Progressive 2011 Annual Report Download - page 10

Letter to Shareholders
“I’m a good driver why don’t I get credit for that?” “What
does my age or occupation tell you about my driving?”
...and the list goes on as consumers struggle with group
statistics of correlation versus their sense of controllable
causes. Snapshot, and what is sure to follow in its evolution,
is a meaningful start toward personalized insurance pricing
based on real-time measurement of your driving behavior —
the statistics of one.
The power of participation and personalization has strong
appeal, no better demonstrated than when we asked cus-
tomers, employees, shareholders, and directors to contribute
art work for this Annual eport. A simple request to draw
online a car facing to the right resulted in tens of thousands
of responses — no two the same. Objective curation of the
responses has selected a sample to highlight this report —
sadly mine is absent, but the point is not diminished. The
num erosity of responses provides a visual clue as to the
expansive power that personalization provides to segmen-
tation in insurance pricing.
As exciting as Snapshot is, and I’ll discuss it in more detail
later, there is much more to reflect on for Progressive in 2011.
For the first time in Progressive’s history net premiums
written topped $15 billion, surpassing that mark in the closing
days of the year. Earned premiums, recognized on a lag to
written, finished around $14.9 billion.
Our combined ratio of 93 was an equally satisfying result,
and while three points better than the objective we commu-
nicate to shareholders, it benefited from what I would classify
as generally higher-than-expected favorable development
from prior year loss reserves, as those estimates were refined
based on actual payment patterns. However, net of any favor-
able development, we outperformed our target 96 combined
ratio and comfortably handled an active catastrophe year.
Net premiums written growth for the year was 5%, or alter-
natively about $670 million, not yet numbers that come
close to taxing our ability or desire to manage growth, but a
strong growth quarter to end the year was encouraging.
eporting last year
I commented that,
“The closing years of
the decade appear to
be the approximate
time frame during
which in dustrywide
profitability will once
again be mod erated
and sustained indus -
try premium declines will turn positive.” This appears to have
some continued veracity and for Progressive the combination
of growth and margin in the last few years supports our turn.
It’s not always apparent when meaningful business history is being made and in auto insurance
that’s not very often, but in 2 011, Progressive’s introduction of Snapshot® just might qualify.
9
Kombi (Leonardo, age 27) Eco (Mary Anne, age 42)
Industrywide
Premium Growth Combined Ratio
2006 0.4% 94.2
2007 (0.7)% 97.7
2008 (0.7)% 99.8
2009 (0.9)% 100.8
2010 1.5% 100.4
Note: Represents A.M. Best Private Passenger Auto Data.