10-KPeriod: FY2015

PROGRESSIVE CORP/OH/ Annual Report, Year Ended Dec 31, 2015

Filed February 29, 2016For Securities:PGR

Summary

The Progressive Corporation (PGR) reported solid performance in its 2015 10-K filing, highlighting growth in net premiums written to $20.6 billion, up from $18.7 billion in 2014. This growth was driven by strength in its core Personal Lines segment, which accounted for 86% of total net premiums written, and a strategic acquisition that expanded its Property insurance offerings. The company maintained a competitive combined ratio of 92.5, indicating effective management of losses and expenses relative to earned premiums. Key strategic initiatives include expanding its property insurance capabilities through the acquisition of a controlling interest in ARX Holding Corp. (ASI) and focusing on bundling property and auto insurance products, such as through its Progressive Home Advantage® program. This strategy aims to increase customer household penetration, enhance customer loyalty, and potentially reduce claims costs. The company also continues to invest in its direct channel, which saw a 4% increase in Personal Lines volume in 2015, and maintain its strong position in the commercial auto market.

Financial Highlights

39 data points
Beta

Revenue

$20.85B

Net Income

$1.27B

6.1% Net Margin

EPS (Diluted)

$2.15

Total Assets

$29.82B

Cash & Equivalents

$224.10M

Free Cash Flow

$2.16B

Financial Statements
Beta
Revenue$20.85B
Interest Expense$136.00M
Net Income$1.27B
EPS (Basic)$2.16
EPS (Diluted)$2.15
Shares Outstanding (Basic)585.50M
Shares Outstanding (Diluted)589.20M

Key Highlights

  • 1Net premiums written grew to $20.6 billion in 2015, an increase from $18.7 billion in 2014, demonstrating consistent business expansion.
  • 2The company achieved a combined ratio of 92.5 in 2015, indicating effective underwriting and claims management.
  • 3Acquired a controlling interest in ARX Holding Corp. (ASI) in April 2015, significantly expanding its presence in the property insurance market.
  • 4Personal Lines remained the dominant segment, contributing 86% of total net premiums written in 2015.
  • 5The Direct channel continued to grow, representing 48% of Personal Lines volume in 2015, up from 46% in 2014.
  • 6Progressive ranked as a top insurer in both personal and commercial auto markets, aiming for the top position in commercial auto for 2015.
  • 7The company reported favorable reserve development of $315.1 million in 2015, contributing positively to its financial results.

Frequently Asked Questions

The acquisition of a controlling interest in ARX Holding Corp. (ASI) in April 2015 significantly expanded Progressive's presence in the property insurance market, allowing it to offer homeowners, other property owners, and renters insurance. This segment is now reported separately and is expected to be fully acquired by the end of 2021. The property business represented about 3% of total net premiums written in 2015.

Progressive reported a combined ratio of 92.5 in 2015. This ratio, which represents the sum of losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses divided by net premiums earned, indicates that the company effectively managed its costs relative to its earned premiums, resulting in an underwriting profit.

Progressive has an annual variable dividend policy based on a percentage of after-tax underwriting income multiplied by a companywide performance factor (Gainshare factor). For 2015, the target percentage was 33-1/3%. The company declared and paid a variable dividend of $0.8882 per share in February 2016, totaling $519.2 million, reflecting positive performance driven by underwriting income and the Gainshare factor.

Progressive competes by focusing on price competitiveness, brand recognition, service quality, and technological innovation. They leverage data analysis for accurate risk segmentation and pricing, invest in their direct and agency channels, and pursue strategies like bundling products (e.g., home and auto) to enhance customer loyalty and penetration. The company also emphasizes superior customer service and efficient claims handling.