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PGR · PROGRESSIVE CORP/OH/

34 filings

10-K

PGR 10-K Annual Reports

PROGRESSIVE CORP/OH/ - 34 annual reports

Filing record · 2016–202610-K1110-Q328-K177

2025
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2025
Progressive (PGR) closed 2025 with a strong year of growth and profitability. Net premiums written rose 12% to $83.2 billion, net premiums earned rose 15% to $81.7 billion, and policies in force grew 10% to 38.6 million. Net income reached $11.3 billion ($19.23 diluted EPS), up from $8.5 billion in 2024, and the companywide underwriting margin improved to 12.6% from 11.2%, above the company's 4% calendar-year goal. The improvement was driven mainly by lower auto accident frequency, lower weather-related catastrophe losses (1.8 points versus 3.6 in 2024), and $1.4 billion of favorable prior-year reserve development. These gains were partly offset by a $1.2 billion Florida policyholder credit expense, which reduced the companywide underwriting margin by roughly 1.5 points. Growth was uneven across segments. Personal Lines NPW grew 14%, with personal auto agency up 11% and direct up 19%, while Commercial Lines NPW fell 3%, largely because certain TNC policies were not renewed. Personal property was a deliberate drag: homeowners new applications fell about 45% as the company tightened underwriting in volatile weather markets. Management also flagged softer retention, with trailing 12-month personal auto policy life expectancy down 7%, and some pressure on rates, with personal auto rates down less than 1% and tariffs a possible driver of higher loss costs in 2026. Capital and balance sheet strength improved markedly. Shareholders' equity rose to $30.3 billion, book value per share reached $51.74, and the debt-to-capital ratio fell to 18.5% from 21.2%. Statutory surplus was $28.4 billion, giving a 2.9:1 premiums-to-surplus ratio. Operating cash flow was $17.5 billion, and the company declared $13.90 per share in common dividends, including a $13.50 annual-variable payment. Total shareholder return was -3.0% for 2025, as the share price fell from $239.61 to $227.72 despite the earnings growth.
Mar 2, 2026
2024
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2024
Progressive (PGR) reported a strong 2024, with net income rising to $8.48 billion ($14.40 diluted EPS) from $3.90 billion ($6.58) in 2023, driven by a sharp improvement in underwriting profitability. The underwriting margin rose to 11.2% from 5.1%, with the combined ratio improving to 88.8% from 94.9%. Net premiums written grew 21% to $74.4 billion, and policies in force grew 18% to nearly 35 million. Results were supported by lower loss frequency, favorable prior-year reserve development of $416 million, and higher average premiums per policy from rate increases taken in 2023. Growth came with a much larger advertising budget, which rose 150% to $4.0 billion and added 2.4 points to the expense ratio. Investment income also improved meaningfully, with net investment income of $2.8 billion, up about 50%, as the portfolio's book yield rose to 3.9% from 3.1%. The total investment portfolio reached $80.3 billion. Capital strengthened as shareholders' equity rose to $25.6 billion and the debt-to-total-capital ratio fell to 21.2%. Progressive also redeemed its Series B preferred shares for $500 million and declared $2.9 billion in common dividends, including a $4.50 annual-variable dividend. The filing also flags several risks. Personal auto rates were described as modestly changed in 2024 and are expected to stay relatively stable in 2025. Policy life expectancy declined in personal auto, and the company is non-renewing Florida property policies and tightening its personal property book. Its auto liability reserves face significant severity uncertainty, and the company is defending multiple class actions over total-loss vehicle valuation. Its catastrophe exposure remains substantial, with 2024 cat losses of $2.5 billion, including Hurricanes Helene and Milton.
Mar 3, 2025
2023
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2023
Progressive (PGR) reported a strong 2023 rebound. Net income rose to $3.90 billion ($6.58 diluted EPS) from $721.5 million in 2022, and comprehensive income reached $5.09 billion, driven mainly by investment valuation gains as credit spreads tightened and equity markets rallied. Net premiums written grew 20% to $61.6 billion, and the company hit its underwriting target: a 5.1% underwriting margin (94.9 combined ratio), above its 4% goal and up from 4.2% in 2022. Personal Lines drove results with a 6.2% margin, while Commercial Lines fell to 1.2% and Property reached only 1.1%, both well below their earlier levels. Growth was achieved while management deliberately slowed new business through rate increases (about 19% in personal auto, 17% in commercial auto, 16% in Property) and reduced advertising spend by 21%. Investors should weigh several headwinds: unfavorable prior-year reserve development of $1.09 billion (1.9 points), severity pressure in auto physical damage and Florida injury claims, and a planned non-renewal of up to 115,000 Florida Property policies beginning in Q2 2024. Management also expects the Property business to continue rebalancing away from catastrophe-exposed states. The balance sheet strengthened, with shareholders' equity up to $20.3 billion, book value per share up 28% to $33.80, and statutory surplus of $22.2 billion (2.8:1 premiums-to-surplus). The company redeemed its $500 million Series B preferred shares in February 2024, paid a $0.75 annual-variable dividend plus quarterly $0.10 dividends, and kept its debt-to-capital ratio at 25.4%, below its 30% policy ceiling.
Feb 26, 2024
2022
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2022
Progressive (PGR) reported a sharp earnings decline for 2022 even as the franchise kept growing. Net income fell 78% to $721.5 million, or $1.18 per diluted share, from $3.35 billion in 2021, and comprehensive income swung to a $2.1 billion loss. The drivers were a $2.1 billion net holding period loss, mostly on its common equity portfolio, a $2.8 billion decline in fixed-maturity valuations as interest rates rose, and a $224.8 million goodwill write-off on the Property segment (ARX acquisition). Core underwriting remained profitable: the underwriting margin was 4.2% (versus a 4% target), with underwriting income of about $2.1 billion, though down from a 4.7% margin in 2021 due to catastrophe losses (3.4 points, including Hurricane Ian) and rising claim severity. Top-line growth was strong. Net premiums written rose 10% to $51.1 billion, driven by about 13% average personal auto rate increases across 49 states, a roughly 19% Property rate increase, and 17% Commercial Lines growth. Policies in force grew 3% to 27.4 million. Management is prioritizing profitability over volume, which slowed new business in the first half of 2022. Investment income rose 46% to $1.26 billion as reinvestment yields climbed, and the company issued $1.5 billion of senior notes. Debt-to-total-capital reached 28.7%, close to the company's 30% ceiling, while statutory surplus grew to $17.9 billion and the premium-to-surplus ratio rose to 2.9:1. For investors, the key questions are whether pricing actions restore margins as severity trends moderate, how Property returns to profitability after Hurricane Ian, and how much mark-to-market volatility affects book value, which fell to $26.32 per share from $30.35. The board declined to declare an annual variable dividend for 2022, leaving only the $0.10 quarterly dividend. Litigation exposure is broad, with numerous pending class actions, though none is currently accrued as probable and estimable.
Feb 27, 2023
2021
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2021
Progressive (PGR) reported a sharp earnings decline in 2021 as auto insurance profitability compressed. Net income fell 41% to $3.35 billion from $5.70 billion, and comprehensive income fell 61% to $2.46 billion. The underwriting margin dropped to 4.7% from 12.3% in 2020, below the 12.3% of the prior year but still above the company's 4% internal goal. The decline was driven by a 14% increase in personal auto accident frequency and a 9% increase in severity as miles driven recovered from pandemic lows, along with record inflation and $1.3 billion of catastrophe losses, including about $420 million from Hurricane Ida. Management responded with roughly 8% net personal auto rate increases, tighter underwriting, and reduced advertising, which the company says will reduce new auto applications in the near term. Top-line growth remained strong. Net premiums written rose 14% to $46.4 billion, policies in force grew 7% to 26.5 million, and Commercial Lines premiums jumped 51%, helped by the June 2021 acquisition of Protective Insurance for about $338 million. Property was the weakest segment, with a 15.3% underwriting loss (combined ratio 115.3), and Progressive plans to non-renew about 60,000 Florida homeowners policies starting in Q2 2022. Balance sheet strength improved, with shareholders' equity of $18.2 billion, a debt-to-capital ratio of 21.2%, and a net premiums written to surplus ratio of 2.8 to 1. For investors, the key question is whether rate actions restore the 96 combined ratio target while growth holds. The 2021 results show margin pressure is real and cyclical, but the company's capital position gives it room to absorb it. The 10-K also flags ongoing litigation over claims practices and the risk of reserve adequacy, since about 90% of reserves relate to vehicle businesses.
Feb 28, 2022
2020
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2020
Progressive (PGR) closed 2020 with a strong year driven by a sharp drop in personal auto accident frequency during COVID-19 restrictions. Net income attributable to Progressive rose 44% to $5.70 billion ($9.66 diluted EPS), total revenues reached $42.66 billion (up 9%), and net premiums written grew 8% to $40.6 billion. The companywide underwriting profit margin expanded to 12.3% from 9.1% in 2019, with Personal Lines at 13.2%, Commercial Lines at 13.0%, and Property a loss-making segment at (7.1%) due to $878 million of catastrophe losses across the business. The combined ratio improved to 87.7 from 90.9. The profit improvement was partly offset by costs that management chose to pass back to customers and invest in growth. Progressive issued $1.1 billion in policyholder credits to personal auto customers, advertising spend rose 18% to $2.2 billion, and severity increased about 10%. Personal auto rates were cut roughly 3% from April through December. Prior-year reserve development was modestly adverse at $195 million, and the company continued to grow policies in force by 11% to 24.7 million. Capital strength remained solid. Statutory surplus reached $15.2 billion with a 2.7-to-1 net premiums written to surplus ratio, and debt-to-total-capital was 24.1%. Shareholders' equity rose to $17.0 billion, and the company paid $4.90 per share in dividends declared for 2020, including an annual variable dividend. Subsequent to year-end, Progressive agreed to acquire Protective Insurance Corporation for approximately $338 million.
Mar 1, 2021
2019
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2019
Progressive (PGR) closed 2019 with a strong year. Net premiums written grew 15% to $37.6 billion and net premiums earned grew 17% to $36.2 billion, with policies in force up 10% to 22.4 million. Net income attributable to Progressive rose 52% to $3.97 billion ($6.72 diluted EPS), and comprehensive income rose 76% to $4.43 billion. Results were helped by a 13% increase in underwriting income and a sharp rise in investment income, which climbed 27% to $1.04 billion. Realized gains on securities of $1.03 billion, driven largely by equity holding-period gains, also boosted reported earnings. The companywide underwriting margin was 9.1%, slightly below 9.4% in 2018, with a combined ratio of 90.9%. The quality of the results has some caveats. The Property segment posted an underwriting loss of 1.7% (including 4.3 points of ARX-related amortization), and Personal Lines margins held near 9.5%. Unfavorable prior-year reserve development rose to $232 million from $89 million, and the company recorded a $163 million charge for fraudulent renewable energy tax credit investments. Auto new application growth slowed as competitors cut rates, and the 2019 accident-year severity assumption in reserves is sensitive to inflation. Management is also pursuing growth through its Destination Era bundling strategy and expanding Commercial Lines (TNC business and the new BOP product). Capital remains solid. Total capital reached $18.1 billion, the debt-to-capital ratio fell to 24.4%, and the premium-to-surplus ratio was 2.7:1. The company paid $2.65 per share in dividends for 2019, including an annual variable dividend, and it agreed in February 2020 to buy out the minority interest in ARX for about $242 million, bringing its stake to 100% in the second quarter of 2020.
Mar 2, 2020
2018
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2018
Progressive (PGR) reported a strong 2018 in its 10-K filed February 27, 2019, with net premiums written up 20% to $32.6 billion and net income attributable to Progressive up 64% to $2.6 billion ($4.42 diluted EPS). Growth was broad-based across Personal Lines, Commercial Lines, and Property, and policies in force rose 12% to 20.4 million. The companywide underwriting margin improved to 9.4% from 6.6%, helped by lower catastrophe losses (2.0 loss ratio points versus 3.2 in 2017) and a lower auto claims frequency, which fell about 3%, even as severity rose about 5%. Investors should note that reported net income is now more volatile. Under the new accounting standard effective in 2018, equity holding-period gains and losses flow through net income. The 2018 result absorbed roughly $498 million of net holding-period losses on equity securities. Comprehensive income of $2.5 billion, up about 30%, is management's suggested alternative measure. The Property segment remains unprofitable, with a 6.9% underwriting loss that includes 5.6 points of ARX-related amortization, and it carries Florida and Texas exposure and catastrophe risk. Capital management changed materially. The board ended the annual variable dividend after 2018 and replaced it with regular quarterly dividends, initially targeted near $0.10 per share, plus a possible annual supplemental dividend. Progressive issued $1.65 billion of debt and preferred shares, raised debt-to-capital to 28.9%, and took its ARX ownership to 86.8%. The 2018 annual dividend of $2.514 per share, about $1.47 billion, was paid in February 2019.
Feb 27, 2019
2017
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2017
Progressive (PGR) closed 2017 with a strong year on the top line and a rebound in profitability. Net premiums written rose 16% to $27.1 billion, a company record increase of $3.8 billion, and policies in force grew 10% to 18.2 million. The companywide combined ratio improved to 93.4 (underwriting margin 6.6%) from 95.1 in 2016, and net income attributable to Progressive rose 54% to $1.59 billion, or $2.72 per diluted share. Results were helped by lower auto claim frequency and higher earned premium per policy, partly offset by $830.5 million of catastrophe losses, including Hurricanes Harvey and Irma, and an underwriting loss in the Property segment (ASI). The Property business, acquired via the 2015 ARX deal, was the weak spot: it posted a 105.1 combined ratio, including about 6.7 points of acquisition-related amortization. Management is transitioning ASI products to the Progressive brand and building a bundled auto/home strategy (Destination Era). Progressive also faces a near-term obligation to buy out ARX minority shares, roughly $180 million in Q2 2018 if ownership reaches 80%, and up to about $310 million if all put rights are exercised. Debt-to-capital was 26.3%, and management said it will likely need to raise additional capital in the next 12 months to support premium growth, which could push debt-to-capital above its 30% target. A structural tailwind is the Tax Cuts and Jobs Act, which cut the federal rate to 21% and produced a one-time $99.5 million net tax benefit in 2017. Management expects the effective tax rate to fall to about 20% from the historical 32-33%, which should boost future net income. Shareholder returns run through an annual variable dividend, $1.1247 per share for 2017, paid in February 2018 at about $655 million, with a 33-1/3% underwriting-income target maintained for 2018.
Feb 27, 2018
2016
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2016
Progressive (PGR) delivered strong top-line growth in 2016 but weaker profitability. Net premiums written rose 14% to a record $23.4 billion, policies in force grew 7% to 16.5 million, and the company met its profitability objective. However, net income attributable to Progressive fell 19% to $1.03 billion ($1.76 per diluted share) from $1.27 billion, driven by higher catastrophe losses (2.5 combined ratio points, versus 1.3 in 2015), less favorable prior-year reserve development (0.4 points versus 1.6), and a $59.7 million impairment on two renewable energy tax credit investments. The companywide combined ratio deteriorated to 95.1 from 92.5, and the underwriting margin fell to 4.9% from 7.5%. Growth was broad-based but uneven by segment. Personal Lines remained the core, with the Agency and Direct channels both growing, while Commercial Lines margins compressed sharply (combined ratio 93.6 versus 84.1) as accident frequency rose and the company restricted new business in the second half of the year. The Property business, acquired through ARX in 2015, contributed $864.5 million in net premiums earned but ran a 96.2 combined ratio, weighed down by catastrophe losses and amortization of acquired intangibles. Balance-sheet strength remained solid: statutory surplus reached $8.6 billion, the premiums-to-surplus ratio was 2.7 to 1, debt-to-capital was 28.3% (below the company's 30% policy ceiling), and book value per share rose to $13.72. Capital return continued under the annual variable dividend policy. The Board declared a $0.6808 per share dividend (about $395 million, paid February 2017), and the company repurchased 6.1 million shares for $192.5 million. The variable dividend is tied to after-tax underwriting income and a Gainshare factor (1.67 for 2016), so payouts can swing considerably year to year. The ARX minority stake creates future cash obligations, with put/call rights in 2018 and 2021 that could take Progressive's ownership to 100%.
Mar 1, 2017
2015
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2015
Progressive (PGR) reported a strong 2015 with net premiums written rising 10% to $20.6 billion and an underwriting margin of 7.5% (combined ratio 92.5), comfortably above its 4% long-term target. Net income attributable to Progressive was flat at $1.27 billion, or $2.15 per diluted share, while comprehensive income fell 23% to $1.04 billion as unrealized losses on the investment portfolio hit equity markets and credit spreads widened. Favorable prior-year reserve development of $315.1 million, largely from bodily injury and Property lines, helped results. The most significant structural change was the April 2015 acquisition of a controlling 69.2% stake in ARX Holding Corp. (American Strategic Insurance), which added a homeowners Property segment that generated $689.6 million of net premiums written and an 89.9 combined ratio, including 7.4 points of acquisition-related amortization. The deal cost $890.1 million in cash, and the remaining ARX stake is subject to put/call rights that could take Progressive to 100% ownership by 2021, while adding a redeemable noncontrolling interest of $464.9 million to the balance sheet. Growth momentum improved across the business. Personal auto new applications rose 8%, Direct auto policies in force grew 9%, and Commercial Lines new applications jumped 15%. Capital remained strong, with statutory surplus of $7.6 billion, a premiums-to-surplus ratio of 2.7 to 1, and a debt-to-capital ratio of 27.1%, still under the company's 30% policy ceiling. Shareholders received an annual variable dividend of $0.8882 per share, and the company repurchased 7.3 million shares for $208.5 million.
Feb 29, 2016
2014
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2014
The Progressive Corporation's 2014 Form 10-K (filed March 2, 2015) shows a year of strong profitability and growth. Net premiums written rose 8% to $18.7 billion, net income increased to $1.28 billion ($2.15 diluted EPS, up from $1.93), and the combined ratio improved to 92.3 from 93.5, producing a 7.7% underwriting margin that beat the company's 4% target. Commercial Lines was the standout, with a combined ratio of 82.8 driven by lower loss ratios after rate increases and favorable reserve development. Personal Lines remained the core at roughly 90% of premiums, with Direct auto growing faster than Agency auto, which saw new applications fall 7% amid rate increases and competitive pressure. The balance sheet remains strong. Statutory surplus reached $6.4 billion, the premiums-to-surplus ratio held at 2.9 to 1, and the investment portfolio totaled $19.0 billion with a short 1.6-year duration. Investment income declined about 3% on lower yields, and net realized gains fell. Progressive also issued $350 million of 4.35% senior notes in 2014 and a further $400 million of 3.70% notes in January 2015, and it signed a deal to acquire a controlling stake in ARX Holding Corp., parent of its homeowners provider American Strategic Insurance, for an estimated $875 million, with closing expected in April 2015. Key risks for investors include the cyclical nature of auto insurance pricing, rising severity (up about 4% in 2014, with PIP severity up about 7%), ongoing litigation (including multi-district labor-rate litigation and several class actions), and the execution risk of the ARX acquisition, which adds homeowners catastrophe exposure and earnings volatility. The variable dividend policy means the 2015 payout will depend on Gainshare performance and remains at the Board's discretion.
Mar 2, 2015
2013
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2013
The Progressive Corporation (PGR) reported strong 2013 results, with net income rising to $1,165.4 million ($1.93 per diluted share) from $902.3 million in 2012, driven primarily by higher underwriting profitability. The underwriting margin improved to 6.5% (combined ratio 93.5) from 4.4% in 2012, aided by fewer catastrophe losses (1.0 point in 2013 versus 1.7 points in 2012) and higher average premiums following 2012 rate increases. Net premiums written grew 6% to $17.3 billion, though growth was largely driven by rate increases rather than policy count, as policies in force rose only about 2% and new personal auto applications were roughly flat. The company's balance sheet and capital return posture remained strong. Shareholders' equity reached $6.19 billion, debt-to-total-capital fell to 23.1% from 25.6%, and statutory surplus rose to $6.0 billion with a 2.9-to-1 premiums-to-surplus ratio. Progressive returned roughly $1.2 billion to shareholders and other investors in 2013 through dividends, share repurchases, and debt buybacks, and declared a $1.00 special dividend plus a $0.4929 annual variable dividend payable in February 2014. Investors should note that the variable dividend is performance-based and may vary significantly or be skipped in future years, as the 2012 variable dividend was only $0.2845 per share. Key risks flagged in the filing include ongoing regulatory and legislative pressure on auto insurance rates and the use of credit in underwriting, litigation (including numerous pending class actions, though the company reports no material exposure), unfavorable prior-year reserve development in Commercial Lines and run-off businesses, and the cyclical, highly competitive nature of the auto insurance market. Investment returns were solid, with a 5.4% total portfolio return aided by a 32.8% return on common equities, while the fixed-income portfolio returned only 1.7%.
Feb 26, 2014
2012
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2012
The Progressive Corporation (PGR) reported a solid but less profitable 2012. Net premiums written grew 8% to $16.4 billion and net premiums earned rose 7% to $16.0 billion, with total revenues reaching $17.1 billion. However, net income fell 11% to $902.3 million (diluted EPS $1.48, down from $1.59), driven by a rise in the combined ratio to 95.6 from 93.0. Drivers included roughly 5% higher personal auto severity, elevated catastrophe losses (about 1.7 points, including Superstorm Sandy), and a swing to unfavorable prior-year reserve development of $22.0 million versus favorable development of $242.0 million in 2011. The company still met its 4% underwriting margin target at 4.4%. Investment performance was a bright spot. Pretax recurring investment income fell 8% to $443.0 million as portfolio yields declined, but net realized gains of $306.8 million and a 6.8% fully taxable equivalent total return lifted comprehensive income 17% to $1,080.8 million. The $16.5 billion portfolio remains conservatively positioned, with a 1.9-year duration, an average credit quality of AA-, and a 2.9-to-1 premiums-to-surplus ratio. Capital return remained a priority: Progressive returned nearly $1.0 billion to shareholders in 2012 through a $1.00 special dividend ($604.7 million), an annual variable dividend of $0.2845 per share (about $172 million, paid February 2013), and $174.2 million of buybacks. Debt-to-total capital fell to 25.6% from 29.6% after retiring $350 million of 6.375% notes. Management noted that the variable dividend depends on underwriting results and the Gainshare factor, so future payouts may vary significantly.
Feb 26, 2013
2011
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2011
The Progressive Corporation (PGR) reported a solid 2011 despite an active catastrophe year. Net premiums written rose 5% to $15.1 billion, and net income was $1.0 billion, or $1.59 per diluted share, compared with $1.61 in 2010. The combined ratio deteriorated modestly to 93.0 from 92.4, leaving an underwriting profit margin of 7.0% versus a 4% long-term target. Management attributed the decline to roughly 1.4 points of catastrophe losses (largely Hurricane Irene and spring storms) and less favorable reserve development than in 2010, partly offset by lower auto claim frequency (down about 2%). Favorable prior-year reserve development still contributed $242 million, or 1.6 combined ratio points. The company's capital management was a major focus during the year. Progressive issued $500 million of 3.75% Senior Notes due 2021, repurchased 51.3 million common shares for $997.8 million, and retired $15 million of its 6.70% Debentures. It declared a $0.4072 per share annual variable dividend ($249.4 million) paid in February 2012, based on a Gainshare factor of 1.10 and a 33-1/3% target. Total capital stood at $8.2 billion, and the debt-to-total-capital ratio rose to 29.6%, though it fell to about 25.9% after the $350 million 6.375% notes were retired in January 2012. Shareholders' equity declined to $5.8 billion, largely due to buybacks and lower unrealized investment gains. Operationally, the company continued to grow policies in force, which rose 5% to about 12.3 million in Personal Lines, driven by Direct auto (up 6%) and a record Agency auto base. Snapshot usage-based insurance expanded nationally, and retention improved as policy life expectancy in personal auto rose 2%. Risks for investors include the company's dependence on auto insurance pricing cycles, rising Commercial Auto severity, reserve uncertainty, cyber and regulatory exposures, and the variable nature of the annual dividend, which Progressive does not guarantee and which will vary with underwriting results and the Gainshare factor.
Feb 28, 2012
2010
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2010
The Progressive Corporation (PGR) closed fiscal 2010 with strong profitability and a clear capital-return posture. Net income was $1,068.3 million, or $1.61 per diluted share, versus $1,057.5 million ($1.57) in 2009 and a net loss of $70.0 million in 2008. The combined ratio improved to 92.4 from 91.6 in 2009 on a basis slightly weaker than 2009 but still well inside the company's 96 target, and the underwriting margin was 7.6%, above management's 4% objective. Net premiums written grew 3% to $14.5 billion, driven by a 9% rise in Direct auto premiums and a 4% rise in Agency auto applications, while Commercial Auto continued to shrink under economic pressure. Policies in force rose 7% in Personal Lines, led by 13% growth in Direct auto. The balance sheet and capital story is central to the investment case. Shareholders' equity rose to $6.05 billion and book value per share to $9.13. Total investments were $15.5 billion, and the fixed-income portfolio carried a weighted average credit quality of AA- and a duration of only 2.0 years, reflecting a deliberate defensive stance. Progressive returned about $1.4 billion to shareholders in 2010 through a $1.00 extraordinary dividend ($663.2 million), share repurchases of $258.6 million, and the annual variable dividend of $.3987 per share paid in February 2011. It also retired $222.9 million of its 6.70% Debentures. The variable dividend formula will rise to a 33-1/3% target of after-tax underwriting income for 2011, which signals management's intention to keep distributing excess capital. Key risks flagged in the filing include reserve adequacy (the company released $320.4 million of prior-year reserves, a 2.2-point benefit to the combined ratio, which flatters current results), a cyclical auto insurance market, regulatory and litigation exposure (including credit-based underwriting, PIP and bodily injury claims), a federal insurance regulatory framework established by Dodd-Frank, and the variability of the annual dividend, which may fall to zero in a weak year as it did for 2008.
Mar 1, 2011
2009
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2009
The Progressive Corporation (PGR) closed 2009 with a strong rebound from a difficult 2008. Net income was $1.06 billion, or $1.57 per diluted share, compared with a net loss of $70.0 million in 2008. The turnaround was driven by underwriting results: the combined ratio improved to 91.6 from 94.6, an 8.4% underwriting margin that beat the company's 4% target. Net premiums written grew 3% to $14.0 billion, helped by an 11% rise in total personal auto written premium and a 20% jump in new Direct auto applications. Commercial Auto remained weak, with premiums down 10% and policies in force down 5%, although its margin improved sharply to 14.2%. Favorable prior-year reserve development of $136.0 million added roughly one point to 2009 profitability. Investment results also recovered. Net realized gains were $27.1 million, compared with a $1.4 billion realized loss in 2008 driven by preferred stock impairments. The portfolio's fair value rose 13% to $14.7 billion, and its total return was 12.5%. Shareholders' equity increased to $5.7 billion from $4.2 billion, and book value per share rose to $8.55 from $6.23. Statutory policyholders' surplus reached $5.0 billion, and the premiums-to-surplus ratio improved to 2.8 to 1. Debt to total capital fell to 27.5% from 34.0%. Capital return remains tied to a formula-based annual variable dividend. For 2009, the Board declared a $0.1613 per share dividend, about $108.5 million, paid in February 2010. Management also repurchased $180.6 million of shares. Investors should note that the dividend is performance-based and may vary sharply year to year, and that the Board can change or suspend the policy. Risks disclosed include reserve adequacy, catastrophe exposure, regulatory and litigation exposure, and the portfolio's concentration in preferred stocks, although 2009 showed the portfolio recovering.
Mar 1, 2010
2008
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2008
The Progressive Corporation (PGR) reported a net loss of $70.0 million, or $0.10 per share, for fiscal 2008, its first annual net loss in 26 years. The loss was driven by $1.4 billion of net realized investment losses, including roughly $1.9 billion of other-than-temporary impairment write-downs, about 90% of which related to its preferred stock holdings. Underlying insurance operations remained solid: the companywide underwriting profit margin was 5.4% (combined ratio 94.6), above the company's 4% target, and total underwriting profit was $734.9 million. Net premiums written fell 1% to $13.6 billion, while policies in force grew 3%, led by Direct auto, which grew 9%. The weakness shows up in the investment portfolio and capital base. The portfolio fell to $13.0 billion from $14.2 billion, total capital (debt plus equity) dropped to $6.4 billion, and shareholders' equity declined to $4.2 billion from $4.9 billion. The company reduced equity exposure from about 16.5% to 5.6% of the portfolio and raised its cash and U.S. Treasury holdings to $4.8 billion. Because of the net loss, the board declared no annual variable dividend for 2008, so the payout is tied directly to after-tax underwriting income and comprehensive income. Debt-to-total-capital rose to 34.0% from 30.6%, and the premiums-to-surplus ratio stayed at 3.0 to 1. For investors, the central question is whether the insurance franchise can keep producing underwriting margins above target while the company rebuilds investment-driven capital. The 10-K highlights rising claims severity and frequency in Commercial Auto, growth pressure in Agency auto, and exposure to financial-sector preferred stocks as key risks. The company also disclosed a Massachusetts regulatory investigation over comparative rating errors. Management said its new capital layers, including a $1.0 billion non-insurance subsidiary reserve, are intended to support growth, but the diminished third layer of excess capital limits flexibility for repurchases and dividends.
Feb 25, 2009
2007
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2007
Progressive (PGR) closed 2007 with net income of $1.18 billion ($1.65 diluted EPS), down about 28% from $1.65 billion ($2.10) in 2006, as the company deliberately cut auto rates from mid-2006 to chase growth. Net premiums written fell 3% to $13.77 billion and net premiums earned fell 2% to $13.88 billion, while policies in force grew 4%. The combined ratio deteriorated to 92.6 from 86.7 in 2006, though the 7.4% underwriting margin still exceeded management's stated 4% target. Management's stated long-run goal is to grow as fast as possible at a 96 combined ratio, so investors should view 2007 as a deliberate trade of margin for unit growth rather than an operational breakdown. The year was dominated by a capital restructuring. Progressive issued $1 billion of 6.70% junior subordinated debentures due 2067, paid a $2.00 per share extraordinary dividend (about $1.4 billion), and repurchased 72.9 million shares for $1.5 billion at an average of $21.24. Debt-to-total capital rose to 30.6% from 14.8%, slightly above the company's own 30% policy ceiling. Book value per share fell to $7.26 from $9.15, and shareholders' equity dropped to $4.94 billion from $6.85 billion. Going forward, the variable annual dividend (20% of after-tax underwriting income times a Gainshare factor) means the 2008 payout will be uncertain and could be zero. Reserve development turned unfavorable, with $80.3 million of adverse prior-year development in 2007 compared with favorable development of $246.9 million in 2006. The company also faces multiple putative class actions over claims practices, credit-based underwriting, and aftermarket parts, though management believes most are not yet probable and estimable losses. The investment portfolio of $14.2 billion (83% fixed income, average AA credit quality, 3.5-year duration) is conservatively positioned, but $306 million of unrealized losses on preferred stocks, largely financial issuers, reflect sub-prime market stress.
Feb 27, 2008
2006
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2006
Progressive (PGR) closed 2006 with net income of $1.65 billion, or $2.10 per diluted share, up 18% from $1.39 billion in 2005, on total revenues of $14.79 billion. The result was driven by strong underwriting profitability: the total underwriting combined ratio was 86.7 (13.3% underwriting margin), improved from 88.1 in 2005, despite net premiums written growing only 1% to $14.13 billion. Favorable prior-year loss reserve development contributed 1.7 points to the combined ratio, and catastrophe losses were light (0.5 points versus 2.4 in 2005). Management described the year as 'good, but not great,' citing slow premium growth, falling policies in force in Personal Lines (up only 3%), and a deliberate shift toward rate reductions to win back retention. Capital management was the other major theme. Progressive repurchased 39.1 million shares for $1.2 billion, paid only $25 million in regular dividends, and retired its $100 million 7.30% notes. Its debt-to-total-capital ratio fell to 14.8%, and the premiums-to-surplus ratio was 2.8 to 1. Management also announced that beginning with the 2007 dividend, it will replace the nominal fixed dividend with an annual variable dividend equal to 20% of after-tax underwriting profit, multiplied by a Gainshare factor ranging from zero to two. Applied to 2006, that formula would have produced roughly $0.39 per share, or about $292 million. The main risks for investors are a softening auto market with rising competitor advertising and rate cutting, a slowing rate of premium growth, dependence on continued favorable reserve development, and regulatory and litigation exposure, including a $61 million jury verdict in February 2007 that the company says will be reduced to the $300,000 statutory cap.
Feb 28, 2007
2005
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2005
The Progressive Corporation (PGR) closed 2005 with net income of $1.39 billion, or $6.98 per diluted share, down from $1.65 billion ($7.63) in 2004, as underwriting margins compressed and hurricane losses rose. Net premiums written grew 5% to $14.0 billion, while the combined ratio deteriorated to 88.1 from 85.1 in 2004. Management attributed $327.6 million (2.4 combined ratio points) to storm losses, primarily Hurricanes Katrina and Wilma, and said favorable prior-year reserve development of $355.9 million (2.6 points) masked a weaker current accident-year result, with the accident-year loss and LAE ratio rising to 70.6 from 65.7. Management explicitly anticipates that margins will decline toward more historical levels in 2006 as the auto insurance pricing cycle turns and competitors cut rates. The balance sheet remained strong: total shareholders' equity rose to $6.1 billion (book value of $30.96 per share, up 20%), debt-to-capital fell to 17.4%, and the net premiums-to-surplus ratio edged up to 3.0x. Progressive repurchased 5.2 million shares for $483 million during 2005 and paid only $0.12 per share in dividends. The most significant forward-looking item is the February 26, 2006 board decision to replace the modest regular dividend with an annual variable dividend starting in 2007, tied to a target percentage of after-tax underwriting income multiplied by a performance factor from 0 to 2. Management illustrated the policy by noting that 2005 results would have produced a $1.66 per share dividend under the new formula, compared with the $0.12 actually paid. For investors, the key questions are how quickly margins compress in 2006, whether the variable dividend policy reduces excess capital effectively, and the ongoing litigation and regulatory inquiries into contingent commissions and claims practices. The filing shows a company with strong profitability and capital generation, but one whose 2005 earnings were flattered by reserve releases and which is entering a period of expected margin normalization.
Feb 28, 2006
2004-A
PROGRESSIVE CORP/OH/ Annual Report (Amendment), Year Ended Dec 31, 2004
This filing is an amendment (10-K/A) to The Progressive Corporation's annual report for the fiscal year ended December 31, 2004. The primary purpose of this amendment is to correct and resubmit Exhibits 31(A) and 31(B), which contain the certifications of the Principal Executive Officer and Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002. These corrected exhibits ensure compliance with SOX regulations by including previously omitted wording. Investors should note that this filing does not introduce new financial or operational information but rather rectifies a procedural compliance aspect of the original 10-K filing.
Apr 28, 2005
2004
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2004
The Progressive Corporation (PGR) closed 2004 with a strong year of profitable growth in personal auto insurance. Net premiums written rose 12% to $13.4 billion, net income reached $1.65 billion (diluted EPS of $7.63, up from $5.69 in 2003), and the GAAP combined ratio improved to 85.1 from 87.3. Progressive ranks third in U.S. personal auto insurance with an estimated 7.4% market share, and the company's Personal Lines segment accounts for 88% of premiums written. Results were supported by a historically low level of auto accident frequency, favorable prior-year reserve development of $109.1 million, and continued rate adequacy, though the company cut auto rates by roughly 1% in aggregate during the year. Capital management was a major theme in 2004. Progressive completed a Dutch auction tender offer that repurchased 16.9 million shares at $88 per share (about $1.5 billion), and it repurchased about 27 million shares over the three years ended 2004. Book value per share rose to $25.73 and return on average equity was 30.0%. Debt was reduced to $1.28 billion, bringing the debt-to-capital ratio down to 20%, and the company says it has substantial capital resources and borrowing capacity. Investors should weigh several risks disclosed in the filing. The company faces pending class action litigation over claims practices and credit-based underwriting, and a February 2005 court decision denied final approval of a Fair Credit Reporting Act settlement. State attorney general and regulatory inquiries into contingent commissions and bid-rigging began in late 2004. The company also flagged that it did not achieve its expected improvement in customer retention, that policy life expectancy declined modestly, and that its monthly earnings reporting can produce volatility. Florida's combined ratio missed the company's 4% underwriting profit target because of hurricane losses, and the company plans to spend heavily on new call centers, a data center, and up to 50 additional concierge claims centers.
Mar 1, 2005
2003
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2003
The Progressive Corporation (PGR) closed 2003 with a banner year: net income rose 88% to $1,255.4 million ($5.69 diluted EPS) on total revenues of $11.9 billion, up 28% from 2002. Net premiums written grew 26% to $11.9 billion, and the company's underwriting margin improved 5.1 points to 12.7%, well above its 4% long-term target. Growth was driven by rate adequacy, improved retention, new business, and policies in force up 19%, while favorable loss reserve development of $56.1 million (1.5% of prior-year reserves) and continued low accident frequency supported profitability. Personal Lines accounted for 88% of premiums, with the Agency channel and Direct channel both growing, and Commercial Auto moved to roughly third place nationally. The balance sheet strengthened materially, with shareholders' equity rising to $5.03 billion from $3.77 billion, book value per share reaching $23.25, and statutory policyholders' surplus climbing to $4.5 billion. The company repurchased 4.95 million shares for $316.8 million and repaid $200 million of 6.60% notes in January 2004. Management flagged several risks, including intensifying competition as the auto market softens, pending class action litigation on claims practices, regulatory pressure on rate-setting and credit-based underwriting, and a potential reversal of the favorable reserve trend. Investors should weigh the strong 2003 results against an expected slowdown in year-over-year growth and a softening pricing environment.
Mar 4, 2004
2002
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2002
The Progressive Corporation (PGR) reported a strong 2002 with net premiums written up 30% to $9.45 billion, driven by rate adequacy, improved retention, and new business growth in both its Agent and Direct channels. The GAAP combined ratio improved to 92.4 from 95.2 in 2001, producing a 7.6% underwriting margin versus 4.8% a year earlier. Net income rose 62% to $667.3 million, or $2.99 per diluted share, and operating income (a non-GAAP measure excluding realized gains/losses and nonrecurring items) reached $718.4 million, or $3.22 per share. Personal Lines, at 88% of premiums, drove the results, while Commercial Auto grew 51% to $1.0 billion and now ranks fifth nationally. The balance sheet expanded meaningfully. Total assets rose to $13.6 billion and shareholders' equity to $3.77 billion, or $17.28 per share. Debt increased to $1.49 billion after a $400 million 6.25% Senior Notes issuance in November 2002, and the debt-to-capital ratio edged up to 28%. Investment portfolio grew to $10.3 billion, though 2002 included $202 million of other-than-temporary impairment write-downs, largely on common equities, and realized losses of $78.6 million. Management repurchased 3.6 million shares for $214 million and committed to offsetting option dilution through buybacks, while shifting future equity compensation to restricted stock beginning in 2003. Key risks flagged in the filing include intense competition, regulatory pressure on rate-setting and credit-based underwriting, ongoing class-action litigation (including after-market parts, diminished value, and PIP claims), catastrophe exposure, and reserve adequacy. Loss reserve development was essentially flat in 2002 (adverse $3.5 million), following $99 million of favorable development in 2001. Investors should weigh the strong growth and margin expansion against the cyclical nature of auto insurance pricing, the litigation overhang, and the sensitivity of earnings to reserve estimates and equity markets.
Mar 14, 2003
2000
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2000
The Progressive Corporation's 2000 Form 10-K reveals a sharply deteriorated year for the auto insurer. Net income fell 84% to $46.1 million ($0.62 diluted EPS) from $295.2 million in 1999, and operating income (excluding realized gains and one-time items) dropped 79% to $55.4 million ($0.75 per share). The GAAP combined ratio rose to 104.4 from 98.3, meaning an underwriting loss of 4.4% versus a 1.7% profit in 1999. Management attributes the results to inadequate rate levels relative to rising loss cost trends (particularly personal injury protection and physical damage), $75.8 million of adverse prior-year reserve development, and an expense base that was only partly offset by lower Gainsharing payouts. Net premiums written grew just 1% to $6.2 billion, and Personal Lines Agent volume fell 8% as rate increases and a shift to six-month policies took effect, while the Direct channel grew 35%. The balance sheet remains conservative. Total assets were $10.05 billion, shareholders' equity rose 4% to $2.87 billion (book value per share $39.04), and debt fell to $748.8 million after a $300 million repayment in December 2000, lowering the debt-to-capital ratio to 21%. The fixed-income portfolio is high-grade, with an average credit quality of AA-, a 3.5-year duration, and a total portfolio return of 8.6%. Operating cash flow remained strong at $822.4 million. Statutory policyholders' surplus declined to $2.18 billion, and the company expects a roughly $300 million increase in statutory surplus from the January 1, 2001 Codification change. The company also took a $20 million accrual related to terminating a Strategic Alliance partnership and disclosed purported class action lawsuits concerning total loss valuation and aftermarket parts, which it intends to contest vigorously. Leadership transitioned as Glenn M. Renwick became President and CEO on January 1, 2001, succeeding Peter B. Lewis, who remains Chairman. Management openly acknowledged the 2000 shortfall and stated a return to its 4% underwriting profit objective, with rate increases already underway for about 15 months and a continued focus on claims handling and expense reduction. Shares closed 2000 at $103.63, up 42.3% for the year, while the share price on February 28, 2001 was $99.00. For investors, the key question is whether the rate increases and six-month policy transition can restore underwriting profitability in 2001 without a meaningful loss of premium volume.
Mar 29, 2001
1999
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 1999
Progressive (PGR) closed 1999 with a sharp earnings reversal. Net income fell 35% to $295.2 million ($3.96 diluted EPS) from $456.7 million ($6.11) in 1998, and operating income dropped 41% to $266.7 million ($3.58 per share). The GAAP combined ratio deteriorated to 98.3 from 91.6, and the underwriting margin fell from 8.4% to 1.7%, well short of the company's 4% target. Net premiums written still grew 16% to $6,124.7 million, showing that the company continued to expand aggressively even as profitability suffered. Management attributed the decline to four factors: a much smaller reserve release ($29.8 million versus $184.2 million in 1998), heavy growth in the Direct channel with its up-front costs, rate cuts in 1998 and early 1999, and an unexpected acceleration in loss trends. Management also disclosed roughly six points of adverse development in the first two months of 2000 and planned a March 2000 reserve review. The balance sheet remained strong. Shareholders' equity rose 8% to $2,752.8 million, book value per share reached $37.66, and statutory policyholders' surplus was $2,258.9 million. Debt increased to $1,048.6 million after the March 1999 issuance of $300 million of 6 5/8% senior notes due 2029, and the debt-to-total-capital ratio was 28%. The company generated $2,127.8 million of operating cash flow over the three years through 1999. Ratings were A+ (S&P) and A2 (Moody's). Return on equity fell to 10.9% from 19.3%. The stock was the dominant story for investors. PGR traded as high as $174 1/4 in January 1999, then fell to $68 1/2 by year-end and closed at $73 1/8, a one-year decline of 56.7%. The stock was around $59.50 in late February 2000. Management is changing its incentive structure to calendar-year underwriting targets, pulling back on growth to focus on claims service and retention, and launching a homeowners product in Arizona in March 2000. Investors should weigh the strong franchise and capital position against near-term margin pressure, adverse reserve development, and a rate increase that will not fully flow through to earnings until the fourth quarter of 2000.
Mar 30, 2000
1998
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 1998
The Progressive Corporation (NYSE: PGR) reported a strong 1998 for its 10-K filing. Net premiums written rose 14% to $5,299.7 million and the GAAP underwriting profit margin reached 8.4%, up from 6.6% in 1997. Operating income climbed 34% to $449.3 million ($6.01 per diluted share), and net income grew 14% to $456.7 million ($6.11 per diluted share). Return on average shareholders' equity was 19.3%, versus a stated long-term objective of at least 15 points above inflation. Growth was driven by Personal Lines, which accounted for 93% of premiums, and by expanding direct, Internet, and strategic-alliance distribution, alongside heavier national advertising. Investors should weigh several pressures. Competition intensified in 1998, with rivals cutting rates and increasing advertising and agent compensation. Progressive lowered rates an average of 5.3%, and management warned that expansion spending and lower first-year margins would pull profitability toward its 4% long-term underwriting target over a policyholder's lifetime. Realized investment gains fell sharply to $11.4 million from $98.5 million, and $32.2 million of other-than-temporary write-downs were taken. Unrealized gains on the portfolio declined, and the company's stock appreciation of 41.6% in 1998 outpaced the S&P 500 on price while its equity portfolio underperformed the index. The balance sheet remains conservative, with a debt-to-capital ratio of about 23% to 29%, a $300 million 6 5/8% senior note issued in March 1999 to refinance debt maturing in 2000, and operating cash flows of roughly $2.0 billion over three years. Management also disclosed a Y2K remediation program that was largely complete, a planned homeowners product test for 1999, and a reserve redundancy of $184.2 million in 1998 loss reserves, indicating prior-year reserves were conservatively set.
Mar 26, 1999
1997-A2
PROGRESSIVE CORP/OH/ Annual Report (Amendment), Year Ended Dec 31, 1997
This Form 10-K/A (Amendment No. 2) for The Progressive Corporation's fiscal year ended December 31, 1997 does not contain new financial statements or operating results. It was filed solely to add Item 7A, Quantitative and Qualitative Disclosures About Market Risk, to the original 10-K filed March 27, 1998. Item 7A incorporates by reference the "Investments" section of MD&A and Exhibit 13 (the 1997 Annual Report to Shareholders), so the substantive market-risk discussion is in those documents, not in this amendment. The filing confirms basic registration details: Progressive is an Ohio corporation headquartered in Mayfield Village, Ohio, with Common Shares ($1.00 par value) listed on the New York Stock Exchange. As of February 27, 1998, 72,427,300 shares were outstanding. The aggregate market value of voting stock held by non-affiliates was $6,748,111,562.50 as of January 31, 1998. Investors seeking performance, underwriting, or balance-sheet figures for 1997 should consult the original 10-K and its Exhibit 13. This amendment's main value is the market-risk disclosure cross-reference, which is relevant to how Progressive's investment portfolio exposure is discussed.
Jun 8, 1998
1997-A
PROGRESSIVE CORP/OH/ Annual Report (Amendment), Year Ended Dec 31, 1997
This document is Amendment No. 1 (Form 10-K/A) to The Progressive Corporation's annual report for fiscal year 1997. It contains no financial statements, MD&A, or operating results. Its sole purpose is to replace Exhibit 10(H), the Progressive Corporation 1998 Directors' Stock Option Plan, in its entirety. The amendment amends the original 10-K filed March 27, 1998, so the filing date noted in the request differs from the date of the original report. Investors looking for 1997 performance should consult the original 10-K and its Exhibit 13, the 1997 Annual Report to Shareholders, which is incorporated by reference but not included in this document. The cover page provides basic capitalization data: 72,427,300 common shares outstanding as of February 27, 1998, and an aggregate market value of non-affiliate voting stock of approximately $6.75 billion as of January 31, 1998. The company's common shares trade on the New York Stock Exchange. The exhibit index, which is largely a cross-reference to previously filed documents, shows the company's debt and credit arrangements. These include a $10 million unsecured line of credit with National City Bank, $150 million of 7% notes due 2013, $200 million of 6.60% notes due 2004, and $100 million of 7.30% notes due 2006, all issued under the 1993 Senior Indenture with State Street Bank and Trust Company as trustee. The index also references construction agreements for Progressive Casualty Insurance Company and executive compensation plans, including gainsharing and executive bonus plans.
Mar 30, 1998
1997
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 1997
The Progressive Corporation (NYSE: PGR) reported a strong 1997 for its 10-K filing, with net premiums written rising 36% to $4,665.1 million and net income climbing 28% to $400.0 million, or $5.31 per diluted share. Operating income, which excludes realized investment gains, grew 9% to $336.0 million ($4.46 per share). The company posted an underwriting profit margin of 6.6% (versus 8.5% in 1996), above its 4% long-term target, and a GAAP combined ratio of 93.4. Return on average common shareholders' equity was 20.9%, and book value per share rose 26% to $29.54. Shares returned 78.4% in 1997, and the stock was added to the S&P 500 in August 1997. Growth was driven by aggressive pricing (average rate cuts of 0.9%), heavy investment in advertising, claims and customer service staff, and the March 1997 acquisition of Midland Financial Group for about $50 million. Management acknowledged that these growth investments, along with lower first-year margins, are likely to pressure profit margins toward the 4% target in the near term. Ceded premiums and reserve development were largely favorable, with a $103.3 million prior-year reserve redundancy, though the redundancy as a percentage of reserves fell to 6.7% from 12.6% the prior year. The balance sheet remains conservative, with a 27% debt-to-capital ratio, $775.9 million of debt, and an investment portfolio of $5.27 billion that is mostly investment-grade fixed income with a 3.3-year duration. Management is also spending on infrastructure, including a Tampa call center (estimated $42.0 million) and Mayfield Village office buildings, and is preparing for Year 2000 remediation with a total estimated cost of about $11 million. Key risks flagged include state rate regulation and rollbacks, rising competitive intensity, and the potential for regulatory pressure on the nonstandard auto market.
Mar 27, 1998
1996
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 1996
The Progressive Corporation (PGR) reported strong 1996 results, driven by rapid premium growth and improved underwriting. Net premiums written rose 18% to $3,441.7 million, and the GAAP underwriting margin improved to 8.5% from 5.7% in 1995. Operating income, which excludes realized gains and one-time items, increased 40% to $309.1 million, or $4.08 per share. Net income was $313.7 million, or $4.11 per share fully diluted, and return on average common shareholders' equity was 20.5%. The company's stock rose 38.5% during 1996, with the closing price at $67 3/8 and market capitalization at about $4.8 billion. The core auto business is the bulk of the story, accounting for 98% of net premiums written and growing 19%. Management is deliberately pursuing growth in standard and preferred auto, which is expected to compress near-term margins. Management attributes that compression to customer acquisition spending, brand advertising, and expected losses on first-year business, and it has explicitly guided toward margins moving closer to its 4% long-term underwriting target. Expenses are a key lever: underwriting expenses fell to 21.6% of premiums from 23.0% in 1995. Investor-relevant risks include ongoing regulatory pressure on auto rates in some states, competition from larger carriers, and the unpredictable pace of margin and growth changes. The balance sheet is conservative, with a fixed-income portfolio averaging about 89% of investments, a 3.2-year duration, and 63% in AAA securities. Common stocks rose to 12.1% of the portfolio, moving toward a 15% target. Funded debt increased to $775.7 million, a 32% debt-to-capital ratio. The company also agreed to acquire Midland Financial Group for $49.5 million and signed a letter of intent for a stake in Danielson Holding, which was terminated in March 1997. Management also expects homeowners insurance to be assessed in 1997, and the Year 2000 remediation project is estimated at $4.3 million.
Mar 31, 1997
1994
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 1994
The Progressive Corporation (NYSE: PGR), an insurance holding company, reported a strong 1994 driven by aggressive growth in its core personal auto insurance business. Net premiums written rose 35% to $2,457.2 million, and the core business (about 95% of volume) grew 38%, with the Company now the seventh-largest U.S. private passenger auto insurer at roughly 2.0-2.2% market share. Net income was $274.3 million, or $3.59 per share, while operating income (excluding realized gains and one-time items) rose 8% to $212.7 million, or $2.76 per share. Return on shareholders' equity was 27.4%, down from 36.0% in 1993, largely because 1993 included large equity-security gains. The quality of earnings was supported by a one-time item: the company eliminated a $71.0 million "supplemental reserve" in 1994, which added $.62 per share to net income and about 3.2 points to the underwriting margin. Investors should weigh that boost when comparing years. The GAAP combined ratio was 91.7 (88.5 excluding the one-time effect), and management reports 2% to 4% reserve redundancy over the prior five years, with favorable prior-year development of $142.5 million in 1994. Risks flagged in the filing include rising interest rates that produced $41.1 million of unrealized investment losses, heightened state regulatory scrutiny and rate rollback pressure (notably in California and Georgia), and the operational challenge of managing rapid growth, including hiring and training many new staff. Management targets a 4% underwriting margin and continued growth in the standard and preferred auto market, which it has only recently begun entering.
Mar 28, 1995
1993
PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 1993
The Progressive Corporation (NYSE: PGR), an insurance holding company formed in 1965, reported a record 1993 with net income up 74% to $267.3 million ($3.58 per fully diluted share) on total revenues of $1,954.8 million, and a return on average shareholders' equity of 36.0%. The results were driven by its Insurance Group, which writes primarily nonstandard personal auto insurance through 13-14 divisions and roughly 30,000 independent agents. Net premiums written rose 25% to $1,819.2 million, and the GAAP underwriting margin improved to 10.7% from 3.5% in 1992, largely because claim costs fell to 62% of earned premium and expense ratios dropped to 28%. Management emphasized that the company is in a multi-year transition toward a low-cost, full-line auto insurer with a consumer brand. Management was explicit that the strategy carries near-term earnings risk. The company plans to cut prices to bring underwriting margins down toward a 4% target, expand standard and preferred auto lines (currently 4.5% of private passenger auto premiums), and grow faster, which it says could reduce 1994 and 1995 earnings growth. Regulatory risk is also significant, including state rate rollback pressure in California and Georgia and possible federal scrutiny of insurers. The balance sheet was strengthened during 1993 through a $177 million common stock sale, $350 million of new long-term debt, and the redemption of higher-cost debentures. Total assets reached $4,011.3 million and shareholders' equity $997.9 million, with funded debt-to-capital falling to 32% from 47%. The loss reserve analysis shows a $98.5 million redundancy that emerged during 1993, which supports current earnings quality but may not recur.
Mar 29, 1994