EX-99 2 l20834aexv99.htm EX-99: PRESS RELEASE EX-99
 

Exhibit 99
     
(PROGRESSIVE LOGO)
  NEWS
RELEASE
 
     
The Progressive Corporation
  Company Contact:
6300 Wilson Mills Road
  Thomas A. King
Mayfield Village, Ohio 44143
  (440)395-2260
http://www.progressive.com
    
 
As previously announced, the Company will host a simultaneous webcast of its 2006 Investor Relations Meeting on Thursday, June 15, 2006, beginning at 9:00 a.m. eastern time. The meeting will last approximately three hours and will include a question and answer session following the presentations. Information that is distributed at the meeting will be made available on the Company’s Web site on the morning of the meeting. To attend the webcast, visit the Company Web site at http://investors.progressive.com/events.asp.
FOR IMMEDIATE RELEASE
MAYFIELD VILLAGE, OHIO — June 14, 2006 — The Progressive Corporation today reported the following results for May 2006:
                         
(millions, except per share amounts and ratios)   May     May        
    2006     2005     Change  
Net premiums written
   $ 1,100.2     $ 1,070.9       3 %
Net premiums earned
     1,097.8       1,062.5       3 %
Net income
     125.8       126.1       0 %
Per share
     .16       .16       2 %
Combined ratio
     86.7       85.8     .9 pts.
See the “Income Statements” for further month and year-to-date information and the Monthly Commentary at the end of this release for additional discussion . All share and per share amounts in this release have been adjusted to reflect Progressive’s May 18, 2006, 4-for-1 stock split.
     Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines business units write insurance for private passenger automobiles and recreational vehicles. Our Commercial Auto business unit writes primary liability, physical damage and other auto-related insurance for automobiles and trucks owned by small businesses. See “Supplemental Information” for month and year-to-date results.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
May 2006
(millions — except per share amounts)
(unaudited)
             
    Current      
    Month     Comments on Monthly Results1
 
            
Direct premiums written
   $ 1,125.1      
 
          
 
            
Net premiums written
   $ 1,100.2      
 
          
 
            
Revenues:
            
Net premiums earned
   $ 1,097.8      
Investment income
     53.6      
Net realized gains (losses) on securities
     (6.7 )   Includes $.8 million of write-downs on securities determined to have other-than-temporary declines in market value.
Service revenues
     2.7      
 
          
Total revenues
     1,147.4      
 
          
Expenses:
            
Losses and loss adjustment expenses
     735.1      
Policy acquisition costs
     112.0      
Other underwriting expenses
     104.6      
Investment expenses
     1.2      
Service expenses
     2.0      
Interest expense
     6.7      
 
          
Total expenses
     961.6      
 
          
 
            
Income before income taxes
     185.8      
Provision for income taxes
     60.0      
 
          
Net income
   $ 125.8      
 
          
 
            
COMPUTATION OF EARNINGS PER SHARE
            
Basic:
            
Average shares outstanding
     774.8      
 
          
Per share
   $ .16      
 
          
Diluted:
            
Average shares outstanding
     774.8      
Net effect of dilutive stock-based compensation
     9.8      
 
          
Total equivalent shares
     784.6      
 
          
Per share
   $ .16      
 
          
1See the Monthly Commentary at the end of this release for additional discussion. For a description of our reporting and accounting policies, see Note 1 to our 2005 audited consolidated financial statements included in our 2005 Shareholders’ Report, which can be found at www.progressive.com/annualreport.
 
The following table sets forth the investment results for the month:
             
 
   Fully taxable equivalent total return:        
 
      Fixed-income securities     .3 %
 
      Common stocks     (2.9 )%
 
      Total portfolio     (.2 )%
 
            
 
   Pretax recurring investment book yield     4.6 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
May 2006 Year-to-Date
(millions — except per share amounts)
(unaudited)
                         
    Year-to-Date        
                    %  
    2006     2005     Change  
Direct premiums written
   $ 6,390.1     $ 6,240.2       2  
 
                    
Net premiums written
   $ 6,266.7     $ 6,106.1       3  
 
                    
 
                        
Revenues:
                        
Net premiums earned
   $ 5,968.0     $ 5,734.2       4  
Investment income
     254.1       202.3       26  
Net realized gains (losses) on securities
     (2.2 )     7.1     NM  
Service revenues
     14.1       18.4       (23 )
 
                    
Total revenues
     6,234.0       5,962.0       5  
 
                    
Expenses:
                        
Losses and loss adjustment expenses
     3,923.5       3,716.7       6  
Policy acquisition costs
     615.4       609.2       1  
Other underwriting expenses
     573.2       561.4       2  
Investment expenses
     5.1       4.9       4  
Service expenses
     11.1       10.1       10  
Interest expense
     33.9       34.6       (2 )
 
                    
Total expenses
     5,162.2       4,936.9       5  
 
                    
 
                        
Income before income taxes
     1,071.8       1,025.1       5  
Provision for income taxes
     349.8       338.7       3  
 
                    
Net income
   $ 722.0     $ 686.4       5  
 
                    
 
                        
COMPUTATION OF EARNINGS PER SHARE
                        
Basic:
                        
Average shares outstanding
     783.7       793.5       (1 )
 
                    
Per share
   $ .92     $ .87       7  
 
                    
Diluted:
                        
Average shares outstanding
     783.7       793.5       (1 )
Net effect of dilutive stock-based compensation
     10.2       11.6       (12 )
 
                    
Total equivalent shares
     793.9       805.1       (1 )
 
                    
Per share
   $ .91     $ .85       7  
 
                    
NM = Not Meaningful
The following table sets forth the investment results for the year-to-date period:
                     
        2006     2005  
 
   Fully taxable equivalent total return:                
 
      Fixed-income securities     1.0 %     1.7 %
 
      Common stocks     3.1 %     (.1 )%
 
      Total portfolio     1.3 %     1.4 %
 
                    
 
   Pretax recurring investment book yield     4.4 %     3.8 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
May 2006
($ in millions)
(unaudited)
Current Month
                                                 
    Personal Lines     Commercial              
                          Auto     Other     Companywide  
    Drive     Direct     Total     Business     Businesses1     Total  
Net Premiums Written
   $ 612.1     $ 327.5     $ 939.6     $ 158.4     $ 2.2     $ 1,100.2  
% Growth in NPW
     0 %     6 %     2 %     9 %   NM       3 %
Net Premiums Earned
   $ 614.6     $ 336.3     $ 950.9     $ 145.2     $ 1.7     $ 1,097.8  
% Growth in NPE
     (1 )%     7 %     2 %     14 %   NM       3 %
 
                                                
GAAP Ratios
                                                
Loss/LAE ratio
     69.9       67.2       69.0       55.4     NM       67.0  
Expense ratio
     19.8       19.8       19.8       18.9     NM       19.7  
 
                                    
Combined ratio
     89.7       87.0       88.8       74.3     NM       86.7  
 
                                    
 
                                                
Actuarial Adjustments2
                                                
Reserve Decrease/(Increase)
                                                
Prior accident years
                                           $ 15.9  
Current accident year
                                             6.8  
 
                                              
Calendar year actuarial adjustment
   $ 9.5     $ 5.5     $ 15.0     $ 7.7     $ —     $ 22.7  
 
                                              
 
                                                
Prior Accident Years Development
                                                
Favorable/(Unfavorable)
                                               
Actuarial adjustment
                                           $ 15.9  
All other development
                                             7.8  
 
                                              
Total development
                                           $ 23.7  
 
                                              
 
                                                
Calendar year loss/LAE ratio
                                             67.0  
 
                                              
Accident year loss/LAE ratio
                                             69.2  
 
                                              
 
                                                
Statutory Ratios
                                                
Loss/LAE ratio
                                             67.0  
Expense ratio
                                             19.7  
 
                                              
Combined ratio
                                             86.7  
 
                                              
NM = Not Meaningful
1Primarily includes professional liability insurance for community banks and Progressive’s run-off businesses. The other businesses generated an underwriting profit of $1.8 million for the month.
2Represents adjustments solely based on our corporate actuarial reviews.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
May 2006 Year-to-Date
($ in millions)
(unaudited)
Year-to-Date
                                                 
    Personal Lines     Commercial              
                          Auto     Other     Companywide  
    Drive     Direct     Total     Business     Businesses1     Total  
Net Premiums Written
   $ 3,473.6     $ 1,911.1     $ 5,384.7     $ 870.1     $ 11.9     $ 6,266.7  
% Growth in NPW
     (1 )%     6 %     1 %     13 %   NM       3 %
Net Premiums Earned
   $ 3,370.1     $ 1,822.6     $ 5,192.7     $ 764.7     $ 10.6     $ 5,968.0  
% Growth in NPE
     0 %     9 %     3 %     13 %   NM       4 %
 
                                                
GAAP Ratios
                                                
Loss/LAE ratio
     67.0       66.3       66.8       59.6     NM       65.8  
Expense ratio
     20.1       19.9       20.0       19.1     NM       19.9  
 
                                    
Combined ratio
     87.1       86.2       86.8       78.7     NM       85.7  
 
                                    
 
                                                
Actuarial Adjustments2
                                                
Reserve Decrease/(Increase)
                                                
Prior accident years
                                           $ 85.3  
Current accident year
                                             16.2  
 
                                              
Calendar year actuarial adjustment
   $ 53.8     $ 25.8     $ 79.6     $ 21.7     $ .2     $ 101.5  
 
                                              
 
                                                
Prior Accident Years Development
                                                
Favorable/(Unfavorable)
                                                
Actuarial adjustment
                                           $ 85.3  
All other development
                                             70.0  
 
                                              
Total development
                                           $ 155.3  
 
                                              
 
                                                
Calendar year loss/LAE ratio
                                             65.8  
 
                                              
Accident year loss/LAE ratio
                                             68.4  
 
                                              
 
                                                
Statutory Ratios
                                                
Loss/LAE ratio
                                             65.8  
Expense ratio
                                             19.5  
 
                                              
Combined ratio
                                             85.3  
 
                                              
 
                                                
Statutory Surplus
                                           $ 5,436.3  
 
                                              
 
                                                
NM = Not Meaningful
                                                
                         
    May     May        
Policies in Force   2006     2005     Change  
(in thousands)                        
Drive — Auto
     4,558       4,482       2 %
Direct — Auto
     2,403       2,252       7 %
Special Lines3
     2,830       2,555       11 %
 
                    
Total Personal Lines
     9,791       9,289       5 %
 
                    
Commercial Auto Business
     497       449       11 %
 
                    
1 The other businesses generated an underwriting profit of $5.8 million.
2 Represents adjustments solely based on our corporate actuarial reviews.
3 Includes insurance for motorcycles, recreational vehicles, mobile homes, watercraft, snowmobiles and similar items.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions— except per share amounts)
(unaudited)
         
    May  
    2006  
CONDENSED GAAP BALANCE SHEET:1
        
Investments — Available-for-sale, at market:
        
Fixed maturities (amortized cost: $10,632.8)
   $ 10,459.2  
Equity securities:
        
Preferred stocks (cost: $1,351.7)
     1,348.4  
Common equities (cost: $1,426.3)
     2,086.5  
Short-term investments (amortized cost: $3,453.5)
     3,454.0  
 
      
Total investments2
     17,348.1  
Net premiums receivable
     2,690.2  
Deferred acquisition costs
     478.3  
Other assets
     1,687.5  
 
      
Total assets
   $ 22,204.1  
 
      
 
        
Unearned premiums
   $ 4,635.5  
Loss and loss adjustment expense reserves
     5,691.3  
Other liabilities2
     4,172.4  
Debt
     1,285.2  
Shareholders’ equity
     6,419.7  
 
      
Total liabilities and shareholders’ equity
   $ 22,204.1  
 
      
Common Shares outstanding
     779.2  
Shares repurchased — May3
     2.3  
Average cost per share3
   NM  
Book value per share
   $ 8.24  
Trailing 12-month return on average shareholders’ equity
     23.8 %
Net unrealized pre-tax gains on investments
   $ 483.8  
Increase (decrease) from April 2006
   $ (81.3 )
Increase (decrease) from December 2005
   $ (116.3 )
Debt to total capital ratio
     16.7 %
Fixed-income portfolio duration
   3.1 Years
Weighted average credit quality
   AA  
Year-to-date Gainshare factor
     1.39  
NM = Not Meaningful
1Pursuant to SFAS 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts,” loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $339.7 million.
2Amounts include net unsettled security acquisitions, including repurchase commitments, of $2,725.5 million.
3Includes .3 million Common Shares repurchased prior to our 4-for-1 stock split at an average cost of $107.94 per share and 2.0 million Common Shares repurchased after the stock split at an average cost of $27.16; we did not split treasury shares.

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Monthly Commentary
•   We retired our $100 million, 7.30% Notes at maturity on June 1, 2006. This repayment is not reflected on the May 2006 Condensed GAAP Balance Sheet included in this release.
The Progressive Group of Insurance Companies, in business since 1937, ranks third in the nation for auto insurance based on premiums written and provides drivers with competitive rates and 24/7, in-person and online service. The products and services of the Progressive Direct Group of Insurance Companies are marketed directly to consumers by phone at 1-800-PROGRESSIVE and online at www.progressivedirect.com through the Progressive DirectSM brand. The Drive Group of Progressive Insurance Companies offers insurance through more than 30,000 independent insurance agencies that market their products and services through the Drive® Insurance from Progressive brand. For more information about Drive Insurance, go to www.driveinsurance.com. The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, are publicly traded at NYSE:PGR. More information, including a guide to interpreting the monthly reporting package, can be found at www.progressive.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this release that are not historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to estimates, assumptions and projections generally; inflation and changes in economic conditions (including changes in interest rates and financial markets); the accuracy and adequacy of the Company’s pricing and loss reserving methodologies; pricing competition and other initiatives by competitors; the Company’s ability to obtain regulatory approval for requested rate changes and the timing thereof; the effectiveness of the Company’s advertising campaigns; legislative and regulatory developments; 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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