-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, jpyhTz4DCYfkRqV02cR9gYeouGC2qd0WTxGroUMLxQE6Y86QsAQB5m5PBOYNxL3K T52rfDVK4O3/0ru8gHW26Q== 0000950152-95-000976.txt : 19950517 0000950152-95-000976.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950152-95-000976 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROGRESSIVE CORP/OH/ CENTRAL INDEX KEY: 0000080661 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 340963169 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09518 FILM NUMBER: 95537794 BUSINESS ADDRESS: STREET 1: 6300 WILSON MILLS RD CITY: MAYFIELD VILLAGE STATE: OH ZIP: 44143 BUSINESS PHONE: 2164647471 10-Q 1 THE PROGRESSIVE CORP FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 ---------------------------------------------- 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 (I.R.S. Employer incorporation or organization) Identification No.) 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 - ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (216) 461-5000 - ----------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Shares, $1.00 par value: 71,835,953 outstanding at April 28, 1995 1 2 PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. Financial Statements The Progressive Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three months ended March 31, 1995 1994 % Change - ------------------------------------------------------------------------------------------------------------ (millions - except per share amounts) NET PREMIUMS WRITTEN $686.9 $558.2 23 ======================= REVENUES Premiums earned $624.3 $478.7 30 Investment income 44.8 36.8 22 Net realized gains (losses) on security sales 15.4 (2.6) -- Service revenues 9.3 9.5 (2) ----------------------- Total revenues 693.8 522.4 33 ----------------------- EXPENSES Losses and loss adjustment expenses 436.9 309.0 41 Policy acquisition costs 106.6 87.1 22 Other underwriting expenses 44.0 38.9 13 Investment expenses 2.1 2.1 -- Service expenses 8.4 8.1 4 Interest expense 14.3 13.5 6 ----------------------- Total expenses 612.3 458.7 33 ----------------------- NET INCOME Income before Federal income taxes 81.5 63.7 28 Provision for Federal income taxes 20.8 15.6 33 ----------------------- Net income $ 60.7 $ 48.1 26 ======================= PER SHARE Primary $ .79 $ .62 27 Fully diluted .79 .62 27 WEIGHTED NUMBER EQUIVALENT SHARES Primary 74.0 74.5 (1) Fully diluted 74.1 74.5 (1) See notes to consolidated financial statements.
2 3 The Progressive Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, December 31, -------------------------------------------------- 1995 1994 1994 ------------------------------------------------------------------------------------------------------------------ (millions) ASSETS Investments: Held-to-maturity: Fixed maturities, at amortized cost (market: $329.0, $358.8 and $343.8) $ 321.0 $ 346.9 $ 337.6 Available-for-sale: Fixed maturities, at market (amortized cost: $2,219.0, $1,963.3 and $2,129.7) 2,201.8 1,969.3 2,087.0 Equity securities, at market (cost: $434.4, $461.7 and $481.0) 439.4 472.8 476.3 Short-term investments, at amortized cost (market: $298.5, $299.8 and $279.2) 298.5 299.8 279.1 -------------------------------------------------- Total investments 3,260.7 3,088.8 3,180.0 Cash 15.2 17.7 13.4 Accrued investment income 36.5 36.6 43.4 Premiums receivable, net of allowance for doubtful accounts of $16.4, $8.9 and $15.6 574.4 421.4 542.4 Reinsurance recoverables 387.7 407.3 379.7 Prepaid reinsurance premiums 77.0 87.8 83.2 Deferred acquisition costs 170.9 138.4 161.6 Federal income taxes 88.4 76.2 103.2 Property and equipment, net of accumulated depreciation of $121.4, $108.5 and $116.7 149.2 116.9 143.3 Other assets 90.9 24.5 24.9 -------------------------------------------------- Total assets $4,850.9 $4,415.6 $4,675.1 =================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Unearned premiums $1,093.1 $ 854.7 $1,036.7 Loss and loss adjustment expense reserves 1,486.0 1,389.9 1,434.4 Policy cancellation reserve 43.3 56.3 47.3 Accounts payable and accrued expenses 310.9 422.1 329.2 Funded debt 675.7 675.4 675.6 -------------------------------------------------- Total liabilities 3,609.0 3,398.4 3,523.2 -------------------------------------------------- Shareholders' equity: 9 3/8% Serial Preferred Shares, Series A (issued and outstanding, 3.5, 3.6 and 3.5) 85.8 87.0 85.8 Common Shares, $1.00 par value (treasury shares of 11.2, 10.1 and 11.2) 71.8 72.1 71.2 Paid-in capital 368.9 359.2 357.1 Net unrealized appreciation (depreciation) on investment securities (7.9) 11.1 (30.7) Retained earnings 723.3 487.8 668.5 -------------------------------------------------- Total shareholders' equity 1,241.9 1,017.2 1,151.9 -------------------------------------------------- Total liabilities and shareholders' equity $4,850.9 $4,415.6 $4,675.1 =================================================== See notes to consolidated financial statements.
3 4 The Progressive Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three months ended March 31, 1995 1994 - ------------------------------------------------------------------------------------------------------- (millions) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 60.7 $ 48.1 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 4.8 4.0 Net realized (gains) losses on security sales (15.4) 2.6 Changes in: Unearned premiums 56.4 82.7 Loss and loss adjustment expense reserves 51.6 41.3 Accounts payable and accrued expenses (12.5) 30.3 Policy cancellation reserve (4.0) (3.8) Prepaid reinsurance 6.2 (3.2) Reinsurance recoverables (8.0) (26.4) Premiums receivable (32.0) (40.8) Deferred acquisition costs (9.3) (13.8) Federal income taxes 2.4 14.2 Other, net 8.8 6.8 ---------------------------------- Net cash provided by operating activities 109.7 142.0 CASH FLOWS FROM INVESTING ACTIVITIES Purchases: Held-to-maturity: fixed maturities -- (46.3) Available-for-sale: fixed maturities (752.9) (429.5) equity securities (249.8) (54.5) Sales: Available-for-sale: fixed maturities 510.8 137.4 equity securities 297.2 28.7 Maturities, paydowns, calls and other: Held-to-maturity: fixed maturities 16.0 8.1 Available-for-sale: fixed maturities 164.4 79.6 Net purchases of short-term investments (19.4) (69.0) (Receivable) payable on securities (68.9) 36.2 Purchase of property and equipment (11.6) (14.7) ---------------------------------- Net cash used in investing activities (114.2) (324.0) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options 6.3 1.0 Tax benefits from exercise of stock options 6.1 -- Proceeds from funded debt -- 198.4 Payments on funded debt (.1) (.2) Dividends paid to shareholders (6.0) (5.7) Acquisition of treasury shares -- (2.5) ---------------------------------- Net cash provided by financing activities 6.3 191.0 ---------------------------------- Increase in cash 1.8 9.0 Cash, January 1 13.4 8.7 ---------------------------------- Cash, March 31 $ 15.2 $ 17.7 ================================== See notes to consolidated financial statements.
4 5 The Progressive Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 Supplemental Cash Flow Information -- The Company paid Federal income taxes of $6.5 million and $0 for the periods ended March 31, 1995 and 1994, respectively. Total interest paid was $6.6 million and $5.1 million for the periods ended March 31, 1995 and 1994, respectively. NOTE 2 On March 31, 1995, the Company paid a quarterly dividend of $.055 per Common Share and a regular quarterly dividend of approximately $.59 per share on the 9 3/8% Serial Preferred Shares, Series A, to shareholders of record as of the close of business on March 10, 1995. Both dividends were declared by the Board of Directors on February 10, 1995. On April 28, 1995, the Board of Directors declared a quarterly dividend of $.055 per Common Share and a regular quarterly dividend of approximately $.59 per share on the 9 3/8% Serial Preferred Shares, Series A. Both dividends are payable June 30, 1995, to shareholders of record as of the close of business on June 9, 1995. NOTE 3 The financial statements reflect all normal recurring adjustments which were, in the opinion of management, necessary to present a fair statement of the results for the interim periods. The results of operations for the period ended March 31, 1995 are not necessarily indicative of the results expected for the full year. 5 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS For the first quarter 1995, operating income, which excludes net realized gains and losses on security sales, was $50.7 million, or $.66 per share, compared to $49.8 million, or $.64 per share, last year. The combined ratio was 94.1, compared to 90.9 for the first quarter 1994. Net premiums written increased 23% over the first quarter 1994, primarily reflecting unit growth in the core automobile insurance business. This growth resulted from the Company maintaining competitive rates due to cost control efforts. Premiums earned, which are a function of the amount of premiums written in the current and prior periods, increased 30% for the quarter. Service revenue decreased 2% to $9.3 million for the quarter. Claim costs, which represent actual and estimated future payments to or for our policyholders, as well as loss estimates for future assignments and assessments under state-mandated assigned risk programs, increased as a percentage of premiums earned to 70% for the quarter, compared to 65% in 1994. During the quarter, the Company raised rates but at a pace slower than its rising loss costs. Policy acquisition costs and other underwriting expenses as a percentage of premiums earned decreased to 24% for the first quarter, compared to 26% in 1994. Service expenses increased 4% for the quarter, primarily reflecting a slight increase in fixed operating expenses. Recurring investment income (interest and dividends) increased 22% for the quarter, reflecting an increase in the average investment portfolio and a mix shift to taxable securities. The Company had net realized gains on security sales of $15.4 million for the quarter, compared to net realized losses on security sales of $2.6 million in the first quarter of 1994. At March 31, 1995, the Company's portfolio had $4.2 million in total unrealized losses, compared to $41.1 million in total unrealized losses at December 31, 1994, primarily reflecting a general decline in interest rate levels. The Company continues to invest in fixed maturity, short-term and equity securities. The majority of the portfolio ($2,617.0 million, or 80.3%, at March 31, 1995 and $2,360.8 million, or 76.4%, at March 31, 1994) was in short-term and intermediate-term, investment-grade fixed-income securities. Long-term investment-grade fixed-income securities represented $53.7 million, or 1.6%, and $81.5 million, or 2.7% of the total investment portfolio at March 31, 1995 and 1994, respectively. As of March 31, 1995 and 1994, the equity portfolio of the Company was $439.4 million, or 13.5%, and $472.8 million, or 15.3%, respectively, of the total investment portfolio. The equity portfolio consists of preferred stocks ($266.9 million in 1995 and $360.1 million in 1994), and common stocks ($172.5 million in 1995 and $112.7 million in 1994). As of March 31, 1995 and 1994, the non-investment grade fixed-income portfolio of the Company was $150.6 million, or 4.6%, and $173.7 million, or 5.6%, respectively, of the total investment portfolio. The Company's financial instruments with off-balance-sheet risk had a net market value of $(.6) million and $.4 million as of March 31, 1995 and 1994, respectively. The weighted average annualized fully taxable equivalent book yield of the portfolio was 6.8% and 6.5% for the quarters ended March 31, 1995 and 1994, respectively. FINANCIAL CONDITION Progressive's insurance operations create liquidity by collecting and investing premiums written from new and renewal business in advance of paying claims. For the three months ended March 31, 1995, operations generated a positive cash flow of $109.7 million. 6 7 PART II - OTHER INFORMATION --------------------------- ITEM 4. Submission of Matters to a Vote of Security Holders. At the April 28, 1995 Annual Meeting of the Shareholders of the Company, 62,019,184 Common Shares were represented in person or by proxy. The shareholders approved the proposal to fix the number of directors at nine. The proposal received 60,797,276 affirmative votes, 931,173 negative votes and 290,735 abstentions. At the meeting, the shareholders elected the eight directors named below, each to serve for a term of one year. One vacancy remains on the Board. The votes cast for each director were as follows: For Withheld --- -------- Milton N. Allen 61,593,216 425,968 B. Charles Ames 61,604,915 414,269 Stephen R. Hardis 61,618,948 400,236 Janet Hill 61,602,188 416,996 Peter B. Lewis 61,610,796 408,388 Norman S. Matthews 61,618,101 401,083 Donald B. Shackelford 61,615,008 404,176 Paul B. Sigler 61,598,705 420,479
The shareholders approved The Progressive Corporation 1995 Executive Bonus Plan, which provides certain executive officers of the Company with the opportunity to earn performance-based incentive compensation. This proposal received 59,691,280 affirmative votes, 1,410,057 negative votes and 917,847 abstentions. The shareholders approved The Progressive Corporation Executive Deferred Compensation Plan, pursuant to which certain executive officers and other key employees of the Company may defer receipt and invest some or all of the incentive compensation that they earn. This proposal received 59,219,287 affirmative votes, 1,846,911 negative votes and 952,986 abstentions. The shareholders approved the Progressive Corporation 1995 Incentive Plan, pursuant to which stock options and other stock-based awards may be granted to officers or other key employees of the Company or its subsidiaries. This proposal received 52,774,485 affirmative votes, 8,538,173 negative votes and 706,526 abstentions. ITEM 5. Other Information. On April 28, 1995, Michael C. Murr, the Company's Chief Investment and Capital Officer and the President of Progressive Partners, Inc., resigned. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits: See exhibit index on page 9. (b) Reports on Form 8-K during the quarter ended March 31, 1995: None 7 8 SIGNATURES ---------- Pursuant to the requirements 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 --------------------------- (Registrant) Date: May 12, 1995 BY: /s/ DAVID M. SCHNEIDER ---------------- --------------------------- David M. Schneider Secretary of the Registrant Date: May 12, 1995 BY: /s/ CHARLES B. CHOKEL ---------------- --------------------------- Charles B. Chokel Treasurer and Chief Financial Officer of the Registrant 8 9 EXHIBIT INDEX ------------- Exhibit No. Form 10-Q Under Reg. Exhibit S-K, Item 601 No. Description of Exhibit ------------- --------- ---------------------- (11) 11 Computation of Earnings Per Share (27) 27 Financial Data Schedule (99) 99 Computation of Premiums Earned 9 EX-11 2 THE PROGRESSIVE CORP EXHIBIT 11 1 EXHIBIT NO. 11 -------------- COMPUTATION OF EARNINGS PER SHARE 2 THE PROGRESSIVE CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (millions - except per share amounts) (unaudited)
Three Months Ended March 31, ---------------------------------------------------------------- 1995 1994 --------------------- ----------------------- Per Per Amount Share Amount Share ------ ----- ------ ----- PRIMARY: Net income $60.7 $48.1 Less: Preferred stock dividends (2.1) (2.2) ------ ------ Income available to Common Shareholders $58.6 $.79 $45.9 $ .62 ====== ===== ====== ===== Average shares outstanding 71.5 72.1 Net effect of dilutive stock options 2.5 2.4 ------ ------ Total 74.0 74.5 ====== ====== FULLY DILUTED: Net income $60.7 $48.1 Less: Preferred stock dividends (2.1) (2.2) ----- ----- Income available to Common Shareholders $58.6 $.79 $45.9 $ .62 ====== ===== ====== ===== Average shares outstanding 71.5 72.1 Net effect of dilutive stock options 2.6 2.4 ------ ------ Total 74.1 74.5 ====== ======
EX-27 3 THE PROGRESSIVE CORP EXHIBIT 27
7 This schedule contains summary financial information extracted from the consolidated balance sheets and statements of income and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 2,201,800 321,000 329,000 439,400 0 0 3,260,700 15,200 387,700 170,900 4,850,900 1,486,000 1,093,100 0 0 675,700 71,800 0 85,800 1,084,300 4,850,900 624,300 42,700 15,400 9,300 436,900 106,600 44,000 81,500 20,800 60,700 0 0 0 60,700 .79 .79 0 0 0 0 0 0 0
EX-99 4 THE PROGRESSIVE CORP EXHIBIT 99 1 EXHIBIT NO. 99 -------------- COMPUTATION OF PREMIUMS EARNED 2 THE PROGRESSIVE CORPORATION AND SUBSIDIARIES COMPUTATION OF PREMIUMS EARNED (millions) (unaudited)
Three Months Ended March 31, ---------------------------------------------------- 1995 1994 % Change ---------------------------------------------------- Total direct premiums written $726.0 $605.6 20 Reinsurance ceded, net (39.1) (47.4) 18 -------------------------------- Net premiums written 686.9 558.2 23 Change in net unearned premiums(1) (62.6) (79.5) 21 -------------------------------- Premiums earned $624.3 $478.7 30 ================================ (1) Represents change in unearned premiums net of prepaid reinsurance premiums.
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