivity of the comparable benchmark U.S. Treasury Notes, at December 31, was:

Duration Distribution	2017		2016
1 year	19.8	%	25.9	%
2 years	15.7		13.4
3 years	27.0		24.2
5 years	24.1		21.4
7 years	8.7		11.1
10 years	4.7		4.2
20 years	0		(0.2	)
30 years	0		0
Total fixed-income portfolio	100.0	%	100.0	%

The negative duration in the 20-year category in 2016 arises from the variable rate nature of the dividends on some of our preferred stocks. If not called at their call dates, the dividends on these securities will reset from a fixed rate to a floating rate, which could cause these securities to trade at a discount and, therefore, with a negative duration as the securities’ valuation will likely rise if the floating rate moves higher.

Another primary exposure related to the fixed-income portfolio is credit risk. This risk is managed by maintaining an A+ minimum average portfolio credit quality rating, as defined by NRSROs, which was successfully maintained during both 2017 and 2016.

The credit quality distribution of the fixed-income portfolio at December 31, was:

Rating	2017		2016
AAA	45.8	%	35.7	%
AA	13.6		19.1
A	12.2		15.3
BBB	23.2		24.3
Non-investment grade/non-rated:1
BB	3.6		3.7
B	1.0		0.6
CCC and lower	0.1		0.3
Non-rated	0.5		1.0
Total fixed-income portfolio	100.0	%	100.0	%

¹ The ratings in the table above are assigned by NRSROs. The non-investment grade fixed-income securities based upon our Group I classification represented 2.6% of the total fixed-income portfolio at December 31, 2017, compared to 3.4% at December 31, 2016.

The changes in credit quality profile from December 31, 2016 were the result of transactions in our portfolio that shifted the mix within the various credit categories.

Our portfolio is also exposed to concentration risk. Our investment constraints limit investment in a single issuer, other than U.S. Treasury Notes or a state’s general obligation bonds, to 2.5% of shareholders’ equity, while the single issuer guideline on preferred stocks and/or non-investment-grade debt is 1.25% of shareholders’ equity. Additionally, the guideline applicable to any state’s general obligation bonds is 6% of shareholders’ equity. We also consider sector concentration a risk, and we frequently evaluate the portfolio’s sector allocation with regard to internal requirements and external market factors. We consider concentration risk both overall and in the context of individual asset classes, including but not limited to common equities, residential and commercial mortgage-backed securities, municipal bonds, and high-yield bonds. At December 31, 2017 and 2016, we were within all of the constraints described above.

We monitor prepayment and extension risk, especially in our structured product and preferred stock portfolios. Prepayment risk includes the risk of early redemption of security principal that may need to be reinvested at less attractive rates. Extension risk includes the risk that a security will not be redeemed when anticipated, and that the security that is extended will have a lower yield than a security we might be able to obtain by reinvesting the expected redemption principal. Our holdings of different

App.-A-78

types of structured debt and preferred securities help manage these risks. During 2017, we did not experience significant prepayment or extension of principal relative to our cash flow expectations in the portfolio.

Liquidity risk is another risk factor we monitor. Our overall portfolio remains very liquid and we believe that it is sufficient to meet expected near-term liquidity requirements. The short-to-intermediate duration of our portfolio provides a source of liquidity, as we expect approximately $3.8 billion, or 27%, of principal repayment from our fixed-income portfolio, excluding U.S. Treasury Notes and short-term investments, during 2018. Cash from interest and dividend payments provides an additional source of recurring liquidity.

The duration of our U.S. government obligations, which are included in the fixed-income portfolio, was comprised of the following at December 31, 2017:

($ in millions)	Fair Value		Duration (years)
U.S. Treasury Notes
Less than one year	$	129.1	0.9
One to two years	1,088.6		1.8
Two to three years	1,229.1		2.7
Three to five years	3,135.5		4.2
Five to seven years	767.3		5.9
Seven to ten years	296.3		8.7
Total U.S. Treasury Notes	$	6,645.9	3.9

As of December 31, 2017, we had no interest rate swaps or treasury futures.

App.-A-79

ASSET-BACKED SECURITIES

Included in the fixed-income portfolio are asset-backed securities, which were comprised of the following at December 31:

($ in millions)	Fair Value		Net Unrealized Gains (Losses)			% of Asset- Backed Securities		Duration (years)	Rating (at period end)
2017
Residential mortgage-backed securities:
Collateralized mortgage obligations	$	404.3	$	0		6.7	%	1.1	A+
Home equity (sub-prime bonds)	432.4		7.9			7.1		0.2	BBB+
Residential mortgage-backed securities	836.7		7.9			13.8		0.7	A-
Commercial mortgage-backed securities	2,758.6		(1.5		)	45.6		2.9	A
Other asset-backed securities:
Automobile	1,182.2		(1.8		)	19.5		0.7	AAA-
Credit card	95.8		(0.1		)	1.6		0.5	AAA
Student loan	538.7		2.3			8.9		1.1	AA-
Other1	638.0		(0.4		)	10.6		2.2	A+
Other asset-backed securities	2,454.7		0			40.6		1.2	AA+
Total asset-backed securities	$	6,050.0	$	6.4		100.0	%	1.9	A+
2016
Residential mortgage-backed securities:
Collateralized mortgage obligations	$	821.3	$	(4.9	)	13.5	%	1.1	A
Home equity (sub-prime bonds)	678.0		13.0			11.1		<0.1	BBB
Residential mortgage-backed securities	1,499.3		8.1			24.6		0.5	BBB+
Commercial mortgage-backed securities	2,253.4		(13.5		)	36.9		3.7	A
Other asset-backed securities:
Automobile	1,074.9		(0.4		)	17.6		0.8	AAA-
Credit card	435.3		(0.4		)	7.1		0.5	AAA
Student loan	526.4		2.4			8.6		1.0	AA-
Other1	314.5		(1.4		)	5.2		1.5	AA+
Other asset-backed securities	2,351.1		0.2			38.5		0.9	AAA-
Total asset-backed securities	$	6,103.8	$	(5.2	)	100.0	%	1.8	A+

¹Includes equipment leases, whole business securitizations, and other types of structured debt.

The decrease in asset-backed securities since December 31, 2016, is primarily due to a combination of maturities and security sales in the residential mortgage-backed sector and credit card receivables, partially offset by purchases of commercial mortgage-backed securities, automobile receivables, student loan receivables, and other asset-backed securities. See below for a further discussion of our residential and commercial mortgage-backed securities. The other asset-backed securities are not included in the discussion below due to the high credit quality, short duration, and security structure of those instruments.

App.-A-80

Residential Mortgage-Backed Securities (RMBS) The following table details the credit quality rating and fair value of our RMBSs, along with the loan classification and a comparison of the fair value at December 31, 2017, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Residential Mortgage-Backed Securities (at December 31, 2017)
				Collateralized Mortgage Obligations
($ in millions) Rating1	Home Equity			Agency Pass-Through			Non-Agency Prime			Alt-A2			Government/GSE3			Total			% of Total
AAA	$	29.3		$	33.4		$	106.7		$	3.1		$	57.2		$	229.7		27.4	%
AA	50.2			0			28.8			27.7			1.0			107.7			12.9
A	146.4			0			17.8			14.5			0			178.7			21.4
BBB	43.7			0			14.2			0			0			57.9			6.9
Non-investment grade/non-rated:
BB	106.6			0			3.8			1.6			0			112.0			13.4
B	7.6			0			3.3			0.8			0			11.7			1.4
CCC and lower	12.5			0			7.3			0			0			19.8			2.4
Non-rated	36.1			0			24.7			58.4			0			119.2			14.2
Total fair value	$	432.4		$	33.4		$	206.6		$	106.1		$	58.2		$	836.7		100.0	%
Increase (decrease) in value	1.9		%	(1.7		)%	(0.1		)%	1.8		%	(1.5		)%	1.0		%

¹ The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings for our RMBSs, $236.4 million of our non-investment-grade securities are rated investment grade and classified as Group II and $26.3 million, or 3.1% of our total RMBSs, are not rated by the NAIC and are classified as Group I.

²Represents structured securities with primary residential loans as collateral for which documentation standards for loan approval were less stringent than conventional loans; the collateral loans are often referred to as low documentation or no documentation loans.

³ The securities in this category are insured by a Government Sponsored Entity (GSE) and/or collateralized by mortgage loans insured by the Federal Housing Administration (FHA) or the U.S. Department of Veteran Affairs (VA).

The majority of our collateralized mortgage obligation (CMO) portfolio is composed of non-GSE/FHA/VA mortgage securities. In the largest part of this portfolio, we took advantage of the securitization structure to have an underlying bond split into senior and subordinated classes. We own the senior classes, which provide extra credit support to our position. During 2017, we sold exposure in our CMO positions, which had spreads that did not compensate for the risks taken due to their long durations or sensitivity to prepay and default assumptions. Our CMO portfolio decreased due to these security sales and returns of principal. Our home-equity loan-backed security portfolio decreased in value due to both sales of securities, which we deemed to be inadequately compensating us for the risks given the tight spread levels, and returns of principal.

App.-A-81

Commercial Mortgage-Backed Securities (CMBS) The following table details the credit quality rating and fair value of our CMBSs, along with a comparison of the fair value at December 31, 2017, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Commercial Mortgage-Backed Securities (at December 31, 2017)
($ in millions) Rating1	Multi-Borrower			Single-Borrower			Total			% of Total
AAA	$	219.7		$	440.5		$	660.2		23.9	%
AA	0			430.4			430.4			15.6
A	0			578.5			578.5			21.0
BBB	0			782.3			782.3			28.4
Non-investment grade/non-rated:
BB	10.3			264.2			274.5			9.9
B	1.0			31.7			32.7			1.2
Total fair value	$	231.0		$	2,527.6		$	2,758.6		100.0	%
Increase (decrease) in value	1.0		%	(0.2		)%	(0.1		)%

¹The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings for our CMBSs, $306.2 million of our non-investment-grade securities are rated investment grade and classified as Group II and $1.0 million, or <0.1% of our total CMBSs, are not rated by the NAIC and are classified as Group I.

We continue to focus on single-borrower CMBS because we believe these transactions provide an opportunity to select investments based on real estate and underwriting criteria that fit our preferred credit risk and duration profile. Our multi-borrower, fixed-rate CMBS portfolio is concentrated in vintages with conservative underwriting. During the year, we increased our CMBS bond portfolio by $493.3 million, which resulted in an allocation of 91.6% to single-borrower CMBS and 8.4% to multi-borrower CMBS. We reduced duration in our CMBS portfolio from 3.7 to 2.9 years during the year as floating rate securities with short durations were added and longer duration securities that had appreciated in price were sold. The average credit quality was A at both December 31, 2017 and 2016.

MUNICIPAL SECURITIES

Included in the fixed-income portfolio at December 31, 2017 and 2016, were $2,297.1 million and $2,502.6 million, respectively, of state and local government obligations. These securities had a duration of 2.7 years and an overall credit quality rating of AA (excluding the benefit of credit support from bond insurance) at December 31, 2017, compared to 3.0 years and AA at December 31, 2016. These securities had net unrealized gains of $11.4 million at December 31, 2017, compared to net unrealized losses of $6.9 million at December 31, 2016.

The following table details the credit quality rating of our municipal securities at December 31, 2017, without the benefit of credit or bond insurance:

Municipal Securities (at December 31, 2017)
(millions) Rating	General Obligations		Revenue Bonds		Total
AAA	$	317.4	$	500.1	$	817.5
AA	374.4		773.2		1,147.6
A	1.1		287.2		288.3
BBB	40.9		2.8		43.7
Total	$	733.8	$	1,563.3	$	2,297.1

App.-A-82

Included in revenue bonds were $892.3 million of single family housing revenue bonds issued by state housing finance agencies, of which $636.4 million were supported by individual mortgages held by the state housing finance agencies and $255.9 million were supported by mortgage-backed securities. Of the programs supported by mortgage-backed securities, approximately 25% were collateralized by Fannie Mae and Freddie Mac mortgages; the remaining 75% were collateralized by Ginnie Mae loans, which are fully guaranteed by the U.S. government. Of the programs supported by individual mortgages held by the state housing finance agencies, the overall credit quality rating was AA+. Most of these mortgages were supported by FHA, VA, or private mortgage insurance providers.

The decrease in municipal securities since December 31, 2016 was primarily due to sales and maturity activity during the year.

CORPORATE SECURITIES

Included in our fixed-income securities at December 31, 2017 and 2016, were $4,997.7 million and $4,550.9 million, respectively, of corporate securities. These securities had a duration of 2.6 years and 2.7 years at December 31, 2017 and 2016, respectively, and an overall credit quality rating of BBB at both December 31, 2017 and 2016. These securities had net unrealized gains of $0.4 million and net unrealized losses of $7.0 million at December 31, 2017 and 2016, respectively.

We increased the size of our corporate bond portfolio in 2017 as we took advantage of certain large merger and acquisition financings to add exposure at attractive levels.

The table below shows the exposure break-down by sector and rating at year-end:

Corporate Securities (at December 31, 2017)
(millions) Rating	Consumer		Industrial		Communication		Financial Services		Agency		Technology		Basic Materials		Energy		Total
AAA	$	0	$	0	$	0	$	72.7	$	0.5	$	0	$	0	$	0	$	73.2
AA	0		0		0		74.2		1.2		0.1		0		32.8		108.3
A	286.1		120.5		54.0		329.8		0		5.2		31.6		38.2		865.4
BBB	1,548.6		925.3		412.2		293.0		0		249.1		78.6		105.3		3,612.1
Non-investment grade/non-rated:
BB	66.4		59.9		38.5		3.0		0		4.0		7.0		16.9		195.7
B	53.1		59.6		0		20.9		0		0		9.4		0		143.0
Total fair value	$	1,954.2	$	1,165.3	$	504.7	$	793.6	$	1.7	$	258.4	$	126.6	$	193.2	$	4,997.7

At December 31, 2017, we held $873.7 million of U.S. dollar-denominated corporate bonds issued by companies that are domiciled, or whose parent companies are domiciled, in the U.K. ($165.6 million) and other European countries ($708.1 million), primarily in the consumer, financial, and industrial industries.

PREFERRED STOCKS – REDEEMABLE AND NONREDEEMABLE

We hold both redeemable (i.e., mandatory redemption dates) and nonredeemable (i.e., perpetual with call dates) preferred stocks. At December 31, 2017, we held $211.0 million in redeemable preferred stocks and $803.8 million in nonredeemable preferred stocks, compared to $191.9 million and $853.5 million, respectively, at December 31, 2016. Our preferred stock portfolio had net unrealized gains of $121.5 million and $122.4 million at December 31, 2017 and 2016, respectively.

Preferred returns were strong again in 2017, following up on good performance in 2016. After two years of strong performance, the sector is less attractive than it has been in the past. As a consequence, we are holding less preferreds as a percentage of our portfolio.

App.-A-83

Our preferred stock portfolio had a duration of 2.9 years at December 31, 2017, compared to 2.4 years at December 31, 2016. The majority of our preferred securities have fixed-rate dividends until a call date and then, if not called, convert to floating-rate dividends. The interest rate duration of our preferred securities is calculated to reflect the call, floor, and floating rate features. Although a preferred security will remain outstanding if not called, its interest rate duration will reflect the variable nature of the dividend. The overall credit quality rating was BBB- at both December 31, 2017 and 2016. Our non-investment-grade preferred stocks were primarily with issuers that maintain investment-grade senior debt ratings.

The table below shows the exposure break-down by sector and rating at year-end:

Preferred Stocks (at December 31, 2017)
	Financial services
(millions) Rating	U.S. Banks		Insurance		Other Financial		Industrials		Utilities		Total
A	$	47.7	$	0	$	10.4	$	0	$	0	$	58.1
BBB	394.1		63.3		104.7		94.1		11.4		667.6
Non-investment grade/non-rated:
BB	162.5		42.4		0		41.4		0		246.3
B	0		0		37.8		0		0		37.8
Non-rated	0		0		0		5.0		0		5.0
Total fair value	$	604.3	$	105.7	$	152.9	$	140.5	$	11.4	$	1,014.8

We also face the risk that dividend payments on our preferred stock holdings could be deferred for one or more periods or skipped entirely. As of December 31, 2017, all of our preferred securities continued to pay their dividends in full and on time. Approximately 83% of our preferred stock securities pay dividends that have tax preferential characteristics, while the balance pay dividends that are fully taxable.

At December 31, 2017, we held $72.8 million of U.S. dollar-denominated redeemable preferred stocks issued by financial institutions that are domiciled, or whose parent companies are domiciled, in foreign countries.

Common Equities

Common equities, as reported on the balance sheets at December 31, were comprised of the following:

($ in millions)	2017				2016
Indexed common stocks	$	3,248.4	95.6	%	$	2,676.2	95.2	%
Managed common stocks	151.1		4.4		135.8		4.8
Total common stocks	3,399.5		100.0		2,812.0		100.0
Other risk investments	0.3		0		0.4		0
Total common equities	$	3,399.8	100.0	%	$	2,812.4	100.0	%

In our indexed common stock portfolio, our individual holdings are selected based on their contribution to the correlation with the Russell 1000 Index. For both periods reported in the table above, the GAAP basis total return was within the desired tracking error when compared to the index. We held 824 out of 978, or 84%, of the common stocks comprising the index at December 31, 2017, which made up 94% of the total market capitalization of the index.

The actively managed common stock portfolio is managed by an external investment manager. At December 31, 2017, the fair value of the actively managed portfolio was $151.1 million, compared to a cost basis of $101.9 million.

App.-A-84

The following is a summary of our indexed common stock portfolio holdings by sector compared to the Russell 1000 Index composition:

Sector	Equity Portfolio Allocation at December 31, 2017		Russell 1000 Allocation at December 31, 2017		Russell 1000 Sector Return in 2017
Consumer discretionary	14.5	%	14.9	%	24.1	%
Consumer staples	6.4		6.9		9.8
Financial services	19.9		20.7		21.5
Health care	12.7		12.6		22.1
Materials and processing	3.6		3.8		23.9
Other energy	6.0		5.8		(1.1	)
Producer durable	9.9		10.7		22.7
Technology	20.3		19.5		38.4
Utilities	4.7		5.1		6.2
Other equity	2.0		NA		NA
Total common stocks	100.0	%	100.0	%	21.7	%

NA = Not Applicable

App.-A-85

V. CRITICAL ACCOUNTING POLICIES

Progressive is required to make certain estimates and assumptions when preparing its financial statements and accompanying notes in conformity with GAAP. Actual results could differ from those estimates in a variety of areas. The three areas that we view as most critical with respect to the application of estimates and assumptions are the establishment of our loss reserves, the method of determining impairments in our investment portfolio, and our analysis of goodwill for impairment.

A. Loss and LAE Reserves

Loss and loss adjustment expense (LAE) reserves represent our best estimate of our ultimate liability for losses and LAE relating to events that occurred prior to the end of any given accounting period but have not yet been paid. At December 31, 2017, we had $10.9 billion of net loss and LAE reserves, which included $8.7 billion of case reserves and $2.2 billion of incurred but not recorded (IBNR) reserves. Personal auto liability and commercial auto liability reserves represent approximately 96% of our total carried net reserves. For this reason, the following discussion focuses on our vehicle businesses.

We do not review our loss reserves for the vehicle businesses on a macro level and, therefore, do not derive a companywide range of reserves to compare to a standard deviation. Instead, we review a large majority of our reserves by product/state combination on a quarterly time frame, with the remaining reserves generally reviewed on a semiannual basis. A change in our scheduled reviews of a particular subset of the business depends on the size of the subset or emerging issues relating to the product or state. By reviewing the reserves at such a detailed level, we have the ability to identify and measure variances in the trends by state, product, and line coverage that otherwise would not be seen on a consolidated basis. We believe our comprehensive process of reviewing at a subsegment level provides us more meaningful estimates of our aggregate loss reserves.

In analyzing the ultimate accident year loss and LAE experience, our actuarial staff reviews in detail, at the subsegment level, frequency (number of losses per earned car year), severity (dollars of loss per each claim), and average premium (dollars of premium per earned car year) of loss, as well as the frequency and severity of our LAE costs. The loss ratio, a primary measure of loss experience, is equal to the product of frequency times severity divided by the average premium. The average premium for personal and commercial auto businesses is not estimated. The actual frequency experienced will vary depending on the change in mix of class of drivers insured by Progressive, but the frequency projections for these lines of business are generally stable in the short term, because a large majority of the parties involved in an accident report their claims within a short time period after the occurrence. The severity experienced by Progressive is much more difficult to estimate, especially for injury claims, since severity is affected by changes in underlying costs, such as medical costs, jury verdicts, and regulatory changes. In addition, severity will vary relative to the change in our mix of business by limit.

Assumptions regarding needed reserve levels made by the actuarial staff take into consideration influences on available historical data that reduce the predictiveness of our projected future loss costs. Internal considerations that are process-related, which generally result from changes in our claims organization’s activities, include claim closure rates, the number of claims that are closed without payment, and the level of the claims representatives’ estimates of the needed case reserve for each claim. These changes and their effect on the historical data are studied at the state level versus on a larger, less indicative, countrywide basis.

External items considered include the litigation atmosphere, state-by-state changes in medical costs, and the availability of services to resolve claims. These also are better understood at the state level versus at a more macro, countrywide level.

The manner in which we consider and analyze the multitude of influences on the historical data, as well as how loss reserves affect our financial results, is discussed in more detail in our Report on Loss Reserving Practices, which was filed on August 12, 2016 via Form 8-K. There have been no significant changes to our reserving practices since this report was filed.

At December 31, 2017, Progressive had $13.1 billion of carried gross reserves and $10.9 billion of net reserves (net of reinsurance recoverables on unpaid losses). Our net reserve balance implicitly assumes that the loss and LAE severity for accident year 2017 over accident year 2016 would be 4.4% higher for personal auto liability and 9.0% higher for commercial auto liability. As discussed above, the severity estimates are influenced by many variables that are difficult to precisely quantify and which influence the final amount of claims settlement. That, coupled with changes in internal claims practices, the legal environment, and state regulatory requirements, requires significant judgment in the estimate of the needed reserves to be carried.

App.-A-86

The following table highlights what the effect would be to our carried loss and LAE reserves, on a net basis, as of December 31, 2017, if during 2018 we were to experience the indicated change in our estimate of severity for the 2017 accident year (i.e., claims that occurred in 2017):

	Estimated Changes in Severity for Accident Year 2017
(millions)	-4%		-2%		As Reported		+2%		+4%
Personal auto liability	$	7,934.4	$	8,132.6	$	8,330.8	$	8,529.0	$	8,727.2
Commercial auto liability	2,060.8		2,090.8		2,120.8		2,150.8		2,180.8
Other1	465.2		465.2		465.2		465.2		465.2
Total	$	10,460.4	$	10,688.6	$	10,916.8	$	11,145.0	$	11,373.2

¹ Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is presented due to the immaterial level of these reserves.

Note: Every percentage point change in our estimate of severity for the 2017 accident year would affect our personal auto liability reserves by $99.1 million and our commercial auto reserves by $15.0 million.

Our 2017 year-end loss and LAE reserve balance also includes claims from prior years. Claims that occurred in 2017, 2016, and 2015, in the aggregate, accounted for approximately 93% of our reserve balance. If during 2017 we were to experience the indicated change in our estimate of severity for the total of the prior three accident years (i.e., 2017, 2016, and 2015), the effect to our year-end 2017 reserve balances would be as follows:

	Estimated Changes in Severity for Accident Years 2017, 2016, and 2015
(millions)	-4%		-2%		As Reported		+2%		+4%
Personal auto liability	$	7,244.8	$	7,787.8	$	8,330.8	$	8,873.8	$	9,416.8
Commercial auto liability	1,967.6		2,044.2		2,120.8		2,197.4		2,274.0
Other1	465.2		465.2		465.2		465.2		465.2
Total	$	9,677.6	$	10,297.2	$	10,916.8	$	11,536.4	$	12,156.0

¹ Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is presented due to the immaterial level of these reserves.

Note: Every percentage point change in our estimate of severity for the 2017, 2016, and 2015 accident years would affect our personal auto liability reserves by $271.5 million and our commercial auto reserves by $38.3 million.

Our best estimate of the appropriate amount for our reserves as of year-end 2017 is included in our financial statements for the year. Our goal is to ensure that total reserves are adequate to cover all loss costs, while sustaining minimal variation from the time reserves are initially established until losses are fully developed. At the point in time when reserves are set, we have no way of knowing whether our reserve estimates will prove to be high or low, or whether one of the alternative scenarios discussed above is “reasonably likely” to occur. The above tables show the potential favorable or unfavorable development we will realize if our estimates miss by 2% or 4%.

App.-A-87

B. Other-Than-Temporary Impairment (OTTI)

Realized losses may include write-downs of securities held in our investment portfolios determined to have had other-than-temporary declines in fair value. We routinely monitor our investment portfolio for pricing changes that might indicate potential impairments and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to: (i) fundamental factors specific to the issuer, such as financial conditions, business prospects, or other factors; (ii) market-related factors, such as interest rates or equity market declines (e.g., negative return at either a sector index level or at the broader market level); or (iii) credit-related losses, where the present value of cash flows expected to be collected is lower than the amortized cost basis of the security.

Fixed-income securities and common equities with declines attributable to issuer-specific fundamentals are reviewed to identify available evidence, circumstances, and influences to estimate the potential for, and timing of, recovery of the investment’s impairment. An OTTI loss is deemed to have occurred when the potential for recovery does not satisfy the criteria set forth in the current accounting guidance.

For fixed-income investments with unrealized losses due to market- or sector-related declines, the losses are not deemed to

qualify as other-than-temporary if we do not have the intent to sell the investments, and it is more likely that we will not be

required to sell the investments prior to the periods of time that we anticipate to be necessary for the investments to recover

their cost bases. In general, our policy for common equity securities with market- or sector-related declines is to recognize

impairment losses on individual securities with losses we cannot reasonably conclude will recover in the near term under

historical conditions when: (i) we are able to objectively determine that the loss is other-than-temporary, or (ii) the security has been in such a loss position for three consecutive quarters.

When a security in our fixed-maturity portfolio has an unrealized loss and we intend to sell the security, or it is more likely than not that we will be required to sell the security, we write down the security to its current fair value and recognize the entire unrealized loss through the comprehensive income statement as a realized loss. If a fixed-maturity security has an unrealized loss and it is more likely than not that we will hold the debt security until recovery (which could be maturity), then we determine if any of the decline in value is due to a credit loss (i.e., where the present value of cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we will recognize that portion of the impairment in net income as part of the comprehensive income statement as a realized loss; any remaining unrealized loss on the security is considered to be due to other factors (e.g., interest rate and credit spread movements) and is reflected in other comprehensive income as part of shareholders’ equity, along with unrealized gains or losses on securities that are not deemed to be other-than-temporarily impaired.

The following table stratifies the gross unrealized losses in our fixed-income and common equity portfolios at December 31, 2017, by the duration in a loss position and magnitude of the loss as a percentage of the cost of the security:

	Fair Value		Total Gross Unrealized Losses
(millions)
Fixed income:
Unrealized loss for less than 12 months	$	10,421.2	$	58.1
Unrealized loss for 12 months or greater	3,545.6		41.1
Total	$	13,966.8	$	99.2
Common equity:
Unrealized loss for less than 12 months	$	13.4	$	0.2
Unrealized loss for 12 months or greater	0		0
Total	$	13.4	$	0.2

None of these securities had a decline in investment value of greater than 15%.

We completed a thorough review of the existing securities in these loss categories and determined that, applying the procedures and criteria discussed above, these securities were not other-than-temporarily impaired. We do not intend to sell these securities. We also determined that it is more likely that we will not be required to sell these securities, for the periods of time necessary to recover the respective cost bases of these securities, and that there are no additional credit-related impairments on our debt securities.

App.-A-88

Since total unrealized losses are already a component of other comprehensive income and included in shareholders’ equity, any recognition of these losses as additional OTTI losses would have no effect on our comprehensive income, book value, or reported investment total return.

C. Goodwill

Substantially all of our goodwill relates to the April 1, 2015, acquisition of a controlling interest in ARX. We test our goodwill balance for impairment at the reporting unit level annually as of October 1, or more frequently if indicators of impairment exist. Below our reportable segment level, we have identified reporting units that are expected to receive the future economic benefits created through this acquisition. These reporting units represent the lowest operational level of our business for which management regularly reviews discrete financial operating results.

To test for impairment, we may elect to perform a qualitative or quantitative analysis, based on our judgment of the relevant qualitative factors that exist at the time we perform the valuation, including the consideration of the length of time lapsed since the previous quantitative assessment.

The quantitative goodwill impairment assessment currently consists of a two-step analysis, if necessary. The first step is to compare the fair value of a reporting unit to its carrying value, which includes the amount of goodwill allocated to the unit. We use discounted cash flow models to determine the fair value of a reporting unit. The assumptions used in these models are consistent with those we believe hypothetical marketplace participants would use. If the fair value of the reporting unit is less than its carrying value, the second step of the impairment test must be performed in order to determine whether impairment loss exists. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment charge must be recognized in an amount equal to that excess.

For 2017, we elected to performed a qualitative analysis to test for impairment of the goodwill allocated to our Agency auto, ARX, and Commercial Lines reporting units. The analysis was performed by assessing certain trends and factors, actual and forecasted operating information (including growth rates and profitability), industry and macroeconomic data, and other relevant qualitative factors. The results of the qualitative analysis did not indicate a need to perform an additional quantitative analysis.

As of the evaluation date, we concluded that there were no indicators of impairment to goodwill in any of our reporting units. We believe the amount of goodwill recorded is recoverable for our reporting units; however, this does not provide assurance that goodwill will not be impaired in future periods. For additional information on goodwill, see Note 16 – Goodwill and Intangible Assets.

App.-A-89

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that certain statements in this report not based upon historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements often use words such as “estimate,” “expect,” “intend,” “plan,” “believe,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Forward-looking statements are based on current expectations and projections about future events, and are subject to certain risks, assumptions and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to estimates, assumptions, and projections generally; inflation and changes in general economic conditions (including changes in interest rates and financial markets); the possible failure of one or more governmental, corporate, or other entities to make scheduled debt payments or satisfy other obligations; our ability to access capital markets and financing arrangements when needed to support growth or other capital needs, and the favorable evaluations by credit and other rating agencies on which this access depends; the potential or actual downgrading by one or more rating agencies of our securities or governmental, corporate, or other securities we hold; the financial condition of, and other issues relating to the strength of and liquidity available to, issuers of securities held in our investment portfolios and other companies with which we have ongoing business relationships, including reinsurers and other counterparties to certain financial transactions or under certain government programs; the accuracy and adequacy of our pricing, loss reserving, and claims methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to attract and retain more customers; initiatives by competitors and the effectiveness of our response; our ability to obtain regulatory approval for the introduction of products to new jurisdictions, for requested rate changes and the timing thereof and for any proposed acquisitions; the effectiveness of our brand strategy and advertising campaigns relative to those of competitors; legislative and regulatory developments at the state and federal levels, including, but not limited to, matters relating to vehicle and homeowners insurance, health care reform and tax law changes; the outcome of disputes relating to intellectual property rights; the outcome of litigation or governmental investigations that may be pending or filed against us; severe weather conditions and other catastrophe events; the effectiveness of our reinsurance programs; changes in vehicle usage and driving patterns, which may be influenced by oil and gas prices; changes in residential occupancy patterns and the effects of the emerging “sharing economy”; advancements in vehicle or home technology or safety features, such as accident and loss prevention technologies or the development of autonomous or partially autonomous vehicles; our ability to accurately recognize and appropriately respond in a timely manner to changes in loss frequency and severity trends; technological advances; acts of war and terrorist activities; our ability to maintain the uninterrupted operation of our facilities, systems (including information technology systems), and business functions, and safeguard personal and sensitive information in our possession, whether from cyber-attacks, other technology events or other means; our continued access to and functionality of third-party systems that are critical to our business; our continued ability to access cash accounts and/or convert securities into cash on favorable terms when we desire to do so; restrictions on our subsidiaries’ ability to pay dividends to The Progressive Corporation; possible impairment of our goodwill or intangible assets if future results do not adequately support either, or both, of these items; court decisions, new theories of insurer liability or interpretations of insurance policy provisions and other trends in litigation; changes in health care and auto and property repair costs; and other matters described from time to time in our releases and publications, and in our periodic reports and other documents filed with the United States Securities and Exchange Commission. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.

App.-A-90

Supplemental Information

The Progressive Corporation and Subsidiaries

Quarterly Financial and Common Share Data

(unaudited)

(millions – except per share amounts)
									Stock Price1
Quarter	Total Revenues		Net Income		Net Income Attributable to Progressive2		Per Share3		High		Low		Close		Rate of Return4	Dividends Declared Per Share5
2017
1	$	6,321.7	$	430.3	$	424.3	$	0.73	$	40.74	$	35.23	$	39.18		$	0
2	6,605.7		372.7		367.6		0.63		45.03		38.61		44.09			0
3	6,791.8		214.8		224.0		0.38		49.01		43.59		48.42			0
4	7,119.8		580.3		576.3		0.98		57.18		47.89		56.32			1.1247
	$	26,839.0	$	1,598.1	$	1,592.2	$	2.72	$	57.18	$	35.23	$	56.32	61.6%	$	1.1247
2016
1	$	5,557.5	$	258.7	$	258.2	$	0.44	$	35.27	$	29.32	$	35.14		$	0
2	5,819.3		194.9		190.9		0.33		35.54		31.14		33.50			0
3	5,935.0		205.5		198.7		0.34		34.29		30.54		31.50			0
4	6,129.6		398.1		383.2		0.66		35.95		30.66		35.50			0.6808
	$	23,441.4	$	1,057.2	$	1,031.0	$	1.76	$	35.95	$	29.32	$	35.50	14.7%	$	0.6808
2015
1	$	4,895.3	$	295.6	$	295.6	$	0.50	$	27.90	$	25.23	$	27.20		$	0
2	5,283.3		368.5		363.3		0.62		28.50		26.44		27.83			0
3	5,273.8		286.5		278.3		0.47		31.70		27.23		30.64			0
4	5,401.4		349.9		330.4		0.56		33.95		30.09		31.80			0.8882
	$	20,853.8	$	1,300.5	$	1,267.6	$	2.15	$	33.95	$	25.23	$	31.80	20.9%	$	0.8882

¹ Prices are as reported on the New York Stock Exchange (NYSE). Progressive’s common shares are listed under the symbol PGR.

² Prior to the April 1, 2015 acquisition of a controlling interest in ARX, net income attributable to Progressive was equivalent to net income.

³ Based on net income attributable to Progressive. The sum may not equal the total because the average equivalent shares differ in the quarterly and annual periods.

⁴ Represents annual rate of return, assuming dividend reinvestment.

⁵ Progressive maintains an annual variable dividend policy under which a dividend is typically declared each December and paid early the following year.

App.-A-91

The Progressive Corporation and Subsidiaries

Ten Year Summary – Selected Financial Information

(unaudited)

(millions – except ratios, policies in force, per share amounts, and number of people employed)	2017			2016			2015			2014			2013
Net premiums written	$	27,132.1		$	23,353.5		$	20,564.0		$	18,654.6		$	17,339.7
Growth	16		%	14		%	10		%	8		%	6		%
Net premiums earned	$	25,729.9		$	22,474.0		$	19,899.1		$	18,398.5		$	17,103.4
Growth	14		%	13		%	8		%	8		%	7		%
Policies in force (thousands):
Personal Lines	16,075.5			14,656.8			13,764.7			13,261.9			13,056.4
Growth	10		%	6		%	4		%	2		%	3		%
Commercial Lines	646.8			607.9			555.8			514.7			514.6
Growth	6		%	9		%	8		%	0		%	(1		)%
Property1	1,461.7			1,201.9			1,076.5			—			—
Growth1	22		%	12		%	NM			—			—
Total revenues	$	26,839.0		$	23,441.4		$	20,853.8		$	19,391.4		$	18,170.9
Underwriting margins:2
Personal Lines	6.9		%	4.7		%	6.5		%	6.7		%	6.6		%
Commercial Lines	7.7		%	6.4		%	15.9		%	17.2		%	6.5		%
Property1	(5.1		)%	3.8		%	10.1		%	—			—
Total underwriting operations	6.6		%	4.9		%	7.5		%	7.7		%	6.5		%
Net income (loss) attributable to Progressive	$	1,592.2		$	1,031.0		$	1,267.6		$	1,281.0		$	1,165.4
Per share3	2.72			1.76			2.15			2.15			1.93
Average equivalent shares3	585.7			585.0			589.2			594.8			603.6
Comprehensive income (loss) attributable to Progressive	$	1,941.0		$	1,164.0		$	1,044.9		$	1,352.4		$	1,246.1
Total assets	$	38,701.2		$	33,427.5		$	29,819.3		$	25,787.6		$	24,408.2
Debt outstanding	3,306.3			3,148.2			2,707.9			2,164.7			1,860.9
Redeemable noncontrolling interest	503.7			483.7			464.9			—			—
Total shareholders’ equity	9,284.8			7,957.1			7,289.4			6,928.6			6,189.5
Statutory surplus	9,664.4			8,560.0			7,575.5			6,442.8			5,991.0
Common shares outstanding	581.7			579.9			583.6			587.8			595.8
Common share price:
High	$	57.18		$	35.95		$	33.95		$	27.52		$	28.54
Low	35.23			29.32			25.23			22.53			21.36
Close (at December 31)	56.32			35.50			31.80			26.99			27.27
Market capitalization	$	32,761.3		$	20,586.5		$	18,558.5		$	15,864.7		$	16,247.5
Book value per common share	15.96			13.72			12.49			11.79			10.39
Ratios:
Return on average shareholders’ equity:
Net income (loss) attributable to Progressive	17.8		%	13.2		%	17.2		%	19.1		%	17.7		%
Comprehensive income (loss) attributable to Progressive	21.7		%	14.9		%	14.2		%	20.1		%	19.0		%
Debt to total capital4	26.3		%	28.3		%	27.1		%	23.8		%	23.1		%
Price to earnings	20.7			20.2			14.8			12.6			14.1
Price to book	3.5			2.6			2.5			2.3			2.6
Earnings to fixed charges	14.0		x	10.7		x	14.2		x	16.4		x	14.7		x
Net premiums written to statutory surplus	2.8			2.7			2.7			2.9			2.9
Statutory combined ratio	92.8			94.8			91.8			92.1			93.4
Dividends declared per share5	$	1.1247		$	0.6808		$	0.8882		$	0.6862		$	1.4929
Number of people employed6	33,656			31,721			28,580			26,501			26,145

¹ We began reporting our Property business as a segment on April 1, 2015, when we acquired a controlling interest in ARX; therefore, year-over-year growth in policies in force for 2015 is not meaningful (NM).

²Underwriting margins are calculated as pretax underwriting profit (loss), as defined in Note 10 – Segment Information, as a percentage of net premiums earned.

³Amounts reflect basic earnings per share and basic average equivalent shares for 2008 since we reported a net loss; all other periods are presented on a diluted basis.

App.-A-92

(millions – except ratios, policies in force, per share amounts, and number of people employed)	2012			2011			2010			2009			2008
Net premiums written	$	16,372.7		$	15,146.6		$	14,476.8		$	14,002.9		$	13,604.3
Growth	8		%	5		%	3		%	3		%	(1		)%
Net premiums earned	$	16,018.0		$	14,902.8		$	14,314.8		$	14,012.8		$	13,631.4
Growth	7		%	4		%	2		%	3		%	(2		)%
Policies in force (thousands):
Personal Lines	12,735.3			12,283.8			11,702.7			10,940.6			10,464.9
Growth	4		%	5		%	7		%	5		%	3		%
Commercial Lines	519.6			509.1			510.4			512.8			539.4
Growth	2		%	0		%	0		%	(5		)%	0		%
Property1	—			—			—			—			—
Growth	—			—			—			—			—
Total revenues	$	17,083.9		$	15,774.6		$	15,215.5		$	14,791.1		$	13,049.0
Underwriting margins:2
Personal Lines	4.4		%	6.8		%	7.0		%	7.6		%	5.4		%
Commercial Lines	5.2		%	9.1		%	12.5		%	14.2		%	5.3		%
Property	—			—			—			—			—
Total underwriting operations	4.4		%	7.0		%	7.6		%	8.4		%	5.4		%
Net income (loss) attributable to Progressive	$	902.3		$	1,015.5		$	1,068.3		$	1,057.5		$	(70.0	)
Per share3	1.48			1.59			1.61			1.57			(0.10		)
Average equivalent shares3	607.8			636.9			663.3			672.2			668.0
Comprehensive income (loss) attributable to Progressive	$	1,080.8		$	924.3		$	1,398.8		$	1,752.2		$	(614.7	)
Total assets	$	22,694.7		$	21,844.8		$	21,150.3		$	20,049.3		$	18,250.5
Debt outstanding	2,063.1			2,442.1			1,958.2			2,177.2			2,175.5
Redeemable noncontrolling interest	—			—			—			—			—
Total shareholders’ equity	6,007.0			5,806.7			6,048.9			5,748.6			4,215.3
Statutory surplus	5,605.2			5,269.2			5,073.0			4,953.6			4,470.6
Common shares outstanding	604.6			613.0			662.4			672.6			676.5
Common share price:
High	$	23.41		$	22.08		$	22.13		$	18.10		$	21.31
Low	19.01			16.88			16.18			9.76			10.29
Close (at December 31)	21.10			19.51			19.87			17.99			14.81
Market capitalization	$	12,757.1		$	11,959.6		$	13,161.9		$	12,100.1		$	10,019.0
Book value per common share	9.94			9.47			9.13			8.55			6.23
Ratios:
Return on average shareholders’ equity:
Net income (loss) attributable to Progressive	14.5		%	16.5		%	17.1		%	21.4		%	(1.5		)%
Comprehensive income (loss) attributable to Progressive	17.4		%	15.0		%	22.3		%	35.5		%	(13.3		)%
Debt to total capital4	25.6		%	29.6		%	24.5		%	27.5		%	34.0		%
Price to earnings	14.3			12.3			12.3			11.5			NA
Price to book	2.1			2.1			2.2			2.1			2.4
Earnings to fixed charges	11.0		x	11.6		x	11.9		x	11.3		x	NA
Net premiums written to statutory surplus	2.9			2.9			2.9			2.8			3.0
Statutory combined ratio	95.2			92.9			92.5			91.6			94.6
Dividends declared per share5	$	1.2845		$	0.4072		$	1.3987		$	0.1613		$	0
Number of people employed6	25,889			25,007			24,638			24,661			25,929

⁴Ratio reflects debt as a percent of debt plus shareholders’ equity; redeemable noncontrolling interest is not part of this calculation.

⁵Represents dividends pursuant to our annual variable dividend policy, plus special cash dividends of $1.00 per common share in 2013, 2012, and 2010. In 2008, comprehensive income was less than after-tax underwriting income; therefore, no dividend was declared in accordance with this policy.

⁶The number of people employed in 2017, 2016, and 2015 includes 806, 692, and 620 ARX employees, respectively.

NA = Not applicable due to the net loss reported for 2008.

App.-A-93

The Progressive Corporation and Subsidiaries

Performance Graph

(unaudited)

The following performance graph compares the performance of Progressive’s Common Shares (“PGR”) to the Standard & Poor’s Index (“S&P Index”) and the Value Line Property/Casualty Industry Group (“P/C Group”) for the last five years.

Cumulative Five-Year Total Return*

PGR, S&P Index, P/C Group (Performance Results through 12/31/17)

(Assumes $100 was invested at the close of trading on December 31, 2012)
	2013		2014		2015		2016		2017
PGR	$	130.87	$	137.87	$	166.74	$	191.32	$	309.20
S&P Index	132.39		150.52		152.62		170.83		208.19
P/C Group1	134.88		154.49		171.52		202.84		254.86

*Assumes reinvestment of dividends

¹ Per Value Line Publishing LLC

App.-A-94

The Progressive Corporation and Subsidiaries

Quantitative Market Risk Disclosures

(unaudited)

Quantitative market risk disclosures are only presented for market risk categories when risk is considered material. Materiality is determined based on the fair value of the financial instruments at December 31, 2017, and the potential for near-term losses from reasonably possible near-term changes in market rates or prices. We had no trading financial instruments at December 31, 2017 and 2016. See Management’s Discussion and Analysis of Financial Condition and Results of Operations for our discussion of the qualitative information about market risk.

OTHER-THAN-TRADING FINANCIAL INSTRUMENTS

Financial instruments subject to interest rate risk were:

	Fair Value
	-200 bps		-100 bps				+100 bps		+200 bps
(millions)	Change1		Change1		Actual		Change		Change
U.S. government obligations	$	7,194.9	$	6,913.7	$	6,645.9	$	6,392.0	$	6,150.8
State and local government obligations	2,404.6		2,359.8		2,297.1		2,234.4		2,153.8
Asset-backed securities	6,292.7		6,170.5		6,050.0		5,935.1		5,825.4
Corporate securities	5,253.6		5,125.6		4,997.7		4,873.3		4,753.3
Preferred stocks	1,066.7		1,041.7		1,014.8		988.2		964.0
Short-term investments	2,869.9		2,869.6		2,869.4		2,869.1		2,868.8
Total at December 31, 2017	$	25,082.4	$	24,480.9	$	23,874.9	$	23,292.1	$	22,716.1
Total at December 31, 2016	$	21,487.3	$	21,139.8	$	20,670.2	$	20,221.6	$	19,789.3

¹ The amounts reflect an interest rate of 1 basis point (bps) when the hypothetical decline in interest rates would have pushed yields to a negative level.

Exposure to risk is represented in terms of changes in fair value due to selected hypothetical movements in market rates. Bonds and preferred stocks are individually priced to yield to the worst case scenario, which includes any issuer-specific features, such as a call option. Asset-backed securities and state and local government housing securities are priced assuming deal specific prepayment scenarios, considering the deal structure, prepayment penalties, yield maintenance agreements, and the underlying collateral.

Financial instruments subject to equity market risk were:

	Fair Value
(millions)	-10%		Actual		+10%
Common equities at December 31, 2017	$	3,043.5	$	3,399.8	$	3,756.1
Common equities at December 31, 2016	$	2,524.4	$	2,812.4	$	3,100.4

The model represents the estimated value of our common equity portfolio given a +/-10% change in the market, based on the common stock portfolio’s weighted average beta of 1.05 for 2017 and 1.02 for 2016. The beta is derived from recent historical experience, using the S&P 500 as the market surrogate. The historical relationship of the common stock portfolio’s beta to the S&P 500 is not necessarily indicative of future correlation, as individual company or industry factors may affect price movements. Betas are not available for all securities. In such cases, the change in fair value reflects a direct +/-10% change; the portion of our securities without betas is <0.1%.

App.-A-95

The Progressive Corporation and Subsidiaries

Net Premiums Written by State

(unaudited)

($ in millions)	2017				2016				2015				2014				2013
Florida	$	3,808.0	14.0	%	$	3,305.1	14.1	%	$	2,839.6	13.8	%	$	2,399.0	12.9	%	$	2,188.1	12.6	%
Texas	2,704.9		10.0		2,226.8		9.5		1,941.5		9.4		1,664.6		8.9		1,560.7		9.0
California	1,520.5		5.6		1,284.8		5.5		1,173.6		5.7		1,080.6		5.8		996.0		5.7
New York	1,472.8		5.4		1,279.4		5.5		1,095.6		5.3		1,000.7		5.4		882.8		5.1
Michigan	1,186.8		4.4		971.3		4.2		812.5		4.0		659.6		3.5		539.5		3.1
Georgia	1,177.0		4.4		939.4		4.0		813.2		4.0		774.0		4.1		771.6		4.5
Ohio	1,033.5		3.8		905.2		3.9		820.8		4.0		807.7		4.3		757.4		4.4
Pennsylvania	1,005.5		3.7		895.8		3.8		787.3		3.8		718.6		3.9		663.8		3.8
New Jersey	985.8		3.6		902.8		3.9		820.2		4.0		754.6		4.0		697.4		4.0
Louisiana	739.2		2.7		694.7		3.0		614.9		3.0		552.5		3.0		540.1		3.1
All other	11,498.1		42.4		9,948.2		42.6		8,844.8		43.0		8,242.7		44.2		7,742.3		44.7
Total	$	27,132.1	100.0	%	$	23,353.5	100.0	%	$	20,564.0	100.0	%	$	18,654.6	100.0	%	$	17,339.7	100.0	%

App.-A-96

Principal Office

The Progressive Corporation

6300 Wilson Mills Road

Mayfield Village, Ohio 44143

440-461-5000

progressive.com

24-Hour Insurance Quotes, Claims Reporting, and Customer Service

	Personal autos, motorcycles, and recreational vehicles	Commercial autos/trucks
To receive a quote	1-800-PROGRESSIVE (1-800-776-4737) progressive.com	1-888-806-9598 progressivecommercial.com
To report a claim	1-800-PROGRESSIVE (1-800-776-4737) progressive.com1	1-800-PROGRESSIVE (1-800-776-4737)
For customer service:
If you bought your policy through an independent agent or broker	1-800-925-2886 (1-800-300-3693 in California) progressiveagent.com	1-800-444-4487 progressivecommercial.com
If you bought your policy directly through Progressive online or by phone	1-800-PROGRESSIVE (1-800-776-4737) progressive.com	1-800-895-2886 progressivecommercial.com
Homeowners - to receive a quote, report a claim, or speak to a customer service representative, please call 1-800-PROGRESSIVE or visit progressive.com and your inquiry will be routed to the appropriate contact center.
In addition, iPhone® and Android® users can download the Progressive App to start a quote, report a claim, or service a policy.
1Claims reporting via the website is currently only available for personal auto policies.

Annual Meeting  The Annual Meeting of Shareholders will be held at the offices of The Progressive Corporation, Studio 96, 6671 Beta Drive, Mayfield Village, Ohio 44143 on May 11, 2018, at 10 a.m. eastern time. There were 2,082 shareholders of record on December 31, 2017.

Common Shares and Dividends  The Progressive Corporation’s common shares are traded on the New York Stock Exchange (symbol PGR). Progressive currently has an annual variable dividend policy. We expect the Board to declare the next annual variable dividend, subject to policy limitations, in December 2018, with a record date in early 2019 and payment shortly thereafter. A complete description of our annual variable dividend policy can be found at: progressive.com/dividend.

Shareholder/Investor Relations  Progressive does not maintain a mailing list for distribution of shareholders’ reports. To view Progressive’s publicly filed documents, shareholders can access our website: progressive.com/sec. To view our earnings and other releases, access: progressive.com/investors.

For financial-related information or to request copies of Progressive’s publicly filed documents free of charge, write to: The Progressive Corporation, Investor Relations, 6300 Wilson Mills Road, Box W33, Mayfield Village, Ohio 44143, email: investor_relations@progressive.com, or call: 440-395-2222.

For all other company information, call: 440-461-5000 or access our website at: progressive.com/contactus.

Transfer Agent and Registrar

Registered Shareholders:  If you have questions or changes to your account and your Progressive shares are registered in your name, write to: American Stock Transfer & Trust Company, Attn: Operations Center, 6201 15th Avenue, Brooklyn, NY 11219; phone: 1-866-709-7695; email: info@astfinancial.com; or visit their website at: astfinancial.com.

App.-A-97

Beneficial Shareholders:  If your Progressive shares are held in a brokerage or other financial institution account, contact your broker or financial institution directly regarding questions or changes to your account.

Contact Non-Management Directors  Interested parties have the ability to contact the non-management directors as a group by sending a written communication clearly addressed to the non-management directors to either of the following:

Lawton W. Fitt, Lead Independent Director, The Progressive Corporation, email: lead_director@progressive.com; or

Daniel P. Mascaro, Secretary, The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 or email: secretary@progressive.com.

The recipient will forward communications so received to the non-management directors.

Accounting Complaint Procedure  Any employee or other interested party with a complaint or concern regarding accounting, internal accounting controls, or auditing matters relating to Progressive may report such complaint or concern directly to the Chairman of the Audit Committee, as follows: Patrick H. Nettles, Ph.D., Chairman of the Audit Committee, patrick_nettles@progressive.com.

Any such complaint or concern also may be reported anonymously over the following toll-free Alert Line: 1-800-683-3604 or online at: www.progressivealertline.com. Progressive will not retaliate against any individual by reason of his or her having made such a complaint or reported such a concern in good faith. View the complete procedures at: progressive.com/governance.

Whistleblower Protections  Progressive will not retaliate against any officer or employee of Progressive because of any lawful act done by the officer or employee to provide information or otherwise assist in investigations regarding conduct that the officer or employee reasonably believes to be a violation of federal securities laws or of any rule or regulation of the Securities and Exchange Commission. View the complete Whistleblower Protections at: progressive.com/governance.

Corporate Governance  Progressive’s Corporate Governance Guidelines and Board Committee Charters are available at: progressive.com/governance.

Counsel  Baker & Hostetler LLP, Cleveland, Ohio

Charitable Contributions  We contribute annually to: (i) The Insurance Institute for Highway Safety to further its work in reducing the human trauma and economic costs of auto accidents; and (ii) The Progressive Insurance Foundation, which provides matching funds to eligible 501(c)(3) charitable organizations to which Progressive employees contribute. Over the last five years, the matching funds provided to The Progressive Insurance Foundation averaged approximately $4 million per year.

Social Responsibility  Progressive uses an interactive online format to communicate our social responsibility efforts. This report can be found at: progressive.com/socialresponsibility.

Online Annual Report and Proxy Statement  Our 2017 Annual Report to Shareholders can be found at: progressive.com/annualreport.

Our 2018 Proxy Statement and 2017 Annual Report to Shareholders, in a PDF format, can be found at: progressiveproxy.com.

App.-A-98

Directors
Philip Bleser3,6	Patrick H. Nettles, Ph.D.1,6
Retired Chairman of Global Corporate	Executive Chairman,
Banking,	Ciena Corporation
J. P. Morgan Chase & Co.	(telecommunications)
(financial services)
	* Glenn M. Renwick2,4
Stuart B. Burgdoerfer1,6	Chairman of the Board,	1 Audit Committee Member
Executive Vice President and	The Progressive Corporation	2 Executive Committee Member
Chief Financial Officer,		3 Compensation Committee Member
L Brands, Inc.	* Bradley T. Sheares, Ph.D.3,6	4 Investment and Capital Committee
(retailing)	Former Chief Executive Officer,	Member
	Reliant Pharmaceuticals, Inc.	5 Nominating and Governance
Charles A. Davis4,5,6	(pharmaceuticals)	Committee Member
Chief Executive Officer,		6 Independent Director
Stone Point Capital LLC	Barbara R. Snyder1,6
(private equity investing)	President,
	Case Western Reserve University
Roger N. Farah3,5,6	(higher education)
Former Executive Director,
Tory Burch LLC		* In May 2018, Glenn M. Renwick and Bradley T. Sheares will retire from the Board. Mr. Renwick has served on the Board for over 18 years and has been Chairman since November 2013. Dr. Sheares has been a member of the Board for 14 years. Progressive would like to thank both Mr. Renwick and Dr. Sheares for their dedicated service and the many contributions they made during their tenure on the Board. It is expected that a new Chairman will be appointed at that time.
(retailing)
Lawton W. Fitt2,4,5,6
Lead Independent Director,
Retired Partner,
Goldman Sachs Group
(financial services)
Susan Patricia Griffith2
President and Chief Executive Officer,
The Progressive Corporation
Jeffrey D. Kelly1,6
Retired Chief Operating Officer and
Chief Financial Officer,
RenaissanceRe Holdings Ltd.
(reinsurance services)

App.-A-99

Corporate Officers	Other Executive Officers
Susan Patricia Griffith	John F. Auer
President	President and Chief Executive Officer,
and Chief Executive Officer	ARX Holding Corp.
John P. Sauerland	John A. Barbagallo
Vice President	Commercial Lines President
and Chief Financial Officer
	Steven A. Broz
Daniel P. Mascaro	Chief Information Officer
Vice President, Secretary,
and Chief Legal Officer	Patrick K. Callahan
	Personal Lines President
Jeffrey W. Basch
Vice President	M. Jeffrey Charney
and Chief Accounting Officer	Chief Marketing Officer
Patrick S. Brennan	William M. Cody
Treasurer	Chief Investment Officer
Mariann Wojtkun Marshall	John Murphy
Assistant Secretary	Customer Relationship Management
	President
Glenn M. Renwick
Chairman of the Board	Lori Niederst
(non-executive)	Chief Human Resource Officer
	Michael D. Sieger
	Claims President
©2018 The Progressive Corporation

App.-A-100

EX-21

Exhibit 21

SUBSIDIARIES OF THE PROGRESSIVE CORPORATION

	Jurisdiction
Name of Subsidiary	of Incorporation
ARX Holding Corp. (owns 69.0% of outstanding capital stock)	Delaware
American Strategic Insurance Corp.	Florida
Ark Royal Underwriters, LLC	Florida
ASI Assurance Corp.	Florida
ASI Home Insurance Corp.	Florida
ASI Lloyds, Inc.	Texas
ASI Preferred Insurance, Corp.*	Florida
ASI Select Auto Insurance Corp.	California
ASI Select Insurance Corp.	Delaware
ASI Services, Inc.	Florida
ASI Underwriters Corp.	Florida
ASI Underwriters of Texas, Inc.	Texas
e-Ins. LLC*	Florida
Progressive Property Insurance Company	Florida
PropertyPlus Insurance Agency, Inc.	Delaware
Sunshine Security Insurance Agency, Inc.	Florida
Drive Insurance Holdings, Inc.	Delaware
Drive New Jersey Insurance Company	New Jersey
Progressive American Insurance Company	Ohio
Progressive Bayside Insurance Company	Ohio
Progressive Casualty Insurance Company	Ohio
PC Investment Company	Delaware
Progressive Gulf Insurance Company	Ohio
Progressive Specialty Insurance Company	Ohio
Trussville/Cahaba, AL, LLC	Ohio
Progressive Classic Insurance Company	Wisconsin
Progressive Commercial Advantage Agency, Inc.	Ohio
Progressive Commercial Casualty Company	Ohio
Progressive Hawaii Insurance Corp.	Ohio
Progressive Michigan Insurance Company	Michigan
Progressive Mountain Insurance Company	Ohio
Progressive Northern Insurance Company	Wisconsin
Progressive Northwestern Insurance Company	Ohio
Progressive Preferred Insurance Company	Ohio
Progressive Security Insurance Company	Louisiana
Progressive Southeastern Insurance Company	Indiana
Progressive West Insurance Company	Ohio
Garden Sun Insurance Services, Inc.	Hawaii
Pacific Motor Club	California
Progny Agency, Inc.	New York
*Wholly owned by ARX Holding Corp.; however, ownership is shared by one or more ARX Holding Corp. subsidiary. Subsidiary is reported under the majority owned parent.

	Jurisdiction
Name of Subsidiary	of Incorporation
Progressive Adjusting Company, Inc.	Ohio
Progressive Capital Management Corp.	New York
Progressive Commercial Holdings, Inc.	Delaware
Artisan and Truckers Casualty Company	Wisconsin
Blue Hill Specialty Insurance Company, Inc.	Illinois
National Continental Insurance Company	New York
Progressive Express Insurance Company	Ohio
United Financial Casualty Company	Ohio
Progressive Direct Holdings, Inc.	Delaware
Mountain Laurel Assurance Company	Ohio
Progressive Advanced Insurance Company	Ohio
Progressive Auto Pro Insurance Agency, Inc.	Florida
Progressive Choice Insurance Company	Ohio
Progressive Direct Insurance Company	Ohio
Gadsden, AL, LLC	Ohio
Progressive Freedom Insurance Company	Ohio
Progressive Garden State Insurance Company	New Jersey
Progressive Marathon Insurance Company	Michigan
Progressive Max Insurance Company	Ohio
Progressive Paloverde Insurance Company	Indiana
Progressive Premier Insurance Company of Illinois	Ohio
Progressive Select Insurance Company	Ohio
Progressive Specialty Insurance Agency, Inc.	Ohio
Progressive Universal Insurance Company	Wisconsin
Progressive Investment Company, Inc.	Delaware
Progressive Premium Budget, Inc.	Ohio
Progressive RSC, Inc.	Ohio
Progressive Vehicle Service Company	Ohio
Village Transport Corp.	Delaware
Wilson Mills Land Co.	Ohio

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 33-16509, 33-51034, 33-57121, 333-41238, 333-172663, 333-185703, 333-185704, 333-204406, and 333-217922) of The Progressive Corporation of our report dated February 27, 2018 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the 2017 Annual Report to Shareholders, which is incorporated by reference in The Progressive Corporation’s Annual Report on Form 10‑K. We also consent to the incorporation by reference of our report dated February 27, 2018 relating to the financial statement schedules, which appears in this Form 10‑K.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

February 27, 2018

EX-24

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Jeffrey W. Basch

Jeffrey W. Basch

Vice President and Chief Accounting Officer

1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 12th day of February, 2018.

/s/John P. Sauerland___________________

John P. Sauerland

Vice President and Chief Financial Officer

2

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 12th day of February, 2018.

/s/Susan Patricia Griffith

Susan Patricia Griffith

Director, President and Chief Executive Officer

3

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 12th day of February, 2018.

/s/Philip Bleser

Philip Bleser

Director

4

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 19th day of February, 2018.

/s/Stuart B. Burgdoerfer

Stuart B. Burgdoerfer

Director

5

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Charles A. Davis

Charles A. Davis

Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 12th day of February, 2018.

/s/Roger N. Farah

Roger N. Farah

Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Lawton W. Fitt

Lawton W. Fitt

Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Glenn M. Renwick

Glenn M. Renwick

Director and Chairman of the Board

9

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Jeffrey D. Kelly

Jeffrey D. Kelly

Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Patrick H. Nettles, Ph.D.

Patrick H. Nettles, Ph.D.

Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Bradley T. Sheares, Ph.D.

Bradley T. Sheares, Ph.D.

Director

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Jeffrey W. Basch, John P. Sauerland, Daniel P. Mascaro, David M. Coffey, Laurie F. Humphrey and Andrew J. Kane, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year ended December 31, 2017, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2018.

/s/Barbara R. Snyder

Barbara R. Snyder

Director

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Susan Patricia Griffith, certify that:

1. I have reviewed this annual report on Form 10-K of The Progressive Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 27, 2018	/s/ Susan Patricia Griffith
		Susan Patricia Griffith
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John P. Sauerland, certify that:

1. I have reviewed this annual report on Form 10-K of The Progressive Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 27, 2018	/s/ John P. Sauerland
		John P. Sauerland
		Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

I, Susan Patricia Griffith, President and Chief Executive Officer of The Progressive Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2017 (the “Report”), which this certification accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Susan Patricia Griffith

Susan Patricia Griffith

President and Chief Executive Officer

February 27, 2018

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

I, John P. Sauerland, Vice President and Chief Financial Officer of The Progressive Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2017 (the “Report”), which this certification accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John P. Sauerland

John P. Sauerland

Vice President and Chief Financial Officer

February 27, 2018

EX-99

Exhibit 99

LETTER TO SHAREHOLDERS

When reflecting on the year, as I was composing the year-end evaluations for my team, the positive adjectives flowed, but the one that I believe best describes this year is “remarkable.” We started the year with a crystal-clear plan of both what we wanted to achieve and the pace with which we wanted to achieve it knowing that we would have glitches along the way, typically coming from mother nature (she did not disappoint). The success we have achieved in growth (both written premium and unit) and profit, on both a relative and absolute basis, would be a great story on its own merit, but that is only one half of the story.

Thanks to our recruiting machine and leaders across the company, we hired almost 6,000 external people in 2017 after hiring over 6,600 new people in 2016. That is a massive amount of new people to onboard and train and doesn’t consider all the people who are also in new leadership roles to support this growth. Many companies might implode with this growth, but we excelled and are prepared for similar increases in 2018. The theme of acceleration for this year’s report seems very fitting based on what we have accomplished and our plans going forward.

Synopsis of the Year

Hurricanes Irma and Harvey mark the first time in U.S. history that two Atlantic Category 4 landfalls have occurred in the same year. Even with these unprecedented storms in two of our biggest states, we ended the year with a 93.4 combined ratio (CR) while net premiums written (NPW) grew 16%. After adding $2.8 billion of NPW in 2016, we added an additional $3.8 billion in 2017, which is larger than the size of the 11th largest private passenger auto insurance company. Once again, we got out ahead of hiring to make sure that we could grow as fast as possible at or below a 96 CR and be able to provide the service our customers have come to expect. I’ve mentioned in past letters how proud I am that nearly every employee helped in some way with the storms, but the claims department deserves special thanks for all they accomplished for the customers we are privileged to serve.

Often, we are challenged regarding our long-standing goal of making at least four cents of underwriting profit while growing as fast as we can. If we must choose, profit (one of our five Core Values) comes before growth, with the aspiration to always have as much as we can of both in order to sustain an enduring business. This objective has been efficacious as our business model and, because of that, we do whatever we can, within reason, to protect it. In fact, our stated profit objective has been written in some form or another in every annual report since Progressive went public in 1971. That said, we have numerous products, channels, and venues, and the 4% underwriting margin goal is for the business in the aggregate. That goal permits us to make practical decisions on profitably growing the business based on the competitive landscape and allowing for reasonable returns for each product.

Our commitment to this profitability goal continues to move us forward. Based on our estimates using statutory data through September, we think our private passenger auto programs were more profitable than all of our major competitors and about 10 points more profitable than the industry. We also believe we grew our market share by approximately half of a point to almost 10% of the market. There are occasions where the planets (high growth plus profit) align and that occurred for us in 2017.

In Personal Lines, we have created a structure that we use to help guide us in acquiring new customers, deepening our relationships with our current customers, and extending how long our customers stay with us based on our ability to satisfy them from both a product and service perspective.

Our new auto policy applications increased by 18% year-over-year and our policies in force grew 13%. Our policies in force growth in bundled customers (auto plus home, a.k.a. Robinsons) was just over 30%. Lastly, retention continues to improve with our trailing 12-month policy life expectancy (PLE) for total auto up close to 7%, with PLE in the Agency channel up about 8%.

We frequently communicate the critical importance of keeping our customers, whom we spend so much time and resources to acquire. I’m thrilled to say that we have seen a steady increase in trailing 12-month auto PLE for some time, and our focus will be to continue to make this a central component of our strategy. Our goal, in addition to

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having competitive rates, will be to intently focus on the relationships we have with our customers and continue to enhance them.

To that end, we’ve done extensive research into customer desires. We’ve used those insights to form our priorities, and we’ve made considerable investments over these past few years. These include several areas within our Customer Relationship Management organization, such as service design and delivery methods, digital transformation, advanced analytics and modeling, artificial intelligence, and machine learning. These investments are made with our customers in mind and are designed with the intent of allowing them to service their policies when, where, and how they choose, and to receive a personalized, relevant experience that gives them a reason to continue to choose Progressive as their insurance needs evolve.

On the investment side, our portfolio posted a 5.2% total return for 2017. The year was characterized by low volatility with ever rising equity prices. Interest rates for short-maturity bonds rose as the Federal Open Market Committee followed through on their predicted path of three rate hikes in 2017, while rates for bonds maturing in ten years or longer fell slightly. Strong equity portfolio returns of over 21% contributed almost half of our post-tax comprehensive investment income of almost $825 million, despite comprising around 12% of our portfolio. Our fixed-income portfolio also performed well with a return of 3% for the year. As the yield premium we earn for holding bonds other than U.S. treasuries fell during the year, we reduced our allocation to almost all non-U.S. treasury sectors.

Our strong operating growth and maturities from our portfolio gave us plenty of new cash to invest during 2017. This created the high-class problem of finding investments that meet our criteria for quality and return. We will not relax our quality standards to pursue incremental yield. The rapid growth of our underwriting business makes our goal of protecting the balance sheet paramount.  

In April, we issued $850 million of 30-year debt to “pre-fund” the redemption in June of $564 million of our 6.70% fixed-to-floating rate securities and to provide a little more capital to fund our profitable growth. We bought back enough stock to comply with our policy of neutralizing dilution from equity-based compensation in the year of grant, but not much more. The first question we ask, when deciding if we should repurchase stock, is if we can use our capital efficiently to grow our underwriting business. I’m thrilled that last year the answer was unequivocally yes.

We celebrated our 25th anniversary of Gainshare with a score of 1.79. This is the best result since 2004 and the 6th year in a row that the score has increased. We declared an annual dividend of $1.1247 per share, based on 2017 results and the formula that we communicate publicly.

Down to the Details

After over two decades with a corporate income tax rate of 35%, we head into 2018 with a newly enacted rate of 21%. We are excited by the benefits this brings to our net income, as well as to our shareholders through adjusted valuations and application of the new tax rate to our variable dividend formula. Our effective income tax rate, which historically has been in the 32% to 33% range before tax credits, is expected to be in the neighborhood of 20%. We also continue to pay state premium taxes at a rate close to 1.6% of written premium, which amounted to more than $400 million for 2017.

We continue to be very pleased with our newest auto product model, and it is performing very well in both channels. We continually keep a close eye on rate need and quickly react when needed. The great story on the auto side continues to be growth in the Agency channel, which had eluded us for years and now seems to be a consistent source of growth. We appreciate the close relationships that we have with our more than 35,000 independent insurance agencies and look forward to continued growth.

Our Direct business is humming along as well and we are delighted with our growth in new quotes and conversion. The prolonged hard market has helped us as shopping continues due to rate increases from our competitors. We are well-positioned with our rates and product and our customers are reacting favorably to our media messages (more on that later).

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During 2017, we had persistent favorable frequency trends that were not anticipated when we priced the auto book and this is one of the reasons underwriting margins widened. We analyze a variety of factors to separate out frequency changes specific to our book versus underlying macro trends. A few unique things we see are a change in our customer mix towards lower pure premium customers and longer trips by Snapshot^® customers, who we view as representative of our entire book. We will continue to dissect our data to aid in understanding the favorable trend, should it persist.

Our special lines policies in force grew at a rate of 2% with growth coming primarily from our boat and RV businesses, while motorcycle maintained its market-leading position. The concentration of preferred customers in our special lines book of business makes it critically important to take care of these customers when infrequent losses do happen, and the 2017 catastrophe season afforded us ample opportunity to showcase our claims service. These weather losses put some pressure on our special lines margins during 2017, but we’ve responded and adjusted rates accordingly and, as we wrapped up 2017, we felt confident about our positioning from both a profit and growth perspective going into 2018.  

The special lines markets are an important element of our Destination Era strategy, and during the year we continued to invest to maintain our leadership position through deployment of our new product version and our policy issuance and maintenance system, integration of the special lines products into our upcoming Integrated Agency Quoting (IAQ) system, and transitioning management and expansion of our manufactured home product to our Property business. 

Direct premiums written (DPW) in our Property business grew 15% to $1.35 billion. This total includes around $100 million in flood premium, which is 100% ceded to the national flood insurance program. DPW in our home, condo, renters, and dwelling fire insurance products increased 21% to $1.24 billion. New Property applicationsincreased 48%, with policies in force at year end at almost 1.5 million. The Property business unit's CR was 105.1, which included about 6.7 points of amortization expenses predominately associated with the acquisition of a controlling interest in ARX.

Storm activity was well above previous years in 2017. In our auto programs, we price for storm losses using a “load” based on average storm losses over a reasonable trailing-year period, generally in the 5- to 10-year range. Storm losses in 2017 exceeded that load substantially. We have already adjusted pricing to address half that gap and plan to take further actions to ensure price adequacy as warranted.

In our Property business, we employ both occurrence-based and aggregate-based reinsurance. Hurricane Irma was a large event for ASI with more than 28,000 claims reported. Irma losses in excess of $50 million were ceded to reinsurers; therefore, Irma contributed only 5.1 points to the 2017 Property combined ratio. Losses from Hurricane Harvey were under our reinsurance threshold and contributed 1.7 points to the Property results. In addition to the hurricanes, 2017 was a very active year for severe thunderstorms, which include hail storms, with industry catastrophe losses from severe thunderstorms more than 60% above the 20-year average. Losses from severe thunderstorms had a far bigger impact on our Property results in 2017 than named storms and added 25.6 points to the Property combined ratio for the year, which is net of the $5 million recoverable we had under our aggregate stop-loss reinsurance agreement.

While recent storm activity may modestly raise pricing levels in the reinsurance market, we plan to continue to employ a robust reinsurance program for our Property business and we plan to remain diligent in ensuring the costs of this program are expeditiously reflected in our pricing. We plan to also remain diligent in employing an adequate load component for storm losses in our vehicle businesses. These tactics help to ensure that we hit our 96 combined ratio target and produce attractive returns on our capital, and that we do so with modest variation across the year.

Our Commercial Lines profitability and growth continued to outperform the industry and we finished the year writing over $3 billion in NPW. We continue to closely monitor and react to rate need, especially in states and business tiers where we are running close to or above our target profit margins.

We are acutely aware that this market is very volatile and it can be a challenge to profitable growth. We feel great about our ability to deliver nonetheless. As we expand our transportation network company business and build

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knowledge in this growing area, we plan to manage our policy portfolio risk and grow at a level that doesn’t outstrip our claims or customer service capabilities or our ability to understand any mix changes in business we are writing.

Throughout the past several years, we have clearly outlined our approach of how we will accomplish becoming a destination for our insureds and we are quite satisfied with our results. Having ASI (which will be transitioned to the Progressive brand over the next few years) as our exclusive homeowners carrier in our agency channel, and one of a strong stable of carriers in our direct channel, has been a key part of attracting customers who prefer their needs be met by the same company.

We are relishing in the momentum of our growth in our auto/home bundled customers we refer to as Robinsons in both channels. During 2017, we grew Robinsons policies in force more than twice as fast as our other consumer segments creating over 45% more bundles in 2017 than in 2016.

The Progressive Advantage Agency’s (our direct in-house agency) focus was to continue to design sales experiences and build operations that support the graduation to Robinsons. We grew staff in the agency by 80% to support our growth both on the phones and online. The growth in staff was a blend of internal and external talent as we attracted skill sets from the financial and insurance sectors, many with property experience. Robinsons policies in force growth via the Progressive Advantage Agency was just over 80% year-over-year.

We recently received this compliment from a customer who we would classify as a Diane (think renter who is saving for life events) who graduated to a Robinson. Although this is only a sample from one customer, we are enjoying our journey of being the company where customers can have nearly all of their insurance needs met.

I have been with Progressive since 2011 and I just wanted to praise you all. A couple years ago I added my girlfriend (now wife) Jenna to my policy so we could save money. I bought a house last year and signed up with Progressive for home insurance and saved more money. We just had our wedding and changed her to my spouse and saved more money again. We bought a car 2 weeks ago and it only increased our insurance by $13/month. I never go out of my way to praise a company but I've been so pleased with Progressive over the years I just wanted to say.... thank you. Thank you for being there.

Not only do our customers transition over time, but so does our management team. In January 2018, John Auer, President and CEO of ARX Holding Corp., announced his retirement, effective April of 2018. At that time, he will become the Chairman of ARX. The Progressive and ARX integration has gone very smoothly largely due to John’s leadership, vision, and values. Dave Pratt, a long-time Progressive leader, will take over the reins at ARX with the predominance of John Auer’s team reporting directly to him. Dave has been at Progressive for 27 years leading a variety of roles including Auto General Manager, Chief Marketing Officer, and most recently Usage-Based Insurance leader.  

We are also transitioning some of our claims processing. The Service Center has been part of our claims operating model for almost two decades. Over that time, we have evolved the model to reflect both internal claims process and external environmental changes. As we accelerate into our next claims operating model, we believe that moving away from our Service Center communities to a Network Shop operation will benefit all of our key constituents. Our customers, based on us strengthening our relationships with our network shops, now rate the Network Shop experience as high as our Service Center experience. Allowing our customers to drop off and pick up their vehicles at a shop that is likely closer to their home or work will improve their overall experience. For our employees, moving to a Network operation will provide more certainty around start and finish times, as well as provide multiple career opportunities for future growth as our photo estimating volume increases. Finally, for our shareholders, this evolution of our model is expected to improve our operating efficiency without any loss to claims accuracy or customer service.

The biggest development in our Snapshot^® program during 2017 was our completion of the rollout of the Snapshot mobile app that we introduced in late 2016. The app provides consumers with an alternative to the hardware-based method of collecting data for the program, simplifying the experience for consumers and lowering Progressive's costs. The Snapshot mobile app is now available to Direct and Agency consumers in 42 states and the District of Columbia. Results to date have been encouraging, with the availability of the mobile app increasing the number of

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customers choosing to enroll in Snapshotand nearly half of those enrolling selecting the mobile app when it's available. Even though much of the deployment happened in the latter half of 2017 and volume continues to ramp up, we've already collected over 33 million trips and 300 million miles driven via the mobile app.

Strategic Pillars

Our Strategy focuses on our unique culture, well-known brand, competitive pricing, and our ability to meet the broader needs of our customers throughout their lives. We think about this when we design our products, services, and marketing messages.

Culture: With the amount of hiring we have completed in the past few years and more on the way, we thought it was time to showcase our company and culture and to show job seekers who we are and ask them in a creative way to “Rethink Progressive.” Our culture is something that most people, even after a few weeks of being employed here, say they did not expect, so the campaign is aptly named “Unexpectedly Progressive.” It is designed to address the common misconceptions of insurance but, more specifically, Progressive insurance. It highlights our legacy of blending technology, art, and science with our unique culture, and it appeals to people looking for an exciting career in technology or quantitative analytics.

Brand: Celebrating 10 years, Flo and the Superstore continue to be our high-performing, value-driving campaign. This anchor program, within our broader content network strategy, grew this year with the introduction of fresh story arcs and the addition of a new cast of characters. We also expanded message mix beyond price to include protection and problem-resolution propositions to broaden brand appeal.

Even with an extremely successful Superstore campaign, we continue to diversify our creative content. Growing our focus on young homeowners, we launched a second round of “Parentamorphosis” (how you become your parents when you buy your first home) creative this year, which continues to be a top performer across both mass media and digital channels.

The success of our homeowner/bundle messaging continued into 2017. Good progress, that we believe will only accelerate, as we continue the balance of work in a market designed to support both our growing customer base and our customers' desire to stay and grow with us.  

When we dissect the performance of our ads in 2017, home messaging continues to outperform the other categories in driving new quotes for both auto and home.  What’s most exciting is our diversity of messaging and subsequent success. We had four different campaigns and messages with all four showing success in both home and auto, which confirms that our messages and creative are resonating with consumers. Given the success of these messages, comparing 2017 to 2015 (if you recall we pulled back on advertising slightly in 2016), we are more than doubling our impressions against the homeowner/bundle category. Our increased focus on premium programming has helped us to get these messages out to more potential Progressive Robinsons at costs that still allow us to deliver on our target economics.

From a volume perspective, we had a very strong year in Direct auto. We entered our fifth consecutive year of new quote growth. Sales have been even stronger. We had 16% growth in new applications in 2017, which was also our fifth consecutive year of new application growth. We have strung together four years of new app growth a couple times since 2002, but this is the first time we have had five years. The five-year compounded average growth rate is 11%. Given our strong position in the market and increase in media spend, I expect us to deliver a sixth consecutive year of growth for both new quotes and applications.

Competitive Prices: Our focus here has always been on efficiency, claims accuracy, and segmentation. Of recent times, we have spoken more about segmentation and accuracy, which we believe are strengths of ours, so for this communication I’d like to comment more on the importance of efficiency.

We know that price matters and the companies that will win, in the long-run, are the ones that have a competitive cost structure, and much of that comes from operational efficiency defined as both our general expense ratio plus loss adjustment expenses (LAE).

5

Our expense ratio for our Personal Lines business is now consistently below 20 points, which, while not the lowest in the industry by design, is quite competitive. Personal auto represents around 90% of that business and, for personal auto, advertising and agent commissions (acquisition costs) make up more than half of our expense ratio. We are happy to spend more on acquisition costs as long as we grow commensurately. We believe that driving non-acquisition expenses down, while maintaining high service levels, is a strong path to competitive prices. We have taken out more than half a point of non-acquisition expenses over the course of the last three years and are focused on continuing to reduce these expenses.

We continue to work on initiatives to reduce adjusting costs per claim and the resulting paid LAE ratio. Our objective has always been to focus on total costs of indemnity plus LAE, so any efficiency improvements we may make relative to claims adjusting must be evaluated against potential changes in indemnity accuracy.

Our strategic claims agenda has long focused on what we refer to as our Guiding Principles of Accuracy, Efficiency, Customer Service, and Work Environment. We consider all critical to our claims organization, and measure the effect of any change to claims operations across all four. New initiatives may not move every Guiding Principle in a favorable direction; however, appropriately assessing the trade-offs allows the claims organization to make the most effective process improvement investments. As an example, hiring the amount of people that we have in advance of need put pressure on the LAE side, but we believe it has had favorable results on our Accuracy, Customer Service, and Work Environment. We’d take that trade-off every day.

That said, we’re excited about the investments that we made in 2017 in claims technology and process improvements and expect to see the positive results of those on the efficiency side in the coming years.  

Meeting the broader needs of our customers: In July, we announced a new online platform called HomeQuote Explorer^® (HQX). HQX allows homeowners to quickly and easily compare home insurance quotes from multiple carriers to find the best option to protect their homes. We leveraged the formula that we used two decades ago when we put the power of comparison shopping in the hands of auto insurance customers.

HQX helped drive online home and condo new application growth of 49%. We have enhanced the experience in HQX and with it sales yield has improved over 50% since we initially rolled out the platform.

We made significant investments to make the system simple for customers by pulling in publicly available information on a property to save the homeowner time, and providing an easy-to-use series of prompts to help the user enter other required information.

For the last 10 years, Flo has represented the nearly 34,000 employees who serve our customers each and every day. In 2017, we were able to bring all Flo represents in broadcast into the digital world and continue our long legacy of innovation by being the first top 10 U.S. insurance company to allow users to start an auto quote via a Flo Chatbot experience in Facebook Messenger. We look forward to expanding that functionality and foundation in 2018 as we strive to provide easy and innovative experiences for current and prospective customers.

What’s on the Horizon(s)

Previously during an investor webcast, I shared some detail into our growth horizons and how we think about growing the current business, mid-term opportunities, and long-term investments. The main essence of this construct is that we must invest in all three horizons to be an enduring company. We accept that challenge with excitement and eagerness as we seek to be the company with the mantra of “always grow” philosophy. That way of thinking has been an unremitting part of who we are at Progressive.

As we contemplate the future, knowing that there will be considerable changes to our industry and other industries adjacent to ours, we must think about both expanding our addressable market by leveraging our strengths, but also by exploring new horizons that we haven’t considered in the past.

With that, and to formalize work being done in several areas within the company, we have assembled an internal Strategy Council. The council will work side-by-side with me and John Sauerland, our CFO, to assess the changing

6

landscape. We have invested, and will continue to invest, in whatever we think it will take to ensure we have the opportunity to grow profitably for many decades to come. Much more to come on this in the next several years.

Purpose and Pride

My belief is that when you devise and then pen statements like missions and visions they should be something that the entire company can easily recall, relate to, and reflect upon as they go about their day-to-day work. My senior leadership team and I all agreed that the company’s Core Values, Vision, and Strategy met this test and have been effective in guiding the company’s performance for many years. However, we felt that something else was needed to reflect how the company has evolved in light of our Destination Era strategy. We decided that it would be valuable to create a pithy statement to reflect our purpose.

We generated several statements through a series of focus groups and ultimately came up with two that we thought reflected why we are here. We asked every Progressive and ASI employee to vote and, although it was very close, the winner was “True to our name. Progressive.” Many employees have told me that they felt that statement was the best choice because it accurately reflects what our name stands for - forward motion, accelerated movement toward a destination, and striving to do things better.

This year also marks the 25th anniversary of Gainshare, our annual incentive program that is available to all employees and promotes a common culture and rewards employees when annual business goals and objectives are achieved. Payouts can range from 0 to 2 times a target amount under this program. We’ve certainly come a long way from giving each employee a crisp $100 bill. I vividly recall the excitement in my small claims branch because it was the first time many of us had ever held a hundred-dollar bill. I just remember feeling grateful and proud that I worked for a company who did that sort of thing for its people. For 2017, employees received 1.79 times their target payout amount, which for our median employee equated to a payout of just over $8,100. That pride continued when we decided in 2007 to extend Gainshare to our shareholders via our annual variable dividend. Aligning the interests of the employees and shareholders, and sharing when we make gains, are essential parts of who we are as a company.

In November, we held our fifth annual Keys to Progress^® events to publicly recognize those who have dedicated their lives to serving our country and communities. Together with many of our partners, we donated refurbished vehicles to more than 100 recipients - including our 500th car since the program’s inception in 2013. This is always a proud day at Progressive and one of the many ways we make our new purpose statement come to life.

As we wrap up another year, I want to reiterate one additional time how honored I am to work with the almost 34,000 Progressive people who make being true to our name something that we will strive to bring to life each day.

Thank you for all that you do.

/s/ Tricia Griffith

Tricia Griffith

President and Chief Executive Officer

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XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Jan. 31, 2018	Jun. 30, 2017
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	PGR
Entity Registrant Name	PROGRESSIVE CORP/OH/
Entity Central Index Key	0000080661
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		582,275,989
Entity Public Float			$ 25,242,148,256

XML

Consolidated Statements of Comprehensive Income - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenues
Net premiums earned	$ 25,729.9	$ 22,474.0	$ 19,899.1
Investment income	563.1	478.9	454.6
Net realized gains (losses) on securities:
Net impairment losses recognized in earnings	(64.5)	(86.8)	(23.8)
Net realized gains (losses) on securities	114.1	137.9	136.5
Total net realized gains (losses) on securities	49.6	51.1	112.7
Fees and other revenues	370.6	332.5	302.0
Service revenues	126.8	103.3	86.3
Other (gains) losses	(1.0)	1.6	(0.9)
Total revenues	26,839.0	23,441.4	20,853.8
Expenses
Losses and loss adjustment expenses	18,808.0	16,879.6	14,342.0
Policy acquisition costs	2,124.9	1,863.8	1,651.8
Other underwriting expenses	3,480.7	2,972.0	2,712.1
Investment expenses	23.9	22.4	22.8
Service expenses	109.5	92.0	77.5
Interest expense	153.1	140.9	136.0
Total expenses	24,700.1	21,970.7	18,942.2
Net Income
Income before income taxes	2,138.9	1,470.7	1,911.6
Provision for income taxes	540.8	413.5	611.1
Net income	1,598.1	1,057.2	1,300.5
Net (income) loss attributable to noncontrolling interest (NCI)	(5.9)	(26.2)	(32.9)
Net income attributable to Progressive	1,592.2	1,031.0	1,267.6
Changes in:
Total net unrealized gains on securities	355.4	130.6	(212.9)
Net unrealized losses on forecasted transactions	(5.4)	(1.2)	(9.7)
Foreign currency translation adjustment	1.1	0.4	(1.2)
Other comprehensive income (loss)	351.1	129.8	(223.8)
Other comprehensive (income) loss attributable to NCI	(2.3)	3.2	1.1
Comprehensive income attributable to Progressive	$ 1,941.0	$ 1,164.0	$ 1,044.9
Computation of Per Share Earnings Attributable to Progressive
Average shares outstanding — Basic	580.8	581.7	585.5
Net effect of dilutive stock-based compensation	4.9	3.3	3.7
Total average equivalent shares — Diluted	585.7	585.0	589.2
Basic: Earnings per share (usd per share)	$ 2.74	$ 1.77	$ 2.16
Diluted: Earnings per share (usd per share)	$ 2.72	$ 1.76	$ 2.15

XML

Consolidated Balance Sheets - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Investments – Available-for-sale, at fair value:
Fixed maturities (amortized cost: $20,209.9 and $16,287.1)		$ 20,201.7	$ 16,243.8
Equity securities:
Nonredeemable preferred stocks (cost: $698.6 and $734.2)		803.8	853.5
Common equities (cost: $1,499.0 and $1,437.5)		3,399.8	2,812.4
Short-term investments (amortized cost: $2,869.4 and $3,572.9)		2,869.4	3,572.9
Total investments		27,274.7	23,482.6
Cash		265.0	211.5
Restricted Cash		10.3	14.9
Total Cash, Cash Equivalents, and Restricted Cash		275.3	226.4
Accrued investment income		119.7	103.9
Premiums receivable, net of allowance for doubtful accounts of $210.9 and $186.8		5,422.5	4,509.2
Reinsurance recoverables, including $103.3 and $83.8 on paid losses and loss adjustment expenses		2,273.4	1,884.8
Prepaid reinsurance premiums		203.3	170.5
Deferred acquisition costs		780.5	651.2
Property and equipment, net of accumulated depreciation of $940.6 and $845.8		1,119.6	1,177.1
Goodwill		452.7	449.4
Intangible assets, net of accumulated amortization of $175.7 and $109.5		366.6	432.8
Other assets		412.9	339.6
Total assets		38,701.2	33,427.5
Liabilities
Unearned premiums		8,903.5	7,468.3
Loss and loss adjustment expense reserves		13,086.9	11,368.0
Net deferred income taxes		135.0	111.3
Dividends payable		655.1	395.4
Accounts payable, accrued expenses, and other liabilities	[1]	2,825.9	2,495.5
Debt	[2]	3,306.3	3,148.2
Total liabilities		28,912.7	24,986.7
Redeemable noncontrolling interest (NCI)	[3]	503.7	483.7
Shareholders’ Equity
Common shares, $1.00 par value (authorized 900.0; issued 797.5 including treasury shares of 215.8 and 217.6)		581.7	579.9
Paid-in capital		1,389.2	1,303.4
Retained earnings		6,031.7	5,140.4
Accumulated other comprehensive income:
Net unrealized gains (losses) on securities		1,295.0	939.6
Net unrealized losses on forecasted transactions		(14.8)	(9.4)
Foreign currency translation adjustment		0.0	(1.1)
Accumulated other comprehensive (income) loss attributable to NCI		2.0	4.3
Total accumulated other comprehensive income attributable to Progressive		1,282.2	933.4
Total shareholders’ equity		9,284.8	7,957.1
Total liabilities, redeemable NCI, and shareholders’ equity		$ 38,701.2	$ 33,427.5

[1] See Note 12 – Litigation and Note 13 – Commitments and Contingencies for further discussion.

[2] Consists of both short-term and long-term debt. See Note 4 – Debt for further discussion.

[3] See Note 15 – Redeemable Noncontrolling Interest for further discussion.

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Fixed maturities, amortized cost	$ 20,209.9	$ 16,287.1
Nonredeemable preferred stocks, cost	698.6	734.2
Common equities, cost	1,499.0	1,437.5
Short Term Investments Amortized Cost	2,869.4	3,572.9
Premiums receivable, allowance for doubtful accounts	210.9	186.8
Reinsurance recoverables, paid losses and loss adjustment expenses	103.3	83.8
Property and equipment, accumulated depreciation	940.6	845.8
Finite-Lived Intangible Assets, Accumulated Amortization	$ 175.7	$ 109.5
Common Shares, par value (USD per share)	$ 1.00	$ 1.00
Common Shares, authorized (shares)	900,000,000.0	900,000,000.0
Common Shares, issued (shares)	797,500,000	797,500,000
Common Shares, treasury shares (shares)	215,800,000	217,600,000

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Millions	Total	Common Shares, $1.00 Par Value	Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income Attributable to Progressive
Balance, Beginning of year at Dec. 31, 2014		$ 587.8	$ 1,184.3	$ 4,133.4	$ 1,023.1
Tax benefit from vesting of equity-based compensation			16.8
Treasury shares purchased		(7.3)	(15.2)	(186.0)
Net restricted equity awards issued/vested		3.1	(3.1)
Amortization of equity-based compensation			64.5
Reinvested dividends on restricted stock units			5.7	(5.7)
Adjustment to carrying amount of redeemable noncontrolling interest			(34.2)
Net income attributable to Progressive	$ 1,267.6			1,267.6
Cash dividends declared on common shares ($1.1247, $0.6808, and $0.8882 per share)				(520.5)
Other, net				(2.2)
Attributable to noncontrolling interest	1.1				1.1
Other comprehensive income (loss)					(223.8)
Balance, End of year at Dec. 31, 2015	7,289.4	583.6	1,218.8	4,686.6	800.4
Tax benefit from vesting of equity-based compensation			9.2
Treasury shares purchased		(6.1)	(13.4)	(173.0)
Net restricted equity awards issued/vested		2.4	(2.4)
Amortization of equity-based compensation			80.9
Reinvested dividends on restricted stock units			6.1	(6.1)
Adjustment to carrying amount of redeemable noncontrolling interest	(4.2)		4.2
Net income attributable to Progressive	1,031.0			1,031.0
Cash dividends declared on common shares ($1.1247, $0.6808, and $0.8882 per share)				(394.7)
Other, net				(3.4)
Attributable to noncontrolling interest	3.2				3.2
Other comprehensive income (loss)					129.8
Balance, End of year at Dec. 31, 2016	7,957.1	579.9	1,303.4	5,140.4	933.4
Tax benefit from vesting of equity-based compensation			0.0
Treasury shares purchased		(1.5)	(3.4)	(57.6)
Net restricted equity awards issued/vested		3.3	(3.3)
Amortization of equity-based compensation			92.9
Reinvested dividends on restricted stock units			8.0	(8.0)
Adjustment to carrying amount of redeemable noncontrolling interest	8.4		(8.4)
Net income attributable to Progressive	1,592.2			1,592.2
Cash dividends declared on common shares ($1.1247, $0.6808, and $0.8882 per share)				(654.2)
Other, net				18.9
Attributable to noncontrolling interest	(2.3)				(2.3)
Other comprehensive income (loss)					351.1
Balance, End of year at Dec. 31, 2017	$ 9,284.8	$ 581.7	$ 1,389.2	$ 6,031.7	$ 1,282.2

XML

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Retained Earnings
Cash dividends declared on common shares, per share	$ 1.1247	$ 0.6808	$ 0.6862
Serial Preferred Stock
Preference Shares authorized	20,000,000.0	20,000,000.0	20,000,000.0
Preference Shares issued	0	0	0
Preferred Shares outstanding	0	0	0
Voting Preferred Stock
Preference Shares authorized	5,000,000	5,000,000	5,000,000
Preference Shares issued	0	0	0

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net income		$ 1,598.1	$ 1,057.2	$ 1,300.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		169.9	137.4	103.7
Amortization of intangible assets		66.2	62.1	46.8
Net amortization of fixed-income securities		86.2	77.2	98.4
Amortization of equity-based compensation		95.4	85.2	66.2
Net realized (gains) losses on securities		(49.6)	(51.1)	(112.7)
Net (gains) losses on disposition of property and equipment		7.2	6.6	2.0
Other (gains) losses		1.0	(1.6)	0.9
Net loss on exchange transaction		0.0	4.5	0.0
Changes in:
Premiums receivable		(913.2)	(518.5)	(421.1)
Reinsurance recoverables		(388.6)	(388.2)	(202.6)
Prepaid reinsurance premiums		(32.8)	48.8	32.5
Deferred acquisition costs		(129.3)	(103.8)	(42.3)
Income taxes		(172.6)	(55.7)	(107.2)
Unearned premiums		1,434.9	830.7	632.4
Loss and loss adjustment expense reserves		1,718.8	1,323.2	917.7
Accounts payable, accrued expenses, and other liabilities		400.0	308.9	37.9
Other, net		(134.8)	(90.2)	(60.2)
Net cash provided by operating activities		3,756.8	2,732.7	2,292.9
Purchases:
Fixed maturities		(14,587.8)	(11,610.6)	(9,311.1)
Equity securities		(255.6)	(434.2)	(647.1)
Sales:
Fixed maturities		5,382.5	5,694.9	4,913.5
Equity securities		252.9	484.6	402.4
Maturities, paydowns, calls, and other:
Fixed maturities		5,215.8	4,907.4	3,579.5
Equity securities		50.0	0.0	12.0
Net sales (purchases) of short-term investments		727.6	(1,357.2)	20.5
Net unsettled security transactions		(33.6)	50.9	(8.2)
Purchases of property and equipment		(155.7)	(215.0)	(130.7)
Sales of property and equipment		15.3	6.2	10.6
Net cash disposed in exchange transaction		0.0	(7.7)	0.0
Acquisition of additional shares of ARX Holding Corp.		0.0	0.0	(12.6)
Net cash used in investing activities		(3,406.7)	(2,480.7)	(1,923.9)
Cash Flows From Financing Activities
Proceeds from exercise of equity options		0.5	0.0	0.2
Net proceeds from debt issuance		841.1	495.6	382.0
Payments of debt		(49.0)	(25.5)	(20.4)
Redemption/reacquisition of subordinated debt		(635.6)	(18.2)	(19.3)
Dividends paid to shareholders		(395.4)	(519.0)	(403.6)
Acquisition of treasury shares for restricted stock tax liabilities		(57.6)	(25.1)	(30.6)
Acquisition of treasury shares acquired in open market		(4.9)	(167.4)	(177.9)
Tax benefit from vesting of equity-based compensation		0.0	9.2	16.8
Net cash used in financing activities		(300.9)	(250.4)	(252.8)
Effect of exchange rate changes on cash		(0.3)	0.4	(0.2)
Increase in cash, cash equivalents, and restricted cash		48.9	2.0	116.0
Cash, cash equivalents, and restricted cash - Beginning of year		226.4	224.4	108.4
Cash, cash equivalents, and restricted cash - End of year		275.3	226.4	224.4
Insurance Company
Maturities, paydowns, calls, and other:
Acquisition of business, net of cash acquired	[1]	(18.1)	0.0	0.0
ARX Holding Corp.
Maturities, paydowns, calls, and other:
Acquisition of business, net of cash acquired		$ 0.0	$ 0.0	$ (752.7)

[1] See Note 1 – Reporting and Accounting Policies for further information.

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SCHEDULE I - Summary Of Investments - Other Than Investments in Related Parties

12 Months Ended

Dec. 31, 2017

Text Block [Abstract]

SCHEDULE I - Summary Of Investments - Other Than Investments In Related Parties

SCHEDULE I — SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

	December 31, 2017
Type of Investment	Cost		Fair Value		Amount At Which Shown In The Balance Sheet
Available-for-sale
Fixed maturities:
Bonds:
United States Government and government agencies and authorities	$	6,688.8	$	6,645.9	$	6,645.9
States, municipalities, and political subdivisions	2,285.6		2,297.1		2,297.1
Public utilities	192.5		193.6		193.6
Corporate and other debt securities	4,804.7		4,804.1		4,804.1
Asset-backed securities	6,043.4		6,050.0		6,050.0
Redeemable preferred stocks	194.9		211.0		211.0
Total fixed maturities	20,209.9		20,201.7		20,201.7
Equity securities:
Common stocks:
Public utilities	106.8		177.5		177.5
Banks, trusts, and insurance companies	285.8		685.0		685.0
Industrial, miscellaneous, and all other	1,106.4		2,537.3		2,537.3
Nonredeemable preferred stocks	698.6		803.8		803.8
Total equity securities	2,197.6		4,203.6		4,203.6
Short-term investments	2,869.4		2,869.4		2,869.4
Total investments	$	25,276.9	$	27,274.7	$	27,274.7

Progressive did not have any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2017.

XML

SCHEDULE II - Condensed Financial Information Of Registrant

12 Months Ended

Dec. 31, 2017

Text Block [Abstract]

SCHEDULE II - Condensed Financial Information Of Registrant

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2017		2016		2015
Revenues
Dividends from subsidiaries	$	867.3	$	375.5	$	852.5
Undistributed income (loss) from subsidiaries	866.3		741.9		500.0
Equity in net income of subsidiaries*	1,733.6		1,117.4		1,352.5
Intercompany investment income*	11.3		5.5		3.9
Gains (losses) on extinguishment of debt	0.2		1.6		(0.9		)
Total revenues	1,745.1		1,124.5		1,355.5
Expenses
Interest expense	151.1		140.4		136.1
Deferred compensation1	23.2		5.3		5.3
Other operating costs and expenses	4.6		4.2		5.4
Total expenses	178.9		149.9		146.8
Income before income taxes	1,566.2		974.6		1,208.7
Benefit for income taxes	26.0		56.4		58.9
Net income attributable to Progressive	1,592.2		1,031.0		1,267.6
Other comprehensive income (loss)	348.8		133.0		(222.7		)
Comprehensive income attributable to Progressive	$	1,941.0	$	1,164.0	$	1,044.9

* Eliminated in consolidation.

¹ See Note 4 – Employee Benefit Plans in these condensed financial statements.

See notes to condensed financial statements.

CONDENSED BALANCE SHEETS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	December 31,
	2017		2016
Assets
Investment in affiliate	$	5.0	$	5.0
Investment in subsidiaries*	11,721.3		10,280.9
Receivable from investment subsidiary*	1,466.1		1,121.9
Intercompany receivable*	578.6		443.3
Net deferred income taxes	67.1		97.1
Other assets	167.3		137.3
Total assets	$	14,005.4	$	12,085.5
Liabilities and Shareholders’ Equity
Accounts payable, accrued expenses, and other liabilities	$	292.6	$	228.4
Dividend payable	655.1		395.4
Debt	3,269.2		3,020.9
Total liabilities	4,216.9		3,644.7
Redeemable noncontrolling interest (NCI)	503.7		483.7
Shareholders’ Equity
Common shares, $1.00 par value (authorized 900.0; issued 797.5 including treasury shares of 215.8 and 217.6)	581.7		579.9
Paid-in capital	1,389.2		1,303.4
Retained earnings	6,031.7		5,140.4
Total accumulated other comprehensive income attributable to Progressive	1,282.2		933.4
Total shareholders’ equity	9,284.8		7,957.1
Total liabilities, redeemable NCI, and shareholders’ equity	$	14,005.4	$	12,085.5

*Eliminated in consolidation.

See notes to condensed financial statements.

CONDENSED STATEMENTS OF CASH FLOWS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2017			2016			2015
Cash Flows From Operating Activities:
Net income attributable to Progressive	$	1,592.2		$	1,031.0		$	1,267.6
Adjustments to reconcile net income attributable to Progressive to net cash provided by operating activities:
Undistributed (income) loss from subsidiaries	(866.3		)	(741.9		)	(500.0		)
Amortization of equity-based compensation	2.1			2.2			2.4
(Gains) losses on extinguishment of debt	(0.2		)	(1.6		)	0.9
Changes in:
Intercompany receivable	(71.3		)	(37.3		)	7.0
Accounts payable, accrued expenses, and other liabilities	53.6			24.2			(46.2		)
Income taxes	37.3			(5.0		)	12.3
Other, net	(22.6		)	(13.3		)	(3.1		)
Net cash provided by operating activities	724.8			258.3			740.9
Cash Flows From Investing Activities:
Additional investments in equity securities of consolidated subsidiaries	(86.7		)	(112.0		)	(40.2		)
Acquisition of an insurance company	(18.7		)	0			0
Acquisition of ARX	0			0			(890.1		)
(Paid to) received from investment subsidiary	(344.2		)	78.6			409.1
Net cash used in investing activities	(449.6		)	(33.4		)	(521.2		)
Cash Flows From Financing Activities:
Net proceeds from debt issuance	841.1			495.6			394.9
Reacquisitions of debt	(594.4		)	(18.2		)	(19.3		)
Dividends paid to shareholders	(395.4		)	(519.0		)	(403.6		)
Acquisition of treasury shares for restricted stock tax liabilities	(57.6		)	(25.1		)	(30.6		)
Acquisition of treasury shares acquired in open market	(4.9		)	(167.4		)	(177.9		)
Loan to ARX Holding Corp.1	(64.0		)	0			0
Tax benefit from vesting of equity-based compensation	0			9.2			16.8
Net cash used in financing activities	(275.2		)	(224.9		)	(219.7		)
Change in cash, cash equivalents, and restricted cash	0			0			0
Cash, cash equivalents, restricted cash - Beginning of year	0			0			0
Cash, cash equivalents, restricted cash - End of year	$	0		$	0		$	0

¹ Eliminated in consolidation. See Note 4 – Debt in our Annual Report.

See notes to condensed financial statements.

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements of The Progressive Corporation (parent company) should be read in conjunction with the consolidated financial statements and notes thereto in the Annual Report to Shareholders of The Progressive Corporation and its subsidiaries, which is included as Exhibit 13 to this Form 10-K.

Note 1. Statements of Cash Flows — For the purpose of the Statements of Cash Flows, cash includes only bank demand deposits. The Progressive Corporation does not hold any cash but has unrestricted access to funds maintained in a non-insurance, investment subsidiary to meet its holding company obligations; at year-end 2017 and 2016, $1.6 billion and $1.3 billion, respectively, of marketable securities were available in this subsidiary. Non-cash activity includes declared but unpaid dividends, the transfer of the previous 5% ownership interest in ARX to The Progressive Corporation from an investment subsidiary in 2015, and the change in redemption value of the redeemable NCI. For the years ended December 31, The Progressive Corporation paid the following:

(millions)	2017		2016		2015
Income taxes	$	669.7	$	450.2	$	625.0
Interest	142.2		134.2		128.2

Note 2. Income Taxes — The Progressive Corporation files a consolidated federal income tax return with all eligible subsidiaries and acts as an agent for the consolidated tax group when making payments to the Internal Revenue Service. Since The Progressive Corporation owns less than 80% of ARX’s outstanding stock, ARX and its subsidiaries are not eligible to file on a consolidated basis with The Progressive Corporation. The Progressive Corporation consolidated group’s net income taxes currently payable/recoverable are included in other liabilities/assets, respectively, in the accompanying Condensed Balance Sheets based on the balance at the end of the year. The Progressive Corporation and its eligible subsidiaries have adopted, pursuant to a written agreement, a method of allocating consolidated federal income taxes. Amounts allocated to the eligible subsidiaries under the written agreement are included in “Intercompany Receivable” in the accompanying Condensed Balance Sheets.

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. One of the provisions of the Tax Act reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Pursuant to current accounting guidance, all deferred tax assets and liabilities were revalued to recognize the tax rate that is expected to apply when the tax effects are ultimately recognized in future periods. The impact of revaluing the deferred tax assets and liabilities from 35% to 21% was a net increase to The Progressive Corporation’s income tax expense of $44.7 million.

Note 3. Debt — The information relating to debt is incorporated by reference from Note 4 – Debt in our Annual Report.

Note 4. Employee Benefit Plans — The information relating to incentive compensation plans and deferred compensation is incorporated by reference from Note 9 – Employee Benefit Plans in our Annual Report.

Note 5. Other Comprehensive Income — On the condensed Statements of Comprehensive Income, other comprehensive income represents activity of the subsidiaries of The Progressive Corporation and includes net unrealized gains (losses) on securities, net unrealized gains on forecasted transactions, and foreign currency translation adjustments.

Note 6. Dividends — The information relating to our dividend policy is incorporated by reference from Note 14 – Dividends in our Annual Report.

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SCHEDULE III - Supplementary Insurance Information

12 Months Ended

Dec. 31, 2017

Text Block [Abstract]

SCHEDULE III - Supplementary Insurance Information

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

Segment	Deferred policy acquisition costs1		Future policy benefits, losses, claims, and loss expenses1		Unearned premiums1		Other policy claims and benefits payable1		Premium revenue			Net investment income1,2		Benefits, claims, losses, and settlement expenses			Amortization of deferred policy acquisition costs		Other operating expenses		Net premiums written
Year ended December 31, 2017:
Personal Lines									$	21,947.2				$	16,141.4		$	1,656.4	$	2,954.8	$	22,928.4
Commercial Lines									2,793.9					1,966.4			309.3		335.3		3,112.7
Property									988.8					700.2			159.2		190.4		1,091.0
Other indemnity									0					0			0		0.2		0
Total	$	780.5	$	13,086.9	$	8,903.5	$	0	$	25,729.9		$	539.2	$	18,808.0		$	2,124.9	$	3,480.7	$	27,132.1
Year ended December 31, 2016:
Personal Lines									$	19,188.2				$	14,591.1		$	1,446.6	$	2,549.2	$	19,819.5
Commercial Lines									2,421.3					1,741.0			266.7		285.4		2,598.3
Property									864.5					546.1			150.5		137.2		935.7
Other indemnity									0					1.4			0		0.2		0
Total	$	651.2	$	11,368.0	$	7,468.3	$	0	$	22,474.0		$	456.5	$	16,879.6		$	1,863.8	$	2,972.0	$	23,353.5
Year ended December 31, 2015:
Personal Lines									$	17,294.5				$	12,748.7		$	1,331.3	$	2,379.9	$	17,703.6
Commercial Lines									1,995.9					1,244.5			219.4		232.6		2,171.2
Property									609.1					349.0			101.1		98.8		689.6
Other indemnity									(0.4		)			(0.2		)	0		0.8		(0.4		)
Total	$	564.1	$	10,039.0	$	6,621.8	$	0	$	19,899.1		$	431.8	$	14,342.0		$	1,651.8	$	2,712.1	$	20,564.0

¹ Progressive does not allocate assets, liabilities, or investment income to operating segments.

² Excludes total net realized gains (losses) on securities.

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SCHEDULE IV - Reinsurance

12 Months Ended

Dec. 31, 2017

Text Block [Abstract]

SCHEDULE IV - Reinsurance

SCHEDULE IV — REINSURANCE

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

Year Ended:	Gross Amount		Ceded to Other Companies		Assumed From Other Companies		Net Amount		Percentage of Amount Assumed to Net
December 31, 2017
Premiums earned:
Property and liability insurance	$	26,425.7	$	695.8	$	0	$	25,729.9	0	%
December 31, 2016
Premiums earned:
Property and liability insurance	$	23,111.2	$	637.2	$	0	$	22,474.0	0	%
December 31, 2015
Premiums earned:
Property and liability insurance	$	20,454.1	$	555.0	$	0	$	19,899.1	0	%

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Reporting and Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Reporting and Accounting Policies

REPORTING AND ACCOUNTING POLICIES

Nature of OperationsThe Progressive insurance organization began business in 1937. The Progressive Corporation, an insurance holding company, was formed in 1965. The financial results of The Progressive Corporation include its subsidiaries and affiliates (references to “subsidiaries” in these notes include affiliates as well). Our insurance subsidiaries (collectively the Progressive Group of Insurance Companies) provide personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles, which we refer to as our special lines products, through both an independent insurance agency channel and a direct channel. Our Commercial Lines segment writes primary liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses through both the independent agency and direct channels. Our Property segment writes residential property insurance for homeowners, other property owners, and renters, primarily through the independent insurance agency channel. We operate our businesses throughout the United States.

Basis of Consolidation and Reporting The accompanying consolidated financial statements include the accounts of The Progressive Corporation and ARX Holding Corp. (ARX), and their respective wholly owned insurance and non-insurance subsidiaries and affiliates, in which Progressive or ARX has a controlling financial interest. The Progressive Corporation owned 69.0% of the outstanding capital stock of ARX at December 31, 2017 and 69.2% at December 31, 2016 and 2015. The decrease reflects ARX employee stock options that were exercised during 2017. All intercompany accounts and transactions are eliminated in consolidation.

EstimatesWe are required to make estimates and assumptions when preparing our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact (e.g., losses are paid), results may, and will likely, differ from those estimates.

InvestmentsOur fixed-maturity securities, equity securities, and short-term investments are accounted for on an available-for-sale basis. See Note 2 – Investments for details regarding the composition of our investment portfolio.

Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes, reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.

Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are generally accounted for under the retrospective method. The retrospective method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception of the investment holding period, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The prospective method is used primarily for interest-only securities, non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure or where there is a greater risk of non-performance and where it is possible the initial investment may not be substantially recovered. The prospective method requires a calculation of expected future repayments and resets the yield to allow for future period adjustments; no current period impact to investment income or the security’s cost is made based on the cash flow update. Prepayment assumptions are updated quarterly.

Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments, and are reported at fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in the current period.

Short-term investments may include Eurodollar deposits, commercial paper, repurchase transactions, and other securities expected to mature within one year. From time to time, we may also invest in municipal bonds that have maturity dates that are longer than one year, but have either liquidity facilities or mandatory put features within one year.

Trading securities are securities bought principally for the purpose of sale in the near term. We do not hold any trading securities. To the extent we have trading securities, changes in fair value would be recognized in income in the current period. Derivative instruments, which may be used for trading purposes or classified as trading derivatives due to the characteristics of the transaction, are discussed below.

Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements, and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:

• Changes in fair value of an asset or liability (fair value hedge),

• Foreign currency of an investment in a foreign operation (foreign currency hedge), or

• Variable cash flows of a forecasted transaction (cash flow hedge).

We did not have any derivatives outstanding at December 31, 2017 and 2016. To the extent we have derivatives held for general investment purposes, these derivative instruments are recognized as either assets or liabilities and measured at fair value, with changes in fair value recognized in income as a component of net realized gains (losses) on securities during the period of change.

Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:

• Fair value hedge:  changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of change while the hedge is in effect.

• Foreign currency hedge:  changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.

• Cash flow hedge:  changes in fair value of the hedge would be reported as a component of accumulated other comprehensive income and subsequently amortized into earnings over the life of the hedged transaction.

If a hedge is deemed to become ineffective or discontinued, the following accounting treatment would be applied:

• Fair value hedge:  the derivative instrument would continue to be adjusted through income, while the adjustment in the change in value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive income.

• Foreign currency hedge:  changes in the value of the hedged item would continue to be reflected as a change in translation adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income for the current period.

• Cash flow hedge:  changes in fair value of the derivative instrument would be reported in income for the current period.

For all derivative positions, net cash requirements are limited to changes in fair values, which may vary as a result of changes in interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same counterparty under a master netting arrangement.

Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio’s value in the near term. We regularly monitor our portfolio for price changes, which might indicate potential impairments, and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to: (i) fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors, (ii) market-related factors, such as interest rates or equity market declines, or (iii) credit-related losses, where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security.

We analyze our debt securities that are in a loss position to determine if we intend to sell, or if it is more likely than not that we will be required to sell, the security prior to recovery and, if so, we write down the security to its current fair value, with the entire amount of the write-down recorded to earnings. To the extent that it is more likely than not that we will hold the debt security until recovery (which could be maturity), we determine if any of the decline in value is due to a credit loss (i.e., where the present value of future cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we recognize that portion of the impairment as a component of net realized gains (losses) in the comprehensive income statement, with the difference (i.e., non-credit related impairment) recognized as part of our net unrealized gains (losses) in accumulated other comprehensive income. When an equity security (common equity and nonredeemable preferred stock) in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the comprehensive income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in unrealized gains (losses) as part of accumulated other comprehensive income.

Investment income consists of interest, dividends, and accretion net of amortization. In addition to the discussion above for asset-backed securities, interest is recognized on an accrual basis using the effective yield method. Depending on the nature of the equity instruments, dividends are recorded at either the ex-dividend date or on an accrual basis.

Realized gains (losses) on securities are computed based on the first-in first-out method and include write-downs on available-for-sale securities considered to have other-than-temporary declines in fair value (excluding non-credit related impairments), as well as holding period valuation changes on derivatives, trading securities, and hybrid instruments (e.g., securities with embedded options, where the option is a feature of the overall change in the value of the instrument).

Insurance Premiums and Receivables  Insurance premiums written are earned into income on a pro rata basis over the period of risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that are applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts and offer a variety of payment plans. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk.

For our vehicle businesses, we perform a policy level evaluation to determine the extent to which the premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for doubtful accounts based on prior experience.

For our Property business, we do not establish an allowance for doubtful accounts since the risk of uncollectibility is relatively low. If premiums are unpaid by the policy due date, we provide advance notice of cancellation in accordance with each state’s requirements and, if the premiums remain unpaid after receipt of notice, cancel the policy and write off any remaining balance.

Deferred Acquisition CostsDeferred acquisition costs include commissions, premium taxes, and other variable underwriting and direct sales costs incurred in connection with the successful acquisition or renewal of insurance contracts. These acquisition costs, net of ceding allowances, are deferred and amortized over the policy period in which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these costs. Management believes that these costs will be fully recoverable in the near term.

We do not defer any advertising costs. Total advertising costs, which are expensed as incurred, for the years ended

December 31, were:

(millions)	Advertising Costs
2017	$	1,005.4
2016	756.2
2015	748.3

Loss and Loss Adjustment Expense ReservesLoss reserves represent the estimated liability on claims reported to us, plus reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are reflected in income in the current period. Such loss and loss adjustment expense reserves are susceptible to change in the near term.

Reinsurance  Our reinsurance transactions include premiums ceded to “Regulated” plans and “Non-Regulated” plans. The  Regulated plans in which we participate are governed by insurance regulations and include state-provided reinsurance facilities (Michigan Catastrophic Claims Association, Florida Hurricane Catastrophe Fund, North Carolina Reinsurance Facility), as well as state-mandated involuntary plans for commercial vehicles (Commercial Automobile Insurance Procedures/Plans – “CAIP”) and federally regulated plans for flood (National Flood Insurance Program – “NFIP”); we act as a servicing agent for CAIP and as a participant in the “Write Your Own” program for the NFIP. The Non-Regulated plans are voluntary contractual arrangements and primarily relate to our Property business and transportation network company business written by our Commercial Lines segment. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written. See Note 7 – Reinsurance for further discussion.

Income Taxes  The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. The principal items giving rise to such differences are investment securities (e.g., net unrealized gains (losses), write-downs on securities determined to be other-than-temporarily impaired), loss and loss adjustment expense reserves, unearned premiums reserves, deferred acquisition costs, property and equipment, intangible assets, and non-deductible accruals. We review our deferred tax assets regularly for recoverability. The effects of any changes in the tax rate are recorded to our provision for income taxes, including any changes on items initially recognized in accumulated other comprehensive income. See Note 5 – Income Taxes for further discussion.

Property and Equipment  Property and equipment are recorded at cost, less accumulated depreciation, and include capitalized software developed or acquired for internal use. Depreciation is recognized over the estimated useful lives of the assets using accelerated methods for computer equipment and laptops and the straight-line method for all other fixed assets. We evaluate impairment whenever events or circumstances warrant such a review and write-off the impaired assets if appropriate. Land and buildings comprised 66% and 65% of total property and equipment at December 31, 2017 and 2016, respectively.

The useful lives for property and equipment at December 31, 2017, were:

	Useful Lives
Computer equipment and laptops	3 years
Software licenses (internal use)	1-5 years
Capitalized software	3-10 years
Buildings, improvements, and integrated components	7-40 years
All other property and equipment	3-15 years

At December 31, 2017 and 2016, included in other assets in the consolidated balance sheets is $5.3 million and $8.7 million, respectively, of “held for sale” property, which represents the fair value of this property less the estimated costs to sell.

Total capitalized interest, which primarily relates to capitalized software projects, for the years ended December 31, was:

(millions)	Capitalized Interest
2017	$	2.8
2016	2.9
2015	2.4

Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the estimated fair value of the assets and liabilities acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Substantially all of the goodwill recorded as of December 31, 2017 and 2016, relates to the April 1, 2015 acquisition of a controlling interest in ARX.

Intangible assets primarily arose through the acquisition of ARX and mainly represent the future premiums that will be recognized from the policies and agency relationships that existed at the acquisition date. The majority of the intangible assets have finite lives, which, at December 31, 2017, had a remaining life range from 2 to 11 years. See Note 16 – Goodwill and Intangible Assets for further discussion.

We evaluate our goodwill for impairment at least annually using a qualitative approach. If events or changes in circumstances indicate that the carrying value of goodwill or intangible assets may not be recoverable, we will evaluate such items for impairment using a quantitative approach.

Guaranty Fund Assessments  We are subject to state guaranty fund assessments, which provide for the payment of covered claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal determination of insolvency has occurred, and we have written the premiums on which the assessments will be based. Assessments that are available for recoupment from policyholders are capitalized when incurred; all other assessments are expensed.

Fees and Other Revenues  Fees and other revenues primarily represent fees collected from policyholders relating to installment charges in accordance with our bill plans, as well as late payment and insufficient funds fees. Other revenues may include revenue from ceding commissions in excess of acquisition costs, the sale of tax credits, referral fees, rental income, and other revenue transactions. Fees and other revenues are generally earned when collected, except for excess ceding commissions, which are earned over the policy period.

Service Revenues and ExpensesOur service businesses provide insurance-related services. Service revenues and expenses from our commission-based businesses are recorded in the period in which they are earned or incurred. Service revenues generated from processing business for involuntary CAIP plans are earned on a pro rata basis over the term of the related policies. Service expenses related to these CAIP plans are expensed as incurred.

Equity-Based Compensation  We issue time-based and performance-based restricted stock unit awards to key members of management (including members of ARX and its subsidiaries in 2017) as our form of equity compensation, and time-based restricted stock awards to non-employee directors. Collectively, we refer to these awards as “restricted equity awards.” Compensation expense for time-based restricted equity awards with installment vesting is recognized over each respective vesting period. For performance-based restricted equity awards, compensation expense is recognized over the respective estimated vesting periods. Dividend equivalent units are credited to outstanding restricted stock unit awards, both time-based and performance-based, at the time a dividend is paid to shareholders.

We record an estimate for expected forfeitures of restricted equity awards based on our historical forfeiture rates. In addition, we shorten the vesting periods of certain time-based restricted equity awards based on the “qualified retirement” provisions in our equity compensation plans, under which (among other provisions) if the participant satisfies certain age and years-of-service requirements, the vesting and distribution of 50% of outstanding time-based restricted equity awards accelerates upon reaching eligibility for a qualified retirement and shortly after the grant date for each subsequent award.

ARX has nonqualified and incentive stock options outstanding that were issued prior to April 2015 as a form of equity compensation to certain of the officers and employees of ARX and its subsidiaries. These outstanding stock options are subject to the put/call features contained in the current stockholders’ agreement, pursuant to which The Progressive Corporation has the right, and can be required, to purchase a portion or all the shares underlying these awards in 2018 and 2021. The vested stock options, and the shares issuable upon exercise of the stock options, are also subject to repurchase by ARX if the holder’s employment terminates. See Note 15 – Redeemable Noncontrolling Interest for further discussion. These stock options, which are treated for accounting purposes as liability awards, are expensed over the respective vesting periods based on the Black-Scholes value determined at period end.

The total compensation expense recognized for equity-based compensation, both our equity and liability awards, for the years ended December 31, was:

(millions)	2017		2016		2015
Pretax expense	$	95.4	$	85.2	$	66.2
Tax benefit1	33.4		29.8		23.2

¹Reflected at the 35% corporate federal tax rate; the revaluation to the 21% rate is reflected in the total revaluation adjustment recorded at December 31, 2017 (see Note 5 – Income Taxes for further discussion).

Earnings Per Share  Net income attributable to Progressive is used in our calculation of the per share amounts. Basic earnings per share is computed using the weighted average number of common shares outstanding during the reporting period, excluding unvested time-based and performance-based restricted equity awards that are subject to forfeiture. Diluted earnings per share includes common stock equivalents assumed outstanding during the period. Our common stock equivalents include the incremental shares assumed to be issued for:

• earned but unvested time-based restricted equity awards, and

• certain unvested performance-based restricted equity awards that satisfied contingency conditions for common stock equivalents during the period.

Supplemental Cash Flow InformationCash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments of funds held in bank demand deposit accounts on ARX’s subsidiaries, which are primarily collateralized by U.S. Treasury notes. The amount of reverse repurchase commitments held by ARX’s subsidiaries at December 31, 2017, 2016, and 2015, were $247.2 million, $150.0 million, and $174.8 million, respectively. Restricted cash on our consolidated balance sheets at December 31, 2017 and 2016, represents cash that is restricted to pay flood claims under the National Flood Insurance Program’s “Write Your Own” program, for which American Strategic Insurance and other subsidiaries of ARX (ASI) are administrators. Non-cash activity includes declared but unpaid dividends.

The cash transferred in the exchange transaction, which occurred in June 2016, was revised to correct the reclassification of a

non-cash transaction; there was no overall impact on the increase in cash, cash equivalents, and restricted cash that was reported in our consolidated statement of cash flows for the year ended December 31, 2016. See Note 16 – Goodwill and Intangible Assets for further discussion of the exchange transaction.

For the years ended December 31, we paid the following:

(millions)	2017		2016		2015
Income taxes	$	715.6	$	459.4	$	701.8
Interest	146.3		139.2		132.0

New Accounting Standards

Issued

In January 2018, the Financial Accounting Standards Board (FASB) proposed an Accounting Standards Update (ASU), which would provide targeted improvements to the new lease accounting guidance issued by the FASB in February 2016 (the “2016 ASU”). The 2016 ASU, which eliminates the off-balance-sheet accounting for leases, will require lessees to report their operating leases as both an asset and liability on the statement of financial position and to disclose key information about leasing arrangements in the financial statement footnotes. Under the 2016 ASU, there will be no change to the recognition of lease expense in our results of operations. The ASU will be effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2018 (2019 for calendar-year companies). Under the proposed guidance, companies would have the option to apply the new lease requirements either as of the effective date (i.e., January 1, 2019), with comparative information presented in accordance with the previous standard, or on a modified restrospective basis, which would restate all financial statement information as of the beginning of the earliest period presented and is the transition method under the 2016 ASU. Based on our lease portfolio at December 31, 2017, and in accordance with the accounting elections available in the ASU, we would have recorded an increase to assets and liabilities of approximately $140 million, and there would have been no impact on our results of operations or cash flows. Therefore, we do not expect this standard to have a material impact on our financial condition.

In March 2017, the FASB issued an ASU related to premium amortization on purchased callable debt securities. The intent of the standard is to shorten the amortization period for certain purchased callable debt securities held at a premium. Under the ASU, the premium is required to be amortized to the earliest call date. The ASU more closely aligns interest income recorded on bonds held at a premium with the economics of the underlying instrument. The ASU, which is required to be applied on a modified retrospective basis, is effective for fiscal years beginning after December 15, 2018 (2019 for calendar-year companies), and interim periods within those fiscal years. Since we have historically used a yield-to-worst scenario for our securities that were purchased at a premium, and the first call on a premium security most often produces the lowest and most conservative yield, we do not expect this standard to have a significant impact on our financial condition, cash flows, or results of operations.

In January 2017, the FASB issued an ASU, which eliminates the requirement to determine the implied value of goodwill in measuring an impairment loss. Upon adoption, the measurement of a goodwill impairment will represent the excess of the reporting unit’s carrying value over fair value, limited to the carrying value of goodwill. This ASU is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 (2020 for calendar-year companies), with early adoption permitted. We do not expect this standard to have a material impact on our financial position or results of operations.

In June 2016, the FASB issued an ASU intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. Additionally, this update will modify the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities and will result in the creation of an allowance for credit losses as a contra asset account. The ASU will require cumulative-effect changes to retained earnings in the period of adoption, if any occur, and will also require prospective changes on previously recorded impairments. This ASU is effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2019 (2020 for calendar-year companies), with early adoption permissible (including interim periods within that fiscal year) beginning after December 15, 2018 (2019 for calendar-year companies). While the ASU creates additional accounting complexities related to the recognition of the impairment losses, and subsequent recoveries, through an allowance for credit losses account, we do not expect that the ASU will have a material impact on our current method of evaluating securities for credit losses or the timing or recognition of the amounts of the impairment losses.

In January 2016, the FASB released an ASU intended to improve the recognition and measurement of financial instruments. The new guidance will require the changes in fair value of equity securities to be recognized as a component of net income. The ASU is effective for fiscal years beginning after December 15, 2017 (2018 for calendar-year companies) and requires the prospective method of adoption with a cumulative-effect adjustment recorded to beginning retained earnings upon adoption. In January 2018, we recorded a cumulative-effect adjustment of $1.3 billion, which is net of taxes at the 35% tax rate. The cumulative-effect adjustment represents the amount of after-tax net unrealized gains on equity securities that was recorded as part of accumulated other comprehensive income at December 31, 2017. This ASU will have no impact on comprehensive income.

Adopted

For the year ended December 31, 2017, we adopted the ASU related to the statement of cash flows and the classification and presentation of changes in restricted cash. This update requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts described as restricted cash. This ASU, which is required to be applied on a retrospective basis, is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We elected to early adopt this ASU. Since this standard only affected classification and presentation, there was no impact on our results of operations, financial condition, or cash flows.

On January 1, 2017, we adopted the ASU to simplify the accounting for employee share-based payment transactions. There were several provisions that could be adopted under this ASU. We did not elect to make any changes to our method of recording forfeitures and are continuing to withhold taxes at the minimum statutory tax rate. We did elect, on a retrospective basis, to disclose the payment of cash to a taxing authority for which we withheld shares for this purpose as a financing activity. Lastly, during the year ended December 31, 2017, we recognized $25.1 million of excess tax benefits as an income tax benefit in our consolidated statements of comprehensive income; this provision was adopted on a prospective basis.

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Investments

12 Months Ended

Dec. 31, 2017

Investments Schedule [Abstract]

Investments

INVESTMENTS

Our securities are reported at fair value, with the changes in fair value of these securities (other than hybrid securities and derivative instruments) reported as a component of accumulated other comprehensive income, net of deferred income taxes. The changes in fair value of the hybrid securities and derivative instruments are recorded as a component of net realized gains (losses) on securities.

The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio. The net holding period gains (losses) represent the

amounts realized on our hybrid securities only (see discussion below).

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)			Fair Value		% of Total Fair Value
December 31, 2017
Fixed maturities:
U.S. government obligations	$	6,688.8	$	1.1	$	(44.0	)	$	0		$	6,645.9	24.4	%
State and local government obligations	2,285.6		20.7		(9.3		)	0.1			2,297.1		8.4
Foreign government obligations	0		0		0			0			0		0
Corporate debt securities	4,997.2		14.8		(14.4		)	0.1			4,997.7		18.3
Residential mortgage-backed securities	828.8		11.3		(3.4		)	0			836.7		3.1
Commercial mortgage-backed securities	2,760.1		11.8		(13.3		)	0			2,758.6		10.1
Other asset-backed securities	2,454.5		4.5		(4.5		)	0.2			2,454.7		9.0
Redeemable preferred stocks	194.9		17.8		(1.5		)	(0.2		)	211.0		0.8
Total fixed maturities	20,209.9		82.0		(90.4		)	0.2			20,201.7		74.1
Equity securities:
Nonredeemable preferred stocks	698.6		114.0		(8.8		)	0			803.8		2.9
Common equities	1,499.0		1,901.0		(0.2		)	0			3,399.8		12.5
Short-term investments	2,869.4		0		0			0			2,869.4		10.5
Total portfolio1,2	$	25,276.9	$	2,097.0	$	(99.4	)	$	0.2		$	27,274.7	100.0	%

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)		Fair Value		% of Total Fair Value
December 31, 2016
Fixed maturities:
U.S. government obligations	$	2,899.2	$	0	$	(29.1	)	$	0	$	2,870.1	12.2	%
State and local government obligations	2,509.5		13.8		(20.7		)	0		2,502.6		10.7
Foreign government obligations	24.5		0		0			0		24.5		0.1
Corporate debt securities	4,557.8		17.3		(24.3		)	0.1		4,550.9		19.4
Residential mortgage-backed securities	1,489.7		23.7		(15.6		)	1.5		1,499.3		6.4
Commercial mortgage-backed securities	2,266.9		12.0		(25.5		)	0		2,253.4		9.6
Other asset-backed securities	2,350.7		4.6		(4.4		)	0.2		2,351.1		10.0
Redeemable preferred stocks	188.8		5.1		(2.0		)	0		191.9		0.8
Total fixed maturities	16,287.1		76.5		(121.6		)	1.8		16,243.8		69.2
Equity securities:
Nonredeemable preferred stocks	734.2		135.4		(16.1		)	0		853.5		3.6
Common equities	1,437.5		1,377.0		(2.1		)	0		2,812.4		12.0
Short-term investments	3,572.9		0		0			0		3,572.9		15.2
Total portfolio1,2	$	22,031.7	$	1,588.9	$	(139.8	)	$	1.8	$	23,482.6	100.0	%

¹ Our portfolio reflects the effect of unsettled security transactions and collateral on any open derivative positions; at December 31, 2017, $5.8 million was included in “other assets,” compared to $27.8 million in “other liabilities” at December 31, 2016.

² The total fair value of the portfolio at December 31, 2017 and 2016 included $1.6 billion and $1.3 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

The increase in fixed-maturity securities, primarily U.S. government obligations, and decrease in short-term investments since December 31, 2016, was due to a decision to slightly lengthen the average maturity of the portfolio late in the fourth quarter 2017 in response to the rising interest rate environment.

At December 31, 2017, bonds and certificates of deposit in the principal amount of $222.6 million were on deposit to meet state insurance regulatory and/or rating agency requirements. We did not hold any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2017 or 2016. At December 31, 2017, we did not hold any debt securities that were non-income producing during the preceding 12 months.

Short-Term Investments Our short-term investments may include commercial paper and other investments that are expected to mature or are redeemable within one year. We did not hold any treasury bills issued by the Australian government at December 31, 2017 or 2016.

We did not have any open repurchase or reverse repurchase transactions in our short-term investment portfolio at December 31, 2017 or 2016. To the extent we had any repurchase and reverse repurchase transactions with the same counterparty and subject to an enforceable master netting arrangement, we could elect to offset these transactions. Consistent with past practice, we have elected not to offset these transactions and, therefore, report these transactions on a gross basis on our balance sheets.

Hybrid Securities Included in our fixed maturities are hybrid securities, which are reported at fair value at December 31:

(millions)	2017		2016
State and local government obligations	$	6.1	$	0
Corporate debt securities	99.8		40.1
Residential mortgage-backed securities	0		170.5
Other asset-backed securities	6.7		8.9
Redeemable preferred stocks	30.3		0
Total hybrid securities	$	142.9	$	219.5

Certain securities in our portfolio are accounted for as hybrid securities because they contain embedded derivatives that are not deemed to be clearly and closely related to the host investments. Since the embedded derivative does not have an observable intrinsic value (e.g., change-in-control put options, debt-to-equity conversion, or any other feature unrelated to the credit quality or risk of default of the issuer that could impact the amount or timing of our expected future cash flows), we have elected to record the change in fair value of the entire security through income as a realized gain or loss.

Fixed Maturities  The composition of fixed maturities by maturity at December 31, 2017, was:

(millions)	Cost		Fair Value
Less than one year	$	3,964.1	$	3,980.0
One to five years	12,706.5		12,671.3
Five to ten years	3,294.4		3,306.9
Ten years or greater	244.9		243.5
Total	$	20,209.9	$	20,201.7

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities that do not have a single maturity date are reported based upon expected average maturity. Contractual maturities may differ from expected maturities because the issuers of the securities may have the right to call or prepay obligations.

Gross Unrealized Losses  As of December 31, 2017, we had $99.2 million of gross unrealized losses in our fixed-income securities (i.e., fixed-maturity securities and nonredeemable preferred stocks) and $0.2 million in our common equities. We currently do not intend to sell the fixed-income securities and determined that it is more likely that we will not be required to sell these securities for the period of time necessary to recover their cost bases. A review of our fixed-income securities indicated that the issuers were current with respect to their interest obligations and that there was no evidence of deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity. For common equities, 96% of our common stock portfolio was indexed to the Russell 1000; as such, this portfolio may contain securities in a loss position for an extended period of time, subject to possible write-downs, as described below. We may retain these securities as long as the portfolio and index correlation remain similar. To the extent there is issuer-specific deterioration, we may write-down the securities of that issuer. The remaining 4% of our common stocks were part of a managed equity strategy selected and administered by an external investment advisor. If our review of loss position securities were to indicate there was a fundamental, or market, impairment on these securities that was determined to be other-than-temporary, we would recognize a write-down in accordance with our stated policy.

The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)							No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair  Value		Unrealized Losses
December 31, 2017
Fixed maturities:
U.S. government obligations	58	$	5,817.0	$	(44.0	)	41	$	4,869.3	$	(34.6	)	17	$	947.7	$	(9.4	)
State and local government obligations	358	1,200.3		(9.3		)	230	737.6		(4.4		)	128	462.7		(4.9		)
Corporate debt securities	222	2,979.4		(14.4		)	171	2,072.9		(9.1		)	51	906.5		(5.3		)
Residential mortgage-backed securities	201	300.9		(3.4		)	30	75.1		(0.2		)	171	225.8		(3.2		)
Commercial mortgage-backed securities	105	1,682.3		(13.3		)	63	1,221.2		(5.9		)	42	461.1		(7.4		)
Other asset-backed securities	197	1,837.3		(4.5		)	134	1,377.8		(3.3		)	63	459.5		(1.2		)
Redeemable preferred stocks	2	21.8		(1.5		)	1	10.8		(0.1		)	1	11.0		(1.4		)
Total fixed maturities	1,143	13,839.0		(90.4		)	670	10,364.7		(57.6		)	473	3,474.3		(32.8		)
Equity securities:
Nonredeemable preferred stocks	4	127.8		(8.8		)	1	56.5		(0.5		)	3	71.3		(8.3		)
Common equities	19	13.4		(0.2		)	18	13.4		(0.2		)	1	0		0
Total equity securities	23	141.2		(9.0		)	19	69.9		(0.7		)	4	71.3		(8.3		)
Total portfolio	1,166	$	13,980.2	$	(99.4	)	689	$	10,434.6	$	(58.3	)	477	$	3,545.6	$	(41.1	)

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)							No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair Value		Unrealized Losses
December 31, 2016
Fixed maturities:
U.S. government obligations	30	$	2,774.0	$	(29.1	)	30	$	2,774.0	$	(29.1	)	0	$	0	$	0
State and local government obligations	618	1,497.9		(20.7		)	584	1,404.3		(19.6		)	34	93.6		(1.1		)
Corporate debt securities	184	2,615.1		(24.3		)	175	2,559.9		(24.0		)	9	55.2		(0.3		)
Residential mortgage-backed securities	233	953.7		(15.6		)	117	209.7		(1.7		)	116	744.0		(13.9		)
Commercial mortgage-backed securities	111	1,347.3		(25.5		)	85	1,061.2		(22.9		)	26	286.1		(2.6		)
Other asset-backed securities	103	1,605.2		(4.4		)	89	1,423.3		(3.9		)	14	181.9		(0.5		)
Redeemable preferred stocks	2	31.0		(2.0		)	0	0		0			2	31.0		(2.0		)
Total fixed maturities	1,281	10,824.2		(121.6		)	1,080	9,432.4		(101.2		)	201	1,391.8		(20.4		)
Equity securities:
Nonredeemable preferred stocks	13	329.6		(16.1		)	8	175.2		(3.8		)	5	154.4		(12.3		)
Common equities	75	22.1		(2.1		)	69	19.7		(1.7		)	6	2.4		(0.4		)
Total equity securities	88	351.7		(18.2		)	77	194.9		(5.5		)	11	156.8		(12.7		)
Total portfolio	1,369	$	11,175.9	$	(139.8	)	1,157	$	9,627.3	$	(106.7	)	212	$	1,548.6	$	(33.1	)

During 2017, the number of securities in our fixed-maturity portfolio with unrealized losses decreased, primarily the result of a narrowing of credit spreads during the year. We had no material decreases in valuation as a result of credit rating downgrades during the year. All of the fixed-maturity securities in an unrealized loss position at December 31, 2017 in the table above are current with respect to required principal and interest payments.

Since December 31, 2016, our nonredeemable preferred stocks with unrealized losses decreased to four securities, averaging approximately 6% of their total cost. The decrease in the number of securities was the result of valuation increases in the portfolio. We reviewed these securities and concluded that the unrealized losses are market-related adjustments to the values, which were determined not to be other-than-temporary; we expect to recover our initial investments on these securities. The number of issuers with unrealized losses in our common stock portfolio decreased during 2017. A review of the securities in a loss position did not uncover fundamental issues with the issuers that would indicate other-than-temporary impairments existed. Additionally, consensus analyst expectations for recovery in the next 12 months would put the fair values at or above our current book values. Lastly, we determined, as of the balance sheet date, that it was not likely these securities would be sold prior to that recovery.

Other-Than-Temporary Impairment (OTTI)  The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined (i.e., unadjusted for valuation changes subsequent to the original write-down):

	December 31,
(millions)	2017			2016
Fixed maturities:
Residential mortgage-backed securities	$	(19.7	)	$	(43.3	)
Commercial mortgage-backed securities	(0.3		)	(0.6		)
Total fixed maturities	$	(20.0	)	$	(43.9	)

The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2017, 2016, and 2015, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Total
Total at December 31, 2016	$	11.1		$	0.4		$	11.5
Credit losses for which an OTTI was not previously recognized	0			0.4			0.4
Reductions for securities sold/matured	(10.9		)	(0.3		)	(11.2		)
Change in recoveries of future cash flows expected to be collected1	(0.2		)	0			(0.2		)
Total at December 31, 2017	$	0		$	0.5		$	0.5

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed		Total
Total at December 31, 2015	$	12.4		$	0.4	$	12.8
Credit losses for which an OTTI was not previously recognized	0			0		0
Reductions for securities sold/matured	0			0		0
Change in recoveries of future cash flows expected to be collected1	(1.3		)	0		(1.3		)
Total at December 31, 2016	$	11.1		$	0.4	$	11.5

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed		Total
Total at December 31, 2014	$	12.7		$	0.4	$	13.1
Credit losses for which an OTTI was not previously recognized	0			0		0
Reductions for securities sold/matured	(1.4		)	0		(1.4		)
Change in recoveries of future cash flows expected to be collected1	1.1			0		1.1
Total at December 31, 2015	$	12.4		$	0.4	$	12.8

¹ Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

Although we determined it is more likely that we will not be required to sell the securities prior to the recovery of their respective cost bases (which could be maturity), we are required to measure the amount of potential credit losses on the securities that were in an unrealized loss position. In that process, we considered a number of factors and inputs related to the individual securities. The methodology and significant inputs used to measure the amount of credit losses in our portfolio included: current performance indicators on the business model or underlying assets (e.g., delinquency rates, foreclosure rates, and default rates); credit support (via current levels of subordination); historical credit ratings; and updated cash flow expectations based upon these performance indicators. In order to determine the amount of credit loss, if any, the net present value of the cash flows expected (i.e., expected recovery value) was calculated using the current book yield for each security, and was compared to its current amortized value. In the event that the net present value was below the amortized value, a credit loss would be deemed to exist, and the security would be written down. During the period ended December 31, 2017, we recorded a credit impairment write-down of $0.4 million. We did not have any credit impairment write-downs for the periods ended December 31, 2016 or 2015.

Realized Gains (Losses)  The components of net realized gains (losses) for the years ended December 31, were:

(millions)	2017			2016			2015
Gross realized gains on security sales
Fixed maturities:
U.S. government obligations	$	6.2		$	24.6		$	17.5
State and local government obligations	10.5			16.0			7.8
Corporate and other debt securities	20.3			43.3			31.2
Residential mortgage-backed securities	23.8			2.5			4.9
Commercial mortgage-backed securities	4.9			13.3			15.7
Other asset-backed securities	0.3			0			0
Redeemable preferred stocks	8.5			20.9			0.1
Total fixed maturities	74.5			120.6			77.2
Equity securities:
Nonredeemable preferred stocks	58.4			11.9			65.3
Common equities	43.0			61.3			50.4
Short-term investments	0			0.1			0
Subtotal gross realized gains on security sales	175.9			193.9			192.9
Gross realized losses on security sales
Fixed maturities:
U.S. government obligations	(28.7		)	(2.4		)	(0.9		)
State and local government obligations	(0.1		)	(1.6		)	(0.3		)
Corporate and other debt securities	(5.1		)	(2.5		)	(5.0		)
Residential mortgage-backed securities	(0.4		)	(0.2		)	(0.8		)
Commercial mortgage-backed securities	(5.3		)	(5.6		)	(1.3		)
Other asset-backed securities	(0.4		)	0			0
Redeemable preferred stocks	(6.4		)	(6.6		)	0
Total fixed maturities	(46.4		)	(18.9		)	(8.3		)
Equity securities:
Nonredeemable preferred stocks	(5.9		)	(5.3		)	(3.2		)
Common equities	(12.2		)	(15.7		)	(38.4		)
Short-term investments	(0.2		)	(0.1		)	0
Subtotal gross realized losses on security sales	(64.7		)	(40.0		)	(49.9		)
Net realized gains (losses) on security sales
Fixed maturities:
U.S. government obligations	(22.5		)	22.2			16.6
State and local government obligations	10.4			14.4			7.5
Corporate and other debt securities	15.2			40.8			26.2
Residential mortgage-backed securities	23.4			2.3			4.1
Commercial mortgage-backed securities	(0.4		)	7.7			14.4
Other asset-backed securities	(0.1		)	0			0
Redeemable preferred stocks	2.1			14.3			0.1
Total fixed maturities	28.1			101.7			68.9
Equity securities:
Nonredeemable preferred stocks	52.5			6.6			62.1
Common equities	30.8			45.6			12.0
Short-term investments	(0.2		)	0			0
Subtotal net realized gains (losses) on security sales	111.2			153.9			143.0
Other-than-temporary impairment losses
Fixed maturities:
Commercial mortgage-backed securities	(0.4		)	0			0
Redeemable preferred stocks	0			(25.3		)	0
Total fixed maturities	(0.4		)	(25.3		)	0
Equity securities:
Common equities	(11.2		)	(0.3		)	(8.7		)
Subtotal investment other-than-temporary impairment losses	(11.6		)	(25.6		)	(8.7		)
Other asset impairment	(49.6		)	(59.7		)	0
Subtotal other-than-temporary impairment losses	(61.2		)	(85.3		)	(8.7		)
Other gains (losses)
Hybrid securities	(1.6		)	2.1			(1.3		)
Derivative instruments	0			(20.0		)	(20.7		)
Litigation settlements	1.2			0.4			0.4
Subtotal other gains (losses)	(0.4		)	(17.5		)	(21.6		)
Total net realized gains (losses) on securities	$	49.6		$	51.1		$	112.7

Gross realized gains and losses were predominantly the result of sales transactions in our fixed-income portfolio related to

movements in credit spreads and interest rates and sales from our equity portfolios. In addition, gains and losses reflect recoveries from litigation settlements related to investments and holding period valuation changes on hybrids and derivatives. Also included are write-downs for securities determined to be other-than-temporarily impaired. The other asset impairment relates to renewable energy investments, which are reflected in “other assets” on the balance sheet, under which the future pretax cash flows are expected to be less than the carrying value of the assets.

Net Investment Income  The components of net investment income for the years ended December 31, were:

(millions)	2017			2016			2015
Fixed maturities:
U.S. government obligations	$	72.7		$	18.2		$	28.3
State and local government obligations	51.5			52.3			60.7
Foreign government obligations	0.3			0.4			0.4
Corporate debt securities	125.2			110.7			102.4
Residential mortgage-backed securities	34.7			47.3			54.3
Commercial mortgage-backed securities	79.6			81.6			74.6
Other asset-backed securities	47.1			28.0			22.0
Redeemable preferred stocks	11.8			14.9			15.0
Total fixed maturities	422.9			353.4			357.7
Equity securities:
Nonredeemable preferred stocks	44.1			48.6			43.7
Common equities	58.3			57.2			51.0
Short-term investments	37.8			19.7			2.2
Investment income	563.1			478.9			454.6
Investment expenses	(23.9		)	(22.4		)	(22.8		)
Net investment income	$	539.2		$	456.5		$	431.8

The amount of investment income we recognize varies from year to year based on the average assets during the year and the book yields of the securities in our portfolio. In addition to proceeds from debt offerings in each of the last three years, the increase in investment income in both 2017 and 2016, as compared to their prior respective years, reflects an increase in average assets of the portfolio due to the strong underwriting growth and profitability. During 2017, an additional increase was due to a slight increase in overall portfolio yield on new cash and portfolio turnover from our decision to lengthen our portfolio’s duration during the year. The increase in income in 2016 over 2015 also reflects a slight offset due to a lower portfolio yield as a result of the sharp decline in interest rates (which was prevalent during most of 2016), affecting investment yields on new cash and portfolio turnover, as well as our decision to shorten our portfolio duration early in 2016 and invest in a higher amount of short-term paper, which had lower overall yields.

Trading Securities  At December 31, 2017 and 2016, we did not hold any trading securities and we did not have any net realized gains (losses) on trading securities for the years ended December 31, 2017, 2016, and 2015.

Derivative Instruments  For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as a net derivative asset and a component of the available-for-sale portfolio, the inception-to-date holding period (realized) gain on the derivative position at period end would have to exceed any upfront cash received. On the other hand, a net derivative liability would include any inception-to-date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to their immaterial effect on our financial condition, cash flows, and results of operations.

The following table shows the status of our derivative instruments at December 31, 2017 and 2016, and for the years ended December 31, 2017, 2016, and 2015:

(millions)								Balance Sheet2					Comprehensive Income Statement
	Notional Value1								Assets (Liabilities) Fair Value				Pretax Net Realized Gains (Losses)
													Years ended
	December 31,								December 31,				December 31,
Derivatives designated as:	2017		2016		2015		Purpose	Classification	2017		2016		2017		2016			2015
Hedging instruments
Closed:
Ineffective cash flow hedge	$	31	$	370	$	18	Manage interest rate risk	NA	$	0	$	0	$	0	$	(1.3	)	$	0.2
Non-hedging instruments
Assets:
Interest rate swaps	0		0		750		Manage portfolio duration	Investments - fixed maturities	0		0		0		0			(23.4		)
Closed:
Interest rate swaps	0		750		0		Manage portfolio duration	NA	0		0		0		(19.0		)	0
U.S. Treasury Note futures	0		135		691		Manage portfolio duration	NA	0		0		0		0.3			2.5
Total	NA		NA		NA				$	0	$	0	$	0	$	(20.0	)	$	(20.7	)

¹ The amounts represent the value held at year end for open positions and the maximum amount held during the year for closed positions.

² To the extent we held both derivative assets and liabilities with the same counterparty that were subject to an enforceable master netting arrangement, we reported them on a gross basis on our balance sheets, consistent with our historical presentation.

NA = Not Applicable

CASH FLOW HEDGES

During March 2017, we entered into a forecasted debt issuance hedge, against a possible rise in interest rates, in conjunction with the $850 million of 4.125% Senior Notes due 2047 issued in April 2017. Upon issuance, we closed the hedge and recognized, as part of accumulated other comprehensive income, a pretax loss of $8.0 million in April 2017.

During the third quarter 2016, we entered into a $350 million forecasted transaction to hedge against a possible rise in interest rates in anticipation of a debt offering under which we issued $500 million of 2.45% Senior Notes due 2027. When the contract was closed, the $1.4 million loss on the derivative was immediately recognized as a realized loss.

The $31 million in 2017, the $18 million in 2015, and the remaining $20 million in 2016, out of the $370 million disclosed in the table above, of our ineffective cash flow hedge resulted from the repurchase of a portion of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067, and we reclassified the unrealized gain on forecasted transactions to net realized gains on securities. The portion repurchased in 2017 resulted in an immaterial gain.

During 2017, we reclassified $0.3 million from accumulated other comprehensive income to interest expense on our closed debt issuance cash flow hedges, compared to $1.9 million during 2016 and $1.8 million during 2015.

See Note 4 – Debt for further discussion.

INTEREST RATE SWAPS and U.S. TREASURY FUTURES

We use interest rate swaps and treasury futures contracts from time to time to manage the fixed-income portfolio duration. We did not hold any interest rate swap positions at December 31, 2017 or 2016. At December 31, 2015, we held interest rate swap positions for which we were paying a fixed rate and receiving a variable rate, effectively shortening the duration of our fixed-income portfolio. As of December 31, 2015, the balance of the cash collateral that we had received from the applicable counterparty on our then open positions was $4.9 million. We did not open any U.S. treasury futures during 2017. We opened and closed treasury futures during 2016 and 2015; no positions were outstanding at either year end.

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Fair Value

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value

FAIR VALUE

We have categorized our financial instruments, based on the degree of subjectivity inherent in the method by which they are valued, into a fair value hierarchy of three levels, as follows:

• Level 1:  Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. government obligations, which are continually priced on a daily basis, active exchange-traded equity securities, and certain short-term securities).

• Level 2:  Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i) quoted prices for similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active, (iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3:  Inputs that are unobservable. Unobservable inputs reflect our subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

Determining the fair value of the investment portfolio is the responsibility of management. As part of the responsibility, we evaluate whether a market is distressed or inactive in determining the fair value for our portfolio. We review certain market level inputs to evaluate whether sufficient activity, volume, and new issuances exist to create an active market. Based on this evaluation, we concluded that there was sufficient activity related to the sectors and securities for which we obtained valuations.

The composition of the investment portfolio by major security type and our outstanding debt was:

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2017
Fixed maturities:
U.S. government obligations	$	6,645.9	$	0	$	0	$	6,645.9	$	6,688.8
State and local government obligations	0		2,297.1		0		2,297.1		2,285.6
Foreign government obligations	0		0		0		0		0
Corporate debt securities	0		4,997.7		0		4,997.7		4,997.2
Subtotal	6,645.9		7,294.8		0		13,940.7		13,971.6
Asset-backed securities:
Residential mortgage-backed	0		836.7		0		836.7		828.8
Commercial mortgage-backed	0		2,758.6		0		2,758.6		2,760.1
Other asset-backed	0		2,454.7		0		2,454.7		2,454.5
Subtotal asset-backed securities	0		6,050.0		0		6,050.0		6,043.4
Redeemable preferred stocks:
Financials	0		64.1		0		64.1		61.3
Utilities	0		11.4		0		11.4		10.1
Industrials	0		135.5		0		135.5		123.5
Subtotal redeemable preferred stocks	0		211.0		0		211.0		194.9
Total fixed maturities	6,645.9		13,555.8		0		20,201.7		20,209.9
Equity securities:
Nonredeemable preferred stocks:
Financials	80.6		718.2		0		798.8		693.6
Industrials	0		0		5.0		5.0		5.0
Subtotal nonredeemable preferred stocks	80.6		718.2		5.0		803.8		698.6
Common equities:
Common stocks	3,399.5		0		0		3,399.5		1,498.7
Other risk investments	0		0		0.3		0.3		0.3
Subtotal common equities	3,399.5		0		0.3		3,399.8		1,499.0
Total fixed maturities and equity securities	10,126.0		14,274.0		5.3		24,405.3		22,407.5
Short-term investments	1,824.4		1,045.0		0		2,869.4		2,869.4
Total portfolio	$	11,950.4	$	15,319.0	$	5.3	$	27,274.7	$	25,276.9
Debt	$	0	$	3,606.5	$	37.1	$	3,643.6	$	3,306.3

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2016
Fixed maturities:
U.S. government obligations	$	2,870.1	$	0	$	0	$	2,870.1	$	2,899.2
State and local government obligations	0		2,502.6		0		2,502.6		2,509.5
Foreign government obligations	24.5		0		0		24.5		24.5
Corporate debt securities	0		4,550.9		0		4,550.9		4,557.8
Subtotal	2,894.6		7,053.5		0		9,948.1		9,991.0
Asset-backed securities:
Residential mortgage-backed	0		1,499.3		0		1,499.3		1,489.7
Commercial mortgage-backed	0		2,253.1		0.3		2,253.4		2,266.9
Other asset-backed	0		2,351.1		0		2,351.1		2,350.7
Subtotal asset-backed securities	0		6,103.5		0.3		6,103.8		6,107.3
Redeemable preferred stocks:
Financials	0		59.5		0		59.5		59.8
Utilities	0		30.9		0		30.9		30.5
Industrials	0		101.5		0		101.5		98.5
Subtotal redeemable preferred stocks	0		191.9		0		191.9		188.8
Total fixed maturities	2,894.6		13,348.9		0.3		16,243.8		16,287.1
Equity securities:
Nonredeemable preferred stocks:
Financials	138.1		715.4		0		853.5		734.2
Industrials	0		0		0		0		0
Subtotal nonredeemable preferred stocks	138.1		715.4		0		853.5		734.2
Common equities:
Common stocks	2,812.0		0		0		2,812.0		1,437.1
Other risk investments	0		0		0.4		0.4		0.4
Subtotal common equities	2,812.0		0		0.4		2,812.4		1,437.5
Total fixed maturities and equity securities	5,844.7		14,064.3		0.7		19,909.7		18,458.8
Short-term investments	3,009.3		563.6		0		3,572.9		3,572.9
Total portfolio	$	8,854.0	$	14,627.9	$	0.7	$	23,482.6	$	22,031.7
Debt	$	0	$	3,188.5	$	127.3	$	3,315.8	$	3,148.2

Our portfolio valuations, excluding short-term investments, classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources, including: pricing vendors, dealers/market makers, and exchange-quoted prices. During 2017 and 2016, we did not have any transfers between Level 1 and Level 2.

Our short-term security holdings classified as Level 1 are highly liquid, actively marketed, and have a very short duration, primarily 90 days or less to redemption. These securities are held at their original cost, adjusted for any accretion of discount, since that value very closely approximates what an active market participant would be willing to pay for such securities. The remainder of our short-term securities are classified as Level 2 and are not priced externally since these securities continually trade at par value. These securities are classified as Level 2 since they are primarily longer-dated auction securities issued by municipalities that contain a redemption put feature back to the auction pool with a redemption period typically less than seven days. The auction pool is created by a liquidity provider and if the auction is not available at the end of the seven days, we have the right to put the security back to the issuer at par.

At December 31, 2017, vendor-quoted prices represented 66% of our Level 1 classifications (excluding short-term investments), compared to 52% at December 31, 2016. The securities quoted by vendors in Level 1 primarily represent our holdings in U.S. Treasury Notes, which are frequently traded and the quotes are considered similar to exchange-traded quotes. The balance of our Level 1 pricing comes from quotes obtained directly from trades made on active exchanges.

At December 31, 2017, vendor-quoted prices comprised 98% of our Level 2 classifications (excluding short-term investments), while dealer-quoted prices represented 2%, compared to 99% and 1% at December 31, 2016, respectively. In our process for selecting a source (e.g., dealer, pricing service) to provide pricing for securities in our portfolio, we reviewed documentation from the sources that detailed the pricing techniques and methodologies used by these sources and determined if their policies adequately considered market activity, either based on specific transactions for the particular security type or based on modeling of securities with similar credit quality, duration, yield, and structure that were recently transacted. Once a source is chosen, we continue to monitor any changes or modifications to their processes by reviewing their documentation on internal controls for pricing and market reviews. We review quality control measures of our sources as they become available to determine if any significant changes have occurred from period to period that might indicate issues or concerns regarding their evaluation or market coverage.

As part of our pricing procedures, we obtain quotes from more than one source to help us fully evaluate the market price of securities. However, our internal pricing policy is to use a consistent source for individual securities in order to maintain the integrity of our valuation process. Quotes obtained from the sources are not considered binding offers to transact. Under our policy, when a review of the valuation received from our selected source appears to be outside of what is considered market level activity (which is defined as trading at spreads or yields significantly different than those of comparable securities or outside the general sector level movement without a reasonable explanation), we may use an alternate source’s price. To the extent we determine that it may be prudent to substitute one source’s price for another, we will contact the initial source to obtain an understanding of the factors that may be contributing to the significant price variance, which often leads the source to adjust their pricing input data for future pricing.

To allow us to determine if our initial source is providing a price that is outside of a reasonable range, we review our portfolio pricing on a weekly basis. We frequently challenge prices from our sources when a price provided does not match our expectations based on our evaluation of market trends and activity. Initially, we perform a review of our portfolio by sector to identify securities whose prices appear outside of a reasonable range. We then perform a more detailed review of fair values for securities disclosed as Level 2. We review dealer bids and quotes for these and/or similar securities to determine the market level context for our valuations. We then evaluate inputs relevant for each class of securities disclosed in the preceding hierarchy tables.

For our structured debt securities, including commercial, residential, and asset-backed securities, we evaluate available market-related data for these and similar securities related to collateral, delinquencies, and defaults for historical trends and reasonably estimable projections, as well as historical prepayment rates and current prepayment assumptions and cash flow estimates. We further stratify each class of our structured debt securities into more finite sectors (e.g., planned amortization class, first pay, second pay, senior, subordinated, etc.) and use duration, credit quality, and coupon to determine if the fair value is appropriate.

For our corporate debt and preferred stock (redeemable and nonredeemable) portfolios, as well as the notes and debentures issued by The Progressive Corporation (see Note 4 – Debt), we review securities by duration, coupon, and credit quality, as well as changes in interest rate and credit spread movements within that stratification. The review also includes recent trades, including: volume traded at various levels that establish a market, issuer specific fundamentals, and industry specific economic news as it comes to light.

For our municipal securities (e.g., general obligations, revenue, and housing), we stratify the portfolio to evaluate securities by type, coupon, credit quality, and duration to review price changes relative to credit spread and interest rate changes. Additionally, we look to economic data as it relates to geographic location as an indication of price-to-call or maturity predictors. For municipal housing securities, we look to changes in cash flow projections, both historical and reasonably estimable projections, to understand yield changes and their effect on valuation.

Lastly, for our short-term securities, we look at acquisition price relative to the coupon or yield. Since our short-term securities are typically 90 days or less to maturity, with the majority listed in Level 2 being seven days or less to redemption, we believe that acquisition price is the best estimate of fair value.

We also review data assumptions as supplied by our sources to determine if that data is relevant to current market conditions. In addition, we independently review each sector for transaction volumes, new issuances, and changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for our market valuations.

During each valuation period, we create internal estimations of portfolio valuation (performance returns), based on current market-related activity (i.e., interest rate and credit spread movements and other credit-related factors) within each major sector of our portfolio. We compare our internally generated portfolio results with those generated based on quotes we received externally and research material valuation differences. We compare our results to index returns for each major sector adjusting for duration and credit quality differences to better understand our portfolio’s results. Additionally, we review on a monthly basis our external sales transactions and compare the actual final market sales price to a previous market valuation price. This review provides us further validation that our pricing sources are providing market level prices, since we are able to explain significant price changes (i.e., greater than 2%) as known events occur in the marketplace and affect a particular security’s price at sale.

This analysis provides us with additional comfort regarding each source’s process, the quality of its review, and its willingness to improve its analysis based on feedback from clients. We believe this effort helps ensure that we are reporting the most representative fair values for our securities.

Except as described below, our Level 3 securities are also priced externally; however, due to several factors (e.g., nature of the securities, level of inactivity, and lack of similar securities trading to obtain observable market level inputs), these valuations are more subjective in nature. Certain private equity investments and fixed-income investments included in the Level 3 category are valued using external pricing supplemented by internal review and analysis.

After all the valuations are received and our review is complete, if the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected security valuations to Level 3. At December 31, 2017, we did not have any securities in our fixed-maturity portfolio listed as Level 3. At December 31, 2016, the security in our fixed-maturity portfolio listed as Level 3 was thinly held with little liquidity and based on these factors, it was difficult to independently verify the observable market inputs that were used to generate the external valuation we received. Despite the lack of sufficient observable market information for our Level 3 security, we believe the valuation received, in conjunction with our procedures for evaluating third-party prices, supports the fair value reported in the financial statement.

At December 31, 2017, we held one private nonredeemable preferred security with a value of $5.0 million that was priced internally. The security was purchased during the third quarter 2017 and the value at December 31, 2017 equals the cost at acquisition. A review of their latest available financial statements did not reveal any significant changes that would impact the security’s fair value. We did not hold any internally-priced securities at December 31, 2016.

We review the prices from our external sources for reasonableness using internally developed assumptions to derive prices for the securities, which are then compared to the prices we received. During 2017 or 2016, there were no material assets or liabilities measured at fair value on a nonrecurring basis. Based on our review, all the prices received from external sources remain unadjusted.

The following tables provide a summary of changes in fair value associated with Level 3 assets for the years ended December 31, 2017 and 2016:

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2016		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at Dec. 31, 2017
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0.3	$	(0.3	)	$	0	$	0	$	0	$	0	$	0	$	0
Total fixed maturities	0.3		(0.3		)	0		0		0		0		0		0
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		0			5.0		0		0		0		0		5.0
Common equities:
Other risk investments	0.4		(0.1		)	0		0		0		0		0		0.3
Total Level 3 securities	$	0.7	$	(0.4	)	$	5.0	$	0	$	0	$	0	$	0	$	5.3

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2015		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at Dec. 31, 2016
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	9.9	$	(9.6	)	$	0	$	0	$	0	$	0	$	0	$	0.3
Total fixed maturities	9.9		(9.6		)	0		0		0		0		0		0.3
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		0			0		0		0		0		0		0
Common equities:
Other risk investments	0.3		0			0		0		0		0.1		0		0.4
Total Level 3 securities	$	10.2	$	(9.6	)	$	0	$	0	$	0	$	0.1	$	0	$	0.7

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at December 31:

	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2017		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0	NA	NA	NA
Total fixed maturities	0
Equity securities:
Nonredeemable preferred stocks:
Industrials1	5.0		Internal price	Unadjusted purchase price	3.9
Subtotal Level 3 securities	5.0
Third-party pricing exemption securities2	0.3
Total Level 3 securities	$	5.3

¹ The security was internally-priced since it is privately held and it was valued at December 31, 2017 using the purchase price.

² The fair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2016		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0.3	External vendor	Prepayment rate1	0
Total fixed maturities	0.3
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		NA	NA	NA
Subtotal Level 3 securities	0.3
Third-party pricing exemption securities2	0.4
Total Level 3 securities	$	0.7

¹ Assumes that one security has 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.

² Thefair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

Due to the relative size of the Level 3 securities’ fair values compared to the total portfolio’s fair value, any changes in pricing methodology would not have a significant change in valuation that would materially impact net or comprehensive income.

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Debt

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Debt

DEBT

Debt at December 31, consisted of:

	2017				2016
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)	$	498.8	$	520.7	$	498.4	$	528.8
2.45% Senior Notes due 2027 (issued: $500.0, August 2016)	496.1		477.9		495.8		464.6
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)	296.1		382.3		295.9		380.1
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)	395.3		516.9		395.2		499.0
4.35% Senior Notes due 2044 (issued: $350.0, April 2014)	346.5		388.7		346.4		362.3
3.70% Senior Notes due 2045 (issued: $400.0, January 2015)	395.2		402.9		395.1		372.5
4.125% Senior Notes due 2047 (issued: $850.0, April 2017)	841.2		917.1		0		0
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued: $1,000.0, June 2007; outstanding: $0 and $594.6)	0		0		594.1		581.2
Other debt instruments	37.1		37.1		127.3		127.3
Total	$	3,306.3	$	3,643.6	$	3,148.2	$	3,315.8

The other debt instruments reported in the table above represent ARX indebtedness and consist of:

	December 31, 2017			December 31, 2016
Type of debt instrument	Number of Instruments	Carrying Value		Number of Instruments	Carrying Value		Stated Maturity Date(s)
Term loans	2	$	37.1	2	$	62.1	December 2018 and 2019
Junior subordinated notes	0	0		2	41.2		NA
Senior notes	0	0		4	24.0		NA
Total		$	37.1		$	127.3

NA - Not applicable as the notes were redeemed during 2017.

Aggregate required principal payments on debt outstanding at December 31, 2017, are as follows:

(millions)
Year	Payments
2018	$	25.0
2019	12.1
2020	0
2021	500.0
2022	0
Thereafter	2,800.0
Total	$	3,337.1

The Progressive Corporation Debt

Excluding the other debt instruments, all of the outstanding debt was issued by The Progressive Corporation, the ultimate holding company. The holding company debt includes amounts that were borrowed and contributed to the capital of its insurance subsidiaries or used, or made available for use, for other business purposes. Fair values for these debt instruments are obtained from external sources. There are no restrictive financial covenants or credit rating triggers on The Progressive Corporation debt.

Interest on all debt issued by The Progressive Corporation is payable semiannually at the stated rates. All principal on the Senior Notes is due at the maturity stated in the tables above. The Senior Notes are redeemable, in whole or in part, at any time; however, the redemption price will equal the greater of the principal amount of the Senior Notes or a “make whole” amount calculated by reference to the present values of remaining scheduled principal and interest payments under the Senior Notes.

The Progressive Corporation issued $850 million of 4.125% Senior Notes due 2047 (the “4.125% Senior Notes”) in April 2017, and $500 million of our 2.45% Senior Notes due 2027 (the “2.45% Senior Notes”) in August 2016, in underwritten public offerings. We received proceeds, after deducting underwriter’s discounts, commissions and other issuance costs, of approximately $841.1 million and $495.6 million, respectively, and paid approximately $1.5 million and $0.9 million of costs related to the issuance of the 4.125% Senior Notes and 2.45% Senior Notes, respectively.

During 2017, we redeemed our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “6.70% Debentures”), at par, in the aggregate principal amount of $563.7 million. During 2017 and 2016, prior to the redemption, we repurchased, in the open market, $30.9 million and $19.8 million, respectively, in aggregate principal amount of our 6.70% Debentures. Since the carrying value of the debt we repurchased differed from the amount paid to extinguish the debt, we recognized a gain of $0.2 million during 2017 and $1.6 million during 2016.

Prior to issuance of our debt securities, we entered into forecasted transactions to hedge against possible rises in interest rates. When the contracts were closed upon issuance of the applicable debt securities, we recognized unrealized gains (losses) as part of accumulated other comprehensive income for all of the Senior Notes, except for the 2.45% Senior Notes. Upon issuance of the 2.45% Senior Notes, we recognized a realized loss of $1.4 million (See Note 2 – Investments for further discussion). The following table shows the original gain (loss) recognized at debt issuance and the unamortized balance at December 31, 2017, on a pretax basis:

(millions)	Unrealized Gain (Loss) at Debt Issuance			Unamortized Balance at December 31, 2017
3.75% Senior Notes	$	(5.1	)	$	(2.1	)
6 5/8% Senior Notes	(4.2		)	(2.7		)
6.25% Senior Notes	5.1			3.6
4.35% Senior Notes	(1.6		)	(1.5		)
3.70% Senior Notes	(12.9		)	(12.2		)
4.125% Senior Notes	(8.0		)	(7.9		)

These unrealized gains (losses) are being amortized as adjustments to interest expense over the life of the related Senior Notes.

ARX Debt (i.e., Other debt instruments)

The other debt instruments were issued by ARX, prior to The Progressive Corporation acquiring a controlling interest in 2015. ARX, not The Progressive Corporation or any of its other subsidiaries, is responsible for the other debt, which includes amounts that were borrowed and contributed to the capital of ARX’s insurance subsidiaries or used, or made available for use, for other business purposes.

In estimating the fair values of the other debt instruments, it was determined that the fair values of these notes are equal to the carrying value, based on the current rates offered for debt of similar maturities and interest rates.

During 2017, ARX redeemed its junior subordinated notes and senior notes, in their entirety, in the aggregate principal amount of $65.2 million, with proceeds from a 5-year, fixed-rate loan made by The Progressive Corporation to fund the redemptions; this intercompany transaction is eliminated in consolidation.

Monthly interest and principal payments are made on the term loans, with interest calculated based on the 30-day LIBOR plus 2.25%. Principal payments of $25.0 million are required to be paid during the next twelve months on these term loans. The term loans are secured by 100% of the outstanding common stock of three subsidiaries of ARX.

The term loans require ARX and its subsidiaries to maintain specified debt leverage and fixed charge coverage ratios, as well as maintain a minimum risk-based capital ratio and minimum financial strength and credit ratings, as provided by A.M. Best Company, Inc. As of December 31, 2017, ARX did not maintain the specified fixed charge coverage ratio or the minimum risk-based capital ratio on one of the subsidiaries that is pledged as collateral on the term loans. Subsequent to year-end, ARX received a waiver from the bank in regards to both of these items.

The Progressive Corporation Line of Credit

During 2017, The Progressive Corporation entered into a new line of credit with PNC Bank, National Association (PNC) in the maximum principal amount of $250 million. This line of credit replaced a previous line of credit with a maximum principal amount of $100 million that expired in April 2017. Subject to the terms and conditions of the line of credit documents, advances under the line of credit (if any) will bear interest at a variable rate equal to the higher of PNC’s Prime Rate or the sum of the Federal Funds Open Rate plus 50 basis points. Each advance must be repaid on the 30th day after the advance or, if earlier, on April 30, 2018, the expiration date of the Line of Credit. Prepayments are permitted without penalty. The Line of Credit is uncommitted and, as such, all advances are subject to PNC’s discretion. We had no borrowings under either line of credit in 2017 or 2016.

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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The components of our income tax provision were as follows:

(millions)	2017			2016			2015
Current tax provision
Federal	$	680.9		$	469.6		$	655.3
State	12.8			12.7			14.7
Deferred tax expense (benefit)
Federal	(149.4		)	(66.3		)	(47.7		)
State	(3.5		)	(2.5		)	(11.2		)
Total income tax provision	$	540.8		$	413.5		$	611.1

The provision for income taxes in the accompanying consolidated statements of comprehensive income differed from the statutory rate as follows:

($ in millions)	2017					2016					2015
Income before income taxes	$	2,138.9				$	1,470.7				$	1,911.6
Tax at statutory federal rate	$	748.6		35	%	$	514.8		35	%	$	669.1		35	%
Tax effect of:
Net deferred tax liability revaluation1	(99.5		)	(5	)	0			0		0			0
Tax credits	(52.4		)	(2	)	(62.2		)	(4	)	(1.9		)	0
Stock-based compensation2	(25.1		)	(1	)	0			0		0			0
Dividends received deduction	(20.7		)	(1	)	(22.6		)	(2	)	(19.8		)	(1	)
Exempt interest income	(16.9		)	(1	)	(15.7		)	(1	)	(17.8		)	(1	)
Tax-deductible dividends	(9.7		)	0		(6.1		)	0		(7.9		)	0
Nondeductible compensation expense3	10.1			0		0.5			0		0.3			0
State income taxes, net of federal taxes	6.0			0		6.6			0		2.3			0
Other items, net	0.4			0		(1.8		)	0		0.6			0
Non-taxable gain4	0			0		0			0		(13.8		)	(1	)
Total income tax provision	$	540.8		25	%	$	413.5		28	%	$	611.1		32	%

¹ Pursuant to the recently enacted legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”); see further discussion below.

² Represents excess tax benefits associated with share-based payments awards. Prior to 2017, these excess tax benefits were recorded directly to additional paid-in capital under the then existing accounting guidance.

³ Increase in 2017 primarily reflects changes in compensation that qualifies for deduction under the Tax Act.

⁴ Represents the tax effect of holding period gains on the 5% interest in ARX we owned prior to acquisition of a controlling interest on April 1, 2015.

On December 22, 2017, legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. One of the provisions of the Tax Act reduced the corporate federal income tax rate from 35% to 21% effective January 1, 2018. Pursuant to current accounting guidance, all deferred tax assets and liabilities were revalued to recognize the tax rate that is expected to apply when the tax effects are ultimately recognized in future periods. The impact of revaluing the deferred tax assets and liabilities from 35% to 21% was a net reduction to income tax expense of $99.5 million, as disclosed in the table above. This revaluation adjustment included a $275.7 million reduction related to the deferred tax liability associated with the net unrealized gains on our investment portfolio, which was originally recorded as a component of other comprehensive income and not through the tax provision. The remaining $176.2 million, which increased the tax provision, was associated with our other deferred tax assets and liabilities identified in the table below.

As of December 31, 2017, the company had not fully completed its accounting for the tax effects of the enactment of the Tax Act with regard to the following:              

• The company recorded a provisional tax amount of  $4.5 million related to deductibility of compensation expense for certain covered executives due to uncertainty surrounding the appropriate tax treatment of outstanding performance-based awards. This amount may change when the Internal Revenue Service (IRS) issues additional guidance.

• The company did not record any amounts related to the changes in loss reserve discounting required by the Tax Act. These changes require the IRS to publish new discount factors based on loss payment patterns and interest rates determined under the Tax Act, and the IRS has not yet published this information. We are unable to make a reasonable estimate at this time; however, the ultimate adjustment is not expected to have any net impact on the current year balance sheet or income statement.

Deferred income taxes reflect the effect for financial statement reporting purposes of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. The following table shows the components of the net deferred tax liability at December 31, 2017 and 2016. As noted above, the federal deferred tax assets and liabilities at December 31, 2017, have been revalued to reflect the new 21% federal corporate income tax rate under the Tax Act.

(millions)	2017			2016
Federal deferred tax assets:
Unearned premiums reserve	$	368.9		$	515.6
Non-deductible accruals	166.0			259.9
Loss and loss adjustment expense reserves	48.4			76.5
Hedges on forecasted transactions	4.8			5.1
Investment basis differences	0			31.3
Other	7.3			8.9
Federal deferred tax liabilities:
Net unrealized gains on securities	(419.5		)	(507.2		)
Deferred acquisition costs	(163.9		)	(227.9		)
Property and equipment	(75.5		)	(120.2		)
Intangible assets	(66.6		)	(145.3		)
Prepaid expenses	(7.1		)	(9.2		)
Investment basis differences	(5.5		)	0
Deferred gain on extinguishment of debt	(0.4		)	(1.5		)
Other	(6.1		)	(7.7		)
Net federal deferred tax liability	(149.2		)	(121.7		)
Net state deferred tax asset	14.2			10.4
Net deferred tax liability	$	(135.0	)	$	(111.3	)

Although realization of the deferred tax assets is not assured, management believes that it is more likely than not that the deferred tax assets will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes and, therefore, no valuation allowance was needed at December 31, 2017 or 2016.

At December 31, 2017 and 2016, we had $23.8 million and $41.2 million, respectively, of net taxes payable (included in other liabilities on the balance sheet).

The Progressive Corporation and its wholly-owned subsidiaries file a consolidated income tax return. This group has been a participant in the Compliance Assurance Program (CAP) since 2007. Under CAP, the IRS begins its examination process for the tax year before the tax return is filed, by examining significant transactions and events as they occur. The goal of the CAP program is to expedite the exam process and to reduce the level of uncertainty regarding a taxpayer’s tax filing positions.

All federal income tax years prior to 2014 are closed to examination for both Progressive and ARX. The IRS exams for 2014-2016 for Progressive have been completed and the returns were accepted as filed. We consider these years to be effectively settled. The 2017 tax year remains open to examination.

ARX and its wholly owned subsidiaries file their own consolidated income tax return since we owned less than 80% of their outstanding stock at December 31, 2017. This group was last examined by the IRS for the 2011 and 2012 tax years, which we consider to be effectively settled. The statute of limitations has expired for the 2013 tax year, while the 2014-2017 tax years remain open to examination.

The statute of limitations for state income tax purposes generally remains open for three to four years from the return filing date, depending upon the jurisdiction. There has been no significant state income tax audit activity.

We recognize interest and penalties, if any, as a component of income tax expense. For the years ended December 31, 2017, 2016, and 2015, $0.2 million, less than $0.1 million, and $0.1 million, respectively, of interest and penalties expense has been recorded in the tax provision. We have not recorded any unrecognized tax benefits, or any related interest and penalties, as of December 31, 2017 and 2016.

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Loss And Loss Adjustment Expense Reserves

12 Months Ended

Dec. 31, 2017

Insurance [Abstract]

Loss And Loss Adjustment Expense Reserves

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

We write personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services throughout the United States. As a property-casualty insurance company, we are exposed to hurricanes or other catastrophes. To help mitigate this risk, we maintain excess of loss and aggregate stop-loss reinsurance coverage on our Property business. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, we believe that, based on historical experience, such an event would not be so material as to disrupt the overall normal operations of Progressive. We are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

As we are primarily an insurer of motor vehicles and residential property, we have limited exposure to environmental, asbestos, and general liability claims. We have established reserves for such exposures, in amounts that we believe to be adequate based on information currently known. These claims are not expected to have a material effect on our liquidity, financial condition, cash flows, or results of operations.

Loss and Loss Adjustment Expense Reserves

Loss and loss adjustment expense (LAE) reserves represent our best estimate of our ultimate liability for losses and LAE relating to events that occurred prior to the end of any given accounting period but have not yet been paid. For our vehicle businesses, which represent about 98% of our total carried reserves, Progressive’s actuarial staff reviews over 400 subsets of business data, which are at a combined state, product, and line coverage level (the “products”), to calculate the needed loss and LAE reserves. We begin our review of a set of data by producing multiple estimates of needed reserves, using both paid and incurred data, to determine if a reserve change is required. In the event of a wide variation among results generated by the different projections, our actuarial group will further analyze the data using additional quantitative analysis. Each review develops a point estimate for a relatively small subset of the business, which allows us to establish meaningful reserve levels for that subset. We believe our comprehensive process of reviewing at a subsegment level provides us more meaningful estimates of our aggregate loss reserves.

The actuarial staff completes separate projections of needed case and incurred but not recorded (IBNR) reserves. Since a large majority of the parties involved in an accident report their claims within a short time period after the occurrence, we do not carry a significant amount of IBNR reserves for older accident years. Based on the methodology we use to estimate case reserves for our vehicle businesses, we do not have expected development on reported claims included in our IBNR reserves. We do, however, include anticipated salvage and subrogation recoveries in our IBNR reserves, which could result in negative carried IBNR reserves, primarily in our physical damage reserves.

Changes in historical data may reduce the predictiveness of our projected future loss costs. Internal considerations that are process-related, which generally result from changes in our claims organization’s activities, include claim closure rates, the number of claims that are closed without payment, and the level of the claims representatives’ estimates of the needed case reserve for each claim. These changes and their effect on the historical data are studied at the state level versus on a larger, less indicative, countrywide basis. External items considered include the litigation atmosphere, state-by-state changes in medical costs, and the availability of services to resolve claims. These also are better understood at the state level versus at a more macro, countrywide level. The actuarial staff takes these changes into consideration when making their assumptions to determine needed reserve levels.

Similar to our vehicle businesses, our actuarial staff analyzes loss and LAE property data on an accident period basis. Many of the methodologies and key parameters reviewed are similar. Unlike our vehicle businesses, primarily due to the low levels of reserves, data is reviewed at a macro level and a range of reserves are generated to determine a reasonable range. In addition, for our Property business, since claims adjusters primarily establish the case reserves, the actuarial staff includes expected development on case reserves as a component of the overall IBNR reserves.

Activity in the loss and loss adjustment expense reserves is summarized as follows:

(millions)	2017		2016			2015
Balance at January 1	$	11,368.0	$	10,039.0		$	8,857.4
Less reinsurance recoverables on unpaid losses	1,801.0		1,442.7			1,185.9
Net balance at January 1	9,567.0		8,596.3			7,671.5
Net loss and loss adjustment reserves (disposed) acquired1	0		(2.5		)	222.4
Total beginning reserves	9,567.0		8,593.8			7,893.9
Incurred related to:
Current year	18,782.1		16,967.1			14,657.1
Prior years	25.9		(87.5		)	(315.1		)
Total incurred	18,808.0		16,879.6			14,342.0
Paid related to:
Current year	12,201.5		11,149.0			9,577.3
Prior years	5,256.7		4,757.4			4,062.3
Total paid	17,458.2		15,906.4			13,639.6
Net balance at December 31	10,916.8		9,567.0			8,596.3
Plus reinsurance recoverables on unpaid losses	2,170.1		1,801.0			1,442.7
Balance at December 31	$	13,086.9	$	11,368.0		$	10,039.0

¹ During 2016, $2.5 million net reserves were disposed by ARX in an exchange transaction (see Note 16 – Goodwill and Intangible Assets for further discussion). During 2015, $222.4 million net reserves were acquired in the ARX acquisition.

We experienced unfavorable reserve development of $25.9 million in 2017, and favorable development of $87.5 million in 2016 and $315.1 million in 2015, which is reflected as “Incurred related to prior years” in the table above.

2017

• Approximately $64 million of unfavorable prior year reserve development was attributable to accident years 2016 and 2015. This unfavorable development was offset by $38 million of favorable development attributable to accident year 2014 and prior accident years.

• Our personal auto products incurred $70 million of unfavorable loss and LAE reserve development, primarily in the Agency business, in part reflecting an increase in costs related to property damage and higher LAE costs, primarily due to an increase in incentive compensation and defense counsel spend.

• Our Property business experienced $37 million in favorable development primarily due to lower severity and frequency than anticipated for accident year 2016 and development of losses eligible to be ceded under our catastrophe bond reinsurance program.

• Our commercial auto products had less than $1 million of unfavorable reserve development.

2016

• Approximately $56 million of the favorable prior year reserve development was attributable to accident year 2015, and approximately $51 million of favorable development was attributable to accident years 2013 and prior. This favorable development was partially offset by $19 million of unfavorable development attributable to accident year 2014.

• Our Personal Lines and Property businesses incurred $54 million and $52 million, respectively, of favorable loss and LAE reserve development, partially offset by the unfavorable loss and LAE development in Commercial Lines. In our Property business, both the severity and frequency of late reported claims was less than anticipated.

• Our personal auto product developed favorably $40 million, almost evenly split between Direct and Agency.

• Our personal auto business incurred favorable case development, primarily in bodily injury due to a lower than anticipated severity.

• Our personal auto and Commercial Lines businesses incurred unfavorable IBNR loss reserve development, primarily due to a higher severity and frequency of late reported claims than anticipated for accident year 2015, due in part to storms in late December 2015, resulting in a greater number of claims being reported in January 2016 than anticipated.

• In addition, our Commercial Lines business experienced unfavorable case reserve development for accident year 2014, primarily due to a higher severity than anticipated on our largest limits, while case reserve development for accident years 2015 and 2013 and prior was favorable.

2015

• Approximately $239 million of the favorable prior year reserve development was primarily attributable to accident year 2014.

• Favorable reserve development occurred in all segments; our combined Agency auto business and Direct auto business experienced approximately $217 million of total development, with the remainder split between our Commercial Lines and Property businesses.

• In our personal auto and Commercial Lines businesses, we incurred favorable case loss reserve development, primarily in bodily injury and uninsured motorist bodily injury coverages, due to lower than anticipated severity.

• Our Property business development was favorable due to lower than anticipated severity and frequency across all products, primarily in accident years 2014 and 2013.

Incurred and Paid Claims Development by Accident Year

The tables below present our incurred and paid claims development by accident year for the last five years, which generally represents the maximum development period for claims in any of our segments. The tables below include inception-to-date information for companies acquired and wholly exclude companies disposed of, rather than including information from the date of acquisition, or until the date of disposition. We believe that the most meaningful presentation of claims development is through the retrospective approach by presenting all relevant historical information for all periods presented.

We have elected to present our incurred and paid claims development consistent with our GAAP reportable segments (see Note 10 – Segment Information for a discussion of our segment reporting), with a further disaggregation of our Personal Lines and Commercial Lines claims development between liability and physical damage, since the loss patterns are significantly different between them. The other business primarily includes reserves for our run-off products, which are not considered material, and, therefore, we are not including separate claims development tables.

The following tables show incurred and paid claims development, net of reinsurance, by accident year. Only 2017 is audited; all prior years are considered required supplementary information and, therefore, are unaudited. Expected development on our case reserves is excluded from the IBNR reserves on our vehicle businesses, as discussed above. For the Property business, the IBNR reserves include expected case development based on the methodology used in establishing the case reserves for that segment. The cumulative number of incurred claims are based on accident coverages (e.g., bodily injury, collision, comprehensive, personal injury protection, property damage) related to opened claims. Coverage counts related to claims closed without payment are excluded from the cumulative number of incurred claims.

Personal Lines - Agency - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	3,506.0	$	3,520.9	$	3,518.2	$	3,528.0	$	3,484.2	$	0	696,624
2014			3,702.1		3,627.7		3,633.2		3,654.4		50.9		701,787
2015					3,774.9		3,773.8		3,798.8		59.2		704,990
2016							4,082.9		4,130.0		158.7		738,563
2017									4,474.8		679.6		765,553
							Total		$	19,542.2
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,684.0	$	2,794.1	$	3,173.1	$	3,362.9	$	3,437.6
2014			1,809.0		2,868.1		3,284.5		3,482.3
2015					1,793.1		2,976.0		3,416.5
2016							1,941.6		3,231.5
2017									2,074.0
							Total		$	15,641.9
	All outstanding liabilities before 2013, net of reinsurance1								55.2
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	3,955.5

¹ Required supplementary information (unaudited)

Personal Lines - Agency - Physical Damage
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	2,014.0	$	2,001.4	$	2,000.1	$	1,999.4	$	2,001.1	$	0		1,347,920
2014			2,107.5		2,090.3		2,089.9		2,088.0		(3.3		)	1,374,666
2015					2,136.8		2,137.2		2,134.4		(2.6		)	1,336,268
2016							2,423.4		2,398.9		(12.1		)	1,398,371
2017									2,635.5		(101.8		)	1,496,298
							Total		$	11,257.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,952.7	$	2,003.9	$	2,002.0	$	2,001.3	$	2,000.8
2014			2,078.8		2,091.6		2,090.6		2,090.7
2015					2,106.2		2,138.1		2,134.4
2016							2,391.0		2,406.9
2017									2,599.8
							Total		$	11,232.6
	All outstanding liabilities before 2013, net of reinsurance1								0.9
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	26.2

¹ Required supplementary information (unaudited)

Personal Lines - Direct - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	2,619.4	$	2,621.8	$	2,615.8	$	2,649.8	$	2,612.9	$	0	550,166
2014			2,946.8		2,887.4		2,898.1		2,913.6		38.2		592,185
2015					3,330.5		3,328.3		3,354.2		48.6		659,102
2016							3,819.0		3,843.9		143.0		733,195
2017									4,209.5		598.6		761,280
							Total		$	16,934.1
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,252.0	$	2,085.1	$	2,375.5	$	2,521.3	$	2,577.8
2014			1,413.0		2,278.0		2,624.2		2,780.0
2015					1,545.2		2,615.0		3,021.0
2016							1,780.6		2,991.1
2017									1,912.6
							Total		$	13,282.5
	All outstanding liabilities before 2013, net of reinsurance1								33.5
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	3,685.1

¹ Required supplementary information (unaudited)

Personal Lines - Direct - Physical Damage
($ in millions)												As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance												December 31, 2017
	For the years ended December 31,											Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	1,653.7	$	1,635.6	$	1,634.6	$	1,633.4	$	1,635.0		$	0		1,367,341
2014			1,889.3		1,862.2		1,861.7		1,859.2			(3.2		)	1,471,016
2015					2,110.7		2,097.7		2,093.5			(3.0		)	1,539,790
2016							2,521.0		2,475.4			(14.3		)	1,675,405
2017									2,750.6			(145.3		)	1,779,665
							Total		$	10,813.7
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,612.9	$	1,638.2	$	1,636.2	$	1,635.3	$	1,635.0
2014			1,874.6		1,864.1		1,862.7		1,861.8
2015					2,094.7		2,100.1		2,094.7
2016							2,505.0		2,485.8
2017									2,742.1
							Total		$	10,819.4
	All outstanding liabilities before 2013, net of reinsurance1								0.1
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	(5.6	)

¹ Required supplementary information (unaudited)

Commercial Lines - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	864.2	$	864.6	$	865.4	$	865.0	$	840.8	$	0	78,075
2014			822.5		795.4		820.3		823.0		15.9		74,724
2015					897.6		911.1		914.8		23.7		77,807
2016							1,185.8		1,204.8		63.1		92,196
2017									1,374.1		219.2		94,992
							Total		$	5,157.5
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	233.3	$	509.4	$	659.1	$	752.5	$	802.6
2014			234.0		438.7		610.0		715.3
2015					238.4		501.5		675.0
2016							298.6		639.9
2017									325.8
							Total		$	3,158.6
	All outstanding liabilities before 2013, net of reinsurance1								28.5
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	2,027.4

¹ Required supplementary information (unaudited)

Commercial Lines - Physical Damage
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	256.2	$	254.2	$	254.5	$	253.7	$	254.2	$	0		62,673
2014			240.3		239.7		238.6		238.0		(0.5		)	59,622
2015					274.4		274.1		273.5		(0.1		)	62,593
2016							379.6		379.8		(0.9		)	74,217
2017									415.4		(5.7		)	77,767
							Total		$	1,560.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	239.4	$	253.1	$	253.9	$	253.7	$	253.8
2014			224.6		238.3		237.7		237.9
2015					248.5		271.9		272.0
2016							336.7		376.9
2017									369.0
							Total		$	1,509.6
	All outstanding liabilities before 2013, net of reinsurance1								0.4
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	51.7

¹ Required supplementary information (unaudited)

Property Business
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	307.3	$	283.3	$	254.3	$	254.1	$	253.9	$	2.5	30,600
2014			415.5		389.1		379.7		376.3		3.6		40,984
2015					460.0		416.5		403.6		11.5		41,957
2016							568.6		541.2		24.8		53,323
2017									672.8		99.7		64,487
							Total		$	2,247.8
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	185.1	$	234.2	$	244.9	$	249.5	$	250.5
2014			269.2		351.5		365.9		370.3
2015					280.3		372.8		383.5
2016							415.2		498.2
2017									506.7
							Total		$	2,009.2
	All outstanding liabilities before 2013, net of reinsurance1								7.2
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	245.8

¹ Required supplementary information (unaudited)

The following table reconciles the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses:

(millions)	2017			2016
Net outstanding liabilities
Personal Lines
Agency, Liability	$	3,955.5		$	3,555.9
Agency, Physical Damage	26.2			30.1
Direct, Liability	3,685.1			3,219.1
Direct, Physical Damage	(5.6		)	11.2
Commercial Lines
Liability	2,027.4			1,675.3
Physical Damage	51.7			46.6
Property	245.8			224.7
Other business	43.7			37.1
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	10,029.8			8,800.0
Reinsurance recoverable on unpaid claims
Personal Lines
Agency, Liability	769.8			724.5
Agency, Physical Damage	0			0
Direct, Liability	838.1			724.3
Direct, Physical Damage	0			0
Commercial Lines
Liability	105.1			59.5
Physical Damage	0.1			0
Property	243.8			132.7
Other business	200.9			154.9
Total reinsurance recoverable on unpaid claims	$	2,157.8		$	1,795.9
Unallocated claims adjustment expense related to:
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	887.0			767.0
Reinsurance recoverable on unpaid claims	12.3			5.1
Total gross liability for unpaid claims and claim adjustment expense	$	13,086.9		$	11,368.0

The following table shows the average historical claims duration as of December 31, 2017:

(Required Supplementary Information - Unaudited)
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance	Years
	1	2	3	4	5
Personal Lines
Agency, Liability	47.6%	30.8%	11.3%	5.4%	2.1%
Agency, Physical Damage	98.9%	1.3%	(0.1)%	0%	0%
Direct, Liability	46.7%	31.3%	11.7%	5.5%	2.2%
Direct, Physical Damage	100.1%	0%	(0.2)%	(0.1)%	0%
Commercial Lines
Liability	25.8%	28.7%	19.2%	11.9%	6.0%
Physical Damage	90.9%	7.9%	0%	0%	0%
Property	73.7%	19.5%	3.5%	1.4%	0.4%

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Reinsurance

12 Months Ended

Dec. 31, 2017

Reinsurance Disclosures [Abstract]

Reinsurance

REINSURANCE

The effect of reinsurance on premiums written and earned for the years ended December 31, was as follows:

	2017						2016						2015
(millions)	Written			Earned			Written			Earned			Written			Earned
Direct premiums	$	27,860.7		$	26,425.7		$	23,941.9		$	23,111.2		$	21,086.5		$	20,454.1
Ceded premiums:
Regulated plans	(505.9		)	(479.6		)	(439.4		)	(425.1		)	(358.0		)	(362.6		)
Non-Regulated plans	(222.7		)	(216.2		)	(149.0		)	(212.1		)	(164.5		)	(192.4		)
Total ceded premiums	(728.6		)	(695.8		)	(588.4		)	(637.2		)	(522.5		)	(555.0		)
Net premiums	$	27,132.1		$	25,729.9		$	23,353.5		$	22,474.0		$	20,564.0		$	19,899.1

The Regulated plans primarily include the following:

• Federal reinsurance plan

• National Flood Insurance Program (NFIP)

• State-provided reinsurance facilities

• Michigan Catastrophic Claims Association (MCCA)

• North Carolina Reinsurance Facility (NCRF)

• Florida Hurricane Catastrophe Fund (FHCF)

• State-mandated involuntary plans

• Commercial Automobile Insurance Procedures/Plans (CAIP)

The Non-Regulated plans primarily include amounts ceded on Property business under catastrophic and aggregate stop-loss reinsurance agreements, as well as amounts ceded on transportation network company (TNC) business under a quota-share reinsurance agreement.

The increase in ceded written premiums for 2017 was primarily driven by growth in the Regulated plans, a full year of ceded premiums on the reinsurance coverage on the TNC business, and the aggregate stop-loss agreement that was effective January 1, 2017. For 2016, the increase reflected the beginning of reinsurance coverage on the TNC pilot program and a full year of ceded premiums on catastrophe reinsurance held by ASI, partially offset by ASI’s termination of a quota-share contract, which reduced ceded earned premium in 2016.

Losses and loss adjustment expenses were net of losses ceded of $1,094.2 million in 2017, $764.4 million in 2016, and $457.3 million in 2015. The increase in losses and loss adjustment expenses ceded in 2017 and 2016, compared to the prior years, was primarily driven by the impact of catastrophic flooding events on the business serviced by ASI and other subsidiaries of ARX as part of its participation in the NFIP. For 2017, ASI also ceded additional losses and loss adjustment expenses due to the hurricanes and other severe storms that were reinsured by ASI.

Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:

	Prepaid Reinsurance Premiums								Reinsurance Recoverables
($ in millions)	2017				2016				2017				2016
Regulated plans:
MCCA	$	44.3	22	%	$	36.5	21	%	$	1,611.5	71	%	$	1,452.7	77	%
CAIP	50.0		25		40.2		24		218.0		10		170.6		9
NCRF	31.5		15		27.5		16		74.2		3		67.0		4
NFIP	53.8		26		49.1		29		148.8		7		78.5		4
Other	0.3		0		0.1		0		8.2		0		3.5		0
Total Regulated plans	179.9		88		153.4		90		2,060.7		91		1,772.3		94
Non-Regulated plans:
Property	9.1		5		3.2		2		138.6		6		62.9		3
Other	14.3		7		13.9		8		74.1		3		49.6		3
Total Non-Regulated plans	23.4		12		17.1		10		212.7		9		112.5		6
Total	$	203.3	100	%	$	170.5	100	%	$	2,273.4	100	%	$	1,884.8	100	%

The increase in reinsurance recoverables during 2017 reflects both new claims and development under the MCCA program, catastrophic flooding on business under the NFIP, and recoverables under the other catastrophe reinsurance programs covering hurricanes and other severe storms. In addition, part of the increase reflects business growth and reserve development in our TNC business, which is covered by a quota-share reinsurance agreement.

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to us. Our exposure to losses from the failure of Regulated plans is minimal, since these plans are funded by the federal government or by mechanisms supported by insurance companies in applicable states. We evaluate the financial condition of our other reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies.

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Statutory Financial Information

12 Months Ended

Dec. 31, 2017

Statutory Financial Information Disclosures [Abstract]

Statutory Financial Information

STATUTORY FINANCIAL INFORMATION

Consolidated statutory surplus was $9,664.4 million and $8,560.0 million at December 31, 2017 and 2016, respectively. Statutory net income was $1,416.2 million, $1,022.3 million, and $1,333.1 million for the years ended December 31, 2017, 2016, and 2015, respectively.

At December 31, 2017, $830.1 million of consolidated statutory surplus represented net admitted assets of our insurance subsidiaries and affiliates that are required to meet minimum statutory surplus requirements in such entities’ states of domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum statutory surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the companies are licensed.

During 2017, the insurance subsidiaries paid aggregate cash dividends of $872.8 million to their parent company. Based on the dividend laws in effect at December 31, 2017, the insurance subsidiaries could pay aggregate dividends of $1,390.5 million in 2018 without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of previous dividends paid by the applicable subsidiary.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2017

Employee Benefit Plans Disclosures [Abstract]

Employee Benefit Plans

EMPLOYEE BENEFIT PLANS

Beginning July 1, 2017, employees of ARX and its subsidiaries were included in the benefit plans described below. References in this Note 9 to Progressive refer to The Progressive Corporation and its subsidiaries, including ARX and its subsidiaries. Prior to July 1, 2017, ARX maintained employee benefit plans that were separate from the plans that covered employees of The Progressive Corporation’s other subsidiaries.

Retirement Plans  Progressive has a defined contribution pension plan (401(k) Plan) that covers employees who have been employed with the company for at least 30 days. Under Progressive’s 401(k) Plan, we match up to a maximum of 6% of an employee’s eligible compensation contributed to the plan. Employee and company matching contributions are invested, at the direction of the employee, in a number of investment options available under the plan, including various mutual funds, a self-directed brokerage option, and a Progressive common stock fund. Progressive’s common stock fund is an employee stock ownership program (ESOP) within the 401(k) Plan. At December 31, 2017, the ESOP held 24.6 million of our common shares, all of which are included in shares outstanding. Dividends on these shares are reinvested in common shares or paid out in cash, at the election of the participant, and the related tax benefit is recorded as part of our tax provision.

Previously, ARX employees were covered by separate qualified defined contribution plans. Matching contributions to these plans for the year ended December 31, 2017, 2016, and 2015 (including the contributions made subsequent to The Progressive Corporation acquiring a controlling interest in ARX) were $97.3 million, $86.8 million, and $79.1 million for the years ended December 31, 2017, 2016, and 2015, respectively.

Postemployment BenefitsProgressive provides various postemployment benefits to former or inactive employees who meet eligibility requirements, and to their beneficiaries and covered dependents. Postemployment benefits include salary continuation and disability-related benefits, including workers’ compensation and, if elected, continuation of health-care benefits for specified limited periods. The liability for these benefits was $19.5 million and $21.7 million at December 31, 2017 and 2016, respectively.

Incentive Compensation Plans – EmployeesProgressive’s incentive compensation programs include both non-equity incentive plans (cash) and equity incentive plans. Progressive’s cash incentive compensation includes an annual cash incentive program for a limited number of senior executives and Progressive’s Gainsharing program for other employees, and for 2017, a separate gainsharing program for ARX employees; the structures of these programs are similar in nature. Progressive’s equity incentive compensation plans provide for the granting of restricted stock awards and restricted stock unit awards (collectively, “restricted equity awards”) to key members of management. Since 2010, Progressive has only issued restricted stock units as the form of equity compensation.

In addition, ARX provides periodic cash bonuses to its employees and, prior to 2017, annual cash bonuses to its employees. ARX also has an equity compensation plan under which it has granted stock option awards, exercisable for shares of ARX common stock, to certain of its key employees. These stock option awards include both nonqualified and incentive stock options; all such stock options are subject to the put and call provisions of the ARX stockholders’ agreement (See Note 15 – Redeemable Noncontrolling Interest for further discussion). As a result of these provisions, and the determination that the ultimate settlement of these awards would be in cash, the ARX stock options are treated as liability awards for accounting purposes.

The amounts charged to income for Progressive and ARX incentive compensation plans for the years ended December 31, were:

	2017				2016				2015
(millions)	Pretax		After Tax		Pretax		After Tax		Pretax		After Tax
Non-equity incentive plans – cash	$	461.3	$	299.8	$	386.8	$	251.4	$	337.7	$	219.5
Equity incentive plans:
Equity awards	92.9		60.4		80.9		52.6		64.5		41.9
Liability awards	2.5		1.6		4.3		2.8		1.7		1.1

The increase in expense for the equity awards during 2017 primarily reflects an increase in management’s expectation of the percentage of certain performance-based awards that will ultimately vest (discussed below). The after-tax amounts are determined using the 35% corporate federal tax rate; the revaluation to the 21% rate is reflected in the total revaluation adjustment recorded at December 31, 2017 (see Note 5 – Income Taxes for further discussion).

Progressive’s 2003 Incentive Plan has expired, and no new awards may be made under this plan; all awards granted prior to the plan’s expiration have vested, been forfeited, or expired, prior to December 31, 2015. Progressive’s 2010 Equity Incentive Plan and 2015 Equity Incentive Plan, which provide for the granting of equity-based compensation to officers and other key employees, originally authorized awards for up to 18.0 million shares and up to 13.0 million shares, respectively.

The restricted equity awards are issued as either time-based or performance-based awards. All restricted stock units are settled at or after vesting in Progressive common shares from existing treasury shares on a one-to-one basis. The time-based awards vest in equal installments upon the lapse of specified periods of time, typically three, four, and five years.

The performance-based awards were granted to approximately 45 Progressive executives and senior managers (including certain ARX managers) in 2017 in addition to their time-based awards, if applicable, to provide additional incentive to achieve pre-established profitability and growth targets, relative investment performance, or specific growth measures.

Vesting of performance-based awards is contingent upon the achievement of predetermined performance goals within specified time periods. The targets for the performance-based awards, as well as the number of units that ultimately may vest, vary by grant. All performance-based awards include a specified number of units that will vest if performance meets a specified target and minimum performance goals. If at least the minimum performance goals are achieved, the range at which an award can vest is determined by the type of measurement goals included in the award, as follows:

Performance Measurement	Year(s) of Grant	Vesting range (as a percentage of target)
Growth of our personal and commercial auto businesses, compared to market	2013-2017	0-250%
	2012	0-200%
Investment results relative to peer group	2012-2017	0-200%
Growth in percentage of auto policies bundled with other specified types of policies	2015	0% or 100-200%
Unit growth in a particular customer segment	2016-2017	0% or 85-150%

Generally, time-based and performance-based equity awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant. Performance-based equity awards that contain variable vesting criteria are expensed based on management’s expectation of the percentage of the award, if any, that will ultimately vest. These estimates can change periodically throughout the measurement period.

A summary of all employee restricted equity award activity during the years ended December 31, follows:

	2017				2016				2015
Restricted Equity Awards	Number of Shares1		Weighted Average Grant Date Fair Value		Number of Shares1		Weighted Average Grant Date Fair Value		Number of Shares1		Weighted Average Grant Date Fair Value
Beginning of year	6,951,373		$	26.18	7,725,227		$	23.37	9,051,564		$	21.27
Add (deduct):
Granted2	2,383,475		32.01		1,870,660		31.54		2,489,976		25.20
Vested	(3,220,671	)	22.53		(2,422,700	)	21.50		(3,682,644	)	19.53
Forfeited	(255,329	)	28.03		(221,814	)	24.64		(133,669	)	21.63
End of year3,4	5,858,848		$	30.47	6,951,373		$	26.18	7,725,227		$	23.37

¹ Includes restricted stock units; 2015 also includes restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares funded from existing treasury shares. All performance-based awards are included at their target amounts.

² We reinvest dividend equivalents on restricted stock units. For 2017, 2016, and 2015, the number of units “granted” shown in the table above includes 157,396, 165,045, and 196,947 of dividend equivalent units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

³ At December 31, 2017, the number of shares included 1,513,779 performance-based units at their target amounts. We expect 3,244,111 units to vest based upon our current estimates of the likelihood of achieving the pre-determined performance goals applicable to each award.

⁴ At December 31, 2017, the total unrecognized compensation cost related to unvested equity awards was $87.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.2 years.

The aggregate fair value of the restricted equity awards that vested during the years ended December 31, 2017, 2016, and 2015, was $130.5 million, $77.0 million, and $105.4 million, respectively, based on the actual stock price on the applicable vesting date.

As a result of the put and call rights described in Note 15 – Redeemable Noncontrolling Interest, all outstanding stock options awarded to ARX employees prior to April 1, 2015, are treated as liability awards for accounting purposes; however, the awards maintain the specific features per the original award agreements. The value of each option is based upon our good faith estimate of the fair market value as of the end of the reporting period and the pro rata expense is recognized.

A summary of all ARX employee stock option activity since acquisition, follows:

	2017				2016			2015
Options Outstanding	Number of Shares		Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Beginning of year	24,995		$	526.46	24,995	$	526.46	NA		NA
At acquisition date 4/1/2015	NA		NA		NA	NA		26,000		$	513.72
Add (deduct):
Exercised1	(2,445	)	174.65		0	0		(1,005	)	197.01
End of year	22,550		$	564.60	24,995	$	526.46	24,995		$	526.46
Exercisable, end of year	17,950		$	517.75	16,995	$	438.77	12,995		$	386.69

NA = Not Applicable

¹ At the time of exercise in 2017 and 2015, the value earned by the option holders was $2.9 million and $1.1 million, respectively.

	2017				2016				2015
Non-Vested Options Outstanding	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Beginning of year	8,000		$	712.74	12,000		$	677.81	NA		NA
At acquisition date 4/1/2015	NA		NA		NA		NA		14,800		$	675.55
Add (deduct):
Vested	(3,400	)	665.79		(4,000	)	607.95		(2,800	)	665.85
End of year1	4,600		$	747.45	8,000		$	712.74	12,000		$	677.81

NA = Not Applicable

¹ At December 31, 2017, 2016, and 2015, the remaining unrecognized compensation cost related to unvested options was $0.7 million, $1.6 million, and $2.9 million, respectively, and the remaining weighted average vesting period on the unvested awards was 1.01 years, 1.36 years, and 1.72 years, respectively.

Incentive Compensation Plans – Directors  Progressive’s 2003 Directors Equity Incentive Plan, has expired and no new awards may be made under this plan; in 2017, shareholders approved the Progressive 2017 Directors Equity Incentive Plan and it provides for the granting of equity-based awards, including restricted stock awards, to non-employee directors, and originally authorized awards for up to 0.5 million shares.

Beginning in 2016, The Progressive Corporation permits each non-employee director to indicate a preference to receive either 100% of their compensation in the form of a restricted stock award or 60% in the form of a restricted stock award and 40% in the form of cash. If the director does not state a preference, it is presumed that he or she preferred to receive 100% of their compensation in the form of restricted stock. After considering such preferences, the Board’s Compensation Committee determines the awards (restricted stock, or restricted stock and cash) for each non-employee director. Prior to 2016, The Progressive Corporation granted restricted stock awards as the sole form of compensation to non-employee directors.

The restricted stock awards are issued as time-based awards. The vesting period (i.e., requisite service period) is typically 11 months from the date of each grant. To the extent a director is newly appointed during the year, or a director’s committee assignments change, the vesting period may be shorter. Both the restricted stock awards and cash, if elected, are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant.

A summary of all directors’ restricted stock activity during the years ended December 31, follows:

	2017				2016				2015
Restricted Stock	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Beginning of year	55,839		$	33.24	89,427		$	27.23	81,579		$	25.45
Add (deduct):
Granted	53,284		40.54		55,839		33.24		89,427		27.23
Vested	(55,839	)	33.24		(89,427	)	27.23		(81,579	)	25.45
End of year	53,284		$	40.54	55,839		$	33.24	89,427		$	27.23

The aggregate fair value of the restricted stock vested, during the years ended December 31, 2017, 2016, and 2015, was $2.2 million, $3.0 million, and $2.2 million, respectively, based on the actual stock price at time of vesting.

Deferred CompensationThe Progressive Corporation Executive Deferred Compensation Plan (Deferral Plan) permits eligible Progressive executives to defer receipt of some or all of their annual incentive payments and all of their annual equity awards. Deferred cash compensation is deemed invested in one or more investment funds, including Progressive common shares, offered under the Deferral Plan and elected by the participant. All Deferral Plan distributions attributable to deferred cash compensation will be paid in cash.

For all equity awards granted in or after March 2005, and deferred pursuant to the Deferral Plan, the deferred amounts are deemed invested in our common shares and are ineligible for transfer to other investment funds in the Deferral Plan; distributions of these deferred awards will be made in Progressive common shares. For all restricted stock awards granted prior to that date, the deferred amounts are eligible to be transferred to any of the investment funds in the Deferral Plan; distributions of these deferred awards will be made in cash. We reserved 11.1 million of our common shares for issuance under the Deferral Plan.

An irrevocable grantor trust has been established to provide a source of funds to assist us in meeting our liabilities under the Deferral Plan. The Deferral Plan Irrevocable Grantor Trust account held the following assets at December 31:

(millions)	2017		2016
Progressive common shares1	$	128.2	$	122.2
Other investment funds2	167.0		136.9
Total	$	295.2	$	259.1

¹Included 4.4 million and 4.7 million common shares as of December 31, 2017 and 2016, respectively, to be distributed in common shares.

² Amount is included in other assets on the balance sheet.

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Segment Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

We write personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles (our special lines products). The Personal Lines segment is comprised of both the Agency and Direct businesses. The Agency business includes business written by our network of more than 35,000 independent insurance agencies, including brokerages in New York and California, and strategic alliance business relationships (other insurance companies, financial institutions, and national agencies). The Direct business includes business written directly by us online, by phone, or on mobile devices. We operate our personal auto businesses throughout the United States. In 2017, we ceased writing and servicing personal auto physical damage and auto property damage liability insurance in Australia.

Our Commercial Lines segment writes primary liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses in the business auto, for-hire transportation, contractor, for-hire specialty, tow, and for-hire livery markets. This segment operates throughout the United States and is distributed through both the independent agency and direct channels.

Our Property segment writes residential property insurance for homeowners, other property owners, and renters primarily through the independent agency channel in 41 states and the District of Columbia as of December 31, 2017. Our Property business primarily consists of the operations of ASI and other insurance subsidiaries. ASI also acts as a participant in the “Write Your Own” program for the National Flood Insurance Program and, as such, writes flood insurance in 43 states and the District of Columbia.

Our other indemnity businesses manage our run-off businesses.

Our service businesses provide insurance-related services, including processing CAIP business, and serving as an agent for homeowners, general liability, and workers’ compensation insurance, among other products, through our programs with ASI and unaffiliated insurance companies.

All segment revenues are generated from external customers and we do not have a reliance on any major customer. All intercompany transactions, including those between Progressive and ASI, are eliminated in consolidation.

We evaluate profitability based on pretax underwriting profit (loss) for the Personal Lines, Commercial Lines, and Property segments and for the other indemnity businesses. Pretax underwriting profit (loss) is calculated as net premiums earned plus fees and other revenues, less: (i) losses and loss adjustment expenses; (ii) policy acquisition costs; and (iii) other underwriting expenses. Service business pretax profit (loss) is the difference between service business revenues and service business expenses.

Expense allocations are based on certain assumptions and estimates primarily related to revenue and volume; stated segment operating results would change if different methods were applied. We do not allocate assets or income taxes to operating segments. In addition, we do not separately identify depreciation expense by segment, and such allocation would be impractical. Companywide depreciation expense was $169.9 million in 2017, $137.4 million in 2016, and $103.7 million in 2015. The accounting policies of the operating segments are the same as those described in Note 1 – Reporting and Accounting Policies.

Following are the operating results for the years ended December 31:

	2017						2016					2015
(millions)	Revenues			Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues			Pretax Profit (Loss)
Personal Lines
Agency	$	11,177.6		$	839.6		$	9,791.7	$	492.8		$	9,108.6		$	713.2
Direct	10,769.6			683.7			9,396.5		412.2			8,185.9			403.4
Total Personal Lines1	21,947.2			1,523.3			19,188.2		905.0			17,294.5			1,116.6
Commercial Lines	2,793.9			214.1			2,421.3		155.2			1,995.9			318.3
Property2	988.8			(50.3		)	864.5		32.5			609.1			61.3
Other indemnity3	0			(0.2		)	0		(1.6		)	(0.4		)	(1.0		)
Total underwriting operations	25,729.9			1,686.9			22,474.0		1,091.1			19,899.1			1,495.2
Fees and other revenues4	370.6			NA			332.5		NA			302.0			NA
Service businesses	126.8			17.3			103.3		11.3			86.3			8.8
Investments5	612.7			588.8			530.0		507.6			567.3			544.5
Other gains (losses)	(1.0		)	(1.0		)	1.6		1.6			(0.9		)	(0.9		)
Interest expense	NA			(153.1		)	NA		(140.9		)	NA			(136.0		)
Consolidated total	$	26,839.0		$	2,138.9		$	23,441.4	$	1,470.7		$	20,853.8		$	1,911.6

NA = Not Applicable

¹ Personal auto insurance accounted for 93% of the total Personal Lines segment net premiums earned in 2017, compared to 92% in 2016 and 2015; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

² We began reporting our Property business as a segment on April 1, 2015, upon acquisition of a controlling interest in ARX; therefore, the year ended 2015 only includes results for nine months and is not comparable to results reported for 2017 or 2016. During 2017, 2016, and 2015, pretax profit (loss) also includes $66.2 million, $62.1 million, and $46.8 million, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Although this expense is included in our Property segment, it is not reported in the consolidated results of ARX and, therefore, will not affect the value of the net income attributable to the noncontrolling interest.

³ Our professional liability group recognized $0.4 million of reinstatement premiums paid to our reinsurers pursuant to their reinsurance contracts during 2015. This premium reduction was reflected in our companywide total results.

⁴ Pretax profit (loss) for fees and other revenues are allocated to operating segments.

⁵ Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

Our management uses underwriting margin and combined ratio as primary measures of underwriting profitability. Underwriting profitability is calculated by subtracting losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses from the total of net premiums earned and fees and other revenues. The underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from underwriting operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for our underwriting operations for the years ended December 31:

	2017			2016			2015
	Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio
Personal Lines
Agency	7.5	%	92.5	5.0	%	95.0	7.8	%	92.2
Direct	6.3		93.7	4.4		95.6	4.9		95.1
Total Personal Lines	6.9		93.1	4.7		95.3	6.5		93.5
Commercial Lines	7.7		92.3	6.4		93.6	15.9		84.1
Property1	(5.1	)	105.1	3.8		96.2	10.1		89.9
Total underwriting operations	6.6		93.4	4.9		95.1	7.5		92.5

¹We began reporting our Property business as a segment on April 1, 2015, when we acquired a controlling interest in ARX; therefore, the year ended 2015 only includes results for nine months and is not comparable to results reported for 2017 or 2016. Included in 2017, 2016, and 2015 is 6.7 points, 7.2 points, and 7.7 points, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX.

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Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Other Comprehensive Income (Loss)

OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss), including reclassification adjustments by income statement line item, for the years ended December 31, were as follows:

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2016	$	1,439.5		$	(506.1	)	$	933.4		$	939.6		$	(9.4	)	$	(1.1	)	$	4.3
Other comprehensive income (loss) before reclassifications:
Investment securities	636.9			(224.0		)	412.9			412.9			0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	0			0			0			0			0			0			0
Forecasted transactions	(8.0		)	2.8			(5.2		)	0			(5.2		)	0			0
Foreign currency translation adjustment	0.4			(0.1		)	0.3			0			0			0.3			0
Loss attributable to noncontrolling interest (NCI)	(3.5		)	1.2			(2.3		)	0			0			0			(2.3		)
Total other comprehensive income (loss) before reclassifications	625.8			(220.1		)	405.7			412.9			(5.2		)	0.3			(2.3		)
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(14.9		)	5.3			(9.6		)	(9.6		)	0			0			0
Net realized gains (losses) on securities	103.3			(36.2		)	67.1			67.1			0			0			0
Other gains (losses)1	(1.2		)	0.4			(0.8		)	0			0			(0.8		)	0
Interest expense	0.3			(0.1		)	0.2			0			0.2			0			0
Total reclassification adjustment for amounts realized in net income	87.5			(30.6		)	56.9			57.5			0.2			(0.8		)	0
Total other comprehensive income (loss)	538.3			(189.5		)	348.8			355.4			(5.4		)	1.1			(2.3		)
Total at December 31, 2017	$	1,977.8		$	(695.6	)	$	1,282.2		$	1,295.0		$	(14.8	)	$	0		$	2.0

¹During 2017, we ceased writing insurance in Australia resulting in a loss of $1.2 million relating to the foreign currency translation adjustment. The loss is netted against a gain on extinguishment of debt (see Note 4 – Debt) in other gains (losses) on our consolidated statements of comprehensive income for the year end December 31, 2017.

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2015	$	1,234.5		$	(434.1	)	$	800.4		$	809.0		$	(8.2	)	$	(1.5	)	$	1.1
Other comprehensive income (loss) before reclassifications:
Investment securities	320.5			(112.6		)	207.9			207.9			0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	(0.1		)	0.1			0			0			0			0			0
Forecasted transactions	0			0			0			0			0			0			0
Foreign currency translation adjustment	0.6			(0.2		)	0.4			0			0			0.4			0
Loss attributable to noncontrolling interest (NCI)	5.1			(1.9		)	3.2			0			0			0			3.2
Total other comprehensive income (loss) before reclassifications	326.1			(114.6		)	211.5			207.9			0			0.4			3.2
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(27.1		)	9.5			(17.6		)	(17.6		)	0			0			0
Net realized gains (losses) on securities	146.3			(51.4		)	94.9			94.9			0			0			0
Other gains (losses)	0			0			0			0			0			0			0
Interest expense	1.9			(0.7		)	1.2			0			1.2			0			0
Total reclassification adjustment for amounts realized in net income	121.1			(42.6		)	78.5			77.3			1.2			0			0
Total other comprehensive income (loss)	205.0			(72.0		)	133.0			130.6			(1.2		)	0.4			3.2
Total at December 31, 2016	$	1,439.5		$	(506.1	)	$	933.4		$	939.6		$	(9.4	)	$	(1.1	)	$	4.3

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2014	$	1,574.0		$	(550.9	)	$	1,023.1		$	1,021.9		$	1.5		$	(0.3	)	$	0
Other comprehensive income (loss) before reclassifications:
Investment securities	(198.7		)	67.5			(131.2		)	(131.2		)	0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	0			0			0			0			0			0			0
Forecasted transactions	(12.9		)	4.5			(8.4		)	0			(8.4		)	0			0
Foreign currency translation adjustment	(1.8		)	0.6			(1.2		)	0			0			(1.2		)	0
Loss attributable to noncontrolling interest (NCI)	1.6			(0.5		)	1.1			0			0			0			1.1
Total other comprehensive income (loss) before reclassifications	(211.8		)	72.1			(139.7		)	(131.2		)	(8.4		)	(1.2		)	1.1
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(23.8		)	8.4			(15.4		)	(15.4		)	0			0			0
Net realized gains (losses) on securities	149.7			(52.5		)	97.2			97.1			0.1			0			0
Other gains (losses)	0			0			0			0			0			0			0
Interest expense	1.8			(0.6		)	1.2			0			1.2			0			0
Total reclassification adjustment for amounts realized in net income	127.7			(44.7		)	83.0			81.7			1.3			0			0
Total other comprehensive income (loss)	(339.5		)	116.8			(222.7		)	(212.9		)	(9.7		)	(1.2		)	1.1
Total at December 31, 2015	$	1,234.5		$	(434.1	)	$	800.4		$	809.0		$	(8.2	)	$	(1.5	)	$	1.1

In an effort to manage interest rate risk, we entered into forecasted transactions on each of The Progressive Corporation’s outstanding debt issuances. We expect to reclassify $1.0 million (pretax) into interest expense during the next 12 months, related to net unrealized losses on forecasted transactions (see Note 4 – Debt for further discussion).

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Litigation

12 Months Ended

Dec. 31, 2017

Litigation Disclosures [Abstract]

Litigation

 LITIGATION

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies written by our insurance subsidiaries in the ordinary course of business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, The Progressive Corporation and/or its insurance and other subsidiaries have been named as defendants in a number of class action or individual lawsuits that challenge certain of the operations of the subsidiaries. Other insurance companies face many of these same issues.

We describe litigation contingencies for which a loss is probable. In addition, we establish accruals for these lawsuits when we can reasonably estimate potential loss exposure, which may include a range of loss, and we will disclose such amount or range of loss if material. As to lawsuits for which the loss is considered probable but not estimable, we do not establish an accrual. Nevertheless, we continue to evaluate this pending litigation to determine if any losses not deemed probable and estimable become so, at which point we would establish an accrual at our best estimate of the loss or range of loss.

We also describe litigation contingencies for which a loss is reasonably possible (but not probable). When disclosing reasonably possible litigation contingencies, we will disclose the amount or range of possible loss, if we are able to make that determination and if material. We review all reasonably possible losses on an ongoing basis to determine whether the likelihood of incurring a loss has become probable, or whether the circumstances have changed such that we may now reasonably estimate a range of loss.

We may also be exposed to litigation contingencies that are remote. Remote litigation contingencies are those for which the likelihood of a loss is slight at period end. We do not disclose, or establish accruals for, remote litigation contingencies, but we evaluate these contingencies on an ongoing basis to determine whether the likelihood of a loss has increased.

Each year, certain of our pending litigation matters are brought to conclusion and/or settlement. Many of these concluded matters involve the same or similar fact patterns as the matters described below. For cases that have settled, but for which settlement is not complete, an accrual is established at our best estimate of the loss exposure. We regularly review these and other accruals to ensure they are adequate, and that there is not the possibility of material losses in excess of our accruals.

Settlements that are complete are fully reflected in our financial statements. The amounts accrued and/or paid for settlements during the periods presented were not material to our consolidated financial condition, cash flows, or results of operations.

The pending lawsuits summarized below are in various stages of development, and the outcomes are uncertain at this time. At period end, except to the extent an immaterial accrual has been established, we do not consider the losses from these pending cases to be both probable and estimable, and we are unable to estimate a range of loss at this time. It is not possible to determine loss exposure for a number of reasons, including, without limitation, one or more of the following: liability appears to be remote; putative class action lawsuits generally pose immaterial exposure until a class is actually certified, which, historically, has not been granted by the courts in the vast majority of our cases in which class certification has been sought; class definitions are often indefinite and preclude detailed exposure analysis; and complaints rarely state an amount sought as relief, and when such amount is stated, it is often a function of pleading requirements and may be unrelated to the potential exposure.

We plan to contest these suits vigorously, but may pursue settlement negotiations in some cases, if appropriate. In the event that any one or more of these cases results in a substantial judgment against, or settlement by, us or if our accruals (if any) prove to be inadequate, the resulting liability could have a material adverse effect on our consolidated financial condition, cash flows, and/or results of operations. Based on information currently known, we do not believe that the outcome of any pending cases described below will have a material impact on our consolidated financial condition, cash flows, and/or results of operations.

At December 31, 2017, pending lawsuits as described above that challenge certain of the operations of our subsidiaries included:

Lawsuits seeking class/collective action status:

• alleging we sell or charge insureds for illusory coverage or coverage lower than amounts allowed by law for personal injury protection (PIP) coverage and pay related claims at levels lower than allowed by law.

• challenging how physical damage claims are handled, adjusted and ultimately paid, including how we value total loss claims, the payment of fees and taxes associated with total losses, and the payment of diminution damages.

• challenging our practice in Florida of adjusting PIP payments.

• challenging our assessment of fees.

• challenging our adjustment of medical bills submitted by insureds in medical claims.

• challenging the manner in which we grant a discount for anti-theft devices.

• challenging our claim settlement practices where the tortfeasor and the injured party are both Progressive insureds.

• challenging general claim practices, such as those relating to subrogation, rental reimbursement, and setting off certain claim payments based on other coverages and payments.

• challenging our payment and reimbursement practices to Medicare Advantage Plans on first party medical, PIP, and bodily injury claims.

• alleging we improperly sell secondary PIP coverage to Medicare and Medicaid beneficiaries in New Jersey.

• challenging our rating practices.

Lawsuits certified or conditionally certified as class/collective actions:

• alleging that we undervalued total loss claims through the use of certain valuation tools.

• alleging that we fail to provide proper uninsured motorist coverage.

• challenging our practice in Florida of adjusting PIP payments.

• alleging that we fail to pay overtime to certain employees who we classify as exempt from overtime pay requirements.

Individual lawsuits:

• challenging the estimation of physical damage and payment practices for physical damage repairs, and allegations of tortious interference with contract and insurance industry antitrust practice asserted by body shops outside our network program.

• challenging, on a representative basis, certain of our pay practices.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

We have certain noncancelable operating lease commitments with lease terms greater than one year for property and computer equipment. The minimum commitments under these agreements at December 31, 2017, were as follows:

(millions)	Commitments
2018	$	53.6
2019	44.2
2020	28.5
2021	16.9
2022	8.0
Thereafter	1.1
Total	$	152.3

Some of the leases have options to renew at the end of the lease periods. The expense we incurred for the leases disclosed above, as well as other operating leases that may be cancelable or have terms less than one year, was:

(millions)	Expense
2017	$	77.2
2016	72.9
2015	66.6

We also have certain noncancelable purchase obligations. The minimum commitment under these agreements at December 31, 2017, was $546.3 million.

The insurance operations of ARX have several multiple-layer property catastrophe excess of loss reinsurance contracts with various reinsurers with terms ranging from one to three years. The minimum commitment under these contracts was $90.7 million at December 31, 2017.

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Dividends

12 Months Ended

Dec. 31, 2017

Dividends [Abstract]

Dividends

DIVIDENDS

We maintain a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of the year. This annual variable dividend is based on a target percentage of after-tax underwriting income multiplied by a performance factor (Gainshare factor), which, beginning in 2017, is determined by reference to the Agency auto, Direct auto, special lines, Commercial Lines, and Property business units, with minor exclusions and adjustments, and subject to the limitations discussed below. The target percentage is determined by our Board of Directors on an annual basis and announced to shareholders and the public. In December 2016, the Board determined the target percentage for 2017 to be 33-1/3% of annual after-tax underwriting income, which is unchanged from the target percentage in both 2016 and 2015. Since the inception of our variable dividend, we have applied a tax rate of 35% to calculate the after-tax underwriting income. Beginning in 2018, we will apply a rate of 21% to calculate the after-tax underwriting income.

The Gainshare factor can range from zero to two and is determined by comparing our operating performance for the specified business units for the year to certain predetermined profitability and growth objectives approved by the Compensation Committee of the Board. This Gainshare factor is also used in the annual cash incentive program currently in place for our employees (our “Gainsharing program”). For 2017, the Gainshare factor was 1.79, compared to 1.67 in 2016 and 1.60 in 2015.

Our annual dividend program will result in a variable payment to shareholders each year, subject to certain limitations. If the Gainshare factor is zero or if our comprehensive income is less than after-tax underwriting income, no dividend would be payable under our annual variable dividend policy. In addition, the ultimate decision on whether or not a dividend will be paid is in the discretion of the Board of Directors. The Board could decide to alter our policy, or not to pay the annual variable dividend, at any time prior to the declaration of the dividend for the year. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in our performance or capital needs, changes in the U.S. federal income tax laws, disruptions of national or international capital markets, or other events affecting our business, liquidity, or financial position.

Following is a summary of our shareholder dividends that were declared in the last three years:

(millions, except per share amounts)			Amount
Dividend Type	Declared	Paid	Per Share		Total1
Annual – Variable	December 2017	February 2018	$	1.1247	$	655.1
Annual – Variable	December 2016	February 2017	0.6808		395.4
Annual – Variable	December 2015	February 2016	0.8882		519.2

¹ Based on an estimate of shares outstanding as of the record date. For the dividends declared in December 2016 and 2015, we paid $395.4 million and $519.0 million, respectively.

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Redeemable Noncontrolling Interest (Notes)

12 Months Ended

Dec. 31, 2017

Noncontrolling Interest [Abstract]

Noncontrolling Interest Disclosure [Text Block]

REDEEMABLE NONCONTROLLING INTEREST

In connection with the April 2015 acquisition of a controlling interest in ARX, The Progressive Corporation entered into a stockholders’ agreement with the other ARX stockholders. As part of the stockholders’ agreement, the minority ARX shareholders have the right to “put” their ARX shares to Progressive in two installments, one in early 2018 and one in early 2021, and Progressive has the ability to “call” a portion of the outstanding shares shortly thereafter. If these rights are exercised in full when available, our ownership stake in ARX capital stock will exceed 80% in 2018 and will reach 100% in 2021. The purchase prices for shares to be purchased by Progressive pursuant to these put or call rights will be determined by adding (A) the price per share paid at the closing on April 1, 2015, to (B) the product of the change in the fully diluted net tangible book value per share of ARX between December 31, 2014 and December 31, 2017 (for the 2018 put or call purchases) or December 31, 2020 (for the 2021 put or call purchases) times a multiple of between 1.0 and 2.0. The multiple will be determined based on the growth and profitability of ARX’s business over the applicable time period, pursuant to criteria included in the stockholders’ agreement. Among other provisions, the stockholders’ agreement also prohibits ARX from taking a number of actions, including the payment of dividends, without the consent of The Progressive Corporation and two other stockholders.

Since these securities are redeemable upon the occurrence of an event that is not solely within the control of Progressive, we have recorded the redeemable noncontrolling interest (NCI) as mezzanine equity on our consolidated balance sheets, which represents the minority shares at the current estimated purchase price pursuant to the put and call provisions of the stockholders’ agreement. The estimated purchase price is based, in part, on the change in tangible net book value of ARX from December 31, 2014 to the balance sheet dates.

The redeemable noncontrolling interest was initially recorded at a fair value of $411.5 million, representing the minority shares at the net acquisition price adjusted for the fair value of the put and call rights. The value of the put and call rights on the acquisition date was based on an internally developed modified binomial model. Subsequent changes to the redeemable noncontrolling interest are based on the maximum redemption value at the end of the reporting period, as determined in accordance with the stockholders’ agreement.

In addition to these minority shares, at December 31, 2017, ARX employees hold options to purchase 22,550 ARX shares. These options and any shares issued upon exercise are subject to the stockholders’ agreement, including the right to “put” these shares to Progressive, as described above. Until the options are exercised, the underlying obligation of approximately $32.5 million is not recorded as part of redeemable NCI.

The changes in the components of redeemable NCI during the year ended December 31, 2017, 2016, and 2015, were:

(millions)	December 31, 2017		December 31, 2016			December 31, 2015
Balance, Beginning of period	$	483.7	$	464.9		$	0
Fair value at date of acquisition	0		0			411.5
Net income attributable to NCI	5.9		26.2			32.9
Other comprehensive income (loss) attributable to NCI	2.3		(3.2		)	(1.1		)
Exercise of employee stock options	3.4		0			0
Purchase of shares from NCI	0		0			(12.6		)
Change in redemption value of NCI	8.4		(4.2		)	34.2
Balance, End of period	$	503.7	$	483.7		$	464.9

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill recorded at December 31, 2017 and 2016 was $452.7 million and $449.4 million, respectively. No accumulated goodwill impairment losses exist.

During 2017 and 2016, the carrying amount of goodwill increased $3.3 million and $1.8 million, respectively. In 2017, we acquired a small excess and surplus lines insurance company to provide us flexibility in our Commercial Lines business. In 2016, ARX entered into an exchange transaction with a third party, whereby ARX acquired 100% of the equity interest in a residential property insurance company and disposed of 100% of the equity interest in a commercial property insurance company.

Intangible Assets

The following table is a summary of the net carrying amount of other intangible assets as of December 31, 2017 and 2016:

(millions)	December 31, 2017		December 31, 2016
Intangible assets subject to amortization	$	354.2	$	420.4
Indefinite-lived intangible assets1	12.4		12.4
Total	$	366.6	$	432.8

¹Indefinite-lived intangible assets are comprised of state insurance and agent licenses. State insurance licenses were previously subject to amortization under superseded accounting guidance and have $0.6 million of accumulated amortization for both periods presented.

Intangible assets subject to amortization consisted of the following:

(millions)	December 31, 2017						December 31, 2016
Category	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Policies in force	$	256.2	$	100.7	$	155.5	$	256.2	$	64.1	$	192.1
Agency relationships	159.2		31.3		127.9		159.2		19.9		139.3
Software rights	79.1		29.4		49.7		79.1		18.8		60.3
Trade name	34.8		13.7		21.1		34.8		6.1		28.7
Total	$	529.3	$	175.1	$	354.2	$	529.3	$	108.9	$	420.4

Amortization expense was $66.2 million, $62.1 million, and $46.8 million for the years ended December 31, 2017, 2016, and 2015, respectively.

During 2017, we revised our estimate of the economic useful life of our trade name intangible asset from an original life of 10 years to a remaining life of 2 years. The decrease in the useful life represents the estimated length of time that it is expected to take to transition the branding of our Property business from the ASI trade name to “Progressive Home.” As of December 31, 2017, the remaining average life of all of our intangible assets was 4.9 years.

The estimated aggregate amortization on these intangible assets for each of the next five years as of December 31, 2017, is as follows:

(millions)
Year	Amortization Expense
2018	$	71.9
2019	66.4
2020	56.9
2021	56.6
2022	29.2

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Reporting and Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Nature Of Operations Policy

Nature of OperationsThe Progressive insurance organization began business in 1937. The Progressive Corporation, an insurance holding company, was formed in 1965. The financial results of The Progressive Corporation include its subsidiaries and affiliates (references to “subsidiaries” in these notes include affiliates as well). Our insurance subsidiaries (collectively the Progressive Group of Insurance Companies) provide personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles, which we refer to as our special lines products, through both an independent insurance agency channel and a direct channel. Our Commercial Lines segment writes primary liability and physical damage insurance for automobiles and trucks owned and/or operated predominantly by small businesses through both the independent agency and direct channels. Our Property segment writes residential property insurance for homeowners, other property owners, and renters, primarily through the independent insurance agency channel.

Basis of Consolidation and Reporting

Basis of Consolidation and Reporting The accompanying consolidated financial statements include the accounts of The Progressive Corporation and ARX Holding Corp. (ARX), and their respective wholly owned insurance and non-insurance subsidiaries and affiliates, in which Progressive or ARX has a controlling financial interest. The Progressive Corporation owned 69.0% of the outstanding capital stock of ARX at December 31, 2017 and 69.2% at December 31, 2016 and 2015. The decrease reflects ARX employee stock options that were exercised during 2017. All intercompany accounts and transactions are eliminated in consolidation.

Estimates

EstimatesWe are required to make estimates and assumptions when preparing our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact (e.g., losses are paid), results may, and will likely, differ from those estimates.

Investments

InvestmentsOur fixed-maturity securities, equity securities, and short-term investments are accounted for on an available-for-sale basis. See Note 2 – Investments for details regarding the composition of our investment portfolio.

Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes, reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.

Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are generally accounted for under the retrospective method. The retrospective method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception of the investment holding period, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The prospective method is used primarily for interest-only securities, non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure or where there is a greater risk of non-performance and where it is possible the initial investment may not be substantially recovered. The prospective method requires a calculation of expected future repayments and resets the yield to allow for future period adjustments; no current period impact to investment income or the security’s cost is made based on the cash flow update. Prepayment assumptions are updated quarterly.

Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments, and are reported at fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in the current period.

Short-term investments may include Eurodollar deposits, commercial paper, repurchase transactions, and other securities expected to mature within one year. From time to time, we may also invest in municipal bonds that have maturity dates that are longer than one year, but have either liquidity facilities or mandatory put features within one year.

Trading securities are securities bought principally for the purpose of sale in the near term. We do not hold any trading securities. To the extent we have trading securities, changes in fair value would be recognized in income in the current period. Derivative instruments, which may be used for trading purposes or classified as trading derivatives due to the characteristics of the transaction, are discussed below.

Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements, and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:

• Changes in fair value of an asset or liability (fair value hedge),

• Foreign currency of an investment in a foreign operation (foreign currency hedge), or

• Variable cash flows of a forecasted transaction (cash flow hedge).

We did not have any derivatives outstanding at December 31, 2017 and 2016. To the extent we have derivatives held for general investment purposes, these derivative instruments are recognized as either assets or liabilities and measured at fair value, with changes in fair value recognized in income as a component of net realized gains (losses) on securities during the period of change.

Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:

• Fair value hedge:  changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of change while the hedge is in effect.

• Foreign currency hedge:  changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.

• Cash flow hedge:  changes in fair value of the hedge would be reported as a component of accumulated other comprehensive income and subsequently amortized into earnings over the life of the hedged transaction.

If a hedge is deemed to become ineffective or discontinued, the following accounting treatment would be applied:

• Fair value hedge:  the derivative instrument would continue to be adjusted through income, while the adjustment in the change in value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive income.

• Foreign currency hedge:  changes in the value of the hedged item would continue to be reflected as a change in translation adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income for the current period.

• Cash flow hedge:  changes in fair value of the derivative instrument would be reported in income for the current period.

For all derivative positions, net cash requirements are limited to changes in fair values, which may vary as a result of changes in interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same counterparty under a master netting arrangement.

Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio’s value in the near term. We regularly monitor our portfolio for price changes, which might indicate potential impairments, and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to: (i) fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors, (ii) market-related factors, such as interest rates or equity market declines, or (iii) credit-related losses, where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security.

We analyze our debt securities that are in a loss position to determine if we intend to sell, or if it is more likely than not that we will be required to sell, the security prior to recovery and, if so, we write down the security to its current fair value, with the entire amount of the write-down recorded to earnings. To the extent that it is more likely than not that we will hold the debt security until recovery (which could be maturity), we determine if any of the decline in value is due to a credit loss (i.e., where the present value of future cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we recognize that portion of the impairment as a component of net realized gains (losses) in the comprehensive income statement, with the difference (i.e., non-credit related impairment) recognized as part of our net unrealized gains (losses) in accumulated other comprehensive income. When an equity security (common equity and nonredeemable preferred stock) in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the comprehensive income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in unrealized gains (losses) as part of accumulated other comprehensive income.

Investment income consists of interest, dividends, and accretion net of amortization. In addition to the discussion above for asset-backed securities, interest is recognized on an accrual basis using the effective yield method. Depending on the nature of the equity instruments, dividends are recorded at either the ex-dividend date or on an accrual basis.

Realized gains (losses) on securities are computed based on the first-in first-out method and include write-downs on available-for-sale securities considered to have other-than-temporary declines in fair value (excluding non-credit related impairments), as well as holding period valuation changes on derivatives, trading securities, and hybrid instruments (e.g., securities with embedded options, where the option is a feature of the overall change in the value of the instrument).

Insurance Premiums and Receivables

Insurance Premiums and Receivables  Insurance premiums written are earned into income on a pro rata basis over the period of risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that are applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts and offer a variety of payment plans. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk.

For our vehicle businesses, we perform a policy level evaluation to determine the extent to which the premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for doubtful accounts based on prior experience.

For our Property business, we do not establish an allowance for doubtful accounts since the risk of uncollectibility is relatively low. If premiums are unpaid by the policy due date, we provide advance notice of cancellation in accordance with each state’s requirements and, if the premiums remain unpaid after receipt of notice, cancel the policy and write off any remaining balance.

Deferred Acquisition Costs

Deferred Acquisition CostsDeferred acquisition costs include commissions, premium taxes, and other variable underwriting and direct sales costs incurred in connection with the successful acquisition or renewal of insurance contracts. These acquisition costs, net of ceding allowances, are deferred and amortized over the policy period in which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these costs. Management believes that these costs will be fully recoverable in the near term.

Advertising Costs

We do not defer any advertising costs. Total advertising costs, which are expensed as incurred

Loss and Loss Adjustment Expense Reserves

Loss and Loss Adjustment Expense ReservesLoss reserves represent the estimated liability on claims reported to us, plus reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are reflected in income in the current period. Such loss and loss adjustment expense reserves are susceptible to change in the near term.

Reinsurance

Reinsurance  Our reinsurance transactions include premiums ceded to “Regulated” plans and “Non-Regulated” plans. The  Regulated plans in which we participate are governed by insurance regulations and include state-provided reinsurance facilities (Michigan Catastrophic Claims Association, Florida Hurricane Catastrophe Fund, North Carolina Reinsurance Facility), as well as state-mandated involuntary plans for commercial vehicles (Commercial Automobile Insurance Procedures/Plans – “CAIP”) and federally regulated plans for flood (National Flood Insurance Program – “NFIP”); we act as a servicing agent for CAIP and as a participant in the “Write Your Own” program for the NFIP. The Non-Regulated plans are voluntary contractual arrangements and primarily relate to our Property business and transportation network company business written by our Commercial Lines segment. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written. See Note 7 – Reinsurance for further discussion.

Income Taxes

Income Taxes  The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. The principal items giving rise to such differences are investment securities (e.g., net unrealized gains (losses), write-downs on securities determined to be other-than-temporarily impaired), loss and loss adjustment expense reserves, unearned premiums reserves, deferred acquisition costs, property and equipment, intangible assets, and non-deductible accruals. We review our deferred tax assets regularly for recoverability. The effects of any changes in the tax rate are recorded to our provision for income taxes, including any changes on items initially recognized in accumulated other comprehensive income. See Note 5 – Income Taxes for further discussion.

Property and Equipment

Property and Equipment  Property and equipment are recorded at cost, less accumulated depreciation, and include capitalized software developed or acquired for internal use. Depreciation is recognized over the estimated useful lives of the assets using accelerated methods for computer equipment and laptops and the straight-line method for all other fixed assets. We evaluate impairment whenever events or circumstances warrant such a review and write-off the impaired assets if appropriate. Land and buildings comprised 66% and 65% of total property and equipment at December 31, 2017 and 2016, respectively.

The useful lives for property and equipment at December 31, 2017, were:

	Useful Lives
Computer equipment and laptops	3 years
Software licenses (internal use)	1-5 years
Capitalized software	3-10 years
Buildings, improvements, and integrated components	7-40 years
All other property and equipment	3-15 years

At December 31, 2017 and 2016, included in other assets in the consolidated balance sheets is $5.3 million and $8.7 million, respectively, of “held for sale” property, which represents the fair value of this property less the estimated costs to sell.

Goodwill and Intangible Assets

Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the estimated fair value of the assets and liabilities acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Substantially all of the goodwill recorded as of December 31, 2017 and 2016, relates to the April 1, 2015 acquisition of a controlling interest in ARX.

Intangible assets primarily arose through the acquisition of ARX and mainly represent the future premiums that will be recognized from the policies and agency relationships that existed at the acquisition date. The majority of the intangible assets have finite lives, which, at December 31, 2017, had a remaining life range from 2 to 11 years. See Note 16 – Goodwill and Intangible Assets for further discussion.

We evaluate our goodwill for impairment at least annually using a qualitative approach. If events or changes in circumstances indicate that the carrying value of goodwill or intangible assets may not be recoverable, we will evaluate such items for impairment using a quantitative approach.

Guaranty Fund Assessments

Guaranty Fund Assessments  We are subject to state guaranty fund assessments, which provide for the payment of covered claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal determination of insolvency has occurred, and we have written the premiums on which the assessments will be based. Assessments that are available for recoupment from policyholders are capitalized when incurred; all other assessments are expensed.

Fees and Other Revenues

Fees and Other Revenues  Fees and other revenues primarily represent fees collected from policyholders relating to installment charges in accordance with our bill plans, as well as late payment and insufficient funds fees. Other revenues may include revenue from ceding commissions in excess of acquisition costs, the sale of tax credits, referral fees, rental income, and other revenue transactions. Fees and other revenues are generally earned when collected, except for excess ceding commissions, which are earned over the policy period.

Service Revenues and Expenses

Service Revenues and ExpensesOur service businesses provide insurance-related services. Service revenues and expenses from our commission-based businesses are recorded in the period in which they are earned or incurred. Service revenues generated from processing business for involuntary CAIP plans are earned on a pro rata basis over the term of the related policies. Service expenses related to these CAIP plans are expensed as incurred.

Equity-Based Compensation

Equity-Based Compensation  We issue time-based and performance-based restricted stock unit awards to key members of management (including members of ARX and its subsidiaries in 2017) as our form of equity compensation, and time-based restricted stock awards to non-employee directors. Collectively, we refer to these awards as “restricted equity awards.” Compensation expense for time-based restricted equity awards with installment vesting is recognized over each respective vesting period. For performance-based restricted equity awards, compensation expense is recognized over the respective estimated vesting periods. Dividend equivalent units are credited to outstanding restricted stock unit awards, both time-based and performance-based, at the time a dividend is paid to shareholders.

We record an estimate for expected forfeitures of restricted equity awards based on our historical forfeiture rates. In addition, we shorten the vesting periods of certain time-based restricted equity awards based on the “qualified retirement” provisions in our equity compensation plans, under which (among other provisions) if the participant satisfies certain age and years-of-service requirements, the vesting and distribution of 50% of outstanding time-based restricted equity awards accelerates upon reaching eligibility for a qualified retirement and shortly after the grant date for each subsequent award.

ARX has nonqualified and incentive stock options outstanding that were issued prior to April 2015 as a form of equity compensation to certain of the officers and employees of ARX and its subsidiaries. These outstanding stock options are subject to the put/call features contained in the current stockholders’ agreement, pursuant to which The Progressive Corporation has the right, and can be required, to purchase a portion or all the shares underlying these awards in 2018 and 2021. The vested stock options, and the shares issuable upon exercise of the stock options, are also subject to repurchase by ARX if the holder’s employment terminates. See Note 15 – Redeemable Noncontrolling Interest for further discussion. These stock options, which are treated for accounting purposes as liability awards, are expensed over the respective vesting periods based on the Black-Scholes value determined at period end.

Earnings Per Share

Earnings Per Share  Net income attributable to Progressive is used in our calculation of the per share amounts. Basic earnings per share is computed using the weighted average number of common shares outstanding during the reporting period, excluding unvested time-based and performance-based restricted equity awards that are subject to forfeiture. Diluted earnings per share includes common stock equivalents assumed outstanding during the period. Our common stock equivalents include the incremental shares assumed to be issued for:

• earned but unvested time-based restricted equity awards, and

• certain unvested performance-based restricted equity awards that satisfied contingency conditions for common stock equivalents during the period.

Cash Flow, Supplemental Disclosures

Supplemental Cash Flow InformationCash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments of funds held in bank demand deposit accounts on ARX’s subsidiaries, which are primarily collateralized by U.S. Treasury notes. The amount of reverse repurchase commitments held by ARX’s subsidiaries at December 31, 2017, 2016, and 2015, were $247.2 million, $150.0 million, and $174.8 million, respectively. Restricted cash on our consolidated balance sheets at December 31, 2017 and 2016, represents cash that is restricted to pay flood claims under the National Flood Insurance Program’s “Write Your Own” program, for which American Strategic Insurance and other subsidiaries of ARX (ASI) are administrators. Non-cash activity includes declared but unpaid dividends.

The cash transferred in the exchange transaction, which occurred in June 2016, was revised to correct the reclassification of a

non-cash transaction; there was no overall impact on the increase in cash, cash equivalents, and restricted cash that was reported in our consolidated statement of cash flows for the year ended December 31, 2016. See Note 16 – Goodwill and Intangible Assets for further discussion of the exchange transaction.

For the years ended December 31, we paid the following:

(millions)	2017		2016		2015
Income taxes	$	715.6	$	459.4	$	701.8
Interest	146.3		139.2		132.0

New Accounting Standards

New Accounting Standards

Issued

In January 2018, the Financial Accounting Standards Board (FASB) proposed an Accounting Standards Update (ASU), which would provide targeted improvements to the new lease accounting guidance issued by the FASB in February 2016 (the “2016 ASU”). The 2016 ASU, which eliminates the off-balance-sheet accounting for leases, will require lessees to report their operating leases as both an asset and liability on the statement of financial position and to disclose key information about leasing arrangements in the financial statement footnotes. Under the 2016 ASU, there will be no change to the recognition of lease expense in our results of operations. The ASU will be effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2018 (2019 for calendar-year companies). Under the proposed guidance, companies would have the option to apply the new lease requirements either as of the effective date (i.e., January 1, 2019), with comparative information presented in accordance with the previous standard, or on a modified restrospective basis, which would restate all financial statement information as of the beginning of the earliest period presented and is the transition method under the 2016 ASU. Based on our lease portfolio at December 31, 2017, and in accordance with the accounting elections available in the ASU, we would have recorded an increase to assets and liabilities of approximately $140 million, and there would have been no impact on our results of operations or cash flows. Therefore, we do not expect this standard to have a material impact on our financial condition.

In March 2017, the FASB issued an ASU related to premium amortization on purchased callable debt securities. The intent of the standard is to shorten the amortization period for certain purchased callable debt securities held at a premium. Under the ASU, the premium is required to be amortized to the earliest call date. The ASU more closely aligns interest income recorded on bonds held at a premium with the economics of the underlying instrument. The ASU, which is required to be applied on a modified retrospective basis, is effective for fiscal years beginning after December 15, 2018 (2019 for calendar-year companies), and interim periods within those fiscal years. Since we have historically used a yield-to-worst scenario for our securities that were purchased at a premium, and the first call on a premium security most often produces the lowest and most conservative yield, we do not expect this standard to have a significant impact on our financial condition, cash flows, or results of operations.

In January 2017, the FASB issued an ASU, which eliminates the requirement to determine the implied value of goodwill in measuring an impairment loss. Upon adoption, the measurement of a goodwill impairment will represent the excess of the reporting unit’s carrying value over fair value, limited to the carrying value of goodwill. This ASU is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 (2020 for calendar-year companies), with early adoption permitted. We do not expect this standard to have a material impact on our financial position or results of operations.

In June 2016, the FASB issued an ASU intended to improve the timing, and enhance the accounting and disclosure, of credit losses on financial assets. Additionally, this update will modify the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities and will result in the creation of an allowance for credit losses as a contra asset account. The ASU will require cumulative-effect changes to retained earnings in the period of adoption, if any occur, and will also require prospective changes on previously recorded impairments. This ASU is effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2019 (2020 for calendar-year companies), with early adoption permissible (including interim periods within that fiscal year) beginning after December 15, 2018 (2019 for calendar-year companies). While the ASU creates additional accounting complexities related to the recognition of the impairment losses, and subsequent recoveries, through an allowance for credit losses account, we do not expect that the ASU will have a material impact on our current method of evaluating securities for credit losses or the timing or recognition of the amounts of the impairment losses.

In January 2016, the FASB released an ASU intended to improve the recognition and measurement of financial instruments. The new guidance will require the changes in fair value of equity securities to be recognized as a component of net income. The ASU is effective for fiscal years beginning after December 15, 2017 (2018 for calendar-year companies) and requires the prospective method of adoption with a cumulative-effect adjustment recorded to beginning retained earnings upon adoption. In January 2018, we recorded a cumulative-effect adjustment of $1.3 billion, which is net of taxes at the 35% tax rate. The cumulative-effect adjustment represents the amount of after-tax net unrealized gains on equity securities that was recorded as part of accumulated other comprehensive income at December 31, 2017. This ASU will have no impact on comprehensive income.

Adopted

For the year ended December 31, 2017, we adopted the ASU related to the statement of cash flows and the classification and presentation of changes in restricted cash. This update requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts described as restricted cash. This ASU, which is required to be applied on a retrospective basis, is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. We elected to early adopt this ASU. Since this standard only affected classification and presentation, there was no impact on our results of operations, financial condition, or cash flows.

On January 1, 2017, we adopted the ASU to simplify the accounting for employee share-based payment transactions. There were several provisions that could be adopted under this ASU. We did not elect to make any changes to our method of recording forfeitures and are continuing to withhold taxes at the minimum statutory tax rate. We did elect, on a retrospective basis, to disclose the payment of cash to a taxing authority for which we withheld shares for this purpose as a financing activity. Lastly, during the year ended December 31, 2017, we recognized $25.1 million of excess tax benefits as an income tax benefit in our consolidated statements of comprehensive income; this provision was adopted on a prospective basis.

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Reporting and Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Advertising Costs

Total advertising costs, which are expensed as incurred, for the years ended

December 31, were:

(millions)	Advertising Costs
2017	$	1,005.4
2016	756.2
2015	748.3

Property and Equipment

The useful lives for property and equipment at December 31, 2017, were:

	Useful Lives
Computer equipment and laptops	3 years
Software licenses (internal use)	1-5 years
Capitalized software	3-10 years
Buildings, improvements, and integrated components	7-40 years
All other property and equipment	3-15 years

Interest Capitalized

Total capitalized interest, which primarily relates to capitalized software projects, for the years ended December 31, was:

(millions)	Capitalized Interest
2017	$	2.8
2016	2.9
2015	2.4

Equity Based Compensation and Related Tax Benefits

The total compensation expense recognized for equity-based compensation, both our equity and liability awards, for the years ended December 31, was:

(millions)	2017		2016		2015
Pretax expense	$	95.4	$	85.2	$	66.2
Tax benefit1	33.4		29.8		23.2

¹Reflected at the 35% corporate federal tax rate; the revaluation to the 21% rate is reflected in the total revaluation adjustment recorded at December 31, 2017 (see Note 5 – Income Taxes for further discussion).

Supplemental Cash Flow Information

For the years ended December 31, we paid the following:

(millions)	2017		2016		2015
Income taxes	$	715.6	$	459.4	$	701.8
Interest	146.3		139.2		132.0

XML

Investments (Tables)

12 Months Ended

Dec. 31, 2017

Investments Schedule [Abstract]

Investment Portfolio by Major Security Type

The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio. The net holding period gains (losses) represent the

amounts realized on our hybrid securities only (see discussion below).

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)			Fair Value		% of Total Fair Value
December 31, 2017
Fixed maturities:
U.S. government obligations	$	6,688.8	$	1.1	$	(44.0	)	$	0		$	6,645.9	24.4	%
State and local government obligations	2,285.6		20.7		(9.3		)	0.1			2,297.1		8.4
Foreign government obligations	0		0		0			0			0		0
Corporate debt securities	4,997.2		14.8		(14.4		)	0.1			4,997.7		18.3
Residential mortgage-backed securities	828.8		11.3		(3.4		)	0			836.7		3.1
Commercial mortgage-backed securities	2,760.1		11.8		(13.3		)	0			2,758.6		10.1
Other asset-backed securities	2,454.5		4.5		(4.5		)	0.2			2,454.7		9.0
Redeemable preferred stocks	194.9		17.8		(1.5		)	(0.2		)	211.0		0.8
Total fixed maturities	20,209.9		82.0		(90.4		)	0.2			20,201.7		74.1
Equity securities:
Nonredeemable preferred stocks	698.6		114.0		(8.8		)	0			803.8		2.9
Common equities	1,499.0		1,901.0		(0.2		)	0			3,399.8		12.5
Short-term investments	2,869.4		0		0			0			2,869.4		10.5
Total portfolio1,2	$	25,276.9	$	2,097.0	$	(99.4	)	$	0.2		$	27,274.7	100.0	%

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)		Fair Value		% of Total Fair Value
December 31, 2016
Fixed maturities:
U.S. government obligations	$	2,899.2	$	0	$	(29.1	)	$	0	$	2,870.1	12.2	%
State and local government obligations	2,509.5		13.8		(20.7		)	0		2,502.6		10.7
Foreign government obligations	24.5		0		0			0		24.5		0.1
Corporate debt securities	4,557.8		17.3		(24.3		)	0.1		4,550.9		19.4
Residential mortgage-backed securities	1,489.7		23.7		(15.6		)	1.5		1,499.3		6.4
Commercial mortgage-backed securities	2,266.9		12.0		(25.5		)	0		2,253.4		9.6
Other asset-backed securities	2,350.7		4.6		(4.4		)	0.2		2,351.1		10.0
Redeemable preferred stocks	188.8		5.1		(2.0		)	0		191.9		0.8
Total fixed maturities	16,287.1		76.5		(121.6		)	1.8		16,243.8		69.2
Equity securities:
Nonredeemable preferred stocks	734.2		135.4		(16.1		)	0		853.5		3.6
Common equities	1,437.5		1,377.0		(2.1		)	0		2,812.4		12.0
Short-term investments	3,572.9		0		0			0		3,572.9		15.2
Total portfolio1,2	$	22,031.7	$	1,588.9	$	(139.8	)	$	1.8	$	23,482.6	100.0	%

¹ Our portfolio reflects the effect of unsettled security transactions and collateral on any open derivative positions; at December 31, 2017, $5.8 million was included in “other assets,” compared to $27.8 million in “other liabilities” at December 31, 2016.

² The total fair value of the portfolio at December 31, 2017 and 2016 included $1.6 billion and $1.3 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

Hybrid Securities

Included in our fixed maturities are hybrid securities, which are reported at fair value at December 31:

(millions)	2017		2016
State and local government obligations	$	6.1	$	0
Corporate debt securities	99.8		40.1
Residential mortgage-backed securities	0		170.5
Other asset-backed securities	6.7		8.9
Redeemable preferred stocks	30.3		0
Total hybrid securities	$	142.9	$	219.5

Composition of Fixed Maturities by Maturity

The composition of fixed maturities by maturity at December 31, 2017, was:

(millions)	Cost		Fair Value
Less than one year	$	3,964.1	$	3,980.0
One to five years	12,706.5		12,671.3
Five to ten years	3,294.4		3,306.9
Ten years or greater	244.9		243.5
Total	$	20,209.9	$	20,201.7

Gross Unrealized Losses by Major Security

The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)							No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair  Value		Unrealized Losses
December 31, 2017
Fixed maturities:
U.S. government obligations	58	$	5,817.0	$	(44.0	)	41	$	4,869.3	$	(34.6	)	17	$	947.7	$	(9.4	)
State and local government obligations	358	1,200.3		(9.3		)	230	737.6		(4.4		)	128	462.7		(4.9		)
Corporate debt securities	222	2,979.4		(14.4		)	171	2,072.9		(9.1		)	51	906.5		(5.3		)
Residential mortgage-backed securities	201	300.9		(3.4		)	30	75.1		(0.2		)	171	225.8		(3.2		)
Commercial mortgage-backed securities	105	1,682.3		(13.3		)	63	1,221.2		(5.9		)	42	461.1		(7.4		)
Other asset-backed securities	197	1,837.3		(4.5		)	134	1,377.8		(3.3		)	63	459.5		(1.2		)
Redeemable preferred stocks	2	21.8		(1.5		)	1	10.8		(0.1		)	1	11.0		(1.4		)
Total fixed maturities	1,143	13,839.0		(90.4		)	670	10,364.7		(57.6		)	473	3,474.3		(32.8		)
Equity securities:
Nonredeemable preferred stocks	4	127.8		(8.8		)	1	56.5		(0.5		)	3	71.3		(8.3		)
Common equities	19	13.4		(0.2		)	18	13.4		(0.2		)	1	0		0
Total equity securities	23	141.2		(9.0		)	19	69.9		(0.7		)	4	71.3		(8.3		)
Total portfolio	1,166	$	13,980.2	$	(99.4	)	689	$	10,434.6	$	(58.3	)	477	$	3,545.6	$	(41.1	)

	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)							No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair Value		Unrealized Losses
December 31, 2016
Fixed maturities:
U.S. government obligations	30	$	2,774.0	$	(29.1	)	30	$	2,774.0	$	(29.1	)	0	$	0	$	0
State and local government obligations	618	1,497.9		(20.7		)	584	1,404.3		(19.6		)	34	93.6		(1.1		)
Corporate debt securities	184	2,615.1		(24.3		)	175	2,559.9		(24.0		)	9	55.2		(0.3		)
Residential mortgage-backed securities	233	953.7		(15.6		)	117	209.7		(1.7		)	116	744.0		(13.9		)
Commercial mortgage-backed securities	111	1,347.3		(25.5		)	85	1,061.2		(22.9		)	26	286.1		(2.6		)
Other asset-backed securities	103	1,605.2		(4.4		)	89	1,423.3		(3.9		)	14	181.9		(0.5		)
Redeemable preferred stocks	2	31.0		(2.0		)	0	0		0			2	31.0		(2.0		)
Total fixed maturities	1,281	10,824.2		(121.6		)	1,080	9,432.4		(101.2		)	201	1,391.8		(20.4		)
Equity securities:
Nonredeemable preferred stocks	13	329.6		(16.1		)	8	175.2		(3.8		)	5	154.4		(12.3		)
Common equities	75	22.1		(2.1		)	69	19.7		(1.7		)	6	2.4		(0.4		)
Total equity securities	88	351.7		(18.2		)	77	194.9		(5.5		)	11	156.8		(12.7		)
Total portfolio	1,369	$	11,175.9	$	(139.8	)	1,157	$	9,627.3	$	(106.7	)	212	$	1,548.6	$	(33.1	)

Total Non-Credit Portion of Other-Than-Temporary Impairment Recorded in Accumulated Other Comprehensive Income, Reflecting Original Non-Credit Loss at the Time Credit Impairment

The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined (i.e., unadjusted for valuation changes subsequent to the original write-down):

	December 31,
(millions)	2017			2016
Fixed maturities:
Residential mortgage-backed securities	$	(19.7	)	$	(43.3	)
Commercial mortgage-backed securities	(0.3		)	(0.6		)
Total fixed maturities	$	(20.0	)	$	(43.9	)

OTTI Credit Losses Recognized in Earnings

The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2017, 2016, and 2015, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Total
Total at December 31, 2016	$	11.1		$	0.4		$	11.5
Credit losses for which an OTTI was not previously recognized	0			0.4			0.4
Reductions for securities sold/matured	(10.9		)	(0.3		)	(11.2		)
Change in recoveries of future cash flows expected to be collected1	(0.2		)	0			(0.2		)
Total at December 31, 2017	$	0		$	0.5		$	0.5

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed		Total
Total at December 31, 2015	$	12.4		$	0.4	$	12.8
Credit losses for which an OTTI was not previously recognized	0			0		0
Reductions for securities sold/matured	0			0		0
Change in recoveries of future cash flows expected to be collected1	(1.3		)	0		(1.3		)
Total at December 31, 2016	$	11.1		$	0.4	$	11.5

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed		Total
Total at December 31, 2014	$	12.7		$	0.4	$	13.1
Credit losses for which an OTTI was not previously recognized	0			0		0
Reductions for securities sold/matured	(1.4		)	0		(1.4		)
Change in recoveries of future cash flows expected to be collected1	1.1			0		1.1
Total at December 31, 2015	$	12.4		$	0.4	$	12.8

¹ Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

Components of Net Realized Gains (Losses)

The components of net realized gains (losses) for the years ended December 31, were:

(millions)	2017			2016			2015
Gross realized gains on security sales
Fixed maturities:
U.S. government obligations	$	6.2		$	24.6		$	17.5
State and local government obligations	10.5			16.0			7.8
Corporate and other debt securities	20.3			43.3			31.2
Residential mortgage-backed securities	23.8			2.5			4.9
Commercial mortgage-backed securities	4.9			13.3			15.7
Other asset-backed securities	0.3			0			0
Redeemable preferred stocks	8.5			20.9			0.1
Total fixed maturities	74.5			120.6			77.2
Equity securities:
Nonredeemable preferred stocks	58.4			11.9			65.3
Common equities	43.0			61.3			50.4
Short-term investments	0			0.1			0
Subtotal gross realized gains on security sales	175.9			193.9			192.9
Gross realized losses on security sales
Fixed maturities:
U.S. government obligations	(28.7		)	(2.4		)	(0.9		)
State and local government obligations	(0.1		)	(1.6		)	(0.3		)
Corporate and other debt securities	(5.1		)	(2.5		)	(5.0		)
Residential mortgage-backed securities	(0.4		)	(0.2		)	(0.8		)
Commercial mortgage-backed securities	(5.3		)	(5.6		)	(1.3		)
Other asset-backed securities	(0.4		)	0			0
Redeemable preferred stocks	(6.4		)	(6.6		)	0
Total fixed maturities	(46.4		)	(18.9		)	(8.3		)
Equity securities:
Nonredeemable preferred stocks	(5.9		)	(5.3		)	(3.2		)
Common equities	(12.2		)	(15.7		)	(38.4		)
Short-term investments	(0.2		)	(0.1		)	0
Subtotal gross realized losses on security sales	(64.7		)	(40.0		)	(49.9		)
Net realized gains (losses) on security sales
Fixed maturities:
U.S. government obligations	(22.5		)	22.2			16.6
State and local government obligations	10.4			14.4			7.5
Corporate and other debt securities	15.2			40.8			26.2
Residential mortgage-backed securities	23.4			2.3			4.1
Commercial mortgage-backed securities	(0.4		)	7.7			14.4
Other asset-backed securities	(0.1		)	0			0
Redeemable preferred stocks	2.1			14.3			0.1
Total fixed maturities	28.1			101.7			68.9
Equity securities:
Nonredeemable preferred stocks	52.5			6.6			62.1
Common equities	30.8			45.6			12.0
Short-term investments	(0.2		)	0			0
Subtotal net realized gains (losses) on security sales	111.2			153.9			143.0
Other-than-temporary impairment losses
Fixed maturities:
Commercial mortgage-backed securities	(0.4		)	0			0
Redeemable preferred stocks	0			(25.3		)	0
Total fixed maturities	(0.4		)	(25.3		)	0
Equity securities:
Common equities	(11.2		)	(0.3		)	(8.7		)
Subtotal investment other-than-temporary impairment losses	(11.6		)	(25.6		)	(8.7		)
Other asset impairment	(49.6		)	(59.7		)	0
Subtotal other-than-temporary impairment losses	(61.2		)	(85.3		)	(8.7		)
Other gains (losses)
Hybrid securities	(1.6		)	2.1			(1.3		)
Derivative instruments	0			(20.0		)	(20.7		)
Litigation settlements	1.2			0.4			0.4
Subtotal other gains (losses)	(0.4		)	(17.5		)	(21.6		)
Total net realized gains (losses) on securities	$	49.6		$	51.1		$	112.7

Components of Net Investment Income

The components of net investment income for the years ended December 31, were:

(millions)	2017			2016			2015
Fixed maturities:
U.S. government obligations	$	72.7		$	18.2		$	28.3
State and local government obligations	51.5			52.3			60.7
Foreign government obligations	0.3			0.4			0.4
Corporate debt securities	125.2			110.7			102.4
Residential mortgage-backed securities	34.7			47.3			54.3
Commercial mortgage-backed securities	79.6			81.6			74.6
Other asset-backed securities	47.1			28.0			22.0
Redeemable preferred stocks	11.8			14.9			15.0
Total fixed maturities	422.9			353.4			357.7
Equity securities:
Nonredeemable preferred stocks	44.1			48.6			43.7
Common equities	58.3			57.2			51.0
Short-term investments	37.8			19.7			2.2
Investment income	563.1			478.9			454.6
Investment expenses	(23.9		)	(22.4		)	(22.8		)
Net investment income	$	539.2		$	456.5		$	431.8

Derivative Instruments

The following table shows the status of our derivative instruments at December 31, 2017 and 2016, and for the years ended December 31, 2017, 2016, and 2015:

(millions)								Balance Sheet2					Comprehensive Income Statement
	Notional Value1								Assets (Liabilities) Fair Value				Pretax Net Realized Gains (Losses)
													Years ended
	December 31,								December 31,				December 31,
Derivatives designated as:	2017		2016		2015		Purpose	Classification	2017		2016		2017		2016			2015
Hedging instruments
Closed:
Ineffective cash flow hedge	$	31	$	370	$	18	Manage interest rate risk	NA	$	0	$	0	$	0	$	(1.3	)	$	0.2
Non-hedging instruments
Assets:
Interest rate swaps	0		0		750		Manage portfolio duration	Investments - fixed maturities	0		0		0		0			(23.4		)
Closed:
Interest rate swaps	0		750		0		Manage portfolio duration	NA	0		0		0		(19.0		)	0
U.S. Treasury Note futures	0		135		691		Manage portfolio duration	NA	0		0		0		0.3			2.5
Total	NA		NA		NA				$	0	$	0	$	0	$	(20.0	)	$	(20.7	)

¹ The amounts represent the value held at year end for open positions and the maximum amount held during the year for closed positions.

² To the extent we held both derivative assets and liabilities with the same counterparty that were subject to an enforceable master netting arrangement, we reported them on a gross basis on our balance sheets, consistent with our historical presentation.

NA = Not Applicable

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Fair Value (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Composition of Investment Portfolio by Major Security Type

The composition of the investment portfolio by major security type and our outstanding debt was:

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2017
Fixed maturities:
U.S. government obligations	$	6,645.9	$	0	$	0	$	6,645.9	$	6,688.8
State and local government obligations	0		2,297.1		0		2,297.1		2,285.6
Foreign government obligations	0		0		0		0		0
Corporate debt securities	0		4,997.7		0		4,997.7		4,997.2
Subtotal	6,645.9		7,294.8		0		13,940.7		13,971.6
Asset-backed securities:
Residential mortgage-backed	0		836.7		0		836.7		828.8
Commercial mortgage-backed	0		2,758.6		0		2,758.6		2,760.1
Other asset-backed	0		2,454.7		0		2,454.7		2,454.5
Subtotal asset-backed securities	0		6,050.0		0		6,050.0		6,043.4
Redeemable preferred stocks:
Financials	0		64.1		0		64.1		61.3
Utilities	0		11.4		0		11.4		10.1
Industrials	0		135.5		0		135.5		123.5
Subtotal redeemable preferred stocks	0		211.0		0		211.0		194.9
Total fixed maturities	6,645.9		13,555.8		0		20,201.7		20,209.9
Equity securities:
Nonredeemable preferred stocks:
Financials	80.6		718.2		0		798.8		693.6
Industrials	0		0		5.0		5.0		5.0
Subtotal nonredeemable preferred stocks	80.6		718.2		5.0		803.8		698.6
Common equities:
Common stocks	3,399.5		0		0		3,399.5		1,498.7
Other risk investments	0		0		0.3		0.3		0.3
Subtotal common equities	3,399.5		0		0.3		3,399.8		1,499.0
Total fixed maturities and equity securities	10,126.0		14,274.0		5.3		24,405.3		22,407.5
Short-term investments	1,824.4		1,045.0		0		2,869.4		2,869.4
Total portfolio	$	11,950.4	$	15,319.0	$	5.3	$	27,274.7	$	25,276.9
Debt	$	0	$	3,606.5	$	37.1	$	3,643.6	$	3,306.3

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2016
Fixed maturities:
U.S. government obligations	$	2,870.1	$	0	$	0	$	2,870.1	$	2,899.2
State and local government obligations	0		2,502.6		0		2,502.6		2,509.5
Foreign government obligations	24.5		0		0		24.5		24.5
Corporate debt securities	0		4,550.9		0		4,550.9		4,557.8
Subtotal	2,894.6		7,053.5		0		9,948.1		9,991.0
Asset-backed securities:
Residential mortgage-backed	0		1,499.3		0		1,499.3		1,489.7
Commercial mortgage-backed	0		2,253.1		0.3		2,253.4		2,266.9
Other asset-backed	0		2,351.1		0		2,351.1		2,350.7
Subtotal asset-backed securities	0		6,103.5		0.3		6,103.8		6,107.3
Redeemable preferred stocks:
Financials	0		59.5		0		59.5		59.8
Utilities	0		30.9		0		30.9		30.5
Industrials	0		101.5		0		101.5		98.5
Subtotal redeemable preferred stocks	0		191.9		0		191.9		188.8
Total fixed maturities	2,894.6		13,348.9		0.3		16,243.8		16,287.1
Equity securities:
Nonredeemable preferred stocks:
Financials	138.1		715.4		0		853.5		734.2
Industrials	0		0		0		0		0
Subtotal nonredeemable preferred stocks	138.1		715.4		0		853.5		734.2
Common equities:
Common stocks	2,812.0		0		0		2,812.0		1,437.1
Other risk investments	0		0		0.4		0.4		0.4
Subtotal common equities	2,812.0		0		0.4		2,812.4		1,437.5
Total fixed maturities and equity securities	5,844.7		14,064.3		0.7		19,909.7		18,458.8
Short-term investments	3,009.3		563.6		0		3,572.9		3,572.9
Total portfolio	$	8,854.0	$	14,627.9	$	0.7	$	23,482.6	$	22,031.7
Debt	$	0	$	3,188.5	$	127.3	$	3,315.8	$	3,148.2

Summary of Changes in Fair Value Associated With Level 3 Assets

The following tables provide a summary of changes in fair value associated with Level 3 assets for the years ended December 31, 2017 and 2016:

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2016		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at Dec. 31, 2017
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0.3	$	(0.3	)	$	0	$	0	$	0	$	0	$	0	$	0
Total fixed maturities	0.3		(0.3		)	0		0		0		0		0		0
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		0			5.0		0		0		0		0		5.0
Common equities:
Other risk investments	0.4		(0.1		)	0		0		0		0		0		0.3
Total Level 3 securities	$	0.7	$	(0.4	)	$	5.0	$	0	$	0	$	0	$	0	$	5.3

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2015		Calls/ Maturities/ Paydowns			Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at Dec. 31, 2016
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	9.9	$	(9.6	)	$	0	$	0	$	0	$	0	$	0	$	0.3
Total fixed maturities	9.9		(9.6		)	0		0		0		0		0		0.3
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		0			0		0		0		0		0		0
Common equities:
Other risk investments	0.3		0			0		0		0		0.1		0		0.4
Total Level 3 securities	$	10.2	$	(9.6	)	$	0	$	0	$	0	$	0.1	$	0	$	0.7

Summary of Quantitative Information about Level 3 Fair Value Measurements

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at December 31:

	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2017		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0	NA	NA	NA
Total fixed maturities	0
Equity securities:
Nonredeemable preferred stocks:
Industrials1	5.0		Internal price	Unadjusted purchase price	3.9
Subtotal Level 3 securities	5.0
Third-party pricing exemption securities2	0.3
Total Level 3 securities	$	5.3

¹ The security was internally-priced since it is privately held and it was valued at December 31, 2017 using the purchase price.

² The fair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

	Quantitative Information about Level 3 Fair Value Measurements
($ in millions)	Fair Value at Dec. 31, 2016		Valuation Technique	Unobservable Input	Unobservable Input Assumption
Fixed maturities:
Asset-backed securities:
Commercial mortgage-backed	$	0.3	External vendor	Prepayment rate1	0
Total fixed maturities	0.3
Equity securities:
Nonredeemable preferred stocks:
Industrials	0		NA	NA	NA
Subtotal Level 3 securities	0.3
Third-party pricing exemption securities2	0.4
Total Level 3 securities	$	0.7

¹ Assumes that one security has 0% of the principal amount of the underlying loans that will be paid off prematurely in each year.

² Thefair values for these securities were obtained from non-binding external sources where unobservable inputs are not reasonably available to us.

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Debt (Tables)

12 Months Ended

Dec. 31, 2017

Debt Table

Debt at December 31, consisted of:

	2017				2016
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)	$	498.8	$	520.7	$	498.4	$	528.8
2.45% Senior Notes due 2027 (issued: $500.0, August 2016)	496.1		477.9		495.8		464.6
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)	296.1		382.3		295.9		380.1
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)	395.3		516.9		395.2		499.0
4.35% Senior Notes due 2044 (issued: $350.0, April 2014)	346.5		388.7		346.4		362.3
3.70% Senior Notes due 2045 (issued: $400.0, January 2015)	395.2		402.9		395.1		372.5
4.125% Senior Notes due 2047 (issued: $850.0, April 2017)	841.2		917.1		0		0
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued: $1,000.0, June 2007; outstanding: $0 and $594.6)	0		0		594.1		581.2
Other debt instruments	37.1		37.1		127.3		127.3
Total	$	3,306.3	$	3,643.6	$	3,148.2	$	3,315.8

Aggregate Principal Payments on Debt Outstanding

Aggregate required principal payments on debt outstanding at December 31, 2017, are as follows:

(millions)
Year	Payments
2018	$	25.0
2019	12.1
2020	0
2021	500.0
2022	0
Thereafter	2,800.0
Total	$	3,337.1

Cash Flow Hedging [Member]

Unrealized Gain (Loss) on Interest Rate Cash Flow Hedges Included in Accumulated Other Comprehensive Income

The following table shows the original gain (loss) recognized at debt issuance and the unamortized balance at December 31, 2017, on a pretax basis:

(millions)	Unrealized Gain (Loss) at Debt Issuance			Unamortized Balance at December 31, 2017
3.75% Senior Notes	$	(5.1	)	$	(2.1	)
6 5/8% Senior Notes	(4.2		)	(2.7		)
6.25% Senior Notes	5.1			3.6
4.35% Senior Notes	(1.6		)	(1.5		)
3.70% Senior Notes	(12.9		)	(12.2		)
4.125% Senior Notes	(8.0		)	(7.9		)

Other Debt Instruments [Member]

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments [Table Text Block]

The other debt instruments reported in the table above represent ARX indebtedness and consist of:

	December 31, 2017			December 31, 2016
Type of debt instrument	Number of Instruments	Carrying Value		Number of Instruments	Carrying Value		Stated Maturity Date(s)
Term loans	2	$	37.1	2	$	62.1	December 2018 and 2019
Junior subordinated notes	0	0		2	41.2		NA
Senior notes	0	0		4	24.0		NA
Total		$	37.1		$	127.3

NA - Not applicable as the notes were redeemed during 2017.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Components of Income Tax Provision

(millions)	2017			2016			2015
Current tax provision
Federal	$	680.9		$	469.6		$	655.3
State	12.8			12.7			14.7
Deferred tax expense (benefit)
Federal	(149.4		)	(66.3		)	(47.7		)
State	(3.5		)	(2.5		)	(11.2		)
Total income tax provision	$	540.8		$	413.5		$	611.1

Reconciliation of Provision (Benefit) for Income Taxes Reported in Consolidated Statements of Income with Tax at Statutory Rate

($ in millions)	2017					2016					2015
Income before income taxes	$	2,138.9				$	1,470.7				$	1,911.6
Tax at statutory federal rate	$	748.6		35	%	$	514.8		35	%	$	669.1		35	%
Tax effect of:
Net deferred tax liability revaluation1	(99.5		)	(5	)	0			0		0			0
Tax credits	(52.4		)	(2	)	(62.2		)	(4	)	(1.9		)	0
Stock-based compensation2	(25.1		)	(1	)	0			0		0			0
Dividends received deduction	(20.7		)	(1	)	(22.6		)	(2	)	(19.8		)	(1	)
Exempt interest income	(16.9		)	(1	)	(15.7		)	(1	)	(17.8		)	(1	)
Tax-deductible dividends	(9.7		)	0		(6.1		)	0		(7.9		)	0
Nondeductible compensation expense3	10.1			0		0.5			0		0.3			0
State income taxes, net of federal taxes	6.0			0		6.6			0		2.3			0
Other items, net	0.4			0		(1.8		)	0		0.6			0
Non-taxable gain4	0			0		0			0		(13.8		)	(1	)
Total income tax provision	$	540.8		25	%	$	413.5		28	%	$	611.1		32	%

¹ Pursuant to the recently enacted legislation commonly known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”); see further discussion below.

² Represents excess tax benefits associated with share-based payments awards. Prior to 2017, these excess tax benefits were recorded directly to additional paid-in capital under the then existing accounting guidance.

³ Increase in 2017 primarily reflects changes in compensation that qualifies for deduction under the Tax Act.

⁴ Represents the tax effect of holding period gains on the 5% interest in ARX we owned prior to acquisition of a controlling interest on April 1, 2015.

Components of Net Deferred Tax Assets

t December 31, 2017 and 2016. As noted above, the federal deferred tax assets and liabilities at December 31, 2017, have been revalued to reflect the new 21% federal corporate income tax rate under the Tax Act.

(millions)	2017			2016
Federal deferred tax assets:
Unearned premiums reserve	$	368.9		$	515.6
Non-deductible accruals	166.0			259.9
Loss and loss adjustment expense reserves	48.4			76.5
Hedges on forecasted transactions	4.8			5.1
Investment basis differences	0			31.3
Other	7.3			8.9
Federal deferred tax liabilities:
Net unrealized gains on securities	(419.5		)	(507.2		)
Deferred acquisition costs	(163.9		)	(227.9		)
Property and equipment	(75.5		)	(120.2		)
Intangible assets	(66.6		)	(145.3		)
Prepaid expenses	(7.1		)	(9.2		)
Investment basis differences	(5.5		)	0
Deferred gain on extinguishment of debt	(0.4		)	(1.5		)
Other	(6.1		)	(7.7		)
Net federal deferred tax liability	(149.2		)	(121.7		)
Net state deferred tax asset	14.2			10.4
Net deferred tax liability	$	(135.0	)	$	(111.3	)

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Loss And Loss Adjustment Expense Reserves (Tables)

12 Months Ended

Dec. 31, 2017

Insurance [Abstract]

Activity in Loss and Loss Adjustment Expense Reserves

Activity in the loss and loss adjustment expense reserves is summarized as follows:

(millions)	2017		2016			2015
Balance at January 1	$	11,368.0	$	10,039.0		$	8,857.4
Less reinsurance recoverables on unpaid losses	1,801.0		1,442.7			1,185.9
Net balance at January 1	9,567.0		8,596.3			7,671.5
Net loss and loss adjustment reserves (disposed) acquired1	0		(2.5		)	222.4
Total beginning reserves	9,567.0		8,593.8			7,893.9
Incurred related to:
Current year	18,782.1		16,967.1			14,657.1
Prior years	25.9		(87.5		)	(315.1		)
Total incurred	18,808.0		16,879.6			14,342.0
Paid related to:
Current year	12,201.5		11,149.0			9,577.3
Prior years	5,256.7		4,757.4			4,062.3
Total paid	17,458.2		15,906.4			13,639.6
Net balance at December 31	10,916.8		9,567.0			8,596.3
Plus reinsurance recoverables on unpaid losses	2,170.1		1,801.0			1,442.7
Balance at December 31	$	13,086.9	$	11,368.0		$	10,039.0

¹ During 2016, $2.5 million net reserves were disposed by ARX in an exchange transaction (see Note 16 – Goodwill and Intangible Assets for further discussion). During 2015, $222.4 million net reserves were acquired in the ARX acquisition.

Short-duration Insurance Contracts, Claims Development

The following tables show incurred and paid claims development, net of reinsurance, by accident year. Only 2017 is audited; all prior years are considered required supplementary information and, therefore, are unaudited. Expected development on our case reserves is excluded from the IBNR reserves on our vehicle businesses, as discussed above. For the Property business, the IBNR reserves include expected case development based on the methodology used in establishing the case reserves for that segment. The cumulative number of incurred claims are based on accident coverages (e.g., bodily injury, collision, comprehensive, personal injury protection, property damage) related to opened claims. Coverage counts related to claims closed without payment are excluded from the cumulative number of incurred claims.

Personal Lines - Agency - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	3,506.0	$	3,520.9	$	3,518.2	$	3,528.0	$	3,484.2	$	0	696,624
2014			3,702.1		3,627.7		3,633.2		3,654.4		50.9		701,787
2015					3,774.9		3,773.8		3,798.8		59.2		704,990
2016							4,082.9		4,130.0		158.7		738,563
2017									4,474.8		679.6		765,553
							Total		$	19,542.2
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,684.0	$	2,794.1	$	3,173.1	$	3,362.9	$	3,437.6
2014			1,809.0		2,868.1		3,284.5		3,482.3
2015					1,793.1		2,976.0		3,416.5
2016							1,941.6		3,231.5
2017									2,074.0
							Total		$	15,641.9
	All outstanding liabilities before 2013, net of reinsurance1								55.2
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	3,955.5

¹ Required supplementary information (unaudited)

Personal Lines - Agency - Physical Damage
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	2,014.0	$	2,001.4	$	2,000.1	$	1,999.4	$	2,001.1	$	0		1,347,920
2014			2,107.5		2,090.3		2,089.9		2,088.0		(3.3		)	1,374,666
2015					2,136.8		2,137.2		2,134.4		(2.6		)	1,336,268
2016							2,423.4		2,398.9		(12.1		)	1,398,371
2017									2,635.5		(101.8		)	1,496,298
							Total		$	11,257.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,952.7	$	2,003.9	$	2,002.0	$	2,001.3	$	2,000.8
2014			2,078.8		2,091.6		2,090.6		2,090.7
2015					2,106.2		2,138.1		2,134.4
2016							2,391.0		2,406.9
2017									2,599.8
							Total		$	11,232.6
	All outstanding liabilities before 2013, net of reinsurance1								0.9
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	26.2

¹ Required supplementary information (unaudited)

Personal Lines - Direct - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	2,619.4	$	2,621.8	$	2,615.8	$	2,649.8	$	2,612.9	$	0	550,166
2014			2,946.8		2,887.4		2,898.1		2,913.6		38.2		592,185
2015					3,330.5		3,328.3		3,354.2		48.6		659,102
2016							3,819.0		3,843.9		143.0		733,195
2017									4,209.5		598.6		761,280
							Total		$	16,934.1
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,252.0	$	2,085.1	$	2,375.5	$	2,521.3	$	2,577.8
2014			1,413.0		2,278.0		2,624.2		2,780.0
2015					1,545.2		2,615.0		3,021.0
2016							1,780.6		2,991.1
2017									1,912.6
							Total		$	13,282.5
	All outstanding liabilities before 2013, net of reinsurance1								33.5
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	3,685.1

¹ Required supplementary information (unaudited)

Personal Lines - Direct - Physical Damage
($ in millions)												As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance												December 31, 2017
	For the years ended December 31,											Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	1,653.7	$	1,635.6	$	1,634.6	$	1,633.4	$	1,635.0		$	0		1,367,341
2014			1,889.3		1,862.2		1,861.7		1,859.2			(3.2		)	1,471,016
2015					2,110.7		2,097.7		2,093.5			(3.0		)	1,539,790
2016							2,521.0		2,475.4			(14.3		)	1,675,405
2017									2,750.6			(145.3		)	1,779,665
							Total		$	10,813.7
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	1,612.9	$	1,638.2	$	1,636.2	$	1,635.3	$	1,635.0
2014			1,874.6		1,864.1		1,862.7		1,861.8
2015					2,094.7		2,100.1		2,094.7
2016							2,505.0		2,485.8
2017									2,742.1
							Total		$	10,819.4
	All outstanding liabilities before 2013, net of reinsurance1								0.1
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	(5.6	)

¹ Required supplementary information (unaudited)

Commercial Lines - Liability
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	864.2	$	864.6	$	865.4	$	865.0	$	840.8	$	0	78,075
2014			822.5		795.4		820.3		823.0		15.9		74,724
2015					897.6		911.1		914.8		23.7		77,807
2016							1,185.8		1,204.8		63.1		92,196
2017									1,374.1		219.2		94,992
							Total		$	5,157.5
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	233.3	$	509.4	$	659.1	$	752.5	$	802.6
2014			234.0		438.7		610.0		715.3
2015					238.4		501.5		675.0
2016							298.6		639.9
2017									325.8
							Total		$	3,158.6
	All outstanding liabilities before 2013, net of reinsurance1								28.5
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	2,027.4

¹ Required supplementary information (unaudited)

Commercial Lines - Physical Damage
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims			Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	256.2	$	254.2	$	254.5	$	253.7	$	254.2	$	0		62,673
2014			240.3		239.7		238.6		238.0		(0.5		)	59,622
2015					274.4		274.1		273.5		(0.1		)	62,593
2016							379.6		379.8		(0.9		)	74,217
2017									415.4		(5.7		)	77,767
							Total		$	1,560.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	239.4	$	253.1	$	253.9	$	253.7	$	253.8
2014			224.6		238.3		237.7		237.9
2015					248.5		271.9		272.0
2016							336.7		376.9
2017									369.0
							Total		$	1,509.6
	All outstanding liabilities before 2013, net of reinsurance1								0.4
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	51.7

¹ Required supplementary information (unaudited)

Property Business
($ in millions)											As of
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance											December 31, 2017
	For the years ended December 31,										Total of IBNR Liabilities Plus Expected Development on Reported Claims		Cumulative Number of Incurred Claim Counts
Accident Year	20131		20141		20151		20161		2017
2013	$	307.3	$	283.3	$	254.3	$	254.1	$	253.9	$	2.5	30,600
2014			415.5		389.1		379.7		376.3		3.6		40,984
2015					460.0		416.5		403.6		11.5		41,957
2016							568.6		541.2		24.8		53,323
2017									672.8		99.7		64,487
							Total		$	2,247.8
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident Year	20131		20141		20151		20161		2017
2013	$	185.1	$	234.2	$	244.9	$	249.5	$	250.5
2014			269.2		351.5		365.9		370.3
2015					280.3		372.8		383.5
2016							415.2		498.2
2017									506.7
							Total		$	2,009.2
	All outstanding liabilities before 2013, net of reinsurance1								7.2
	Liabilities for claims and claim adjustment expenses, net of reinsurance								$	245.8

¹ Required supplementary information (unaudited)

Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability

The following table reconciles the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses:

(millions)	2017			2016
Net outstanding liabilities
Personal Lines
Agency, Liability	$	3,955.5		$	3,555.9
Agency, Physical Damage	26.2			30.1
Direct, Liability	3,685.1			3,219.1
Direct, Physical Damage	(5.6		)	11.2
Commercial Lines
Liability	2,027.4			1,675.3
Physical Damage	51.7			46.6
Property	245.8			224.7
Other business	43.7			37.1
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	10,029.8			8,800.0
Reinsurance recoverable on unpaid claims
Personal Lines
Agency, Liability	769.8			724.5
Agency, Physical Damage	0			0
Direct, Liability	838.1			724.3
Direct, Physical Damage	0			0
Commercial Lines
Liability	105.1			59.5
Physical Damage	0.1			0
Property	243.8			132.7
Other business	200.9			154.9
Total reinsurance recoverable on unpaid claims	$	2,157.8		$	1,795.9
Unallocated claims adjustment expense related to:
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	887.0			767.0
Reinsurance recoverable on unpaid claims	12.3			5.1
Total gross liability for unpaid claims and claim adjustment expense	$	13,086.9		$	11,368.0

Short-duration Insurance Contracts, Schedule of Historical Claims Duration

The following table shows the average historical claims duration as of December 31, 2017:

(Required Supplementary Information - Unaudited)
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance	Years
	1	2	3	4	5
Personal Lines
Agency, Liability	47.6%	30.8%	11.3%	5.4%	2.1%
Agency, Physical Damage	98.9%	1.3%	(0.1)%	0%	0%
Direct, Liability	46.7%	31.3%	11.7%	5.5%	2.2%
Direct, Physical Damage	100.1%	0%	(0.2)%	(0.1)%	0%
Commercial Lines
Liability	25.8%	28.7%	19.2%	11.9%	6.0%
Physical Damage	90.9%	7.9%	0%	0%	0%
Property	73.7%	19.5%	3.5%	1.4%	0.4%

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Reinsurance (Tables)

12 Months Ended

Dec. 31, 2017

Reinsurance Disclosures [Abstract]

Effect of Reinsurance on Premiums Written and Earned

The effect of reinsurance on premiums written and earned for the years ended December 31, was as follows:

	2017						2016						2015
(millions)	Written			Earned			Written			Earned			Written			Earned
Direct premiums	$	27,860.7		$	26,425.7		$	23,941.9		$	23,111.2		$	21,086.5		$	20,454.1
Ceded premiums:
Regulated plans	(505.9		)	(479.6		)	(439.4		)	(425.1		)	(358.0		)	(362.6		)
Non-Regulated plans	(222.7		)	(216.2		)	(149.0		)	(212.1		)	(164.5		)	(192.4		)
Total ceded premiums	(728.6		)	(695.8		)	(588.4		)	(637.2		)	(522.5		)	(555.0		)
Net premiums	$	27,132.1		$	25,729.9		$	23,353.5		$	22,474.0		$	20,564.0		$	19,899.1

Prepaid Reinsurance Premiums and Reinsurance Recoverables

Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:

	Prepaid Reinsurance Premiums								Reinsurance Recoverables
($ in millions)	2017				2016				2017				2016
Regulated plans:
MCCA	$	44.3	22	%	$	36.5	21	%	$	1,611.5	71	%	$	1,452.7	77	%
CAIP	50.0		25		40.2		24		218.0		10		170.6		9
NCRF	31.5		15		27.5		16		74.2		3		67.0		4
NFIP	53.8		26		49.1		29		148.8		7		78.5		4
Other	0.3		0		0.1		0		8.2		0		3.5		0
Total Regulated plans	179.9		88		153.4		90		2,060.7		91		1,772.3		94
Non-Regulated plans:
Property	9.1		5		3.2		2		138.6		6		62.9		3
Other	14.3		7		13.9		8		74.1		3		49.6		3
Total Non-Regulated plans	23.4		12		17.1		10		212.7		9		112.5		6
Total	$	203.3	100	%	$	170.5	100	%	$	2,273.4	100	%	$	1,884.8	100	%

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2017

Amounts Charged to Income for Employees Incentive Compensation Plans

The amounts charged to income for Progressive and ARX incentive compensation plans for the years ended December 31, were:

	2017				2016				2015
(millions)	Pretax		After Tax		Pretax		After Tax		Pretax		After Tax
Non-equity incentive plans – cash	$	461.3	$	299.8	$	386.8	$	251.4	$	337.7	$	219.5
Equity incentive plans:
Equity awards	92.9		60.4		80.9		52.6		64.5		41.9
Liability awards	2.5		1.6		4.3		2.8		1.7		1.1

Assets Held in Deferral Plan Irrevocable Grantor Trust Account

The Deferral Plan Irrevocable Grantor Trust account held the following assets at December 31:

(millions)	2017		2016
Progressive common shares1	$	128.2	$	122.2
Other investment funds2	167.0		136.9
Total	$	295.2	$	259.1

¹Included 4.4 million and 4.7 million common shares as of December 31, 2017 and 2016, respectively, to be distributed in common shares.

² Amount is included in other assets on the balance sheet.

Employee

Summary of Restricted Stock Activity

A summary of all employee restricted equity award activity during the years ended December 31, follows:

	2017				2016				2015
Restricted Equity Awards	Number of Shares1		Weighted Average Grant Date Fair Value		Number of Shares1		Weighted Average Grant Date Fair Value		Number of Shares1		Weighted Average Grant Date Fair Value
Beginning of year	6,951,373		$	26.18	7,725,227		$	23.37	9,051,564		$	21.27
Add (deduct):
Granted2	2,383,475		32.01		1,870,660		31.54		2,489,976		25.20
Vested	(3,220,671	)	22.53		(2,422,700	)	21.50		(3,682,644	)	19.53
Forfeited	(255,329	)	28.03		(221,814	)	24.64		(133,669	)	21.63
End of year3,4	5,858,848		$	30.47	6,951,373		$	26.18	7,725,227		$	23.37

¹ Includes restricted stock units; 2015 also includes restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares funded from existing treasury shares. All performance-based awards are included at their target amounts.

² We reinvest dividend equivalents on restricted stock units. For 2017, 2016, and 2015, the number of units “granted” shown in the table above includes 157,396, 165,045, and 196,947 of dividend equivalent units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

³ At December 31, 2017, the number of shares included 1,513,779 performance-based units at their target amounts. We expect 3,244,111 units to vest based upon our current estimates of the likelihood of achieving the pre-determined performance goals applicable to each award.

⁴ At December 31, 2017, the total unrecognized compensation cost related to unvested equity awards was $87.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.2 years.

Director

Summary of Restricted Stock Activity

A summary of all directors’ restricted stock activity during the years ended December 31, follows:

	2017				2016				2015
Restricted Stock	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Beginning of year	55,839		$	33.24	89,427		$	27.23	81,579		$	25.45
Add (deduct):
Granted	53,284		40.54		55,839		33.24		89,427		27.23
Vested	(55,839	)	33.24		(89,427	)	27.23		(81,579	)	25.45
End of year	53,284		$	40.54	55,839		$	33.24	89,427		$	27.23

Employee Stock Option

Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding and Exercisable [Table Text Block]

A summary of all ARX employee stock option activity since acquisition, follows:

	2017				2016			2015
Options Outstanding	Number of Shares		Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Beginning of year	24,995		$	526.46	24,995	$	526.46	NA		NA
At acquisition date 4/1/2015	NA		NA		NA	NA		26,000		$	513.72
Add (deduct):
Exercised1	(2,445	)	174.65		0	0		(1,005	)	197.01
End of year	22,550		$	564.60	24,995	$	526.46	24,995		$	526.46
Exercisable, end of year	17,950		$	517.75	16,995	$	438.77	12,995		$	386.69

NA = Not Applicable

¹ At the time of exercise in 2017 and 2015, the value earned by the option holders was $2.9 million and $1.1 million, respectively.

	2017				2016				2015
Non-Vested Options Outstanding	Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Beginning of year	8,000		$	712.74	12,000		$	677.81	NA		NA
At acquisition date 4/1/2015	NA		NA		NA		NA		14,800		$	675.55
Add (deduct):
Vested	(3,400	)	665.79		(4,000	)	607.95		(2,800	)	665.85
End of year1	4,600		$	747.45	8,000		$	712.74	12,000		$	677.81

NA = Not Applicable

¹ At December 31, 2017, 2016, and 2015, the remaining unrecognized compensation cost related to unvested options was $0.7 million, $1.6 million, and $2.9 million, respectively, and the remaining weighted average vesting period on the unvested awards was 1.01 years, 1.36 years, and 1.72 years, respectively.

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Reconciliation of Revenue and Operating Income from Segments to Consolidated

Following are the operating results for the years ended December 31:

	2017						2016					2015
(millions)	Revenues			Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues			Pretax Profit (Loss)
Personal Lines
Agency	$	11,177.6		$	839.6		$	9,791.7	$	492.8		$	9,108.6		$	713.2
Direct	10,769.6			683.7			9,396.5		412.2			8,185.9			403.4
Total Personal Lines1	21,947.2			1,523.3			19,188.2		905.0			17,294.5			1,116.6
Commercial Lines	2,793.9			214.1			2,421.3		155.2			1,995.9			318.3
Property2	988.8			(50.3		)	864.5		32.5			609.1			61.3
Other indemnity3	0			(0.2		)	0		(1.6		)	(0.4		)	(1.0		)
Total underwriting operations	25,729.9			1,686.9			22,474.0		1,091.1			19,899.1			1,495.2
Fees and other revenues4	370.6			NA			332.5		NA			302.0			NA
Service businesses	126.8			17.3			103.3		11.3			86.3			8.8
Investments5	612.7			588.8			530.0		507.6			567.3			544.5
Other gains (losses)	(1.0		)	(1.0		)	1.6		1.6			(0.9		)	(0.9		)
Interest expense	NA			(153.1		)	NA		(140.9		)	NA			(136.0		)
Consolidated total	$	26,839.0		$	2,138.9		$	23,441.4	$	1,470.7		$	20,853.8		$	1,911.6

NA = Not Applicable

¹ Personal auto insurance accounted for 93% of the total Personal Lines segment net premiums earned in 2017, compared to 92% in 2016 and 2015; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

² We began reporting our Property business as a segment on April 1, 2015, upon acquisition of a controlling interest in ARX; therefore, the year ended 2015 only includes results for nine months and is not comparable to results reported for 2017 or 2016. During 2017, 2016, and 2015, pretax profit (loss) also includes $66.2 million, $62.1 million, and $46.8 million, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Although this expense is included in our Property segment, it is not reported in the consolidated results of ARX and, therefore, will not affect the value of the net income attributable to the noncontrolling interest.

³ Our professional liability group recognized $0.4 million of reinstatement premiums paid to our reinsurers pursuant to their reinsurance contracts during 2015. This premium reduction was reflected in our companywide total results.

⁴ Pretax profit (loss) for fees and other revenues are allocated to operating segments.

⁵ Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

Underwriting Margins and Combined Ratios for our Underwriting Operations

Following are the underwriting margins/combined ratios for our underwriting operations for the years ended December 31:

	2017			2016			2015
	Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio
Personal Lines
Agency	7.5	%	92.5	5.0	%	95.0	7.8	%	92.2
Direct	6.3		93.7	4.4		95.6	4.9		95.1
Total Personal Lines	6.9		93.1	4.7		95.3	6.5		93.5
Commercial Lines	7.7		92.3	6.4		93.6	15.9		84.1
Property1	(5.1	)	105.1	3.8		96.2	10.1		89.9
Total underwriting operations	6.6		93.4	4.9		95.1	7.5		92.5

¹We began reporting our Property business as a segment on April 1, 2015, when we acquired a controlling interest in ARX; therefore, the year ended 2015 only includes results for nine months and is not comparable to results reported for 2017 or 2016. Included in 2017, 2016, and 2015 is 6.7 points, 7.2 points, and 7.7 points, respectively, of amortization expense predominately associated with the acquisition of a controlling interest in ARX.

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Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Components of Other Comprehensive Income (Loss)

The components of other comprehensive income (loss), including reclassification adjustments by income statement line item, for the years ended December 31, were as follows:

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2016	$	1,439.5		$	(506.1	)	$	933.4		$	939.6		$	(9.4	)	$	(1.1	)	$	4.3
Other comprehensive income (loss) before reclassifications:
Investment securities	636.9			(224.0		)	412.9			412.9			0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	0			0			0			0			0			0			0
Forecasted transactions	(8.0		)	2.8			(5.2		)	0			(5.2		)	0			0
Foreign currency translation adjustment	0.4			(0.1		)	0.3			0			0			0.3			0
Loss attributable to noncontrolling interest (NCI)	(3.5		)	1.2			(2.3		)	0			0			0			(2.3		)
Total other comprehensive income (loss) before reclassifications	625.8			(220.1		)	405.7			412.9			(5.2		)	0.3			(2.3		)
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(14.9		)	5.3			(9.6		)	(9.6		)	0			0			0
Net realized gains (losses) on securities	103.3			(36.2		)	67.1			67.1			0			0			0
Other gains (losses)1	(1.2		)	0.4			(0.8		)	0			0			(0.8		)	0
Interest expense	0.3			(0.1		)	0.2			0			0.2			0			0
Total reclassification adjustment for amounts realized in net income	87.5			(30.6		)	56.9			57.5			0.2			(0.8		)	0
Total other comprehensive income (loss)	538.3			(189.5		)	348.8			355.4			(5.4		)	1.1			(2.3		)
Total at December 31, 2017	$	1,977.8		$	(695.6	)	$	1,282.2		$	1,295.0		$	(14.8	)	$	0		$	2.0

¹During 2017, we ceased writing insurance in Australia resulting in a loss of $1.2 million relating to the foreign currency translation adjustment. The loss is netted against a gain on extinguishment of debt (see Note 4 – Debt) in other gains (losses) on our consolidated statements of comprehensive income for the year end December 31, 2017.

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2015	$	1,234.5		$	(434.1	)	$	800.4		$	809.0		$	(8.2	)	$	(1.5	)	$	1.1
Other comprehensive income (loss) before reclassifications:
Investment securities	320.5			(112.6		)	207.9			207.9			0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	(0.1		)	0.1			0			0			0			0			0
Forecasted transactions	0			0			0			0			0			0			0
Foreign currency translation adjustment	0.6			(0.2		)	0.4			0			0			0.4			0
Loss attributable to noncontrolling interest (NCI)	5.1			(1.9		)	3.2			0			0			0			3.2
Total other comprehensive income (loss) before reclassifications	326.1			(114.6		)	211.5			207.9			0			0.4			3.2
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(27.1		)	9.5			(17.6		)	(17.6		)	0			0			0
Net realized gains (losses) on securities	146.3			(51.4		)	94.9			94.9			0			0			0
Other gains (losses)	0			0			0			0			0			0			0
Interest expense	1.9			(0.7		)	1.2			0			1.2			0			0
Total reclassification adjustment for amounts realized in net income	121.1			(42.6		)	78.5			77.3			1.2			0			0
Total other comprehensive income (loss)	205.0			(72.0		)	133.0			130.6			(1.2		)	0.4			3.2
Total at December 31, 2016	$	1,439.5		$	(506.1	)	$	933.4		$	939.6		$	(9.4	)	$	(1.1	)	$	4.3

										Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)	Pretax total accumulated other comprehensive income			Total tax (provision) benefit			After tax total accumulated other comprehensive income			Total net unrealized gains  (losses) on securities			Net unrealized gains on forecasted transactions			Foreign currency translation adjustment			Loss attributable to NCI
Total at December 31, 2014	$	1,574.0		$	(550.9	)	$	1,023.1		$	1,021.9		$	1.5		$	(0.3	)	$	0
Other comprehensive income (loss) before reclassifications:
Investment securities	(198.7		)	67.5			(131.2		)	(131.2		)	0			0			0
Net non-credit related OTTI losses, adjusted for valuation changes	0			0			0			0			0			0			0
Forecasted transactions	(12.9		)	4.5			(8.4		)	0			(8.4		)	0			0
Foreign currency translation adjustment	(1.8		)	0.6			(1.2		)	0			0			(1.2		)	0
Loss attributable to noncontrolling interest (NCI)	1.6			(0.5		)	1.1			0			0			0			1.1
Total other comprehensive income (loss) before reclassifications	(211.8		)	72.1			(139.7		)	(131.2		)	(8.4		)	(1.2		)	1.1
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net impairment losses recognized in earnings	(23.8		)	8.4			(15.4		)	(15.4		)	0			0			0
Net realized gains (losses) on securities	149.7			(52.5		)	97.2			97.1			0.1			0			0
Other gains (losses)	0			0			0			0			0			0			0
Interest expense	1.8			(0.6		)	1.2			0			1.2			0			0
Total reclassification adjustment for amounts realized in net income	127.7			(44.7		)	83.0			81.7			1.3			0			0
Total other comprehensive income (loss)	(339.5		)	116.8			(222.7		)	(212.9		)	(9.7		)	(1.2		)	1.1
Total at December 31, 2015	$	1,234.5		$	(434.1	)	$	800.4		$	809.0		$	(8.2	)	$	(1.5	)	$	1.1

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Minimum Commitments under Noncancelable Operating Lease Agreements

The minimum commitments under these agreements at December 31, 2017, were as follows:

(millions)	Commitments
2018	$	53.6
2019	44.2
2020	28.5
2021	16.9
2022	8.0
Thereafter	1.1
Total	$	152.3

Expense Incurred for Leases

The expense we incurred for the leases disclosed above, as well as other operating leases that may be cancelable or have terms less than one year, was:

(millions)	Expense
2017	$	77.2
2016	72.9
2015	66.6

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Dividends (Tables)

12 Months Ended

Dec. 31, 2017

Dividends [Abstract]

Dividends

Following is a summary of our shareholder dividends that were declared in the last three years:

(millions, except per share amounts)			Amount
Dividend Type	Declared	Paid	Per Share		Total1
Annual – Variable	December 2017	February 2018	$	1.1247	$	655.1
Annual – Variable	December 2016	February 2017	0.6808		395.4
Annual – Variable	December 2015	February 2016	0.8882		519.2

¹ Based on an estimate of shares outstanding as of the record date. For the dividends declared in December 2016 and 2015, we paid $395.4 million and $519.0 million, respectively.

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Redeemable Noncontrolling Interest (Tables)

12 Months Ended

Dec. 31, 2017

Noncontrolling Interest [Abstract]

Redeemable Noncontrolling Interest [Table Text Block]

The changes in the components of redeemable NCI during the year ended December 31, 2017, 2016, and 2015, were:

(millions)	December 31, 2017		December 31, 2016			December 31, 2015
Balance, Beginning of period	$	483.7	$	464.9		$	0
Fair value at date of acquisition	0		0			411.5
Net income attributable to NCI	5.9		26.2			32.9
Other comprehensive income (loss) attributable to NCI	2.3		(3.2		)	(1.1		)
Exercise of employee stock options	3.4		0			0
Purchase of shares from NCI	0		0			(12.6		)
Change in redemption value of NCI	8.4		(4.2		)	34.2
Balance, End of period	$	503.7	$	483.7		$	464.9

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Net Carrying Amount of Other Intangible Assets

The following table is a summary of the net carrying amount of other intangible assets as of December 31, 2017 and 2016:

(millions)	December 31, 2017		December 31, 2016
Intangible assets subject to amortization	$	354.2	$	420.4
Indefinite-lived intangible assets1	12.4		12.4
Total	$	366.6	$	432.8

¹Indefinite-lived intangible assets are comprised of state insurance and agent licenses. State insurance licenses were previously subject to amortization under superseded accounting guidance and have $0.6 million of accumulated amortization for both periods presented.

Intangible Assets Subject to Amortization

Intangible assets subject to amortization consisted of the following:

(millions)	December 31, 2017						December 31, 2016
Category	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Policies in force	$	256.2	$	100.7	$	155.5	$	256.2	$	64.1	$	192.1
Agency relationships	159.2		31.3		127.9		159.2		19.9		139.3
Software rights	79.1		29.4		49.7		79.1		18.8		60.3
Trade name	34.8		13.7		21.1		34.8		6.1		28.7
Total	$	529.3	$	175.1	$	354.2	$	529.3	$	108.9	$	420.4

Amortization on Intangible Assets

The estimated aggregate amortization on these intangible assets for each of the next five years as of December 31, 2017, is as follows:

(millions)
Year	Amortization Expense
2018	$	71.9
2019	66.4
2020	56.9
2021	56.6
2022	29.2

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SCHEDULE I - Summary Of Investments - Other Than Investments in Related Parties Summary Of Investments - Other than Investments In Related Parties (Detail) $ in Millions	Dec. 31, 2017 USD ($)
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	$ 25,276.9
Fair Value	27,274.7
Amount At Which Shown In The Balance Sheet	27,274.7
Fixed maturities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	20,209.9
Fair Value	20,201.7
Amount At Which Shown In The Balance Sheet	20,201.7
Fixed maturities | Bonds | US Government and Government Agencies and Authorities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	6,688.8
Fair Value	6,645.9
Amount At Which Shown In The Balance Sheet	6,645.9
Fixed maturities | Bonds | State and local government obligations
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2,285.6
Fair Value	2,297.1
Amount At Which Shown In The Balance Sheet	2,297.1
Fixed maturities | Bonds | Public Utility, Bonds
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	192.5
Fair Value	193.6
Amount At Which Shown In The Balance Sheet	193.6
Fixed maturities | Bonds | Corporate And Other Debt Securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	4,804.7
Fair Value	4,804.1
Amount At Which Shown In The Balance Sheet	4,804.1
Fixed maturities | Bonds | Asset-backed Securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	6,043.4
Fair Value	6,050.0
Amount At Which Shown In The Balance Sheet	6,050.0
Fixed maturities | Redeemable preferred stocks
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	194.9
Fair Value	211.0
Amount At Which Shown In The Balance Sheet	211.0
Equity securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2,197.6
Fair Value	4,203.6
Amount At Which Shown In The Balance Sheet	4,203.6
Equity securities | Common Stocks, by Industry | Utilities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	106.8
Fair Value	177.5
Amount At Which Shown In The Balance Sheet	177.5
Equity securities | Common Stocks, by Industry | Financials
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	285.8
Fair Value	685.0
Amount At Which Shown In The Balance Sheet	685.0
Equity securities | Common Stocks, by Industry | Industrials
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,106.4
Fair Value	2,537.3
Amount At Which Shown In The Balance Sheet	2,537.3
Equity securities | Nonredeemable preferred stocks
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	698.6
Fair Value	803.8
Amount At Which Shown In The Balance Sheet	803.8
Short-term investments
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2,869.4
Fair Value	2,869.4
Amount At Which Shown In The Balance Sheet	$ 2,869.4

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SCHEDULE II - Condensed Financial Information Of Registrant Condensed Statements Of Comprehensive Income (Parent Company) (Detail) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Revenues
Total revenues		$ 26,839.0	$ 23,441.4	$ 20,853.8
Expenses
Interest expense		153.1	140.9	136.0
Total expenses		24,700.1	21,970.7	18,942.2
Income before income taxes		2,138.9	1,470.7	1,911.6
Benefit for income taxes		540.8	413.5	611.1
Net income attributable to Progressive		1,592.2	1,031.0	1,267.6
Comprehensive income attributable to Progressive		1,941.0	1,164.0	1,044.9
Parent Company
Revenues
Dividends from subsidiaries		867.3	375.5	852.5
Undistributed income (loss) from subsidiaries		866.3	741.9	500.0
Equity in net income of subsidiaries	[1]	1,733.6	1,117.4	1,352.5
Intercompany investment income	[1]	11.3	5.5	3.9
Gains (losses) on extinguishment of debt		0.2	1.6	(0.9)
Total revenues		1,745.1	1,124.5	1,355.5
Expenses
Interest expense		151.1	140.4	136.1
Deferred compensation	[2]	23.2	5.3	5.3
Other operating costs and expenses		4.6	4.2	5.4
Total expenses		178.9	149.9	146.8
Income before income taxes		1,566.2	974.6	1,208.7
Benefit for income taxes		26.0	56.4	58.9
Net income attributable to Progressive		1,592.2	1,031.0	1,267.6
Other comprehensive income (loss)		348.8	133.0	(222.7)
Comprehensive income attributable to Progressive		$ 1,941.0	$ 1,164.0	$ 1,044.9

[1] Eliminated in consolidation.

[2] See Note 4 – Employee Benefit Plans in these condensed financial statements.

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SCHEDULE II - Condensed Financial Information Of Registrant Condensed Balance Sheets (Parent Company) (Detail) - USD ($) $ in Millions		Dec. 31, 2017		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Assets
Other assets		$ 412.9		$ 339.6
Total assets		38,701.2		33,427.5
Liabilities and Shareholders' Equity
Accounts payable, accrued expenses, and other liabilities	[1]	2,825.9		2,495.5
Dividends payable		655.1		395.4		$ 519.2
Total liabilities		28,912.7		24,986.7
Redeemable noncontrolling interest (NCI)		503.7	[2]	483.7	[2]	464.9	$ 0.0
Common shares, $1.00 par value (authorized 900.0; issued 797.5 including treasury shares of 215.8 and 217.6)		581.7		579.9
Paid-in capital		1,389.2		1,303.4
Retained earnings		6,031.7		5,140.4
Total accumulated other comprehensive income attributable to Progressive		1,282.2		933.4		800.4	$ 1,023.1
Total shareholders’ equity		9,284.8		7,957.1		$ 7,289.4
Total liabilities, redeemable NCI, and shareholders’ equity		38,701.2		33,427.5
Parent Company
Assets
Investment in affiliate		5.0		5.0
Investment in subsidiaries	[3]	11,721.3		10,280.9
Receivable from investment subsidiary	[3]	1,466.1		1,121.9
Intercompany receivable	[3]	578.6		443.3
Net deferred income taxes		67.1		97.1
Other assets		167.3		137.3
Total assets		14,005.4		12,085.5
Liabilities and Shareholders' Equity
Accounts payable, accrued expenses, and other liabilities		292.6		228.4
Dividends payable		655.1		395.4
Debt		3,269.2		3,020.9
Total liabilities		4,216.9		3,644.7
Redeemable noncontrolling interest (NCI)		503.7		483.7
Common shares, $1.00 par value (authorized 900.0; issued 797.5 including treasury shares of 215.8 and 217.6)		581.7		579.9
Paid-in capital		1,389.2		1,303.4
Retained earnings		6,031.7		5,140.4
Total accumulated other comprehensive income attributable to Progressive		1,282.2		933.4
Total shareholders’ equity		9,284.8		7,957.1
Total liabilities, redeemable NCI, and shareholders’ equity		$ 14,005.4		$ 12,085.5

[1] See Note 12 – Litigation and Note 13 – Commitments and Contingencies for further discussion.

[2] See Note 15 – Redeemable Noncontrolling Interest for further discussion.

[3] Eliminated in consolidation.

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SCHEDULE II - Condensed Financial Information Of Registrant Condensed Balance Sheets (Parent Company) (Parenthetical) (Detail) - $ / shares	Dec. 31, 2017	Dec. 31, 2016
Condensed Financial Statements, Captions [Line Items]
Common Shares, par value (USD per share)	$ 1.00	$ 1.00
Common Shares, authorized (shares)	900,000,000.0	900,000,000.0
Common Shares, issued (shares)	797,500,000	797,500,000
Common Shares, treasury shares (shares)	215,800,000	217,600,000
Parent Company
Condensed Financial Statements, Captions [Line Items]
Common Shares, par value (USD per share)	$ 1.00	$ 1.00
Common Shares, authorized (shares)	900,000,000.0	900,000,000.0
Common Shares, issued (shares)	797,500,000	797,500,000
Common Shares, treasury shares (shares)	215,800,000	217,600,000

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SCHEDULE II - Condensed Financial Information Of Registrant Condensed Statements Of Cash Flows (Parent Company) (Detail) - USD ($) $ in Millions	1 Months Ended		12 Months Ended
	Feb. 28, 2017	Feb. 29, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash Flows From Operating Activities:
Net income attributable to Progressive			$ 1,592.2	$ 1,031.0	$ 1,267.6
Adjustments to reconcile net income attributable to Progressive to net cash provided by operating activities:
Amortization of equity-based compensation			95.4	85.2	66.2
Changes in:
Accounts payable, accrued expenses, and other liabilities			400.0	308.9	37.9
Income taxes			(172.6)	(55.7)	(107.2)
Other, net			(134.8)	(90.2)	(60.2)
Net cash provided by operating activities			3,756.8	2,732.7	2,292.9
Cash Flows From Investing Activities:
Net cash used in investing activities			(3,406.7)	(2,480.7)	(1,923.9)
Cash Flows From Financing Activities:
Net proceeds from debt issuance			841.1	495.6	382.0
Reacquisitions of debt			(635.6)	(18.2)	(19.3)
Dividends paid to shareholders	$ (395.4)	$ (519.0)
Acquisition of treasury shares for restricted stock tax liabilities			(57.6)	(25.1)	(30.6)
Acquisition of treasury shares acquired in open market			(4.9)	(167.4)	(177.9)
Tax benefit from vesting of equity-based compensation			0.0	9.2	16.8
Net cash used in financing activities			(300.9)	(250.4)	(252.8)
Change in cash, cash equivalents, and restricted cash			48.9	2.0	116.0
Cash, cash equivalents, and restricted cash - Beginning of year			226.4	224.4	108.4
Cash, cash equivalents, and restricted cash - End of year			275.3	226.4	224.4
Parent Company
Cash Flows From Operating Activities:
Net income attributable to Progressive			1,592.2	1,031.0	1,267.6
Adjustments to reconcile net income attributable to Progressive to net cash provided by operating activities:
Undistributed (income) loss from subsidiaries			(866.3)	(741.9)	(500.0)
Amortization of equity-based compensation			2.1	2.2	2.4
(Gains) losses on extinguishment of debt			(0.2)	(1.6)	0.9
Changes in:
Intercompany receivable			(71.3)	(37.3)	7.0
Accounts payable, accrued expenses, and other liabilities			53.6	24.2	(46.2)
Income taxes			37.3	(5.0)	12.3
Other, net			(22.6)	(13.3)	(3.1)
Net cash provided by operating activities			724.8	258.3	740.9
Cash Flows From Investing Activities:
Additional investments in equity securities of consolidated subsidiaries			(86.7)	(112.0)	(40.2)
(Paid to) received from investment subsidiary			(344.2)	78.6	409.1
Net cash used in investing activities			(449.6)	(33.4)	(521.2)
Cash Flows From Financing Activities:
Net proceeds from debt issuance			841.1	495.6	394.9
Reacquisitions of debt			(594.4)	(18.2)	(19.3)
Dividends paid to shareholders			(395.4)	(519.0)	(403.6)
Acquisition of treasury shares for restricted stock tax liabilities			(57.6)	(25.1)	(30.6)
Acquisition of treasury shares acquired in open market			(4.9)	(167.4)	(177.9)
Loan to ARX Holding Corp.			(64.0)	0.0	0.0
Tax benefit from vesting of equity-based compensation			0.0	9.2	16.8
Net cash used in financing activities			(275.2)	(224.9)	(219.7)
Change in cash, cash equivalents, and restricted cash			0.0	0.0	0.0
Cash, cash equivalents, and restricted cash - Beginning of year			0.0	0.0	0.0
Cash, cash equivalents, and restricted cash - End of year			0.0	0.0	0.0
Insurance Company | Parent Company
Cash Flows From Investing Activities:
Acquisition of business			(18.7)	0.0	0.0
ARX Holding Corp. | Parent Company
Cash Flows From Investing Activities:
Acquisition of business			$ 0.0	$ 0.0	$ (890.1)

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SCHEDULE II - Condensed Financial Information Of Registrant Condensed Financial Information Of Registrant - Additional Information (Detail) - USD ($) $ in Billions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Apr. 01, 2015
Significant Accounting Policies [Line Items]
Securities Held In Consolidated Non-Insurance Subsidiary	$ 1.6	$ 1.3
ARX Holding Corp.
Significant Accounting Policies [Line Items]
Equity interest percentage	69.00%	69.20%	69.20%	5.00%
Parent Company
Significant Accounting Policies [Line Items]
Securities Held In Consolidated Non-Insurance Subsidiary	$ 1.6	$ 1.3

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SCHEDULE II - Condensed Financial Information Of Registrant Progressive Corporation Cash Paid (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income taxes	$ 715.6	$ 459.4	$ 701.8
Interest	146.3	139.2	132.0
Parent Company
Income taxes	669.7	450.2	625.0
Interest	$ 142.2	$ 134.2	$ 128.2

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SCHEDULE II - Condensed Financial Information Of Registrant Income Taxes (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Taxes [Line Items]
Benefit for income taxes	$ 540.8	$ 413.5	$ 611.1
ARX and subsidiaries
Income Taxes [Line Items]
Noncontrolling interest, ownership percentage (less than)	80.00%
Adjustments for New Accounting Pronouncement
Income Taxes [Line Items]
Benefit for income taxes	$ 44.7

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SCHEDULE III - Supplementary Insurance Information Supplementary Insurance Information (Detail) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	[1]	$ 780.5	$ 651.2	$ 564.1
Future policy benefits, losses, claims, and loss expenses	[1]	13,086.9	11,368.0	10,039.0
Unearned premiums	[1]	8,903.5	7,468.3	6,621.8
Other policy claims and benefits payable	[1]	0.0	0.0	0.0
Premium revenue		25,729.9	22,474.0	19,899.1
Net investment income	[1],[2]	539.2	456.5	431.8
Benefits, claims, losses, and settlement expenses		18,808.0	16,879.6	14,342.0
Amortization of deferred policy acquisition costs		2,124.9	1,863.8	1,651.8
Other operating expenses		3,480.7	2,972.0	2,712.1
Net Premiums Written		27,132.1	23,353.5	20,564.0
Personal Lines
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue		21,947.2	19,188.2	17,294.5
Benefits, claims, losses, and settlement expenses		16,141.4	14,591.1	12,748.7
Amortization of deferred policy acquisition costs		1,656.4	1,446.6	1,331.3
Other operating expenses		2,954.8	2,549.2	2,379.9
Net Premiums Written		22,928.4	19,819.5	17,703.6
Commercial Lines
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue		2,793.9	2,421.3	1,995.9
Benefits, claims, losses, and settlement expenses		1,966.4	1,741.0	1,244.5
Amortization of deferred policy acquisition costs		309.3	266.7	219.4
Other operating expenses		335.3	285.4	232.6
Net Premiums Written		3,112.7	2,598.3	2,171.2
Property, Liability and Casualty Insurance Product Line
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue		988.8	864.5	609.1
Benefits, claims, losses, and settlement expenses		700.2	546.1	349.0
Amortization of deferred policy acquisition costs		159.2	150.5	101.1
Other operating expenses		190.4	137.2	98.8
Net Premiums Written		1,091.0	935.7	689.6
Other Indemnity
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue		0.0	0.0	(0.4)
Benefits, claims, losses, and settlement expenses		0.0	1.4	(0.2)
Amortization of deferred policy acquisition costs		0.0	0.0	0.0
Other operating expenses		0.2	0.2	0.8
Net Premiums Written		$ 0.0	$ 0.0	$ (0.4)

[1] Progressive does not allocate assets, liabilities, or investment income to operating segments.

[2] Excludes total net realized gains (losses) on securities.

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SCHEDULE IV - Reinsurance Reinsurance (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Gross Amount	$ 26,425.7	$ 23,111.2	$ 20,454.1
Ceded to Other Companies	695.8	637.2	555.0
Property, Liability and Casualty Insurance Product Line
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Gross Amount	26,425.7	23,111.2	20,454.1
Ceded to Other Companies	695.8	637.2	555.0
Assumed From Other Companies	0.0	0.0	0.0
Net Amount	$ 25,729.9	$ 22,474.0	$ 19,899.1
Percentage of Amount Assumed to Net	0.00%	0.00%	0.00%

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Reporting and Accounting Policies - Advertising Costs (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Advertising costs	$ 1,005.4	$ 756.2	$ 748.3

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Reporting and Accounting Policies - Capitalized Interest (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Capitalized interest	$ 2.8	$ 2.9	$ 2.4

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Reporting and Accounting Policies - Compensation Expense Recognized for Equity-Based Compensation (Details) - Stock compensation plan - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pretax expense	$ 95.4	$ 85.2	$ 66.2
Tax benefit1	$ 33.4	$ 29.8	$ 23.2

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Reporting and Accounting Policies - Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accounting Policies [Abstract]
Income taxes	$ 715.6	$ 459.4	$ 701.8
Interest	$ 146.3	$ 139.2	$ 132.0

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Reporting and Accounting Policies - Additional Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Apr. 01, 2015
Property, Plant and Equipment [Line Items]
Change in Amortized Cost, Prospective Yield Adjustment, Quarterly Cash Flow Update	$ 0
Derivative Assets (Liabilities), at Fair Value, Net	0	$ 0
Held for sale property	$ 5,300,000	$ 8,700,000
Accelerated vesting percentage	50.00%
Tax at statutory federal rate	35.00%	35.00%	35.00%
Open reverse repurchase commitments	$ 0	$ 0
Assets	38,701,200,000	33,427,500,000
Liabilities	28,912,700,000	24,986,700,000
Benefit for income taxes	$ (540,800,000)	$ (413,500,000)	$ (611,100,000)
Computer equipment and laptops [Member]
Property, Plant and Equipment [Line Items]
Property and equipment useful life	3 years
Land and building [Member]
Property, Plant and Equipment [Line Items]
Percentage of total property and equipment	66.00%	65.00%
Software licenses [Member] | Lower Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	1 year
Software licenses [Member] | Upper Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	5 years
Capitalized software [Member] | Lower Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	3 years
Capitalized software [Member] | Upper Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	10 years
Buildings, improvements and integrated components [Member] | Lower Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	7 years
Buildings, improvements and integrated components [Member] | Upper Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	40 years
All other property and equipment [Member] | Lower Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	3 years
All other property and equipment [Member] | Upper Limit
Property, Plant and Equipment [Line Items]
Property and equipment useful life	15 years
ARX Holding Corp.
Property, Plant and Equipment [Line Items]
Equity interest percentage	69.00%	69.20%	69.20%	5.00%
ARX Holding Corp. | Lower Limit
Property, Plant and Equipment [Line Items]
Intangible assets finite lives	2 years
ARX Holding Corp. | Upper Limit
Property, Plant and Equipment [Line Items]
Intangible assets finite lives	11 years
Accounting Standards Update 2016-01 [Member]
Property, Plant and Equipment [Line Items]
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 1,300,000,000
Adjustments for New Accounting Pronouncement
Property, Plant and Equipment [Line Items]
Benefit for income taxes	(44,700,000)
Adjustments for New Accounting Pronouncement
Property, Plant and Equipment [Line Items]
Benefit for income taxes	25,100,000
Cash and Cash Equivalents [Member] | ARX Holding Corp.
Property, Plant and Equipment [Line Items]
Open reverse repurchase commitments	247,200,000	$ 150,000,000	$ 174,800,000
Property Subject to Operating Lease [Member] | Pro Forma [Member] | Adjustments for New Accounting Pronouncement
Property, Plant and Equipment [Line Items]
Assets	140,000,000
Liabilities	$ 140,000,000
Tax Year 2018
Property, Plant and Equipment [Line Items]
Tax at statutory federal rate	21.00%

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Investments Investment Portfolio by Major Security Type (Detail) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 25,276.9	$ 22,031.7
Gross Unrealized Gains	2,097.0	1,588.9
Gross Unrealized Losses	(99.4)	(139.8)
Net Realized Gains (Losses)	0.2	1.8
Fair Value	$ 27,274.7	$ 23,482.6
% of Total Fair Value	100.00%	100.00%
Other Receivables from Broker-Dealers and Clearing Organizations	$ 5.8
Other Payables to Broker-Dealers and Clearing Organizations		$ 27.8
Securities Held In Consolidated Non-Insurance Subsidiary	1,600.0	1,300.0
Fixed maturities
Schedule of Available-for-sale Securities [Line Items]
Cost	20,209.9	16,287.1
Gross Unrealized Gains	82.0	76.5
Gross Unrealized Losses	(90.4)	(121.6)
Net Realized Gains (Losses)	0.2	1.8
Fair Value	$ 20,201.7	$ 16,243.8
% of Total Fair Value	74.10%	69.20%
Fixed maturities | U.S. government obligations
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 6,688.8	$ 2,899.2
Gross Unrealized Gains	1.1	0.0
Gross Unrealized Losses	(44.0)	(29.1)
Net Realized Gains (Losses)	0.0	0.0
Fair Value	$ 6,645.9	$ 2,870.1
% of Total Fair Value	24.40%	12.20%
Fixed maturities | State and local government obligations
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 2,285.6	$ 2,509.5
Gross Unrealized Gains	20.7	13.8
Gross Unrealized Losses	(9.3)	(20.7)
Net Realized Gains (Losses)	0.1	0.0
Fair Value	$ 2,297.1	$ 2,502.6
% of Total Fair Value	8.40%	10.70%
Fixed maturities | Foreign government obligations
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 0.0	$ 24.5
Gross Unrealized Gains	0.0	0.0
Gross Unrealized Losses	0.0	0.0
Net Realized Gains (Losses)	0.0	0.0
Fair Value	$ 0.0	$ 24.5
% of Total Fair Value	0.00%	0.10%
Fixed maturities | Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 4,997.2	$ 4,557.8
Gross Unrealized Gains	14.8	17.3
Gross Unrealized Losses	(14.4)	(24.3)
Net Realized Gains (Losses)	0.1	0.1
Fair Value	$ 4,997.7	$ 4,550.9
% of Total Fair Value	18.30%	19.40%
Fixed maturities | Residential mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 828.8	$ 1,489.7
Gross Unrealized Gains	11.3	23.7
Gross Unrealized Losses	(3.4)	(15.6)
Net Realized Gains (Losses)	0.0	1.5
Fair Value	$ 836.7	$ 1,499.3
% of Total Fair Value	3.10%	6.40%
Fixed maturities | Commercial mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 2,760.1	$ 2,266.9
Gross Unrealized Gains	11.8	12.0
Gross Unrealized Losses	(13.3)	(25.5)
Net Realized Gains (Losses)	0.0	0.0
Fair Value	$ 2,758.6	$ 2,253.4
% of Total Fair Value	10.10%	9.60%
Fixed maturities | Other asset-backed securities
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 2,454.5	$ 2,350.7
Gross Unrealized Gains	4.5	4.6
Gross Unrealized Losses	(4.5)	(4.4)
Net Realized Gains (Losses)	0.2	0.2
Fair Value	$ 2,454.7	$ 2,351.1
% of Total Fair Value	9.00%	10.00%
Fixed maturities | Redeemable preferred stocks
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 194.9	$ 188.8
Gross Unrealized Gains	17.8	5.1
Gross Unrealized Losses	(1.5)	(2.0)
Net Realized Gains (Losses)	(0.2)	0.0
Fair Value	$ 211.0	$ 191.9
% of Total Fair Value	0.80%	0.80%
Equity securities | Nonredeemable preferred stocks
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 698.6	$ 734.2
Gross Unrealized Gains	114.0	135.4
Gross Unrealized Losses	(8.8)	(16.1)
Net Realized Gains (Losses)	0.0	0.0
Fair Value	$ 803.8	$ 853.5
% of Total Fair Value	2.90%	3.60%
Equity securities | Common equities
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 1,499.0	$ 1,437.5
Gross Unrealized Gains	1,901.0	1,377.0
Gross Unrealized Losses	(0.2)	(2.1)
Net Realized Gains (Losses)	0.0	0.0
Fair Value	$ 3,399.8	$ 2,812.4
% of Total Fair Value	12.50%	12.00%
Short-term investments
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 2,869.4	$ 3,572.9
Gross Unrealized Gains	0.0	0.0
Gross Unrealized Losses	0.0	0.0
Net Realized Gains (Losses)	0.0	0.0
Fair Value	$ 2,869.4	$ 3,572.9
% of Total Fair Value	10.50%	15.20%

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Investments Hybrid Securities (Detail) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Hybrid Securities [Line Items]
Hybrid securities	$ 142.9	$ 219.5
Fixed maturities | State and local government obligations
Hybrid Securities [Line Items]
Hybrid securities	6.1	0.0
Fixed maturities | Corporate debt securities
Hybrid Securities [Line Items]
Hybrid securities	99.8	40.1
Fixed maturities | Residential mortgage-backed securities
Hybrid Securities [Line Items]
Hybrid securities	0.0	170.5
Fixed maturities | Other asset-backed securities
Hybrid Securities [Line Items]
Hybrid securities	6.7	8.9
Fixed maturities | Redeemable preferred stocks
Hybrid Securities [Line Items]
Hybrid securities	$ 30.3	$ 0.0

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Investments Composition of Fixed Maturities by Maturity (Detail) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Available for sale, cost
Less than one year	$ 3,964.1
One to five years	12,706.5
Five to ten years	3,294.4
Ten years or greater	244.9
Total	20,209.9	$ 16,287.1
Available for sale, Fair value
Less than one year	3,980.0
One to five years	12,671.3
Five to ten years	3,306.9
Ten years or greater	243.5
Total	$ 20,201.7	$ 16,243.8

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Investments Gross Unrealized losses by Major Security (Detail) $ in Millions	Dec. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($) security
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	1,166	1,369
Total Fair Value	$ 13,980.2	$ 11,175.9
Gross Unrealized Losses	$ (99.4)	$ (139.8)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	689	1,157
Less than 12 Months Fair Value	$ 10,434.6	$ 9,627.3
Less than 12 Months Unrealized Losses	$ (58.3)	$ (106.7)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	477	212
12 Months or Greater Fair Value	$ 3,545.6	$ 1,548.6
12 Months or Greater Unrealized Losses	$ (41.1)	$ (33.1)
Fixed maturities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	1,143	1,281
Total Fair Value	$ 13,839.0	$ 10,824.2
Gross Unrealized Losses	$ (90.4)	$ (121.6)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	670	1,080
Less than 12 Months Fair Value	$ 10,364.7	$ 9,432.4
Less than 12 Months Unrealized Losses	$ (57.6)	$ (101.2)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	473	201
12 Months or Greater Fair Value	$ 3,474.3	$ 1,391.8
12 Months or Greater Unrealized Losses	$ (32.8)	$ (20.4)
Fixed maturities | U.S. government obligations
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	58	30
Total Fair Value	$ 5,817.0	$ 2,774.0
Gross Unrealized Losses	$ (44.0)	$ (29.1)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	41	30
Less than 12 Months Fair Value	$ 4,869.3	$ 2,774.0
Less than 12 Months Unrealized Losses	$ (34.6)	$ (29.1)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	17	0
12 Months or Greater Fair Value	$ 947.7	$ 0.0
12 Months or Greater Unrealized Losses	$ (9.4)	$ 0.0
Fixed maturities | State and local government obligations
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	358	618
Total Fair Value	$ 1,200.3	$ 1,497.9
Gross Unrealized Losses	$ (9.3)	$ (20.7)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	230	584
Less than 12 Months Fair Value	$ 737.6	$ 1,404.3
Less than 12 Months Unrealized Losses	$ (4.4)	$ (19.6)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	128	34
12 Months or Greater Fair Value	$ 462.7	$ 93.6
12 Months or Greater Unrealized Losses	$ (4.9)	$ (1.1)
Fixed maturities | Corporate debt securities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	222	184
Total Fair Value	$ 2,979.4	$ 2,615.1
Gross Unrealized Losses	$ (14.4)	$ (24.3)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	171	175
Less than 12 Months Fair Value	$ 2,072.9	$ 2,559.9
Less than 12 Months Unrealized Losses	$ (9.1)	$ (24.0)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	51	9
12 Months or Greater Fair Value	$ 906.5	$ 55.2
12 Months or Greater Unrealized Losses	$ (5.3)	$ (0.3)
Fixed maturities | Residential mortgage-backed securities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	201	233
Total Fair Value	$ 300.9	$ 953.7
Gross Unrealized Losses	$ (3.4)	$ (15.6)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	30	117
Less than 12 Months Fair Value	$ 75.1	$ 209.7
Less than 12 Months Unrealized Losses	$ (0.2)	$ (1.7)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	171	116
12 Months or Greater Fair Value	$ 225.8	$ 744.0
12 Months or Greater Unrealized Losses	$ (3.2)	$ (13.9)
Fixed maturities | Commercial mortgage-backed securities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	105	111
Total Fair Value	$ 1,682.3	$ 1,347.3
Gross Unrealized Losses	$ (13.3)	$ (25.5)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	63	85
Less than 12 Months Fair Value	$ 1,221.2	$ 1,061.2
Less than 12 Months Unrealized Losses	$ (5.9)	$ (22.9)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	42	26
12 Months or Greater Fair Value	$ 461.1	$ 286.1
12 Months or Greater Unrealized Losses	$ (7.4)	$ (2.6)
Fixed maturities | Other asset-backed securities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	197	103
Total Fair Value	$ 1,837.3	$ 1,605.2
Gross Unrealized Losses	$ (4.5)	$ (4.4)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	134	89
Less than 12 Months Fair Value	$ 1,377.8	$ 1,423.3
Less than 12 Months Unrealized Losses	$ (3.3)	$ (3.9)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	63	14
12 Months or Greater Fair Value	$ 459.5	$ 181.9
12 Months or Greater Unrealized Losses	$ (1.2)	$ (0.5)
Fixed maturities | Redeemable preferred stocks
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	2	2
Total Fair Value	$ 21.8	$ 31.0
Gross Unrealized Losses	$ (1.5)	$ (2.0)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	1	0
Less than 12 Months Fair Value	$ 10.8	$ 0.0
Less than 12 Months Unrealized Losses	$ (0.1)	$ 0.0
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	1	2
12 Months or Greater Fair Value	$ 11.0	$ 31.0
12 Months or Greater Unrealized Losses	$ (1.4)	$ (2.0)
Equity securities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	23	88
Total Fair Value	$ 141.2	$ 351.7
Gross Unrealized Losses	$ (9.0)	$ (18.2)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	19	77
Less than 12 Months Fair Value	$ 69.9	$ 194.9
Less than 12 Months Unrealized Losses	$ (0.7)	$ (5.5)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	4	11
12 Months or Greater Fair Value	$ 71.3	$ 156.8
12 Months or Greater Unrealized Losses	$ (8.3)	$ (12.7)
Equity securities | Nonredeemable preferred stocks
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	4	13
Total Fair Value	$ 127.8	$ 329.6
Gross Unrealized Losses	$ (8.8)	$ (16.1)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	1	8
Less than 12 Months Fair Value	$ 56.5	$ 175.2
Less than 12 Months Unrealized Losses	$ (0.5)	$ (3.8)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	3	5
12 Months or Greater Fair Value	$ 71.3	$ 154.4
12 Months or Greater Unrealized Losses	$ (8.3)	$ (12.3)
Equity securities | Common equities
Investments, Unrealized Loss Position [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	19	75
Total Fair Value	$ 13.4	$ 22.1
Gross Unrealized Losses	$ (0.2)	$ (2.1)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | security	18	69
Less than 12 Months Fair Value	$ 13.4	$ 19.7
Less than 12 Months Unrealized Losses	$ (0.2)	$ (1.7)
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | security	1	6
12 Months or Greater Fair Value	$ 0.0	$ 2.4
12 Months or Greater Unrealized Losses	$ 0.0	$ (0.4)

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Investments Total Non-Credit Portion of Other-Than-Temporary Impairment Recorded in Accumulated Other Comprehensive Income, Reflecting Original Non-Credit Loss at Time Credit Impairment (Detail) - Fixed maturities - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Other Than Temporary Impairment Non Credit Losses Recognized In Accumulated Other Comprehensive Income [Line Items]
Accumulated Other Comprehensive Income (Loss), Other than Temporary Impairment, Not Credit Loss, Pre-Tax, Available-for-sale, Debt Securities	$ (20.0)	$ (43.9)
Residential mortgage-backed securities
Other Than Temporary Impairment Non Credit Losses Recognized In Accumulated Other Comprehensive Income [Line Items]
Accumulated Other Comprehensive Income (Loss), Other than Temporary Impairment, Not Credit Loss, Pre-Tax, Available-for-sale, Debt Securities	(19.7)	(43.3)
Commercial mortgage-backed securities
Other Than Temporary Impairment Non Credit Losses Recognized In Accumulated Other Comprehensive Income [Line Items]
Accumulated Other Comprehensive Income (Loss), Other than Temporary Impairment, Not Credit Loss, Pre-Tax, Available-for-sale, Debt Securities	$ (0.3)	$ (0.6)

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Investments OTTI Credit Losses Recognized in Earnings (Detail) - Fixed maturities - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Beginning balance	$ 11,500,000	$ 12,800,000	$ 13,100,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Additions, No Previous Impairment	400,000	0	0
Reductions for securities sold/matured	(11,200,000)	0	(1,400,000)
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Changes in Cash Flows	(200,000)	(1,300,000)	1,100,000
Ending balance	500,000	11,500,000	12,800,000
Residential mortgage-backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Beginning balance	11,100,000	12,400,000	12,700,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Additions, No Previous Impairment	0	0	0
Reductions for securities sold/matured	(10,900,000)	0	(1,400,000)
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Changes in Cash Flows	(200,000)	(1,300,000)	1,100,000
Ending balance	0	11,100,000	12,400,000
Commercial mortgage-backed securities
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Beginning balance	400,000	400,000	400,000
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Additions, No Previous Impairment	400,000	0	0
Reductions for securities sold/matured	(300,000)	0	0
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Changes in Cash Flows	0	0	0
Ending balance	$ 500,000	$ 400,000	$ 400,000

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Investments Components of Net Realized Gains (Losses) (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	$ 175.9	$ 193.9	$ 192.9
Gross realized losses on securities sales	(64.7)	(40.0)	(49.9)
Net realized gains (losses) on securities sales	111.2	153.9	143.0
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	(61.2)	(85.3)	(8.7)
Other gains (losses)	(0.4)	(17.5)	(21.6)
Total net realized gains (losses) on securities	49.6	51.1	112.7
Fixed maturities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	74.5	120.6	77.2
Gross realized losses on securities sales	(46.4)	(18.9)	(8.3)
Net realized gains (losses) on securities sales	28.1	101.7	68.9
Fixed maturities | U.S. government obligations
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	6.2	24.6	17.5
Gross realized losses on securities sales	(28.7)	(2.4)	(0.9)
Net realized gains (losses) on securities sales	(22.5)	22.2	16.6
Fixed maturities | State and local government obligations
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	10.5	16.0	7.8
Gross realized losses on securities sales	(0.1)	(1.6)	(0.3)
Net realized gains (losses) on securities sales	10.4	14.4	7.5
Fixed maturities | Corporate And Other Debt Securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	20.3	43.3	31.2
Gross realized losses on securities sales	(5.1)	(2.5)	(5.0)
Net realized gains (losses) on securities sales	15.2	40.8	26.2
Fixed maturities | Residential mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	23.8	2.5	4.9
Gross realized losses on securities sales	(0.4)	(0.2)	(0.8)
Net realized gains (losses) on securities sales	23.4	2.3	4.1
Fixed maturities | Commercial mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	4.9	13.3	15.7
Gross realized losses on securities sales	(5.3)	(5.6)	(1.3)
Net realized gains (losses) on securities sales	(0.4)	7.7	14.4
Fixed maturities | Other asset-backed securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	0.3	0.0	0.0
Gross realized losses on securities sales	(0.4)	0.0	0.0
Net realized gains (losses) on securities sales	(0.1)	0.0	0.0
Fixed maturities | Redeemable preferred stocks
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	8.5	20.9	0.1
Gross realized losses on securities sales	(6.4)	(6.6)	0.0
Net realized gains (losses) on securities sales	2.1	14.3	0.1
Equity securities | Nonredeemable preferred stocks
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	58.4	11.9	65.3
Gross realized losses on securities sales	(5.9)	(5.3)	(3.2)
Net realized gains (losses) on securities sales	52.5	6.6	62.1
Equity securities | Common equities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	43.0	61.3	50.4
Gross realized losses on securities sales	(12.2)	(15.7)	(38.4)
Net realized gains (losses) on securities sales	30.8	45.6	12.0
Short-term investments
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	0.0	0.1	0.0
Gross realized losses on securities sales	(0.2)	(0.1)	0.0
Net realized gains (losses) on securities sales	(0.2)	0.0	0.0
Hybrid and Derivative Instruments and Litigation Settlements | Litigation Settlements
Gain (Loss) on Investments [Line Items]
Other gains (losses)	1.2	0.4	0.4
Hybrid and Derivative Instruments and Litigation Settlements | Hybrid Preferred Stock
Gain (Loss) on Investments [Line Items]
Other gains (losses)	(1.6)	2.1	(1.3)
Hybrid and Derivative Instruments and Litigation Settlements | Derivative Instruments
Gain (Loss) on Investments [Line Items]
Other gains (losses)	0.0	(20.0)	(20.7)
Investment [Domain]
Gain (Loss) on Investments [Line Items]
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	(11.6)	(25.6)	(8.7)
Investment [Domain] | Fixed maturities
Gain (Loss) on Investments [Line Items]
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	(0.4)	(25.3)	0.0
Investment [Domain] | Fixed maturities | Commercial mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	(0.4)	0.0	0.0
Investment [Domain] | Fixed maturities | Redeemable preferred stocks
Gain (Loss) on Investments [Line Items]
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	0.0	(25.3)	0.0
Investment [Domain] | Equity securities | Common equities
Gain (Loss) on Investments [Line Items]
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	(11.2)	(0.3)	(8.7)
Other Assets [Member] | Other Assets [Member]
Gain (Loss) on Investments [Line Items]
Other than Temporary Impairment Losses, Portion Recognized in Earnings, Net of Sales	$ (49.6)	$ (59.7)	$ 0.0

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Investments Components of Net Investment Income (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	$ 563.1	$ 478.9	$ 454.6
Investment expenses	(23.9)	(22.4)	(22.8)
Net investment income	539.2	456.5	431.8
Fixed maturities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	422.9	353.4	357.7
Fixed maturities | U.S. government obligations
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	72.7	18.2	28.3
Fixed maturities | State and local government obligations
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	51.5	52.3	60.7
Fixed maturities | Foreign government obligations
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	0.3	0.4	0.4
Fixed maturities | Corporate debt securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	125.2	110.7	102.4
Fixed maturities | Residential mortgage-backed securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	34.7	47.3	54.3
Fixed maturities | Commercial mortgage-backed securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	79.6	81.6	74.6
Fixed maturities | Other asset-backed securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	47.1	28.0	22.0
Fixed maturities | Redeemable preferred stocks
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	11.8	14.9	15.0
Equity securities | Nonredeemable preferred stocks
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	44.1	48.6	43.7
Equity securities | Common equities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	58.3	57.2	51.0
Short-term investments
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	$ 37.8	$ 19.7	$ 2.2

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Investments Derivative Instruments (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Aug. 31, 2016
Derivative [Line Items]
Derivative Assets (Liabilities), at Fair Value, Net	$ 0	$ 0
Gain (Loss) on Derivative Instruments, Net, Pretax	0	(20,000,000)	$ (20,700,000)
Designated as Hedging Instrument [Member] | Ineffective Cash Flow Hedge [Member]
Derivative [Line Items]
Derivative, Notional Amount	31,000,000	370,000,000	18,000,000	$ 350,000,000
Derivative Assets (Liabilities), at Fair Value, Net	0	0
Gain (Loss) on Derivative Instruments, Net, Pretax	0	(1,300,000)	200,000
Non-hedging Instruments | Interest Rate Swaps
Derivative [Line Items]
Derivative Assets (Liabilities), at Fair Value, Net	0	0
Non-hedging Instruments | Interest Rate Swaps | Fixed maturities
Derivative [Line Items]
Derivative, Notional Amount	0	0	750,000,000
Derivative Assets (Liabilities), at Fair Value, Net	0	0
Gain (Loss) on Derivative Instruments, Net, Pretax	0	0	(23,400,000)
Non-hedging Instruments | Future [Member]
Derivative [Line Items]
Derivative Assets (Liabilities), at Fair Value, Net	0	0
Closed Positions [Member] | Non-hedging Instruments | Interest Rate Swaps
Derivative [Line Items]
Derivative, Notional Amount	0	750,000,000	0
Derivative Assets (Liabilities), at Fair Value, Net	0	0
Gain (Loss) on Derivative Instruments, Net, Pretax	0	(19,000,000)	0
Closed Positions [Member] | Non-hedging Instruments | Future [Member]
Derivative [Line Items]
Derivative, Notional Amount	0	135,000,000	691,000,000
Derivative Assets (Liabilities), at Fair Value, Net	0	0
Gain (Loss) on Derivative Instruments, Net, Pretax	$ 0	$ 300,000	$ 2,500,000

XML

Investments - Additional Information (Detail)	1 Months Ended		12 Months Ended
	Apr. 30, 2017 USD ($)	Aug. 31, 2016 USD ($)	Dec. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($) security	Dec. 31, 2015 USD ($)
Schedule of Investments [Line Items]
Principal amount of bonds and certificates of deposit on deposit to meet state insurance regulatory and/or rating agency requirements			$ 222,600,000
Securities exceeding 10% of Shareholders' Equity			0	$ 0
Fair value of fixed-maturity securities that were non-income producing during the preceding 12 months			0
Short-term Investments			2,869,400,000	3,572,900,000
Securities Sold under Agreements to Repurchase			0	0
Open reverse repurchase commitments			0	0
Gross Unrealized Losses			$ 99,400,000	$ 139,800,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			1,166	1,369
Trading securities			$ 0	$ 0
Net realized gains (losses) on securities			114,100,000	137,900,000	$ 136,500,000
Gain (Loss) on Derivative Instruments, Net, Pretax			0	(20,000,000)	(20,700,000)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax			300,000	1,900,000	1,800,000
Derivative Assets (Liabilities), at Fair Value, Net			0	0
4.125% Senior Notes due 2047
Schedule of Investments [Line Items]
Senior notes, issuance amount	$ 850,000,000		$ 850,000,000	0
Debt Instrument, Interest Rate, Stated Percentage	4.125%		4.125%
Unrealized Gain (Loss) on Interest Rate Cash Flow Hedges, Pretax, Accumulated Other Comprehensive Income (Loss)	$ (8,000,000)
2.45% Senior Notes Due 2027
Schedule of Investments [Line Items]
Senior notes, issuance amount		$ 500,000,000	$ 500,000,000	500,000,000
Debt Instrument, Interest Rate, Stated Percentage		2.45%	2.45%
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Schedule of Investments [Line Items]
Senior notes, issuance amount			$ 0	1,000,000,000
Debt Instrument, Interest Rate, Stated Percentage			6.70%
Debt Instrument, Repurchased Face Amount			$ 31,000,000	20,000,000	18,000,000
Equity securities
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 9,000,000	$ 18,200,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			23	88
Equity securities | Common equities
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 200,000	$ 2,100,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			19	75
Equity securities | Nonredeemable preferred stocks
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 8,800,000	$ 16,100,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			4	13
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Percentage Decline			6.00%
Fixed maturities
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 90,400,000	$ 121,600,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			1,143	1,281
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Additions, No Previous Impairment			$ 400,000	$ 0	0
Fixed maturities | Corporate debt securities
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 14,400,000	$ 24,300,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			222	184
Fixed maturities | Redeemable preferred stocks
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 1,500,000	$ 2,000,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			2	2
Fixed maturities | Commercial mortgage-backed securities
Schedule of Investments [Line Items]
Gross Unrealized Losses			$ 13,300,000	$ 25,500,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security			105	111
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Additions, No Previous Impairment			$ 400,000	$ 0	0
Fixed Income Securities
Schedule of Investments [Line Items]
Gross Unrealized Losses			99,200,000
Foreign Government Debt
Schedule of Investments [Line Items]
Short-term Investments			0	0
Interest Rate Swaps
Schedule of Investments [Line Items]
Cash collateral received from counterparty				4,900,000
Categories of Investments, Marketable Securities, Trading Securities
Schedule of Investments [Line Items]
Net realized gains (losses) on securities			$ 0	0	0
Russell One Thousand | Equity securities | Common equities
Schedule of Investments [Line Items]
Percentage of common stock portfolio			96.00%
Managed Equity Strategy | Equity securities | Common equities
Schedule of Investments [Line Items]
Percentage of common stock portfolio			4.00%
Designated as Hedging Instrument [Member] | Ineffective Cash Flow Hedge [Member]
Schedule of Investments [Line Items]
Derivative, Notional Amount		$ 350,000,000	$ 31,000,000	370,000,000	18,000,000
Gain (Loss) on Derivative Instruments, Net, Pretax			0	(1,300,000)	200,000
Derivative Assets (Liabilities), at Fair Value, Net			0	0
Designated as Hedging Instrument [Member] | Ineffective Cash Flow Hedge [Member] | 2.45% Senior Notes Due 2027
Schedule of Investments [Line Items]
Gain (Loss) on Derivative Instruments, Net, Pretax		$ (1,400,000)	(1,400,000)
Non-hedging Instruments | Interest Rate Swaps
Schedule of Investments [Line Items]
Derivative Assets (Liabilities), at Fair Value, Net			0	0
Non-hedging Instruments | Future [Member]
Schedule of Investments [Line Items]
Derivative Assets (Liabilities), at Fair Value, Net			0	0
Non-hedging Instruments | Fixed maturities | Interest Rate Swaps
Schedule of Investments [Line Items]
Derivative, Notional Amount			0	0	750,000,000
Gain (Loss) on Derivative Instruments, Net, Pretax			0	0	$ (23,400,000)
Derivative Assets (Liabilities), at Fair Value, Net			$ 0	$ 0

XML

Fair Value Composition of Investment Portfolio by Major Security Type (Detail) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 27,274.7	$ 23,482.6
Long-term Debt, Fair Value	3,643.6	3,315.8
Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	20,201.7	16,243.8
Fixed maturities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,050.0	6,103.8
Fixed maturities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	13,940.7	9,948.1
Fixed maturities | U.S. government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,645.9	2,870.1
Fixed maturities | U.S. government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,645.9	2,870.1
Fixed maturities | State and local government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,297.1	2,502.6
Fixed maturities | State and local government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,297.1	2,502.6
Fixed maturities | Foreign government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	24.5
Fixed maturities | Foreign government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	24.5
Fixed maturities | Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	4,997.7	4,550.9
Fixed maturities | Corporate debt securities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	4,997.7	4,550.9
Fixed maturities | Residential mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	836.7	1,499.3
Fixed maturities | Residential mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	836.7	1,499.3
Fixed maturities | Commercial mortgage-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,758.6	2,253.4
Fixed maturities | Commercial mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,758.6	2,253.4
Fixed maturities | Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,454.7	2,351.1
Fixed maturities | Other asset-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,454.7	2,351.1
Fixed maturities | Redeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	211.0	191.9
Fixed maturities | Redeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	64.1	59.5
Fixed maturities | Redeemable preferred stocks | Utilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	11.4	30.9
Fixed maturities | Redeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	135.5	101.5
Equity securities | Nonredeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	803.8	853.5
Equity securities | Nonredeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	798.8	853.5
Equity securities | Nonredeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5.0	0.0
Equity securities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	3,399.8	2,812.4
Equity securities | Common equities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	3,399.5	2,812.0
Equity securities | Common equities | Other risk investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.3	0.4
Total Fixed Maturities and Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	24,405.3	19,909.7
Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,869.4	3,572.9
Carrying (Reported) Amount, Fair Value Disclosure
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	25,276.9	22,031.7
Debt	3,306.3	3,148.2
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	20,209.9	16,287.1
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,043.4	6,107.3
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	13,971.6	9,991.0
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | U.S. government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,688.8	2,899.2
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | State and local government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,285.6	2,509.5
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Foreign government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	24.5
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Corporate debt securities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	4,997.2	4,557.8
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Residential mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	828.8	1,489.7
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Commercial mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,760.1	2,266.9
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Other asset-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,454.5	2,350.7
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	194.9	188.8
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	61.3	59.8
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks | Utilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	10.1	30.5
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	123.5	98.5
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	698.6	734.2
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	693.6	734.2
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5.0	0.0
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,499.0	1,437.5
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Common equities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,498.7	1,437.1
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Common equities | Other risk investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.3	0.4
Carrying (Reported) Amount, Fair Value Disclosure | Total Fixed Maturities and Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	22,407.5	18,458.8
Carrying (Reported) Amount, Fair Value Disclosure | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,869.4	3,572.9
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	11,950.4	8,854.0
Long-term Debt, Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,645.9	2,894.6
Fair Value, Inputs, Level 1 | Fixed maturities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,645.9	2,894.6
Fair Value, Inputs, Level 1 | Fixed maturities | U.S. government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,645.9	2,870.1
Fair Value, Inputs, Level 1 | Fixed maturities | State and local government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Foreign government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	24.5
Fair Value, Inputs, Level 1 | Fixed maturities | Corporate debt securities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Residential mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Commercial mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Other asset-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks | Utilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	80.6	138.1
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	80.6	138.1
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Equity securities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	3,399.5	2,812.0
Fair Value, Inputs, Level 1 | Equity securities | Common equities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	3,399.5	2,812.0
Fair Value, Inputs, Level 1 | Equity securities | Common equities | Other risk investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 1 | Total Fixed Maturities and Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	10,126.0	5,844.7
Fair Value, Inputs, Level 1 | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,824.4	3,009.3
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	15,319.0	14,627.9
Long-term Debt, Fair Value	3,606.5	3,188.5
Fair Value, Inputs, Level 2 | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	13,555.8	13,348.9
Fair Value, Inputs, Level 2 | Fixed maturities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,050.0	6,103.5
Fair Value, Inputs, Level 2 | Fixed maturities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	7,294.8	7,053.5
Fair Value, Inputs, Level 2 | Fixed maturities | U.S. government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 2 | Fixed maturities | State and local government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,297.1	2,502.6
Fair Value, Inputs, Level 2 | Fixed maturities | Foreign government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 2 | Fixed maturities | Corporate debt securities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	4,997.7	4,550.9
Fair Value, Inputs, Level 2 | Fixed maturities | Residential mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	836.7	1,499.3
Fair Value, Inputs, Level 2 | Fixed maturities | Commercial mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,758.6	2,253.1
Fair Value, Inputs, Level 2 | Fixed maturities | Other asset-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	2,454.7	2,351.1
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	211.0	191.9
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	64.1	59.5
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks | Utilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	11.4	30.9
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	135.5	101.5
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	718.2	715.4
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	718.2	715.4
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 2 | Equity securities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 2 | Equity securities | Common equities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 2 | Equity securities | Common equities | Other risk investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 2 | Total Fixed Maturities and Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	14,274.0	14,064.3
Fair Value, Inputs, Level 2 | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,045.0	563.6
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5.3	0.7
Long-term Debt, Fair Value	37.1	127.3
Fair Value, Inputs, Level 3 | Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.3
Fair Value, Inputs, Level 3 | Fixed maturities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.3
Fair Value, Inputs, Level 3 | Fixed maturities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | U.S. government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | State and local government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Foreign government obligations | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Corporate debt securities | Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Residential mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Commercial mortgage-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.3
Fair Value, Inputs, Level 3 | Fixed maturities | Other asset-backed securities | Asset-backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks | Utilities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5.0	0.0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks | Financials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks | Industrials
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5.0	0.0
Fair Value, Inputs, Level 3 | Equity securities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.3	0.4
Fair Value, Inputs, Level 3 | Equity securities | Common equities | Common equities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.0	0.0
Fair Value, Inputs, Level 3 | Equity securities | Common equities | Other risk investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0.3	0.4
Fair Value, Inputs, Level 3 | Total Fixed Maturities and Equity Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	5.3	0.7
Fair Value, Inputs, Level 3 | Short-term investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 0.0	$ 0.0

XML

Fair Value Summary of Changes in Fair Value Associated With Level 3 Assets (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Fair Value	$ 0.7	$ 10.2
Calls/ Maturities/ Paydowns	(0.4)	(9.6)
Purchases	5.0	0.0
Sales	0.0	0.0
Net Realized (Gain)/Loss on Sales	0.0	0.0
Change in Valuation	0.0	0.1
Net Transfers In (Out)	0.0	0.0
Ending Fair value	5.3	0.7
Fixed maturities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Fair Value	0.3	9.9
Calls/ Maturities/ Paydowns	(0.3)	(9.6)
Purchases	0.0	0.0
Sales	0.0	0.0
Net Realized (Gain)/Loss on Sales	0.0	0.0
Change in Valuation	0.0	0.0
Net Transfers In (Out)	0.0	0.0
Ending Fair value	0.0	0.3
Fixed maturities | Commercial mortgage-backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Fair Value	0.3	9.9
Calls/ Maturities/ Paydowns	(0.3)	(9.6)
Purchases	0.0	0.0
Sales	0.0	0.0
Net Realized (Gain)/Loss on Sales	0.0	0.0
Change in Valuation	0.0	0.0
Net Transfers In (Out)	0.0	0.0
Ending Fair value	0.0	0.3
Equity securities | Nonredeemable preferred stocks | Industrials
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Fair Value	0.0	0.0
Calls/ Maturities/ Paydowns	0.0	0.0
Purchases	5.0	0.0
Sales	0.0	0.0
Net Realized (Gain)/Loss on Sales	0.0	0.0
Change in Valuation	0.0	0.0
Net Transfers In (Out)	0.0	0.0
Ending Fair value	5.0	0.0
Equity securities | Common equities | Other risk investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning Fair Value	0.4	0.3
Calls/ Maturities/ Paydowns	(0.1)	0.0
Purchases	0.0	0.0
Sales	0.0	0.0
Net Realized (Gain)/Loss on Sales	0.0	0.0
Change in Valuation	0.0	0.1
Net Transfers In (Out)	0.0	0.0
Ending Fair value	$ 0.3	$ 0.4

XML

Fair Value Summary of Quantitative Information about Level 3 Fair Value Measurements (Detail) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) security $ / shares	Dec. 31, 2016 USD ($) security
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 27,274.7	$ 23,482.6
Equity securities | Nonredeemable preferred stocks
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	803.8	853.5
Fixed maturities
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	20,201.7	16,243.8
Fixed maturities | Commercial mortgage-backed securities
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	2,758.6	2,253.4
Fair Value, Inputs, Level 3
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	5.3	0.7
Fair Value, Inputs, Level 3 | Third Party Pricing Exemption Securities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	0.3	0.4
Fair Value, Inputs, Level 3 | Total Quantitative Level Three Securities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 5.0	$ 0.3
Fair Value, Inputs, Level 3 | Internal Pricing
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Number of securities | security	1	0
Fair Value	$ 5.0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	5.0	$ 0.0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks | Internal Pricing
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 5.0	0.0
Valuation Technique	Internal price
Fair Value Inputs, Original Issue Price | $ / shares	$ 3.9
Fair Value, Inputs, Level 3 | Fixed maturities
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	$ 0.0	0.3
Fair Value, Inputs, Level 3 | Fixed maturities | External Pricing [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Fair Value	0.0	$ 0.3
Fair Value, Inputs, Level 3 | Fixed maturities | Commercial mortgage-backed securities | External Pricing [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items]
Number of securities | security		1
Fair Value	$ 0.0	$ 0.3
Fair Value Inputs, Prepayment Rate		0.00%
Valuation Technique		External vendor

XML

Fair Value - Additional Information (Detail) $ in Millions	Dec. 31, 2017 USD ($) security	Dec. 31, 2016 USD ($) security
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value of securities transferred out of Level 2 into Level 1	$ 0.0	$ 0.0
Fair Value	$ 27,274.7	$ 23,482.6
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Vendor Quoted Prices, Percent of FV Hierarchy Level	66.00%	52.00%
Fair Value	$ 11,950.4	$ 8,854.0
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Vendor Quoted Prices, Percent of FV Hierarchy Level	98.00%	99.00%
Dealer Quoted Prices, Percent of FV Hierarchy Level	2.00%	1.00%
Fair Value	$ 15,319.0	$ 14,627.9
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 5.3	$ 0.7
Internal Pricing | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Number of securities | security	1	0
Fair Value	$ 5.0
Fixed maturities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	20,201.7	$ 16,243.8
Fixed maturities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	6,645.9	2,894.6
Fixed maturities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	13,555.8	13,348.9
Fixed maturities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	$ 0.0	$ 0.3

XML

Debt (Detail) $ in Millions		Dec. 31, 2017 USD ($) instrument	Dec. 31, 2016 USD ($) instrument
Debt Instrument [Line Items]
Fair Value		$ 3,643.6	$ 3,315.8
Debt, Long-term and Short-term, Combined Amount	[1]	3,306.3	3,148.2
3.75% Senior Notes due 2021
Debt Instrument [Line Items]
Carrying Value		498.8	498.4
Fair Value		520.7	528.8
2.45% Senior Notes Due 2027
Debt Instrument [Line Items]
Carrying Value		496.1	495.8
Fair Value		477.9	464.6
6 5/8% Senior Notes due 2029
Debt Instrument [Line Items]
Carrying Value		296.1	295.9
Fair Value		382.3	380.1
6.25% Senior Notes due 2032
Debt Instrument [Line Items]
Carrying Value		395.3	395.2
Fair Value		516.9	499.0
4.35% Senior Notes due 2044
Debt Instrument [Line Items]
Carrying Value		346.5	346.4
Fair Value		388.7	362.3
3.70% Senior Notes due 2045
Debt Instrument [Line Items]
Carrying Value		395.2	395.1
Fair Value		402.9	372.5
4.125% Senior Notes due 2047
Debt Instrument [Line Items]
Carrying Value		841.2	0.0
Fair Value		917.1	0.0
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Carrying Value		0.0	594.1
Fair Value		0.0	581.2
Other Debt Instruments [Member]
Debt Instrument [Line Items]
Debt, Long-term and Short-term, Combined Amount		$ 37.1	$ 127.3
Notes Payable, Other Payables [Member] | Other Debt Instruments [Member]
Debt Instrument [Line Items]
Debt Instrument, Number of Debt Instruments Acquired | instrument		2	2
Debt, Long-term and Short-term, Combined Amount		$ 37.1	$ 62.1
Trust Preferred Debt Securities [Member] | Other Debt Instruments [Member]
Debt Instrument [Line Items]
Carrying Value		$ 0.0	$ 41.2
Debt Instrument, Number of Debt Instruments Acquired | instrument		0	2
Senior Notes [Member] | Other Debt Instruments [Member]
Debt Instrument [Line Items]
Carrying Value		$ 0.0	$ 24.0
Debt Instrument, Number of Debt Instruments Acquired | instrument		0	4

[1] Consists of both short-term and long-term debt. See Note 4 – Debt for further discussion.

XML

Debt (Parenthetical) (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Apr. 30, 2017	Aug. 31, 2016
Debt Instrument [Line Items]
Debt instrument, outstanding	$ 3,337,100,000
3.75% Senior Notes due 2021
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 500,000,000	$ 500,000,000
Debt Instrument, Interest Rate, Stated Percentage	3.75%
6 5/8% Senior Notes due 2029
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 300,000,000	300,000,000
Debt Instrument, Interest Rate, Stated Percentage	6.625%
6.25% Senior Notes due 2032
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 400,000,000	400,000,000
Debt Instrument, Interest Rate, Stated Percentage	6.25%
4.35% Senior Notes due 2044
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 350,000,000	350,000,000
Debt Instrument, Interest Rate, Stated Percentage	4.35%
3.70% Senior Notes due 2045
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 400,000,000	400,000,000
Debt Instrument, Interest Rate, Stated Percentage	3.70%
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 0	1,000,000,000
Debt instrument, outstanding	$ 0	594,600,000
Debt Instrument, Interest Rate, Stated Percentage	6.70%
2.45% Senior Notes Due 2027
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 500,000,000	500,000,000		$ 500,000,000
Debt Instrument, Interest Rate, Stated Percentage	2.45%			2.45%
4.125% Senior Notes due 2047
Debt Instrument [Line Items]
Senior notes, issuance amount	$ 850,000,000	0	$ 850,000,000
Debt Instrument, Interest Rate, Stated Percentage	4.125%		4.125%
Discretionary Line of Credit
Debt Instrument [Line Items]
Proceeds from Lines of Credit	$ 0	$ 0

XML

Debt Unrealized Gains (Losses) From Debt Hedges Included In Accumulated Other (Detail) - USD ($) $ in Millions	Dec. 31, 2017	Apr. 06, 2017	Dec. 31, 2016	Jan. 26, 2015	Apr. 22, 2014	Aug. 17, 2011	Nov. 21, 2002	Mar. 01, 1999
Debt Instrument [Line Items]
Unrealized Gain (Loss)	$ (14.8)		$ (9.4)
3.75% Senior Notes due 2021
Debt Instrument [Line Items]
Unrealized Gain (Loss)	(2.1)					$ (5.1)
6 5/8% Senior Notes due 2029
Debt Instrument [Line Items]
Unrealized Gain (Loss)	(2.7)							$ (4.2)
6.25% Senior Notes due 2032
Debt Instrument [Line Items]
Unrealized Gain (Loss)	3.6						$ 5.1
4.35% Senior Notes due 2044
Debt Instrument [Line Items]
Unrealized Gain (Loss)	(1.5)				$ (1.6)
3.70% Senior Notes due 2045
Debt Instrument [Line Items]
Unrealized Gain (Loss)	(12.2)			$ (12.9)
4.125% Senior Notes due 2047
Debt Instrument [Line Items]
Unrealized Gain (Loss)	$ (7.9)	$ (8.0)

XML

Debt Aggregate Principal Payments On Debt Outstanding (Detail) $ in Millions	Dec. 31, 2017 USD ($)
Debt Disclosure [Abstract]
Debt Instrument, Periodic Payment, Principal in Next Twelve Months	$ 25.0
Long-term Debt, Maturities, Repayments of Principal in Year Two	12.1
Long-Term Debt, Maturities, Repayments of Principal in Year Three	0.0
Long-Term Debt, Maturities, Repayments of Principal in Year Four	500.0
Long-Term Debt, Maturities, Repayments of Principal in Year Five	0.0
Long-Term Debt, Maturities, Repayments of Principal after Year Five	2,800.0
Total	$ 3,337.1

XML

Debt - Additional Information (Detail)	1 Months Ended		9 Months Ended	12 Months Ended
	Apr. 30, 2017 USD ($)	Aug. 31, 2016 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Mar. 31, 2017	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Debt Instrument [Line Items]
Early Repayment of Subordinated Debt				$ 635,600,000		$ 18,200,000	$ 19,300,000
Gain (Loss) on Derivative Instruments, Net, Pretax				0		(20,000,000)	(20,700,000)
Debt Instrument, Periodic Payment, Principal in Next Twelve Months			$ 25,000,000	$ 25,000,000
Debt Instrument, Number of Subsidiaries, one hundred percent of common stock as collateral			3	3
Discretionary Line of Credit
Debt Instrument [Line Items]
Debt Instrument, Term				30 days
Line of Credit Facility, Maximum Borrowing Capacity			$ 250,000,000	$ 250,000,000
Proceeds from Lines of Credit				0		0
Discretionary Line of Credit | Federal Funds Rate
Debt Instrument [Line Items]
Basis points			0.50%		0.50%
Terminated Discretionary Line of Credit [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 100,000,000
4.125% Senior Notes due 2047
Debt Instrument [Line Items]
Debt Instrument, Face Amount	$ 850,000,000		$ 850,000,000	$ 850,000,000		0
Debt Instrument, Interest Rate, Stated Percentage	4.125%		4.125%	4.125%
Proceeds from Debt, Net of Issuance Costs	$ 841,100,000
Debt Related Commitment Fees and Debt Issuance Costs	$ 1,500,000
2.45% Senior Notes Due 2027
Debt Instrument [Line Items]
Debt Instrument, Face Amount		$ 500,000,000	$ 500,000,000	$ 500,000,000		500,000,000
Debt Instrument, Interest Rate, Stated Percentage		2.45%	2.45%	2.45%
Proceeds from Debt, Net of Issuance Costs		$ 495,600,000
Debt Related Commitment Fees and Debt Issuance Costs		900,000
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Debt Instrument, Face Amount			$ 0	$ 0		1,000,000,000
Debt Instrument, Interest Rate, Stated Percentage			6.70%	6.70%
Early Repayment of Subordinated Debt				$ 30,900,000		19,800,000
Gains (losses) on extinguishment of debt				200,000		1,600,000
Trust Preferred Debt Securities and Senior Notes [Member] | Other Debt Instruments [Member]
Debt Instrument [Line Items]
Repayments of Debt				$ 65,200,000
Loans Payable [Member] | Fixed Rate, Five Year Loan [Member]
Debt Instrument [Line Items]
Debt Instrument, Term				5 years
London Interbank Offered Rate (LIBOR) [Member] | Notes Payable, Other Payables [Member] | Other Debt Instruments [Member]
Debt Instrument [Line Items]
Basis points				2.25%
Designated as Hedging Instrument [Member] | Ineffective Cash Flow Hedge [Member]
Debt Instrument [Line Items]
Gain (Loss) on Derivative Instruments, Net, Pretax				$ 0		$ (1,300,000)	$ 200,000
Designated as Hedging Instrument [Member] | Ineffective Cash Flow Hedge [Member] | 2.45% Senior Notes Due 2027
Debt Instrument [Line Items]
Gain (Loss) on Derivative Instruments, Net, Pretax		$ (1,400,000)		(1,400,000)
debt extinguishment [Member] | 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Early Repayment of Subordinated Debt				$ 563,700,000

XML

Income Taxes Components of Income Tax Provision (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Current Federal Tax Expense (Benefit)	$ 680.9	$ 469.6	$ 655.3
Current State and Local Tax Expense (Benefit)	12.8	12.7	14.7
Deferred Federal Income Tax Expense (Benefit)	(149.4)	(66.3)	(47.7)
Deferred State and Local Income Tax Expense (Benefit)	(3.5)	(2.5)	(11.2)
Total income tax provision	$ 540.8	$ 413.5	$ 611.1

XML

Income Taxes Reconciliation of Provision (Benefit) for income Taxes Reported in Consolidated Statements Of Income with Tax at Statutory Rate (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Apr. 01, 2015
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Income before income taxes	$ 2,138,900,000	$ 1,470,700,000	$ 1,911,600,000
Tax at statutory federal rate	748,600,000	514,800,000	669,100,000
Net deferred tax liability revaluation1	(99,500,000)	0.00	0.00
Tax credits	(52,400,000)	(62,200,000)	(1,900,000)
Stock-based compensation2	(25,100,000)	0	0
Dividends received deduction	(20,700,000)	(22,600,000)	(19,800,000)
Exempt interest income	(16,900,000)	(15,700,000)	(17,800,000)
Tax-deductible dividends	(9,700,000)	(6,100,000)	(7,900,000)
State income taxes, net of federal taxes	6,000,000	6,600,000	2,300,000
Other items, net	400,000	(1,800,000)	600,000
Non-taxable gain4	0	0	(13,800,000)
Total income tax provision	$ 540,800,000	$ 413,500,000	$ 611,100,000
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Tax at statutory federal rate	35.00%	35.00%	35.00%
Net deferred tax liability revaluation1	(5.00%)	0.00%	0.00%
Tax credits	(2.00%)	(4.00%)	(0.00%)
Stock-based compensation2	(1.00%)	0.00%	0.00%
Dividends received deduction	(1.00%)	(2.00%)	(1.00%)
Exempt interest income	(1.00%)	(1.00%)	(1.00%)
Tax-deductible dividends	(0.00%)	(0.00%)	(0.00%)
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Amount	$ 10,100,000	$ 500,000	$ 300,000
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Percent	0.00%	0.00%	0.00%
State income taxes, net of federal taxes	0.00%	0.00%	0.00%
Other items, net	0.00%	0.00%	0.00%
Non-taxable gain4	0.00%	0.00%	(1.00%)
Total income tax provision	25.00%	28.00%	32.00%
ARX Holding Corp.
Business Acquisition [Line Items]
Ownership interest prior to acquisition				5.00%

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Income Taxes Components of Net Deferred Tax Assets (Detail) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Federal deferred tax assets:
Unearned premiums reserve	$ 368.9	$ 515.6
Non-deductible accruals	166.0	259.9
Loss and loss adjustment expense reserves	48.4	76.5
Hedges on forecasted transactions	4.8	5.1
Investment basis differences	0.0	31.3
Other	7.3	8.9
Federal deferred tax liabilities:
Net unrealized gains on securities	(419.5)	(507.2)
Deferred acquisition costs	(163.9)	(227.9)
Property and equipment	(75.5)	(120.2)
Intangible assets	(66.6)	(145.3)
Prepaid expenses	(7.1)	(9.2)
Investment basis differences	(5.5)	0.0
Deferred gain on extinguishment of debt	(0.4)	(1.5)
Other	(6.1)	(7.7)
Net federal deferred tax liability	(149.2)	(121.7)
Net state deferred tax asset	14.2	10.4
Net deferred tax liability	$ (135.0)	$ (111.3)

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Income Taxes - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Income Taxes [Line Items]
Tax at statutory federal rate	35.00%	35.00%	35.00%
Tax cuts and jobs act, reduction in income tax expense related to revaluing deferred tax assets and liabilities	$ 99,500,000
Federal tax benefits resulting from investments in renewable energy tax credit funds	52,400,000	$ 62,200,000	$ 1,900,000
Tax cuts and jobs act, provisional tax amount related to deductibility of executive compensation expense	4,500,000
Deferred tax assets valuation allowance	0	0
Net taxes payable	23,800,000	41,200,000
Provision for income taxes	540,800,000	413,500,000	611,100,000
Interest and Penalties [Member]
Income Taxes [Line Items]
Provision for income taxes	$ 200,000	$ 100,000	$ 100,000
ARX and subsidiaries
Income Taxes [Line Items]
Noncontrolling interest, ownership percentage (less than)	80.00%
Net unrealized gains (losses) on securities
Income Taxes [Line Items]
Tax cuts and jobs act, reduction in income tax expense related to revaluing deferred tax liability associated with net unrealized gains on investment portfolio	$ 275,700,000
Other Deferred Tax Assets and Liabilities [Member]
Income Taxes [Line Items]
Tax cuts and jobs act, reduction in income tax expense related to other deferred tax assets (liabilities)	$ 176,200,000
Tax Year 2018
Income Taxes [Line Items]
Tax at statutory federal rate	21.00%

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Loss And Loss Adjustment Expense Reserves Activity in Loss and loss Adjustment Expense Reserves (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Balance at beginning of period	$ 11,368.0	$ 10,039.0	$ 8,857.4
Less reinsurance recoverables on unpaid losses	1,801.0	1,442.7	1,185.9
Net balance at beginning of period	9,567.0	8,596.3	7,671.5
Net loss and loss adjustment reserves acquired	0.0	(2.5)	222.4
Total beginning reserves		9,567.0	8,593.8	$ 7,893.9
Incurred related to:
Current year	18,782.1	16,967.1	14,657.1
Prior years	25.9	(87.5)	(315.1)
Total incurred	18,808.0	16,879.6	14,342.0
Paid related to:
Current year	12,201.5	11,149.0	9,577.3
Prior years	5,256.7	4,757.4	4,062.3
Total paid	17,458.2	15,906.4	13,639.6
Net balance at ending of period	10,916.8	9,567.0	8,596.3
Plus reinsurance recoverables on unpaid losses	2,170.1	1,801.0	1,442.7
Balance at ending of period	$ 13,086.9	$ 11,368.0	$ 10,039.0

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Loss And Loss Adjustment Expense Reserves Loss And Loss Adjustment Expense Reserves - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) data_subset	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Number of subsets of business data reviewed (over) | data_subset	400
Reserve development, prior years	$ 25.9	$ (87.5)	$ (315.1)
Short-duration Insurance Contracts, Accident Year 2016 and 2015 [Member]
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years	64.0
Short-duration Insurance Contracts, Accident Years 2014 and Prior [Member]
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years	(38.0)
2015
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years		(56.0)
2013
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years		(51.0)
2014
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years		19.0	(239.0)
Commercial Lines Segment
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years	1.0
Property Segment
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years	$ (37.0)
Auto
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Percentage of reserves	98.00%
Personal Auto | Personal Lines Segment
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years	$ 70.0	(40.0)	$ (217.0)
Personal Lines - Liability | Personal Lines Segment
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years		(54.0)
Property | Property Segment
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Reserve development, prior years		$ (52.0)

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Loss And Loss Adjustment Expense Reserves Incurred and Paid Claims Development with IBNR and Claim Counts (Details) $ in Millions	Dec. 31, 2017 USD ($) claim	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Claims Development [Line Items]
Liabilities for claims and claim adjustment expenses, net of reinsurance	$ 10,029.8	$ 8,800.0
Commercial Lines - Physical Damage | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	1,560.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	1,509.6
All outstanding liabilities before 2013, net of reinsurance1	0.4
Liabilities for claims and claim adjustment expenses, net of reinsurance	51.7	46.6
Commercial Lines - Liability | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	5,157.5
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	3,158.6
All outstanding liabilities before 2013, net of reinsurance1	28.5
Liabilities for claims and claim adjustment expenses, net of reinsurance	2,027.4	1,675.3
Property | Property Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,247.8
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,009.2
All outstanding liabilities before 2013, net of reinsurance1	7.2
Liabilities for claims and claim adjustment expenses, net of reinsurance	245.8	224.7
2013 | Commercial Lines - Physical Damage | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	254.2	253.7	$ 254.5	$ 254.2	$ 256.2
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 0.0
Cumulative Number of Incurred Claim Counts | claim	62,673
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 253.8	253.7	253.9	253.1	239.4
2013 | Commercial Lines - Liability | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	840.8	865.0	865.4	864.6	864.2
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 0.0
Cumulative Number of Incurred Claim Counts | claim	78,075
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 802.6	752.5	659.1	509.4	233.3
2013 | Property | Property Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	253.9	254.1	254.3	283.3	307.3
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 2.5
Cumulative Number of Incurred Claim Counts | claim	30,600
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 250.5	249.5	244.9	234.2	185.1
2014 | Commercial Lines - Physical Damage | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	238.0	238.6	239.7	240.3
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (0.5)
Cumulative Number of Incurred Claim Counts | claim	59,622
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 237.9	237.7	238.3	224.6
2014 | Commercial Lines - Liability | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	823.0	820.3	795.4	822.5
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 15.9
Cumulative Number of Incurred Claim Counts | claim	74,724
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 715.3	610.0	438.7	234.0
2014 | Property | Property Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	376.3	379.7	389.1	415.5
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 3.6
Cumulative Number of Incurred Claim Counts | claim	40,984
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 370.3	365.9	351.5	269.2
2015 | Commercial Lines - Physical Damage | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	273.5	274.1	274.4
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (0.1)
Cumulative Number of Incurred Claim Counts | claim	62,593
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 272.0	271.9	248.5
2015 | Commercial Lines - Liability | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	914.8	911.1	897.6
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 23.7
Cumulative Number of Incurred Claim Counts | claim	77,807
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 675.0	501.5	238.4
2015 | Property | Property Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	403.6	416.5	460.0
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 11.5
Cumulative Number of Incurred Claim Counts | claim	41,957
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 383.5	372.8	280.3
2016 | Commercial Lines - Physical Damage | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	379.8	379.6
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (0.9)
Cumulative Number of Incurred Claim Counts | claim	74,217
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 376.9	336.7
2016 | Commercial Lines - Liability | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	1,204.8	1,185.8
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 63.1
Cumulative Number of Incurred Claim Counts | claim	92,196
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 639.9	298.6
2016 | Property | Property Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	541.2	568.6
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 24.8
Cumulative Number of Incurred Claim Counts | claim	53,323
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 498.2	415.2
Short-duration Insurance Contracts, Accident Year 2017 [Member] | Commercial Lines - Physical Damage | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	415.4
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (5.7)
Cumulative Number of Incurred Claim Counts | claim	77,767
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 369.0
Short-duration Insurance Contracts, Accident Year 2017 [Member] | Commercial Lines - Liability | Commercial Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	1,374.1
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 219.2
Cumulative Number of Incurred Claim Counts | claim	94,992
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 325.8
Short-duration Insurance Contracts, Accident Year 2017 [Member] | Property | Property Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	672.8
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 99.7
Cumulative Number of Incurred Claim Counts | claim	64,487
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 506.7
Agency Channel | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	19,542.2
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	15,641.9
All outstanding liabilities before 2013, net of reinsurance1	55.2
Liabilities for claims and claim adjustment expenses, net of reinsurance	3,955.5	3,555.9
Agency Channel | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	11,257.9
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	11,232.6
All outstanding liabilities before 2013, net of reinsurance1	0.9
Liabilities for claims and claim adjustment expenses, net of reinsurance	26.2	30.1
Agency Channel | 2013 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	3,484.2	3,528.0	3,518.2	3,520.9	3,506.0
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 0.0
Cumulative Number of Incurred Claim Counts | claim	696,624
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 3,437.6	3,362.9	3,173.1	2,794.1	1,684.0
Agency Channel | 2013 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,001.1	1,999.4	2,000.1	2,001.4	2,014.0
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 0.0
Cumulative Number of Incurred Claim Counts | claim	1,347,920
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,000.8	2,001.3	2,002.0	2,003.9	1,952.7
Agency Channel | 2014 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	3,654.4	3,633.2	3,627.7	3,702.1
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 50.9
Cumulative Number of Incurred Claim Counts | claim	701,787
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 3,482.3	3,284.5	2,868.1	1,809.0
Agency Channel | 2014 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,088.0	2,089.9	2,090.3	2,107.5
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (3.3)
Cumulative Number of Incurred Claim Counts | claim	1,374,666
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,090.7	2,090.6	2,091.6	2,078.8
Agency Channel | 2015 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	3,798.8	3,773.8	3,774.9
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 59.2
Cumulative Number of Incurred Claim Counts | claim	704,990
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 3,416.5	2,976.0	1,793.1
Agency Channel | 2015 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,134.4	2,137.2	2,136.8
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (2.6)
Cumulative Number of Incurred Claim Counts | claim	1,336,268
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,134.4	2,138.1	2,106.2
Agency Channel | 2016 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	4,130.0	4,082.9
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 158.7
Cumulative Number of Incurred Claim Counts | claim	738,563
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 3,231.5	1,941.6
Agency Channel | 2016 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,398.9	2,423.4
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (12.1)
Cumulative Number of Incurred Claim Counts | claim	1,398,371
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,406.9	2,391.0
Agency Channel | Short-duration Insurance Contracts, Accident Year 2017 [Member] | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	4,474.8
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 679.6
Cumulative Number of Incurred Claim Counts | claim	765,553
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,074.0
Agency Channel | Short-duration Insurance Contracts, Accident Year 2017 [Member] | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,635.5
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (101.8)
Cumulative Number of Incurred Claim Counts | claim	1,496,298
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,599.8
Direct Channel | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	16,934.1
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	13,282.5
All outstanding liabilities before 2013, net of reinsurance1	33.5
Liabilities for claims and claim adjustment expenses, net of reinsurance	3,685.1	3,219.1
Direct Channel | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	10,813.7
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	10,819.4
All outstanding liabilities before 2013, net of reinsurance1	0.1
Liabilities for claims and claim adjustment expenses, net of reinsurance	(5.6)	11.2
Direct Channel | 2013 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,612.9	2,649.8	2,615.8	2,621.8	2,619.4
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 0.0
Cumulative Number of Incurred Claim Counts | claim	550,166
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,577.8	2,521.3	2,375.5	2,085.1	1,252.0
Direct Channel | 2013 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	1,635.0	1,633.4	1,634.6	1,635.6	1,653.7
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 0.0
Cumulative Number of Incurred Claim Counts | claim	1,367,341
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 1,635.0	1,635.3	1,636.2	1,638.2	$ 1,612.9
Direct Channel | 2014 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,913.6	2,898.1	2,887.4	2,946.8
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 38.2
Cumulative Number of Incurred Claim Counts | claim	592,185
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,780.0	2,624.2	2,278.0	1,413.0
Direct Channel | 2014 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	1,859.2	1,861.7	1,862.2	1,889.3
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (3.2)
Cumulative Number of Incurred Claim Counts | claim	1,471,016
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 1,861.8	1,862.7	1,864.1	$ 1,874.6
Direct Channel | 2015 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	3,354.2	3,328.3	3,330.5
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 48.6
Cumulative Number of Incurred Claim Counts | claim	659,102
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 3,021.0	2,615.0	1,545.2
Direct Channel | 2015 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,093.5	2,097.7	2,110.7
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (3.0)
Cumulative Number of Incurred Claim Counts | claim	1,539,790
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,094.7	2,100.1	$ 2,094.7
Direct Channel | 2016 | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	3,843.9	3,819.0
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 143.0
Cumulative Number of Incurred Claim Counts | claim	733,195
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,991.1	1,780.6
Direct Channel | 2016 | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,475.4	2,521.0
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (14.3)
Cumulative Number of Incurred Claim Counts | claim	1,675,405
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,485.8	$ 2,505.0
Direct Channel | Short-duration Insurance Contracts, Accident Year 2017 [Member] | Personal Lines - Liability | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	4,209.5
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ 598.6
Cumulative Number of Incurred Claim Counts | claim	761,280
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 1,912.6
Direct Channel | Short-duration Insurance Contracts, Accident Year 2017 [Member] | Personal Lines - Physical Damage | Personal Lines Segment
Claims Development [Line Items]
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	2,750.6
Total of IBNR Liabilities Plus Expected Development on Reported Claims	$ (145.3)
Cumulative Number of Incurred Claim Counts | claim	1,779,665
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance	$ 2,742.1

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Loss And Loss Adjustment Expense Reserves Reconciliation of the Claims Development to the Liability for Claims and Claim Adjustment Expenses (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	$ 10,029.8	$ 8,800.0
Total reinsurance recoverable on unpaid claims	2,157.8	1,795.9
Unallocated claims adjustment expense related to:	887.0	767.0
Total gross liability for unpaid claims and claim adjustment expense	13,086.9	11,368.0	$ 10,039.0	$ 8,857.4
Other business
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	43.7	37.1
Total reinsurance recoverable on unpaid claims	200.9	154.9
Commercial Lines Segment | Commercial Lines - Liability
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	2,027.4	1,675.3
Total reinsurance recoverable on unpaid claims	105.1	59.5
Commercial Lines Segment | Commercial Lines - Physical Damage
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	51.7	46.6
Total reinsurance recoverable on unpaid claims	0.1	0.0
Property Segment | Property
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	245.8	224.7
Total reinsurance recoverable on unpaid claims	243.8	132.7
Short-duration Insurance Contracts, Liability for Unpaid Claims and Claim Adjustment Expense, Other Reconciling Item	12.3	5.1
Agency Channel | Personal Lines Segment | Personal Lines - Liability
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	3,955.5	3,555.9
Total reinsurance recoverable on unpaid claims	769.8	724.5
Agency Channel | Personal Lines Segment | Personal Lines - Physical Damage
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	26.2	30.1
Total reinsurance recoverable on unpaid claims	0.0	0.0
Direct Channel | Personal Lines Segment | Personal Lines - Liability
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	3,685.1	3,219.1
Total reinsurance recoverable on unpaid claims	838.1	724.3
Direct Channel | Personal Lines Segment | Personal Lines - Physical Damage
Short-duration Insurance Contracts, Reconciliation of Claims Development to Liability [Line Items]
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance	(5.6)	11.2
Total reinsurance recoverable on unpaid claims	$ 0.0	$ 0.0

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Loss And Loss Adjustment Expense Reserves Historical Claims Duration (Details)	Dec. 31, 2017
Personal Lines Segment | Agency Channel | Personal Lines - Liability
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	47.60%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	30.80%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	11.30%
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	5.40%
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	2.10%
Personal Lines Segment | Agency Channel | Personal Lines - Physical Damage
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	98.90%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	1.30%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	(0.10%)
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	0.00%
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	0.00%
Personal Lines Segment | Direct Channel | Personal Lines - Liability
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	46.70%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	31.30%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	11.70%
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	5.50%
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	2.20%
Personal Lines Segment | Direct Channel | Personal Lines - Physical Damage
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	100.10%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	0.00%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	(0.20%)
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	(0.10%)
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	0.00%
Commercial Lines Segment | Commercial Lines - Liability
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	25.80%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	28.70%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	19.20%
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	11.90%
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	6.00%
Commercial Lines Segment | Commercial Lines - Physical Damage
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	90.90%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	7.90%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	0.00%
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	0.00%
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	0.00%
Property Segment | Property
Short-duration Insurance Contracts, Historical Claims Duration [Line Items]
Short-duration Insurance Contracts, Historical Claims Duration, Year One	73.70%
Short-duration Insurance Contracts, Historical Claims Duration, Year Two	19.50%
Short-duration Insurance Contracts, Historical Claims Duration, Year Three	3.50%
Short-duration Insurance Contracts, Historical Claims Duration, Year Four	1.40%
Short-duration Insurance Contracts, Historical Claims Duration, Year Five	0.40%

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Reinsurance Effect of Reinsurance on Premiums Written and Earned (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Direct premiums written	$ 27,860.7	$ 23,941.9	$ 21,086.5
Ceded written	(728.6)	(588.4)	(522.5)
Net premiums written	27,132.1	23,353.5	20,564.0
Direct premiums earned	26,425.7	23,111.2	20,454.1
Ceded earned	(695.8)	(637.2)	(555.0)
Net premiums earned	25,729.9	22,474.0	19,899.1
non regulated reinsurance plan [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Ceded written	(222.7)	(149.0)	(164.5)
Ceded earned	(216.2)	(212.1)	(192.4)
Regulated reinsurance plan [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Ceded written	(505.9)	(439.4)	(358.0)
Ceded earned	$ (479.6)	$ (425.1)	$ (362.6)

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Reinsurance Prepaid Reinsurance Premiums and Reinsurance Recoverables (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 203.3	$ 170.5
Percentage Of Total Prepaid Reinsurance Premiums	100.00%	100.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 2,273.4	$ 1,884.8
Percentage Of Total Reinsurance Recoverables	100.00%	100.00%
State Reinsurance Plans [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 179.9	$ 153.4
Percentage Of Total Prepaid Reinsurance Premiums	88.00%	90.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 2,060.7	$ 1,772.3
Percentage Of Total Reinsurance Recoverables	91.00%	94.00%
State Reinsurance Plans [Member] | Michigan Catastrophic Claims Association [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 44.3	$ 36.5
Percentage Of Total Prepaid Reinsurance Premiums	22.00%	21.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 1,611.5	$ 1,452.7
Percentage Of Total Reinsurance Recoverables	71.00%	77.00%
State Reinsurance Plans [Member] | Commercial Auto Insurance Procedures Plans [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 50.0	$ 40.2
Percentage Of Total Prepaid Reinsurance Premiums	25.00%	24.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 218.0	$ 170.6
Percentage Of Total Reinsurance Recoverables	10.00%	9.00%
State Reinsurance Plans [Member] | North Carolina Reinsurance Facility [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 31.5	$ 27.5
Percentage Of Total Prepaid Reinsurance Premiums	15.00%	16.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 74.2	$ 67.0
Percentage Of Total Reinsurance Recoverables	3.00%	4.00%
State Reinsurance Plans [Member] | other reinsurance program [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 0.3	$ 0.1
Percentage Of Total Prepaid Reinsurance Premiums	0.00%	0.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 8.2	$ 3.5
Percentage Of Total Reinsurance Recoverables	0.00%	0.00%
Federal Reinsurance Plans [Member] | National Flood Insurance Program [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 53.8	$ 49.1
Percentage Of Total Prepaid Reinsurance Premiums	26.00%	29.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 148.8	$ 78.5
Percentage Of Total Reinsurance Recoverables	7.00%	4.00%
Non State Reinsurance Plans [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 23.4	$ 17.1
Percentage Of Total Prepaid Reinsurance Premiums	12.00%	10.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 212.7	$ 112.5
Percentage Of Total Reinsurance Recoverables	9.00%	6.00%
Property reinsurance program [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 9.1	$ 3.2
Percentage Of Total Prepaid Reinsurance Premiums	5.00%	2.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 138.6	$ 62.9
Percentage Of Total Reinsurance Recoverables	6.00%	3.00%
other reinsurance program [Member]
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid reinsurance premiums	$ 14.3	$ 13.9
Percentage Of Total Prepaid Reinsurance Premiums	7.00%	8.00%
Reinsurance Recoverables, Including Reinsurance Premium Paid	$ 74.1	$ 49.6
Percentage Of Total Reinsurance Recoverables	3.00%	3.00%

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Reinsurance - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Prepaid Reinsurance Premiums [Abstract]
Policyholder Benefits and Claims Incurred, Ceded	$ 1,094.2	$ 764.4	$ 457.3

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Statutory Financial Information - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statutory Financial Information Disclosures [Abstract]
Consolidated statutory policyholders' surplus	$ 9,664.4	$ 8,560.0
Statutory net income	1,416.2	$ 1,022.3	$ 1,333.1
Consolidated statutory policyholders' surplus, net admitted assets of insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities' states of domicile	830.1
Aggregate cash dividends paid to the parent company by subsidiaries	872.8
Maximum aggregate dividend amount subsidiaries could pay without prior approval from regulatory authorities	$ 1,390.5

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Employee Benefit Plans Amounts Charged to Income for employees Incentive Compensation Plans (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Incentive Compensation Cash Award
Incentive Compensation Plans Expense [Line Items]
Pretax	$ 461.3	$ 386.8	$ 337.7
After Tax	299.8	251.4	219.5
Employee Stock [Member]
Incentive Compensation Plans Expense [Line Items]
Pretax	92.9	80.9	64.5
After Tax	60.4	52.6	41.9
Employee Stock Option
Incentive Compensation Plans Expense [Line Items]
Pretax	2.5	4.3	1.7
After Tax	$ 1.6	$ 2.8	$ 1.1

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Employee Benefit Plans Summary of All Employee Restricted Equity Award Activity (Detail) - Employee Restricted Equity Awards - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Number of Shares
Beginning of year	6,951,373	7,725,227	9,051,564
Add (deduct):
Granted	2,383,475	1,870,660	2,489,976
Vested	(3,220,671)	(2,422,700)	(3,682,644)
Forfeited	(255,329)	(221,814)	(133,669)
End of year	5,858,848	6,951,373	7,725,227
Weighted Average Grant Date Fair Value
Beginning of year	$ 26.18	$ 23.37	$ 21.27
Granted	32.01	31.54	25.20
Vested	22.53	21.50	19.53
Forfeited	28.03	24.64	21.63
End of year	$ 30.47	$ 26.18	$ 23.37
Unrecognized compensation cost related to unvested equity awards	$ 87.1
Period of recognition of compensation expense related to unvested equity awards	2 years 2 months
Dividend Equivalent Units
Add (deduct):
Granted	157,396	165,045	196,947
Weighted Average Grant Date Fair Value
Granted	$ 0	$ 0	$ 0
Performance Shares
Weighted Average Grant Date Fair Value
Target shares	1,513,779
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Expected To Vest Number	3,244,111

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Employee Benefit Plans Summary of all Directors' Restricted Stock Activity (Detail) - Non Employee Director Restricted Equity Awards - $ / shares	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Number of Shares
Beginning of year	55,839	89,427	81,579
Add (deduct):
Granted	53,284	55,839	89,427
Vested	(55,839)	(89,427)	(81,579)
End of year	53,284	55,839	89,427
Weighted Average Grant Date Fair Value
Beginning of year	$ 33.24	$ 27.23	$ 25.45
Granted	40.54	33.24	27.23
Vested	33.24	27.23	25.45
End of year	$ 40.54	$ 33.24	$ 27.23

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Employee Benefit Plans Assets Held in Deferral Plan Irrevocable Grantor Trust Account (Detail) - USD ($) shares in Millions, $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Assets held in Deferral Plan Irrevocable Grantor Trust account	$ 295.2	$ 259.1
Progressive common shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred Compensation Arrangement with Individual, Shares Authorized for Issuance	4.4	4.7
Assets held in Deferral Plan Irrevocable Grantor Trust account	$ 128.2	$ 122.2
Other Investment Funds
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Assets held in Deferral Plan Irrevocable Grantor Trust account	$ 167.0	$ 136.9

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Employee Benefit Plans - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) Person shares	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Employee Benefits Disclosure [Line Items]
Minimum employment period for benefits	30 days
Employee Stock Ownership Plan Shares held	24,600,000
Postemployment benefits liability | $	$ 19.5	$ 21.7
Compensation, Percentage	100.00%
Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Aggregate fair value of the restricted equity awards that vested during the period | $	$ 130.5	77.0	$ 105.4
Non Employee Director Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Vesting period of grants to date	11 months
Total pretax intrinsic value of options exercised and restricted stock vested | $	$ 2.2	$ 3.0	$ 2.2
Executive Deferred Compensation Plan
Employee Benefits Disclosure [Line Items]
Common shares reserved for issuance under executive deferred compensation plan	11,100,000
2010 Equity Incentive Plan | Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Shares authorized	18,000,000.0
2015 Equity Incentive Plan | Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Shares authorized	13,000,000.0
2003 Directors Equity Incentive Plan | Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Shares authorized	0
2003 Directors Equity Incentive Plan | Non Employee Director Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Shares authorized	0
2017 Directors Equity Incentive Plan | Non Employee Director Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Shares authorized	500,000
Performance Based Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Estimated Number Of Participants | Person	45
Performance Based Restricted Equity Awards | Insurance Operating Results | Lower Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Performance Based Restricted Equity Awards | Insurance Operating Results | Upper Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	250.00%	250.00%	250.00%	250.00%	250.00%	200.00%
Performance Based Restricted Equity Awards | Investment Results | Lower Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Performance Based Restricted Equity Awards | Investment Results | Upper Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	200.00%	200.00%	200.00%	200.00%	200.00%	200.00%
Performance Based Restricted Equity Awards | Growth in percentage of auto policies bundled with other specified types of policies [Member] | Lower Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount			100.00%
Performance Based Restricted Equity Awards | Growth in percentage of auto policies bundled with other specified types of policies [Member] | Upper Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount			200.00%
Performance Based Restricted Equity Awards | Growth in percentage of auto policies bundled with other specified types of policies, performance objective not achieved
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount			0.00%
Performance Based Restricted Equity Awards | Unit growth in a particular customer segment [Member] | Lower Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	85.00%	85.00%
Performance Based Restricted Equity Awards | Unit growth in a particular customer segment [Member] | Upper Limit
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	150.00%	150.00%
Performance Based Restricted Equity Awards | Unit growth in a particular customer segment, performance objective not achieved
Employee Benefits Disclosure [Line Items]
Performance-based awards granted vesting percentage of the award amount	0.00%	0.00%
Defined Contribution Pension Plan 401k
Employee Benefits Disclosure [Line Items]
Matching contributions | $	$ 97.3	$ 86.8	$ 79.1
Defined Contribution Pension Plan 401k | Upper Limit
Employee Benefits Disclosure [Line Items]
Matching contribution to defined contribution pension plan	6.00%
Vesting tranche one | Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Vesting period of grants to date	3 years
Vesting tranche two | Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Vesting period of grants to date	4 years
Vesting tranche three | Employee Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Vesting period of grants to date	5 years
Cash [Member]
Employee Benefits Disclosure [Line Items]
Compensation, Percentage	40.00%
Non Employee Director Restricted Equity Awards
Employee Benefits Disclosure [Line Items]
Compensation, Percentage	60.00%

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Employee Benefit Plans Summary of ARX employee stock option plans (Details) - Employee Stock Option - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Apr. 01, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number	22,550	24,995	24,995	26,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price	$ 564.60	$ 526.46	$ 526.46	$ 513.72
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period	(2,445)	0	(1,005)
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price	$ 174.65	$ 0	$ 197.01
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number	17,950	16,995	12,995
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 517.75	$ 438.77	$ 386.69
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$ 2.9		$ 1.1
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares	4,600	8,000	12,000	14,800
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Weighted Average Grant Date Fair Value	$ 747.45	$ 712.74	$ 677.81	$ 675.55
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares	(3,400)	(4,000)	(2,800)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value	$ 665.79	$ 607.95	$ 665.85
Unrecognized compensation cost related to unvested equity awards	$ 0.7	$ 1.6	$ 2.9
Period of recognition of compensation expense related to unvested equity awards	1 year 5 days	1 year 4 months 10 days	1 year 8 months 20 days

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Employee Benefit Plans Summary of ARX Defined Contribution Plan (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Contribution Pension Plan 401k
Defined Contribution Plan Disclosure [Line Items]
Matching contributions	$ 97.3	$ 86.8	$ 79.1

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Segment Information Operating Results (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Revenues	$ 26,839.0	$ 23,441.4	$ 20,853.8
Pretax Profit (Loss)	2,138.9	1,470.7	1,911.6
Personal Lines Segment | Agency Channel | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	11,177.6	9,791.7	9,108.6
Pretax Profit (Loss)	839.6	492.8	713.2
Personal Lines Segment | Direct Channel | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	10,769.6	9,396.5	8,185.9
Pretax Profit (Loss)	683.7	412.2	403.4
Operating Segments | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	25,729.9	22,474.0	19,899.1
Pretax Profit (Loss)	1,686.9	1,091.1	1,495.2
Operating Segments | Personal Lines Segment | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	21,947.2	19,188.2	17,294.5
Pretax Profit (Loss)	1,523.3	905.0	1,116.6
Operating Segments | Commercial Lines Segment | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	2,793.9	2,421.3	1,995.9
Pretax Profit (Loss)	214.1	155.2	318.3
Operating Segments | Property Segment | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	988.8	864.5	609.1
Pretax Profit (Loss)	(50.3)	32.5	61.3
Operating Segments | Other Indemnity | Underwriting Operations
Segment Reporting Information [Line Items]
Revenues	0.0	0.0	(0.4)
Pretax Profit (Loss)	(0.2)	(1.6)	(1.0)
Segment Reconciling Items | Fees And Other Revenues
Segment Reporting Information [Line Items]
Revenues	370.6	332.5	302.0
Segment Reconciling Items | Service Businesses
Segment Reporting Information [Line Items]
Revenues	126.8	103.3	86.3
Pretax Profit (Loss)	17.3	11.3	8.8
Segment Reconciling Items | Investments
Segment Reporting Information [Line Items]
Revenues	612.7	530.0	567.3
Pretax Profit (Loss)	588.8	507.6	544.5
Segment Reconciling Items | Other gains (losses)
Segment Reporting Information [Line Items]
Revenues	(1.0)	1.6	(0.9)
Pretax Profit (Loss)	(1.0)	1.6	(0.9)
Segment Reconciling Items | Interest Expense
Segment Reporting Information [Line Items]
Pretax Profit (Loss)	$ (153.1)	$ (140.9)	$ (136.0)

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Segment Information Operating Results (Parenthetical) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Segment Reporting Information [Line Items]
Amortization of intangible assets	$ 66.2	$ 62.1	$ 46.8
Net Premiums Written	$ (27,132.1)	$ (23,353.5)	$ (20,564.0)
Personal Lines Segment | Underwriting Operations | Operating Segments
Segment Reporting Information [Line Items]
Personal auto insurance percentage of the total personal lines segment net premiums earned	93.00%	92.00%	92.00%
Property Segment | Underwriting Operations | Operating Segments
Segment Reporting Information [Line Items]
Amortization of intangible assets	$ 66.2	$ 62.1	$ 46.8
Other Indemnity
Segment Reporting Information [Line Items]
Net Premiums Written	$ 0.0	$ 0.0	$ 0.4

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Segment Information Underwriting Margins and Combined Ratios for our Underwriting Operations (Details) - Underwriting Operations	9 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Personal Lines Segment | Agency Channel
Segment Reporting Information [Line Items]
Underwriting Margin		7.50%	5.00%	7.80%
Combined Ratio		92.50%	95.00%	92.20%
Personal Lines Segment | Direct Channel
Segment Reporting Information [Line Items]
Underwriting Margin		6.30%	4.40%	4.90%
Combined Ratio		93.70%	95.60%	95.10%
Operating Segments
Segment Reporting Information [Line Items]
Underwriting Margin		6.60%	4.90%	7.50%
Combined Ratio		93.40%	95.10%	92.50%
Operating Segments | Personal Lines Segment
Segment Reporting Information [Line Items]
Underwriting Margin		6.90%	4.70%	6.50%
Combined Ratio		93.10%	95.30%	93.50%
Operating Segments | Commercial Lines Segment
Segment Reporting Information [Line Items]
Underwriting Margin		7.70%	6.40%	15.90%
Combined Ratio		92.30%	93.60%	84.10%
Operating Segments | Property Segment
Segment Reporting Information [Line Items]
Underwriting Margin		(5.10%)	3.80%	10.10%
Combined Ratio		105.10%	96.20%	89.90%
Combined ratio amortization points	0.077	0.067	0.072

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Segment Information - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) state Entity	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Segment Reporting Information [Line Items]
Depreciation | $	$ 169.9	$ 137.4	$ 103.7
Operating Segments | Personal Lines Segment | Agency Channel | Lower Limit
Segment Reporting Information [Line Items]
Independent insurance agencies and brokerages | Entity	35,000
Residential Insurance [Member] | Property Segment
Segment Reporting Information [Line Items]
Number of states	41
National Flood Insurance Program [Member] | Property Segment
Segment Reporting Information [Line Items]
Number of states	43

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Other Comprehensive Income (Loss) Components of Other Comprehensive Income (Loss) Including Reclassification Adjustments by Income Statement (Detail) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss), before Tax [Roll Forward]
AOCI before Tax, Attributable to Parent, beginning balance		$ 1,439.5	$ 1,234.5	$ 1,574.0
Unrealized Holding Gain (Loss) on Securities Arising During the Period, before tax		636.9	320.5	(198.7)
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, before tax		0.0	(0.1)	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, before Tax		(8.0)	0.0	(12.9)
Foreign Currently Translation Adjustment, before tax		0.4	0.6	(1.8)
Portion Attributable to Noncontrolling Interest, before tax		(3.5)	5.1	1.6
Total other comprehensive income (loss) before reclassifications, before tax		625.8	326.1	(211.8)
Total reclassification adjustment for amounts realized in net income, before tax		87.5	121.1	127.7
Total other comprehensive income, before tax		538.3	205.0	(339.5)
AOCI before Tax, Attributable to Parent, ending balance	$ 1,234.5	1,977.8	1,439.5	1,234.5
Accumulated Other Comprehensive Income (Loss), Tax [Roll Forward]
AOCI Tax, Attributable to Parent, beginning balance		(506.1)	(434.1)	(550.9)
Unrealized Holding Gain (Loss) on Securities Arising During the Period, tax		(224.0)	(112.6)	67.5
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, tax		0.0	0.1	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, Tax		2.8	0.0	4.5
Foreign currency translation adjustment, tax		(0.1)	(0.2)	0.6
Portion Attributable to Noncontrolling Interest, tax		1.2	(1.9)	(0.5)
Total Other Comprehensive Income (Loss), before Reclassification Adjustments, Tax		(220.1)	(114.6)	72.1
Total reclassification adjustment for amounts realized in net income, Total tax (provisions) benefit		(30.6)	(42.6)	(44.7)
Total other comprehensive income, Total tax (provision) benefit		(189.5)	(72.0)	116.8
AOCI Tax, Attributable to Parent, ending balance	(434.1)	(695.6)	(506.1)	(434.1)
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
After tax total accumulated other comprehensive income, beginning balance		933.4	800.4	1,023.1
Unrealized Holding Gain (Loss) on Securities Arising During Period, after tax		412.9	207.9	(131.2)
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, after tax		0.0	0.0	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, after tax		(5.2)	0.0	(8.4)
Foreign currency translation adjustment, after tax		0.3	0.4	(1.2)
Other comprehensive (income) loss attributable to NCI	1.1	(2.3)	3.2	1.1
Total other comprehensive income (loss), before reclassifications, after tax		405.7	211.5	(139.7)
Total reclassification adjustment for amounts realized in net income, Net of tax		56.9	78.5	83.0
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent		348.8	133.0	(222.7)
After tax total accumulated other comprehensive income, ending balance	800.4	1,282.2	933.4	800.4
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, before Tax		(14.9)	(27.1)	(23.8)
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, Tax		5.3	9.5	8.4
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, Net of Tax		(9.6)	(17.6)	(15.4)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, before Tax		103.3	146.3	149.7
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax		(36.2)	(51.4)	(52.5)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		67.1	94.9	97.2
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, before Tax		(1.2)	0.0	0.0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Tax		0.4	0.0	0.0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Net of Tax		(0.8)	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, before Tax		0.3	1.9	1.8
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax		(0.1)	(0.7)	(0.6)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax		0.2	1.2	1.2
Net unrealized gains (losses) on securities
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
After tax total accumulated other comprehensive income, beginning balance		939.6	809.0	1,021.9
Unrealized Holding Gain (Loss) on Securities Arising During Period, after tax		412.9	207.9	(131.2)
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, after tax		0.0	0.0	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, after tax		0.0	0.0	0.0
Foreign currency translation adjustment, after tax		0.0	0.0	0.0
Other comprehensive (income) loss attributable to NCI		0.0	0.0	0.0
Total other comprehensive income (loss), before reclassifications, after tax		412.9	207.9	(131.2)
Total reclassification adjustment for amounts realized in net income, Net of tax		57.5	77.3	81.7
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent		355.4	130.6	(212.9)
After tax total accumulated other comprehensive income, ending balance	809.0	1,295.0	939.6	809.0
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, Net of Tax		(9.6)	(17.6)	(15.4)
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		67.1	94.9	97.1
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax		0.0	0.0	0.0
Net unrealized gains on forecasted transactions
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
After tax total accumulated other comprehensive income, beginning balance		(9.4)	(8.2)	1.5
Unrealized Holding Gain (Loss) on Securities Arising During Period, after tax		0.0	0.0	0.0
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, after tax		0.0	0.0	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, after tax		(5.2)	0.0	(8.4)
Foreign currency translation adjustment, after tax		0.0	0.0	0.0
Other comprehensive (income) loss attributable to NCI		0.0	0.0	0.0
Total other comprehensive income (loss), before reclassifications, after tax		(5.2)	0.0	(8.4)
Total reclassification adjustment for amounts realized in net income, Net of tax		0.2	1.2	1.3
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent		(5.4)	(1.2)	(9.7)
After tax total accumulated other comprehensive income, ending balance	(8.2)	(14.8)	(9.4)	(8.2)
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		0.0	0.0	0.1
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax		0.2	1.2	1.2
Foreign Currency Translation Adjustments
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
After tax total accumulated other comprehensive income, beginning balance		(1.1)	(1.5)	(0.3)
Unrealized Holding Gain (Loss) on Securities Arising During Period, after tax		0.0	0.0	0.0
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, after tax		0.0	0.0	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, after tax		0.0	0.0	0.0
Foreign currency translation adjustment, after tax		0.3	0.4	(1.2)
Other comprehensive (income) loss attributable to NCI		0.0	0.0	0.0
Total other comprehensive income (loss), before reclassifications, after tax		0.3	0.4	(1.2)
Total reclassification adjustment for amounts realized in net income, Net of tax		(0.8)	0.0	0.0
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent		1.1	0.4	(1.2)
After tax total accumulated other comprehensive income, ending balance	(1.5)	0.0	(1.1)	(1.5)
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Net of Tax		(0.8)	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax		0.0	0.0	0.0
Noncontrolling Interest
Accumulated Other Comprehensive Income (Loss), Net of Tax [Roll Forward]
After tax total accumulated other comprehensive income, beginning balance		4.3	1.1	0.0
Unrealized Holding Gain (Loss) on Securities Arising During Period, after tax		0.0	0.0	0.0
Net Non-credit Related OTTI Losses, Adjusted for Valuation Changes, after tax		0.0	0.0	0.0
Unrealized Gain (Loss) on Derivatives Arising During Period, after tax		0.0	0.0	0.0
Foreign currency translation adjustment, after tax		0.0	0.0	0.0
Other comprehensive (income) loss attributable to NCI		(2.3)	3.2	1.1
Total other comprehensive income (loss), before reclassifications, after tax		(2.3)	3.2	1.1
Total reclassification adjustment for amounts realized in net income, Net of tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent		(2.3)	3.2	1.1
After tax total accumulated other comprehensive income, ending balance	$ 1.1	2.0	4.3	1.1
Other Comprehensive (Income) Loss, Reclassification Adjustment from AOCI for Write-down of Securities, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Net of Tax		0.0	0.0	0.0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Net of Tax		$ 0.0	$ 0.0	$ 0.0

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Other Comprehensive Income (Loss) Components of Other Comprehensive Income (Loss) Including Reclassification Adjustments by Income Statement Additional Information (Detail) $ in Millions	Dec. 31, 2017 USD ($)
Statement of Comprehensive Income [Abstract]
Net unrealized gains on forecasted transactions, expected to reclassify into income within the next 12 months	$ 1.0

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Commitments and Contingencies Minimum Commitments under Noncancelable Operating Lease Agreements (Detail) $ in Millions	Dec. 31, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 53.6
Operating Leases, Future Minimum Payments, Due in Two Years	44.2
Operating Leases, Future Minimum Payments, Due in Three Years	28.5
Operating Leases, Future Minimum Payments, Due in Four Years	16.9
Operating Leases, Future Minimum Payments, Due in Five Years	8.0
Operating Leases, Future Minimum Payments, Due Thereafter	1.1
Operating Leases, Future Minimum Payments Due	$ 152.3

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Commitments and Contingencies Expenses Incurred for Leases (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Expense	$ 77.2	$ 72.9	$ 66.6

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Commitments and Contingencies - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($)
reinsurance contract obligation [Line Items]
Minimum commitment under noncancelable purchase obligations	$ 546.3
unrecorded unconditional purchase obligations reinsurance [Member] | Lower Limit
reinsurance contract obligation [Line Items]
Reinsurance Contract Terms	1 year
Other Commitment	$ 90.7
unrecorded unconditional purchase obligations reinsurance [Member] | Upper Limit
reinsurance contract obligation [Line Items]
Reinsurance Contract Terms	3 years

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Dividends Dividends (Details) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended
	Feb. 28, 2018	Feb. 28, 2017	Feb. 29, 2016	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Dividends payable				$ 655.1	$ 395.4	$ 519.2
Payments of Ordinary Dividends, Common Stock		$ 395.4	$ 519.0
Annual variable dividend
Common Stock, Dividends, Per Share, Cash Paid		$ 0.6808	$ 0.8882
Subsequent Event | Annual variable dividend
Common Stock, Dividends, Per Share, Cash Paid	$ 1.1247

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Dividends-Additional Information (Details)	12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016	Dec. 31, 2015
Dividends Payable [Line Items]
Target percentage used to determine annual variable dividend	33.33%	33.33%	33.33%
Tax at statutory federal rate	35.00%	35.00%	35.00%
Gainshare factor used to determine annual variable dividend range, minimum	0
Gainshare factor used to determine annual variable dividend range, maximum	2
Gainshare factor used to determine annual variable dividend	1.79	1.67	1.60
Minimum Payments of Ordinary Dividends, Common Stock	$ 0
Tax Year 2018
Dividends Payable [Line Items]
Tax at statutory federal rate	21.00%

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Redeemable Noncontrolling Interest (Details) $ in Millions	9 Months Ended	12 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2017 USD ($) vote shares		Dec. 31, 2016 USD ($)		Dec. 31, 2015 USD ($)	Apr. 01, 2021 installment	Apr. 01, 2018 installment	Apr. 01, 2015 USD ($) installment	Dec. 31, 2014 USD ($)
Redeemable Noncontrolling Interest [Line Items]
Number of Installments Related to Stockholders Agreement | installment									2
Number of stockholder votes to approve actions | vote		2
Redeemable Noncontrolling Interest, Equity, Carrying Amount	$ 464.9	$ 503.7	[1]	$ 483.7	[1]	$ 464.9				$ 0.0
Fair value at date of acquisition		0.0		0.0					$ 411.5
Net income attributable to NCI	32.9	5.9		26.2		32.9
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest	(1.1)	2.3		(3.2)		$ (1.1)
Stock Issued During Period, Value, Stock Options Exercised Attributable to Redeemable Noncontrolling Interest	0.0	3.4		0.0
Noncontrolling Interest, Decrease from Redemptions or Purchase of Interests	(12.6)	0.0		0.0
Adjustment to carrying amount of redeemable noncontrolling interest	$ 34.2	$ 8.4		$ (4.2)
Forecast
Redeemable Noncontrolling Interest [Line Items]
Number of Installments Related to Stockholders Agreement | installment							1	1
ARX Holding Corp.
Redeemable Noncontrolling Interest [Line Items]
Equity interest percentage	69.20%	69.00%		69.20%		69.20%			5.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | shares		22,550
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value		$ 32.5
ARX Holding Corp. | Forecast
Redeemable Noncontrolling Interest [Line Items]
Equity interest percentage							100.00%	80.00%
Lower Limit
Redeemable Noncontrolling Interest [Line Items]
Multiple for determining purchase price of shares		1.0
Upper Limit
Redeemable Noncontrolling Interest [Line Items]
Multiple for determining purchase price of shares		2.0

[1] See Note 15 – Redeemable Noncontrolling Interest for further discussion.

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Goodwill and Intangible Assets Goodwill (Details) - USD ($)	6 Months Ended		12 Months Ended
	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Goodwill [Line Items]
Goodwill	$ 452,700,000		$ 452,700,000	$ 449,400,000
Goodwill, Impaired, Accumulated Impairment Loss	$ 0		0
Goodwill, Acquired During Period			3,300,000	1,800,000
Amortization of intangible assets			$ 66,200,000	$ 62,100,000	$ 46,800,000
Weighted Average [Member]
Goodwill [Line Items]
Finite-Lived Intangible Assets, Remaining Amortization Period			4 years 10 months 27 days
Trade name
Goodwill [Line Items]
Intangible assets finite lives	2 years	10 years
Residential Property Insurance Company
Goodwill [Line Items]
ARX Acquisition Percent in Residential Insurance Subsidiary				100.00%
Commercial Property Insurance Company | Disposal Group, Disposed of by Sale, Not Discontinued Operations
Goodwill [Line Items]
ARX Disposal Percent in Commercial Insurance Subsidiary				100.00%

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Goodwill and Intangible Assets - Net Carrying Amount of Other Intangible Assets (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Accumulated Amortization	$ 175.7	$ 109.5
Indefinite-lived intangible assets	12.4	12.4
Total	366.6	432.8
Finite-Lived Intangible Assets
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Accumulated Amortization	175.1	108.9
Intangible assets subject to amortization	354.2	420.4
Licenses
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Assets, Accumulated Amortization	$ 0.6	$ 0.6

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Goodwill and Intangible Assets - Finite-lived Intangible Assets (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Accumulated Amortization	$ 175.7	$ 109.5
Policies in force
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	256.2	256.2
Accumulated Amortization	100.7	64.1
Net Carrying Amount	155.5	192.1
Agency relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	159.2	159.2
Accumulated Amortization	31.3	19.9
Net Carrying Amount	127.9	139.3
Software rights
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	79.1	79.1
Accumulated Amortization	29.4	18.8
Net Carrying Amount	49.7	60.3
Trade name
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	34.8	34.8
Accumulated Amortization	13.7	6.1
Net Carrying Amount	21.1	28.7
Finite-Lived Intangible Assets
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	529.3	529.3
Accumulated Amortization	175.1	108.9
Net Carrying Amount	$ 354.2	$ 420.4

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Goodwill and Intangible Assets Goodwill and Intangible Assets - Amortization (Details) $ in Millions	Dec. 31, 2017 USD ($)
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Finite- Lived Intangible Assets, Amortization Expense, Next Twelve Months	$ 71.9
Finite-Lived Intangible Assets, Amortization Expense, Year Two	66.4
Finite-Lived Intangible Assets, Amortization Expense, Year Three	56.9
Finite-Lived Intangible Assets, Amortization Expense, Year Four	56.6
Finite-Lived Intangible Assets, Amortization Expense, Year Five	$ 29.2