10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-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, 2006

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

(440) 461-5000

(Registrant’s telephone number, including area code)

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):   Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o

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

     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: 195,623,623 outstanding at April 30, 2006

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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 1A. Risk Factors
	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) Amended Articles of Incorporation
EX-10(A) Amendment to the 2006 Gainsharing Plan
EX-10(B) Agreement Dated April 7, 2006
EX-12 Computation of Earnings
EX-31(A) Certification of CEO
EX-31(B) Certification of CFO
EX-32(A) Certification of CEO Per Section 906
EX-32(B) Certification of CFO Per Section 906

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

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

Three Months Ended March 31,	2006		2005		% Change
(millions - except per share amounts)
Revenues
Net premiums earned	$	3,500.5	$	3,350.0		4
Investment income		151.5		120.4		26
Net realized gains on securities		.5		10.2		(95	)
Service revenues		8.4		11.2		(25	)
Total revenues		3,660.9		3,491.8		5
Expenses
Losses and loss adjustment expenses		2,282.8		2,168.6		5
Policy acquisition costs		362.1		356.1		2
Other underwriting expenses		338.7		323.4		5
Investment expenses		2.5		2.8		(11	)
Service expenses		6.8		5.4		26
Interest expense		20.5		20.8		(1	)
Total expenses		3,013.4		2,877.1		5
Net Income
Income before income taxes		647.5		614.7		5
Provision for income taxes		210.9		202.0		4
Net income	$	436.6	$	412.7		6
Computation of Earnings Per Share
Basic:
Average shares outstanding		195.3		199.0		(2	)
Per share	$	2.24	$	2.07		8
Diluted:
Average shares outstanding		195.3		199.0		(2	)
Net effect of dilutive stock-based compensation		2.6		2.9		(10	)
Total equivalent shares		197.9		201.9		(2	)
Per share	$	2.21	$	2.04		8
Dividends per Share	$	.030	$	.030		—

See notes to consolidated financial statements.

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The Progressive Corporation and Subsidiaries
Consolidated Balance Sheets
(unaudited)

	March 31,						December 31,
	2006			2005			2005
(millions)
Assets
Investments — Available-for-sale, at market:
Fixed maturities (amortized cost: $10,513.3, $9,548.0 and $10,260.7)	$	10,368.0		$	9,505.5		$	10,221.9
Equity securities:
Preferred stocks (cost: $1,305.5, $952.0 and $1,217.0)		1,304.6			957.7			1,220.3
Common equities (cost: $1,429.2, $1,400.2 and $1,423.4)		2,140.3			1,898.9			2,058.9
Short-term investments (amortized cost: $708.2, $1,042.3 and $773.5)		708.5			1,042.8			773.6
Total investments		14,521.4			13,404.9			14,274.7
Cash		10.6			16.8			5.6
Accrued investment income		135.7			100.4			133.1
Premiums receivable, net of allowance for doubtful accounts of $103.8, $76.8 and $116.3		2,639.7			2,469.2			2,500.7
Reinsurance recoverables, including $55.2, $53.7 and $58.5 on paid losses		400.2			391.7			405.7
Prepaid reinsurance premiums		100.5			121.3			103.7
Deferred acquisition costs		461.5			450.6			444.8
Income taxes		—			—			138.3
Property and equipment, net of accumulated depreciation of $569.7, $584.0 and $562.0		822.5			660.9			758.7
Other assets		166.1			107.4			133.3
Total assets	$	19,258.2		$	17,723.2		$	18,898.6
Liabilities and Shareholders’ Equity
Unearned premiums	$	4,508.1		$	4,364.3		$	4,335.1
Loss and loss adjustment expense reserves		5,632.0			5,348.3			5,660.3
Accounts payable, accrued expenses and other liabilities		1,468.9			1,385.9			1,510.8
Income taxes		48.3			45.4			—
Debt1		1,285.0			1,284.5			1,284.9
Total liabilities		12,942.3			12,428.4			12,791.1
Shareholders’ equity:
Common Shares, $1.00 par value (authorized 600.02; issued 213.1, 213.2 and 213.1, including treasury shares of 17.2, 13.6 and 15.8)		195.9			199.6			197.3
Paid-in capital		906.0			805.8			848.2
Unamortized restricted stock		(99.5	)		(82.0	)		(62.7	)
Accumulated other comprehensive income:
Net unrealized gains on securities		367.4			300.6			390.1
Net unrealized gains on forecasted transactions		8.3			9.4			8.6
Retained earnings		4,937.8			4,061.4			4,726.0
Total shareholders’ equity		6,315.9			5,294.8			6,107.5
Total liabilities and shareholders’ equity	$	19,258.2		$	17,723.2		$	18,898.6

1	Includes current and non-current debt. See Note 4 — Debt.
2	On April 21, 2006, the shareholders of The Progressive Corporation approved a proposal to amend Progressive’s Amended Articles of Incorporation to increase the number of authorized Common Shares from 600.0 million to 900.0 million.

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,	2006			2005
(millions)
Cash Flows From Operating Activities
Net income	$	436.6		$	412.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		24.2			22.2
Amortization of fixed maturities		52.3			42.0
Amortization of stock-based compensation		4.8			6.7
Net realized gains on securities		(.5	)		(10.2	)
Changes in:
Unearned premiums		173.0			256.3
Loss and loss adjustment expense reserves		(28.3	)		62.7
Accounts payable, accrued expenses and other liabilities		24.7			(13.3	)
Prepaid reinsurance premiums		3.2			(1.5	)
Reinsurance recoverables		5.5			(10.1	)
Premiums receivable		(139.0	)		(182.0	)
Deferred acquisition costs		(16.7	)		(18.4	)
Income taxes		198.8			91.9
Tax benefit from exercise/vesting of stock-based compensation		—			13.2
Other, net		(34.9	)		(13.7	)
Net cash provided by operating activities		703.7			658.5
Cash Flows From Investing Activities
Purchases:
Fixed maturities		(1,325.8	)		(1,757.6	)
Equity securities		(240.3	)		(409.4	)
Short-term investments — auction rate securities		(616.4	)		(2,425.4	)
Sales:
Fixed maturities		813.7			1,094.1
Equity securities		42.7			53.6
Short-term investments — auction rate securities		907.3			2,639.3
Maturities, paydowns, calls and other:
Fixed maturities		203.3			123.3
Equity securities		107.4			—
Net (purchases) sales of short-term investments — other		(225.3	)		120.4
Net unsettled security transactions		(62.7	)		73.3
Purchases of property and equipment		(88.0	)		(16.6	)
Net cash used in investing activities		(484.1	)		(505.0	)
Cash Flows From Financing Activities
Proceeds from exercise of stock options		11.0			15.7
Tax benefit from exercise/vesting of stock-based compensation		11.5			—
Dividends paid to shareholders		(5.8	)		(6.0	)
Acquisition of treasury shares		(231.3	)		(166.4	)
Net cash used in financing activities		(214.6	)		(156.7	)
Increase (decrease) in cash		5.0			(3.2	)
Cash, January 1		5.6			20.0
Cash, March 31	$	10.6		$	16.8

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 Progressive’s audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2005.

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, 2006, are not necessarily indicative of the results expected for the full year.

Note 2 Stock-Based Compensation — As of January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards 123 (revised 2004)(SFAS 123(R)), “Share-Based Payment,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors.

We adopted SFAS 123(R) using the modified prospective method, which requires the application of the accounting standard as of January 1, 2006. As a result, our consolidated financial statements for the three months ended March 31, 2006, reflect the effect of SFAS 123(R). In accordance with the modified prospective transition method, our consolidated financial statements for prior periods have not been restated to reflect, and do not include, the effect of SFAS 123(R).

Pursuant to the modified prospective application, we are required to expense the fair value at the grant date of our unvested outstanding stock options. No stock options have been granted after December 31, 2002. We will not incur any additional expense relating to currently outstanding stock options in years subsequent to 2006, since the final vesting date of stock options previously granted will be January 1, 2007. Beginning in 2003, we began issuing restricted stock awards as our form of equity compensation to key members of management and non-employee directors in lieu of stock options; we do not intend to issue additional stock options. Compensation expense for restricted stock awards is recognized over the respective vesting periods. The current year expense for restricted stock is not representative of the effect on net income for future years since each subsequent year will reflect expense for additional awards.

For the three months ended March 31, 2006, the pre-tax expense of our stock-based compensation was $4.8 million (tax benefit of $1.7 million), of which $.3 million related to our unvested outstanding stock options. We used the modified Black-Scholes pricing model to calculate the fair value of the options awarded as of the date of grant.

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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 three months ended March 31:

(millions, except per share amounts)	2005
Net income, as reported	$	412.7
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	)
Net income, pro forma	$	412.1
Earnings per share
Basic — as reported	$	2.07
Basic — pro forma		2.07
Diluted — as reported	$	2.04
Diluted — pro forma		2.04

In addition, in conjunction with the Financial Accounting Standards Board Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards,” we elected to adopt the alternative transition method for calculating the tax effects of stock-based compensation pursuant to SFAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool related to the tax effects of employee stock-based compensation, and to determine the subsequent effect on the paid-in capital pool and the consolidated statements of cash flows of the tax effects of employee stock-based compensation awards that were outstanding upon the adoption of SFAS 123(R).

As highlighted above, the adoption of SFAS 123(R) had minimal effect on us. Under SFAS 123(R), we also began recording an estimate for expected forfeitures of restricted stock based on our historical forfeiture rates. Prior to adoption, we accounted for forfeitures as they occurred as permitted under previous accounting standards. In addition, we shortened the vesting period of our stock-based awards based on the “qualified retirement dates” as defined in our incentive compensation plans. The cumulative effect of adopting these changes was not material to our financial statements for the quarter ended March 31, 2006.

Stock-Based Incentive Compensation Plans The stock-based incentive compensation plans include time-based and performance-based restricted stock awards granted to key members of management and the non-employee directors and, prior to 2003, we granted non-qualified stock options as stock-based incentive compensation (see below).

Our 2003 Incentive Plan, which provides for the granting of stock-based awards, including restricted stock awards, to our key employees, has 5.0 million shares authorized. Our 1995 Incentive Plan and 1989 Incentive Plan have expired; however, awards made under those plans prior to the plan’s expiration are still in effect.

Beginning in 2003, we began issuing restricted stock awards in lieu of stock options. The restricted stock awards are issued as either time-based or performance-based awards. The time-based awards vest in equal installments upon the lapse of a period of time, typically over three, four and five year periods. The vesting period (i.e., requisite service period) must be a minimum of six months and one day. The performance-based awards vest upon the achievement of predetermined performance criteria. The performance-based awards are granted to approximately 50 executives and senior managers in addition to their time-based awards to provide additional compensation for achieving profitability and growth targets. The restricted stock awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant. For restricted stock awards granted in 2003 and 2004, which were deferred pursuant to our deferred

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compensation plan, we record expense on a pro rata basis based on the current market value of Common Shares at the end of the reporting period.

Prior to 2003, we issued nonqualified stock options, which were granted for periods up to ten years, become exercisable at various dates not earlier than six months after the date of grant, and remain exercisable for specified periods thereafter. All options granted had an exercise price equal to the market value of the Common Shares on the date of grant and, under the then applicable accounting guidance, no compensation expense was recorded. Pursuant to the adoption of SFAS 123(R), on January 1, 2006, we began expensing the remaining unvested stock option awards. All option exercises are settled in Common Shares from either existing treasury shares or newly issued shares of Progressive.

A summary of all employee restricted stock activity during the period indicated follows:

	Three Months Ended
	March 31, 2006
				Weighted
				Average
	Number of			Grant Date
Nonvested restricted stock outstanding	Shares			Fair Value
Beginning of period		1,360,747		$	80.83
Add (deduct):
Granted		440,599			106.25
Vested		(139,182	)		66.03
Forfeited		(21,974	)		81.84
End of period		1,640,190		$	88.90

There were 109,128 non-deferred restricted stock awards which vested during the three months ended March 31, 2006. The pretax intrinsic value on these non-deferred awards, based on the average of the high and low stock price the day prior to vesting, was $5.6 million. There was no intrinsic value on the 30,054 deferred restricted stock awards that vested during the period since, as previously discussed, these awards are expensed based on the current market value at each reporting period.

A summary of all employee stock option activity during the period indicated follows:

	Three Months Ended
	March 31, 2006
				Weighted
				Average
	Number of			Grant Date
Nonvested stock options outstanding	Shares			Fair Value
Beginning of period		1,058,055		$	19.05
Add (deduct):
Vested		(763,338	)		17.42
Forfeited		(8,231	)		23.25
End of period		286,486		$	23.27

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	Three Months Ended
	March 31, 2006
				Weighted
	Number of			Average
Options outstanding	Shares			Exercise Price
Beginning of period		4,905,369		$	33.76
Add (deduct):
Exercised		(332,608	)		32.22
Forfeited		(8,231	)		52.15
End of year		4,564,530		$	33.84
Exercisable, end of period		4,278,044		$	32.61
Available, end of period		3,378,579

The total pretax intrinsic value of options exercised during the three months ended March 31, 2006, was $25.5 million, based on the market price of our Common Shares at the time of exercise.

During the three months ended March 31, 2006, we recognized $4.8 million, or $3.1 million after taxes, of compensation expense related to our outstanding unvested restricted stock and stock option awards. At March 31, 2006, the total compensation cost related to nonvested awards not yet recognized was $100.5 million. This compensation expense will be recognized into income over the weighted-average period of 2.73 years.

The following employee stock options were outstanding or exercisable as of March 31, 2006:

			Weighted		Aggregate		Weighted Average
	Number of		Average		Intrinsic Value		Remaining
	Shares		Exercise Price		(in millions)		Contractual Life
Options outstanding		4,564,530	$	33.84	$	321.4	3.87 years
Options exercisable		4,278,044	$	32.61	$	306.5	3.75 years

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on our closing stock price of $104.26 as of March 31, 2006, which would have been received by the option holders had all option holders exercised their options as of that date. All of the exercisable options at March 31, 2006, were “in-the-money.”

See “Item 5-Other Information” in Part II of this Form 10-Q for details regarding the restricted stock awards granted during the first quarter 2006.

Note 3 Supplemental Cash Flow Information — We did not make any income tax payments during the first quarter 2006, compared to $99.0 million paid during the first quarter 2005. Total interest paid was $21.1 million for both the three months ended March 31, 2006 and 2005. Non-cash activity includes the liability for deferred restricted stock compensation and the changes in net unrealized gains (losses) on investment securities.

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Note 4 Debt — Debt at March 31 consisted of:

	2006				2005
	Carrying		Market		Carrying		Market
(millions)	Value		Value		Value		Value
7.30% Notes due 2006	$	100.0	$	100.3	$	99.9	$	103.6
6.375% Senior Notes due 2012		348.0		364.0		347.8		376.7
7% Notes due 2013		149.0		162.5		148.9		168.3
6 5/8% Senior Notes due 2029		294.3		317.3		294.2		328.0
6.25% Senior Notes due 2032		393.7		401.6		393.7		423.5
	$	1,285.0	$	1,345.7	$	1,284.5	$	1,400.1

Note 5 Comprehensive Income — Total comprehensive income was $413.6 million and $277.9 million for the quarters ended March 31, 2006 and 2005, respectively.

Note 6 Dividends — On March 31, 2006, we paid a quarterly dividend of $.03 per Common Share to shareholders of record as of the close of business on March 10, 2006. The Board of Directors declared the dividend on February 4, 2006.

On April 21, 2006, the Board of Directors declared a quarterly dividend of $.03 per Common Share ($.0075 per share after giving effect to the 4-for-1 stock split; see Note 9-Subsequent Event below for further discussion). The dividend is payable June 30, 2006, to shareholders of record as of the close of business on June 9, 2006.

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

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

	2006					2005
			Pretax
			Profit					Pretax
(millions)	Revenues		(Loss)			Revenues		Profit (Loss)
Personal Lines
Drive	$	1,984.0	$	278.9		$	1,975.4	$	279.8
Direct		1,067.0		153.4			972.6		132.2
Total Personal Lines1		3,051.0		432.3			2,948.0		412.0
Commercial Auto		442.8		82.1			395.2		84.5
Other-indemnity		6.7		2.5			6.8		5.4
Total underwriting operations		3,500.5		516.9			3,350.0		501.9
Service businesses		8.4		1.6			11.2		5.8
Investments2		152.0		149.5			130.6		127.8
Interest expense		—		(20.5	)		—		(20.8	)
	$	3,660.9	$	647.5		$	3,491.8	$	614.7

1	Personal automobile insurance accounted for 92% and 93% of the total Personal Lines segment net premiums earned in the first quarters of 2006 and 2005, respectively.
2	Revenues represent recurring investment income and net realized gains (losses) on securities; pretax profit is net of investment expenses.

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Progressive’s management uses underwriting margin and combined ratio as primary measures of underwriting profitability. The underwriting margin is the pretax underwriting profit (loss) 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 our underwriting operations for the three months ended March 31:

	2006					2005
	Underwriting			Combined		Underwriting			Combined
	Margin			Ratio		Margin			Ratio
Personal Lines
Drive		14.1	%		85.9		14.2	%		85.8
Direct		14.4			85.6		13.6			86.4
Total Personal Lines		14.2			85.8		14.0			86.0
Commercial Auto		18.5			81.5		21.4			78.6
Other–indemnity1	NM			NM		NM			NM
Total underwriting operations		14.8			85.2		15.0			85.0

¹ Underwriting margins/combined ratios are not meaningful (NM) for our other-indemnity businesses due to the insignificant amount of premiums earned by such businesses.

Note 8 Litigation — One or more of The Progressive Corporation’s insurance subsidiaries are named as a defendant in various lawsuits arising out of their insurance operations. All legal actions relating to claims made under insurance policies are considered in establishing our loss and loss adjustment expense reserves.

In addition, various Progressive entities are named as a 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 our total loss evaluation methodology or handling, 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 payment claims, the use of preferred provider rates for payment of personal injury protection claims, the use of automated database vendors or products to assist in evaluating certain bodily injury claims, policy implementation and renewal procedures and cases challenging other aspects of our claims and marketing practices and business operations.

We plan to contest the outstanding suits vigorously, but may pursue settlement negotiations where appropriate. In accordance with accounting principles generally accepted in the United States (GAAP), we have established accruals for lawsuits as to which we have determined that it is probable that a loss has been incurred and we can reasonably estimate its potential exposure. Pursuant to GAAP, we have not established reserves for those lawsuits where the loss is not probable and/or we are currently unable to estimate the potential exposure. If any one or more of these lawsuits results in a judgment against or settlement by us 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 our financial condition, cash flows and results of operations.

For a further discussion on our pending litigation, see “Item 3-Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2005.

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Note 9 Subsequent Event — On April 21, 2006, the Board of Directors of The Progressive Corporation, approved a 4-for-1 stock split of Progressive’s Common Shares, $1.00 par value, to be effected in the form of a stock dividend. In connection with the transaction, three additional Common Shares will be issued on May 18, 2006, for each Common Share held by shareholders of record as of the close of business on May 8, 2006; we will not split our treasury shares. The purpose of the stock split is to increase the supply of Progressive’s Common Shares and to improve the liquidity of the stock.

Shares outstanding and per share amounts have not been restated in the accompanying financial statements and notes to the consolidated financial statements to reflect this split since the stock split is not effective until May 18, 2006. Information on a pro forma basis, reflecting the effect of this split for the three months ending March 31, is as follows:

(millions - except per share amounts)	2006		2005
Net income	$	436.6	$	412.7
Computation of Earnings Per Share
Basic:
Average shares outstanding		781.2		796.0
Per share	$	.56	$	.52
Diluted:
Average shares outstanding		781.2		796.0
Net effect of dilutive stock-based compensation		10.5		11.7
Total equivalent shares		791.7		807.7
Per share	$	.55	$	.51

On April 21, 2006, the Board also approved an increase to the number of Common Shares available for repurchase under the April 2003 Board authorization to adjust for the 4-for-1 stock split. In addition, the Board set a new authorization to repurchase 60 million Common Shares (on a post-split basis) to be used in addition to, and after completion of, the remaining repurchases available under the April 2003, split-adjusted authorization.

Note 10 Reclassifications — Certain amounts in the Consolidated Statements of Cash Flows (i.e., short-term investments) were reclassified for 2005 to comply with the presentation requirements under SFAS 95, “Statement of Cash Flows,” and SFAS 115, “Accounting for Certain Investments in Debt and Equity Securities.”

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

OVERVIEW

For the first quarter 2006, The Progressive Corporation’s insurance subsidiaries generated strong profitability and experienced slower growth. On a companywide basis, our combined ratio was 85.2 for the quarter, and net premiums written increased 2% over the same period last year. For the first quarter 2006, net income was $436.6 million, or $2.21 per share.

Current market conditions, where rates are stable or decreasing, continue to influence our growth rates. Premium growth can be explained by some combination of new business applications, premium per policy and retention. During the first quarter 2006, new business applications were down 8% in our Personal Lines businesses, but up 10% in Commercial Auto. The industry is continuing to experience “soft market” conditions as explained in the Results of Operations section. The decrease in new personal auto applications was the most significant contributor to lower growth rates during the quarter. The increase in renewal applications remained relatively strong during the first quarter 2006, as compared to the same period last year. In addition, premium per policy was down on both new and renewal business compared to prior year levels. Policy life expectancy, which is one measure of retention, lengthened since the end of 2005, but is down as compared to the first quarter last year in most of our Direct auto and Commercial Auto tiers, and up for Drive auto. Companywide policies in force grew 7%. We continue to believe our market response is the best balanced course of action for us and that we are on track in executing our strategic agenda, as discussed in the 2005 Annual Report to Shareholders.

Profitability remains very strong for each reporting segment. On a companywide basis, the combined ratio is very comparable to the first quarter 2005, although we had expected our loss cost trends to begin pushing our underwriting margins closer to our long-term goal of a calendar year 96 combined ratio. We are continuing to experience reduced accident frequency trends that have characterized the auto insurance industry for some time. Severity trends, while increasing, were unremarkable for the quarter. Our strong underwriting margins in the first quarter also benefited from 3.0 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).

During the quarter, we expanded our coverage in the New Jersey personal lines market by offering our motorcycle and specialized boat insurance through both the Drive and Direct channels.

We have made no substantial changes in the allocation of our investment portfolio during the quarter. Our investment portfolio produced a fully taxable equivalent total return of 1.0%, with positive total returns for the quarter in both fixed-income securities and common stocks. We continued to keep our credit quality high and exposure to interest rate risk low. At March 31, 2006, the fixed-income portfolio duration was 3.1 years with a weighted average credit quality of AA.

FINANCIAL CONDITION

Capital Resources and Liquidity

Progressive has substantial capital resources, and we believe we have sufficient borrowing capacity and other capital resources to support current and anticipated growth and satisfy scheduled debt and interest payments. During the second quarter 2006, $100 million of our 7.30% Notes will mature; we will use operating cash flows to fund this obligation. Our 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, 2006, operations generated a positive cash flow of $703.7 million.

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During the first quarter 2006, we repurchased 2.2 million Common Shares at a total cost of $231.3 million (average cost of $105.97 per share), bringing the total remaining shares authorized for repurchase under the April 2003 Board resolution to 2,806,288 (on a pre-split basis; see discussion below) at March 31, 2006.

On April 21, 2006, the Board of Directors approved a 4-for-1 stock split payable in the form of a stock dividend on May 18, 2006; we will not split our treasury shares in conjunction with the stock split. In addition, the Board approved an increase to the number of Common Shares available for repurchase under the April 2003 Board authorization to adjust for the 4-for-1 stock split. The Board also set a new authorization to repurchase 60 million Common Shares (on a post-split basis) to be used in addition to, and after completion of, the remaining repurchases available under the April 2003, split-adjusted authorization.

In February 2006, the Board of Directors approved a plan to replace our current dividend policy in 2007 with an annual variable dividend, based on a target percentage of after-tax underwriting income, multiplied by a companywide performance factor, referred to as the “Gainshare factor.” The Gainshare factor, which is based on premium growth and profitability, can range from zero to two. For example, through the first quarter 2006, based on year-to-date results, the Gainshare factor was 1.54. Since the final factor will be determined based on our results for the full year (beginning in 2007), the factor for any interim period may not be representative of what the final factor will be. The new variable dividend policy will not go into effect until 2007 with the first payout expected in early 2008. Throughout 2006, we will continue with our current quarterly dividend policy.

Commitments and Contingencies

We are currently constructing a data center, printing center and related facilities in Colorado Springs, Colorado, at an estimated total cost of $65.9 million. Construction on these facilities is expected to be completed in 2006 and they are scheduled to become operational in 2007. During 2006, we acquired additional land for future development to support our corporate operations in Colorado Springs, Colorado and Mayfield Village, Ohio near our current corporate facilities, at a total cost of $16.2 million. In 2007, we expect to begin a multi-year project to construct two buildings, two parking garages and associated facilities in Mayfield Village at a currently estimated construction cost of $150 million. All such projects, including the additional service centers discussed below, are, or will be, funded through operating cash flows.

As of March 31, 2006, we have a total of 29 centers that are available to provide concierge-level claims service, including 3 centers completed during the first quarter. We previously announced a significant expansion of this service and are currently researching, acquiring and constructing additional sites around the country. We expect to open 26 new service centers during the remainder of 2006.

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 Progressive’s Annual Report on Form 10-K for the year ended December 31, 2005, we do not have any off-balance-sheet leverage.

Contractual Obligations

During the first quarter 2006, our contractual obligations have not changed materially from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2005.

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RESULTS OF OPERATIONS
Underwriting Operations
Growth

	Growth
	2006 vs. 2005
	First Quarter
Direct premiums written		2	%
Net premiums written		2	%
Net premiums earned		4	%
Policies in force		7	%

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 as revenue using a daily earnings convention.

To analyze growth, we review new policies, rate levels, and the retention characteristics of our books of business. The decline in new business applications is the most significant contributor to the flattening growth rates we experienced in the first three months of 2006. For the first quarter 2006, new business applications decreased 8% in our Personal Lines businesses, compared to an increase of 7% for the first quarter 2005, reflecting “softer” market conditions. Although both channels saw less new auto business, the effect was greater in the Drive business. The strong profitability in the personal auto market over the last several years has resulted in increased competition, as evidenced by rate cutting by competitors and other non-price actions, such as increased advertising, relaxed underwriting standards and higher commission payments to agents and brokers. Solid increases in our renewal business helped contribute to the 6% and 12% increase in Personal Lines policies in force in the first quarter 2006 and 2005, respectively. In our Commercial Auto business, for the first quarter 2006 and 2005, new applications increased 10% and 3%, respectively, while policies in force grew 11% and 14%.

We filed 63 auto rate revisions in various states in the first three months of 2006. The overall effect of these revisions was that rates remained relatively flat. These rate changes, coupled with shifts in the mix of our personal auto business, contributed to a 4% decrease in average earned premium per policy for the first quarter 2006, as compared to the prior year period. We will continue to assess market conditions on a state-by-state basis, consider rate reductions in states where we will be able to maintain an attractive combination of profit and growth while still maintaining service quality, and seek selective rate increases where it is necessary to maintain rate adequacy.

Another important element affecting growth is customer retention. We have seen a lengthening in retention since the end of 2005 in all personal auto tiers, but most tiers in our Direct business ended the first quarter 2006 lower than the same period last year, while the Drive business saw a modest lengthening in retention over the prior year. Commercial Auto retention remained relatively flat during the quarter and was down slightly compared to prior year levels. With a greater percentage of our premium coming from renewal business, increasing retention remains an area where we are continuing to focus our efforts.

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Profitability

Profitability for our 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. We also use underwriting profit margin, which is underwriting profit expressed as a percent of net premiums earned, to analyze our results. For the three months ended March 31, our underwriting profitability measures were as follows:

	2006					2005
	Underwriting Profit					Underwriting Profit
(millions)	$		Margin			$		Margin
Personal Lines
Drive	$	278.9		14.1	%	$	279.8		14.2	%
Direct		153.4		14.4			132.2		13.6
Total Personal Lines		432.3		14.2			412.0		14.0
Commercial Auto		82.1		18.5			84.5		21.4
Other-indemnity1		2.5	NM				5.4	NM
Total underwriting operations	$	516.9		14.8	%	$	501.9		15.0	%

¹ Underwriting margins are not meaningful (NM) for our other-indemnity businesses due to the insignificant amount of premiums earned by such businesses.

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

	Three Months Ended March 31,
(dollars in millions)	2006		2005		Change
NET PREMIUMS WRITTEN
Personal Lines
Drive	$	2,032.3	$	2,081.8		(2	)%
Direct		1,141.4		1,081.0		6	%
Total Personal Lines		3,173.7		3,162.8		—	%
Commercial Auto		496.3		436.3		14	%
Other-indemnity		6.7		5.7		18	%
Total underwriting operations	$	3,676.7	$	3,604.8		2	%
NET PREMIUMS EARNED
Personal Lines
Drive	$	1,984.0	$	1,975.4		—	%
Direct		1,067.0		972.6		10	%
Total Personal Lines		3,051.0		2,948.0		3	%
Commercial Auto		442.8		395.2		12	%
Other-indemnity		6.7		6.8		(1	)%
Total underwriting operations	$	3,500.5	$	3,350.0		4	%
UNDERWRITING PERFORMANCE
Personal Lines — Drive
Loss & loss adjustment expense ratio		65.7		65.0	.7 pts.
Underwriting expense ratio		20.2		20.8	(.6) pts.
Combined ratio		85.9		85.8	.1 pts.
Personal Lines — Direct
Loss & loss adjustment expense ratio		65.6		66.8	(1.2) pts.
Underwriting expense ratio		20.0		19.6	.4 pts.
Combined ratio		85.6		86.4	(.8) pts.
Total Personal Lines
Loss & loss adjustment expense ratio		65.7		65.6	.1 pts.
Underwriting expense ratio		20.1		20.4	(.3) pts.
Combined ratio		85.8		86.0	(.2) pts.
Commercial Auto
Loss & loss adjustment expense ratio		62.5		58.7	3.8 pts.
Underwriting expense ratio		19.0		19.9	(.9) pts.
Combined ratio		81.5		78.6	2.9 pts.
Total Underwriting Operations1
Loss & loss adjustment expense ratio		65.2		64.7	.5 pts.
Underwriting expense ratio		20.0		20.3	(.3) pts.
Combined ratio		85.2		85.0	.2 pts.
Accident year-Loss & loss adjustment expense ratio		68.2		68.1	.1 pts.
POLICIES IN FORCE
(at March 31) (thousands)
Personal Lines
Drive — Auto		4,546		4,443		2	%
Direct — Auto		2,383		2,209		8	%
Special Lines2		2,722		2,429		12	%
Total Personal Lines		9,651		9,081		6	%
Commercial Auto		482		433		11	%

1	Combined ratios for the other-indemnity businesses are not presented separately due to the insignificant amount of premiums earned by such businesses. For the three months ended March 31, 2006 and 2005, these businesses generated an underwriting profit of $2.5 million and $5.4 million, respectively.
2	Includes insurance for motorcycles, recreational vehicles, mobile homes, watercraft, snowmobiles and similar items.

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Losses and Loss Adjustment Expenses (LAE)

	Three Months Ended March 31,
(millions)	2006			2005
Change in loss and LAE reserves	$	(26.1	)	$	61.8
Paid losses and LAE		2,308.9			2,106.8
Total incurred losses and LAE	$	2,282.8		$	2,168.6

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

During the quarter, we continued to report favorable loss ratios, reflecting frequency rates and severity below historical trends. Auto accident frequency was down about 6% in the first quarter 2006, compared to both the fourth quarter 2005 and the first quarter last year (after adjusting for the effect of the hurricanes in the fourth quarter 2005). During the first quarter 2006, we experienced very mild weather in contrast to severe weather conditions in the first and fourth quarters of 2005. We continue to analyze trends to distinguish changes in our experience from external factors versus those resulting from shifts in the mix of our business.

Severity increased about 2% in the first quarter 2006, compared to both the fourth quarter and first quarter 2005, after adjusting for the effect of the catastrophes in the fourth quarter. Bodily injury severity was relatively flat, while the severity in the property coverages was up about 5%.

We monitor physical damage trend in evaluating our claims handling performance and capacity. Claims handling is our single largest cost and one of our most visible consumer experiences. During the first quarter 2006, claims quality remained consistent with the level achieved in 2005, based on internal evaluations. The result of achieving more consistency in claims quality and process allows us to deploy more effectively claims personnel to needed areas.

We reported the following loss reserve development for the three months ended March 31:

(millions)	2006		2005
ACTUARIAL ADJUSTMENTS
Favorable/(Unfavorable)
Prior accident years	$	48.4	$	36.4
Current accident year		7.3		(2.9	)
Calendar year actuarial adjustment	$	55.7	$	33.5
PRIOR ACCIDENT YEARS DEVELOPMENT
Favorable/(Unfavorable)
Actuarial adjustment	$	48.4	$	36.4
All other development		55.3		78.5
Total development	$	103.7	$	114.9
Combined ratio effect	3.0 pts.		3.4 pts.

Total development consists both of actuarial adjustments and “all other development.” The actuarial adjustments represent the net changes made by our actuarial department to both current and prior accident year reserves based on regularly scheduled reviews. The “all other development” represents claims settling for more or less than reserved, emergence of unrecorded claims at rates different than reserved and changes in reserve estimates by claim representatives. The continued recognition of more modest increases in loss severity for prior accident years than had been previously estimated, contributed to the favorable prior year reserve development in both 2006 and 2005. We continue to focus on our loss reserves analysis, attempting to

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enhance accuracy and to further our understanding of our loss costs. A detailed discussion of our loss reserving practices can be found in our Report on Loss Reserving Practices, which was filed in a Form 8-K on June 28, 2005.

Underwriting Expenses

There were no significant fluctuations in our companywide underwriting expense ratio in the first quarter 2006, compared to the same period last year.

Personal Lines

	Growth
	2006 vs. 2005
	First Quarter
Net premiums written		—	%
Net premiums earned		3	%
Policies in force		6	%

Progressive’s Personal Lines business units write insurance for private passenger automobiles and recreational vehicles, and represents 86% of our total year-to-date net premiums written, compared to 88% in the first quarter 2005. Personal auto represents 92% of this portion of our business. Compared to the first quarter last year, we experienced no growth in our personal auto business, while the special lines products (e.g., motorcycles, watercraft and RV’s) grew 5%. Total Personal Lines generated an 85.8 combined ratio, compared to an 86.0 in the first quarter 2005. Since the special lines products are typically used less in the colder weather months, we typically experience lower loss costs during those periods. During the first quarters 2006 and 2005, the special lines results had a favorable effect on the total Personal Lines combined ratio of about 2.5 points and 2 points, respectively. The Personal Lines business is comprised of the Drive and Direct business.

The Drive Business

	Growth
	2006 vs. 2005
	First Quarter
Net premiums written		(2	)%
Net premiums earned		—	%
Auto policies in force		2	%

The Drive business includes business written by the more than 30,000 independent insurance agencies that represent Progressive, as well as brokerages in New York and California. The Drive business saw a decrease in new applications in the first quarter 2006 as compared to the same period last year. Premiums per application were also lower on both new and renewal auto business in the first three months of 2006. For the first quarter 2006, the rate of conversion (i.e., converting a quote to a sale) was down on an increased number of auto quotes. We have seen retention lengthen in all of the Drive auto tiers over the last several months and retention measures ended the period at levels modestly higher than the first quarter of 2005.

The Drive expense ratio decreased .6 points for the first quarter 2006, as compared to the same period last year, primarily due to significant advertising expenditures in the first quarter 2005 following the launch of our Drive^® Insurance from Progressive brand. We continue to build on the Drive brand and are hopeful that greater brand identity, coupled with our product offerings, systems, claims and customer service, will support growth in the Drive channel.

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The Direct Business

	Growth
	2006 vs. 2005
	First Quarter
Net premiums written		6	%
Net premiums earned		10	%
Auto policies in force		8	%

The Direct business includes business written directly by Progressive through 1-800-PROGRESSIVE or online at progressivedirect.com. The Direct business experienced a modest decrease in new applications in the first quarter 2006, as compared to the first quarter 2005, while the increase in renewal applications remained strong. Premiums per application remained level in the first three months of 2006 for both new and renewal auto business. 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. Quotes generated via the phone decreased substantially for the first quarter 2006, as compared to the same period last year. Conversion rates for phone- and Internet-initiated business both increased during the quarter, with phone greater than Internet. The increasing mix of Internet business, which has a lower conversion rate than phone, resulted in the overall conversion rate for the Direct business remaining relatively flat for the quarter. Direct auto has also seen a lengthening in retention in every tier over the last several months; however, most tiers are still at retention levels lower than the first quarter 2005.

The Direct expense ratio was up .4 points for the first quarter 2006, as compared to the same period last year. The increase is primarily due to increased advertising expenditures during the quarter compared to the first three months of 2005, partially offset by a shift in the mix of business to more renewals. The Progressive Direct^SM marketing efforts continue to emphasize the ease of doing business with Progressive and credible price comparisons provided to consumers. We are advertising on a national basis and supplement that coverage by local market media campaigns in over 100 designated market areas.

Commercial Auto

	Growth
	2006 vs. 2005
	First Quarter
Net premiums written		14	%
Net premiums earned		12	%
Policies in force		11	%

Progressive’s Commercial Auto business unit writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses, with the majority of our customers insuring three or fewer vehicles. The Commercial Auto business, which is primarily distributed through the independent agency channel, represented 14% and 12% of our total first quarter net premiums written in 2006 and 2005, respectively.

Commercial Auto net premiums written were generated either in the specialty commercial auto market or the light and local commercial auto market, each accounting for approximately half of the total Commercial Auto business. The specialty commercial auto market includes dump trucks, logging trucks and other short-haul commercial vehicles. The light and local commercial auto market includes autos, vans and pick-up trucks used by artisans, such as contractors, landscapers and plumbers, and a variety of other small businesses. The strong growth in Commercial Auto for the first quarter was led by the specialty truck market.

New applications in the Commercial Auto business increased about 10% for the first three months of 2006, as compared to the same period last year; policies in force also had a strong increase of 11%. In February 2006, we entered West Virginia with our Commercial Auto product, bringing the total number of states in which we

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write commercial auto business to 48. Retention remained relatively flat over the quarter and is down slightly from the first quarter 2005.

Since the Commercial Auto policies have higher limits (up to $1 million) than Personal Lines auto, we analyze the large loss trends in more detail to allow us to react quickly to changes in this exposure. In addition, Commercial Auto’s expense ratio decreased .9 points as compared to the first quarter last year, primarily due to the branding of Commercial Auto under Drive Insurance from Progressive, during 2005, as well as increased involuntary market assessments incurred last year.

Other-Indemnity

Progressive’s other-indemnity businesses, which represent less than 1% of our net premiums earned, primarily include writing professional liability insurance for community banks and our run-off businesses. The underwriting profit (loss) in these businesses may fluctuate widely due to the insignificant premium volume and the run-off nature of some of these products.

Service Businesses

Our service businesses include providing insurance-related services. Our principal service business is providing policy issuance and claims adjusting services for the Commercial Auto Insurance Procedures/Plans (CAIP), which are state-supervised plans serving the involuntary market. The service businesses represent less than 1% of our revenues.

Income Taxes

Progressive’s income tax position, which includes both deferred taxes and income taxes payable, was a net liability at March 31, 2006 and 2005, compared to a net asset at December 31, 2005. The net asset balance at December 31, 2005, primarily reflects estimated payments in excess of our actual current liability for 2005 due to lower fourth quarter 2005 income and an increase in our net deferred tax asset during the period.

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Investments
Portfolio Allocation
The composition of the investment portfolio at March 31 was:

					Gross					% of
			Gross		Unrealized			Market		Total			Duration
(millions)	Cost		Unrealized Gains		Losses			Value		Portfolio			(Years)		Rating1
2006
Fixed maturities	$	10,513.3	$	37.5	$	(182.8	)	$	10,368.0		71.4	%		3.4	AA		+
Preferred stocks		1,305.5		17.3		(18.2	)		1,304.6		9.0			2.1		A	-
Short-term investments:
Auction rate municipal obligations		—		—		—			—		—			—		—
Auction rate preferred stocks		94.2		.3		—			94.5		.7			<1		A	-
Other short-term investments2		614.0		—		—			614.0		4.2			<1		AA	-
Total short-term investments		708.2		.3		—			708.5		4.9			<1		A	+
Total fixed income		12,527.0		55.1		(201.0	)		12,381.1		85.3			3.1		AA
Common equities		1,429.2		720.7		(9.6	)		2,140.3		14.7		na			na
Total portfolio3,4	$	13,956.2	$	775.8	$	(210.6	)	$	14,521.4		100.0	%		3.1		AA
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 investments:
Auction rate municipal obligations		—		—		—			—		—			—		—
Auction rate preferred stocks		289.4		.5		—			289.9		2.2			<1		A	+
Other short-term investments2		752.9		—		—			752.9		5.6			<1		AA
Total short-term investments		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		na			na
Total portfolio3,4	$	12,942.5	$	597.6	$	(135.2	)	$	13,404.9		100.0	%		2.9		AA	+

na = not applicable
1	Credit quality ratings are assigned by nationally recognized securities rating organizations. To calculate the weighted average credit quality ratings, we weight individual securities based on market value and assign a numeric score to each credit rating based on a scale from 0-5.
2	Other short-term investments include Eurodollar deposits, commercial paper and other investments, which are expected to mature within one year.
3	Includes net unsettled security acquisitions of $95.8 million and $105.2 million at March 31, 2006 and 2005, respectively.
4	March 31, 2006 and 2005 totals include $1.9 billion and $1.1 billion, respectively, of securities in the portfolio of a consolidated, non-insurance subsidiary of the holding company.

As of March 31, 2006, our portfolio had $565.2 million of net unrealized gains, compared to $462.4 million at March 31, 2005 and $600.1 million at December 31, 2005. During the first quarter 2006, the fixed-income portfolio’s valuation decreased $110.5 million, primarily reflecting the increase in interest rates during the period. The common stock portfolio had an increase of $75.6 million reflecting movement in the market.

Fixed-Income Securities
The fixed-income portfolio, which includes fixed-maturity securities, short-term investments and preferred stocks, had a duration of 3.1 years at March 31, 2006, compared to 3.2 years at December 31, 2005 and 2.9 years at March 31, 2005. After adjustments to exclude unsettled security transactions, the allocation of fixed-income securities at March 31, 2006, was 85.2% of the total portfolio, compared to 85.7% at March 31, 2005.

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

(millions)	March 31, 2006				March 31, 2005
Investment-grade fixed maturities:
Short/intermediate term	$	10,778.1	97.3	%	$	10,365.4	98.3	%
Long term1		14.1	.1			103.1	1.0
Non-investment-grade fixed maturities2		284.3	2.6			79.8	.7
Total	$	11,076.5	100.0	%	$	10,548.3	100.0	%

1	Long term includes securities with expected liquidation dates of 10 years or greater.
2	These securities are non-rated or have a quality rating of BB+ or lower. The increase primarily reflects securities downgraded during 2005.

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Included in the fixed-income portfolio are asset-backed securities, which were comprised of the following at March 31:

			% of Asset-Backed			Duration
(millions)	Market Value		Securities			(years)		Rating
2006
Collateralized mortgage obligations	$	347.1		14.6	%		2.2	AAA
Commercial mortgage-backed obligations		595.2		25.1			3.2	AA	+
Commercial mortgage-backed obligations: interest-only		720.9		30.4			2.2	AAA	-
		1,316.1		55.5			2.6	AAA	-
Other asset-backed securities:
Automobile		433.8		18.3			.5	AAA
Home equity		155.7		6.6			.5	AAA
Other		119.3		5.0			1.2	AA	-
		708.8		29.9			.6	AAA	-
Total asset-backed securities	$	2,372.0		100.0	%		2.0	AAA	-
2005
Collateralized mortgage obligations	$	611.6		26.9	%		3.0	AAA
Commercial mortgage-backed obligations		352.6		15.5			3.0	AA	-
Commercial mortgage-backed obligations: interest-only		585.7		25.8			2.4	AAA
		938.3		41.3			2.6	AA	+
Other asset-backed securities:
Automobile		344.3		15.2			1.0	AAA	-
Home equity		247.7		10.9			1.1	AAA
Other		130.4		5.7			1.6	AA	-
		722.4		31.8			1.1	AAA	-
Total asset-backed securities	$	2,272.3		100.0	%		2.2	AAA	-

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

(millions)	March 31, 2006				March 31, 2005
Common stocks	$	2,124.5	99.3	%	$	1,876.3	98.8	%
Other risk investments		15.8	.7			22.6	1.2
Total common equities	$	2,140.3	100.0	%	$	1,898.9	100.0	%

Common equities comprised 14.8% and 14.3% of the total portfolio, excluding the net unsettled security transactions, at March 31, 2006 and 2005, respectively. Common stocks are managed externally to track the Russell 1000 Index with an anticipated annual tracking error of +/- 50 basis points. To maintain high correlation with the Russell 1000, we held 74% of the common stocks comprising the index at March 31, 2006. Our individual holdings are selected based on their contribution to the correlation with the index. Our 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. For the first quarters of 2006 and 2005, the GAAP return was within the designated tracking error.

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 $1.8 million of open funding commitments at March 31, 2006.

22

Trading Securities
Trading securities are entered into for the purpose of near-term profit generation. We did not have any trading securities, with the exception of the derivatives classified as trading discussed below, at any time during the first three months of 2006 and 2005.

Derivative Instruments
From time to time, we invest in derivative instruments, which are primarily used to manage the risks of the available-for-sale portfolio. This is accomplished by modifying the duration, interest rate or foreign currency characteristics of the portfolio, hedged securities or hedged cash flows. We had no risk management derivatives at any time during the first three months of 2006 or 2005.

Derivative instruments may also be used for trading purposes or classified as trading derivatives due to characteristics of the transaction. During the first quarter 2006, we held four credit default protection derivatives, which were sold on four separate issuers and matched with Treasury securities with an equivalent principal and maturity to replicate cash bond positions. These positions had a notional amount of $130.0 million at March 31, 2006 and generated a net gain of $5.2 million during the quarter. During the first quarter 2005, we held no open trading derivatives. The amount and results of the derivative and Treasury positions are immaterial to our financial condition, cash flows and results of operations and are reported as part of the available-for-sale portfolio, with the net gains (losses) reported as a component of net realized gains (losses) on securities.

Investment Results
Recurring investment income (interest and dividends, before investment and interest expenses) increased 26% for the first quarter 2006, compared to the same period last year, reflecting both an increase in yields on new investments and portfolio turnover, as well as an increase in invested assets.

We report total return to reflect more accurately the management philosophy of the portfolio and our evaluation of 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. We generated the following investment results for the three months ended March 31:

	2006			2005
Pretax recurring investment book yield		4.4	%		3.8	%
Weighted average FTE book yield		5.1	%		4.4	%
FTE total return:
Fixed-income securities		.4	%		(.2	)%
Common stocks		4.7	%		(1.7	)%
Total portfolio		1.0	%		(.4	)%

23

Realized Gains/Losses
The components of net realized gains (losses) were:

	Three Months Ended
	March 31,
(millions)	2006			2005
Gross realized gains:
Fixed maturities	$	6.5		$	18.1
Preferred stocks		—			—
Common equities		9.0			6.3
Short-term investments:
Auction rate municipal obligations		—			—
Auction rate preferred stocks		—			—
Other short-term investments		—			—
		15.5			24.4
Gross realized losses:
Fixed maturities		10.1			5.7
Preferred stocks		3.2			—
Common equities		1.6			8.5
Short-term investments:
Auction rate municipal obligations		—			—
Auction rate preferred stocks		.1			—
Other short-term investments		—			—
		15.0			14.2
Net realized gains (losses) on securities:
Fixed maturities		(3.6	)		12.4
Preferred stocks		(3.2	)		—
Common equities		7.4			(2.2	)
Short-term investments:
Auction rate municipal obligations		—			—
Auction rate preferred stocks		(.1	)		—
Other short-term investments		—			—
	$	.5		$	10.2
Per share	$	—		$	.03

Gross realized 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. Gross realized losses also include write-downs of both fixed-income and equity securities determined to be other-than-temporarily impaired.

Other-Than-Temporary Impairment (OTI)
From time to time, realized losses include write-downs of securities determined to have had an other-than-temporary decline in market value. We routinely monitor our portfolio for pricing changes, which might indicate potential impairments, and perform 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 criteria set forth in the current accounting guidance.

24

For fixed-income investments with unrealized losses due to market or industry-related declines where we have the intent and ability to hold the investment for the period of time necessary to recover a significant portion of the investment’s impairment and collect the interest obligation, declines are not deemed to qualify as other than temporary. Our 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 such a loss position for three consecutive quarters.

When a security in our investment portfolio has an unrealized loss in market value that is deemed to be other than temporary, we reduce 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 three months ended March 31 was as follows:

			Write-downs		Write-downs
	Total		On Securities		On Securities
(millions)	Write-downs		Sold		Held at Period End
2006
Fixed income	$	.3	$	.3	$	—
Common equities		1.6		—		1.6
Total portfolio	$	1.9	$	.3	$	1.6
2005
Fixed income	$	1.0	$	—	$	1.0
Common equities		.4		—		.4
Total portfolio	$	1.4	$	—	$	1.4

The following table stratifies the gross unrealized losses in our portfolio at March 31, 2006, by duration in a loss position and magnitude of the loss as a percentage of the cost of the security. The individual amounts represent the additional OTI loss we would have recognized in the income statement if our policy for market-related declines was different than that stated above.

(millions)	Total		Total Gross
	Market		Unrealized		Decline of Investment Value
Total Portfolio	Value		Losses		>15%		>25%		>35%		>45%
Unrealized loss for 1 quarter	$	3,156.3	$	39.7	$	1.0	$	.6	$	—	$	—
Unrealized loss for 2 quarters		921.8		17.9		1.1		.5		—		—
Unrealized loss for 3 quarters		2,785.4		76.3		.1		—		—		—
Unrealized loss for 1 year or longer		2,639.3		76.7		1.9		.2		—		—
	$	9,502.8	$	210.6	$	4.1	$	1.3	$	—	$	—

We determined that none of the securities represented by the table above met the criteria for other-than-temporary impairment write-downs. However, if we 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%, we would have recognized an additional $.2 million of OTI losses in the income statement.

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

25

Repurchase Transactions

During the quarter, we entered into repurchase commitment transactions, whereby we loaned 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 were invested in AA or higher financial institution obligations with yields that exceeded our interest obligation on the borrowed cash. We are able to borrow the cash at low rates since the securities loaned are in short supply. Our interest rate exposure does not increase or decrease since the borrowing and investing periods match. During the three months ended March 31, 2006, our largest single outstanding balance of repurchase commitments was $2.1 billion, open for one business day, with an average daily balance of $1.5 billion for the quarter. We had no open repurchase commitments at March 31, 2006 and 2005. We earned income of $1.3 million and $.5 million on repurchase commitments during the three months ended March 31, 2006 and 2005, 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 3.1 years at March 31, 2006 and 3.2 years at December 31, 2005. The weighted average beta of the equity portfolio was 1.0 at both March 31, 2006 and December 31, 2005, meaning that our equity portfolio generally moves in tandem with the overall stock market. 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, 2005.

We use Value-at-Risk (VaR) for measuring exposure to short-term volatility and for longer-term contingency capital planning. The VaR quantifies the potential reductions in market value of our portfolio for the following 22 and 66 trading days (one- and three-month intervals) at the 95th percentile loss. 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.

	March 31,			December 31,
(millions)	2006			2005
22-Day VaR
Fixed-income portfolio	$	(107.2	)	$	(106.0	)
% of portfolio		(.9	)%		(.9	)%
Equity portfolio	$	(83.8	)	$	(84.6	)
% of portfolio		(3.9	)%		(4.1	)%
Total portfolio	$	(144.9	)	$	(137.4	)
% of portfolio		(1.0	)%		(1.0	)%
66-Day VaR
Fixed-income portfolio	$	(183.9	)	$	(181.9	)
% of portfolio		(1.5	)%		(1.5	)%
Equity portfolio	$	(138.5	)	$	(140.7	)
% of portfolio		(6.5	)%		(6.8	)%
Total portfolio	$	(244.3	)	$	(230.9	)
% of portfolio		(1.7	)%		(1.6	)%

Item 4. Controls and Procedures.

Progressive, 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 us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and 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 Progressive’s disclosure controls and procedures as of the end of the period covered by this report. Based on that review and evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Progressive’s disclosure controls and procedures are effectively serving the stated purposes as of the end of the period covered by this report.

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

27

PART II — OTHER INFORMATION

Item 1A. Risk Factors.

There have been no material changes in the risk factors that were discussed in our Annual Report on
Form 10-K for the year ended December 31, 2005.

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

(c) Share Repurchases

ISSUER PURCHASES OF EQUITY SECURITIES1
2006					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		787,199	$	107.40		10,798,614		4,201,386
February		325,000		104.84		11,123,614		3,876,386
March		1,070,098		105.27		12,193,712		2,806,288
Total		2,182,297	$	105.97

¹ Presented on a pre-split basis.

In April 2003, the Board of Directors authorized the repurchase of up to 15,000,000 Common Shares. Progressive’s financial policies state that we will repurchase shares to neutralize dilution from equity-based compensation in the year of issuance and to return underleveraged capital to investors. On April 21, 2006, the Board approved an increase to the number of Common Shares available for repurchase under this authorization to adjust for the 4-for-1 stock split; the shares available for repurchase as of May 8, 2006, will be adjusted for the stock split.

In addition, the Board set a new authorization to repurchase 60 million Common Shares (on a post-split basis) to be used in addition to, and after completion of, the remaining repurchases available under the April 2003, split-adjusted authorization.

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

At Progressive’s April 21, 2006, Annual Meeting of Shareholders, 172,234,013 Common Shares were represented in person or by proxy.

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

Director	Term Expires		For		Withheld
Stephen R. Hardis		2009		148,964,045		23,269,968
Philip A. Laskawy		2009		167,653,038		4,580,975
Norman S. Matthews		2009		165,419,725		6,814,288
Bradley T. Sheares, Ph.D.		2009		170,620,944		1,613,069

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

Director	Term Expires
Peter B. Lewis		2007
Patrick H. Nettles, Ph.D.		2007
Glenn M. Renwick		2007
Donald B. Shackelford		2007
Charles A. Davis		2008
Bernadine P. Healy, M.D.		2008
Jeffrey D. Kelly		2008

Shareholders approved a proposal to amend Progressive’s Amended Articles of Incorporation to increase the number of authorized Common Shares from 600,000,000 to 900,000,000. This proposal received 164,397,963 affirmative votes and 6,900,594 negative votes. There were 935,456 abstentions and no broker non-votes with respect to this proposal.

Shareholders ratified the appointment of PricewaterhouseCoopers LLP as Progressive’s independent registered public accounting firm for 2006. This proposal received 168,934,187 affirmative votes and 2,341,207 negative votes. There were 958,619 abstentions and no broker non-votes with respect to this proposal.

Item 5. Other Information.

On March 16, 2006, Progressive granted time-based restricted stock awards covering a total of 337,626 Common Shares to 736 management employees, including 12 executive officers, under Progressive’s 2003 Incentive Plan. These awards were based on a $105.90 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 $35.8 million. The time-based restricted stock awards vest in equal installments on January 1 of 2009, 2010 and 2011, respectively.

In addition, on March 16, 2006, we granted performance-based restricted stock awards covering a total of 87,085 Common Shares to 46 executives and senior managers pursuant to our 2003 Incentive Plan. These performance-based awards will vest upon the date of a news release reporting earnings for Progressive and its subsidiaries for a fiscal month which is the final month of a period of 12 consecutive fiscal months during which period Progressive’s insurance subsidiaries have generated net earned premiums of $20 billion or more and achieved an average combined ratio of 96 or less. If these objectives are not achieved by December 31, 2015, these awards will be forfeited. At the date of grant, these performance-based restricted stock awards had an aggregate dollar value of approximately $9.2 million.

We also granted time-based restricted stock awards covering a total of 15,312 Common Shares to our non-employee directors on April 21, 2006. These awards are scheduled to vest on March 21, 2007, and had an aggregate dollar value of approximately $1.6 million at the date of grant.

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

29

The following table discloses the restricted stock awards granted during the first quarter 2006 to each of the named executive officers identified in Progressive’s 2006 Proxy Statement dated March 3, 2006:

	Time-Based Award				Performance-Based Award
Name and Principal Position	Shares1		Value2		Shares1		Value2
Glenn M. Renwick President and Chief Executive Officer		35,412	$	3,750,131		35,410	$	3,749,919
W. Thomas Forrester Vice President and Chief Financial Officer		4,722		500,060		5,900		624,810
Robert T. Williams Drive® Group President		4,533		480,045		4,760		504,084
Alan R. Bauer Direct Group President		4,155		440,015		4,155		440,015
Brian J. Passell Group President of Claims		4,014		425,083		4,415		467,549

¹Presented on a pre-split basis.

²Based on the market value at the date of grant of $105.90 and without discount for risk of forfeiture.

Item 6. Exhibits.

See exhibit index on page 32.

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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 4, 2006	BY:	/s/ W. Thomas Forrester
		W. Thomas Forrester
		Vice President and Chief Financial Officer

31

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)(i)	3(A)	Amended Articles of Incorporation of The Progressive Corporation (as amended April 21, 2006)	Filed herewith
(10)(iii)	10(A)	Amendment to The Progressive Corporation 2006 Gainsharing Plan	Filed herewith
(10)(iii)	10(B)	Agreement dated April 7, 2006 between Drive Resource Services Company and Robert T. Williams	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

32

EX-3.A

Exhibit No. 3(A)

Amended Articles of Incorporation, as amended, of the Registrant

CERTIFICATE
OF
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

     PETER B. LEWIS, Chairman of the Board, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, an Ohio corporation (the “Corporation”), with its principal office at Mayfield Village, Cuyahoga County, Ohio, do hereby certify that on April 20, 1984, in order to consolidate the Corporation’s existing Articles of Incorporation and all previously adopted amendments thereto that were in force at that time, the directors of the Corporation, at a meeting duly called and held, duly adopted, pursuant to the authority of Ohio Code Section 1701.72(B), the Amended Articles of Incorporation attached hereto as Exhibit I, to supersede and take the place of the existing Articles of Incorporation and all amendments thereto. A true and correct copy of the resolution as adopted by the directors of the Corporation is attached hereto as Exhibit II.

     IN WITNESS WHEREOF, said PETER B. LEWIS, Chairman of the Board, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, acting for and in behalf of said Corporation, have hereunto subscribed their names this 20th day of April, 1984.

/s/ Peter B. Lewis

Peter B. Lewis, Chairman of the Board

/s/ David M. Schneider

David M. Schneider, Secretary

- 1 -

EXHIBIT I

AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

     FIRST: The name of said corporation shall be THE PROGRESSIVE CORPORATION.

     SECOND: The place in the State of Ohio where its principal office is to be located is Mayfield Village, Cuyahoga County.

     THIRD: The purpose of the corporation is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code.

     FOURTH: SECTION 1. AUTHORIZED SHARES. The aggregate number of shares which the corporation shall have authority to issue is 22,000,000 shares, consisting of 2,000,000 Non-Voting Preferred Shares, without par value, and 20,000,000 Common Shares, $1.00 par value.

     SECTION 2. ISSUANCE OF PREFERRED SHARES. The Board of Directors is authorized at any time, and from time to time, to provide for the issuance of Non-Voting Preferred Shares in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the Non-Voting Preferred Shares or any series thereof. For each series, the Board of Directors shall determine, by resolution or resolutions adopted prior to the issuance of any shares thereof, the designations, preferences, limitations and relative or other rights thereof, including but not limited to the following relative rights and preferences, as to which there may be variations among different series:

A.	the division of such shares into series and the designation and authorized number of shares of each series,
B.	the dividend rate,
C.	the dates of payment of dividends and the dates from which they are cumulative,
D.	liquidation price,
E.	redemption rights and price,
F.	sinking fund requirements,
G.	conversion rights, and
H.	restrictions on the issuance of such shares.

     Prior to the issuance of any shares of a series, but after adoption by the Board of Directors of the resolution establishing such series, the appropriate officers of the corporation shall file such documents with the State of Ohio as may be required by law including, without limitation, an amendment to these Articles of Incorporation.

     SECTION 3. COMMON SHARES. Each Common Share shall entitle the holder thereof to one vote, in person or by proxy, at any and all meetings of the shareholders of the corporation, on all meetings of the shareholders of the corporation, on all propositions before such meetings. Each Common Share

- 2 -

shall be entitled to participate equally in such dividends as may be declared by the Board of Directors out of funds legally available therefor, and to participate equally in all distributions of assets upon liquidation.

     FIFTH: No holder of shares of the corporation of any class shall be entitled as such, as a matter of right, to subscribe for or purchase shares of any class, now or hereafter authorized, or to subscribe for or purchase securities convertible into or exchangeable for shares of the corporation or to which shall be attached or appertain any warrants or rights entitling the holder thereof to subscribe for or purchase shares, except such rights of subscription or purchase, if any, for such considerations and upon such terms and conditions as its Board of Directors from time to time may determine.

     SIXTH: Except as otherwise provided in these Articles of Incorporation or the Code of Regulations of the corporation, notwithstanding any provisions in Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code, now or hereafter in effect, requiring for any purpose the vote, consent, waiver or release of the holders of a designated proportion (but less than all) of the share of the corporation or any of particular class or classes of shares, as the case may be, the vote, consent, waiver or release of the holders of shares entitling them to exercise a majority of the voting power of the shares of the corporation or of any class or classes of shares, as the case may be, shall be required and sufficient for any such purpose, except that the affirmative vote of the holders of record of 75 percent of the shares having voting power with respect to any such proposal shall be required to amend, alter, change or repeal Article NINTH of these Articles or the provisions of this Article SIXTH dealing with the amendment, alteration, change or repeal of Article NINTH.

     SEVENTH: To the extent permitted by law, the corporation, by action of its Board of Directors, may purchase or otherwise acquire shares of any class issued by it at such times, for such considerations and upon such terms and conditions as its Board of Directors may determine.

     EIGHTH: These Amended Articles of Incorporation shall supersede and take the place of the heretofore existing Articles of Incorporation of the corporation and all amendments thereto.

     NINTH: The affirmative vote of the holders of record of 75 percent of the shares having voting power with respect to any such proposal AND the affirmative vote of a majority of such holders of record other than shares held or beneficially owned by a “Related Person” (as hereinafter defined) shall be required for the approval or authorization of any “Business Combination” (as hereinafter defined) of the corporation with any Related Person; provided, however, that the 75 percent voting requirement and the majority voting requirement of holders of record of shares other than a Related Person shall not be applicable if:

     1. A majority of the “Continuing Directors” of the Corporation (as hereinafter defined) have approved the Business Combination; or

     2. The Business Combination is a merger or consolidation and the cash or fair market value of the property, securities or other consideration to be received per share by holders of Common Shares of the corporation in the Business Combination is not less than the highest per share price (with appropriate adjustments for recapitalization and for share splits, share dividends and like distributions), paid by the Related Person in acquiring any of its holdings of the corporation’s Common Shares.

          For the purposes of this Article NINTH:

     (a) The term “Business Combination” shall mean (i) any merger or consolidation of the corporation or a subsidiary with or into a Related Person, (ii) any sale, lease, exchange, transfer or other disposition, including without limitation, a mortgage or any other security

- 3 -

device, of all or any “Substantial Part” (as hereinafter defined) of the assets either of the corporation (including without limitation any voting securities of a subsidiary) or of a subsidiary, to a Related Person, (iii) any merger or consolidation of a Related Person with or into the corporation or a subsidiary of the corporation, (iv) any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to the corporation or a subsidiary of the corporation, (v) the issuance of any securities of the corporation or a subsidiary of the corporation to a Related Person, (vi) any recapitalization that would have the effect of increasing the voting power of a Related Person, and (vii) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination.

     (b) The term “Related Person” shall mean and include any individual, corporation, partnership or other person or entity which, together with its “Affiliates” and “Associates” (as defined on September 1, 1982 at Rule 12b-2 under the Securities Exchange Act of 1934), “Beneficially Owns” (as defined on September 1, 1982 at Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate 20 percent or more of the outstanding Common Shares of the corporation, and any Affiliate or Associate of any such individual, corporation, partnership or other person or entity.

     (c) The term “Substantial Part” shall mean more than 30 percent of the fair market value of the total assets of the corporation in question, as of the end of its most recent fiscal year ending prior to the time the determination is being made.

     (d) Without limitation, any Common Shares of the corporation that any Related Person has the right to acquire pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed beneficially owned by the Related Person.

     (e) For the purposes of sub-paragraph (2) of this Article NINTH, the term “other consideration to be received” shall include, without limitation, Common Shares of the corporation retained by its existing public shareholders in the event of a Business Combination in which the corporation is the surviving corporation.

     (f) The term “Continuing Director” shall mean a director who was a member of the Board of Directors of the corporation immediately prior to the time that the Related Person involved in a Business Combination became a Related Person.

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EXHIBIT II
THE PROGRESSIVE CORPORATION
DIRECTORS RESOLUTION

     RESOLVED, that to consolidate the Company’s existing Articles of Incorporation and all previously adopted amendments thereto, the Amended Articles of Incorporation presented to this meeting are hereby adopted to supersede and take the place of the existing Articles and all amendments thereto.

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CERTIFICATE OF AMENDMENT
TO
THE AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

     PETER B. LEWIS, Chairman of the Board, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, an Ohio corporation for profit with its principal office at Mayfield Village, Cuyahoga County, Ohio (the “Company”),do hereby certify that a meeting of the shareholders of the Company was duly called and held on April 25, 1986, at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on proposals to amend the Company’s Amended Articles of Incorporation, the following resolution was adopted:

     RESOLVED, that Article FOURTH of the Company’s Amended Articles of Incorporation be, and the same hereby is, amended to be and read in its entirety as follows:

     FOURTH: SECTION 1. AUTHORIZED SHARES. The aggregate number of shares which the corporation shall have authority to issue is 52,000,000 shares, consisting of 2,000,000 Non-Voting Preferred Shares, without par value, and 50,000,000 Common Shares, $1.00 par value.

     SECTION 2. ISSUANCE OF PREFERRED SHARES. The Board of Directors is authorized at any time, and from time to time, to provide for the issuance of Non-Voting Preferred Shares in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the Non-Voting Preferred Shares or any series thereof. For each series, the Board of Directors shall determine, by resolution or resolutions adopted prior to the issuance of any shares thereof, the designations, preferences, limitations and relative or other rights thereof, including but not limited to the following relative rights and preferences, as to which there may be variations among different series:

A.	the division of such shares into series and the designation and authorized number of shares of each series,
B.	the dividend rate,
C.	the dates of payment of dividends and the dates from which they are cumulative,
D.	liquidation price,
E.	redemption rights and price,
F.	sinking fund requirements,
G.	conversion rights, and
H.	restrictions on the issuance of such shares.

Prior to the issuance of any shares of a series, but after adoption by the Board of Directors of the resolution establishing such series, the appropriate officers of the

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corporation shall file such documents with the State of Ohio as may be required by law including, without limitation, an amendment to these Amended Articles of Incorporation.

     SECTION 3. COMMON SHARES. Each Common Share shall entitle the holder hereof to one vote, in person or by proxy, at any and all meetings of the shareholders of the corporation, on all propositions before such meetings. Each Common Share shall be entitled to participate equally in such dividends as may be declared by the Board of Directors out of funds legally available therefor, and to participate equally in all distributions of assets upon liquidation.

     IN WITNESS WHEREOF, said PETER B. LEWIS, Chairman of the Board, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, acting for and in behalf of said corporation, have hereunto subscribed their names this 25th day of April, 1986.

/s/ Peter B. Lewis

Peter B. Lewis, Chairman

/s/ David M. Schneider

David M. Schneider, Secretary

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CERTIFICATE OF AMENDMENT
TO
THE AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

     PETER B. LEWIS, Chairman of the Board, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, an Ohio corporation for profit with its principal office at 6300 Wilson Mills Road, Mayfield Village, Cuyahoga County, Ohio (the “Company”), do hereby certify that a meeting of the shareholders of the Company was duly called and held on April 24, 1987, at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on proposals to amend the Company’s Amended Articles of incorporation, the following resolution was adopted:

     RESOLVED, that Article FOURTH of the Company’s Amended Articles of Incorporation be, and the same hereby is, amended to be and read in its entirety as follows:

     FOURTH: SECTION 1. AUTHORIZED SHARES. The aggregate number of shares which the corporation shall have authority to issue is 110,000,000 shares, consisting of 10,000,000 Non-Voting Preferred Shares, without par value, and 100,000,000 Common Shares, $1.00 par value.

     SECTION 2. ISSUANCE OF PREFERRED SHARES. The Board of Directors is authorized at any time, and from time to time, to provide for the issuance of Non-Voting Preferred Shares in one or more series, and to determine the designations, preferences, limitations and relative or other rights of the Non-Voting Preferred Shares or any series thereof. For each series, the Board of Directors shall determine, by resolution or resolutions adopted prior to the issuance of any shares thereof, the designations, preferences, limitations and relative or other rights thereof, including but not limited to the following relative rights and preferences, as to which there may be variations among different series:

A.	the division of such shares into series and the designation and authorized number of shares of each series,
B.	the dividend rate,
C.	the dates of payment of dividends and the dates from which they are cumulative,
D.	liquidation price,
E.	redemption rights and price,
F.	sinking fund requirements,
G.	conversion rights, and
H.	restrictions on the issuance of such shares.

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Prior to the issuance of any shares of a series, but after adoption by the Board of Directors of the resolution establishing such series, the appropriate officers of the corporation shall file such documents with the State of Ohio as may be required by law including, without limitation, an amendment to these Amended Articles of Incorporation.

     SECTION 3. COMMON SHARES. Each Common Share shall entitle the holder thereof to one vote, in person or by proxy, at any and all meetings of the shareholders of the corporation, on all propositions before such meetings. Each Common Share shall be entitled to participate equally in such dividends as may be declared by the Board of Directors out of funds legally available therefor, and to participate equally in all distributions of assets upon liquidation.

     IN WITNESS WHEREOF, said PETER B. LEWIS, Chairman of the Board, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, acting for and in behalf of said corporation, have hereunto subscribed their names this 24th day of April, 1987.

/s/ Peter B. Lewis

Peter B. Lewis, Chairman

/s/ David M. Schneider

David M. Schneider, Secretary

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CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

     PETER B. LEWIS, President, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, an Ohio corporation for profit with its principal office at Mayfield Village, Cuyahoga County, Ohio (the “Company”), do hereby certify that a meeting of the Shareholders of the Company was duly called and held on April 19, 1991, at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on a proposal to amend the Company’s Amended Articles of Incorporation, the following resolution was adopted:

     RESOLVED, that Article Fourth of the Company’s Amended Articles of Incorporation be, and the same hereby is, deleted in its entirety and there is substituted therefor the following:

Article Fourth. The authorized number of shares of the corporation is 125,000,000, consisting of 20,000,000 Serial Preferred Shares, without par value (hereinafter called “Serial Preferred Shares”), 5,000,000 Voting Preference Shares, without par value (hereinafter called “Voting Preference Shares”), and 100,000,000 Common Shares, $1.00 par value (hereinafter called “Common Shares”).

DIVISION A

     The Serial Preferred Shares shall have the following express terms:

     Section 1. Series. The Serial Preferred Shares may be issued from time to time in one or more series. All shares of Serial Preferred Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Serial Preferred Shares shall rank on a parity with and be identical to all Voting Preference Shares except in respect of (i) the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), both inclusive, of this Section and (ii) the voting rights and provisions for consents relating to Serial Preferred Shares as fixed and determined by Section 5 of this Division. Subject to the provisions of Sections 2 through 7, both inclusive, of this Division, which provisions shall apply to all Serial Preferred Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and with respect to each such series to determine and fix prior to the thereof (and thereafter, to the extent provided in clause (b) of this Section) the following:

     (a) The designation of the series, which may be by distinguishing number, letter or title;

     (b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of shares thereof then outstanding);

     (c) The dividend rate or rates of the series;

     (d) The dates on which and the period or periods for which dividends, if declared, shall be payable and the date or dates from which dividends shall accrue and be cumulative;

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     (e) The redemption rights and price or prices, if any, for shares of the series;

     (f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;

     (g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation;

     (h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and

     (i) Restrictions (in addition to those set forth in Subsection 5(c) of this Division) on the issuance of shares of the same series or of any other class or series.

     The Board of Directors is authorized to adopt from time to time amendments to the Amended Articles of Incorporation fixing, with respect to each such series, the matters described in clauses (a) through (i), both inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.

     Section 2. Dividends.

     (a) The holders of Serial Preferred Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Serial Preferred Shares, shall be entitled to receive out of any funds legally available for Serial Preferred Shares and Voting Preference Shares and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 of this Division and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Serial Preferred Shares for any dividend period unless at the same time.

     (1) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Serial Preferred Shares of all series then issued and outstanding and entitled to receive such dividend and

     (2) the dividends payable for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Voting Preference Shares of all series then issued and outstanding and entitled to receive such dividend.

     (b) So long as any Serial Preferred Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Serial Preferred Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Serial Preferred Shares, nor shall any Common Shares or any other shares ranking junior to the Serial Preferred Shares be purchased, retired or otherwise acquired by the corporation, except out of the proceeds of the sale of Common Shares or other shares of the corporation ranking junior to the Serial Preferred Shares received by the corporation subsequent to the date of first issuance of Serial Preferred Shares of any series, unless:

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     (1) All accrued and unpaid dividends on Serial Preferred Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart; and

     (2) There shall be no arrearages with respect to the redemption of Serial Preferred Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Division.

     Section 3. Redemption.

     (a) Subject to the express terms of each series and to the provisions of Subsection 5(c)(3) of this Division, the corporation:

     (1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Serial Preferred Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Division; and

     (2) Shall, from time to time, make such redemptions of each series of Serial Preferred Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Division;

and shall in each case pay all accrued and unpaid dividends to the redemption date.

(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Serial Preferred Shares to be redeemed at their respective addresses then appearing on the books of the corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Division prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the corporation may deposit the aggregate redemption price of Serial Preferred Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio or New York, New York, having capital and surplus of not less than $100,000,000, named in such notice and direct that there be paid to the respective holders of the Serial Preferred Shares so to be redeemed amounts equal to the redemption price of the Serial Preferred Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Serial Preferred Shares are to be redeemed, the corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.

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     (2) If the holders of Serial Preferred Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the corporation such unclaimed amounts and thereupon such bank or trust company and the corporation shall be relieved of all responsibility in respect thereof and to such holders.

     (c) Any Serial Preferred Shares which are (1) redeemed by the corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the corporation, shall resume the status of authorized but unissued Serial Preferred Shares without serial designation.

     Section 4. Liquidation.

(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation, the holders of Serial Preferred Shares of any series shall be entitled to receive in full out of the assets of the corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Serial Preferred Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Division, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the corporation. In the event the net assets of the corporation legally available therefor are insufficient to permit the payment upon all outstanding Serial Preferred Shares and Voting Preference Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Serial Preferred Shares and Voting Preference Shares in proportion to the full preferential amount to which each such share is entitled.

     (2) After payment to the holders of Serial Preferred Shares of the full preferential amounts as aforesaid, the holders of Serial Preferred Shares, as such, shall have no right or claim to any of the remaining assets of the corporation.

     (b) The merger or consolidation of the corporation into or with any other corporation, the merger of any other corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the corporation, shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.

     Section 5. Voting.

     (a) The holders of Serial Preferred Shares shall have no voting rights, except as provided in this Section or required by law.

(b) (1) If, and so often as, the corporation shall be in default in the payment of the equivalent of the full dividends on any series of Serial Preferred Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods (whether or not consecutive) which in the aggregate contain at least 540 days, the holders of Serial Preferred Shares of all series, voting separately as a class, shall be entitled to elect, as herein provided, two members of the Board of Directors of the corporation; provided, however, that the holders of Serial Preferred Shares shall not have or exercise such special class voting rights except at meetings of such shareholders for

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the election of directors at which the holders of not less than 50% of the outstanding Serial Preferred Shares of all series then outstanding are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on the Serial Preferred Shares of all series then outstanding shall have been paid, whereupon the holders of Serial Preferred Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph.

     (2) In the event of default entitling the holders of Serial Preferred Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the corporation upon written request of, or may be called by, the holders of record of at least 10% of the Serial Preferred Shares of all series at the time outstanding, and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 120 days after the date of receipt of the foregoing written request from the holders of Serial Preferred Shares. At any meeting at which the holders of Serial Preferred Shares shall be entitled to elect directors, the holders of 50% of the Serial Preferred Shares of all series at the time outstanding, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which the holders of Serial Preferred Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended Articles of Incorporation or the Code of Regulations of the corporation or any action taken by the holders of any class of shares fixing the number of directors of the corporation, the two directors who may be elected by the holders of Serial Preferred Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of directors of the corporation nor require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the corporation, the two directors elected by the holders of Serial Preferred Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.

     (3) Upon any divesting of the special class voting rights of the holders of the Serial Preferred Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

     (c) The affirmative vote or consent of the holders of at least two-thirds of the Serial Preferred Shares at the time outstanding, voting or consenting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect any one or more of the following (but so far as the holders of Serial Preferred Shares are concerned, such action may be effected with such vote or consent):

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     (1) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended Articles of Incorporation or of the Code of Regulations of the corporation which affects adversely the preferences or voting or other rights of the holders of Serial Preferred Shares; provided, however, neither the amendment of the Amended Articles of Incorporation so as to authorize, create or change the authorized or outstanding number of Serial Preferred Shares or of any shares ranking on a parity with or junior to the Serial Preferred Shares nor the amendment of the provisions of the Code of Regulations so as to change the number of directors of the corporation shall be deemed to affect adversely the preferences or voting or other rights of the holders of Serial Preferred Shares; and provided further, that if such amendment, alteration or repeal affects adversely the preferences or voting or other rights of one or more but not all series of Serial Preferred Shares at the time outstanding, only the affirmative vote or consent of the holders of at least two-thirds of the number of the shares at the time outstanding of the series so affected shall be required;

     (2) The authorization, creation or the increase in the authorized number of any shares, or any security convertible into shares, in either case ranking prior to the Serial Preferred Shares; or

     (3) The purchase or redemption (for sinking fund purposes or otherwise) of less than all of the Serial Preferred Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Serial Preferred Shares, unless all dividends on all Serial Preferred Shares then outstanding for all previous dividend periods shall have been declared and paid or funds therefor set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.

     Section 6. Pre-emptive Rights. No holder of Serial Preferred Shares as such, shall have any pre-emptive right to purchase, have offered to him for purchase or subscribe for any of the corporation’s shares or other securities of any class, whether now or hereafter authorized.

     Section 7. Definitions. For the purposes of this Division:

     (a) Whenever reference is made to shares “ranking prior to the Serial Preferred Shares,” such reference shall mean and include all shares of the corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation are given preference over the rights of the holders of Serial Preferred Shares;

     (b) Whenever reference is made to shares “on a parity with the Serial Preferred Shares,” such reference shall mean and include all Voting Preference Shares and all other shares of the corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation rank equally (except as to the amounts fixed therefor) with the rights of the holders of Serial Preferred Shares; and

     (c) Whenever reference is made to shares “ranking junior to the Serial Preferred Shares,” such reference shall mean and include all shares of the corporation other than those defined under Subsections (a) and (b) of this Section as shares “ranking prior to” or “on a parity with” the Serial Preferred Shares.

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DIVISION B

     The Voting Preference Shares shall have the following express terms:

     Section 1. Series. The Voting Preference Shares may be issued from time to time in one or more series. All shares of Voting Preference Shares shall be of equal rank and shall be identical, except in respect of the matters that may be fixed by the Board of Directors as hereinafter provided, and each share of a series shall be identical with all other shares of such series, except as to the dates from which dividends shall accrue and be cumulative. All Voting Preference Shares shall rank on a parity with and be identical to all Serial Preferred Shares except in respect of (i) the matters that may be fixed by the Board of Directors as provided in clauses (a) through (i), both inclusive, of this Section and (ii) the voting rights and provisions for consents relating to Voting Preference Shares as fixed and determined by Section 5 of this Division. Subject to the provisions of Sections 2 through 7, both inclusive, of this Division, which provisions shall apply to all Voting Preference Shares, the Board of Directors hereby is authorized to cause such shares to be issued in one or more series and with respect to each such series to determine and fix prior to the issuance thereof (and thereafter, to the extent provided in clause (b) of this Section) the following:

     (a) The designation of the series, which may be by distinguishing number, letter or title;

     (b) The authorized number of shares of the series, which number the Board of Directors may (except where otherwise provided in the creation of the series) increase or decrease from time to time before or after the issuance thereof (but not below the number of             shares thereof then outstanding);

     (c) The dividend rate or rates of the series;

     (d) The dates on which and the period or periods for which dividends, if declared, shall be payable and the date or dates from which dividends shall accrue and be cumulative;

     (e) The redemption rights and price or prices, if any, for shares of the series;

     (f) The terms and amount of the sinking fund, if any, for the purchase or redemption of shares of the series;

     (g) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation;

     (h) Whether the shares of the series shall be convertible into Common Shares or shares of any other class and, if so, the conversion rate or rates or price or prices, any adjustments thereof and all other terms and conditions upon which such conversion may be made; and

     (i) Restrictions (in addition to those set forth in Subsection 5(c) of this Division) on the issuance of shares of the same series or of any other class or series.

     The Board of Directors is authorized to adopt from time to time amendments to the Amended Articles of Incorporation fixing, with respect to each such series, the matters described in clauses (a) through (i), both inclusive, of this Section and is authorized to take such actions with respect thereto as may be required by law in order to effect such amendments.

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     Section 2. Dividends.

     (a) The holders of Voting Preference Shares of each series, in preference to the holders of Common Shares and of any other class of shares ranking junior to the Voting Preference Shares, shall be entitled to receive out of any funds legally available for Voting Preference Shares and Serial Preferred Shares and when and as declared by the Board of Directors, dividends in cash at the rate or rates for such series fixed in accordance with the provisions of Section 1 of this Division and no more, payable on the dates fixed for such series. Such dividends shall accrue and be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends shall be paid upon or declared or set apart for any series of the Voting Preference Shares for any dividend period unless at the same time (1) a like proportionate dividend for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective annual dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Voting Preference Shares of all series then issued and outstanding and entitled to receive such dividend and (2) the dividends payable for the dividend periods terminating on the same or any earlier date, ratably in proportion to the respective dividend rates fixed therefor, shall have been paid upon or declared or set apart for all Serial Preferred Shares of all series then issued and outstanding and entitled to receive such dividend.

     (b) So long as any Voting Preference Shares shall be outstanding no dividend, except a dividend payable in Common Shares or other shares ranking junior to the Voting Preference Shares, shall be paid or declared or any distribution be made, except as aforesaid, in respect of the Common Shares or any other shares ranking junior to the Voting Preference Shares, nor shall any Common Shares or any other shares ranking junior to the Voting Preference Shares be purchased, retired or otherwise acquired by the corporation, except out of the proceeds of the sale of Common Shares or other shares of the corporation ranking junior to the Voting Preference Shares received by the corporation subsequent to the date of first issuance of Voting Preference Shares of any series, unless:

     (1) All accrued and unpaid dividends on Voting Preference Shares, including the full dividends for all current dividend periods, shall have been declared and paid or a sum sufficient for payment thereof set apart; and

     (2) There shall be no arrearages with respect to the redemption of Voting Preference Shares of any series from any sinking fund provided for shares of such series in accordance with the provisions of Section 1 of this Division.

        Section 3. Redemption.

     (a) Subject to the express terms of each series and the provisions of Subsection 5(c)(6) of this Division, the corporation:

     (1) May, from time to time at the option of the Board of Directors, redeem all or any part of any redeemable series of Voting Preference Shares at the time outstanding at the applicable redemption price for such series fixed in accordance with the provisions of Section 1 of this Division; and

     (2) Shall, from time to time, make such redemptions of each series of Voting Preference Shares as may be required to fulfill the requirements of any sinking fund provided for shares of such series at the applicable sinking fund redemption price fixed in accordance with the provisions of Section 1 of this Division;

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and shall in each case pay all accrued and unpaid dividends to the redemption date.

(b) (1) Notice of every such redemption shall be mailed, postage prepaid, to the holders of record of the Voting Preference Shares to be redeemed at their respective addresses then appearing on the books of the corporation, not less than 30 days nor more than 60 days prior to the date fixed for such redemption, or such other time prior thereto as the Board of Directors shall fix for any series pursuant to Section 1 of this Division prior to the issuance thereof. At any time after notice as provided above has been deposited in the mail, the corporation may deposit the aggregate redemption price of Voting Preference Shares to be redeemed, together with accrued and unpaid dividends thereon to the redemption date, with any bank or trust company in Cleveland, Ohio or New York, New York, having capital and surplus of not less than $100,000,000, named in such notice and direct that there be paid to the respective holders of the Voting Preference Shares so to be redeemed amounts equal to the redemption price of the Voting Preference Shares so to be redeemed, together with such accrued and unpaid dividends thereon, on surrender of the share certificate or certificates held by such holders; and upon the deposit of such notice in the mail and the making of such deposit of money with such bank or trust company, such holders shall cease to be shareholders with respect to such shares; and from and after the time such notice shall have been so deposited and such deposit of money shall have been so made, such holders shall have no rights or claim against the corporation with respect to such shares, except only the right to receive such money from such bank or trust company without interest or to exercise before the redemption date any unexpired privileges of conversion. In the event less than all of the outstanding Voting Preference Shares are to be redeemed, the corporation shall select by lot the shares so to be redeemed in such manner as shall be prescribed by the Board of Directors.

     (2) If the holders of Voting Preference Shares which have been called for redemption shall not within six years after such deposit claim the amount deposited for the redemption thereof, any such bank or trust company shall, upon demand, pay over to the corporation such unclaimed amounts and thereupon such bank or trust company and the corporation shall be relieved of all responsibility in respect thereof and to such holders.

     (c) Any Voting Preference Shares which are (1) redeemed by the corporation pursuant to the provisions of this Section, (2) purchased and delivered in satisfaction of any sinking fund requirements provided for shares of such series, (3) converted in accordance with the express terms thereof, or (4) otherwise acquired by the corporation, shall resume the status of authorized but unissued Voting Preference Shares without serial designation.

       Section 4. Liquidation.

(a) (1) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation, the holders of Voting Preference Shares of any series shall be entitled to receive in full out of the assets of the corporation, including its capital, before any amount shall be paid or distributed among the holders of the Common Shares or any other shares ranking junior to the Voting Preference Shares, the amounts fixed with respect to shares of such series in accordance with Section 1 of this Division, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment of the amount due pursuant to such liquidation, dissolution or winding up of the affairs of the corporation. In the event the net assets of the corporation legally available

- 18 -

therefor are insufficient to permit the payment upon all outstanding Voting Preference Shares and Serial Preferred Shares of the full preferential amount to which they are respectively entitled, then such net assets shall be distributed ratably upon all outstanding Voting Preference Shares and Serial Preferred Shares in proportion to the full preferential amount to which each such share is entitled.

     (2) After payment to the holders of Voting Preference Shares of the full preferential amounts as aforesaid, the holders of Voting Preference Shares, as such, shall have no right or claim to any of the remaining assets of the corporation.

     (b) The merger or consolidation of the corporation into or with any other corporation, the merger of any other corporation into it, or the sale, lease or conveyance of all or substantially all the assets of the corporation, shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this Section.

       Section 5. Voting.

     (a) The holders of Voting Preference Shares shall be entitled at all times to one vote for each share and, except as otherwise provided in this Section or required by law, the holders of Voting Preference Shares and the holders of Common Shares shall vote together as a class on all matters presented, subject, however, to the special voting rights of the holders of Serial Preferred Shares as provided in Section 5 of Division A hereof.

(b) (1) If, and so often as, the corporation shall be in default in the payment of the equivalent of the full dividends on any series of Voting Preference Shares at the time outstanding, whether or not earned or declared, for a number of dividend payment periods (whether or not consecutive) which in the aggregate contain at least 540 days, the holders of Voting Preference Shares of all series, voting separately as a class, shall be entitled to elect, as herein provided, two members of the Board of Directors of the corporation; provided, however, that the holders of Voting Preference Shares shall not have or exercise such special class voting rights except at meetings of such shareholders for the election of directors at which the holders of not less than 50% of the outstanding Voting Preference Shares of all series then outstanding are present in person or by proxy; and provided further that the special class voting rights provided for in this paragraph when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on the Voting Preference Shares of all series then outstanding shall have been paid, whereupon the holders of Voting Preference Shares shall be divested of their special class voting rights in respect of subsequent elections of directors, subject to the revesting of such special class voting rights in the event above specified in this paragraph.

     (2) In the event of default entitling the holders of Voting Preference Shares to elect two directors as specified in paragraph (1) of this Subsection, a special meeting of such holders for the purpose of electing such directors shall be called by the Secretary of the corporation upon written request of, or may be called by, the holders of record of at least 10% of the Voting Preference Shares of all series at the time outstanding, and notice thereof shall be given in the same manner as that required for the annual meeting of shareholders; provided, however, that the corporation shall not be required to call such special meeting if the annual meeting of shareholders shall be called to be held within 120 days after the date of receipt of the foregoing written request from the holders of Voting Preference Shares. At any meeting at which the holders of Voting Preference Shares shall be entitled to elect directors, the holders of 50% of the Voting Preference

- 19 -

Shares of all series at the time outstanding, present in person or by proxy, shall be sufficient to constitute a quorum, and the vote of the holders of a majority of such shares so present at any such meeting at which there shall be such a quorum shall be sufficient to elect the members of the Board of Directors which the holders of Voting Preference Shares are entitled to elect as herein provided. Notwithstanding any provision of these Amended Articles of Incorporation or the Code of Regulations of the corporation or any action taken by the holders of any class of shares fixing the number of directors of the corporation, the two directors who may be elected by the holders of Voting Preference Shares pursuant to this Subsection shall serve in addition to any other directors then in office or proposed to be elected otherwise than pursuant to this Subsection. Nothing in this Subsection shall prevent any change otherwise permitted in the total number of directors of the corporation or require the resignation of any director elected otherwise than pursuant to this Subsection. Notwithstanding any classification of the other directors of the corporation, the two directors elected by the holders of Voting Preference Shares shall be elected annually for terms expiring at the next succeeding annual meeting of shareholders.

     (3) Upon any divesting of the special class voting rights of the holders of the Voting Preference Shares in respect of elections of directors as provided in this Subsection, the terms of office of all directors then in office elected by such holders shall terminate immediately thereupon. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, removal from office or otherwise, the remaining director elected by such holders voting as a class may elect a successor who shall hold office for the unexpired term in respect of which such vacancy occurred.

     (c) The affirmative vote or consent of the holders of at least two-thirds of the Voting Preference Shares at the time outstanding, voting or consenting separately as a class, given in person or by proxy either in writing or at a meeting called for the purpose, shall be necessary to effect any one or more of the following (but so far as the holders of Voting Preference Shares are concerned, such action may be effected with such vote or consent):

     (1) The sale, lease or conveyance by the corporation of all or substantially all of its assets;

     (2) The merger or consolidation of the corporation into or with any other corporation or the merger of any other corporation into it;

     (3) The voluntary liquidation, dissolution or winding up of the affairs of the corporation;

     (4) Any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended Articles of Incorporation or of the Code of Regulations of the corporation which affects adversely the preferences or voting or other rights of the holders of Voting Preference Shares; provided, however, that for the purpose of this paragraph only, neither the amendment of the Amended Articles of Incorporation so as to authorize, create or change the authorized or outstanding number of Voting Preference Shares or of any shares ranking on a parity with or junior to the Voting Preference Shares nor the amendment of the provisions of the Code of Regulations so as to change the number of directors of the corporation shall be deemed to affect adversely the preferences or voting or other rights of the holders of Voting Preference Shares; and provided further, that if such amendment, alteration or repeal

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affects adversely the preferences or voting or other rights of one or more but not all series of Voting Preference Shares at the time outstanding, only the affirmative vote or consent of the holders of at least two-thirds of the number of the shares at the time outstanding of the series so affected shall be required;

     (5) The authorization, creation or the increase in the authorized amount of any shares, or any security convertible into shares, in either case ranking prior to the Voting Preference Shares; or

     (6) The purchase or redemption (for sinking fund purposes or otherwise) of less than all of the Voting Preference Shares then outstanding except in accordance with a stock purchase offer made to all holders of record of Voting Preference Shares, unless all dividends on all Voting Preference Shares then outstanding for all previous dividend periods shall have been declared and paid or funds therefore set apart and all accrued sinking fund obligations applicable thereto shall have been complied with.

     Section 6. Pre-emptive Rights. No holder of Voting Preference Shares as such shall have any preemptive right to purchase or subscribe for any of the corporation’s shares or other securities of any class, whether now or hereafter authorized.

     Section 7. Definitions. For the purposes of this Division:

     (a) Whenever reference is made to shares “ranking prior to the Voting Preference Shares,” such reference shall mean and include all shares of the corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation are given preference over the rights of the holders of Voting Preference Shares;

     (b) Whenever reference is made to shares “on a parity with the Voting Preference Shares,” such reference shall mean and include all Serial Preferred Shares and all other shares of the corporation in respect of which the rights of the holders thereof as to the payment of dividends or as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation rank equally (except as to the amounts fixed therefor) with the rights of the holders of Voting Preference Shares; and

     (c) Whenever reference is made to shares “ranking junior to the Voting Preference Shares,” such reference shall mean and include all shares of the corporation other than those defined under Subsections (a) and (b) of this Section as shares “ranking prior to” or “on a parity with” the Voting Preference Shares.

DIVISION C

     The Common Shares shall have the following express terms:

     The Common Shares shall be subject to the express terms of the Serial Preferred Shares and any series thereof and to the express terms of the Voting Preference Shares and any series thereof. Each Common Share shall be equal to every other Common Share and the holders thereof shall be entitled to one vote for each Common Share on all matters presented. No holder of Common Shares shall have any pre-emptive right to purchase or subscribe for any of the corporation’s shares or other securities of any class, whether now or hereafter authorized.

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     IN WITNESS WHEREOF, Peter B. Lewis, President, and David M. Schneider, Secretary, of The Progressive Corporation, acting for and on its behalf do hereunto subscribe their names this 19th day of April, 1991.

/s/ Peter B. Lewis

Peter B. Lewis, President

/s/ David M. Schneider

David M. Schneider, Secretary

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CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

     PETER B. LEWIS, President, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, an Ohio corporation for profit with its principal office in Mayfield Village, Cuyahoga County, Ohio (the “Company”), do hereby certify that a Written Action Taken Without A Meeting of the Executive Committee of the Board of Directors of the Company was duly executed by all members of the Executive Committee of the Board of Directors and that the following resolution to amend the Amended Articles of Incorporation of the Company was adopted pursuant to said Written Action Taken Without A Meeting by the Executive Committee of the Board of Directors of the Company pursuant to the authority of Section 1701.70(B)(1) and 1701.73(A) of the Ohio Revised Code and Section 1 of Division A of Article Fourth of said Amended Articles of Incorporation:

     RESOLVED, that the Amended Articles of Incorporation of the Company be and they hereby are amended by adding at the end of Division A of Article FOURTH thereof a new Section 8 reading as follows:

     Section 8. 9 3/8% Serial Preferred Shares, Series A. Of the 20,000,000 authorized Serial Preferred Shares, without par value, 4,600,000 shares are designated as a series entitled “9 3/8% Serial Preferred Shares, Series A” (hereinafter called “Series A Shares”). The Series A Shares shall have the express terms set forth in this Division as being applicable to all Serial Preferred Shares as a class and, in addition, the following express terms applicable to all Series A Share as a series of Serial Preferred Shares:

(a)	The annual dividend rate of the Series A Shares shall be 9-3/8% of the liquidation preference of $25.00 per share.
(b)	Dividends on Series A Shares shall be payable, if declared, quarterly on March 31, June 30, September 30 and December 31 of each year, the first quarterly dividend being payable, if declared, on June 30, 1991. The dividends payable for each full quarterly dividend period on each Series A Share shall be $.5859375.
	Dividends for the initial dividend period on the Series A Shares, or for any period shorter or longer than a full dividend period on the Series A Shares, shall be computed on the basis of 30-day months and a 360-day year. The aggregate dividend payable quarterly to each holder of Series A Shares shall be rounded to the nearest one cent with $.005 being rounded upward. Each dividend shall be payable to the holders of record on such record date, not less than 15 nor more than 30 days preceding the payment date thereof, as shall be fixed from time to time by the corporation’s Board of Directors.
(c)	Dividends on Series A Shares shall be cumulative as follows:

(1) With respect to shares included in the initial issue of Series A Shares and shares issued any time thereafter up to and including the record date for the payment of the first dividend on the initial issue of series A Shares, dividends shall be cumulative from the date of the initial issue of Series A Shares; and

-23-

(2) With respect to shares issued any time after the aforesaid record date, dividends shall be cumulative from the dividend payment date next preceding the date of issue of such shares, except that if such shares are issued during the period commencing the day after the record date for the payment of a dividend on Series A Shares and ending on the payment date of that dividend, dividends with respect to such shares shall be cumulative from that dividend payment date.

(d) Subject to the provisions of Subsection 5(c)(3) of this Division, the Series A Shares shall be redeemable in the manner provided in Subsections 3(b)(1) and (2) of this Division as follows:

(1)

Except as provided in clause (2) of this Subsection (d), the Series A Shares may not be redeemed prior to May 31, 1996. At any time or from time to time on and after May 31, 1996, the corporation, at its option, may redeem all or any part of the Series A Shares at a redemption price of $25.00 per share plus, in each case, an amount equal to all dividends accrued and unpaid thereon to the redemption date.

(2)

Prior to May 31, 1996, the corporation, at its option, may redeem all, but not less than all, of the outstanding Series A Shares if the holders of such shares shall be entitled to vote upon or consent to any amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Amended Articles of Incorporation or of the Code of Regulations of the corporation which affects adversely the preferences or voting or other rights of the holders of Series A Shares, as specified under Subsection 5(c)(1) of this Division, and all of the following conditions have been satisfied: (a) the corporation shall have requested the vote or consent of the holders of the Series A Shares to such amendment, alteration or repeal, stating in such request that failing the requisite favorable vote or consent the corporation will have the option to redeem such             shares, (b) the corporation shall not have received the requisite favorable vote or consent within 60 days after making such request (which shall be deemed to have been made upon the mailing of the notice of any meeting of holders of Series A Shares to vote upon such approval or grant such consent) and (c) such amendment, alteration or repeal, whether in connection with a merger, consolidation or otherwise, shall be effected on the date fixed for such redemption, which date shall be no more than one year after such request is made. Any such redemption shall be on notice as aforesaid at a redemption price of 425.00 per Series A Share plus an amount equal to all dividends accrued and unpaid thereon to the redemption date.

(e) The amount payable per Series A Share in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation shall be $25.00, plus an amount equal to all dividends accrued and unpaid thereon to the date of payment.

-24-

     IN WITNESS WHEREOF, Peter B. Lewis, President, and David M. Schneider, Secretary, of The Progressive Corporation, acting for and on its behalf do hereunto subscribe their names this fourteenth day of May, 1991.

/s/ Peter B. Lewis Peter B. Lewis, President

/s/ David M. Schneider David M. Schneider, Secretary

-25-

CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

PETER B. LEWIS, President, and DAVID M. SCHNEIDER, Secretary, of The Progressive Corporation, an Ohio corporation for profit with its principal office at Mayfield Village, Cuyahoga County, Ohio (the “Company”), do hereby certify that a meeting of the Shareholders of the Company was duly called and held on April 23, 1993 at which meeting a quorum of the shareholders was present in person, or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on a proposal to amend the Company’s Amended Articles of Incorporation, the following resolution was adopted:

RESOLVED, that the first paragraph of Article FOURTH of the Company’s Amended Articles of Incorporation, which precedes DIVISION A thereof be, and the same is, hereby amended and restated in its entirety to provide as follows:

FOURTH. The authorized number of shares of the corporation is 225,000,000, consisting of 20,000,000 Serial Preferred Shares, without par value (hereinafter called “Serial Preferred Shares”), 5,000,000 Voting Preference Shares, without par value (hereinafter called “Voting Preference Shares”), and 200,000,000 Common Shares, $1.00 par value (hereinafter called “Common Shares”).

IN WITNESS WHEREOF, Peter B. Lewis, President, and David M. Schneider, Secretary of The Progressive Corporation, acting for and on its behalf do hereunto subscribe their names this 23rd day of April, 1993.

/s/ Peter B. Lewis Peter B. Lewis, President

/s/ David M. Schneider David M. Schneider, Secretary

-26-

CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

DAVID M. SCHNEIDER, Secretary of the Progressive Corporation, an Ohio corporation for profit with its principal office at Mayfield Village, Cuyahoga County, Ohio (the “Company”), does hereby certify that a meeting of the Shareholders of the Company was duly called and held on April 24, 1998, at which meeting a quorum of the Shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on a proposal to amend the Company’s Amended Articles of Incorporation, the following resolution was adopted:

RESOLVED, that the first paragraph of Article FOURTH of the Company’s Amended Articles of Incorporation, which precedes DIVISION A thereof be, and the same is, hereby amended and restated in its entirety to provide as follows:

FOURTH. The authorized number of shares of the corporation is 325,000,000, consisting of 20,000,000 Serial Preferred Shares, without par value (hereinafter called “Serial Preferred Shares”), 5,000,000 Voting Preference Shares, without par value (hereinafter called “Voting Preference Shares”), and 300,000,000 Common Shares, $1.00 par value (hereinafter called “Common Shares”).

IN WITNESS WHEREOF, David M. Schneider, Secretary of The Progressive Corporation, acting for and on behalf of said corporation, does hereunto subscribe his name this 24th day of April, 1998.

/s/ David M. Schneider David M. Schneider, Secretary

-27-

CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION

          CHARLES E. JARRETT, Secretary of The Progressive Corporation, an Ohio corporation for profit with its principal office at Mayfield Village, Cuyahoga County, Ohio (the “Company”), does hereby certify that a meeting of the Shareholders of the Company was duly called and held on April 18, 2003, at which meeting a quorum of the Shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on a proposal to amend the Company’s Amended Articles of Incorporation, the following resolution was adopted:

RESOLVED, that the first paragraph of Article FOURTH of the Company’s Amended Articles of Incorporation, which precedes DIVISION A thereof be, and the same is, hereby amended and restated in its entirety to provide as follows:

Article FOURTH. The authorized number of shares of the corporation is 625,000,000, consisting of 20,000,000 Serial Preferred Shares, without par value (hereinafter called “Serial Preferred Shares”), 5,000,000 Voting Preference Shares, without par value (hereinafter called “Voting Preference Shares”), and 600,000,000 Common Shares, $1.00 par value (hereinafter called “Common Shares”).

          IN WITNESS WHEREOF, Charles E. Jarrett, Secretary of The Progressive Corporation, acting for and on behalf of said corporation, does hereunto subscribe his name this 18th day of April, 2003.

/s/ Charles E. Jarrett Charles E. Jarrett, Secretary

-28-

CERTIFICATE OF AMENDMENT
TO
AMENDED ARTICLES OF INCORPORATION
OF
THE PROGRESSIVE CORPORATION
(Charter No: 337395)

          CHARLES E. JARRETT, Secretary of The Progressive Corporation, an Ohio corporation for profit with its principal office at Mayfield Village, Cuyahoga County, Ohio (the “Company”), does hereby certify that a meeting of the Shareholders of the Company was duly called and held on April 21, 2006, at which meeting a quorum of the Shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Company on a proposal to amend the Company’s Amended Articles of Incorporation, the following resolution was adopted:

RESOLVED, that the first paragraph of Article FOURTH of the Company’s Amended Articles of Incorporation, which precedes DIVISION A thereof, be, and the same is, hereby amended and restated in its entirety to provide as follows:

Article FOURTH. The authorized number of shares of the corporation is 925,000,000, consisting of 20,000,000 Serial Preferred Shares, without par value (hereinafter called “Serial Preferred Shares”), 5,000,000 Voting Preference Shares, without par value (hereinafter called “Voting Preference Shares”), and 900,000,000 Common Shares, $1.00 par value (hereinafter called “Common Shares”).

          IN WITNESS WHEREOF, Charles E. Jarrett, Secretary of The Progressive Corporation, acting for and on behalf of said corporation, does hereunto subscribe his name this 21st day of April, 2006.

/s/ Charles E. Jarrett Charles E. Jarrett, Secretary

-29-

EX-10.A

Exhibit No. 10(A)

AMENDMENT TO
THE PROGRESSIVE CORPORATION
2006 GAINSHARING PLAN

Section 7 of the Plan is hereby amended to read as follows:

Subject to Paragraph 9 below, no later than December 31 of each Plan year, each participant will receive an initial payment in respect of his or her Annual Gainsharing Payment for that Plan year equal to 75% of an amount calculated on the basis of Paid Earnings for the first 24 pay periods of the Plan year, estimated earnings for the remainder of the Plan year and performance data through the first 11 months of the Plan year (estimated, if necessary). No later than February 15 of the following year, each participant will receive the balance of his or her Annual Gainsharing Payment, if any, for such Plan year, based on his or her Paid Earnings and performance data for the entire Plan year.

Any Plan participant who is then eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) may elect to defer all or a portion of the Annual Gainsharing Payment otherwise payable to him/her under this Plan, subject to and in accordance with the terms of the Deferral Plan.

EX-10.B

Exhibit No. 10(B)

AGREEMENT BETWEEN
DRIVE RESOURCE SERVICES COMPANY
AND ROBERT T. WILLIAMS

April 7, 2006

Robert T. Williams
603 Lantern Way
Aurora, OH 44202

Dear Bob:

This Letter Agreement confirms and formalizes the agreement between you and Drive Resource Services Company (“Progressive”) regarding your separation from employment and all matters relating thereto.

In full consideration of your agreement to the terms and conditions set forth below, as acknowledged by your signature of this Letter Agreement, Progressive hereby agrees to the following:

1.	You will continue to perform services in accordance with your current job responsibilities until May 17, 2006 (the “Separation Date”).
2.	Progressive shall continue to pay salary to you on a bi-weekly basis at your current level of compensation through the Separation Date.
3.	You and your qualifying dependents will continue to be entitled to medical, dental, vision, long-term disability and life insurance, and access to services at Progressive’s Primary Care Centers and other benefits under The Progressive Health, Life and Disability Benefits Plan at your present level of benefits and coverage until the Separation Date.

You are entitled to any and all rights available to you in accordance with The Progressive Corporation 1995 Incentive Plan and The Progressive Corporation 2003 Incentive Plan and any non-Qualified Stock Option Agreement or Restricted Stock Agreement between you and Progressive.

You agree that for a period of twenty-four (24) months from the Separation Date, you will not, in any capacity, including that of employee, agent, partner, consultant, or otherwise, on behalf of yourself or any business or entity, compete with the business of any insurance company owned in whole or in part by The Progressive Corporation or any of its subsidiaries. “Competing” shall include, without limitation, the soliciting, selling, underwriting or marketing of any personal lines automobile, special lines or commercial automobile insurance product or service.

You agree that you will maintain the confidentiality of confidential information which you have received by virtue of your employment with Progressive and will refrain from using such information or disclosing it to anyone other than Progressive or its employees. For purposes of this Agreement, confidential information is information which Progressive endeavors to keep confidential, including, without limitation, customer lists, employee lists or other information about Progressive employees, rate schedules, underwriting information, the terms of contracts and policies, marketing plans, program designs, trade secrets, proprietary information, and any such information provided by a third party to Progressive in confidence. You represent that prior to the Separation Date, you will return to Progressive any materials in your possession containing confidential information of Progressive or records which are the property of Progressive

Please acknowledge your agreement to the foregoing by signing where indicated below.

Very truly yours,
DRIVE RESOURCE SERVICES COMPANY
By:	/s/ Dane A. Shrallow Dane A. Shrallow, Secretary

AGREED AND ACCEPTED:

/s/ Robert T. Williams Robert T. Williams

April 7, 2007

Date

EX-12

Exhibit No. 12

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

	Three Months Ended
	March 31,
	2006			2005
Income before income taxes	$	647.5		$	614.7
Fixed Charges:
Interest and amortization on indebtedness		21.0			21.0
Portion of rents representative of the interest factor		5.4			2.8
Total fixed charges		26.4			23.8
Interest capitalized, net of amortized interest		(.4	)		—
Total income available for fixed charges	$	673.5		$	638.5
Ratio of earnings to fixed charges		25.5			26.8

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 4, 2006	/s/ Glenn M. Renwick Glenn M. Renwick
	President and Chief Executive Officer

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 4, 2006
	/s/ W. Thomas Forrester W. Thomas Forrester
	Vice President and Chief Financial Officer

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 September 30, 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 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Glenn M. Renwick Glenn M. Renwick

President and Chief Executive Officer

May 4, 2006

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 September 30, 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 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ W. Thomas Forrester W. Thomas Forrester

Vice President and Chief Financial Officer

May 4, 2006