Progressive 2010 Annual Report Download - page 21

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OPERATIONS SUMMARY
Personal Lines Our Personal Lines business generated a 93.0 combined ratio,
which outperformed our targets but was 0.6 points above the 2009 result.
Net premiums earned grew 4%, while policies in force were up 7%, or more
than three quarters of a million policies.
For our auto products, profitability was down almost a point versus 2009.
In our special lines products, profitability was better than our targets by
a considerable margin driven primarily again by the absence of severe
weather on the coasts.
Policies in force growth was driven by both increases in new business
applications and increases in policyholder retention. Agency auto new ap-
plications were up 4% for the year and Direct new auto applications were
up 9%. The Agency auto performance reflects momentum from the previous
year and continued progress penetrating preferred customer segments.
The Direct auto new applications performance is half the growth rate we
achieved in 2009 and reflects an increasingly competitive marketplace for
Direct auto insurance. New applications in our special lines products were
up 10% overall, resulting from significant growth from our Direct distribution.
Retention improvement, as measured by policy life expectancy, was very
good in Agency auto (+8%), positive in Direct auto (+2%), and down slightly in
special lines (-1%). In aggregate, our average policyholder life expectancy
for Personal Lines increased approximately 3% in 2010 over 2009.
Net written premium growth for the year was 5%. Our filed rate changes
in our auto programs totaled an increase of approximately 2%. In our special
lines programs, our filed rate changes totaled a decrease of slightly less
than 1%. Actual average written premium changes for auto and special lines
were -1% and -2%, respectively. The difference between the filed and actual
price changes is explained by shifts in the mix of business across customer
segments and geography.
We continue to adapt our products and services to meet our customers’
personal insurance needs throughout their lives. The Progressive Home
Advantage
®
program, where we “private label” other companies’ property
insurance products, is growing rapidly. This program allows us to attract
new customers that bundle their dwelling and auto insurance and to meet
the needs of current customers that desire that arrangement. Approximately
40% of U.S. homeowners bundle their home and auto insurance and when
they do, their policy retention is materially better than stand-alone policies.
Towards the end of the year, we elevated a system that provides our
customer service representatives household-level insight into our relation-
ship with customers versus just a policy level view. We will elevate similar
systems soon for our agents and our customers. We also expect to make it
even easier to quote and shop for consumers that desire to bundle during
2011. Last year, we reported that we planned to roll out our patent-protected
usage-based insurance rating feature MyRate® 2.0 in 2010. At year end, we
had usage-based rating active in 27 states and have redesigned the market-
ing to Snapshot
SM
—based on the “snapshot” of driving behavior captured
by our in-vehicle device. We expect to broadly market Snapshot early in
2011. We have been very pleased with the percent of consumers that opt-
in to Snapshot and the loss prediction power of usage-based rating
continues to impress us.