Progressive 2010 Annual Report Download - page 8

Surveys don’t pay the bills, but often serve as a
valuable qualitative read on the company’s brand
and future potential. Our performance in 2010
will, however, pay the bills and more.
We ended the year with net premiums written
of around $14.5 billion, up some 3.4% from 2009,
and net income of $1 billion, comparable to 2009
performance. What distinguishes 2010 perfor-
mance for me is the addition of over 750,000 new
policyholders and by implication well over a
million new customers. Our 92.4 combined ratio
from underwriting operations, in tandem with a
7.8% total return on investments, contributed to
a very strong capital position. We were delighted
to share this performance with shareholders in
multiple ways not the least of which was a $1 ex-
traordinary dividend late in the year and a further
$0.40 variable dividend reflecting our internal
measure of annual per formance—Gainshare.
If the decade ending 2010 were a football
game, it would be a story of two distinct halves.
The first characterized by several years of
the industry regaining profitability through rate
increases, leading to significant industrywide
growth in written premium. Progressive posted
growth rates more often than not in the strong
double digits zone for this half. As well docu-
mented frequency declines emerged and industry
rate levels proved to be more than adequate, a
six-year period of industry profitability followed.
Best efforts interpreting history would suggest
that two consecutive profitable years was the
previous high water mark. Growth in written
premium inevitably slowed, producing a slightly
lagged, but matching, period of industrywide
written premium declines. Progressive frustrat-
ingly posted low single digit growth numbers
above and below zero for the same period. While
gas prices, driving behavior, Internet adoption,
media spending, and the economic crisis at a
minimum would be required to fully chronicle
the decade, there is little doubt the classic nature
of the insurance cycle, with unique wavelength
and amplitude to extend the analogy, has played
a significant role. The closing years of the decade
appear to be the approximate time frame during
which industrywide profitability will once again
be moderated and sustained industry premium
declines will turn positive.
With that as a back drop, it is helpful to review
Progressive’s evolution as a company during the
same period and, more importantly, our position-
ing for whatever emerges over the next decade.
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