 | NEWS RELEASE | ||
| The Progressive Corporation | Company Contact: | ||
| 6300 Wilson Mills Road | Julia Hornack | ||
| Mayfield Village, Ohio 44143 | (440) 395-2164 | ||
PROGRESSIVE REPORTS DECEMBER RESULTS AND ANNUAL DIVIDEND AMOUNT
MAYFIELD VILLAGE, OHIO -- January 27, 2016 -- The Progressive Corporation (NYSE:PGR) today reported the following results for December and the fourth quarter of 2015:
| December | Fourth Quarter | |||||||||||||||||||
| (millions, except per share amounts and ratios; unaudited) | 2015 | 2014 | Change1 | 2015 | 2014 | Change1 | ||||||||||||||
| Net premiums written | $ | 1,392.4 | $ | 1,568.9 | (11) | % | $ | 4,838.5 | $ | 4,613.6 | 5 | % | ||||||||
| Net premiums earned | $ | 1,604.0 | $ | 1,769.9 | (9) | % | $ | 5,166.4 | $ | 4,942.6 | 5 | % | ||||||||
| Net income available to Progressive | $ | 143.7 | $ | 187.6 | (23) | % | $ | 330.4 | $ | 370.2 | (11) | % | ||||||||
| Per share | $ | 0.24 | $ | 0.32 | (23) | % | $ | 0.56 | $ | 0.63 | (10) | % | ||||||||
| Total pretax net realized gains (losses) on securities | ||||||||||||||||||||
| (including net impairment losses) | $ | 3.5 | $ | 22.6 | (85) | % | $ | 19.5 | $ | 26.2 | (26) | % | ||||||||
| Combined ratio | 88.4 | 87.4 | 1.0 pts. | 92.0 | 90.9 | 1.1 pts. | ||||||||||||||
| Average diluted equivalent shares | 587.1 | 591.7 | (1) | % | 587.4 | 591.9 | (1) | % | ||||||||||||
1Operating results for 2014 included an extra week of activity for December and the fourth quarter. Excluding the additional week of activity in 2014, net premiums written growth would have been approximately 11% for the month and 13% for the fourth quarter, and net premiums earned growth would have been approximately 13% for both periods. See the Monthly Commentary at the end of this release for additional discussion.
We acquired a controlling interest in ARX Holding Corp. (ARX), parent company of American Strategic Insurance (ASI) and other subsidiaries, on April 1, 2015. Beginning in April 2015, our companywide results include the results of ARX and its subsidiaries, which are included in the "Property business" throughout the release. Periods prior to April 1, 2015, do not include ARX's results.
| (thousands; unaudited) | December | December | Change | ||
| 2015 | 2014 | ||||
| Policies in Force | |||||
| Vehicle businesses: | |||||
| Agency – auto | 4,737.1 | 4,725.5 | 0 % | ||
| Direct – auto | 4,916.2 | 4,505.5 | 9 % | ||
| Total personal auto | 9,653.3 | 9,231.0 | 5 % | ||
| Total special lines | 4,111.4 | 4,030.9 | 2 % | ||
| Total Personal Lines | 13,764.7 | 13,261.9 | 4 % | ||
| Total Commercial Lines | 555.8 | 514.7 | 8 % | ||
| Property business | 1,076.5 | — | NM | ||
NM = Not meaningful; Property business written by Progressive prior to April 2015 was negligible.
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. Our Property business writes personal and commercial property insurance for homeowners, other property owners, and renters.
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
December 2015
(millions)
(unaudited)
| Current Month | Comments on Monthly Results1 | ||||
| Net premiums written | $ | 1,392.4 | |||
| Revenues: | |||||
| Net premiums earned | $ | 1,604.0 | |||
| Investment income | 42.0 | ||||
| Net realized gains (losses) on securities: | |||||
| Net impairment losses recognized in earnings | (0.6 | ) | |||
| Net realized gains (losses) on securities | 4.1 | ||||
| Total net realized gains (losses) on securities | 3.5 | ||||
| Fees and other revenues | 20.7 | ||||
| Service revenues | 7.1 | ||||
| Total revenues | 1,677.3 | ||||
| Expenses: | |||||
| Losses and loss adjustment expenses | 1,094.7 | ||||
| Policy acquisition costs | 134.8 | ||||
| Other underwriting expenses | 209.0 | ||||
| Investment expenses | 2.0 | ||||
| Service expenses | 6.4 | ||||
| Interest expense | 11.4 | ||||
| Total expenses | 1,458.3 | ||||
| Income before income taxes | 219.0 | ||||
| Provision for income taxes | 65.6 | Includes $7.8 million tax benefit related to dividends to be paid to our Employee Stock Ownership Plan (ESOP), which were declared in December. | |||
| Net income | 153.4 | ||||
| Less: Income attributable to noncontrolling interest (NCI), net of tax | 9.7 | ||||
| Net income available to Progressive | 143.7 | ||||
| Other comprehensive income, net of tax | |||||
| Changes in: | |||||
| Total net unrealized gains (losses) on securities | (76.6 | ) | |||
| Net unrealized gains (losses) on forecasted transactions | (0.1 | ) | |||
| Foreign currency translation adjustment | 0 | ||||
| Other comprehensive income (loss) | (76.7 | ) | |||
| Other comprehensive (income) loss attributable to NCI | (0.7 | ) | |||
| Total comprehensive income (loss) available to Progressive | $ | 66.3 | |||
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENTS
Year Ended December 2015
(millions)
(unaudited)
Year1 | |||||||||
| 2015 | 2014 | % Change | |||||||
| Net premiums written | $ | 20,564.0 | $ | 18,654.6 | 10 | ||||
| Revenues: | |||||||||
| Net premiums earned | $ | 19,899.1 | $ | 18,398.5 | 8 | ||||
| Investment income | 454.6 | 408.4 | 11 | ||||||
| Net realized gains (losses) on securities: | |||||||||
| Net impairment losses recognized in earnings | (23.8 | ) | (7.9 | ) | 201 | ||||
| Net realized gains (losses) on securities | 136.5 | 232.1 | (41) | ||||||
| Total net realized gains (losses) on securities | 112.7 | 224.2 | (50) | ||||||
| Fees and other revenues | 302.0 | 309.1 | (2) | ||||||
| Service revenues | 86.3 | 56.0 | 54 | ||||||
| Gains (losses) on extinguishment of debt | (0.9 | ) | (4.8 | ) | (81) | ||||
| Total revenues | 20,853.8 | 19,391.4 | 8 | ||||||
| Expenses: | |||||||||
| Losses and loss adjustment expenses | 14,342.0 | 13,306.2 | 8 | ||||||
| Policy acquisition costs | 1,651.8 | 1,524.0 | 8 | ||||||
| Other underwriting expenses | 2,712.1 | 2,467.1 | 10 | ||||||
| Investment expenses | 22.8 | 18.9 | 21 | ||||||
| Service expenses | 77.5 | 50.9 | 52 | ||||||
| Interest expense | 136.0 | 116.9 | 16 | ||||||
| Total expenses | 18,942.2 | 17,484.0 | 8 | ||||||
| Income before income taxes | 1,911.6 | 1,907.4 | 0 | ||||||
| Provision for income taxes | 611.1 | 626.4 | (2) | ||||||
| Net income | 1,300.5 | 1,281.0 | 2 | ||||||
| Less: Income attributable to noncontrolling interest (NCI), net of tax | 32.9 | 0 | NM | ||||||
| Net income available to Progressive | 1,267.6 | 1,281.0 | (1) | ||||||
| Other comprehensive income (loss), net of tax | |||||||||
| Changes in: | |||||||||
| Total net unrealized gains (losses) on securities | (212.9 | ) | 74.9 | (384) | |||||
| Net unrealized gains (losses) on forecasted transactions | (9.7 | ) | (2.6 | ) | 273 | ||||
| Foreign currency translation adjustment | (1.2 | ) | (0.9 | ) | 33 | ||||
| Other comprehensive income (loss) | (223.8 | ) | 71.4 | (413) | |||||
| Other comprehensive (income) loss attributable to NCI | 1.1 | 0 | NM | ||||||
| Total comprehensive income available to Progressive | $ | 1,044.9 | $ | 1,352.4 | (23) | ||||
1 Operating results for the vehicle businesses for 2015 include 52 weeks of activity, compared to 53 weeks in 2014. | |||||||||
| NM = Not Meaningful | |||||||||
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE
&
INVESTMENT RESULTS
December 2015
(millions – except per share amounts)
(unaudited)
| The following table sets forth the computation of per share results: | ||||||||||||
| Current | Year | |||||||||||
| Month | 2015 | 2014 | ||||||||||
| Net income available to Progressive | $ | 143.7 | $ | 1,267.6 | $ | 1,281.0 | ||||||
| Per share: | ||||||||||||
| Basic | $ | 0.25 | $ | 2.16 | $ | 2.17 | ||||||
| Diluted | $ | 0.24 | $ | 2.15 | $ | 2.15 | ||||||
| Comprehensive income (loss) available to Progressive | $ | 66.3 | $ | 1,044.9 | $ | 1,352.4 | ||||||
| Per share: | ||||||||||||
| Diluted | $ | 0.11 | $ | 1.77 | $ | 2.27 | ||||||
| Average shares outstanding - Basic | 583.4 | 585.5 | 590.6 | |||||||||
| Net effect of dilutive stock-based compensation | 3.7 | 3.7 | 4.2 | |||||||||
| Total equivalent shares - Diluted | 587.1 | 589.2 | 594.8 | |||||||||
| The following table sets forth the investment results for the period: | |||||||
| Current | Year | ||||||
| Month | 2015 | 2014 | |||||
| Fully taxable equivalent (FTE) total return: | |||||||
| Fixed-income securities | (0.1) % | 1.7 % | 3.2 % | ||||
| Common stocks | (1.8) % | 0.8 % | 12.6 % | ||||
| Total portfolio | (0.3) % | 1.6 % | 4.5 % | ||||
| Pretax annualized investment income book yield | 2.5 % | 2.4 % | 2.4 % | ||||
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
December 2015
($ in millions)
(unaudited)
| Current Month | ||||||||||||||||||
| Vehicles | ||||||||||||||||||
| Commercial | ||||||||||||||||||
| Personal Lines Business | Lines | Property | Companywide | |||||||||||||||
| Agency | Direct | Total | Business | Business | Total1 | |||||||||||||
| Net Premiums Written | $ | 614.9 | $ | 577.8 | $ | 1,192.7 | $ | 134.6 | $ | 65.1 | $ | 1,392.4 | ||||||
% Growth in NPW2 | (19 | )% | (13 | )% | (16 | )% | (10 | )% | NM | (11 | )% | |||||||
| Net Premiums Earned | $ | 710.7 | $ | 661.4 | $ | 1,372.1 | $ | 162.8 | $ | 69.1 | $ | 1,604.0 | ||||||
% Growth in NPE2 | (17 | )% | (10 | )% | (14 | )% | (9 | )% | NM | (9 | )% | |||||||
| GAAP Ratios | ||||||||||||||||||
| Loss/LAE ratio | 69.6 | 73.4 | 71.4 | 70.3 | 1.03 | 68.2 | ||||||||||||
| Expense ratio | 19.7 | 18.7 | 19.2 | 21.6 | 34.13 | 20.2 | ||||||||||||
| Combined ratio | 89.3 | 92.1 | 90.6 | 91.9 | 35.13 | 88.4 | ||||||||||||
Actuarial Adjustments4 | ||||||||||||||||||
| Reserve Decrease/(Increase) | ||||||||||||||||||
| Prior accident years | $ | 18.1 | ||||||||||||||||
| Current accident year | 21.0 | |||||||||||||||||
| Calendar year actuarial adjustment | $ | 1.9 | $ | 1.0 | $ | 2.9 | $ | (1.5 | ) | $ | 37.7 | $ | 39.1 | |||||
| Prior Accident Years Development | ||||||||||||||||||
| Favorable/(Unfavorable) | ||||||||||||||||||
| Actuarial adjustment | $ | 18.1 | ||||||||||||||||
| All other development | 5.3 | |||||||||||||||||
| Total development | $ | 23.4 | ||||||||||||||||
| Calendar year loss/LAE ratio | 68.2 | |||||||||||||||||
| Accident year loss/LAE ratio | 69.7 | |||||||||||||||||
NM=Not meaningful; Property business written by Progressive prior to April 2015 was negligible.
1 Includes results for all of our run-off businesses, including our professional liability group. For the month, our run-off businesses generated a $0.4 million underwriting loss.
2 Excluding the additional week of activity during December 2014, growth would have been approximately:
| Commercial | ||||||
| Personal Lines Business | Lines | Property | Companywide | |||
| Agency | Direct | Total | Business | Business | Total | |
| % Growth in NPW | 2% | 9% | 5% | 13% | NM | 11% |
| % Growth in NPE | 3% | 13% | 8% | 14% | NM | 13% |
3 Included in both the expense ratio and combined ratio is $5.0 million, or 7.2 points, of amortization/depreciation expense associated with the acquisition of a controlling interest in ARX Holding Corp. Excluding this additional expense and the actuarial adjustments taken during the month, the Property business would have reported a loss/LAE ratio of 55.6, an expense ratio of 26.9 and a combined ratio of 82.5 for December 2015.
4Represents adjustments solely based on our actuarial reviews. In the Property segment, in addition to evaluating emerging claim data, ARX and its subsidiaries have been refining their analysis of their loss/LAE reserves based on the revised methodology that was implemented in conjunction with our review of the fair value of their loss/LAE reserves at the date of acquisition, which has created more variability in the monthly actuarial adjustments recorded this year.
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Year Ended December 2015
($ in millions)
(unaudited)
| Year | ||||||||||||||||||
| Vehicles | ||||||||||||||||||
| Commercial | ||||||||||||||||||
| Personal Lines Business | Lines | Property | Companywide | |||||||||||||||
| Agency | Direct | Total | Business | Business | Total1 | |||||||||||||
| Net Premiums Written | $ | 9,230.1 | $ | 8,473.5 | $ | 17,703.6 | $ | 2,171.2 | $ | 689.6 | $ | 20,564.0 | ||||||
% Growth in NPW2 | 1 | % | 11 | % | 6 | % | 15 | % | NM | 10 | % | |||||||
| Net Premiums Earned | $ | 9,108.6 | $ | 8,185.9 | $ | 17,294.5 | $ | 1,995.9 | $ | 609.1 | $ | 19,899.1 | ||||||
% Growth in NPE2 | 0% | 10 | % | 4 | % | 9 | % | NM | 8 | % | ||||||||
| GAAP Ratios | ||||||||||||||||||
| Loss/LAE ratio | 72.6 | 75.0 | 73.7 | 62.4 | 57.33 | 72.1 | ||||||||||||
| Expense ratio | 19.6 | 20.1 | 19.8 | 21.7 | 32.63 | 20.4 | ||||||||||||
| Combined ratio | 92.2 | 95.1 | 93.5 | 84.1 | 89.93 | 92.5 | ||||||||||||
Actuarial Adjustments4 | ||||||||||||||||||
| Reserve Decrease/(Increase) | ||||||||||||||||||
| Prior accident years | $ | 95.1 | ||||||||||||||||
| Current accident year | 97.0 | |||||||||||||||||
| Calendar year actuarial adjustment | $ | 67.2 | $ | 55.0 | $ | 122.2 | $ | 23.9 | $ | 46.0 | $ | 192.1 | ||||||
| Prior Accident Years Development | ||||||||||||||||||
| Favorable/(Unfavorable) | ||||||||||||||||||
| Actuarial adjustment | $ | 95.1 | ||||||||||||||||
| All other development | 220.0 | |||||||||||||||||
| Total development | $ | 315.1 | ||||||||||||||||
| Calendar year loss/LAE ratio | 72.1 | |||||||||||||||||
| Accident year loss/LAE ratio | 73.7 | |||||||||||||||||
NM=Not meaningful; Property business written by Progressive prior to April 2015 was negligible.
1 Includes results for all of our run-off businesses, including our professional liability group. On a year-to-date basis, our professional liability group recognized $0.4 million of reinstatement premiums paid to our reinsurers pursuant to their reinsurance contracts. This premium reduction is reflected in our companywide total results. In total, our run-off businesses generated an underwriting loss of $1.0 million on a year-to-date basis.
2 Excluding the extra week of activity in December 2014, the net written and net earned premium growth rates would have been approximately two percentage points higher for 2015.
3 Included in both the expense ratio and combined ratio is $45.2 million, or 7.4 points, of amortization/depreciation expense associated with the acquisition of a controlling interest in ARX Holding Corp. Excluding this additional expense and the actuarial adjustments taken during the year, the Property business would have reported a loss/LAE ratio of 64.9, an expense ratio of 25.2 and combined ratio of 90.1.
4 Represents adjustments solely based on our actuarial reviews.
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions - except per share amounts)
(unaudited)
| December | |||
| 2015 | |||
| CONDENSED GAAP BALANCE SHEET: | |||
Investments – Available-for-sale, at fair value: | |||
Fixed maturities1 (amortized cost: $15,347.9) | $ | 15,332.2 | |
| Equity securities: | |||
Nonredeemable1 preferred stocks (cost: $674.2) | 782.6 | ||
| Common equities (cost: $1,494.3) | 2,650.5 | ||
| Short-term investments (amortized cost: $2,172.0) | 2,172.0 | ||
Total investments2,3 | 20,937.3 | ||
| Net premiums receivable | 3,987.7 | ||
| Deferred acquisition costs | 564.1 | ||
| Goodwill and intangible assets | 942.5 | ||
Other assets2,4 | 3,387.7 | ||
| Total assets | $ | 29,819.3 | |
| Unearned premiums | $ | 6,621.8 | |
Loss and loss adjustment expense reserves4 | 10,039.0 | ||
| Other liabilities | 2,177.1 | ||
Dividends payable5 | 519.2 | ||
| Debt | 2,707.9 | ||
| Total liabilities | 22,065.0 | ||
| Redeemable noncontrolling interest (NCI) | 464.9 | ||
| Shareholders' equity | 7,289.4 | ||
| Total liabilities, NCI, and shareholders' equity | $ | 29,819.3 | |
| Common shares outstanding | 583.6 | ||
| Shares repurchased - December | 0.7 | ||
| Average cost per share | $ | 31.15 | |
| Book value per share | $ | 12.49 | |
| Trailing 12-month return on average shareholders' equity | |||
| Net income available to Progressive | 17.2 | % | |
| Comprehensive income available to Progressive | 14.2 | % | |
| Net unrealized pretax gains (losses) on investments | $ | 1,247.8 | |
| Increase (decrease) from November 2015 | $ | (120.6 | ) |
| Increase (decrease) from December 2014 | $ | (324.4 | ) |
Debt-to-total capital ratio6 | 27.1 | % | |
| Fixed-income portfolio duration | 1.9 | ||
| Weighted average credit quality | A+ | ||
Final 2015 Gainshare factor7 | 1.60 | ||
1 As of December 31, 2015, we held certain hybrid securities and recognized a change in fair value of $1.1 million as a realized gain during the periods we held these securities.
2 Total investments exclude $23.1 million of net unsettled security transactions that are included in "other assets" as of December 31, 2015.
3 Includes $1.3 billion, net of unsettled security transactions, of investments in a consolidated, non-insurance subsidiary of the holding company.
4 Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $1,442.7 million, which are included in "other assets."
5 Amount based on estimated shares outstanding as of the record date of February 3, 2016. See Monthly Commentary for further discussion.
6 Ratio reflects debt as a percent of debt plus shareholders' equity; redeemable noncontrolling interest is not part of this calculation.
7 The Gainshare factor excludes the results of our Property business.
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Monthly Commentary
| • | Progressive operates on an accounting calendar that typically consists of a 52-week year, with 13-week quarters and a 4-week December. Under this calendar, we periodically recognize an additional week of activity, as was the case in 2014. Consequently, for 2014, our annual, fourth quarter, and December periods each include an additional week, which affects comparisons to the corresponding periods of 2015. |
| • | On December 4, 2015, the Board of Directors declared an annual variable dividend to be paid on February 12, 2016, to shareholders of record at the close of business on February 3, 2016 (ex-dividend date of February 1, 2016). The amount of the annual variable dividend is $0.8882 per common share, or an estimated $519.2 million in the aggregate, and is reflected in our 2015 financial statements. The annual variable dividend was calculated using the following formula, as specified by the Board in its December dividend declaration: |
| After-Tax | 33 1/3% | |||||
| Dividend | Underwriting | X | Target | X | Gainshare Factor | |
| Amount Per | = | Income | Percentage | |||
| Share | Common Shares Outstanding on 12/31/15 | |||||
| Applying full year 2015 financial results, the annual variable dividend was calculated as follows: | ||||||
| $971.9 million | X | 33 1/3% | X | 1.60 | ||
| $0.8882/share | = | 583.6 million Common Shares | ||||
Events
We plan to release January results on Wednesday, February 17, 2016, before the market opens.
We are currently scheduled to hold a one-hour conference call to address questions on Wednesday, March 2, 2016 at 9:00 a.m., eastern
time, subsequent to the posting of our 2015 Shareholders' Report online and the filing of our 2015 Annual Report on Form 10-K with the SEC. Registration for the teleconference and webcast will be available in February at http://investors.progressive.com/phoenix.zhtml?c=81824&p=irol-calendar.
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 us whenever, wherever and however it's most convenient-online at progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.
Progressive provides insurance for personal and commercial autos and trucks, motorcycles, boats, recreational vehicles, and homes. Home insurance is underwritten by select carriers, including our majority-owned subsidiary, American Strategic Insurance (ASI).
Progressive is the fourth largest auto insurer in the country; a leading seller of motorcycle and commercial auto insurance; and through ASI, one of the top 20 homeowners carriers. 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 that affect the valuation of securities, including derivatives, in our portfolio); 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 reinsurers and other counterparties to certain financial transactions; the accuracy and adequacy of our pricing, loss reserving, and reinsurance methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to attract and retain more customers; our ability to obtain adequate reinsurance at acceptable rates and to collect under our reinsurance contracts; initiatives by competitors and the effectiveness of our response; our ability to obtain regulatory approval for the introduction of products to new jurisdictions, for requested rate changes and the timing thereof and for any proposed acquisitions; 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, matters relating to vehicle and homeowners insurance, health care reform and tax law changes; 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, floods, snowfalls, hail, and winter conditions); changes in driving patterns, including vehicle usage as influenced by the level of oil and gas prices, among other factors; our ability to accurately recognize and appropriately respond in a timely manner to changes in loss frequency and severity trends; technological advances; acts of war and terrorist activities; our ability to maintain the uninterrupted operation of our facilities, systems, including protecting our information technology systems from cyber-attacks and other intrusions, and business functions, and safeguard personal and sensitive information and data in our possession; our continued access to and functionality of third-party systems that are critical to our business; court decisions, new theories of insurer liability or interpretations of insurance policy provisions and other trends in litigation; changes in health care and auto and property 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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