10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1O-Q

(Mark One)

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

For the quarterly period ended March 31, 2005

or

o  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)

(440) 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.

Yesþ     No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes þ      No o

     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: 198,794,022 outstanding at April 30, 2005

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TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II — OTHER INFORMATION
	Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits
SIGNATURES
EXHIBIT INDEX
EX-3(A) Code of Regulations
EX-12 Computation of Earnings
EX-31(A) Certification of President and CEO
EX-31(B) Certification of Vice President and CFO
EX-32(A) Certification of President and CEO
EX-32(B) Certification of Vice President and CFO

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

The Progressive Corporation and Subsidiaries
Consolidated Statements of Income
(unaudited)

Three Months Ended March 31,	2005		2004			% Change
(millions - except per share amounts)
Revenues
Net premiums earned	$	3,350.0	$	3,093.5			8
Investment income		120.4		114.9			5
Net realized gains (losses) on securities		10.2		59.5			(83	)
Service revenues		11.2		12.6			(11	)
Other income (expense)		—		(.2	)	NM
Total revenues		3,491.8		3,280.3			6
Expenses
Losses and loss adjustment expenses		2,168.6		1,962.1			11
Policy acquisition costs		356.1		334.0			7
Other underwriting expenses		323.4		276.2			17
Investment expenses		2.8		3.3			(15	)
Service expenses		5.4		5.5			(2	)
Interest expense		20.8		20.5			1
Total expenses		2,877.1		2,601.6			11
Net Income
Income before income taxes		614.7		678.7			(9	)
Provision for income taxes		202.0		218.7			(8	)
Net income	$	412.7	$	460.0			(10	)
Computation of Earnings Per Share
Basic:
Average shares outstanding		199.0		216.4			(8	)
Per share	$	2.07	$	2.13			(2	)
Diluted:
Average shares outstanding		199.0		216.4			(8	)
Net effect of dilutive stock-based compensation		2.9		3.6			(19	)
Total equivalent shares		201.9		220.0			(8	)
Per share	$	2.04	$	2.09			(2	)
Dividends per Share	$	.030	$	.025			20
	-

NM = Not Meaningful

See notes to consolidated financial statements.

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The Progressive Corporation and Subsidiaries
Consolidated Balance Sheets
(unaudited)

	March 31,						December 31,
	2005			2004			2004
(millions)							(audited)
Assets
Investments — Available-for-sale, at market:
Fixed maturities (amortized cost: $9,548.0, $9,008.6 and $8,972.6)	$	9,505.5		$	9,297.3		$	9,084.3
Equity securities:
Preferred stocks (cost: $952.0, $804.7 and $749.4)		957.7			832.8			768.9
Common equities (cost: $1,400.2, $1,600.1 and $1,314.0)		1,898.9			2,004.0			1,851.9
Short-term investments (amortized cost: $1,042.3, $1,113.6 and $1,376.6)		1,042.8			1,113.6			1,376.9
Total investments		13,404.9			13,247.7			13,082.0
Cash		16.8			23.1			20.0
Accrued investment income		100.4			96.8			103.5
Premiums receivable, net of allowance for doubtful accounts of $76.8, $62.9 and $83.8		2,469.2			2,248.2			2,287.2
Reinsurance recoverables, including $53.7, $52.3 and $44.5 on paid losses		391.7			294.5			381.6
Prepaid reinsurance premiums		121.3			120.1			119.8
Deferred acquisition costs		450.6			434.5			432.2
Property and equipment, net of accumulated depreciation of $584.0, $498.3 and $562.1		660.9			616.0			666.5
Other assets		107.4			81.0			91.5
Total assets	$	17,723.2		$	17,161.9		$	17,184.3
Liabilities and Shareholders’ Equity
Unearned premiums	$	4,364.3		$	4,083.9		$	4,108.0
Loss and loss adjustment expense reserves		5,348.3			4,703.9			5,285.6
Accounts payable, accrued expenses and other liabilities		1,385.9			1,386.0			1,325.0
Income taxes		45.4			156.4			26.0
Debt		1,284.5			1,289.9			1,284.3
Total liabilities		12,428.4			11,620.1			12,028.9
Shareholders’ equity:
Common Shares, $1.00 par value (authorized 600.0; issued 213.2, 230.1 and 213.2, including treasury shares of 13.6, 12.6 and 12.8)		199.6			217.5			200.4
Paid-in capital		805.8			755.3			743.3
Unamortized restricted stock		(82.0	)		(65.5	)		(46.0	)
Accumulated other comprehensive income (loss):
Net unrealized gains on investment securities		300.6			468.5			435.1
Net unrealized gains on forecasted transactions		9.4			10.5			9.7
Foreign currency translation adjustment		—			(3.9	)		—
Retained earnings		4,061.4			4,159.4			3,812.9
Total shareholders’ equity		5,294.8			5,541.8			5,155.4
Total liabilities and shareholders’ equity	$	17,723.2		$	17,161.9		$	17,184.3

See notes to consolidated financial statements.

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The Progressive Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

Three Months Ended March 31,	2005			2004
(millions)
Cash Flows From Operating Activities
Net income	$	412.7		$	460.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		22.2			22.8
Amortization of fixed maturities		42.0			38.4
Amortization of restricted stock		6.7			4.7
Net realized (gains) losses on securities		(10.2	)		(59.5	)
Changes in:
Unearned premiums		256.3			189.2
Loss and loss adjustment expense reserves		62.7			127.6
Accounts payable, accrued expenses and other liabilities		(13.3	)		95.9
Prepaid reinsurance premiums		(1.5	)		(5.4	)
Reinsurance recoverables		(10.1	)		(23.2	)
Premiums receivable		(182.0	)		(168.6	)
Deferred acquisition costs		(18.4	)		(22.2	)
Income taxes		91.9			210.9
Tax benefit from exercise/vesting of stock-based compensation		13.2			15.3
Other, net		(13.7	)		14.6
Net cash provided by operating activities		658.5			900.5
Cash Flows From Investing Activities
Purchases:
Fixed maturities		(1,757.6	)		(1,931.2	)
Equity securities		(409.4	)		(229.1	)
Sales:
Fixed maturities		1,094.1			1,659.0
Equity securities		53.6			129.4
Maturities, paydowns, calls and other:
Fixed maturities		123.3			170.6
Equity securities		—			50.0
Net (purchases) sales of short-term investments		334.3			(465.6	)
Net unsettled security transactions		73.3			(13.1	)
Purchases of property and equipment		(16.6	)		(54.2	)
Net cash used in investing activities		(505.0	)		(684.2	)
Cash Flows From Financing Activities
Proceeds from exercise of stock options		15.7			25.9
Payment of debt		—			(200.0	)
Dividends paid to shareholders		(6.0	)		(5.4	)
Acquisition of treasury shares		(166.4	)		(25.8	)
Net cash used in financing activities		(156.7	)		(205.3	)
Increase (decrease) in cash		(3.2	)		11.0
Cash, January 1		20.0			12.1
Cash, March 31	$	16.8		$	23.1

See notes to consolidated financial statements.

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The Progressive Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)

Note 1 Basis of Presentation — These financial statements and the notes thereto should be read in conjunction with the Company’s audited financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2004.

The consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, were necessary for a fair statement of the results for the interim periods presented. The results of operations for the period ended March 31, 2005, are not necessarily indicative of the results expected for the full year.

Note 2 Stock-Based Compensation —The Company follows the provisions of Statement of Financial Accounting Standards (SFAS) 123, “Accounting for Stock-Based Compensation,” to account for its stock compensation activity in the financial statements. Prior to January 1, 2003, the Company followed the provisions of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” to account for its stock option activity.

The change to the fair value method of accounting under SFAS 123 was applied prospectively to all non-qualified stock option awards granted, modified, or settled after January 1, 2003. No stock options were granted after December 31, 2002. As a result, there is no compensation cost for stock options included in net income for 2003 and forward; however, compensation expense would have been recognized if the fair value method had been used for all awards since the original effective date of SFAS 123 (January 1, 1995). Prior to 2003, the Company granted all options currently outstanding at an exercise price equal to the market price of the Company’s Common Shares at the date of grant and therefore, under APB 25, no compensation expense was recorded.

The following table shows the effects on net income and earnings per share had the fair value method been applied to all outstanding and unvested stock option awards for the periods presented. The Company used the modified Black-Scholes pricing model to calculate the fair value of the options awarded as of the date of grant.

	Three months ended March 31,
(millions, except per share amounts)	2005			2004
Net income, as reported	$	412.7		$	460.0
Deduct: Total stock-based employee compensation expense determined under the fair value based method for all stock option awards, net of related tax effects		(.6	)		(1.4	)
Net income, pro forma	$	412.1		$	458.6
Earnings per share
Basic — as reported	$	2.07		$	2.13
Basic — pro forma		2.07			2.12
Diluted — as reported	$	2.04		$	2.09
Diluted — pro forma		2.04			2.09

In 2003, the Company began issuing restricted stock awards. Compensation expense for restricted stock awards is recognized over the respective vesting periods. The current year expense is not representative of the effect on net income for future years since each subsequent year will reflect expense for additional awards.

See “Item 5-Other Information” in Part II of this Form 10-Q for details regarding the restricted stock awards granted by the Company during the first quarter 2005.

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Note 3 Supplemental Cash Flow Information — The Company paid income taxes of $99.0 million and $54.0 million during the three months ended March 31, 2005 and 2004, respectively. Total interest paid was $21.1 million and $27.7 million for the three months ended March 31, 2005 and 2004, respectively. Non-cash activity includes the liability for deferred restricted stock compensation and the changes in net unrealized gains (losses) on investment securities.

Note 4 Debt — Debt at March 31 consisted of:

	2005				2004
			Market				Market
(millions)	Cost		Value		Cost		Value
7.30% Notes due 2006	$	99.9	$	103.6	$	99.9	$	110.9
6.375% Senior Notes due 2012		347.8		376.7		347.5		395.2
7% Notes due 2013		148.9		168.3		148.8		177.0
6 5/8% Senior Notes due 2029		294.2		328.0		294.1		323.6
6.25% Senior Notes due 2032		393.7		423.5		393.6		420.6
Other debt		—		—		6.0		6.0
	$	1,284.5	$	1,400.1	$	1,289.9	$	1,433.3

Note 5 Comprehensive Income — Total comprehensive income was $277.9 million and $510.1 million for the quarters ended March 31, 2005 and 2004, respectively.

Note 6 Dividends — On March 31, 2005, the Company paid a quarterly dividend of $.03 per Common Share to shareholders of record as of the close of business on March 11, 2005. The Board of Directors declared the dividend on January 31, 2005.

On April 15, 2005, the Board of Directors declared a quarterly dividend of $.03 per Common Share. The dividend is payable June 30, 2005, to shareholders of record as of the close of business on June 10, 2005.

Note 7 Segment Information — The Company’s Personal Lines business units write insurance for private passenger automobiles and recreation vehicles. The Commercial Auto business unit writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses. The Company’s other-indemnity businesses primarily include writing professional liability insurance for community banks and managing the Company’s run-off businesses. The Company’s other-service businesses include providing insurance-related services, primarily processing business for Commercial Auto Insurance Procedures/Plans (CAIP), which are state-supervised plans serving the involuntary market. All revenues are generated from external customers.

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Following are the operating results for the three months ended March 31:

	2005					2004
			Pretax						Pretax
			Profit						Profit
(millions)	Revenues		(Loss)			Revenues			(Loss)
Personal Lines — Agency	$	1,975.4	$	279.8		$	1,871.4		$	294.5
Personal Lines — Direct		972.6		132.2			865.9			138.7
Total Personal Lines 1		2,948.0		412.0			2,737.3			433.2
Commercial Auto		395.2		84.5			346.8			87.8
Other-indemnity		6.8		5.4			9.4			.2
Total underwriting operations		3,350.0		501.9			3,093.5			521.2
Other-service		11.2		5.8			12.6			7.1
Investments 2		130.6		127.8			174.4			171.1
Interest expense		—		(20.8	)		—			(20.5	)
Other income (expense)3		—		—			(.2	)		(.2	)
	$	3,491.8	$	614.7		$	3,280.3		$	678.7

¹  Personal automobile insurance accounted for 93% and 94% of the total Personal Lines segment net premiums earned in the first quarters of 2005 and 2004, respectively.

²   Revenues represent recurring investment income and net realized gains (losses) on securities; pretax profit is net of investment expenses.

³   Represents the over-accrual of estimated interest on an income tax refund the Company received in 2004.

The Company’s management uses underwriting margin and combined ratio as primary measures of underwriting profitability. The underwriting margin is the pretax profit (loss) [calculated as net premiums earned less losses and loss adjustment expenses, policy acquisition costs and other underwriting expenses] expressed as a percent of net premiums earned (i.e., revenues). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for the Company’s underwriting operations for the three months ended March 31:

	2005		2004
	Underwriting	Combined	Underwriting	Combined
	Margin	Ratio	Margin	Ratio
Personal Lines — Agency	14.2%	85.8	15.7%	84.3
Personal Lines — Direct	13.6	86.4	16.0	84.0
Total Personal Lines	14.0	86.0	15.8	84.2
Commercial Auto	21.4	78.6	25.3	74.7
Other — indemnity1	NM	NM	NM	NM
Total underwriting operations	15.0	85.0	16.8	83.2

NM = Not Meaningful

¹  Operating profit expressed as a percentage is not meaningful for the Company’s other-indemnity businesses.

Note 8 Litigation — The Company is named as defendant in various lawsuits arising out of its insurance operations. All legal actions relating to claims made under insurance policies are considered by the Company in establishing its loss and loss adjustment expense reserves.

In addition, the Company is named as defendant in a number of class action or individual lawsuits, the outcomes of which are uncertain at this time. These cases include those alleging damages as a result of the Company’s total loss evaluation methodology, use of after-market parts, use of consumer reports (such as credit reports) in underwriting and related notice requirements under the federal Fair Credit Reporting Act, charging betterment in first party physical damage claims, the adjusting of personal injury protection and medical

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payment claims, the use of preferred provider rates for payment of personal injury protection claims, the use of automated database vendors to assist in evaluating certain first party bodily injury claims, and cases challenging other aspects of the Company’s claims and marketing practices and business operations.

The Company plans to contest the outstanding suits vigorously, but may pursue settlement negotiations in appropriate cases. In accordance with accounting principles generally accepted in the United States (GAAP), the Company has established accruals for lawsuits as to which the Company has determined that it is probable that a loss has been incurred and the Company can reasonably estimate its potential exposure. Pursuant to GAAP, the Company has not established reserves for those lawsuits where the loss is not probable and/or the Company is currently unable to estimate the potential exposure. If any one or more of these lawsuits results in a judgment against or settlement by the Company in an amount that is significantly in excess of the reserve established for such lawsuit (if any), the resulting liability could have a material effect on the Company’s financial condition, cash flows and results of operations.

For a further discussion on the Company’s pending litigation, see Item 3-Legal Proceedings in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Note 9 New Accounting Standards — On April 15, 2005, the Securities and Exchange Commission issued an amendment to Rule 4-01(a) of Regulation S-X, which became effective April 21, 2005, regarding the compliance date for SFAS 123 (revised 2004), “Share-Based Payment.” Pursuant to the amendment, companies are not required to prepare financial statements in accordance with SFAS 123R until the first quarter of the first fiscal year beginning after June 15, 2005, although earlier compliance is permitted. The Company plans to adopt SFAS 123R on January 1, 2006, and, as a result, estimates that net income will be reduced by approximately $.9 million in 2006. The Company will not incur any additional expense relating to currently outstanding stock options in years subsequent to 2006, since the latest vesting date of stock options previously granted is January 1, 2007. The Company does not currently intend to issue additional stock options.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

For the first quarter 2005, The Progressive Corporation and subsidiaries (the “Company”) generated strong profitability in each business segment and experienced modest growth as expected. On a companywide basis, net premiums written increased 10% and the Company generated a combined ratio of 85.0 for the quarter. For the first quarter 2005, net income was $412.7 million, or $2.04 per share.

During the first quarter 2005, companywide policies in force growth remained strong at 12%. Policy life expectancy, which is one measure of retention, increased in each of the Company’s auto tiers, as compared to the prior quarter. In addition, the Company is experiencing a decrease in its premium per application on both new and renewal business, consistent with market pricing refinements in several states. The Company will continue to evaluate prudent tradeoffs of profit for growth and seek growth where it deems appropriate. The Company continues to take actions it believes will enhance its competitiveness and allow the Company to be ready for future growth if and when market conditions change.

The favorable underwriting margins in the first quarter benefited from 3.4 points of favorable reserve development. This favorable development reflects both actuarial adjustments, as well as other favorable development (e.g., claims settling for less than reserved). The Company is continuing to experience low accident frequency. In addition, the quality of the Company’s claims processes continues to rise.

The Company made no substantial changes in the allocation of its investment portfolio during the quarter. The Company’s investment portfolio produced a fully taxable equivalent total return of (.4)%, with negative total returns for the quarter in both fixed-income securities and common stocks. The Company continued to keep its credit quality high and exposure to interest rate risk low. At March 31, 2005, the fixed-income portfolio duration was 2.9 years with a weighted average credit quality of AA+.

FINANCIAL CONDITION

Capital Resources and Liquidity

The Company has substantial capital resources and believes it has sufficient borrowing capacity and other capital resources to support current and anticipated growth and satisfy scheduled debt and interest payments. The Company’s existing debt covenants do not include any rating or credit triggers.

Progressive’s insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance of paying claims. For the three months ended March 31, 2005, operations generated a positive cash flow of $658.5 million. Operating cash flows decreased 27% from the first quarter last year, primarily reflecting a one-time IRS refund in the first quarter 2004 and timing differences associated with accrued expenses. During the first quarter 2005, the Company repurchased 1.9 million Common Shares at a total cost of $166.4 million (average cost of $87.47 per share).

Commitments and Contingencies

The Company is currently constructing a data center in Colorado Springs, Colorado at an estimated total cost of $67 million. Construction on this data center is expected to be completed in 2006. In addition, the Company is converting a building purchased in Austin, Texas to a call center. The project is scheduled to be completed in June 2005, at an estimated total cost of $40 million. The Company is also currently pursuing the acquisition of additional land for future development to support corporate operations near its current corporate headquarters with the intent to begin construction in 2006. All such projects, including the additional service centers discussed below, are or will be funded through operating cash flows.

The Company currently has in operation a total of 21 centers that provide concierge-level claims service, including one facility opened in May 2005, the first since the first quarter 2004. The Company has announced a significant

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expansion of this service and is currently looking for additional sites. The Company expects to more than double the number of sites in the next two years, with a total of approximately 50 additional facilities opened over the next several years.

Off-Balance-Sheet Arrangements

Except for the open investment funding commitment and operating leases and service agreements discussed in the notes to the financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, the Company does not have any off-balance-sheet leverage.

Contractual Obligations

During the first quarter 2005, the Company’s contractual obligations have not changed materially from those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

RESULTS OF OPERATIONS

Underwriting Operations

Growth

	Growth over prior year
Net premiums written	10%
Net premiums earned	8%
Policies in force	12%

Companywide net premiums written represent the premiums generated 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 being earned into income using a daily earnings convention.

The Company analyzes its growth by reviewing rate levels, new policies and customers, and the retention characteristics of its books of business. During the first quarter 2005, the Company filed 42 auto rate revisions in various states. The overall effect of these revisions was a slight decrease in rates for the year. The Company will continue to assess market conditions on a state-by-state basis, will consider rate reductions in states where it will be able to maintain an attractive combination of profit and growth while still maintaining service quality, and will seek selective rate increases where it is necessary to maintain rate adequacy. New business applications increased slightly in both the Company’s Personal Lines and Commercial Auto businesses for the quarter.

Customer retention is another factor that affects growth. One measure of improvement in customer retention is policy life expectancy (PLE), which is the estimate of the average length of time that a policy will remain in force before cancellation or non-renewal. The Company has seen slight increases in PLE for its auto business in both the Agency and Direct channels, as compared to the prior quarter. Another way to analyze retention is through customer relationship life expectancy (i.e., focusing on the customer rather than the policy in force). The Company is beginning to develop customer relationship life expectancy estimates for both new and renewal business at a detailed segment level under varying market conditions. With an increasing percentage of the Company’s premium coming from renewal business, increasing retention remains an area where the Company is continuing to focus its efforts.

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Profitability

Profitability for the Company’s underwriting operations is defined by pretax underwriting profit, which is calculated as net premiums earned less losses and loss adjustment expenses, policy acquisition costs and other underwriting expenses. The Company also uses underwriting profit margin, which is underwriting profit expressed as a percent of net premiums earned, to analyze the Company’s results. For the three months ended March 31, the Company’s underwriting profitability measures were as follows:

	2005					2004
	Underwriting Profit					Underwriting Profit
(millions)	$		Margin			$		Margin
Personal Lines — Agency	$	279.8		14.2	%	$	294.5		15.7	%
Personal Lines — Direct		132.2		13.6			138.7		16.0
Total Personal Lines		412.0		14.0			433.2		15.8
Commercial Auto		84.5		21.4			87.8		25.3
Other-indemnity		5.4	NM				.2	NM
Total underwriting operations	$	501.9		15.0	%	$	521.2		16.8	%

NM = Not Meaningful

Further underwriting results for the Company’s Personal Lines businesses, including its channel components, the Commercial Auto business and other-indemnity businesses, were as follows (details discussed below):

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	THREE MONTHS ENDED MARCH 31,
(dollars in millions)	2005			2004			Change
NET PREMIUMS WRITTEN
Personal Lines – Agency	$	2,081.8		$	1,957.1			6	%
Personal Lines – Direct		1,081.0			937.9			15	%
Total Personal Lines		3,162.8			2,895.0			9	%
Commercial Auto		436.3			376.2			16	%
Other-indemnity		5.7			6.1			(7	)%
Total underwriting operations	$	3,604.8		$	3,277.3			10	%
NET PREMIUMS EARNED
Personal Lines — Agency	$	1,975.4		$	1,871.4			6	%
Personal Lines — Direct		972.6			865.9			12	%
Total Personal Lines		2,948.0			2,737.3			8	%
Commercial Auto		395.2			346.8			14	%
Other-indemnity		6.8			9.4			(28	)%
Total underwriting operations	$	3,350.0		$	3,093.5			8	%
PERSONAL LINES — AGENCY
Loss & loss adjustment expense ratio		65.0			64.7			(.3	) pts.
Underwriting expense ratio		20.8			19.6			(1.2	) pts.
Combined ratio		85.8			84.3			(1.5	) pts.
PERSONAL LINES — DIRECT
Loss & loss adjustment expense ratio		66.8			63.6			(3.2	) pts.
Underwriting expense ratio		19.6			20.4			.8	pts.
Combined ratio		86.4			84.0			(2.4	) pts.
PERSONAL LINES — TOTAL
Loss & loss adjustment expense ratio		65.6			64.3			(1.3	) pts.
Underwriting expense ratio		20.4			19.9			(.5	) pts.
Combined ratio		86.0			84.2			(1.8	) pts.
COMMERCIAL AUTO
Loss & loss adjustment expense ratio		58.7			56.2			(2.5	) pts.
Underwriting expense ratio		19.9			18.5			(1.4	) pts.
Combined ratio		78.6			74.7			(3.9	) pts.
TOTAL UNDERWRITING OPERATIONS
Loss & loss adjustment expense ratio		64.7			63.5			(1.2	) pts.
Underwriting expense ratio		20.3			19.7			(.6	) pts.
Combined ratio		85.0			83.2			(1.8	) pts.
Accident year-Loss & loss adjustment expense ratio		68.1			62.8			(5.3	) pts.
ACTUARIAL ADJUSTMENTS1
Favorable/(Unfavorable)
Prior accident years	$	36.4		$	11.4
Current accident year		(2.9	)		.1
Calendar year actuarial adjustment	$	33.5		$	11.5			191	%
PRIOR ACCIDENT YEARS DEVELOPMENT
Favorable/(Unfavorable)
Actuarial adjustment	$	36.4		$	11.4
All other development		78.5			(34.3	)
Total development	$	114.9		$	(22.9	)	NM
POLICIES IN FORCE (at March 31) (thousands)
Agency – Auto		4,443			4,118			8	%
Direct – Auto		2,209			1,941			14	%
Other Personal Lines2		2,429			2,057			18	%
Total Personal Lines		9,081			8,116			12	%
Commercial Auto		433			380			14	%

	NM = Not Meaningful
1	Represents the net changes made by the Company’s actuarial staff to both current and prior accident year reserves based on regularly scheduled reviews. See the Company’s “Report on Loss Reserving Practices,” filed in the Company’s Current Report on Form 8-K on June 29, 2004, for further discussion.
2	Includes insurance for motorcycles, recreation vehicles, mobile homes, watercraft, snowmobiles and similar items.

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Loss and Loss Adjustment Expense Reserves

Claims costs, the Company’s most significant expense, represent payments made, and estimated future payments to be made, to or on behalf of its policyholders, including expenses needed to adjust or settle claims. These costs include an estimate for costs related to assignments, based on current and prior writings, under state-mandated automobile insurance programs. Claims costs are influenced by changes in loss severity and frequency, among other factors. Accordingly, anticipated changes in these factors are taken into account when the Company establishes premium rates and loss reserves.

During the quarter, the Company continued to report favorable loss ratios. Auto accident frequency remained low. The Company continues to experience the same frequency trends as the rest of the industry in nearly every coverage. The Company will continue to analyze these trends to distinguish changes in its experience from external factors versus those resulting from shifts in the mix of the Company’s business.

The Company continued to see an increase in severity during the first quarter 2005, compared to the same period last year. The increase in bodily injury severity for the first quarter 2005 was less than that experienced by the Company in the second half of 2004, but comparable to the changes for the industry, as reported by the Property Casualty Insurers Association of America. The Company’s largest increase in severity was in the personal injury protection coverage. The Company plans to continue to be diligent about recognizing trend when setting rates.

The Company monitors physical damage trend in evaluating its claims handling performance and capacity. During the first quarter 2005, the Company continued to realize improvement in its claims quality, as indicated by the Company’s internal audit of claims files. The result of achieving more consistency in claims quality and process allowed the Company to more effectively deploy claims personnel to needed areas. As a result, the Company has been able to maximize growth opportunities in certain markets and avoid restrictions on growth due to a lack of claims capacity.

During the first quarter 2005, the Company experienced $114.9 million, or 3.4 points, of favorable loss reserve development, compared to $22.9 million, or .7 points, of unfavorable development for the same period last year. The current year favorable development is comprised of $36.4 million of favorable adjustments based on regularly scheduled actuarial reviews and $78.5 million of favorable “all other development” (e.g., claims settling for more or less than reserved, emergence of unreported claims at rates different than reserved and changes in reserve estimates by claims representatives). The favorable “all other development” reflects the continued recognition of lower severity for prior accident years than had been previously estimated. The prior year loss reserve development reflected unfavorable development in the Company’s personal auto product, partially offset by favorable development in the Company’s Commercial Auto and non-auto Personal Lines businesses. The Company continues to increase the analysis intensity of its loss reserves to increase accuracy and further understand its business. A detailed discussion of the Company’s loss reserving practices can be found in its Report on Loss Reserving Practices, which was filed in a Form 8-K on June 29, 2004.

Underwriting Expenses

Other underwriting expenses and policy acquisition costs were 20.3% and 19.7% of premiums earned for the first quarters 2005 and 2004, respectively, primarily reflecting an increase in advertising spending associated with the rollout of Drive Insurance from Progressive^SM, the new Agency brand. In addition, the “other underwriting expenses,” as shown on the income statement, reflect increases in salaries and other infrastructure costs consistent with premium growth.

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Personal Lines

The Company’s Personal Lines business units write insurance for private passenger automobiles and recreation vehicles, and represents 88% of the Company’s total year-to-date net premiums written. Personal Lines net premiums written grew 9% over the first quarter 2004, and net premiums earned grew 8%, compared to the same period last year. The Personal Lines business is comprised of the Agency Business and the Direct Business.

The Agency Business

	Growth over prior year
Net premiums written		6	%
Net premiums earned		6	%
Auto policies in force		8	%

The Agency Business includes business written by more than 30,000 independent insurance agencies that represent the Company, as well as brokerages in New York and California. The Agency auto business saw a slight increase (about 2%) in new applications in the first quarter 2005, as compared to the same period last year. Premiums per application were lower on both new and renewal business. Conversions (i.e., converting a quote to a sale) were down on a greater number of quotes. The Company has seen retention lengthen slightly in all of the Agency auto tiers over the last several months.

The Agency expense ratio increased 1.2 points for the first quarter 2005, as compared to the same period last year, primarily due to a substantial increase in advertising costs as the Company continues to roll out its Drive Insurance from Progressive^SM brand. Drive Insurance commercials are now airing nationally. The Company is hopeful that greater brand identity, coupled with its product offerings, systems, claims and customer service, will support growth in the Agency channel.

The Direct Business

	Growth over prior year
Net premiums written		15	%
Net premiums earned		12	%
Auto policies in force		14	%

The Direct Business includes business written directly by the Company over the telephone and on the Internet. The Direct business experienced a strong increase in new applications (about 15%) in the first quarter 2005. Premiums per application were relatively flat on new business, but lower on renewals. The conversion rate on the Direct business is down slightly from the first quarter last year; however, the number of quotes has risen. The effectiveness of the Company’s advertising campaigns seems to have resulted in an increase in the total quotes the Company has received. The use of the Internet, either for complete or partial quoting, continues to grow and is the most significant source of the new business activity in the Direct channel. Direct auto has also seen a modest lengthening in retention, as compared to the prior quarter.

The Direct expense ratio decreased .8 points for the first quarter 2005, as compared to the same period last year, primarily reflecting a greater percentage of renewal business. Advertising costs in the Direct business increased in the first quarter 2005, as compared to the same period last year. The Progressive Direct^SM marketing efforts continue to emphasize the ease of doing business with Progressive and credible price comparisons provided to consumers. The Company advertises its Direct brand on a national basis and supplements that coverage by local market media campaigns in over 100 designated market areas.

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Commercial Auto

	Growth over prior year
Net premiums written		16	%
Net premiums earned		14	%
Auto policies in force		14	%

The Company’s Commercial Auto business unit writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses, with the majority of its customers insuring three or fewer vehicles. The Commercial Auto business represents 12% of the Company’s total year-to-date net premiums written. Although Commercial Auto differs from Personal Lines auto in its customer base and products written, both businesses require the same fundamental skills, including disciplined underwriting and pricing, as well as excellent claims service. The Company’s Commercial Auto business is primarily distributed through the independent agency channel.

The Company experienced solid growth in Commercial Auto during the quarter. Approximately 49% of the Company’s year-to-date Commercial Auto net premiums written were generated in the light and local commercial auto markets, which includes autos, vans and pick-up trucks used by contractors, such as artisans, landscapers and plumbers, and a variety of other small businesses. The remainder of the business was written in the specialty commercial auto market, which includes dump trucks, logging trucks and other short-haul commercial vehicles. There are many similarities between the Company’s commercial and personal auto businesses; however, since the commercial auto policies have higher limits (up to $1 million) than personal auto, the Company analyzes the limit differences in this product more closely.

New applications increased slightly (about 3%) in the Commercial Auto business. Commercial Auto is increasing its offering of twelve-month term policies, primarily in the specialty commercial auto market, which will have a favorable effect on the premiums per application. Six-month term restrictions will remain in selected markets. The expense ratio in this business increased 1.4 points from the first quarter last year, primarily due to involuntary market assessments.

Other Businesses

Indemnity

The Company’s other-indemnity businesses, which represent less than .2% of year-to-date net premiums written, primarily include writing professional liability insurance for community banks and the Company’s run-off businesses. These businesses generated an operating profit of $5.4 million for the first quarter 2005, compared to $.2 million for the same period last year. The increase in operating profit is primarily due to favorable reserve development in the run-off products during the first quarter 2005.

Service

The other-service businesses primarily provide policy issuance and claims adjusting services for the state Commercial Auto Insurance Procedures/Plans (CAIP) businesses, which are state-supervised plans serving the involuntary market. These service businesses generated an operating profit of $5.8 million for the first quarter 2005, compared to $7.1 million for the same period last year, reflecting slower growth in the CAIP business.

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Investments

Portfolio Allocation

The composition of the investment portfolio at March 31 was:

			Gross		Gross					% of
			Unrealized		Unrealized			Market		Total			Duration
(millions)	Cost		Gains		Losses			Value		Portfolio			(Years)	Rating1
2005
Fixed maturities	$	9,548.0	$	75.8	$	(118.3	)	$	9,505.5		70.9	%	3.3	AA+
Preferred stocks		952.0		12.7		(7.0	)		957.7		7.1		2.3	A-
Short-term investments2		1,042.3		.5		—			1,042.8		7.8		<1	AA
Total fixed income		11,542.3		89.0		(125.3	)		11,506.0		85.8		2.9	AA+
Common equities		1,400.2		508.6		(9.9	)		1,898.9		14.2		NM	NM
Total portfolio3	$	12,942.5	$	597.6	$	(135.2	)	$	13,404.9		100.0	%	2.9	AA+
2004
Fixed maturities	$	9,008.6	$	295.6	$	(6.9	)	$	9,297.3		70.2	%	3.3	AA+
Preferred stocks		804.7		36.6		(8.5	)		832.8		6.3		2.8	A-
Short-term investments2		1,113.6		—		—			1,113.6		8.4		<1	AA-
Total fixed income		10,926.9		332.2		(15.4	)		11,243.7		84.9		3.0	AA+
Common equities		1,600.1		413.7		(9.8	)		2,004.0		15.1		NM	NM
Total portfolio3	$	12,527.0	$	745.9	$	(25.2	)	$	13,247.7		100.0	%	3.0	AA+

NM = Not Meaningful

¹   Credit quality ratings are assigned by nationally recognized securities rating organizations. To calculate the weighted average credit quality ratings, the Company weights individual securities based on market value and assigns a numeric score to each credit rating based on a scale from 0-5.

²   Short-term investments include Eurodollar deposits, commercial paper, auction rate securities and other investments, which are expected to be liquidated within one year.

³   The Company had net unsettled security acquisitions of $105.2 million and $62.0 million at March 31, 2005 and 2004, respectively. March 31, 2005 and 2004 totals include $1.1 billion and $1.2 billion, respectively, of securities in the portfolio of a consolidated, non-insurance subsidiary of the holding company.

As of March 31, 2005, the Company’s portfolio had $462.4 million of net unrealized gains, compared to $720.7 million at March 31, 2004 and $669.4 million at December 31, 2004. During the first quarter 2005, the fixed-income portfolio’s valuation decreased $167.8 million. Since March 31, 2004, interest rates have been rising. The increase in interest rates largely contributed to the decline in valuation of the fixed-income portfolio. The common stock portfolio had a decrease of $39.2 million reflecting movement in the market.

Fixed-Income Securities

The fixed-income portfolio, which includes fixed-maturity securities, preferred stocks and short-term investments, had a duration of 2.9 years at March 31, 2005 and December 31, 2004, compared to 3.0 years at March 31, 2004. After adjustments to exclude unsettled securities transactions, the allocation of fixed-income securities at March 31, 2005, was 85.7% of the total portfolio, compared to 84.8% at March 31, 2004.

The fixed-maturity securities and short-term securities, as reported in the balance sheets, were comprised of the following:

(millions)	March 31, 2005				March 31, 2004
Investment-grade fixed maturities:
Short/intermediate term	$	10,365.4	98.3	%	$	10,026.3	96.3	%
Long term1		103.1	1.0			122.0	1.2
Non-investment-grade fixed maturities		79.8	.7			262.6	2.5
Total	$	10,548.3	100.0	%	$	10,410.9	100.0	%

¹ Long term includes securities with maturities of 10 years or greater.

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Included in the fixed-income portfolio are $2.3 billion of asset-backed securities. These asset-backed securities are comprised of residential mortgage-backed ($.6 billion), commercial mortgage-backed ($.9 billion) and other asset-backed ($.8 billion) securities, with a total duration of 2.2 years and weighted average credit quality of AA+. The largest component of other asset-backed securities are automobile receivable loans ($.3 billion) and home equity loans ($.2 billion). Substantially all asset-backed securities are liquid with available market quotes and contain no residual interests (i.e., the most subordinated class in a pool of securitized assets).

Common Equities

Common equities, as reported in the balance sheets, were comprised of the following:

(millions)	March 31, 2005				March 31, 2004
Common stocks	$	1,876.3	98.8	%	$	1,962.1	97.9	%
Other risk investments		22.6	1.2			41.9	2.1
Total common equities	$	1,898.9	100.0	%	$	2,004.0	100.0	%

Common equities comprised 14.3% and 15.2% of the total portfolio, excluding the net unsettled securities transactions, at March 31, 2005 and 2004, respectively. Common stocks are the majority of the common equity portfolio and are managed externally to track the Russell 1000 index within +/- 50 basis points. To maintain high correlation with the Russell 1000, the Company holds 71% of the 991 common stocks comprising the index at March 31, 2005. Individual holdings are measured based on their contribution to the correlation with the index. The Company’s common equity allocation and management strategy are intended to provide diversification for the total portfolio and focus on changes in value of the equity portfolio relative to the change in value of the index on an annual basis, as noted in the following table:

	Total Return as of
	March 31(1)
	2005			2004
Common Stocks		(1.7	)%		1.9	%
Russell 1000 Index		(1.9	)%		1.9	%

⁽¹⁾ Includes gross dividends reinvested and price appreciation/depreciation.

Other risk investments include private equity investments and limited partnership interests in private equity and mezzanine investment funds, which have no off-balance-sheet exposure or contingent obligations, except for the $6.4 million of open funding commitments at March 31, 2005.

Trading Securities

Trading securities are entered into for the purpose of near-term profit generation. At March 31, 2005 and 2004, the Company did not have any trading securities, with the exception of the derivatives classified as trading discussed below. The Company had no trading security gains or losses during the first quarters of 2005 and 2004.

Derivative Instruments

From time to time, the Company invests in derivative instruments, which are primarily used to manage the risks of the available-for-sale portfolio. This is accomplished by modifying the basis, duration, interest rate or foreign currency characteristics of the portfolio, hedged securities or hedged cash flows. The Company had no risk management derivatives at March 31, 2005 or 2004. The Company recognized no gains or losses during the first quarter 2005 or 2004 on risk management derivatives.

Derivative instruments may also be used for trading purposes or classified as trading derivatives due to characteristics of the transaction. During the first quarter 2005, the Company had no open trading derivatives. At March 31, 2004, the Company held three open credit default protection derivatives, which were sold on three separate issuers and were matched with Treasury securities with an equivalent principal and maturity to replicate cash bond positions. These positions had a notional amount of $128.5 million at March 31, 2004, and

17

net realized gains of $.4 million during the quarter. The results of these positions are immaterial to the financial condition, cash flows and results of operations of the Company and are reported as part of the available-for-sale portfolio.

Investment Income

Recurring investment income (interest and dividends before investment and interest expenses) increased 5% for the first quarter 2005, compared to the same period last year, reflecting growth in the Company’s invested assets.

The Company reports total return to more accurately reflect the management philosophy of the portfolio and evaluation of the investment results. The fully taxable equivalent (FTE) total return includes recurring investment income, net realized gains (losses) on securities and changes in unrealized gains (losses) on investment securities. The Company reported the following investment results for the period ended March 31:

	Three Months
	2005			2004
Pretax recurring investment book yield		3.8	%		3.8	%
Weighted average FTE book yield		4.4	%		4.4	%
FTE total return:
Fixed-income securities		(.2	)%		2.2	%
Common stocks		(1.7	)%		1.9	%
Total portfolio		(.4	)%		2.2	%

Realized Gains/Losses

The components of net realized gains (losses) were:

	Three Months Ended
	March 31,
(millions)	2005			2004
Gross realized gains:
Fixed maturities	$	18.1		$	47.5
Preferred stocks		—			7.6
Common equities		6.3			16.0
Short-term investments		—			—
		24.4			71.1
Gross realized losses:
Fixed maturities		5.7			1.1
Preferred stocks		—			—
Common equities		8.5			10.4
Short-term investments		—			.1
		14.2			11.6
Net realized gains (losses) on securities:
Fixed maturities		12.4			46.4
Preferred stocks		—			7.6
Common equities		(2.2	)		5.6
Short-term investments		—			(.1	)
	$	10.2		$	59.5
Per share	$	.03		$	.18

The gross gains and losses were primarily the result of market driven interest rate movements, sector allocation changes and the rebalancing of the common stock portfolio to the Russell 1000 Index, as part of ordinary investment operations. Gross realized losses also include write-downs of both fixed-income and equity securities determined to be other-than-temporarily impaired.

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Other-Than-Temporary Impairment (OTI)

From time to time, realized losses include write-downs of securities determined to have an other-than-temporary decline in market value. The Company routinely monitors its portfolio for pricing changes which might indicate potential impairments and performs detailed reviews of securities with unrealized losses based on predetermined criteria. In such cases, changes in market 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, or (ii) market-related factors, such as interest rates or equity market declines.

Fixed-income and equity securities with declines attributable to issuer-specific fundamentals are reviewed to identify all available evidence, circumstances and influences to estimate the potential for, and timing of, recovery of the investment’s impairment. An other-than-temporary impairment loss is deemed to have occurred when the potential for, and timing of, recovery does not satisfy the guidance set forth in Staff Accounting Bulletin 59, “Noncurrent Marketable Equity Securities,” SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities,” and other related guidance.

For fixed-income investments with unrealized losses due to market or industry-related declines where the Company has the intent and ability to hold the investment for the period of time necessary to recover a significant portion of the investment’s original principal and interest obligation, declines are not deemed to qualify as other than temporary. The Company’s policy for common stocks with market-related declines is to recognize impairment losses on individual securities with losses that are not reasonably expected to be recovered under historical market conditions when the security has been in a loss position for three consecutive quarters.

When a security in the Company’s investment portfolio has a decline in market value that is deemed to be other than temporary, the Company reduces the book value of such security to its current market value, recognizing the decline as a realized loss in the income statement. All other unrealized gains or losses are reflected in shareholders’ equity. The write-down activity for the period ended March 31 is as follows:

			Three Months
			Write-downs		Write-downs
	Total		On Securities		On Securities
(millions)	Write-downs		Sold		Held at Period End
2005
Fixed income	$	1.0	$	—	$	1.0
Common equities		.4		—		.4
Total portfolio	$	1.4	$	—	$	1.4
2004
Fixed income	$	—	$	—	$	—
Common equities		—		—		—
Total portfolio	$	—	$	—	$	—

The following table stratifies the gross unrealized losses in the Company’s portfolio at March 31, 2005, by length of time in a loss position and magnitude of the loss as a percentage of book value. The individual amounts represent the additional OTI the Company could have recognized in the income statement if its policy for market-related declines was different than that stated above.

(millions)

	Total Gross
	Unrealized		Decline of Investment Value
Total Portfolio	Losses		>15%		>25%		>35%		>45%
Unrealized Loss for 1 Quarter	$	40.0	$	.7	$	.2	$	.2	$	.2
Unrealized Loss for 2 Quarters		31.7		.7		.7		.7		.7
Unrealized Loss for 3 Quarters		9.4		—		—		—		—
Unrealized Loss for 1 year or longer		54.1		.1		.1		.1		—
	$	135.2	$	1.5	$	1.0	$	1.0	$	.9

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For example, if the Company had decided to write down all securities in an unrealized loss position for one year or longer where the securities decline in value exceeded 25%, the Company would have recognized an additional $.1 million of OTI losses in the income statement.

The Company also reviews securities in unrealized loss positions in accordance with Emerging Issues Task Force 03-1 “The Meaning of Other-Than-Temporary Impairments.” At March 31, 2005, the gross unrealized loss of $135.2 million (on securities with a market value of $7,383.2 million) includes $54.1 million of unrealized losses on securities in a loss position for one year or longer (market value of $2,145.6 million). The Company determined that none of these securities met the criteria for other-than-temporary impairment write-downs.

Since total unrealized losses are already a component of the Company’s shareholders’ equity, any recognition of additional OTI losses would have no effect on the Company’s comprehensive income or book value.

Repurchase Transactions

During the quarter, the Company entered into repurchase commitment transactions, whereby the Company loans Treasury or U.S. Government agency securities to accredited brokerage firms in exchange for cash equal to the fair market value of the securities. These internally managed transactions are typically overnight arrangements. The cash proceeds are invested in AA or higher financial institution paper with yields that exceed the Company’s interest obligation on the borrowed cash. The Company is able to borrow the cash at low rates since the securities loaned are in short supply. The Company’s interest rate exposure does not increase or decrease since the borrowing and investing periods match. During the three months ended March 31, 2005, the Company’s largest single outstanding balance of repurchase commitments was $1.1 billion open for one business day, with an average daily balance of $.5 billion for the quarter. The Company had no open repurchase commitments at March 31, 2005 and 2004. The Company earned income of $.5 million and $.3 million on repurchase commitments during the three months ended March 31, 2005 and 2004, respectively.

     Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Statements in this quarterly report on Form 10-Q 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; disputes relating to intellectual property rights; 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; the Company’s ability to maintain the uninterrupted operation of its facilities, systems (including information technology systems) and business functions; 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 one or more contingencies. Reported results, therefore, may appear to be volatile in certain accounting periods.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The duration of the financial instruments subject to interest rate risk was 2.9 years at both March 31, 2005 and December 31, 2004. The weighted average beta of the equity portfolio was 1.0 at March 31, 2005 and December 31, 2004. Although components of the portfolio have changed, no material changes have occurred in the total market risk since reported in the Annual Report on Form 10-K for the year ended December 31, 2004.

As discussed in the Annual Report on Form 10-K for the year ended December 31, 2004, in addition to the sensitivity analysis, the Company presents summarized estimates of the Value-at-Risk (VaR) of the fixed-income and equity portfolios as follows:

	VaR
	March 31,			December 31,
(millions)	2005			2004
Fixed-income portfolio	$	(198.0	)	$	(180.1	)
% of portfolio		(1.7	)%		(1.6	)%
Equity portfolio	$	(142.0	)	$	(130.2	)
% of portfolio		(7.5	)%		(7.0	)%
Total portfolio	$	(276.1	)	$	(222.1	)
% of portfolio		(2.1	)%		(1.7	)%

The model results represent the maximum expected loss in a three-month period at a 95% confidence level. The VaR of the total investment portfolio is less than the sum of the two components (fixed income and equity) due to the benefit of diversification.

Item 4. Controls and Procedures.

The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits 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 the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

The Chief Executive Officer and the Chief Financial Officer reviewed and evaluated the Company’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 the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effectively serving the stated purposes as of the end of the period covered by this report.

There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds

(c) Share Repurchases

ISSUER PURCHASES OF EQUITY SECURITIES
2005					Total Number of Shares		Maximum Number of Shares That
Calendar	Total Number of		Average Price Paid		Purchased as Part of Publicly		May Yet Be Purchased Under the
Month	Shares Purchased		per Share		Announced Plans or Programs		Plans or Programs
January		500,000	$	83.46		5,313,729		9,686,271
February		420,205		87.33		5,733,934		9,266,066
March		982,800		89.56		6,716,734		8,283,266
Total		1,903,005	$	87.47

In April 2003, the Board of Directors authorized the repurchase of up to 15,000,000 Common Shares. The Company may purchase its shares from time to time, in the open market or otherwise, when opportunities exist to buy at attractive prices or for purposes which are otherwise in the best interest of the Company.

Item 4. Submission of Matters to a Vote of Security Holders.

At the April 15, 2005 Annual Meeting of Shareholders of the Company, 181,528,171 Common Shares were represented in person or by proxy.

At the meeting, shareholders elected the three directors named below. The votes cast for each director were as follows:

Director	Term Expires		For		Withheld
Charles A. Davis		2008		175,508,686		6,019,485
Bernadine P. Healy, M.D.		2008		180,697,128		831,043
Jeffrey D. Kelly		2008		180,516,614		1,011,557

The following are the directors whose terms continued after the meeting:

Director	Term Expires
Stephen R. Hardis		2006
Philip A. Laskawy		2006
Norman S. Matthews		2006
Bradley T. Sheares, Ph.D.		2006
Patrick H. Nettles, Ph.D.		2007
Peter B. Lewis		2007
Glenn M. Renwick		2007
Donald B. Shackelford		2007

Shareholders approved a proposal to amend the Company’s Code of Regulations to provide that an individual elected by the directors to fill a vacancy on the board will serve for a term ending at the next shareholders meeting at which an election of directors will occur. This proposal received 177,427,083 affirmative votes and 3,966,621 negative votes. There were 134,467 abstentions and no broker non-votes with respect to this proposal.

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Shareholders ratified the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2005. This proposal received 179,306,121 affirmative votes and 2,159,740 negative votes. There were 62,310 abstentions and no broker non-votes with respect to this proposal.

Item 5. Other Information.

On March 18, 2005, the Company granted time-based restricted stock awards covering a total of 374,190 Common Shares to approximately 697 management employees, including 12 executive officers, under the Company’s 2003 Incentive Plan. These awards were based on a $90.21 closing price, as reported on the New York Stock Exchange, on the date of grant. As a consequence, these awards had an aggregate dollar value of approximately $33.8 million. The time-based restricted stock awards vest in equal installments on January 1 of 2008, 2009 and 2010, respectively.

In addition, on March 18, 2005, the Company granted performance-based restricted stock awards covering a total of 97,355 Common Shares to approximately 45 executives and senior managers pursuant to the Company’s 2003 Incentive Plan. These performance-based awards will vest upon the attainment of pre-established profitability and growth objectives (see below). If the objectives are not achieved by December 31, 2014, these awards will be forfeited. At the date of grant, these performance-based restricted stock awards had an aggregate dollar value of approximately $8.8 million.

Certain executive officers and employees may elect to defer receipt of their restricted stock awards, both time-based and performance-based, under The Progressive Corporation Executive Deferred Compensation Plan. In March 2005, The Progressive Corporation Executive Deferred Compensation Plan was amended to eliminate deemed investment choices for time-based and performance-based deferred restricted stock awards, throughout the deferral period. As a result, any restricted stock award that is deferred will be distributed in Common Shares at the appropriate distribution date.

The Company recognizes compensation expense monthly on a pro-rata basis over the applicable vesting period for all restricted stock awards. The total compensation is fixed based on the market value of the Company’s Common Shares at the date of grant. For performance-based awards, the vesting period can fluctuate based on the estimate of when the performance conditions will be achieved. Forfeitures will be recognized as they occur, regardless of whether the awards are deferred or not.

Subject to the terms and conditions of the Company’s 2003 Incentive Plan and the applicable restricted stock award agreement, these performance-based restricted stock awards will vest on the date of a news release reporting earnings for the Company and its subsidiaries for a fiscal month which is the final month of a period of 12 consecutive fiscal months during which the Company and its subsidiaries have generated net earned premiums of $17.5 billion or more and achieved an average combined ratio of 96 or less.

The Company also granted time-based restricted stock awards covering a total of 12,561 Common Shares to the Company’s non-employee directors on April 15, 2005. These awards are scheduled to vest on March 15, 2006, and had an aggregate dollar value of approximately $1.1 million at the date of grant. The non-employee directors have the option to defer receipt of their restricted stock awards pursuant to The Progressive Corporation Directors Restricted Stock Deferral Plan. All directors’ restricted stock awards are expensed monthly on a pro-rata basis over the vesting period based on the market value of the Company’s Common Shares at the date of grant, regardless of whether the receipt of the award is deferred.

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Dividends will be paid on both the time-based and performance-based restricted stock awards when and as declared by the Company’s Board of Directors. In addition, the participants have the right to vote restricted Common Shares prior to the vesting date.

The following table discloses the restricted stock awards granted during the first quarter 2005 to each of the named executive officers identified in the Company’s 2005 Proxy Statement dated March 7, 2005:

	Time-Based Award				Performance-Based Award
Name and Principal Position	Shares		Value1		Shares		Value1
Glenn M. Renwick President and Chief Executive Officer		41,571	$	3,750,120		41,570	$	3,750,030
W. Thomas Forrester Vice President and Chief Financial Officer		5,544		500,124		6,375		575,089
Robert T. Williams Group President of the Agency Business		5,100		460,071		5,355		483,075
Alan R. Bauer Group President of the Direct Business		4,602		415,146		4,140		373,469
Brian J. Passell Group President of Claims		4,491		405,133		4,940		445,637

¹ Based on the market value at the date of grant of $90.21 and without discount for risk of forfeiture.

Item 6. Exhibits

See exhibit index on page 26.

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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 9, 2005	BY:	/s/ W. Thomas Forrester
		W. Thomas Forrester
		Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.
Under	Form 10-Q				If Incorporated by Reference,
Reg. S-K,	Exhibit				Documents with Which Exhibit was
Item 601	Number			Description of Exhibit	Previously Filed with SEC
(3)(ii)		3	(A)	Code of Regulations of The Progressive Corporation (as amended April 15, 2005)	Filed herewith
(12)		12		Computation of Ratio of Earnings to Fixed Charges	Filed herewith
(31)		31	(A)	Certification of the Principal Executive Officer, Glenn M. Renwick, of The Progressive Corporation, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
(31)		31	(B)	Certification of the Principal Financial Officer, W. Thomas Forrester, of The Progressive Corporation, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
(32)		32	(A)	Certification of the Principal Executive Officer, Glenn M. Renwick, of The Progressive Corporation, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
(32)		32	(B)	Certification of the Principal Financial Officer, W. Thomas Forrester, of The Progressive Corporation, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

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EX-3.A

Exhibit No. 3(A)

CODE OF REGULATIONS
OF
THE PROGRESSIVE CORPORATION
(as amended April 15, 2005)

ARTICLE I

Meetings of Shareholders

     Section 1. Annual Meetings. The annual meeting of shareholders shall be held at such time and on such date in the month of April of each year (beginning in 1972) as may be fixed by the board of directors and stated in the notice of the meeting, for the election of directors the consideration of reports to be laid before such meeting and the transaction of such other business as may properly come before the meeting.

     Section 2. Special Meetings. Special meetings of the shareholders shall be called upon the written request of the president, the directors by action at a meeting, a majority of the directors acting without a meeting, or of the holders of shares entitling them to exercise twenty-five percent (25%) of the voting power of the corporation entitled to vote thereat. Calls for such meetings shall specify the time, place, and purposes thereof. No business other than that specified in the call shall be considered at any special meeting.

     Section 3. Notices of Meetings. Unless waived, written notice of each annual or special meeting stating the time, place, and the purposes thereof, and the means, if any, by which shareholders can be present and vote at the meeting through the use of communications equipment, shall be given by personal delivery, by mail, by overnight delivery service or by any other means of communication authorized by the shareholder to whom the notice is given, to each shareholder of record entitled to vote at or entitled to notice of the meeting, not more than sixty (60) days nor less than seven (7) days before any such meeting. If mailed or sent by overnight delivery service, such notice shall be directed to the shareholder at his address as the same appears upon the records of the corporation. If sent by any other means of communication authorized by the shareholder, the notice shall be sent to the address furnished by the shareholder for those transmissions. Any shareholder, either before or after any meeting, may waive any notice required to be given by law or under these Regulations.

     Section 4. Place of Meetings. Meetings of shareholders shall be held at the principal office of the corporation unless the board of directors determines that a meeting shall be held at some other place within or without the State of Ohio and causes the notice thereof to so state. Notwithstanding the foregoing, the board of directors may determine that a meeting of shareholders shall not be held at any physical place, but instead may be held solely by means of communications equipment as authorized in the following paragraph.

     If authorized by the board of directors, the shareholders and proxyholders who are not physically present at a meeting of shareholders may attend a meeting of shareholders by use of communications equipment that enables the shareholder or proxyholder an opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting and to speak or otherwise participate in the proceedings contemporaneously with those physically present. Any shareholder using communications equipment will be deemed present in person at the meeting, whether the meeting is to be held at a designated place or solely by means of communications equipment. The directors may adopt guidelines and procedures for the use of communications equipment in connection with a meeting of shareholders to permit the corporation to verify that a person is a shareholder or proxyholder and to maintain a record of any vote or other action.

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     Section 5. Quorum. The holders of shares entitling them to exercise a majority of the voting power of the corporation entitled to vote at any meeting, present in person or by proxy, shall constitute a quorum for the transaction of business to be considered at such meeting; provided, however, that no action required by law or by the Articles of Incorporation or these Regulations to be authorized or taken by the holders of a designated proportion of the shares of any particular class or of each class may be authorized or taken by a lesser proportion. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time, until a quorum shall be present.

     Section 6. Record Date. The board of directors may fix a record date for any lawful purpose, including, without limiting the generality of the foregoing, the determination of shareholders entitled to (i) receive notice of or to vote at any meeting, (ii) receive payment of any dividend or distribution, (iii) receive or exercise rights of purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to any contract right with respect thereto, or (iv) participate in the execution of written consents, waivers or releases. Said record date, which shall not be a date earlier than the date on which the record date is fixed, shall not be more than sixty (60) days preceding the date of such meeting, the date fixed for the payment of any dividend or distribution or the date fixed for the receipt or the exercise of rights, as the case may be.

     If a record date shall not be fixed, the record date for the determination of shareholders who are entitled to notice of, or who are entitled to vote at, a meeting of shareholders, shall be the close of business on the date next preceding the day on which notice is given, or the close of business on the date next preceding the day on which the meeting is held, as the case may be.

     Section 7. Proxies. A person who is entitled to attend a shareholders’ meeting, to vote thereat, or to execute consents, waivers or releases, may be represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of his other rights, by proxy or proxies appointed by a writing signed by such person or appointed by a verifiable communication authorized by the person.

ARTICLE II

Directors

     Section 1. Number and Classification of Directors. The number of directors of the corporation, none of whom need to be a shareholder or resident of the State of Ohio, shall be ten, and such directors shall be divided into three classes as nearly equal in number as possible, to be known as Class I, Class II and Class III. The classes shall be elected to staggered terms. The shareholders, acting by the affirmative vote of the holders of record of shares representing 75% of the voting power of the corporation on such proposal, may, from time to time, increase or decrease the number of directors, but in no case shall the number of directors be fewer than five or more than twelve nor shall any decrease in the number of directors shorten the term of any director then in office. In case of any increase in the number of directors, the directors then in office may select the class or classes to which the additional directors shall be assigned, provided that the directors shall be distributed among the several classes as nearly equally as possible.

     Section 2. Election of Directors. Directors shall be elected at the annual meeting of shareholders, but when the annual meeting is not held or directors are not elected thereat, they may be elected at a special meeting called and held for that purpose. Such election shall be by ballot whenever requested by any shareholder entitled to vote at such election; but, unless such request is made, the election may be conducted in any manner approved at such meeting.

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     At each meeting of shareholders for the election of directors, the persons receiving the greatest number of votes shall be directors.

     Section 3. Term of Office. The term of office for each director shall be three years and the members of one class of directors shall be elected annually to serve for such term; except that (i) initially or whenever necessary, a director may be elected for a shorter term in order to provide for a proper rotation of directors, and (ii) a director elected to fill a vacancy pursuant to Section 5 of this Article shall serve for the term specified therein. Each director shall hold office until the annual meeting of shareholders coinciding with the termination of the term of the class of directors to which he or she was elected and until his or her successor shall be elected and qualified or until his or her earlier resignation, removal from office or death.

     Section 4. Removal. All directors, or all directors of a particular class, or any individual director may be removed from office, without assigning any cause, by the affirmative vote of the holders of record of shares representing 75% of the voting power of the corporation with respect to the election of directors, provided that unless all the directors, or all the directors of a particular class, are removed, no individual director shall be removed if the votes of a sufficient number of shares are cast against his or her removal which, if cumulatively voted at an election of all the directors, or all the directors of a particular class, as the case may be, would be sufficient to elect at least one director. In case of any such removal, a new director may be elected at the same meeting for the unexpired term of each director removed.

     Section 5. Vacancies. Vacancies in the board of directors may be filled by a majority vote of the remaining directors. Any director so elected by the remaining directors to fill a vacancy after the 2005 Annual Meeting of Shareholders shall have a term of office ending on the earlier of the next annual meeting of shareholders or the next special meeting of shareholders held to elect directors. At the expiration of such term, each such director shall then be subject to election by shareholders in accordance with this Article for such term as shall be appropriate to provide for a proper rotation of directors.

     Section 6. Quorum and Transaction of Business. A majority of the whole authorized number of directors shall constitute a quorum for the transaction of business, except that a majority of the directors in office shall constitute a quorum for filling a vacancy on the board. Whenever less than a quorum is present at the time and place appointed for any meeting of the board, a majority of those present may adjourn the meeting from time to time, until a quorum shall be present. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board.

     Section 7. Annual Meeting. Annual meetings of the board of directors shall be held immediately following annual meetings of the shareholders, or as soon thereafter as is practicable. If no annual meeting of the shareholders is held, or if directors are not elected thereat, then the annual meeting of the board of directors shall be held immediately following any special meeting of the shareholders at which directors are elected, or as soon thereafter as is practicable. If such annual meeting of directors is held immediately following a meeting of the shareholders, it shall be held at the same place at which such meeting of shareholders was held.

     Section 8. Regular Meetings. Regular meetings of the board of directors shall be held at such times and places, within or without the State of Ohio, as the board of directors may, by resolution or by-law, from time to time, determine. The secretary shall give notice of each such resolution or bylaw to any director who was not present at the time the same was adopted, but no further notice of such regular meeting need be given.

     Section 9. Special Meetings. Special meetings of the board of directors may be called by the chairman of the board or the president to be held at such times and places within or without the State of Ohio as the person calling such meeting shall specify. In addition, any two members of the board of directors may call special

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meetings of the board of directors to be held at the principal office of the corporation at such times as they may specify.

     Section 10. Notice of Annual or Special Meetings. Notice of the time and place of each annual or special meeting shall be given to each director by the secretary or by the person or persons calling such meeting. Such notice need not specify the purpose or purposes of the meeting and may be given in any manner or method and at such time so that the director receiving it may have reasonable opportunity to attend the meeting. Such notice shall, in all events, be deemed to have been properly and duly given if mailed at least forty-eight (48) hours prior to the meeting and directed to the residence of each director as shown upon the secretary’s records. The giving of notice shall be deemed to have been waived by any director who shall attend and participate in such meeting and may be waived, in a writing, by any director either before or after such meeting.

     Section 11. Compensation. The directors, as such, shall be entitled to receive such reasonable compensation for their services as may be fixed from time to time by resolution of the board, and expenses of attendance, if any, may be allowed for attendance of each annual, regular or special meeting of the board. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of the executive committee or of any standing or special committee may by resolution of the board be allowed such compensation for their services as the board may deem reasonable, and additional compensation may be allowed to directors for special services rendered.

     Section 12. By-laws. For the government of its actions, the board of directors may adopt by-laws consistent with the Articles of Incorporation and these Regulations.

     Section 13. Notification of Nominations. Subject to the rights of the holders of any class or series of stock of the corporation having a preference over the Common Shares as to dividends or upon liquidation to elect directors under specified circumstances, nominations for the election of directors may be made only by the Board of Directors or a committee of the Board of Directors or, subject to this Section 13, by any shareholder of record entitled to vote in the election of directors generally. A shareholder of record entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting of shareholders only if written notice of such shareholder’s intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation and has been received by the Secretary of the corporation on or before the following dates, as applicable: (i) with respect to an election to be held at an annual meeting of shareholders, 60 days in advance of such meeting, or (ii) with respect to an election to be held at a special meeting of shareholders, the close of business on the tenth day following the date on which notice of such meeting is first given to shareholders. For purposes of this Section 13, notice shall be deemed to be first given to shareholders when disclosure of such date is first made in a press release reported by the Dow Jones News Services, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended.

     Each such notice shall set forth:

     (a) the name and address of the shareholder who intends to make the nomination or nominations;

     (b) a representation that the shareholder is a holder of record of shares of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

     (c) the name, address and principal occupation or employment of each person to be so nominated;

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     (d) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; and

     (e) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, as then in effect, had the nominee been nominated, or intended to be nominated, by the Board of Directors.

     To be effective, each notice of intent to make a nomination given hereunder must be accompanied by the written consent of each such nominee to serve as a director of the corporation if elected.

     The presiding officer at the meeting may refuse to acknowledge the nomination of any person or persons not made in compliance with the provisions hereof and may declare at such meeting that any such nomination was not properly brought before the meeting and shall not be considered.

ARTICLE III

Committees

     Section 1. Executive Committee. The board of directors may from time to time, by resolution passed by a majority of the whole board, create an executive committee of three or more directors, the members of which shall be elected by the board of directors to serve during the pleasure of the board. If the board of directors does not designate a chairman of the executive committee, the executive committee shall elect a chairman from its own number. Except as otherwise provided herein and in the resolution creating an executive committee, such committee shall, during the intervals between the meetings of the board of directors, possess and may exercise all of the powers of the board of directors in the management of the business and affairs of the corporation, other than that of filling vacancies among the directors or in any committee of the directors. The executive committee shall keep full records and accounts of its proceedings and transactions. All action by the executive committee shall be reported to the board of directors at its meeting next succeeding such action and shall be subject to control, revision and alteration by the board of directors, provided that no rights of third persons shall be prejudicially affected thereby. Vacancies in the executive committee shall be filled by the directors, and the directors may appoint one or more directors as alternate members of the committee who may take the place of any absent member or members at any meeting.

     Section 2. Meetings of Executive Committee. Subject to the provisions of these Regulations, the executive committee shall fix its own rules of procedure and shall meet as provided by such rules or by resolutions of the board of directors, and it shall also meet at the call of the president, the chairman of the executive committee or any two members of the committee. Unless otherwise provided by such rules or by such resolutions, the provisions of Section 10 of Article II relating to the notice required to be given of meetings of the board of directors shall also apply to meetings of the executive committee. A majority of the executive committee shall be necessary to constitute a quorum. The executive committee may act in a writing, or by telephone with written confirmation, without a meeting, but no such action of the executive committee shall be effective unless concurred in by all members of the committee.

     Section 3. Other Committees. The board of directors may by resolution provide for such other standing or special committees as it deems desirable, and discontinue the same at pleasure. Each such committee shall have such powers and perform such duties, not inconsistent with law, as may be delegated to it by the board of directors.

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The provisions of Section 1 and Section 2 of this Article shall govern the appointment and action of such committees so far as consistent, unless otherwise provided by the board of directors. Vacancies in such committees shall be filled by the board of directors or as the board of directors may provide.

ARTICLE IV

Officers

     Section 1. General Provisions. The board of directors shall elect a president, such number of vice presidents as the board may from time to time determine, a secretary and a treasurer and, in its discretion, a chairman of the board of directors. The board of directors may from time to time create such offices and appoint such other officers, subordinate officers and assistant officers as it may determine. The president, any vice president who succeeds to the office of the president, and the chairman of the board shall be, but the other officers need not be, chosen from among the members of the board of directors. Any two of such offices, other than that of president and vice president, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity.

     Section 2. Term of Office. The officers of the corporation shall hold office during the pleasure of the board of directors, and, unless sooner removed by the board of directors, until the organization meeting of the board of directors following the date of their election and until their successors are chosen and qualified. The board of directors may remove any officer at any time, with or without cause. A vacancy in any office, however created, shall be filled by the board of directors.

ARTICLE V

Duties of Officers

     Section 1. Chairman of the Board. The chairman of the board, if one be elected, shall preside at all meetings of the board of directors and shall have such other powers and duties as may be prescribed by the board of directors.

     Section 2. President. The president shall be the chief executive officer of the corporation and shall exercise supervision over the business of the corporation and over its several officers, subject, however, to the control of the board of directors. He shall preside at all meetings of shareholders, and, in the absence of the chairman of the board, or if a chairman of the board shall not have been elected, shall also preside at meetings of the board of directors. He shall have authority to sign all certificates for shares and all deeds, mortgages, bonds, agreements, notes, and other instruments requiring his signature; and shall have all the powers and duties prescribed by Chapter 1701 of the Revised Code of Ohio and such others as the board of directors may from time to time assign to him.

     Section 3. Vice Presidents. The vice presidents shall have such powers and duties as may from time to time be assigned to them by the board of directors or the president. At the request of the president, or in the case of his absence or disability, the vice president designated by the president (or in the absence of such designation, the vice president designated by the board) shall perform all the duties of the president and, when so acting, shall have all the powers of the president. The authority of vice presidents to sign in the name of the corporation certificates for shares and deeds, mortgages, bonds, agreements, notes and other instruments shall be coordinate with like authority of the president.

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     Section 4. Secretary. The secretary shall keep minutes of all the proceedings of the shareholders and board of directors and shall make proper record of the same, which shall be attested by him; shall have authority to sign all certificates for shares and all deeds, mortgages, bonds, agreements, notes, and other instruments executed by the corporation requiring his signature; shall give notice of meetings of shareholders and directors; shall produce on request at each meeting of shareholders a certified list of shareholders arranged in alphabetical order; shall keep such books as may be required by the board of directors; and shall have such other powers and duties as may from time to time be assigned to him by the board of directors or the president.

     Section 5. Treasurer. The treasurer shall have general supervision of all finances; he shall receive and have in charge all money, bills, notes, deeds, leases, mortgages and similar property belonging to the corporation, and shall do with the same as may from time to time be required by the board of directors. He shall cause to be kept adequate and correct accounts of the business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares, together with such other accounts as may be required, and upon the expiration of his term of office shall turn over to his successor or to the board of directors all property, books, papers and money of the corporation in his hands; and shall have such other powers and duties as may from time to time be assigned to him by the board of directors or the president.

     Section 6. Assistant and Subordinate Officers. The board of directors may appoint such assistant and subordinate officers as it may deem desirable. Each such officer shall hold office during the pleasure of the board of directors, and perform such duties as the board of directors or the president may prescribe.

     The board of directors may, from time to time, authorize any officer to appoint and remove subordinate officers, to prescribe their authority and duties, and to fix their compensation.

     Section 7. Duties of Officers May be Delegated. In the absence of any officer of the corporation, or for any other reason the board of directors may deem sufficient, the board of directors may delegate, for the time being, the powers or duties, or any of them, of such officers to any other officer or to any director.

ARTICLE VI

Indemnification and Insurance

     Section 1. Indemnification. The corporation shall indemnify each director, officer and employee and each former director, officer and employee of the corporation, and each person who is serving or has served at its request as a director, officer or employee of another corporation, against expenses, judgements, decrees, fines, penalties or amounts paid in settlement in connection with the defense of any past, pending or threatened action, suit or proceeding, criminal or civil, to which he was, is or may be made a party by reason of being or having been such director, officer or employee, provided a determination is made (i) by the directors of the corporation acting at a meeting at which a quorum consisting of directors who neither were nor are parties to or threatened with any such action, suit or proceeding is present, or (ii) by the shareholders of the corporation at a meeting held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the corporation on such proposal or without a meeting by the written consent of the holders of shares entitling them to exercise two-thirds of the voting power on such proposal, that (a) such director, officer or employee was not, and has not been adjudicated to have been, negligent or guilty of misconduct in the performance of his duty to the corporation of which he is or was a director, officer or employee, (b) he acted in good faith in what he reasonably believed to be the best interest of such corporation, and (c) in any matter the subject of a criminal action, suit or proceeding, he had no reasonable cause to believe that his conduct was unlawful.

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     Expenses of each person indemnified hereunder incurred in defending a civil, criminal, administrative or investigative action, suit or proceeding (including all appeals) or threat thereof, may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the board of directors, whether a disinterested quorum exists or not, upon receipt of an undertaking by or on behalf of the director, officer or employee to repay such expenses unless it shall ultimately be determined that he is entitled to be indemnified by the corporation.

     The foregoing rights of indemnification shall not be deemed exclusive of, or in any way to limit, any other rights to which any person indemnified may be, or may become, entitled apart from the provisions of this Article VI.

     Section 2. Liability Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or designated agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or designated agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article or of Chapter 1701 of the Ohio Revised Code.

ARTICLE VII

Certificates for Shares; Uncertificated Shares

     Section 1. Form and Execution. Except as provided in Section 2 hereof, certificates for shares, certifying the number of full-paid shares owned, shall be issued to each shareholder in such form as shall be approved by the board of directors. Such certificates shall be signed by the president or a vice president and by the secretary or an assistant secretary or the treasurer or an assistant treasurer; provided however, that if such certificates are countersigned by a transfer agent and/or registrar the signatures of any of said officers and the seal of the corporation upon such certificates may be facsimiles, which are engraved, stamped or printed thereon. If any officer or officers, who shall have signed, or whose facsimile signature shall have been used, printed, engraved or stamped on any certificate or certificates for shares, shall cease to be such officer or officers, because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates, if authenticated by the endorsement thereon of the signature of a transfer agent or registrar, shall nevertheless be conclusively deemed to have been adopted by the corporation by the use and delivery thereof and shall be as effective in all respects as though signed by a duly elected, qualified and authorized officer or officers, and as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be an officer or officers of the corporation.

     Section 2. Uncertificated Shares. The board of directors, subject to the immediately succeeding paragraph, may provide by resolution that some or all of any or all classes and series of shares of the corporation shall be uncertificated shares, provided that the resolution shall not apply to shares represented by a certificate until the certificate is surrendered to the corporation and the resolution shall not apply to a

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certificated security issued in exchange for an uncertificated security. Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send to the registered owner of the shares a written notice containing the information required to be set forth or stated on share certificates in accordance with all applicable laws. Except as expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical.

     Notwithstanding the foregoing provisions of this Section 2, a shareholder of record shall at all times have the right to receive one or more certificates for some or all of the shares held of record by such shareholder in accordance with Section 1 hereof by making a written request therefor to the corporation or any transfer agent for the applicable class of shares, accompanied by such assurances as the corporation or such transfer agent may require as to the genuineness of such request; provided, however, that shareholders holding shares of the corporation under one or more of the corporation’s benefit plans for officers, directors and/or employees shall have no such right to have certificates issued unless such a right is provided for under the applicable benefit plan or otherwise ordered by the board of directors or a committee thereof.

     Section 3. Registration of Transfer. Any certificate for shares of the corporation shall be transferable in person or by attorney upon the surrender thereof to the corporation or any transfer agent for the class of shares represented by the certificate surrendered of a certificate, properly endorsed for transfer or accompanied by a duly endorsed stock power, together with such assurances as the corporation or such transfer agent may require as to the genuineness and effectiveness of each necessary endorsement or executed stock power. Any uncertificated shares of the corporation shall be transferable in person or by attorney upon written request in form and substance acceptable to the corporation or any transfer agent for the applicable class of shares, accompanied by a duly endorsed stock power and/or such other assurances as the corporation or such transfer agent may require as to the genuineness and effectiveness thereof.

     Section 4. Lost, Destroyed or Stolen Certificates. Subject to the provisions of Section 2 hereof, a new share certificate or certificates may be issued in place of any certificate theretofore issued by the corporation which is alleged to have been lost, destroyed or wrongfully taken upon (i) the execution and delivery to the corporation by the person claiming the certificate to have been lost, destroyed or wrongfully taken of an affidavit of that fact, specifying whether or not, at the time of such alleged loss, destruction or taking, the certificate was endorsed, and (ii) the furnishing to the corporation of indemnity and other assurances satisfactory to the corporation and to all transfer agents and registrars of the class of shares represented by the certificate against any and all losses, damages, costs, expenses or liabilities to which they or any of them may be subjected by reason of the issue and delivery of such new certificate or certificates or in respect of the original certificate.

     Section 5. Registered Shareholders. A person in whose name shares are of record on the books of the corporation, whether such shares are evidenced by a certificate or are uncertificated, shall conclusively be deemed the unqualified owner and holder thereof for all purposes and to have capacity to exercise all rights of ownership. Neither the corporation nor any transfer agent of the corporation shall be bound to recognize any equitable interest in or claim to such shares on the part of any other person, whether disclosed upon any such certificate or otherwise, nor shall they be obliged to see to the execution of any trust or obligation.

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ARTICLE VIII

Fiscal Year

     The fiscal year of the corporation shall end on the 31st day of December in each year, or on such other date as may be fixed from time to time by the board of directors.

ARTICLE IX

Seal

     The board of directors may provide a suitable seal containing the name of the corporation. If deemed advisable by the board of directors, duplicate seals may be provided and kept for the purposes of the corporation.

ARTICLE X

Amendments

     These Regulations may be amended or repealed at any meeting of shareholders called for that purpose by the affirmative vote of the holders of record of shares entitling them to exercise a majority of the voting power of the corporation with respect to such proposal, except that the affirmative vote of the holders of record of shares representing 75% of the voting power of the corporation with respect to any such proposal shall be required to amend, alter, change or repeal Sections 1, 3, 4, 5 or 13 of Article II or this Article X.

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EX-12

Exhibit No. 12

THE PROGRESSIVE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
(unaudited)

	Three Months Ended
	March 31,
	2005		2004
Income before income taxes	$	614.7	$	678.7
Fixed Charges:
Interest and amortization on indebtedness		21.0		21.6
Portion of rents representative of the interest factor		2.8		2.0
Total fixed charges		23.8		23.6
Interest capitalized, net of amortized interest		—		(1.0	)
Total income available for fixed charges	$	638.5	$	701.3
Ratio of earnings to fixed charges		26.8		29.7

EX-31.A

Exhibit No. 31(A)

CERTIFICATION

I, Glenn M. Renwick, certify that:

1.	I have reviewed this quarterly report on Form 10-Q 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: May 9, 2005	/s/ Glenn M. Renwick
	Glenn M. Renwick
	President and Chief Executive Officer

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EX-31.B

Exhibit No. 31(B)

CERTIFICATION

I, W. Thomas Forrester, certify that:

1.	I have reviewed this quarterly report on Form 10-Q 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: May 9, 2005

/s/ W. Thomas Forrester  

W. Thomas Forrester 

Vice President and Chief Financial Officer 

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EX-32.A

Exhibit No. 32(A)

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, Glenn M. Renwick, President and Chief Executive Officer, of The Progressive Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2005 (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 (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/ Glenn M. Renwick

Glenn M. Renwick
President and Chief Executive Officer

May 9, 2005

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EX-32.B

Exhibit No. 32(B)

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, W. Thomas Forrester, Vice President and Chief Financial Officer, of The Progressive Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2005 (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 (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/ W. Thomas Forrester

W. Thomas Forrester

Vice President and Chief Financial Officer

May 9, 2005

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