UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 15, 2011
THE PROGRESSIVE CORPORATION
(Exact name of registrant as specified in its charter)
Ohio | 1-9518 | 34-0963169 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
6300 Wilson Mills Road, Mayfield Village, Ohio 44143
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code 440-461-5000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01 Regulation FD Disclosure.
On September 15, 2011, The Progressive Corporation issued a news release containing financial results for the Company and its consolidated subsidiaries for the month of, and year-to-date period ended, August 2011. A copy of the news release is attached hereto as Exhibit 99.
Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits |
See exhibit index on page 4.
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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 hereunto duly authorized.
Date: September 15, 2011
THE PROGRESSIVE CORPORATION |
By: | /s/ Jeffrey W. Basch |
Name: | Jeffrey W. Basch |
Title: | Vice President and Chief Accounting Officer |
- 3 -
EXHIBIT INDEX
Exhibit No. |
Form 8-K No. |
Description | ||
99 | 99 | News release dated September 15, 2011, containing financial results of The Progressive Corporation and its consolidated subsidiaries for the month of, and year-to-date period ended, August 2011. |
- 4 -
Exhibit 99
![]() |
NEWS RELEASE |
The Progressive Corporation | Company Contact: | |
6300 Wilson Mills Road | Matt Downing/Clark Khayat | |
Mayfield Village, Ohio 44143 | (440) 395-4222 | |
http://www.progressive.com |
PROGRESSIVE REPORTS AUGUST RESULTS
MAYFIELD VILLAGE, OHIO September 15, 2011 The Progressive Corporation today reported the following results for August 2011:
(millions, except per share amounts and ratios; unaudited) | August 2011 |
August 2010 |
Change | |||||||||
Net premiums written |
$ | 1,206.4 | $ | 1,146.5 | 5 | % | ||||||
Net premiums earned |
$ | 1,149.9 | $ | 1,110.1 | 4 | % | ||||||
Net income |
$ | 22.5 | $ | 66.5 | (66 | )% | ||||||
Per share |
$ | .04 | $ | .10 | (65 | )% | ||||||
Total pretax net realized gains (losses) on securities (including net impairment losses) |
$ | (35.7 | ) | $ | (13.8 | ) | 159 | % | ||||
Combined ratio |
97.6 | 93.1 | 4.5 | pts. | ||||||||
Average diluted equivalent shares |
632.0 | 661.1 | (4 | )% | ||||||||
(in thousands; unaudited) | August 2011 |
August 2010 |
Change | |||||||||
Policies in Force: | ||||||||||||
Agency Auto |
4,617.3 | 4,472.5 | 3 | % | ||||||||
Direct Auto |
3,799.4 | 3,551.0 | 7 | % | ||||||||
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Total Personal Auto |
8,416.7 | 8,023.5 | 5 | % | ||||||||
Total Special Lines |
3,844.6 | 3,665.1 | 5 | % | ||||||||
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Total Personal Lines |
12,261.3 | 11,688.6 | 5 | % | ||||||||
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Total Commercial Auto |
514.0 | 519.6 | (1 | )% | ||||||||
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Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines business writes insurance for personal autos and recreational vehicles. Our Commercial Auto business writes primary liability, physical damage, and other auto-related insurance for autos 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.
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
August 2011
(millions except per share amounts)
(unaudited)
Current Month |
Comments on Monthly Results1 | |||||
Net premiums written |
$ | 1,206.4 | ||||
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|
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Revenues: |
||||||
Net premiums earned |
$ | 1,149.9 | ||||
Investment income |
40.0 | |||||
Net realized gains (losses) on securities: |
||||||
Other-than-temporary impairment (OTTI) losses: |
||||||
Total OTTI losses |
0 | |||||
Non-credit losses, net of credit losses recognized on previously recorded non-credit OTTI losses |
0 | |||||
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|||||
Net impairment losses recognized in earnings |
0 | |||||
Net realized gains (losses) on securities |
(35.7 | ) | Primarily reflects the current month loss on our open interest rate swap positions. | |||
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Total net realized gains (losses) on securities |
(35.7 | ) | ||||
Service revenues |
1.5 | |||||
Net gain (loss) on extinguishment of debt |
(.1 | ) | ||||
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Total revenues |
1,155.6 | |||||
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Expenses: |
||||||
Losses and loss adjustment expenses |
863.4 | |||||
Policy acquisition costs |
107.9 | |||||
Other underwriting expenses |
150.5 | |||||
Investment expenses |
2.0 | Includes $1.0 million of expenses related to the issuance of our 3.75% Senior Notes due 2021. | ||||
Service expenses |
1.6 | |||||
Interest expense |
10.8 | |||||
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Total expenses |
1,136.2 | |||||
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Income before income taxes |
19.4 | |||||
Provision (benefit) for income taxes |
(3.1 | ) | The tax benefit reflects about $6.3 million of elective tax credits primarily related to the 2007-2009 tax years. | |||
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Net income |
$ | 22.5 | ||||
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COMPUTATION OF EARNINGS PER SHARE |
||||||
Basic: |
||||||
Average shares outstanding |
627.6 | |||||
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Per share |
$ | .04 | ||||
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Diluted: |
||||||
Average shares outstanding |
627.6 | |||||
Net effect of dilutive stock-based compensation |
4.4 | |||||
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Total equivalent shares |
632.0 | |||||
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Per share |
$ | .04 | ||||
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1 | See the Monthly Commentary at the end of this release. For a description of our reporting and accounting policies, see Note 1 to our 2010 audited consolidated financial statements included in our 2010 Shareholders Report, which can be found at www.progressive.com/annualreport. |
- 2 -
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
August 2011 Year-to-Date
(millions except per share amounts)
(unaudited)
Year-to-Date | ||||||||||||
2011 | 2010 | % Change | ||||||||||
Net premiums written |
$ | 10,439.5 | $ | 10,053.0 | 4 | |||||||
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Revenues: |
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Net premiums earned |
$ | 9,972.9 | $ | 9,577.0 | 4 | |||||||
Investment income |
321.9 | 347.7 | (7 | ) | ||||||||
Net realized gains (losses) on securities: |
||||||||||||
Other-than-temporary impairment (OTTI) losses: |
||||||||||||
Total OTTI losses |
(4.5 | ) | (17.5 | ) | (74 | ) | ||||||
Non-credit losses, net of credit losses recognized on previously recorded non-credit OTTI losses |
.9 | 5.5 | (84 | ) | ||||||||
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Net impairment losses recognized in earnings |
(3.6 | ) | (12.0 | ) | (70 | ) | ||||||
Net realized gains (losses) on securities |
77.1 | 10.3 | 649 | |||||||||
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Total net realized gains (losses) on securities |
73.5 | (1.7 | ) | NM | ||||||||
Service revenues |
15.0 | 12.5 | 20 | |||||||||
Net gain (loss) on extinguishment of debt |
(.1 | ) | 6.4 | NM | ||||||||
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Total revenues |
10,383.2 | 9,941.9 | 4 | |||||||||
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Expenses: |
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Losses and loss adjustment expenses |
7,097.5 | 6,713.2 | 6 | |||||||||
Policy acquisition costs |
937.0 | 908.1 | 3 | |||||||||
Other underwriting expenses |
1,244.3 | 1,188.0 | 5 | |||||||||
Investment expenses |
9.7 | 7.6 | 28 | |||||||||
Service expenses |
12.3 | 14.5 | (15 | ) | ||||||||
Interest expense |
84.3 | 91.7 | (8 | ) | ||||||||
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Total expenses |
9,385.1 | 8,923.1 | 5 | |||||||||
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Income before income taxes |
998.1 | 1,018.8 | (2 | ) | ||||||||
Provision for income taxes |
316.4 | 331.6 | (5 | ) | ||||||||
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Net income |
$ | 681.7 | $ | 687.2 | (1 | ) | ||||||
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COMPUTATION OF EARNINGS PER SHARE |
||||||||||||
Basic: |
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Average shares outstanding |
643.2 | 659.8 | (3 | ) | ||||||||
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Per share |
$ | 1.06 | $ | 1.04 | 2 | |||||||
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Diluted: |
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Average shares outstanding |
643.2 | 659.8 | (3 | ) | ||||||||
Net effect of dilutive stock-based compensation |
4.3 | 5.2 | (17 | ) | ||||||||
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Total equivalent shares |
647.5 | 665.0 | (3 | ) | ||||||||
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Per share |
$ | 1.05 | $ | 1.03 | 2 | |||||||
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NM = Not Meaningful
- 3 -
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT OTHER INFORMATION
August 2011
(millions except per share amounts)
(unaudited)
The following table sets forth the comprehensive income (loss) for the period:
Current | Year-to-Date | |||||||||||
Month | 2011 | 2010 | ||||||||||
Net income |
$ | 22.5 | $ | 681.7 | $ | 687.2 | ||||||
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After-tax changes in: |
||||||||||||
Net unrealized gains (losses) on securities |
(115.9 | ) | (28.4 | ) | 266.0 | |||||||
Net non-credit related OTTI losses |
0 | (.6 | ) | (3.6 | ) | |||||||
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Total net unrealized gains (losses) on securities |
(115.9 | ) | (29.0 | ) | 262.4 | |||||||
Net unrealized gains on forecasted transactions1 |
(3.9 | ) | (5.8 | ) | (6.0 | ) | ||||||
Foreign currency translation adjustment |
(.2 | ) | .5 | 0 | ||||||||
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Comprehensive income (loss) |
$ | (97.5 | ) | $ | 647.4 | $ | 943.6 | |||||
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Per share |
$ | (.16 | ) | $ | 1.00 | $ | 1.42 | |||||
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1 | During August, we recognized a $3.3 million unrealized loss on our debt issuance hedge, which was closed upon issuance of our 3.75% Senior Notes due 2021, and a $0.3 million realized gain associated with repurchasing a portion of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067; see the Monthly Commentary on page 8 for additional discussion. The remaining balance represents the normal monthly amortization. |
The following table sets forth the investment results for the period:
Current | Year-to-Date | |||||||||||
Month | 2011 | 2010 | ||||||||||
Fully taxable equivalent total return: |
||||||||||||
Fixed-income securities |
(.4 | )% | 3.0 | % | 5.8 | % | ||||||
Common stocks |
(5.7 | )% | (1.3 | )% | (3.6 | )% | ||||||
Total portfolio |
(1.0 | )% | 2.4 | % | 5.2 | % | ||||||
Pretax recurring investment book yield |
3.2 | % | 3.3 | % | 3.6 | % |
- 4 -
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
August 2011
($ in millions)
(unaudited)
Current Month |
||||||||||||||||||||||||
Personal Lines Business | Commercial Auto |
Other | Companywide | |||||||||||||||||||||
Agency | Direct | Total | Business | Businesses1 | Total | |||||||||||||||||||
Net Premiums Written |
$ | 608.2 | $ | 477.9 | $ | 1,086.1 | $ | 120.3 | $ | 0 | $ | 1,206.4 | ||||||||||||
% Growth in NPW |
3 | % | 6 | % | 4 | % | 13 | % | NM | 5 | % | |||||||||||||
Net Premiums Earned |
$ | 587.5 | $ | 448.2 | $ | 1,035.7 | $ | 114.1 | $ | .1 | $ | 1,149.9 | ||||||||||||
% Growth in NPE |
2 | % | 6 | % | 4 | % | 0 | % | NM | 4 | % | |||||||||||||
GAAP Ratios |
||||||||||||||||||||||||
Loss/LAE ratio |
74.9 | 75.9 | 75.3 | 72.5 | NM | 75.1 | ||||||||||||||||||
Expense ratio |
20.7 | 24.8 | 22.5 | 22.6 | NM | 22.5 | ||||||||||||||||||
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Combined ratio |
95.6 | 100.7 | 97.8 | 95.1 | NM | 97.6 | ||||||||||||||||||
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Actuarial Adjustments2 |
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Reserve Decrease/(Increase) |
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Prior accident years |
$ | 12.1 | ||||||||||||||||||||||
Current accident year |
3.6 | |||||||||||||||||||||||
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Calendar year actuarial adjustment |
$ | 7.2 | $ | 4.5 | $ | 11.7 | $ | 4.0 | $ | 0 | $ | 15.7 | ||||||||||||
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Prior Accident Years Development |
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Favorable/(Unfavorable) |
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Actuarial adjustment |
$ | 12.1 | ||||||||||||||||||||||
All other development |
14.7 | |||||||||||||||||||||||
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Total development |
$ | 26.8 | ||||||||||||||||||||||
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Calendar year loss/LAE ratio |
75.1 | |||||||||||||||||||||||
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Accident year loss/LAE ratio |
77.4 | |||||||||||||||||||||||
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Statutory Ratios |
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Loss/LAE ratio |
75.1 | |||||||||||||||||||||||
Expense ratio |
21.6 | |||||||||||||||||||||||
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Combined ratio |
96.7 | |||||||||||||||||||||||
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1 | The other businesses generated an underwriting loss of $0.4 million for the month. Combined ratios and % growth are not meaningful (NM) due to the low level of premiums earned by, and the variability of loss costs in, such businesses. |
2 | Represents adjustments solely based on our corporate actuarial reviews. |
- 5 -
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
August 2011 Year-to-Date
($ in millions)
(unaudited)
Year-to-Date |
||||||||||||||||||||||||
Personal Lines Business | Commercial Auto |
Other | Companywide | |||||||||||||||||||||
Agency | Direct | Total | Business | Businesses1 | Total | |||||||||||||||||||
Net Premiums Written |
$ | 5,311.7 | $ | 4,075.5 | $ | 9,387.2 | $ | 1,052.2 | $ | .1 | $ | 10,439.5 | ||||||||||||
% Growth in NPW |
2 | % | 7 | % | 4 | % | 3 | % | NM | 4 | % | |||||||||||||
Net Premiums Earned |
$ | 5,116.2 | $ | 3,880.3 | $ | 8,996.5 | $ | 972.7 | $ | 3.7 | $ | 9,972.9 | ||||||||||||
% Growth in NPE |
3 | % | 8 | % | 5 | % | (2 | )% | NM | 4 | % | |||||||||||||
GAAP Ratios |
||||||||||||||||||||||||
Loss/LAE ratio |
71.4 | 71.3 | 71.4 | 69.3 | NM | 71.1 | ||||||||||||||||||
Expense ratio |
20.9 | 23.0 | 21.8 | 22.3 | NM | 21.9 | ||||||||||||||||||
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Combined ratio |
92.3 | 94.3 | 93.2 | 91.6 | NM | 93.0 | ||||||||||||||||||
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Actuarial Adjustments2 |
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Reserve Decrease/(Increase) |
||||||||||||||||||||||||
Prior accident years |
$ | 122.1 | ||||||||||||||||||||||
Current accident year |
24.5 | |||||||||||||||||||||||
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Calendar year actuarial adjustment |
$ | 61.9 | $ | 51.8 | $ | 113.7 | $ | 32.9 | $ | 0 | $ | 146.6 | ||||||||||||
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Prior Accident Years Development |
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Favorable/(Unfavorable) |
||||||||||||||||||||||||
Actuarial adjustment |
$ | 122.1 | ||||||||||||||||||||||
All other development |
76.3 | |||||||||||||||||||||||
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Total development |
$ | 198.4 | ||||||||||||||||||||||
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Calendar year loss/LAE ratio |
71.1 | |||||||||||||||||||||||
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Accident year loss/LAE ratio |
73.1 | |||||||||||||||||||||||
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Statutory Ratios |
||||||||||||||||||||||||
Loss/LAE ratio |
71.1 | |||||||||||||||||||||||
Expense ratio |
21.5 | |||||||||||||||||||||||
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Combined ratio |
92.6 | |||||||||||||||||||||||
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Statutory Surplus |
$ | 5,739.4 | ||||||||||||||||||||||
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NM = Not Meaningful
1 | For the year, the other businesses generated an underwriting loss of $2.0 million. |
2 | Represents adjustments solely based on our corporate actuarial reviews. |
- 6 -
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions except per share amounts)
(unaudited)
August 2011 |
||||
CONDENSED GAAP BALANCE SHEET: |
||||
Investments Available-for-sale, at fair value: |
||||
Fixed maturities1 (amortized cost: $11,588.2) |
$ | 11,941.2 | ||
Equity securities: |
||||
Nonredeemable preferred stocks1 (cost: $490.3) |
941.9 | |||
Common equities (cost: $1,384.2) |
1,720.9 | |||
Short-term investments (amortized cost: $1,860.3) |
1,860.3 | |||
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Total investments2, 3 |
16,464.3 | |||
Net premiums receivable |
3,070.6 | |||
Deferred acquisition costs |
458.0 | |||
Other assets4 |
2,382.0 | |||
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Total assets |
$ | 22,374.9 | ||
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Unearned premiums |
$ | 4,816.7 | ||
Loss and loss adjustment expense reserves4 |
7,240.8 | |||
Other liabilities3 |
1,787.5 | |||
Debt5 |
2,444.7 | |||
Shareholders equity |
6,085.2 | |||
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Total liabilities and shareholders equity |
$ | 22,374.9 | ||
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Common shares outstanding |
630.5 | |||
Shares repurchased August |
8.3 | |||
Average cost per share |
$ | 18.45 | ||
Book value per share |
$ | 9.65 | ||
Trailing 12-month return on average shareholders equity |
16.8 | % | ||
Net unrealized pretax gains (losses) on investments |
$ | 1,135.9 | ||
Increase (decrease) from July 2011 |
$ | (178.2 | ) | |
Increase (decrease) from December 2010 |
$ | (44.6 | ) | |
Debt-to-total capital ratio |
28.7 | % | ||
Fixed-income portfolio duration |
1.8 years | |||
Weighted average credit quality |
AA- | |||
Year-to-date Gainshare factor |
1.06 |
1 | As of August 31, 2011, we held certain hybrid securities and recognized a change in fair value of $5.4 million as a realized gain during the period we held these securities. |
2 | Includes $5.0 billion of short-term investments and U.S. Treasury securities prior to settling $21.0 million of net security transactions outstanding at month-end. |
3 | Includes $21.0 million of net unsettled security transactions (as discussed in note 2 above). |
4 | Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $746.8 million, which are included in other assets. |
5 | During August, we issued $500 million of our 3.75% Senior Notes due 2021 and repurchased $11.7 million of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067; see the Monthly Commentary on page 8 for additional discussion. |
- 7 -
Monthly Commentary
| During August, we incurred about $37 million, or 3.2 loss ratio points, of catastrophe losses, compared to $2.2 million, or 0.2 points, in August 2010. About 64% of the total catastrophe losses were related to Hurricane Irene. The states with the largest incurred catastrophe losses for the month were New York, Iowa, New Jersey, Virginia, Pennsylvania, and Nebraska. |
| On August 22, 2011, we issued $500 million of 3.75% Senior Notes due 2021 (the Senior Notes). We received proceeds of $497 million, after deducting underwriters discounts and commissions, and estimate we will incur an additional $1.0 million of expenses related to the issuance. In addition, upon issuance of the Senior Notes, we closed a forecasted debt issuance hedge, which was entered into to hedge against a possible rise in interest rates, and recognized a $3.3 million after-tax loss as part of shareholders equity; the loss will be recognized as an adjustment to interest expense and amortized over the life of the Senior Notes. |
| During August, we repurchased $11.7 million of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 at par in the open market, resulting in a net loss on these debt extinguishments of $0.1 million. In addition, during the month, we reclassified $0.3 million, on an after-tax basis, from accumulated other comprehensive income (balance sheet) to net realized gains on securities (income statement), reflecting the portion of the unrealized gain on forecasted transactions that was related to these debt extinguishments. |
Events
We are currently scheduled to release September results on Wednesday, October 12, 2011, before the market opens.
About Progressive
The Progressive Group of Insurance Companies makes it easy to understand, buy, and use auto insurance. Progressive offers choices so consumers can reach us whenever, wherever, and however its most convenient for themonline at http://www.progressive.com, by phone at 1-800-PROGRESSIVE, or in-person with a local agent.
Progressive offers insurance for personal and commercial autos and trucks, motorcycles, boats, recreational vehicles, and homes. Were the fourth largest auto insurer in the country, the largest seller of motorcycle insurance, and a leader in commercial auto insurance. Progressive also offers car insurance online in Australia at http://www.progressiveonline.com.au.
Founded in 1937, Progressive continues its long history of offering shopping tools and services that save customers time and money, like Name Your Price®, the Snapshot Discount®, and a concierge level of claims service.
The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, trade publicly at NYSE:PGR.
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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 possible failure of one or more governmental entities to make scheduled debt payments or satisfy other obligations; the potential or actual downgrading of governmental, corporate, or other securities by a rating agency; the financial condition of, and other issues relating to the strength of and liquidity available to, issuers of securities held in our investment portfolios and other companies with which we have ongoing business relationships, including counterparties to certain financial transactions; 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, including, but not limited to, health care reform and tax law changes; 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. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.
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