10-KPeriod: FY2010

PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2010

Filed March 1, 2011For Securities:PGR

Summary

The Progressive Corporation (PGR) reported strong financial performance for the fiscal year ended December 31, 2010. The company demonstrated consistent revenue growth, with net premiums written reaching $14.5 billion, an increase from the previous year. Progressive maintained a competitive combined ratio of 92.4, indicating effective underwriting and claims management. The company's strategic focus on personal and commercial auto insurance, alongside its expanding specialty lines and direct-to-consumer offerings like SnapshotSM, positions it well within the highly competitive insurance market. Progressive continued to prioritize shareholder returns, with a variable dividend policy and significant share repurchases aimed at neutralizing dilution. The company also highlighted its robust risk management framework and strong capital position, exceeding regulatory requirements. Despite facing inherent industry risks such as competition, regulatory changes, and economic volatility, Progressive's diversified business model, technological investments, and commitment to customer service appear to be driving sustained operational success and positioning it for long-term value creation.

Financial Highlights

35 data points
Beta

Revenue

$15.22B

Net Income

$1.07B

7.0% Net Margin

EPS (Diluted)

$1.61

Total Assets

$21.15B

Cash & Equivalents

$158.90M

Free Cash Flow

$1.61B

Financial Statements
Beta
Revenue$15.22B
Interest Expense$133.50M
Net Income$1.07B
EPS (Basic)$1.62
EPS (Diluted)$1.61
Shares Outstanding (Basic)657.90M
Shares Outstanding (Diluted)663.30M

Key Highlights

  • 1Net premiums written reached $14.5 billion for the year ended December 31, 2010, showing growth over the prior year.
  • 2The combined ratio stood at 92.4, reflecting solid underwriting performance and operational efficiency.
  • 3Personal Lines business accounted for approximately 90% of total net premiums written, underscoring its core strength.
  • 4The company's direct-to-consumer offering, SnapshotSM, continued its expansion into new states.
  • 5Progressive reported a net income of $1,068.3 million and earnings per share of $1.61.
  • 6The company returned capital to shareholders through dividends and share repurchases, indicating a commitment to shareholder value.
  • 7Statutory surplus was $5.1 billion, with RBC ratios well in excess of minimum requirements, demonstrating a strong capital position.

Frequently Asked Questions

Progressive's primary source of revenue in 2010 was net premiums written, which reached $14.5 billion. The Personal Lines segment was the largest contributor, accounting for approximately 90% of total net premiums written.

Progressive maintained a combined ratio of 92.4 in 2010, indicating effective management of underwriting and claims expenses. The company reported favorable reserve development in 2010 and 2009, primarily due to lower than expected defense and cost containment expenses and favorable settlements on larger losses.

Progressive has a policy of declaring an annual variable dividend based on after-tax underwriting income and a companywide performance factor (Gainshare factor). Additionally, the company engages in share repurchases to neutralize dilution from equity-based compensation and return underleveraged capital to investors.

The primary risks highlighted include insurance risks (inaccurate underwriting and inadequate rates, inaccurate loss reserves, catastrophic events), operating risks (intense competition, inability to innovate or manage complexity, brand reputation, talent acquisition/retention, complex regulatory environment, and claims adjustment accuracy), market risks (performance of investment portfolios), and credit risks (counterparty defaults and limitations on dividend payments from subsidiaries).