Progressive 2008 Annual Report Download

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The Progressive Corporation 2008 Annual Report

Table of contents

  • Page 1
    imagine } The Progressive Corporation 2008 Annual Report

  • Page 2
    ..., 24-hour claims service, such as its concierge level of claims service available at service centers located in major metropolitan areas throughout the United States. Progressive companies offer consumers choices in how to shop for, buy and manage their auto insurance policies. Progressive offers...

  • Page 3
    ... name your price for car insurance. That concept is now a reality for people who shop on progressive.com. Name Your Price® is an easy-to-use tool that gives consumers control over the cost of their car insurance. If you tell us that you want to pay $90 per month, we'll search for coverage options...

  • Page 4
    ... shares outstanding (millions) Book value per share Consolidated shareholders' equity Market capitalization Return on average shareholders' equity Policies in Force (thousands) Personal Lines Agency-Auto Direct-Auto Special Lines Total Personal Lines Growth over prior year Commercial Auto Growth...

  • Page 5
    ..., increasingly savvy about insurance, and ready for new, easy ways to quote, buy, and manage their policies, including claims service that respects their time and reduces the trauma and inconvenience of loss. and exceed the highest expectations of our customers, agents, shareholders, and people. We...

  • Page 6
    by courage and patience." Admiral Hyman George Rickover "Good ideas and innovations must be driven into existence

  • Page 7
    "Creativity is thinking up new things. Innovation is doing new things." Theodore Levitt

  • Page 8
    Thanks to the one million Progressive customers who took us up on our offer to go "paperless" and receive their policy documents online. For each one of you, a tree will be planted in a U.S. National Forest. Progressive is funding the planting of these trees through the Arbor Day Foundation. 8

  • Page 9
    ... to Shareholders Wow! Followed by the claim, "I say it louder," was an effective interjection in the debut television commercial of our revamped 2008 advertising efforts, but might equally be used with a less Writing this time last year, I summarized a prospective view of the auto insurance rate...

  • Page 10
    ... Dec 2007 Jan - Dec 2008 Frequency Progressive: Auto Claim Frequency Consumer behavior did not show perfect elasticity and the re- Profit Our 94.6 combined ratio for the year is testament to our responsiveness and respect for the conditions. The result is well in-line with our target of a 96, and...

  • Page 11
    ...owners, also gained a disproportionate share of our new customers in 2008. Some of these products represent more discretionary consumer spending and, in the near term, we may struggle to see significant market growth in units. Similarly our Commercial Auto business group turned in a very respectable...

  • Page 12
    ...claims service, comparative rating, pet injury coverage, and usage-based insurance. So, for our 2008 report, it seemed apropos for the water torture. Assessments of impairment done in one quarter may require further impairment in the next. Reliable market pricing, in times of high volatility, added...

  • Page 13
    ...in our product and service organizations. Early in 2008 we announced we would be the title sponsor for the Automotive X PRIZE, now known as the Progressive Automotive X PRIZE. This worldwide competition, with a prize purse of $10 million, is designed to inspire a new generation of viable, super fuel...

  • Page 14
    ... an increase in customer retention with both our Agency and Direct auto policy life expectancy measures increasing 11%. Improvement in our special lines products was numerically less at around 1% but, as a group, they remain our longest-tenured customers. Commercial customer measures ended the year...

  • Page 15
    ... Advantage, our offering which combines a Progressive auto policy with a homeowner's or renter's policy underwritten by Homesite Insurance, expanded consistent with our expectations in 2008 and now serves a growing number of our customers, many of whom have added the offering to their existing auto...

  • Page 16
    ... those with special lines products in addition to their auto. We clearly have more opportunity and have set challenging internal goals for multi-policy penetration in 2009 based on achieved results to date. Our usage-based insurance offering, now called MyRate, expanded within and across states...

  • Page 17
    ... got into an accident and only had to spend about 15 minutes on the repair process? Customers who choose one of Progressive's 54 concierge service centers throughout the country can do that. Drivers drop off their car and we do the rest, including finding a quality body shop. A process so unique it...

  • Page 18
    .... 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 (Agency and Direct) to give shareholders a clearer picture of the business...

  • Page 19
    ... Monitor pricing and reserving discipline - Manage profitability targets and operational performance at our lowest level of product definition - Sustain premiums-to-surplus ratios at efficient levels, and below applicable state regulations, for each insurance subsidiary - Ensure loss reserves are...

  • Page 20
    ...9% 14% 18% na na na 19.0% 18.7% 4% Underwriting margin-Progressive 2 -Industry na Net premiums written growth (a) Policies in force growth-Personal Auto (a) -Special Lines (a) -Commercial Auto (a) Companywide premiums-to-surplus ratio (b) Investment allocation-fixed:equity (c) Debt-to-total capital...

  • Page 21
    ... of new business growth and in-force policyholder retention. New business change was positive 2% for Direct auto and 3% for special lines, and negative 13% for Agency auto. Customer retention improved across all of our personal product lines with notable gains in the auto programs and a slight...

  • Page 22
    .... This auto program features significant tenurebased benefits and other features that appeal to preferred drivers. Second is to ensure we have our most competitive rate displayed on the comparative rating systems by ensuring agents see our rates with all applicable discounts applied. This effort is...

  • Page 23
    ... for auto insurance in our patented MyRate program. We added this program in 6 states during 2008, bringing the total to 9, and also made significant improvements in the customer experience. Customers now simply plug a device into SM Commercial Lines Progressive's Commercial Auto business ratio...

  • Page 24
    "Innovation is not the product of logical thought, although the result is tied to logical structure." Albert Einstein

  • Page 25
    "The challenge isn't to keep your eye on big competitors. It's to pay attention to the innovators." Dave Duffield

  • Page 26
    The current standard is 27.5. The government wants 35. Progressive aims higher. The Progressive Insurance Automotive X PRIZE is an international competition designed to inspire a new generation of viable, super fuel-efficient vehicles that get 100 miles per gallon or the energy equivalent. We're not...

  • Page 27
    ... the complete Notes to the Consolidated Financial Statements, as well as Management's Discussion and Analysis of Financial Condition and Results of Operations and Supplemental Information, which are included in Progressive's 2008 Annual Report to Shareholders, which is attached as an Appendix to...

  • Page 28
    ...-except per share amounts) For the years ended December 31, 2008 2007 2006 Revenues Net premiums earned Investment income Net realized gains (losses) on securities Service revenues Total revenues Expenses Losses and loss adjustment expenses Policy acquisition costs Other underwriting expenses...

  • Page 29
    ...and $605.7 Other assets Total assets Liabilities and Shareholders' Equity Unearned premiums Loss and loss adjustment expense reserves Accounts payable, accrued expenses, and other liabilities1 Debt2 Total liabilities Common Shares, $1.00 par value (authorized 900.0; issued 797.9 and 798.1, including...

  • Page 30
    ... Voting Preference Shares authorized; no such shares have been issued. See Notes to the complete Consolidated Financial Statements included in Progressive's 2008 Annual Report to Shareholders, which is attached as an Appendix to Progressive's 2009 Proxy Statement. 32 THE PROGRESSIVE CORPORATION...

  • Page 31
    ... (gains) losses on securities Net loss on disposition of property and equipment Changes in: Premiums receivable Reinsurance recoverables Prepaid reinsurance premiums Deferred acquisition costs Income taxes Unearned premiums Loss and loss adjustment expense reserves Accounts payable, accrued expenses...

  • Page 32
    .... In addition, Mr. Renwick submitted his annual certification to the New York Stock Exchange (NYSE) on May 16, 2008, stating that he was not aware of any violation by Progressive of the NYSE corporate governance listing standards, as required by Section 303A.12(a) of the NYSE Listed Company Manual.

  • Page 33
    ...Appendix to Progressive's 2009 Proxy Statement. Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of The Progressive Corporation: We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the...

  • Page 34
    ... loss adjustment expense reserves becomes known. Reported results, therefore, may be volatile in certain accounting periods. Common Shares The Progressive Corporation's common shares (symbol PGR) are traded on the New York Stock Exchange. Progressive currently has an annual variable dividend policy...

  • Page 35
    Stock Price Rate of Return Dividends Declared per Share Quarter High Low Close 2008 1 2 3 4 $ 19.84 21.31 20.71 17.59 21.31 $ 15.00 16.11 15.70 10.29 10.29 $ ...

  • Page 36
    ... to the non-management directors. Accounting Complaint Procedure Any employee or other interested party with a sive does not maintain a mailing list for distribution of shareholders' reports. To view Progressive's publicly filed documents, shareholders can access our Web site: progressive.com/sec...

  • Page 37
    ... member Independent director 5 6 7 Non-executive chairman 24-Hour Insurance Quotes, Claims Reporting, and Customer Service Private passenger autos, motorcycles, and recreational vehicles To Receive a Quote 1-800-PROGRESSIVE (1-800-776-4737) Commercial autos / trucks 1-888-806-9598 progressive...

  • Page 38
    ..., 17 Skeleton Key with Copper Wires 20 Candle in a Vortex of Water 23 North Pole with Needles Design Nesnadny + Schwartz, Cleveland + New York + Toronto Printing AGS Custom Graphics ©2009 The Progressive Corporation and Water Penlight, and Drill 4 Balloon Clock 6 Bouncing Penlight 7 Ten Seconds...

  • Page 39
    "Innovation is the ability to see change as an opportunity not a threat." anonymous ® 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 440.461.5000 progressive.com