Progressive 2006 Annual Report Download - page 23

26 27
Commercial Auto Competitors were very aggressive in 2006 as once
again the industry enjoyed strong profits. Reductions in rate contin-
ued in 2006 and will likely extend into the early part of 2007. As a
result of overall declining premium per policy, we expect no growth
in the $30 billion commercial auto market in 2006, following the
market decline experienced in 2005. However, supported by our entry
into New Jersey and a strong position in the specialty trucking
market, Commercial Auto’s net premiums written grew 5% to $1.9
billion with policies in force rising 7%. With our growth, we believe
it is likely we ended 2006 in a virtual dead heat with St. Paul Travelers
and Zurich for market leadership.
Our profits were very strong as decreased accident frequency
and a cautious approach to the trade off of rate for volume led to a
combined ratio of 80.2. However, we experienced a decline in the rate
of new business growth and, more notably, a reduction in the propor-
tion of customers who choose to renew their policies. We are moving
quickly to address these issues. For the first four months of 2007, we
have an aggressive schedule that will provide the large majority of our
current customers with a more competitive rate as well as position us
more favorably with potential new customers. At the same time, we
are enhancing distribution by adding new agents and doubling the
commercial account managers serving independent agents through-
out the country. We also entered Massachusetts in January.
We do not expect to reach our long-term goals by rate alone. Our
growth over these past few years has given us the additional data
needed to segment our customers more finely. This enables us to
deliver services, products and rates that align more closely to the
needs of specific business groups. Later this year we will be offering
select customer groups best-in-class coverages and services. In
addition, we continue to invest in training more claims representa-
tives in specific commercial auto estimating and repair processes.
We expect that these efforts will deepen our relationships with
customers and agents as well as extend average policy life as we
deliver a more compelling business value proposition.
Build easy-to-use technology
that gives customers control.
2006 2005 Change
Net premiums written (in billions) $ 1.9 $ 1.8 5%
Net premiums earned (in billions) $ 1.9 $ 1.7 11%
Loss and loss adjustment expense ratio 61.0 62.4 (1.4) pts.
Underwriting expense ratio 19.2 19.7 (.5) pts.
Combined ratio 80.2 82.1 (1.9) pts.
Policies in force (in thousands) 503.2 468.2 7%