10-KPeriod: FY2013

PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2013

Filed February 26, 2014For Securities:PGR

Summary

Progressive Corporation (PGR) filed its 2013 10-K on February 25, 2014, detailing its robust property-casualty insurance operations, primarily focused on personal and commercial auto insurance. The company reported net premiums written of $17.3 billion for 2013, a slight increase from the prior year, indicating continued market presence. A key performance indicator, the combined ratio, stood at 93.5, suggesting efficient operations with claims and expenses managed effectively relative to premiums earned. Progressive's business is strategically organized into Personal Lines (90% of premiums) and Commercial Lines, utilizing both agency and direct distribution channels. The company emphasizes innovation, particularly with its usage-based insurance program, Snapshot®, which generated over $2 billion in annual premiums from customers in 2013. Significant investments in technology and data analytics are highlighted as core to their competitive strategy, enabling accurate risk segmentation and pricing. The report also addresses the competitive landscape, regulatory environment, and financial strategies, including a variable dividend policy tied to performance.

Financial Highlights

36 data points
Beta

Revenue

$18.17B

Net Income

$1.17B

6.4% Net Margin

EPS (Diluted)

$1.93

Total Assets

$24.41B

Cash & Equivalents

$75.10M

Free Cash Flow

$1.76B

Financial Statements
Beta
Revenue$18.17B
Interest Expense$118.20M
Net Income$1.17B
EPS (Basic)$1.95
EPS (Diluted)$1.93
Shares Outstanding (Basic)599.10M
Shares Outstanding (Diluted)603.60M

Key Highlights

  • 1Net premiums written reached $17.3 billion in 2013, up from $16.4 billion in 2012, demonstrating stable revenue growth.
  • 2The combined ratio improved to 93.5 in 2013 from 95.6 in 2012, indicating enhanced underwriting efficiency.
  • 3Personal Lines accounted for approximately 90% of net premiums written, with the Snapshot® usage-based insurance program surpassing $2 billion in annual premiums.
  • 4The company ranked fourth in U.S. private passenger auto market share in 2012 and believed it held this position in 2013.
  • 5Commercial Lines ranked second in the commercial auto insurance market for 2012 and was believed to retain this position in 2013.
  • 6Progressive emphasizes technology and data analytics for risk segmentation, pricing, and competitive advantage.
  • 7The company maintained strong statutory surplus ($6.0 billion at year-end 2013) and risk-based capital ratios well above minimum requirements.

Frequently Asked Questions

Progressive's primary lines of business are personal and commercial automobile insurance, along with other specialty property-casualty insurance products. Personal Lines, which includes personal auto and special lines for recreational vehicles, represents the vast majority (around 90%) of their net premiums written.

Progressive utilizes a multi-channel distribution strategy. Their Personal Lines products are sold through both the Agency channel (via a network of over 35,000 independent insurance agencies) and the Direct channel (online, via mobile devices, and over the phone). Commercial Lines are primarily distributed through the independent agency channel.

Snapshot® is Progressive's usage-based insurance program. It uses telematics to track driving behavior, allowing for more personalized rates. For 2013, customers choosing Snapshot® generated over $2 billion in annual premiums, highlighting its growing importance and acceptance among consumers.

Progressive manages insurance risks through accurate underwriting and pricing, relying heavily on data analysis. They maintain detailed estimates for loss reserves, which represent the best estimate of ultimate payments for incurred claims. The company continuously reviews and adjusts these reserves based on developing experience. While 2011 saw favorable reserve development, 2012 and 2013 experienced slight unfavorable development, particularly in Commercial Lines and certain Personal Lines segments, which was detailed in the filing.