PROGRESSIVE : REPORTS JULY RESULTS - Form 8-K

PROGRESSIVE REPORTS JULY RESULTS

MAYFIELD VILLAGE, OHIO -- August 17, 2022 -- The Progressive Corporation (NYSE:PGR) today reported the following results for July 2022:

July
(millions, except per share amounts and ratios; unaudited)	2022	2021	Change
Net premiums written	$	4,929.4	$	4,551.6	8	%
Net premiums earned	$	4,694.0	$	4,313.5	9	%
Net income	$	688.8	$	255.4	170	%
Per share available to common shareholders	$	1.17	$	0.43	171	%
Total pretax net realized gains (losses) on securities	$	310.0	$	122.7	153	%
Combined ratio	89.8	96.7	(6.9) pts.
Average diluted equivalent common shares	587.2	587.2	0	%

July
(thousands; unaudited)	2022	2021	Change
Policies in Force
Personal Lines
Agency - auto	7,599.7	8,014.2	(5) %
Direct - auto	9,633.2	9,614.9	0 %
Total personal auto	17,232.9	17,629.1	(2) %
Total special lines	5,525.0	5,249.9	5 %
Total Personal Lines	22,757.9	22,879.0	(1) %
Total Commercial Lines	1,030.0	930.1	11 %
Total Property business	2,827.5	2,683.1	5 %
Companywide Total	26,615.4	26,492.2	0 %

Progressive offers personal and commercial insurance throughout the United States. Our Personal Lines business writes insurance for personal autos and special lines products. Our Commercial Lines business writes auto-related liability and physical damage insurance, workers' compensation insurance primarily for the transportation industry, and business-related general liability and property insurance, predominantly for small businesses. Our Property business writes residential property insurance for homeowners, other property owners, and renters.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPREHENSIVE INCOME STATEMENT

July 2022

(millions)

(unaudited)

Current Month	Comments on Monthly Results1
Net premiums written	$	4,929.4
Revenues:
Net premiums earned	$	4,694.0
Investment income	98.2
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales	(29.2)
Net holding period gains (losses) on securities	339.9
Net impairment losses recognized in earnings	(0.7)
Total net realized gains (losses) on securities	310.0
Fees and other revenues	68.5
Service revenues	30.8
Total revenues	5,201.5
Expenses:
Losses and loss adjustment expenses	3,399.8
Policy acquisition costs	340.8
Other underwriting expenses	544.9
Investment expenses	2.1
Service expenses	29.7
Interest expense	21.0
Total expenses	4,338.3
Income before income taxes	863.2
Provision for income taxes	174.4
Net income	688.8
Other comprehensive income (loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities	427.0
Net unrealized losses on forecasted transactions	0.1
Foreign currency translation adjustment	0.1
Other comprehensive income (loss)	427.2
Total comprehensive income (loss)	$	1,116.0

1 For a description of our financial reporting and accounting policies, see Note 1 to our 2021 audited consolidated financial statements included in our 2021 Shareholders' Report, which can be found at www.progressive.com/annualreport.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPREHENSIVE INCOME STATEMENTS

July 2022

(millions)

(unaudited)

Year-to-Date
2022	2021	% Change
Net premiums written	$	30,532.5	$	27,761.0	10
Revenues:
Net premiums earned	$	28,644.8	$	25,716.0	11
Investment income	632.8	498.8	27
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales	462.9	584.9	(21)
Net holding period gains (losses) on securities	(1,770.9)	587.8	(401)
Net impairment losses recognized in earnings	(5.0)	(2.9)	72
Total net realized gains (losses) on securities	(1,313.0)	1,169.8	(212)
Fees and other revenues	419.0	408.2	3
Service revenues	178.6	156.0	14
Total revenues	28,562.2	27,948.8	2
Expenses:
Losses and loss adjustment expenses	21,679.3	18,863.8	15
Policy acquisition costs	2,237.8	2,166.7	3
Other underwriting expenses	3,482.4	3,448.3	1
Investment expenses	13.7	14.5	(6)
Service expenses	168.4	142.7	18
Interest expense	138.3	131.6	5
Goodwill impairment	224.8	0	NM
Total expenses	27,944.7	24,767.6	13
Income before income taxes	617.5	3,181.2	(81)
Provision for income taxes	157.7	655.7	(76)
Net income	459.8	2,525.5	(82)
Other comprehensive income (loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities	(1,822.7)	(313.7)	481
Net unrealized losses on forecasted transactions	0.3	0.5	(40)
Foreign currency translation adjustment	(0.1)	(0.4)	(75)
Other comprehensive income (loss)	(1,822.5)	(313.6)	481
Total comprehensive income (loss)	$	(1,362.7)	$	2,211.9	(162)
NM = Not Meaningful

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE

&

INVESTMENT RESULTS

July 2022

(millions - except per share amounts)

(unaudited)

The following table sets forth the computation of per share results:
Current	Year-to-Date
Month	2022	2021
Net income	$	688.8	$	459.8	$	2,525.5
Less: Preferred share dividends	2.3	15.7	15.7
Net income available to common shareholders	$	686.5	$	444.1	$	2,509.8
Per common share:
Basic	$	1.17	$	0.76	$	4.29
Diluted	$	1.17	$	0.76	$	4.27
Comprehensive income (loss)	$	1,116.0	$	(1,362.7)	$	2,211.9
Less: Preferred share dividends	2.3	15.7	15.7
Comprehensive income (loss) attributable to common shareholders	$	1,113.7	$	(1,378.4)	$	2,196.2
Per common share:
Diluted1	$	1.90	$	(2.36)	$	3.74
Average common shares outstanding - Basic	584.4	584.3	584.7
Net effect of dilutive stock-based compensation	2.8	2.7	2.7
Total average equivalent common shares - Diluted	587.2	587.0	587.4

1 Basic earnings per share is disclosed where either a net loss or a comprehensive loss attributable to common shareholders is reported since diluted earnings per share are antidilutive.

The following table sets forth the investment results for the period:
Current	Year-to-Date
Month	2022	2021
Fully taxable equivalent (FTE) total return:
Fixed-income securities	1.4%	(4.6)%	0.8%
Common stocks	9.3%	(12.9)%	23.1%
Total portfolio	1.8%	(5.5)%	2.7%
Pretax annualized investment income book yield	2.2%	2.1%	1.9%

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

July 2022

($ in millions)

(unaudited)

Current Month
Commercial
Personal Lines Business	Lines	Property	Companywide
Agency	Direct	Total	Business	Business	Total
Net Premiums Written	$	1,815.1	$	2,152.3	$	3,967.4	$	755.4	$	206.4	$	4,929.4
% Growth in NPW	7%	12%	10%	3%	4%	8%
Net Premiums Earned	$	1,695.7	$	1,925.6	$	3,621.3	$	881.5	$	191.0	$	4,694.0
% Growth in NPE	3%	7%	5%	27%	9%	9%
GAAP Ratios
Loss/LAE ratio	73.5	75.5	74.5	64.2	66.1	72.2
Expense ratio	17.3	16.9	17.1	17.1	28.0	17.6
Combined ratio	90.8	92.4	91.6	81.3	94.1	89.8
Net catastrophe loss ratio1	1.2	0.3	9.6	1.4
Actuarial Adjustments2
Reserve Decrease/(Increase)
Prior accident years	$	4.7
Current accident year	(7.6)
Calendar year actuarial adjustment	$	(3.7)	$	(3.8)	$	(7.5)	$	(1.0)	$	5.6	$	(2.9)
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment	$	4.7
All other development	68.3
Total development	$	73.0
Calendar year loss/LAE ratio	72.2
Accident year loss/LAE ratio	73.8

1Represents catastrophe losses incurred during the period, including the impact of reinsurance, as a percent of net premiums earned. During the month, we incurred catastrophe losses primarily related to hail and wind throughout the United States.

2Represents adjustments solely based on our normally scheduled actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

July 2022

($ in millions)

(unaudited)

Year-to-Date
Commercial
Personal Lines Business	Lines	Property	Companywide
Agency	Direct	Total	Business	Business	Total
Net Premiums Written	$	10,825.1	$	12,333.7	$	23,158.8	$	5,989.9	$	1,382.1	$	30,532.5
% Growth in NPW	3%	7%	5%	33%	9%	10%
Net Premiums Earned	$	10,385.5	$	11,625.1	$	22,010.6	$	5,313.1	$	1,319.6	$	28,644.8
% Growth in NPE	4%	7%	6%	42%	15%	11%
GAAP Ratios
Loss/LAE ratio	75.8	77.1	76.5	69.6	83.4	75.6
Expense ratio	17.4	18.6	18.0	18.9	27.0	18.6
Combined ratio	93.2	95.7	94.5	88.5	110.4	94.2
Net catastrophe loss ratio1	1.7	0.3	26.6	2.6
Actuarial Adjustments2
Reserve Decrease/(Increase)
Prior accident years	$	(45.7)
Current accident year	(60.8)
Calendar year actuarial adjustment	$	(20.2)	$	2.8	$	(17.4)	$	(61.8)	$	(27.3)	$	(106.5)
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment	$	(45.7)
All other development	(26.2)
Total development	$	(71.9)
Calendar year loss/LAE ratio	75.6
Accident year loss/LAE ratio	75.3

1Represents catastrophe losses incurred during the period, including the impact of reinsurance, as a percent of net premiums earned.

2Represents adjustments solely based on our normally scheduled actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

BALANCE SHEET AND OTHER INFORMATION

(millions - except per share amounts)

(unaudited)

July 2022
CONDENSED GAAP BALANCE SHEET:
Investments, at fair value:
Available-for-sale securities:
Fixed maturities1 (amortized cost: $46,497.5)	$	44,202.7
Short-term investments (amortized cost: $4,687.4)	4,687.4
Total available-for-sale securities	48,890.1
Equity securities:
Nonredeemable preferred stocks(cost: $1,487.0)	1,389.5
Common equities (cost: $795.3)	3,050.8
Total equity securities	4,440.3
Total investments2	53,330.4
Net premiums receivable	10,601.3
Reinsurance recoverables (including $4,652.6 on unpaid loss and LAE reserves)	4,933.4
Deferred acquisition costs	1,546.7
Goodwill and intangible assets	323.3
Other assets2	3,563.5
Total assets	$	74,298.6
Unearned premiums	$	17,476.4
Loss and loss adjustment expense reserves	27,985.3
Other liabilities	5,676.1
Debt	6,386.8
Total liabilities	57,524.6
Shareholders' equity	16,774.0
Total liabilities and shareholders' equity	$	74,298.6
Common shares outstanding	584.8
Common shares repurchased - July	0.17
Average cost per common share	$	111.66
Book value per common share	$	27.84
Trailing 12-month return on average common shareholders' equity
Net income	7.3	%
Comprehensive income	(6.6)	%
Net unrealized pretax gains (losses) on fixed-maturity securities	$	(2,235.9)
Increase (decrease) from June 2022	$	540.5
Increase (decrease) from December 2021	$	(2,307.3)
Debt-to-total capital ratio	27.6	%
Fixed-income portfolio duration	2.8
Weighted average credit quality	AA-

1 As of July 31, 2022, we held certain hybrid securities and recognized a change in fair value of $58.9 million as a realized loss during the period we held these securities.

2 At July 31, 2022, we had $3.4 million of net unsettled security transactions classified in "other assets."

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Monthly Commentary

•The Company has no additional commentary regarding July's results.

Events

We plan to release August results on Thursday, September 15, 2022, before the market opens.

About Progressive

Progressive Insurance® makes it easy to understand, buy and use car insurance, home insurance, and other protection needs. Progressive offers choices so consumers can reach us whenever, wherever and however it's most convenient - online at progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.

Progressive provides insurance for personal and commercial autos and trucks, motorcycles, boats, recreational vehicles, and homes; it is the third largest car insurer in the country, a leading seller of motorcycle and commercial auto insurance, and one of the top 15 homeowners insurance carriers.

Founded in 1937, Progressive continues its long history of offering shopping tools and services that save customers time and money, like Name Your Price®, Snapshot®, and HomeQuote Explorer®.

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: Investors are cautioned that certain statements in this report not based upon historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements often use words such as "estimate," "expect," "intend," "plan," "believe," and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Forward-looking statements are based on current expectations and projections about future events, and are subject to certain risks, assumptions 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:

•our ability to underwrite and price risks accurately and to charge adequate rates to policyholders;

•our ability to establish accurate loss reserves;

•the impact of severe weather, other catastrophe events and climate change;

•the effectiveness of our reinsurance programs and the continued availability of reinsurance and performance by reinsurers;

•the highly competitive nature of property-casualty insurance markets;

•whether we innovate effectively and respond to our competitors' initiatives;

•whether we effectively manage complexity as we develop and deliver products and customer experiences;

•how intellectual property rights affect our competitiveness and our business operations;

•whether we adjust claims accurately;

•our ability to maintain a recognized and trusted brand;

•our ability to attract, develop and retain talent and maintain appropriate staffing levels;

•compliance with complex and changing laws and regulations;

•litigation challenging our business practices, and those of our competitors and other companies;

•the impacts of a security breach or other attack involving our computer systems or the systems of one or more of our vendors;

•the secure and uninterrupted operation of the facilities, systems, and business functions that are critical to our business;

•the success of our efforts to acquire or develop new products or enter into new areas of business and navigate related risks;

•our continued ability to send and accept electronic payments;

•the possible impairment of our goodwill or intangible assets;

•the performance of our fixed-income and equity investment portfolios;

•the impact on our investment returns and strategies from regulations and societal pressures relating to environmental, social, and other public policy matters;

•the elimination of the London Interbank Offered Rate;

•our continued ability to access our cash accounts and/or convert securities into cash on favorable terms;

•the impact if one or more parties with which we enter into significant contracts or transact business fail to perform;

•legal restrictions on our insurance subsidiaries' ability to pay dividends to The Progressive Corporation;

•limitations on our ability to pay dividends on our common shares under the terms of our outstanding preferred shares;

•our ability to obtain capital when necessary to support our business and potential growth;

•evaluations by credit rating and other rating agencies;

•the variable nature of our common share dividend policy;

•whether our investments in certain tax-advantaged projects generate the anticipated returns;

•the impact from not managing to short-term earnings expectations in light of our goal to maximize the long-term value of the enterprise;

•the impacts of the COVID-19 pandemic and measures taken in response; 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, including, without limitation, the Risk Factors section of our Annual Report on Form 10-K for the year ending December 31, 2021.

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 we establish reserves 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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