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

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8-K - 8-K - PROGRESSIVE CORP/OH/	a8-k614.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 JUNE RESULTS

MAYFIELD VILLAGE, OHIO -- July 10, 2014 -- The Progressive Corporation (NYSE:PGR) today reported the following results for June and the second quarter 2014:



			Month						Quarter
(millions, except per share amounts and ratios; unaudited)	2014		2013		Change		2014		2013		Change

Net premiums written	$	1,378.5	$	1,323.5	4	%	$	4,627.7	$	4,387.1	5	%
Net premiums earned	$	1,394.3	$	1,321.2	6	%	$	4,513.5	$	4,277.0	6	%
Net income	$	48.5	$	68.4	(29)	%	$	293.4	$	324.6	(10)	%
Per share	$	.08	$	.11	(28)	%	$	.49	$	.54	(8)	%
Total pretax net realized gains (losses) on securities
(including net impairment losses)	$	15.2	$	23.5	(35)	%	$	40.4	$	132.9	(70)	%
Combined ratio	97.8		96.0		1.8 pts.		92.6		93.3		(.7) pts.
Average diluted equivalent shares	595.0		603.4		(1)	%	595.5		603.6		(1)	%



(thousands; unaudited)	June	June	Change
	2014	2013
Policies in Force:
Agency – auto	4,872.7	4,849.3	0 %
Direct – auto	4,423.9	4,134.6	7 %
Total personal auto	9,296.6	8,983.9	3 %
Total special lines	4,064.3	4,023.9	1 %
Total Personal Lines	13,360.9	13,007.8	3 %
Total Commercial Lines	516.5	526.6	(2) %

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 and/or operated predominantly 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

June 2014

(millions)

(unaudited)



	Current Month			Comments on Monthly Results¹

Net premiums written	$	1,378.5

Revenues:
Net premiums earned	$	1,394.3
Investment income	35.4
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	15.2
Total net realized gains (losses) on securities	15.2
Fees and other revenues	23.2
Service revenues	4.5
Total revenues	1,472.6

Expenses:
Losses and loss adjustment expenses	1,083.8
Policy acquisition costs	115.6
Other underwriting expenses	187.7
Investment expenses	1.4
Service expenses	4.0
Interest expense	10.2
Total expenses	1,402.7

Income before income taxes	69.9
Provision for income taxes	21.4
Net income	48.5

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	13.8
Total net unrealized gains (losses) on securities	13.8
Net unrealized gains on forecasted transactions	(.1		)
Foreign currency translation adjustment	.1
Other comprehensive income	13.8
Total comprehensive income	$	62.3

¹See the Monthly Commentary at the end of this release for additional discussion. For a description of our financial reporting and accounting policies, see Note 1 to our 2013 audited consolidated financial statements included in our 2013 Shareholders’ Report, which can be found at www.progressive.com/annualreport.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPREHENSIVE INCOME STATEMENTS

June 2014

(millions)

(unaudited)



	Year-to-Date
	2014			2013			% Change

Net premiums written	$	9,308.7		$	8,836.5		5

Revenues:
Net premiums earned	$	8,915.8		$	8,456.3		5
Investment income	202.5			202.7			0
Net realized gains (losses) on securities:
Other-than-temporary impairment (OTTI) losses:
Total OTTI losses	0			(1.7		)	(100)
Non-credit losses, net of credit losses recognized
on previously recorded non-credit OTTI losses¹	0			(.1		)	(100)
Net impairment losses recognized in earnings	0			(1.8		)	(100)
Net realized gains (losses) on securities	159.8			215.3			(26)
Total net realized gains (losses) on securities	159.8			213.5			(25)
Fees and other revenues	147.2			139.3			6
Service revenues	23.8			19.0			25
Total revenues	9,449.1			9,030.8			5

Expenses:
Losses and loss adjustment expenses	6,475.0			6,102.5			6
Policy acquisition costs	743.8			722.9			3
Other underwriting expenses	1,222.1			1,166.7			5
Investment expenses	10.1			9.3			9
Service expenses	22.6			19.0			19
Interest expense	56.3			61.0			(8)
Total expenses	8,529.9			8,081.4			6

Income before income taxes	919.2			949.4			(3)
Provision for income taxes	304.5			316.2			(4)
Net income	614.7			633.2			(3)

Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities:
Net non-credit related OTTI losses, adjusted for
valuation changes	0			.3			(100)
Other net unrealized gains (losses) on securities	88.3			(55.4		)	(259)
Total net unrealized gains (losses) on securities	88.3			(55.1		)	(260)
Net unrealized gains on forecasted transactions	(1.6		)	(.7		)	129
Foreign currency translation adjustment	.5			(1.0		)	(150)
Other comprehensive income (loss)	87.2			(56.8		)	(254)
Total comprehensive income	$	701.9		$	576.4		22

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

June 2014

(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		2014		2013

Net income	$	48.5	$	614.7	$	633.2
Per share:
Basic	$	.08	$	1.04	$	1.06
Diluted	$	.08	$	1.03	$	1.05

Comprehensive income	$	62.3	$	701.9	$	576.4
Per share:
Diluted	$	.10	$	1.18	$	.95

Average shares outstanding - Basic	590.6		592.6		600.1
Net effect of dilutive stock-based compensation	4.4		4.0		3.9
Total equivalent shares - Diluted	595.0		596.6		604.0



The following table sets forth the investment results for the period:
		Current	Year-to-Date
		Month	2014	2013
	Fully taxable equivalent (FTE) total return:
	Fixed-income securities	.2%	2.4%	.4 %
	Common stocks	2.1%	7.2 %	13.8 %
	Total portfolio	.4%	3.0 %	2.2 %

	Pretax annualized investment income book yield	2.5 %	2.4 %	2.6 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

June 2014

($ in millions)

(unaudited)



Current Month
										Commercial
	Personal Lines Business									Lines			Other		Companywide
	Agency			Direct			Total			Business			Businesses¹		Total
Net Premiums Written	$	679.9		$	544.7		$	1,224.6		$	153.9		$	0	$	1,378.5
% Growth in NPW	1		%	8		%	4		%	5		%	NM		4		%
Net Premiums Earned	$	690.8		$	564.6		$	1,255.4		$	138.9		$	0	$	1,394.3
% Growth in NPE	4		%	9		%	6		%	2		%	NM		6		%

GAAP Ratios
Loss/LAE ratio	80.0			78.0			79.1			65.6			NM		77.7
Expense ratio	19.8			20.1			19.9			21.4			NM		20.1
Combined ratio	99.8			98.1			99.0			87.0			NM		97.8

Actuarial Adjustments²
Reserve Decrease/(Increase)
Prior accident years															$	(4.5	)
Current accident year															2.3
Calendar year actuarial adjustment	$	(2.8	)	$	0		$	(2.8	)	$	.6		$	0	$	(2.2	)

Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment															$	(4.5	)
All other development															(2.9		)
Total development															$	(7.4	)

Calendar year loss/LAE ratio															77.7
Accident year loss/LAE ratio															77.2

Statutory Ratios
Loss/LAE ratio															77.8
Expense ratio															20.3
Combined ratio															98.1

¹The other businesses generated an underwriting loss of $0.1 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

June 2014

($ in millions)

(unaudited)



Year-to-Date
										Commercial
	Personal Lines Business									Lines			Other		Companywide
	Agency			Direct			Total			Business			Businesses¹		Total
Net Premiums Written	$	4,583.6		$	3,755.5		$	8,339.1		$	969.6		$	0	$	9,308.7
% Growth in NPW	4		%	8		%	6		%	3		%	NM		5		%
Net Premiums Earned	$	4,445.5		$	3,586.2		$	8,031.7		$	884.1		$	0	$	8,915.8
% Growth in NPE	4		%	8		%	6		%	2		%	NM		5		%

GAAP Ratios
Loss/LAE ratio	73.0			74.0			73.4			64.7			NM		72.6
Expense ratio	19.8			20.8			20.3			21.8			NM		20.4
Combined ratio	92.8			94.8			93.7			86.5			NM		93.0

Actuarial Adjustments²
Reserve Decrease/(Increase)
Prior accident years															$	50.8
Current accident year															(24.8		)
Calendar year actuarial adjustment	$	1.4		$	7.6		$	9.0		$	17.0		$	0	$	26.0

Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment															$	50.8
All other development															(106.2		)
Total development															$	(55.4	)

Calendar year loss/LAE ratio															72.6
Accident year loss/LAE ratio															72.0

Statutory Ratios
Loss/LAE ratio															72.6
Expense ratio															20.1
Combined ratio															92.7

Statutory Surplus															$	6,671.8

NM = Not Meaningful

¹Year to date, the other businesses generated an underwriting loss of $5.4 million.

² Represents adjustments solely based on our corporate actuarial reviews.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

BALANCE SHEET AND OTHER INFORMATION

(millions - except per share amounts)

(unaudited)



	June
	2014
CONDENSED GAAP BALANCE SHEET:
Investments – Available-for-sale, at fair value:
Fixed maturities¹ (amortized cost: $12,265.4)	$	12,498.6
Equity securities:
Nonredeemable preferred stocks¹(cost: $497.1)	760.2
Common equities (cost: $1,265.2)	2,381.7
Short-term investments (amortized cost: $3,118.7)	3,118.7
Total investments^{2, 3}	18,759.2
Net premiums receivable	3,566.3
Deferred acquisition costs	479.0
Other assets⁴	2,648.2
Total assets	$	25,452.7

Unearned premiums	$	5,582.6
Loss and loss adjustment expense reserves⁴	8,639.9
Other liabilities²	2,233.0
Debt	2,208.0
Shareholders' equity	6,789.2
Total liabilities and shareholders' equity	$	25,452.7


Common shares outstanding	591.5
Shares repurchased - June	.5
Average cost per share	$	25.40
Book value per share	$	11.48
Trailing 12-month return on average shareholders' equity
Net income	17.3		%
Comprehensive income	20.7		%
Net unrealized pretax gains (losses) on investments	$	1,592.8
Increase (decrease) from May 2014	$	21.3
Increase (decrease) from December 2013	$	135.9
Debt-to-total capital ratio	24.5		%
Fixed-income portfolio duration	1.6 years
Weighted average credit quality	AA-
Year-to-date Gainshare factor	1.35

¹As of June 30, 2014, we held certain hybrid securities and recognized a change in fair value of $20.0 million as a realized gain during the period we held these securities.

²At June 30, 2014, we had $235.8 million of net unsettled security transactions, including collateral on open derivative positions.

³ Includes $1.1 billion, net of unsettled security transactions, of investments in a consolidated, non-insurance subsidiary of the holding company.

⁴Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $1,098.8 million, which are included in "other assets."

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Monthly Commentary

•

During June, we incurred about $57 million, or 4.1 loss ratio points, of catastrophe losses, including additional development on May storms. This compares with $18 million, or 1.4 points, of catastrophe losses last year. For the second quarter 2014, total catastrophe losses were about $130 million, or 2.9 points, compared to $83 million, or 1.9 points, last year. Year to date, total catastrophe losses were about $139 million, or 1.6 points, compared to $130 million, or 1.5 points, last year.

Events

We are currently scheduled to hold a one-hour conference call to address questions on Thursday, July 31, 2014 at 9:00 a.m., eastern time, subsequent to the posting of our Shareholders’ Report online and the filing of our Quarterly Report on Form 10-Q with the SEC. Registration for the teleconference and webcast will soon be available at

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

We plan to release July results on Wednesday, August 13, 2014.

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.

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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, corporate, or other 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 attract and 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 at the state and federal levels, 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 - July 10, 2014

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