EX-99.2 3 l30565aexv99w2.htm EX-99.2 EX-99.2
 

Exhibit 99.2
     
(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 REPORTS FEBRUARY RESULTS
MAYFIELD VILLAGE, OHIO — March 12, 2008 — The Progressive Corporation today reported the following results for February 2008:
                         
    February     February        
(millions, except per share amounts and ratios)   2008     2007     Change  
Net premiums written
   $ 1,102.2     $ 1,194.5       (8 )%
Net premiums earned
   $ 1,042.5     $ 1,075.5       (3 )%
Net income
   $ 46.2     $ 94.7       (51 )%
Per share
   $ .07     $ .13       (46 )%
Pretax net realized gains (losses) on securities
   $ 8.5     $ 15.3       (44 )%
Combined ratio
     98.2       92.8       5.4  pts.
Average diluted equivalent shares
     677.6       745.2       (9 )%
                         
    February     February        
(in thousands)   2008     2007     Change  
Policies in Force:
                        
Total Personal Auto
     7,070.2       6,962.6       2 %
Total Special Lines
     3,123.9       2,888.1       8 %
Total Commercial Auto
     540.5       508.0       6 %
Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines Business writes 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
February 2008
(millions — except per share amounts)
(unaudited)
                 
    Current        
    Month     Comments on Monthly Results1  
Net premiums written
   $ 1,102.2          
 
              
 
                
Revenues:
                
Net premiums earned
   $ 1,042.5          
Investment income
     47.1     Includes a $4.1 million reduction in recurring income reflecting yield adjustments due to lower interest rates on our variable rate residential mortgage-backed securities.
Net realized gains (losses) on securities
     8.5          
Service revenues
     1.4          
 
              
Total revenues
     1,099.5          
 
              
Expenses:
                
Losses and loss adjustment expenses
     799.6          
Policy acquisition costs
     104.4          
Other underwriting expenses
     119.5          
Investment expenses
     .8          
Service expenses
     1.6          
Interest expense
     11.4          
 
              
Total expenses
     1,037.3          
 
              
 
                
Income before income taxes
     62.2          
Provision for income taxes
     16.0          
 
              
Net income
   $ 46.2          
 
              
 
                
COMPUTATION OF EARNINGS PER SHARE
                
Basic:
                
Average shares outstanding
     671.5          
 
              
Per share
   $ .07          
 
              
Diluted:
                
Average shares outstanding
     671.5          
Net effect of dilutive stock-based compensation
     6.1          
 
              
Total equivalent shares
     677.6          
 
              
Per share
   $ .07          
 
              
 
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 2007 audited consolidated financial statements included in our 2007 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
     (1.3 )%
Common stocks
     (2.8 )%
Total portfolio
     (1.5 )%
 
        
Pretax recurring investment book yield
     4.2 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
February 2008 Year-to-Date
(millions – except per share amounts)
(unaudited)
                         
    Year-to-Date        
                    %  
    2008     2007     Change  
Net premiums written
   $ 2,372.1     $ 2,508.9       (5 )
 
                    
Revenues:
                        
Net premiums earned
   $ 2,340.6     $ 2,410.8       (3 )
Investment income
     97.4       102.0       (5 )
Net realized gains (losses) on securities
     61.2       15.5       295  
Service revenues
     3.1       4.3       (28 )
 
                    
Total revenues
     2,502.3       2,532.6       (1 )
 
                    
Expenses:
                        
Losses and loss adjustment expenses
     1,739.5       1,668.8       4  
Policy acquisition costs
     234.5       245.2       (4 )
Other underwriting expenses
     260.1       257.4       1  
Investment expenses
     .6       2.0       (70 )
Service expenses
     3.4       4.1       (17 )
Interest expense
     22.9       12.6       82  
 
                    
Total expenses
     2,261.0       2,190.1       3  
 
                    
 
                        
Income before income taxes
     241.3       342.5       (30 )
Provision for income taxes
     73.2       110.1       (34 )
 
                    
Net income
   $ 168.1     $ 232.4       (28 )
 
                    
 
                        
COMPUTATION OF EARNINGS PER SHARE
                        
Basic:
                        
Average shares outstanding
     672.3       739.5       (9 )
 
                    
Per share
   $ .25     $ .31       (20 )
 
                    
Diluted:
                        
Average shares outstanding
     672.3       739.5       (9 )
Net effect of dilutive stock-based compensation
     6.1       7.6       (20 )
 
                    
Total equivalent shares
     678.4       747.1       (9 )
 
                    
Per share
   $ .25     $ .31       (20 )
 
                    
The following table sets forth the investment results for the year-to-date period:
                 
    2008   2007
Fully taxable equivalent total return:
                
Fixed-income securities
     .5 %     1.4 %
Common stocks
     (8.7 )%     .3 %
Total portfolio
     (1.0 )%     1.3 %
 
                
Pretax recurring investment book yield
     4.4 %     4.4 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
February 2008
($ in millions)
(unaudited)
                                                 
    Current Month            
                            Commercial        
    Personal Lines   Auto   Other   Companywide
    Agency   Direct   Total   Business   Businesses1   Total
Net Premiums Written
   $ 595.9     $ 371.3     $ 967.2     $ 134.1     $ .9     $ 1,102.2  
% Growth in NPW
     (9 )%     (4 )%     (7 )%     (12 )%   NM     (8 )%
Net Premiums Earned
   $ 567.8     $ 336.7     $ 904.5     $ 136.4     $ 1.6     $ 1,042.5  
% Growth in NPE
     (5 )%     0 %     (3 )%     (4 )%   NM     (3 )%
 
                                                
GAAP Ratios
                                                
Loss/LAE ratio
     76.3       78.2       77.0       74.8     NM     76.7  
Expense ratio
     21.4       21.5       21.4       21.2     NM     21.5  
     
Combined ratio
     97.7       99.7       98.4       96.0     NM     98.2  
     
 
                                                
Actuarial Adjustments2
                                                
Reserve Decrease/(Increase)
                                                
Prior accident years
                                           $ (2.3 )
Current accident year
                                             .7  
 
                                                
Calendar year actuarial adjustment
   $ (1.1 )   $ (.5 )   $ (1.6 )   $ 0     $ 0     $ (1.6 )
 
                                                
 
                                                
Prior Accident Years Development
                                                
Favorable/(Unfavorable)
                                                
Actuarial adjustment
                                           $ (2.3 )
All other development
                                             (41.5 )
 
                                                
Total development
                                           $ (43.8 )
 
                                                
 
                                                
Calendar year loss/LAE ratio
                                             76.7  
 
                                                
Accident year loss/LAE ratio
                                             72.5  
 
                                                
 
                                                
Statutory Ratios
                                                
Loss/LAE ratio
                                             76.7  
Expense ratio
                                             20.9  
 
                                                
Combined ratio
                                             97.6  
 
                                                
 
1   Primarily includes professional liability insurance for community banks and Progressive’s run-off businesses. The other businesses generated an underwriting loss of $.5 million for the month. Combined ratios and % growth are not meaningful (NM) due to the low level of premiums earned by, and the variability of losses in, such businesses.
 
2   Represents adjustments solely based on our corporate actuarial reviews.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
February 2008 Year-to-Date
($ in millions) (unaudited)
                                                 
Year-to-Date  
                            Commercial              
    Personal Lines     Auto     Other     Companywide  
    Agency     Direct     Total     Business     Businesses1     Total  
Net Premiums Written
   $ 1,273.6     $ 790.9     $ 2,064.5     $ 304.3     $ 3.3     $ 2,372.1  
% Growth in NPW
     (7 )%     (2 )%     (5 )%     (8 )%     NM       (5 )%
Net Premiums Earned
   $ 1,275.2     $ 753.8     $ 2,029.0     $ 307.9     $ 3.7     $ 2,340.6  
% Growth in NPE
     (5 )%     0 %     (3 )%     (3 )%     NM       (3 )%
 
                                                
GAAP Ratios
                                                
Loss/LAE ratio
     73.8       76.0       74.7       72.4       NM       74.3  
Expense ratio
     21.1       21.2       21.1       20.8       NM       21.1  
               
Combined ratio
     94.9       97.2       95.8       93.2       NM       95.4  
               
 
                                                
Actuarial Adjustments2
                                                
Reserve Decrease/(Increase)
                                                
Prior accident years
                                           $ (1.4 )
Current accident year
                                             (.3 )
 
                                              
Calendar year actuarial adjustment
   $ .7     $ (.7 )   $ 0     $ (1.7 )   $ 0     $ (1.7 )
 
                                              
 
                                                
Prior Accident Years Development
                                                
Favorable/(Unfavorable)
                                                
Actuarial adjustment
                                           $ (1.4 )
All other development
                                             (15.1 )
 
                                              
Total development
                                           $ (16.5 )
 
                                              
 
                                                
Calendar year loss/LAE ratio
                                             74.3  
 
                                              
Accident year loss/LAE ratio
                                             73.6  
 
                                              
 
                                                
Statutory Ratios
                                                
Loss/LAE ratio
                                             74.4  
Expense ratio
                                             20.9  
 
                                              
Combined ratio
                                             95.3  
 
                                              
Statutory Surplus
                                           $ 4,660.0  
 
                                              
NM = Not Meaningful
                         
    February     February        
Policies in Force   2008     2007     Change  
(in thousands)                        
Agency — Auto
     4,422.2       4,486.9       (1 )%
Direct — Auto
     2,648.0       2,475.7       7 %
Special Lines3
     3,123.9       2,888.1       8 %
               
Total Personal Lines
     10,194.1       9,850.7       3 %
               
Commercial Auto Business
     540.5       508.0       6 %
               
 
1   The other businesses generated an underwriting loss of $.2 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)
         
    February  
    2008  
CONDENSED GAAP BALANCE SHEET:1
        
Investments — Available-for-sale, at fair value:
        
Fixed maturities (amortized cost: $8,902.3)
   $ 8,919.6  
Equity securities:
        
Preferred stocks2 (cost: $2,665.6)
     2,291.7  
Common equities (cost: $1,358.0)
     2,109.7  
Short-term investments (amortized cost: $1,278.3)
     1,278.3  
 
      
Total investments3
     14,599.3  
Net premiums receivable
     2,447.0  
Deferred acquisition costs
     426.5  
Other assets
     1,853.6  
 
      
Total assets
   $ 19,326.4  
 
      
 
        
Unearned premiums
   $ 4,239.2  
Loss and loss adjustment expense reserves
     5,959.1  
Other liabilities3
     2,115.4  
Debt
     2,174.2  
Shareholders’ equity
     4,838.5  
 
      
Total liabilities and shareholders’ equity
   $ 19,326.4  
 
      
 
        
Common Shares outstanding
     677.0  
Shares repurchased — February
     1.9  
Average cost per share
   $ 18.78  
Book value per share
   $ 7.15  
Trailing 12-month return on average shareholders’ equity
     19.5 %
Net unrealized pretax gains on investments
   $ 400.4  
Increase (decrease) from January 2008
   $ (284.8 )
Increase (decrease) from December 2007
   $ (315.0 )
Debt-to-total capital ratio
     31.0 %
Fixed-income portfolio duration
   3.1 years
  
Weighted average credit quality
   AA-
  
Year-to-date Gainshare factor
     .37  
 
1   Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $281.6 million.
 
2   As of February 29, 2008, we held certain hybrid securities and recognized a change in fair value of $5.3 million as a realized loss during the period we held these securities.
 
3   Includes repurchase commitment transactions of $599.3 million and net unsettled security transactions of $131.7 million.

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Monthly Commentary
  •   The unfavorable “All other development” for the month primarily reflects higher than expected increases in our bodily injury severity for prior years, including development on our large losses in both our personal and commercial auto products. On a year-to-date basis, the unfavorable “Total development” is in our Commercial Auto business, with Personal Lines experiencing slight favorable development.
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 rates and products that meet drivers’ needs throughout their lifetimes, superior online and in-person customer service, and best-in-class, 24-hour claims service, including its 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. Progressive offers its products, including personal and commercial auto, motorcycle, boat and recreational vehicle insurance, through more than 30,000 independent insurance agencies throughout the U.S. and online and by phone directly from the Company. To find an agent or to get a quote, go to www.progressive.com.
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, 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 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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