Progressive 2015 Annual Report Download - page 84

The manner in which we consider and analyze the multitude of influences on the historical data, as well as how loss
reserves affect our financial results, is discussed in more detail in our Report on Loss Reserving Practices, which was filed
on August 26, 2015 via Form 8-K. There have been no significant changes to our reserving practices since this report was
filed.
At December 31, 2015, Progressive had $10.0 billion of carried gross reserves and $8.6 billion of net reserves (net of
reinsurance recoverables on unpaid losses). Our net reserve balance implicitly assumes that the loss and LAE severity for
accident year 2015 over accident year 2014 would be 4.2% higher for personal auto liability and 9.2% higher for commercial
auto liability. As discussed above, the severity estimates are influenced by many variables that are difficult to precisely
quantify and which influence the final amount of claims settlement. That, coupled with changes in internal claims practices,
the legal environment, and state regulatory requirements, requires significant judgment in the estimate of the needed
reserves to be carried.
The following table highlights what the effect would be to our carried loss and LAE reserves, on a net basis, as of
December 31, 2015, if during 2016 we were to experience the indicated change in our estimate of severity for the 2015
accident year (i.e., claims that occurred in 2015):
Estimated Changes in Severity for Accident Year 2015
(millions) -4% -2% As Reported +2% +4%
Personal auto liability $6,398.5 $6,560.3 $6,722.1 $6,883.9 $7,045.7
Commercial auto liability 1,405.4 1,425.2 1,445.0 1,464.8 1,484.6
Other1429.2 429.2 429.2 429.2 429.2
Total $8,233.1 $8,414.7 $8,596.3 $8,777.9 $8,959.5
1Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is
presented due to the immaterial level of these reserves.
Note: Every percentage point change in our estimate of severity for the 2015 accident year would affect our personal auto liability reserves by $80.9
million and our commercial auto reserves by $9.9 million.
Our 2015 year-end loss and LAE reserve balance also includes claims from prior years. Claims that occurred in 2015, 2014,
and 2013, in the aggregate, accounted for approximately 92% of our reserve balance. If during 2016 we were to experience
the indicated change in our estimate of severity for the total of the prior three accident years (i.e., 2015, 2014, and 2013),
the effect to our year-end 2015 reserve balances would be as follows:
Estimated Changes in Severity for Accident Years 2015, 2014, and 2013
(millions) -4% -2% As Reported +2% +4%
Personal auto liability $5,824.1 $6,273.1 $6,722.1 $7,171.1 $7,620.1
Commercial auto liability 1,332.2 1,388.6 1,445.0 1,501.4 1,557.8
Other1429.2 429.2 429.2 429.2 429.2
Total $7,585.5 $8,090.9 $8,596.3 $9,101.7 $9,607.1
1Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is
presented due to the immaterial level of these reserves.
Note: Every percentage point change in our estimate of severity for the 2015, 2014, and 2013 accident years would affect our personal auto liability
reserves by $224.5 million and our commercial auto reserves by $28.2 million.
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