EX-99 2 pgr20180331exhibit99earnin.htm EXHIBIT 99 Exhibit
 
image0a04a01a36.jpg
 
 
NEWS RELEASE
 
 
 
 
The Progressive Corporation
 
 
Company Contact:
6300 Wilson Mills Road
 
 
Julia Hornack
Mayfield Village, Ohio 44143
 
 
(440) 395-2164
 
 
 
 
 
 
 

PROGRESSIVE REPORTS MARCH RESULTS

MAYFIELD VILLAGE, OHIO -- April 17, 2018 -- The Progressive Corporation (NYSE:PGR) today reported the following results for March and the first quarter of 2018:

 
March
Quarter
(millions, except per share amounts and ratios; unaudited)
2018
 
2017
 
Change
2018
 
2017
 
Change
 
 
 
 
 
 
 
 
 
 
Net premiums written
$
2,538.7

 
$
2,047.8

 
24
 %
$
7,968.8

 
$
6,491.0

 
23
 %
Net premiums earned
$
2,279.7

 
$
1,892.8

 
20
 %
$
7,174.0

 
$
6,026.7

 
19
 %
Net income attributable to Progressive
$
140.6

 
$
107.7

 
31
 %
$
718.0

 
$
424.3

 
69
 %
  Per share available to common shareholders
$
0.24

 
$
0.18

 
29
 %
$
1.22

 
$
0.73

 
68
 %
Total pretax net realized gains (losses) on securities
$
(89.7
)
 
$
40.1

 
(324)
 %
$
(48.2
)
 
$
51.9

 
(193)
 %
Combined ratio
90.3

 
95.4

 
(5.1) pts.
88.4

 
91.7

 
(3.3) pts.
Average diluted equivalent shares
585.7

 
583.5

 
0
 %
585.6

 
583.3

 
0
 %


(thousands; unaudited)
March
 
March
 
 
 
2018
 
2017
Change
Policies in Force
 
 
 
 
 
Vehicle businesses:
 
 
 
 
 
  Agency – auto
5,909.1
 
5,228.3
 
13 %
  Direct – auto
6,385.6
 
5,570.7
 
15 %
  Total personal auto
12,294.7
 
10,799.0
 
14 %
  Total special lines
4,286.2
 
4,255.4
 
1 %
  Total Personal Lines
16,580.9
 
15,054.4
 
10 %
  Total Commercial Lines
659.0
 
607.5
 
8 %
Property business
1,651.0
 
1,265.3
 
30 %
 
 
 
 
 
 

Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines business writes insurance for personal autos and special lines products. Our Commercial Lines business writes primary liability, physical damage, and other auto-related insurance for autos and trucks owned and/or operated predominantly by small businesses. Our Property business writes residential property insurance for homeowners, other property owners, and renters.

See the “Comprehensive Income Statements” and “Supplemental Information” for further month and year-to-date information and
the "Monthly Commentary" at the end of this release for additional discussion.

- 1 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENTS
March 2018
(millions)
(unaudited)

 
Current Month
 
Comments on Monthly Results1
Net premiums written
$
2,538.7

 
 
 
 
 
 
Revenues:
 
 
 
Net premiums earned
$
2,279.7

 
 
Investment income
61.3

 
 
Net realized gains (losses) on securities:
 
 
 
Net impairment losses recognized in earnings
0

 
 
Net holding period gains (losses) on securities
(92.6
)
 
 
Net realized gains (losses) on security sales
2.9

 
 
Total net realized gains (losses) on securities
(89.7
)
 
 
Fees and other revenues
36.4

 
 
Service revenues
13.1

 
 
Total revenues
2,300.8

 
 
 
 
 
 
Expenses:
 
 
 
Losses and loss adjustment expenses
1,588.8

 
 
Policy acquisition costs
191.2

 
 
Other underwriting expenses
314.1

 
 
Investment expenses
2.2

 
 
Service expenses
11.1

 
 
Interest expense
13.1

 
 
Total expenses
2,120.5

 
 
 
 
 
 
Income before income taxes
180.3

 
 
Provision for income taxes
38.0

 
 
Net income
142.3

 
 
Net (income) loss attributable to noncontrolling interest (NCI)
(1.7
)
 
 
Net income attributable to Progressive
140.6

 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
Changes in:
 
 
 
Total net unrealized gains (losses) on securities
18.5

 
 
Net unrealized losses on forecasted transactions
0.1

 
 
Other comprehensive income (loss)
18.6

 
 
Other comprehensive (income) loss attributable to NCI
(0.6
)
 
 
Total comprehensive income attributable to Progressive
$
158.6

 
 
 
 
 
 
1 See the Monthly Commentary at the end of this release for additional discussion. For a description of our financial reporting and accounting policies, see Note 1 to our 2017 audited consolidated financial statements included in our 2017 Shareholders’ Report, which can be found at www.progressive.com/annualreport.


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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENTS
March 2018
(millions)
(unaudited)

 
Year-to-Date
 
 
 
2018
 
2017
 
% Change
Net premiums written
$
7,968.8

 
$
6,491.0

 
23
 
 
 
 
 
 
Revenues:
 
 
 
 
 
Net premiums earned
$
7,174.0

 
$
6,026.7

 
19
Investment income
166.3

 
129.2

 
29
Net realized gains (losses) on securities:
 
 
 
 
 
Net impairment losses recognized in earnings
0

 
(1.0
)
 
(100)
Net holding period gains (losses) on securities
(155.2
)
 
0.8

 
NM
Net realized gains (losses) on security sales
107.0

 
52.1

 
105
Total net realized gains (losses) on securities
(48.2
)
 
51.9

 
(193)
Fees and other revenues
103.8

 
85.2

 
22
Service revenues
34.2

 
28.5

 
20
Other gains (losses)
0

 
0.2

 
(100)
Total revenues
7,430.1

 
6,321.7

 
18
 
 
 
 
 
 
Expenses:
 
 
 
 
 
Losses and loss adjustment expenses
4,870.8

 
4,263.4

 
14
Policy acquisition costs
596.2

 
502.9

 
19
Other underwriting expenses
980.2

 
845.6

 
16
Investment expenses
6.0

 
5.6

 
7
Service expenses
29.3

 
25.9

 
13
Interest expense
36.8

 
36.8

 
0
Total expenses
6,519.3

 
5,680.2

 
15
 
 
 
 
 
 
Income before income taxes
910.8

 
641.5

 
42
Provision for income taxes
181.0

 
211.2

 
(14)
Net income
729.8

 
430.3

 
70
Net (income) loss attributable to noncontrolling interest (NCI)
(11.8
)
 
(6.0
)
 
97
Net income attributable to Progressive
718.0

 
424.3

 
69
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
Changes in:
 
 
 
 
 
Total net unrealized gains (losses) on securities
(154.5
)
 
132.4

 
(217)
Net unrealized losses on forecasted transactions
0.2

 
2.3

 
(91)
Foreign currency translation adjustment
0

 
0.3

 
(100)
Other comprehensive income (loss)
(154.3
)
 
135.0

 
(214)
Other comprehensive (income) loss attributable to NCI
4.0

 
(0.9
)
 
NM
Total comprehensive income attributable to Progressive
$
567.7

 
$
558.4

 
2
 
 
 
 
 
 
NM = Not Meaningful
 
 
 
 
 


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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE
&
INVESTMENT RESULTS
March 2018
(millions – except per share amounts)
(unaudited)




The following table sets forth the computation of per share results:
 
 
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
Month
 
2018
 
2017
 
 
 
 
 
 
 
 
Net income attributable to Progressive
$
140.6

 
$
718.0

 
$
424.3

 
Less: Preferred share dividends
1.2

 
1.2

 
0

 
Net income available to common shareholders
$
139.4

 
$
716.8

 
$
424.3

 
Per share:
 
 
 
 
 
 
Basic
$
0.24

 
$
1.23

 
$
0.73

 
Diluted
$
0.24

 
$
1.22

 
$
0.73

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Progressive
$
158.6

 
$
567.7

 
$
558.4

 
Less: Preferred share dividends
1.2

 
1.2

 
0

 
Comprehensive income (loss) attributable to common shareholders
$
157.4

 
$
566.5

 
$
558.4

 
Per share:
 
 
 
 
 
 
Diluted
$
0.27

 
$
0.97

 
$
0.96

 
 
 
 
 
 
 
 
Average shares outstanding - Basic
582.0

 
582.0

 
580.3

 
Net effect of dilutive stock-based compensation
3.7

 
3.6

 
3.0

 
Total average equivalent shares - Diluted
585.7

 
585.6

 
583.3

 
 
 
 
 
 
 
 


The following table sets forth the investment results for the period:
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
 
Month
 
2018
 
2017
 
 
Fully taxable equivalent (FTE) total return:
 
 
 
 
 
 
 
Fixed-income securities
0.3%
 
(0.3)%
 
1.1%
 
 
Common stocks
(2.3)%
 
(0.3)%
 
6.1 %
 
 
     Total portfolio
0.0%
 
(0.3)%
 
1.7 %
 
 
 
 
 
 
 
 
 
 
Pretax annualized investment income book yield
2.8%
 
2.6%
 
2.3 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




- 4 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
March 2018
($ in millions)
(unaudited)



Current Month
 
Vehicles
 
 
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Property
Companywide
 
Agency
Direct
Total
Business
Business
Total
Net Premiums Written
$
1,069.9

$
1,063.7

$
2,133.6

$
285.8

$
119.3

$
2,538.7

% Growth in NPW
20
%
26
%
23
%
28
%
38
%
24%
Net Premiums Earned
$
963.6

$
954.8

$
1,918.4

$
261.3

$
100.0

$
2,279.7

% Growth in NPE
17
%
21
%
19
%
31
%
27%
20%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
68.1

70.1

69.0

75.3

66.7
69.7

Expense ratio
19.2

20.7

20.0

20.8

31.91
20.6

Combined ratio
87.3

90.8

89.0

96.1

98.61

90.3

 
 
 
 
 
 
 
Actuarial Adjustments2
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
3.2

Current accident year
 
 
 
 
 
(2.3
)
Calendar year actuarial adjustment
$
5.0

$
8.0

$
13.0

$
(8.7
)
$
(3.4
)
$
0.9

 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
3.2

All other development
 
 
 
 
 
(7.6
)
Total development
 
 
 
 
 
$
(4.4
)
 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
69.7

Accident year loss/LAE ratio
 
 
 
 
 
69.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1 Included in both the expense ratio and the combined ratio is 6.0 points of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Excluding these additional expenses, the Property business would have reported an expense ratio of 25.9, and a combined ratio of 92.6 for March 2018.

2 Represents adjustments solely based on our actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.




- 5 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
March 2018
($ in millions)
(unaudited)



Year-to-Date
 
Vehicles
 
 
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Property
Companywide
 
Agency
Direct
Total
Business
Business
Total
Net Premiums Written
$
3,335.3

$
3,409.5

$
6,744.8

$
926.9

$
297.1

$
7,968.8

% Growth in NPW
18
%
22
%
20
%
40
%
37
%
23%
Net Premiums Earned
$
3,063.8

$
3,016.3

$
6,080.1

$
808.6

$
285.3

$
7,174.0

% Growth in NPE
16
%
20
%
18
%
25
%
26%
19%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
67.5

69.6

68.6

67.4

55.1
67.9

Expense ratio
19.1

20.5

19.8

20.9

34.91
20.5

Combined ratio
86.6

90.1

88.4

88.3

90.01

88.4

 
 
 
 
 
 
 
Actuarial Adjustments2
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
6.2

Current accident year
 
 
 
 
 
7.7

Calendar year actuarial adjustment
$
9.2

$
18.1

$
27.3

$
(8.7
)
$
(4.7
)
$
13.9

 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
6.2

All other development
 
 
 
 
 
(61.8
)
Total development
 
 
 
 
 
$
(55.6
)
 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
67.9

Accident year loss/LAE ratio
 
 
 
 
 
67.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 

1 Included in both the expense ratio and combined ratio is 6.3 points of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Excluding these additional expenses, the Property business would have reported an expense ratio of 28.6 and a combined ratio of 83.7.

2 Represents adjustments solely based on our actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.








- 6 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions - except per share amounts)
(unaudited)

 
March 2018
CONDENSED GAAP BALANCE SHEET:
 
Investments, at fair value:
 
Available-for-sale securities:
 
Fixed maturities1 (amortized cost: $22,627.2)
$
22,420.1

Short-term investments (amortized cost: $3,052.4)
3,052.4

Total available-for-sale securities
25,472.5

Equity securities:
 
Nonredeemable preferred stocks (cost: $659.6)
745.9

Common equities (cost: $1,265.5)
3,033.2

Total equity securities
3,779.1

Total investments2, 3
29,251.6

Net premiums receivable
6,043.8

Deferred acquisition costs
842.3

Goodwill and intangible assets
801.3

Other assets4
4,391.9

Total assets
$
41,330.9

 
 
Unearned premiums
$
9,837.8

Loss and loss adjustment expense reserves4
13,329.0

Other liabilities2
3,467.5

Debt5
3,859.2

Total liabilities
30,493.5

Redeemable noncontrolling interest (NCI)
514.2

Shareholders' equity6
10,323.2

Total liabilities, NCI, and shareholders' equity
$
41,330.9

 
 
 
 
Common shares outstanding
582.4

Common shares repurchased - March
0

Average cost per common share
$
0

Book value per common share
$
16.88

Trailing 12-month return on average common shareholders' equity
 
Net income attributable to Progressive
20.3
%
Comprehensive income attributable to Progressive
21.0
%
Net unrealized pretax gains (losses) on fixed-maturity securities
$
(204.1
)
Increase (decrease) from February 2018
$
23.3

Increase (decrease) from December 2017
$
(195.7
)
Debt-to-total capital ratio5
27.2
%
Fixed-income portfolio duration
2.6

Weighted average credit quality
AA-

Year-to-date Gainshare factor
1.99

1 As of March 31, 2018, we held certain hybrid securities and recognized a change in fair value of $3.0 million as a realized loss during the period
we held these securities.
2 At March 31, 2018, we had $83.6 million of net unsettled security transactions classified in "other liabilities."
3 Includes $2.1 billion, net of unsettled security transactions, of investments in a consolidated, non-insurance subsidiary of the holding company.
4 Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $2,137.0 million, which are included in "other assets."
5 Includes $589.5 million of proceeds from the issuance of 4.20% Senior Notes due 2048 and the repayment of $30.8 million of the total aggregate principal balance remaining on term loans held by ARX. Ratio reflects debt as a percent of debt plus shareholders' equity; redeemable noncontrolling interest is not part of this calculation.
6 Includes $493.9 million of proceeds from the issuance of 500,000 shares of Series B Fixed-to-Floating Rate Cumulative Perpetual Serial Preferred Shares with an initial dividend rate of 5.375%.

- 7 -



Monthly Commentary
•
During March, we incurred about $40 million, or 1.8 loss ratio points, of catastrophe losses, compared to about $74 million, or 3.9 loss ratio points, last year. Approximately $19 million of the catastrophe losses were from our vehicle businesses and $21 million were from our Property business (21.5 points on our Property business combined ratio). Wind and hail storms in Alabama, Texas, and Virgina accounted for nearly half of our total catastrophe losses during the month.
•
On April 2, 2018, the first put transaction contemplated by the ARX stockholders’ agreement closed, and The Progressive Corporation paid an aggregate of $295.9 million for the shares put to it by ARX stockholders. As a result of this transaction, The Progressive Corporation increased its ownership of the outstanding ARX equity to 86.7% from 69.0% at year end 2017.

Events
We plan to release April results on Wednesday, May 16, 2018, before the market opens.

We are currently scheduled to hold our quarterly Investor Relations event on Thursday, May 3, 2018, at 1:30 p.m. eastern time. The
call and live webcast is scheduled to last 90 minutes and will begin with an approximate 45 minute presentation on operational efficiency and claims accuracy, followed by a question and answer session with Tricia Griffith, our CEO, and John Sauerland,
our CFO. We plan to post our Shareholders' Report online and file our Quarterly Report on Form 10-Q with the SEC on Wednesday, May 2, 2018. Registration for the teleconference and webcast will be available at:
http://investors.progressive.com/phoenix.zhtml?c=81824&p=irol-calendar.


About Progressive
The Progressive Group of Insurance Companies makes it easy to understand, buy and use auto insurance. Progressive offers choices so consumers can reach us whenever, wherever and however it's most convenient - online at progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.

Progressive provides insurance for personal and commercial autos and trucks, motorcycles, boats, recreational vehicles, and homes. Home insurance is underwritten by select carriers, including American Strategic Insurance Corp. and subsidiaries (ASI), our majority owned subsidiaries.
 
Progressive is one of the four largest auto insurers in the country; a leading seller of motorcycle and commercial auto insurance; and through ASI, one of the top 20 homeowners insurance carriers. 

Founded in 1937, Progressive continues its long history of offering shopping tools and services that save customers time and money, like Name Your Price®, Snapshot®, and HomeQuote Explorer®.

The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, trade publicly at NYSE:PGR.

- 8 -



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.








- 9 -