EX-99 2 l26985aexv99.htm EX-99 EX-99
 

Exhibit 99
     
(PROGRESSIVE LOGO)   NEWS
RELEASE
     
The Progressive Corporation
  Company Contact:
6300 Wilson Mills Road
    Patrick Brennan
Mayfield Village, Ohio 44143
     (440)395-2370
http://www.progressive.com
    
Progressive is scheduled to hold a one-hour conference call to address questions on Friday, August 3, 2007, at 9:00 a.m. eastern time, subsequent to the posting of our Shareholders’ Report online and the filing of our Quarterly Report on Form 10-Q with the SEC. Registration for the teleconference and webcast is scheduled to be available at http://investors.progressive.com/events.asp on or after July 16, 2007.
PROGRESSIVE DISTRIBUTES JUNE RESULTS
MAYFIELD VILLAGE, OHIO — July 12, 2007 — The Progressive Corporation today reported the following results for June 2007:
                                                 
    Month     Quarter  
(millions, except per share amounts and ratios)   2007     2006     Change     2007     2006     Change  
Net premiums written
  $ 1,056.6     $ 1,089.6       (3 )%   $ 3,558.7     $ 3,679.6       (3 )%
Net premiums earned
     1,076.6       1,096.9       (2 )%     3,509.2       3,564.4       (2 )%
Net income
     65.4       115.0       (43 )%     283.7       400.4       (29 )%
Per share
     .09       .15       (39 )%     .39       .51       (24 )%
Pretax net realized gains (losses) on securities
     (10.0 )     (24.4 )     (59 )%     (6.6 )     (27.1 )     (76 )%
Combined ratio
     95.7       87.4     8.3 pts.      92.3       86.6     5.7 pts. 
Average diluted equivalent shares
     726.9       781.0       (7 )%     729.5       785.9       (7 )%
                         
    June     June        
(in thousands)   2007     2006     Change  
Policies in Force
                        
Total Personal Auto
     7,052.4       6,963.4       1 %
Total Special Lines
     3,081.7       2,870.7       7 %
Total Commercial Auto
     534.2       502.0       6 %
Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines Businesses write insurance for private passenger automobiles and recreational vehicles. Our Commercial Auto Business writes primary liability, physical damage and other auto-related insurance for automobiles and trucks owned by small businesses.
See the “Income Statements” and “Supplemental Information” for further month and year-to-date information and the “Monthly Commentary” at the end of this release for additional discussion.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
June 2007
(millions — except per share amounts)
(unaudited)
                 
    Current        
    Month     Comments on Monthly Results1  
Net premiums written
   $ 1,056.6          
 
              
 
                
Revenues:
                
Net premiums earned
   $ 1,076.6          
Investment income
     62.2          
Net realized gains (losses) on securities
     (10.0 )   Includes $10.6 million of write-downs on a security
determined to have an other-than-temporary decline in market
value.
Service revenues
     1.7          
 
              
Total revenues
     1,130.5          
 
              
Expenses:
                
Losses and loss adjustment expenses
     796.0          
Policy acquisition costs
     108.9          
Other underwriting expenses
     124.9          
Investment expenses
     2.4     Includes $1.4 million of expenses related to the issuance of
the 6.70% Fixed-to-Floating Rate Junior Subordinated
Debentures due 2067.
Service expenses
     1.1          
Interest expense
     8.1     Reflects additional interest accrued on new debt issuance.
 
              
Total expenses
     1,041.4          
 
              
 
                
Income before income taxes
     89.1          
Provision for income taxes
     23.7          
 
              
Net income
   $ 65.4          
 
              
 
                
COMPUTATION OF EARNINGS PER SHARE
                
Basic:
                
Average shares outstanding
     719.1          
 
              
Per share
   $ .09          
 
              
Diluted:
                
Average shares outstanding
     719.1          
Net effect of dilutive stock-based compensation
     7.8          
 
              
Total equivalent shares
     726.9          
 
              
Per share
   $ .09          
 
              
 
1   See 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 2006 audited consolidated financial statements included in our 2006 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
     .1 %
Common stocks
     (1.8 )%
Total portfolio
     (.2 )%
 
        
Pretax recurring investment book yield
     5.2 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
June 2007 Year-to-Date
(millions — except per share amounts)
(unaudited)
                     
    Year-to-Date      
                    %
    2007     2006     Change
Net premiums written
   $ 7,205.4     $ 7,356.3     (2)
 
                
 
                    
Revenues:
                    
Net premiums earned
   $ 7,003.0     $ 7,064.9     (1)
Investment income
     330.9       314.2     5
Net realized gains (losses) on securities
     16.7       (26.6 )   NM
Service revenues
     12.1       16.3     (26)
 
                
Total revenues
     7,362.7       7,368.8     0
 
                
Expenses:
                    
Losses and loss adjustment expenses
     4,888.9       4,667.0     5
Policy acquisition costs
     710.4       727.0     (2)
Other underwriting expenses
     767.1       676.5     13
Investment expenses
     7.4       5.9     25
Service expenses
     9.9       13.1     (24)
Interest expense
     39.4       39.9     (1)
 
                
Total expenses
     6,423.1       6,129.4     5
 
                
 
                    
Income before income taxes
     939.6       1,239.4     (24)
Provision for income taxes
     292.4       402.4     (27)
 
                
Net income
   $ 647.2     $ 837.0     (23)
 
                
 
                    
COMPUTATION OF EARNINGS PER SHARE
                    
Basic:
                    
Average shares outstanding
     729.7       783.2     (7)
 
                
Per share
   $ .89     $ 1.07     (17)
 
                
Diluted:
                    
Average shares outstanding
     729.7       783.2     (7)
Net effect of dilutive stock-based compensation
     7.6       10.2     (25)
 
                
Total equivalent shares
     737.3       793.4     (7)
 
                
Per share
   $ .88     $ 1.05     (17)
 
                
NM = Not Meaningful
The following table sets forth the investment results for the year-to-date period:
                 
    2007   2006
Fully taxable equivalent total return:
                
Fixed-income securities
     2.1 %     1.2 %
Common stocks
     7.5 %     3.4 %
Total portfolio
     3.0 %     1.5 %
 
                
Pretax recurring investment book yield
     4.7 %     4.5 %

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  THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
  SUPPLEMENTAL INFORMATION
  June 2007
  ($ in millions)
  (unaudited)
     Current Month
                                                 
                            Commercial              
    Personal Lines     Auto     Other     Companywide  
    Agency     Direct     Total     Business     Businesses1     Total  
Net Premiums Written
   $ 587.4     $ 320.4     $ 907.8     $ 147.3     $ 1.5     $ 1,056.6  
% Growth in NPW
     (4 )%     (1 )%     (3 )%     (3 )%   NM       (3 )%
Net Premiums Earned
   $ 593.3     $ 338.2     $ 931.5     $ 143.8     $ 1.3     $ 1,076.6  
% Growth in NPE
     (3 )%     0 %     (2 )%     (1 )%   NM       (2 )%
 
                                                
GAAP Ratios
                                                
Loss/LAE ratio
     75.5       72.4       74.3       71.9     NM       74.0  
Expense ratio
     21.6       21.7       21.7       21.5     NM       21.7  
     
Combined ratio
     97.1       94.1       96.0       93.4     NM       95.7  
     
 
                                                
Actuarial Adjustments2
                                                
Reserve Decrease/(Increase)
                                                
Prior accident years
                                           $ 1.9  
Current accident year
                                             (.4 )
 
                                              
Calendar year actuarial adjustment
   $ .8     $ 1.1     $ 1.9     $ (.1 )   $ (.3 )   $ 1.5  
 
                                              
 
                                                
Prior Accident Years Development
                                                
Favorable/(Unfavorable)
                                                
Actuarial adjustment
                                           $ 1.9  
All other development
                                             (25.5 )
 
                                              
Total development
                                           $ (23.6 )
 
                                              
 
                                                
Calendar year loss/LAE ratio
                                             74.0  
 
                                              
Accident year loss/LAE ratio
                                             71.8  
 
                                              
 
                                                
Statutory Ratios
                                                
Loss/LAE ratio
                                             74.0  
Expense ratio
                                             21.9  
 
                                              
Combined ratio
                                             95.9  
 
                                              
NM = Not Meaningful
 
1   Primarily includes professional liability insurance for community banks and Progressive’s run-off businesses. The other businesses generated an underwriting profit of $.2 million for the month.
 
2   Represents adjustments solely based on our corporate actuarial reviews.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
June 2007 Year-to-Date
($ in millions)
(unaudited)
Year-to-Date
                                                 
                            Commercial              
    Personal Lines     Auto     Other     Companywide  
    Agency     Direct     Total     Business     Businesses1     Total  
Net Premiums Written
   $ 3,952.4     $ 2,244.1     $ 6,196.5     $ 998.0     $ 10.9     $ 7,205.4  
% Growth in NPW
     (3 )%     0 %     (2 )%     (2 )%   NM       (2 )%
Net Premiums Earned
   $ 3,871.8     $ 2,193.7     $ 6,065.5     $ 926.7     $ 10.8     $ 7,003.0  
% Growth in NPE
     (3 )%     2 %     (1 )%     2 %   NM       (1 )%
 
                                                
GAAP Ratios
                                                
Loss/LAE ratio
     71.1       69.3       70.5       66.1     NM       69.8  
Expense ratio
     21.3       20.8       21.1       20.6     NM       21.1  
     
Combined ratio
     92.4       90.1       91.6       86.7     NM       90.9  
     
 
                                                
Actuarial Adjustments2
                                                
Reserve Decrease/(Increase)
                                                
Prior accident years
                                           $ 33.7  
Current accident year
                                             (2.2 )
 
                                              
Calendar year actuarial adjustment
   $ 17.2     $ 10.6     $ 27.8     $ 4.0     $ (.3 )   $ 31.5  
 
                                              
 
                                                
Prior Accident Years Development
                                                
Favorable/(Unfavorable)
                                                
Actuarial adjustment
                                           $ 33.7  
All other development
                                             (74.5 )
 
                                              
Total development
                                           $ (40.8 )
 
                                              
 
                                                
Calendar year loss/LAE ratio
                                             69.8  
 
                                              
Accident year loss/LAE ratio
                                             69.2  
 
                                              
 
                                                
Statutory Ratios
                                                
Loss/LAE ratio
                                             69.9  
Expense ratio
                                             20.8  
 
                                              
Combined ratio
                                             90.7  
 
                                              
 
                                                
Statutory Surplus
                                           $ 5,752.4  
 
                                              
NM = Not Meaningful
                         
    June   June    
    2007   2006   Change
Policies in Force
                        
(in thousands)
                        
Agency — Auto
     4,516.0       4,554.2       (1 )%
Direct — Auto
     2,536.4       2,409.2       5 %
Special Lines3
     3,081.7       2,870.7       7 %
             
Total Personal Lines
     10,134.1       9,834.1       3 %
             
Commercial Auto Business
     534.2       502.0       6 %
             
 
1   The other businesses generated an underwriting profit of $1.4 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, as well as a personal umbrella product.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions — except per share amounts)
(unaudited)
         
    June  
    2007  
CONDENSED GAAP BALANCE SHEET:1
        
Investments — Available-for-sale, at fair value:
        
Fixed maturities (amortized cost: $11,406.5)
   $ 11,317.8  
Equity securities:
        
Preferred stocks2 (cost: $2,050.0)
     2,052.4  
Common equities (cost: $1,495.6)
     2,532.1  
Short-term investments (amortized cost: $278.0)
     278.0  
 
      
Total investments3
     16,180.3  
Net premiums receivable
     2,617.3  
Deferred acquisition costs
     461.3  
Other assets
     1,814.7  
 
      
Total assets
   $ 21,073.6  
 
      
Unearned premiums
   $ 4,532.7  
Loss and loss adjustment expense reserves
     5,841.8  
Other liabilities3
     1,574.9  
Debt4
     2,173.1  
Shareholders’ equity
     6,951.1  
 
      
Total liabilities and shareholders’ equity
   $ 21,073.6  
 
      
 
Common Shares outstanding
     724.1  
Shares repurchased — June
     4.3  
Average cost per share
   $ 23.54  
Book value per share
   $ 9.60  
Trailing 12-month return on average shareholders’ equity
     21.3 %
Net unrealized pretax gains on investments
   $ 951.0  
Increase (decrease) from May 2007
   $ (96.4 )
Increase (decrease) from December 2006
   $ 32.8  
Debt-to-total capital ratio4
     23.8 %
Fixed-income portfolio duration
   3.4 years
Weighted average credit quality
   AA
Year-to-date Gainshare factor
     .75  
 
1   Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $323.3 million.
 
2   As of June 30, 2007, we held certain hybrid securities and recognized a change in fair value of $.8 million as realized losses during the period we held these securities.
 
3   Amounts include net unsettled security acquisitions of $69.3 million.
 
4   Reflects the issuance of $1 billion of 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067. See the monthly commentary for further discussion.

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Monthly Commentary
  •   On June 14, 2007, we announced a recapitalization plan that includes paying a $2.00 per Common Share extraordinary cash dividend in September 2007, the expected issuance of approximately $1 billion of hybrid debt securities and a new authorization to repurchase up to 100 million shares over the course of the next two years. On June 18, 2007, we issued $1 billion of 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”). The proceeds were $987.3 million, before $1.4 million of expenses related to the issuance. In addition, upon issuance of the Debentures, we closed a forecasted debt issuance hedge, which was entered into to hedge against a possible rise in interest rates, and recognized a $34.4 million gain as part of shareholders’ equity; the gain will be recognized as an adjustment to interest expense and amortized over the expected life of the Debentures.
 
  •   In June, the unfavorable prior accident year “All other development” primarily related to our reserve reviews of larger bodily injury and uninsured motorist exposures in both personal and commercial auto.
About Progressive
The Progressive Group of Insurance Companies, in business since 1937, is the country’s third largest auto insurance group and largest seller of motorcycle and personal watercraft policies based on premiums written, and is a market leader in commercial auto insurance.
Progressive is committed to becoming consumers’ #1 choice for auto insurance by providing competitive products and rates that meet drivers’ needs throughout their lifetimes, superior online and in-person customer service, and best-in-class, 24-hour claims service, including our concierge level of claims service available at service centers located in major metropolitan areas throughout the United States.
Progressive companies offer consumers choices in how to shop for, buy and manage their auto insurance policies. The Agency Business sells Progressive Drive Insurance private passenger auto insurance through more than 30,000 independent agencies. To find an agent, go to www.progressive.com. The Direct Business sells Progressive Direct® private passenger auto insurance online at www.progressive.com and by phone at 1-800-PROGRESSIVE. Both businesses also offer Progressive’s other insurance products, including Progressive Commercial, Progressive Motorcycle and Progressive Boat. Each business makes independent decisions about private passenger auto insurance product design and pricing. Drive is a registered service mark of Drive Trademark Holdings LP.
The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, are publicly traded at NYSE:PGR. For more information, including a guide to interpreting the monthly reporting package, please visit 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 our pricing and loss reserving methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to retain more customers; initiatives by competitors and the effectiveness of our response; our ability to obtain regulatory approval for requested rate changes and the timing thereof; the effectiveness of our brand strategy and advertising campaigns relative to those of competitors; legislative and regulatory developments; disputes relating to intellectual property rights; the outcome of litigation pending or that may be filed against us; 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; our ability to maintain the uninterrupted operation of our 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 in our releases and publications, and in our 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

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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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