Progressive 2005 Annual Report Download

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The Progressive Corporation 2005 ANNUAL REPORT

Table of contents

  • Page 1
    The Progressive Corporation 2005 ANNUAL REPORT

  • Page 2
    progress IT HAS BEEN MY OBSERVATION THAT MOST PEOPLE GET AHEAD DURING THE TIME THAT OTHERS WASTE. Henry Ford

  • Page 3
    ... Vision and Values Letter to Shareholders Objectives, Policies and Operations Summary Consolidated Financial Statements Safe Harbor Statement Corporate Information Directors and Officers Why TIME? THE PROGRESSIVE INSURANCE ORGANIZATION began in 1937. Since then, we have worked hard to build...

  • Page 4
    ... U.S. personal auto insurance market net premiums written as reported by A.M. Best Company Inc.; 2005 is estimated. 4 Represents average annual compounded rate of increase and assumes dividend reinvestment. All share and per share amounts were adjusted for the April 22, 2002, 3-for-1 stock split...

  • Page 5
    value THE TIME IS ALWAYS RIGHT TO DO WHAT IS RIGHT. Martin Luther King Jr.

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    { Vision and Values } COMMUNICATING A CLEAR PICTURE OF PROGRESSIVE by stating what we try to achieve (Vision), how we interact with customers (Customer Value Proposition) and what guides our behavior (Core Values) permits all people associated with Progressive to understand what we expect of ...

  • Page 7
    ... savvy about insurance and ready for easy, new ways to quote, buy and manage their policies, including claims service that respects their time and reduces the trauma and inconvenience of loss. CORE VALUES Progressive's Core Values serve as the foundation for our corporate culture. They govern...

  • Page 8
    success A MAN WHO DARES TO WASTE ONE HOUR OF TIME HAS NOT DISCOVERED THE VALUE OF LIFE. Charles Darwin

  • Page 9
    ... stated objectives which by design would produce a 1.0. Although 2005 was not a year of record setting growth rates or earnings per share, by our Gainshare score of 1.54, or by any other measure, it was a very solid all-around performance. We ended the year with just over $14 billion in net premiums...

  • Page 10
    ... in using rate reductions in search of profitable growth. Drive Insurance, which operates in an environment where rates are continuously compared to competitive options, reduced rates modestly during the year and found it very hard to get growth in new applications. Progressive Direct kept...

  • Page 11
    ... price, growth and profit, while increasing, remains a challenge and something we want to be smart about. Reviewing Progressive's and the industry's results through 2005 and noting the possible analogue to past cycles, we would make a few important observations. Operating margins, while historically...

  • Page 12
    ... between consumers in ways that best match their expected costs, we manage the claims and administrative costs that must ultimately be allocated, and we provide superior consumer experiences. Our maximum preparedness agenda is designed to encompass the many things we know matter in our business and...

  • Page 13
    .... Last year, I reported that we used the year to fully evaluate every aspect of our concierge-level claims service and concluded by year end that our evaluation discipline and planning had positioned us well for expansion throughout 2005 and 2006. We opened six new facilities in 2005 and ended the...

  • Page 14
    ...the opportunities are starting to be realized and we are encouraged by the potential. A notable and welcomed development for Progressive Direct during the year was the continued strong growth from customers initiating and buying policies on the Internet. Our Web-based activities celebrated their ten...

  • Page 15
    INVESTMENTS AND CAPITAL MANAGEMENT Solid growth in the economy and improving profits supported the equity markets in 2005 while "measured" interest rate increases from the Federal Reserve pushed short-term rates higher to essentially ï¬,at with steady longer maturity yields. We took advantage of ...

  • Page 16
    ... eligible earnings ] [ = Employee GS payout ] ] Our long-standing and continuing position on capital management is to repurchase shares when our capital position, view of the future, and the stock's price make it attractive to do so. Growth rates and profitability levels during 2005 happily led...

  • Page 17
    ... OF PURPOSE Just as measurement is central to Progressive's business discipline, our Core Values, aspirations and people are central to our business culture. We are continuously motivated by our aspiration of becoming Consumers' #1 Choice for Auto Insurance and in 2005 moved another step closer...

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    WE MUST USE TIME AS A TOOL, NOT AS A CRUTCH. John F. Kennedy

  • Page 19
    ...established a product management system responsible for achieving these financial objectives over rolling five-year periods. Progressive monitors its financial policies continuously and strives to meet these targets annually. Experience always clarifies objectives and illuminates better policies.We...

  • Page 20
    ...customer service. Progressive is a growth-oriented company and management incentives are tied to profitable growth. We report Personal Lines and Commercial Auto results separately. We further break down our Personal Lines' results by channel (Drive and Direct) to give shareholders a clearer picture...

  • Page 21
    ... share repurchases and a variable dividend program based on annual underwriting results OBJECTIVES AND POLICIES SCORECARD Financial Results Target 2005 2004 2003 5 Years 1 10 Years 1 Underwriting margin - Progressive Industry 2 Net premiums written growth Companywide premiums-to-surplus...

  • Page 22
    ... objectives and policies consistently. A shareholder who purchased 100 shares of Progressive for $1,800 in our first public stock offering on April 15, 1971, owned 23,066 shares on December 31, 2005, with a market value of $2,693,650, for a 23.5% compounded annual return, compared to the 7.5% return...

  • Page 23
    ... to our new Web site, driveinsurance.com. We continued to enhance functionality of our agency-dedicated Web site, ForAgentsOnly.com, and improved our interface with agency management and comparative rating systems, making it even easier for independent agents to quote and sell our products. We also...

  • Page 24
    ... in our Web application completion rate. We introduced "talk to me" functionality, allowing Internet customers to instantly start a telephone conversation with a licensed professional who can access their quote real-time and provide them counsel. In 2005, we launched a New Jersey product that has...

  • Page 25
    ... core strengths. However, because of our competitive position in the Gulf region and our product's entry into North and South Dakota, New Hampshire and South Carolina in 2004 and early 2005, we gained moderate share last year. Net written premiums grew 11% to $1.8 billion and policies in force rose...

  • Page 26
    money TO ACHIEVE GREAT THINGS, TWO THINGS ARE NEEDED; A PLAN, AND NOT QUITE ENOUGH TIME. Leonard Bernstein

  • Page 27
    ... Statements, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations and Supplemental Information, which are included in the Company's 2005 Annual Report to Shareholders, which is attached as an Appendix to The Progressive Corporation's 2006 Proxy Statement...

  • Page 28
    ... financial statements included in the Company's 2005 Annual Report to Shareholders, which is attached as an Appendix to the Company's 2006 Proxy Statement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | THE PROGRESSIVE CORPORATION AND SUBSIDIARIES .30...

  • Page 29
    ....6 119.8 432.2 - 666.5 91.5 $ 17,184.3 Unearned premiums Loss and loss adjustment expense reserves Accounts payable, accrued expenses and other liabilities Income taxes Debt1 Total liabilities Shareholders' equity: Common Shares, $1.00 par value (authorized 600.0; issued 213.1 and 213.2, including...

  • Page 30
    ...included in the Company's 2005 Annual Report to Shareholders, which is attached as an Appendix to the Company's 2006 Proxy Statement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | .33 | | | | | | | | | | THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

  • Page 31
    ...included in the Company's 2005 Annual Report to Shareholders, which is attached as an Appendix to the Company's 2006 Proxy Statement. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | .35 | | | | | | | | | | THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

  • Page 32
    ... thereon. The consolidated financial statements and management's assessment of the effectiveness of internal control over financial reporting referred to above (not presented herein) appear in The Progressive Corporation's 2005 Annual Report to Shareholders, which is attached as an Appendix to...

  • Page 33
    ... W. Thomas Forrester, Vice President and Chief Financial Officer of The Progressive Corporation, have issued the certifications required by Sections 302 and 906 of The Sarbanes-Oxley Act of 2002 and applicable SEC regulations with respect to the Company's 2005 Annual Report on Form 10-K, including...

  • Page 34
    ...if and when a reserve is established for one or more contingencies. Reported results, therefore, may appear to be volatile in certain accounting periods. COMMON SHARES The Progressive Corporation's Common Shares (symbol PGR) are traded on the New York Stock Exchange. Dividends are customarily paid...

  • Page 35
    ..., shareholders can access the Company's Web site: progressive.com/sec. To view its earnings and other releases, access progressive.com/investors. To request copies of public financial information on the Company, write to: The Progressive Corporation, Investor Relations, 6300 Wilson Mills Road, Box...

  • Page 36
    ... contact the non-management directors as a group by sending a written communication clearly addressed to the non-management directors and sent to any of the following: Peter B. Lewis, Chairman of the Board, The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 or e-mail...

  • Page 37
    ... II .37 Joan Linder, Untitled (Looking at the Moon Without Glasses On) .03 .06 .11 .12 .15 .16 .18 .22 .24 ©2006 The Progressive Corporation Design: Nesnadny + Schwartz, Cleveland + New York + Toronto Printing: AGS Custom Graphics The paper in this annual report is recycled and recyclable.

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    ® 6300 WILSON MILLS ROAD MAYFIELD VILLAGE, OHIO 44143 440.461.5000 progressive.com