PROGRESSIVE CORP/OH/ - FORM 8-K - EX-99 - EXHIBIT

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8-K - 8-K - PROGRESSIVE CORP/OH/	a8-k.htm



			NEWS RELEASE




The Progressive Corporation			Company Contact:
6300 Wilson Mills Road			Matt Downing
Mayfield Village, Ohio 44143			(440) 395-4222
http://www.progressive.com

PROGRESSIVE REPORTS NOVEMBER RESULTS AND DECLARES DIVIDENDS

MAYFIELD VILLAGE, OHIO -- December 11, 2013 -- The Progressive Corporation (NYSE:PGR) today reported the following results for November 2013:



(millions, except per share amounts and ratios; unaudited)	November		November		Change
	2013		2012

Net premiums written	$	1,194.8	$	1,129.9	6	%
Net premiums earned	$	1,337.7	$	1,264.3	6	%
Net income	$	97.6	$	77.7	26	%
Per share	$	.16	$	.13	26	%
Total pretax net realized gains (losses) on securities
(including net impairment losses)	$	46.0	$	10.2	351	%
Combined ratio	94.7		93.6		1.1 pts.
Average diluted equivalent shares	603.0		605.4		0	%



(thousands; unaudited)	November	November	Change
	2013	2012
Policies in Force:
Agency – auto	4,855.7	4,807.6	1 %
Direct – auto	4,221.3	4,001.3	5 %
Total personal auto	9,077.0	8,808.9	3 %
Total special lines	4,004.8	3,956.1	1 %
Total Personal Lines	13,081.8	12,765.0	2 %
Total Commercial Lines	519.3	522.0	(1) %

Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines business writes insurance for personal autos and recreational vehicles. Our Commercial Lines business writes primary liability, physical damage, and other auto-related insurance for autos and trucks owned by small businesses.

See the “Comprehensive Income Statements” and “Supplemental Information” for further month and year-to-date information and the "Monthly Commentary" at the end of this release for additional discussion.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPREHENSIVE INCOME STATEMENT

November 2013

(millions)

(unaudited)



	Current Month			Comments on Monthly Results¹

Net premiums written	$	1,194.8

Revenues:
Net premiums earned	$	1,337.7
Investment income	38.1
Net realized gains (losses) on securities:
Other-than-temporary impairment (OTTI) losses:
Total OTTI losses	0
Non-credit losses, net of credit losses recognized
on previously recorded non-credit OTTI losses	0
Net impairment losses recognized in earnings	0
Net realized gains (losses) on securities	46.0			Includes $35.6 million gain upon completion of the sale of a private equity investment.
Total net realized gains (losses) on securities	46.0
Fees and other revenues	24.7
Service revenues	2.7
Total revenues	1,449.2

Expenses:
Losses and loss adjustment expenses	995.0
Policy acquisition costs	112.4
Other underwriting expenses	184.2
Investment expenses	1.4
Service expenses	2.8
Interest expense	9.0
Total expenses	1,304.8

Income before income taxes	144.4
Provision for income taxes	46.8
Net income	97.6

Other comprehensive income, net of tax:
Net unrealized gains (losses) on securities:
Net non-credit related OTTI losses, adjusted for
valuation changes	0
Other net unrealized gains (losses) on securities	1.6
Total net unrealized gains (losses) on securities	1.6
Net unrealized gains on forecasted transactions	(.1		)
Foreign currency translation adjustment	(.1		)
Other comprehensive income	1.4
Total comprehensive income	$	99.0

¹ See the Monthly Commentary at the end of this release for additional discussion. For a description of our reporting and accounting policies, see Note 1 to our 2012 audited consolidated financial statements included in our 2012 Shareholders’ Report, which can be found at www.progressive.com/annualreport.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPREHENSIVE INCOME STATEMENTS

November 2013

(millions)

(unaudited)



	Year-to-Date
	2013			2012			% Change

Net premiums written	$	16,145.7		$	15,235.2		6

Revenues:
Net premiums earned	$	15,763.6		$	14,751.9		7
Investment income	382.0			403.9			(5)
Net realized gains (losses) on securities:
Other-than-temporary impairment (OTTI) losses:
Total OTTI losses	(3.6		)	(6.3		)	(43)
Non-credit losses, net of credit losses recognized
on previously recorded non-credit OTTI losses¹	(.1		)	(.7		)	(86)
Net impairment losses recognized in earnings	(3.7		)	(7.0		)	(47)
Net realized gains (losses) on securities	295.9			286.2			3
Total net realized gains (losses) on securities	292.2			279.2			5
Fees and other revenues	269.8			261.2			3
Service revenues	36.6			34.0			8
Gains (losses) on extinguishment of debt	(4.3		)	(1.8		)	139
Total revenues	16,739.9			15,728.4			6

Expenses:
Losses and loss adjustment expenses	11,450.5			11,015.5			4
Policy acquisition costs	1,338.9			1,327.4			1
Other underwriting expenses	2,178.6			2,043.9			7
Investment expenses	17.6			14.3			23
Service expenses	36.4			33.7			8
Interest expense	109.3			113.6			(4)
Total expenses	15,131.3			14,548.4			4

Income before income taxes	1,608.6			1,180.0			36
Provision for income taxes	533.1			372.8			43
Net income	1,075.5			807.2			33

Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities:
Net non-credit related OTTI losses, adjusted for
valuation changes	.3			4.8			(94)
Other net unrealized gains (losses) on securities	101.7			186.1			(45)
Total net unrealized gains (losses) on securities	102.0			190.9			(47)
Net unrealized gains on forecasted transactions	(1.8		)	(1.7		)	6
Foreign currency translation adjustment	(1.1		)	.3			NM
Other comprehensive income (loss)	99.1			189.5			(48)
Total comprehensive income	$	1,174.6		$	996.7		18

NM = Not Meaningful

¹A negative amount for the period reflects credit losses reclassified from other comprehensive income, which exceeded the amount of non-credit OTTI losses recognized in other comprehensive income during the period.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE

INVESTMENT RESULTS

November 2013

(millions – except per share amounts)

(unaudited)



The following table sets forth the computation of net income per share and comprehensive income per share:

	Current		Year-to-Date
	Month		2013		2012

Net income	$	97.6	$	1,075.5	$	807.2
Per share:
Basic	$	.16	$	1.79	$	1.34
Diluted	$	.16	$	1.78	$	1.33

Comprehensive income	$	99.0	$	1,174.6	$	996.7
Per share:
Diluted	$	.16	$	1.95	$	1.64

Average shares outstanding - Basic	598.1		599.4		603.6
Net effect of dilutive stock-based compensation	4.9		4.4		4.4
Total equivalent shares - Diluted	603.0		603.8		608.0



The following table sets forth the investment results for the period:
		Current	Year-to-Date
		Month	2013	2012
	Fully taxable equivalent (FTE) total return:
	Fixed-income securities	.1%	1.8%	5.3 %
	Common stocks	2.8%	29.5 %	15.2 %
	Total portfolio	.5%	5.2 %	6.5 %

	Pretax annualized investment income book yield	2.8 %	2.6 %	2.9 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

November 2013

($ in millions)

(unaudited)



Current Month
										Commercial
	Personal Lines Business									Lines			Other		Companywide
	Agency			Direct			Total			Business			Businesses¹		Total
Net Premiums Written	$	604.6		$	476.6		$	1,081.2		$	113.6		$	0	$	1,194.8
% Growth in NPW	5		%	9		%	7		%	(2		)%	NM		6		%
Net Premiums Earned	$	671.2		$	529.7		$	1,200.9		$	136.8		$	0	$	1,337.7
% Growth in NPE	5		%	7		%	6		%	3		%	NM		6		%

GAAP Ratios
Loss/LAE ratio	75.1			75.2			75.2			67.3			NM		74.4
Expense ratio	20.4			20.1			20.2			21.0			NM		20.3
Combined ratio	95.5			95.3			95.4			88.3			NM		94.7

Actuarial Adjustments²
Reserve Decrease/(Increase)
Prior accident years															$	2.5
Current accident year															7.2
Calendar year actuarial adjustment	$	2.5		$	1.7		$	4.2		$	5.5		$	0	$	9.7

Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment															$	2.5
All other development															(14.0		)
Total development															$	(11.5	)

Calendar year loss/LAE ratio															74.4
Accident year loss/LAE ratio															73.5

Statutory Ratios
Loss/LAE ratio															74.4
Expense ratio															21.8
Combined ratio															96.2

¹The other businesses generated an underwriting loss of $0.2 million for the month. Combined ratios and % growth are not meaningful (NM) due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

²Represents adjustments solely based on our corporate actuarial reviews.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

November 2013

($ in millions)

(unaudited)



Year-to-Date
										Commercial
	Personal Lines Business									Lines			Other			Companywide
	Agency			Direct			Total			Business			Businesses¹			Total
Net Premiums Written	$	8,095.2		$	6,387.3		$	14,482.5		$	1,663.2		$	0		$	16,145.7
% Growth in NPW	6		%	7		%	6		%	2		%	NM			6		%
Net Premiums Earned	$	7,929.2		$	6,208.4		$	14,137.6		$	1,625.8		$	.2		$	15,763.6
% Growth in NPE	6		%	8		%	7		%	7		%	NM			7		%

GAAP Ratios
Loss/LAE ratio	73.3			72.0			72.7			71.7			NM			72.6
Expense ratio	20.2			20.8			20.5			21.7			NM			20.6
Combined ratio	93.5			92.8			93.2			93.4			NM			93.2

Actuarial Adjustments²
Reserve Decrease/(Increase)
Prior accident years																$	62.9
Current accident year																26.9
Calendar year actuarial adjustment	$	20.7		$	62.9		$	83.6		$	10.9		$	(4.7	)	$	89.8

Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	62.9
All other development																(112.8		)
Total development																$	(49.9	)

Calendar year loss/LAE ratio																72.6
Accident year loss/LAE ratio																72.3

Statutory Ratios
Loss/LAE ratio																72.7
Expense ratio																20.4
Combined ratio																93.1

Statutory Surplus³																$	6,390.9

NM = Not Meaningful

¹Year to date, the other businesses generated an underwriting loss of $10.2 million.

² Represents adjustments solely based on our corporate actuarial reviews.

³In November 2013, our insurance subsidiaries declared $204.5 million of dividends to the parent holding company; $14.0 million was paid in November and the remainder will be paid in December.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

BALANCE SHEET AND OTHER INFORMATION

(millions - except per share amounts)

(unaudited)



	November
	2013
CONDENSED GAAP BALANCE SHEET:
Investments – Available-for-sale, at fair value:
Fixed maturities¹ (amortized cost: $13,711.3)	$	13,903.9
Equity securities:
Nonredeemable preferred stocks¹(cost: $447.5)	734.1
Common equities (cost: $1,440.2)	2,458.5
Short-term investments (amortized cost: $1,193.1)	1,193.1
Total investments²	18,289.6
Net premiums receivable	3,428.5
Deferred acquisition costs	461.0
Other assets³	2,545.0
Total assets	$	24,724.1

Unearned premiums	$	5,323.4
Loss and loss adjustment expense reserves³	8,382.9
Other liabilities²	2,051.3
Debt	1,860.8
Shareholders' equity	7,105.7
Total liabilities and shareholders' equity	$	24,724.1


Common shares outstanding	599.7
Shares repurchased - November	.15
Average cost per share	$	25.96
Book value per share	$	11.85
Trailing 12-month return on average shareholders' equity
Net income	18.0		%
Comprehensive income	19.3		%
Net unrealized pretax gains (losses) on investments	$	1,484.1
Increase (decrease) from October 2013	$	2.4
Increase (decrease) from December 2012	$	156.8
Debt-to-total capital ratio	20.8		%
Fixed-income portfolio duration	2.0 years
Weighted average credit quality	AA-
Year-to-date Gainshare factor	1.21

¹As of November 30, 2013, we held certain hybrid securities and recognized a change in fair value of $13.4 million as a realized gain during the period we held these securities.

² At November 30, 2013, we had $49.5 million of net unsettled security transactions, including collateral on open derivative positions.

³ Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $1,021.8 million, which are included in "other assets."

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Monthly Commentary

•

On December 9, 2013, the Board of Directors declared both a special cash dividend and an annual variable dividend, consistent with our published policy of returning capital to our shareholders when appropriate and our annual variable dividend policy. Both dividends will be paid together on February 7, 2014, to shareholders of record at the close of business on January 29, 2014 (ex-dividend date of January 27, 2014). The amount of the special dividend will be $1.00 per Common Share and the amount of the annual dividend will be determined based on the Company’s 2013 financial results and the formula discussed below, and announced in our year-end earnings release, which is currently scheduled for January 22, 2014. The annual dividend amount will be calculated using operating results for the full year of 2013, as follows:



Dividend Amount Per Share	=	After-Tax Underwriting Income	X	33 1/3% Target Percentage	X	Gainshare Factor
Dividend Amount Per Share	=	Common Shares Outstanding on 12/31/13

Year-to-date through November, after-tax underwriting income was $692.5 million, after-tax comprehensive income was $1,174.6 million, and the Gainshare Factor was 1.21. Consistent with our policy of not providing projections of our financial results, we are not providing an estimate of the 2013 annual dividend at this time. Investors who choose to calculate or project a dividend amount based on interim results are cautioned, however, that any such estimates may vary from the dividend that may ultimately be paid on the basis of our full-year results and the final Gainshare Factor.

For a detailed discussion of the Company’s annual variable dividend policy, the components of the formula set forth above, and the limitations included in the policy, please go to

http://investors.progressive.com/phoenix.zhtml?c=81824&p=irol-dividends.

The Board also decided that the annual variable dividend for 2014 will be calculated using the same formula described above, including keeping the target percentage for 2014 at 33 1/3% of after-tax underwriting income. In addition to the limitations included in our dividend policy (discussed above), the 2014 dividend will be subject to the Board’s discretion and a declaration by the Board at the end of 2014 or beginning of 2015.

Events

We plan to release December results on Wednesday, January 22, 2014, before the market opens.

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About Progressive

The Progressive Group of Insurance Companies makes it easy to understand, buy and use auto insurance. Progressive offers choices so consumers can reach it whenever, wherever, and however it’s most convenient—online at http://www.progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.

Progressive offers insurance for personal and commercial autos and trucks, motorcycles, boats and recreational vehicles, as well as home insurance from select carriers. It’s the fourth largest auto insurer in the country, the largest seller of motorcycle insurance, and a leader in commercial auto insurance. Progressive also offers car insurance online in Australia at http://www.progressiveonline.com.au.

Founded in 1937, Progressive continues its long history of offering shopping tools and services that save customers time and money, like Name Your Price^®, Snapshot^®, and Service Centers.

The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, trade publicly at NYSE:PGR.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Statements in this release that are not historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to estimates, assumptions, and projections generally; inflation and changes in economic conditions (including changes in interest rates and financial markets); the possible failure of one or more governmental entities to make scheduled debt payments or satisfy other obligations; the potential or actual downgrading by one or more rating agencies of our securities or governmental, corporate, or other securities we hold; the financial condition of, and other issues relating to the strength of and liquidity available to, issuers of securities held in our investment portfolios and other companies with which we have ongoing business relationships, including counterparties to certain financial transactions; the accuracy and adequacy of our pricing and loss reserving methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to retain more customers; initiatives by competitors and the effectiveness of our response; our ability to obtain regulatory approval for requested rate changes and the timing thereof; the effectiveness of our brand strategy and advertising campaigns relative to those of competitors; legislative and regulatory developments, including, but not limited to, health care reform and tax law changes; the outcome of disputes relating to intellectual property rights; the outcome of litigation or governmental investigations that may be pending or filed against us; weather conditions (including the severity and frequency of storms, hurricanes, snowfalls, hail, and winter conditions); changes in driving patterns and loss trends; acts of war and terrorist activities; our ability to maintain the uninterrupted operation of our facilities, systems (including information technology systems), and business functions, and safeguard personal and sensitive information in our possession; our continued access to and functionality of third-party systems that are critical to our business; court decisions and trends in litigation and health care and auto repair costs; and other matters described from time to time in our releases and publications, and in our periodic reports and other documents filed with the United States Securities and Exchange Commission. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.

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PROGRESSIVE CORP/OH/ - FORM 8-K - EX-99 - EXHIBIT - December 11, 2013

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