Progressive Corporation 8-K

THE PROGRESSIVE CORPORATION
(Exact name of registrant as specified in its charter)

On March 12, 2004, The Progressive Corporation (the “Company”) issued a News Release containing financial results of the Company for the month and year-to-date period ended February 2004 (the “News Release”). A copy of the News Release is attached hereto as Exhibit 99.

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.

News Release dated March 12, 2004,
containing financial results of
The Progressive Corporation
for the month and year-to-date period
ended February 2004

MAYFIELD VILLAGE, OHIO – – March 12, 2004 — The Progressive Corporation today reported the following results for February 2004:

Progressive’s Personal Lines business units write insurance for private passenger automobiles and recreation vehicles. Progressive’s Commercial Auto business unit writes primary liability, physical damage and other auto-related insurance for automobiles and trucks owned by small businesses. The Company’s other businesses principally include writing directors’ and officers’ liability insurance and managing the wind down of the Company’s lender’s collateral protection program. See “Supplemental Information” for the month and year-to-date results.

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
February 2004
(millions – except per share amounts)
(unaudited)


	Current Month			Comments on Monthly Results¹
Direct premiums written	$	1,073.2

Net premiums written	$	1,052.5


Revenues:
Net premiums earned	$	951.6
Investment income²		35.8
Net realized gains on securities		21.9
Service revenues		3.7
Other income (expense)		(.3	)	Adjustment for overaccrual of estimated interest on an income tax refund the Company
				received in February 2004; see the Company's 2003 Annual Report at
				progressive.com/annualreport for further information.

Total revenues		1,012.7

Expenses:
Losses and loss adjustment expenses		603.6
Policy acquisition costs		102.0
Other underwriting expenses		90.8
Investment expenses		1.0
Service expenses		2.0
Interest expense		6.6

Total expenses		806.0


Income before income taxes		206.7
Provision for income taxes		61.6		Includes $7.1 million reduction to the Company’s tax liability for the years 1993-1998,
				which years were settled concurrent with receipt of the above-mentioned tax refund.

Net income	$	145.1


COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding		216.4

Per share	$	.67

Diluted:
Average shares outstanding		216.4
Net effect of dilutive stock-based compensation		3.6

Total equivalent shares		220.0

Per share	$	.66

¹		See the Monthly Commentary at the end of this release for additional discussion. Also see the Company’s Annual Report at progressive.com/annualreport for a complete description of its reporting and accounting policies.

²		The following table sets forth the total return for the month:

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
February 2004
(millions – except per share amounts)
(unaudited)


	Year-to-Date
	2004			2003		% Change
Direct premiums written	$	2,249.9		$	1,973.9		14

Net premiums written	$	2,199.6		$	1,935.2		14


Revenues:
Net premiums earned	$	2,119.1		$	1,773.2		20
Investment income¹		73.2			75.2		(3	)
Net realized gains on securities		35.9			28.8		25
Service revenues		8.6			6.0		43
Other income (expense)		(.2	)		—	NM

Total revenues		2,236.6			1,883.2		19

Expenses:
Losses and loss adjustment expenses		1,346.9			1,209.5		11
Policy acquisition costs		228.9			196.7		16
Other underwriting expenses		189.6			156.3		21
Investment expenses		2.3			2.7		(15	)
Service expenses		4.3			4.1		5
Interest expense		13.8			16.0		(14	)

Total expenses		1,785.8			1,585.3		13


Income before income taxes		450.8			297.9		51
Provision for income taxes		143.4			98.2		46

Net income	$	307.4		$	199.7		54


COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding		216.3			218.0		(1	)

Per share	$	1.42		$	.92		55

Diluted:
Average shares outstanding		216.3			218.0		(1	)
Net effect of dilutive stock-based compensation		3.7			3.4		9

Total equivalent shares		220.0			221.4		(1	)

Per share	$	1.40		$	.90		55


NM = Not Meaningful

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
February 2004
($ in millions)(unaudited)


										Commercial
	Personal Lines									Auto			Other			Companywide
	Agency			Direct			Total			Business			Businesses			Total
Net Premiums Written	$	635.2		$	302.2		$	937.4		$	114.0		$	1.1		$	1,052.5
% Growth in NPW		10	%		15	%		12	%		16	%		(82	)%		12	%
Net Premiums Earned	$	575.8		$	266.6		$	842.4		$	106.3		$	2.9		$	951.6
% Growth in NPE		16	%		22	%		18	%		26	%		(54	)%		18	%

GAAP Ratios
Loss/LAE Ratio		64.4			65.2			64.6			54.2			61.2			63.4
Expense Ratio		20.1			21.5			20.6			16.7			40.1			20.3

Combined Ratio		84.5			86.7			85.2			70.9			101.3			83.7


ACTUARIAL ADJUSTMENTS ^(a)
Total Calendar Year Adjustment
Favorable (Unfavorable)	$	.4		$	.2		$	.6		$	.1		$	(.1	)	$	.6

Reserve Decrease/(Increase)
Prior accident years																$	1.8
Current accident year																	(1.2	)

Calendar year actuarial adjustment																$	.6


Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	1.8
All other development																	1.2

Total development																$	3.0


Calendar year loss/LAE Ratio																	63.4

Accident year loss/LAE Ratio																	63.7


Statutory Ratios
Loss/LAE Ratio																	63.6
Expense Ratio																	19.3

Combined Ratio																	82.9

^(a)

Represents adjustments solely based on the Company’s corporate actuarial review.

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
February 2004
($ in millions)(unaudited)


										Commercial
	Personal Lines									Auto			Other			Companywide
	Agency			Direct			Total			Business			Businesses			Total
Net Premiums Written	$	1,316.7		$	629.7		$	1,946.4		$	249.0		$	4.2		$	2,199.6
% Growth in NPW		11	%		18	%		13	%		21	%		(66	)%		14	%
Net Premiums Earned	$	1,282.5		$	592.5		$	1,875.0		$	237.5		$	6.6		$	2,119.1
% Growth in NPE		17	%		23	%		19	%		27	%		(48	)%		20	%

GAAP Ratios
Loss/LAE Ratio		64.7			64.0			64.5			55.9			70.7			63.6
Expense Ratio		19.7			20.4			19.9			18.1			25.8			19.7

Combined Ratio		84.4			84.4			84.4			74.0			96.5			83.3


ACTUARIAL ADJUSTMENTS ^(a)
Total Calendar Year Adjustment
Favorable/(unfavorable)	$	2.7		$	1.6		$	4.3		$	.1		$	(.1	)	$	4.3

Reserve Decrease/ (Increase)
Prior accident years																$	5.3
Current accident year																	(1.0	)

Calendar year actuarial adjustment																$	4.3


Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	5.3
All other development																	6.7

Total development																$	12.0


Calendar year loss/LAE Ratio																	63.6

Accident year loss/LAE Ratio																	64.2


Statutory Ratios
Loss/LAE Ratio																	63.6
Expense Ratio																	19.2

Combined Ratio																	82.8


Statutory Surplus																$	4,856.0


	February		February
Policies in Force	2004		2003		Change
(in thousands)
Agency – Auto		4,068		3,571		14	%
Direct – Auto		1,911		1,624		18	%
Other Personal Lines^(b)		2,015		1,669		21	%

Total Personal Lines		7,994		6,864		16	%

Commercial Auto Business		373		298		25	%

^(a)		Represents adjustments solely based on the Company’s corporate actuarial review.
^(b)		Includes insurance for motorcycles, recreation vehicles, mobile homes, watercraft, snowmobiles, homeowners and similar items.

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


	February 2004
CONDENSED GAAP BALANCE SHEET:¹
Investments -
Available-for-sale:
Fixed maturities, at market (amortized cost: $9,123.0)	$	9,422.2
Equity securities, at market:
Preferred stocks (cost: $763.4)		790.3
Common equities (cost: $1,589.7)		2,029.0
Short-term investments, at amortized cost (market: $1,207.9)		1,207.9

Total investments²		13,449.4
Net premiums receivable		2,181.2
Deferred acquisition costs		422.6
Other assets		1,170.0

Total assets	$	17,223.2


Unearned premiums	$	3,974.4
Loss and loss adjustment expense reserves		4,650.5
Other liabilities²		1,874.1
Debt		1,289.9
Shareholders’ equity		5,434.3

Total liabilities and shareholders’ equity	$	17,223.2


Common Shares outstanding		217.1
Shares repurchased – February		.1
Average cost per share	$	83.78
Book value per share	$	25.03
Return on average shareholders’ equity		27.9	%
Net unrealized pre-tax gains on investments	$	765.4
Debt to total capital ratio		19.2	%

¹		Pursuant to SFAS 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts,” loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $238.3 million.

²		Amounts include net unsettled security acquisitions of $493.3 million, including repurchase commitment transactions.

•		Continued low accident frequency contributed to the Company’s strong profitability for February. Forty-eight of the 49 markets in which the Company writes Personal Lines business were profitable for the month. Favorable reserve development reduced the combined ratio .3 points for February and .6 points year-to-date.

•		The year-over-year growth rate is declining as expected. Policies in force growth remains strong, supported by a strong renewal rate. In Personal Lines, 18 markets have year-to-date net premiums written growth of 20% or greater; these markets represent 29% of the total Personal Lines premiums. Thirteen states (34% of total Personal Lines) grew less than 10%.

•		In general, the Company did not see any significant changes in customer retention.

•		At February month-end, the net unrealized gains in the portfolio were $765.4 million, an increase of $122.0 million from year-end 2003. The pretax recurring investment book yield of the portfolio was 3.6% for the month and 3.7% year-to-date. In the fixed-income portfolio, the duration was 3.2 years and the weighted average credit quality was AA+.

The Progressive group of insurance companies ranks third in the nation for auto insurance based on premiums written, offering its products by phone at 1-800-PROGRESSIVE, online at progressive.com and through more than 30,000 independent agencies and insurance brokers. The Common Shares of The Progressive Corporation, the holding company, are publicly traded at NYSE:PGR.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this release that are not historical fact are forward-looking statements that are subject to certain risks 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 economic conditions (including changes in interest rates and financial markets); the accuracy and adequacy of the Company’s pricing and loss reserving methodologies; pricing competition and other initiatives by competitors; the Company’s ability to obtain regulatory approval for requested rate changes and the timing thereof; the effectiveness of the Company’s advertising campaigns; legislative and regulatory developments; the outcome of litigation pending or that may be filed against the Company; weather conditions (including the severity and frequency of storms, hurricanes, snowfalls, hail and winter conditions); changes in driving patterns and loss trends; acts of war and terrorist activities; court decisions and trends in litigation and health care and auto repair costs; and other matters described from time to time by the Company in releases and publications, and in 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 a major contingency. Reported results therefore may appear to be volatile in certain accounting periods.


Ohio	1-9518	34-0963169

(State or other	(Commission File	(IRS Employer
jurisdiction of	Number)	Identification
incorporation)		No.)


Exhibit No.
Under Reg.	Form 8-K
S-K Item	Exhibit
601	No.	Description

99	99	News Release dated March 12, 2004, containing financial results of The Progressive Corporation for the month and year-to-date period ended February 2004



The Progressive Corporation		Company Contact:
6300 Wilson Mills Road		Thomas A. King
Mayfield Village, Ohio 44143		(440) 395-2260
http://www.progressive.com


Fully taxable equivalent total return:
Fixed income securities	1.1	%
Common stocks	1.4	%
Total portfolio	1.1	%

Table of Contents

Table of Contents

Table of Contents

Table of Contents


Item 9. Regulation FD Disclosure.
SIGNATURES
Exhibit 99.1 Press Release


		THE PROGRESSIVE CORPORATION

		By: /s/ Jeffrey W. Basch Name: Jeffrey W. Basch Title: Vice President and Chief Accounting Officer


	February		February
(millions)	2004		2003		Change
Net premiums written	$	1,052.5	$	942.7		12	%
Net premiums earned		951.6		805.8		18	%
Net income		145.1		89.0		63	%
Per share		.66		.40		64	%
Combined ratio		83.7		89.8	6.1 pts.


[PROGRESSIVE LOGO]		NEWS RELEASE