The Progressive Corporation 8K Progressive Reports January Results | PGR 17 Feb 16



			NEWS RELEASE




The Progressive Corporation			Company Contact:
6300 Wilson Mills Road			Julia Hornack
Mayfield Village, Ohio 44143			(440) 395-2164
http://www.progressive.com

PROGRESSIVE REPORTS JANUARY RESULTS

MAYFIELD VILLAGE, OHIO -- February 17, 2016 -- The Progressive Corporation (NYSE:PGR) today reported the following results for January 2016:



	January			January
(millions, except per share amounts and ratios; unaudited)	2016			2015			Change

Net premiums written	$	2,025.8		$	1,773.6		14	%
Net premiums earned	$	2,001.1		$	1,770.0		13	%
Net income attributable to Progressive	$	100.8		$	89.4		13	%
Per share	$	0.17		$	0.15		14	%
Total pretax net realized gains (losses) on securities
(including net impairment losses)	$	(6.2	)	$	(7.2	)	(14)	%
Combined ratio	93.1			93.1			0 pts.
Average diluted equivalent shares	586.5			591.4			(1)	%

We acquired a controlling interest in ARX Holding Corp. (ARX), parent company of American Strategic Insurance and other subsidiaries (ASI), 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)	January	January	Change
	2016	2015
Policies in Force
Vehicle businesses:
Agency – auto	4,758.5	4,726.9	1 %
Direct – auto	4,987.8	4,551.4	10 %
Total personal auto	9,746.3	9,278.3	5 %
Total special lines	4,105.6	4,027.1	2 %
Total Personal Lines	13,851.9	13,305.4	4 %
Total Commercial Lines	560.3	515.8	9 %
Property business	1,076.0	—	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 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 STATEMENTS

January 2016

(millions)

(unaudited)



	January¹
	2016			2015			% Change
Net premiums written	$	2,025.8		$	1,773.6		14

Revenues:
Net premiums earned	$	2,001.1		$	1,770.0		13
Investment income	37.7			32.3			17
Net realized gains (losses) on securities:
Net impairment losses recognized in earnings	0			0			NM
Net realized gains (losses) on securities	(6.2		)	(7.2		)	(14)
Total net realized gains (losses) on securities	(6.2		)	(7.2		)	(14)
Fees and other revenues	28.6			27.0			6
Service revenues	8.4			7.2			17
Total revenues	2,069.6			1,829.3			13

Expenses:
Losses and loss adjustment expenses	1,445.9			1,284.9			13
Policy acquisition costs	165.8			144.5			15
Other underwriting expenses	279.2			245.8			14
Investment expenses	1.6			2.4			(33)
Service expenses	7.7			6.8			13
Interest expense	11.4			10.2			12
Total expenses	1,911.6			1,694.6			13

Income before income taxes	158.0			134.7			17
Provision for income taxes	53.9			45.3			19
Net income	104.1			89.4			16
Less: Income attributable to noncontrolling interest (NCI)	3.3			0			NM
Net income attributable to Progressive	100.8			89.4			13

Other comprehensive income (loss), net of tax
Changes in:
Total net unrealized gains (losses) on securities	(53.4		)	1.3			NM
Net unrealized gains (losses) on forecasted transactions	(0.1		)	(8.5		)	(99)
Foreign currency translation adjustment	(0.2		)	(0.1		)	100
Other comprehensive income (loss)	(53.7		)	(7.3		)	636
Other comprehensive (income) loss attributable to NCI	(2.1		)	0			NM
Total comprehensive income attributable to Progressive	$	45.0		$	82.1		(45)


NM = Not Meaningful

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 2014 audited consolidated financial statements included in our 2014 Shareholders’ Report, and Note 1 - Basis of Presentation in our Second Quarter 2015 Report on Form 10-Q, both of which can be found at www.progressive.com/investor.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE

INVESTMENT RESULTS

January 2016

(millions – except per share amounts)

(unaudited)



The following table sets forth the computation of per share results:

	January
	2016		2015

Net income attributable to Progressive	$	100.8	$	89.4
Per share:
Basic	$	0.17	$	0.15
Diluted	$	0.17	$	0.15

Comprehensive income (loss) attributable to Progressive	$	45.0	$	82.1
Per share:
Diluted	$	0.08	$	0.14

Average shares outstanding - Basic	584.1		588.1
Net effect of dilutive stock-based compensation	2.4		3.3
Total equivalent shares - Diluted	586.5		591.4



The following table sets forth the investment results for the period:
		January
		2016	2015
	Fully taxable equivalent (FTE) total return:
	Fixed-income securities	0.5%	0.6 %
	Common stocks	(5.1) %	(2.8) %
	Total portfolio	(0.2) %	0.2 %

	Pretax annualized investment income book yield	2.3 %	2.2 %

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

January 2016

($ in millions)

(unaudited)



January
	Vehicles
										Commercial
	Personal Lines Business									Lines			Property			Companywide
	Agency			Direct			Total			Business			Business			Total¹
Net Premiums Written	$	872.3		$	869.4		$	1,741.7		$	234.8		$	49.3		$	2,025.8
% Growth in NPW	6		%	15		%	10		%	22		%	NM			14		%
Net Premiums Earned	$	891.1		$	834.6		$	1,725.7		$	206.9		$	68.5		$	2,001.1
% Growth in NPE	4		%	13		%	8		%	16		%	NM			13		%

GAAP Ratios
Loss/LAE ratio	72.8			75.8			74.3			62.2			51.2			72.3
Expense ratio	19.5			20.8			20.1			22.0			34.7²			20.8
Combined ratio	92.3			96.6			94.4			84.2			85.9²			93.1

Actuarial Adjustments³
Reserve Decrease/(Increase)
Prior accident years																$	5.3
Current accident year																0.2
Calendar year actuarial adjustment	$	2.2		$	4.8		$	7.0		$	0.0		$	(1.5	)	$	5.5

Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	5.3
All other development																(70.8		)
Total development																$	(65.5	)

Calendar year loss/LAE ratio																72.3
Accident year loss/LAE ratio																69.0

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 $1.0 million underwriting loss.

² Included in both the expense ratio and combined ratio is $5.0 million, or 7.3 points, of amortization/depreciation expense associated with the acquisition of a controlling interest in ARX Holding Corp. Excluding this additional expense, the Property business would have reported an expense ratio of 27.4 and a combined ratio of 78.6 for January 2016.

³Represents 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)



	January
	2016
CONDENSED GAAP BALANCE SHEET:
Investments – Available-for-sale, at fair value:
Fixed maturities¹ (amortized cost: $14,787.6)	$	14,837.6
Equity securities:
Nonredeemable¹ preferred stocks (cost: $691.3)	794.6
Common equities (cost: $1,495.5)	2,508.7
Short-term investments (amortized cost: $2,806.8)	2,806.8
Total investments²	20,947.7
Net premiums receivable	4,009.0
Deferred acquisition costs	563.0
Goodwill and intangible assets	937.4
Other assets^2,3	3,492.3
Total assets	$	29,949.4

Unearned premiums	$	6,647.3
Loss and loss adjustment expense reserves³	10,059.5
Other liabilities	2,227.6
Dividends payable	519.0
Debt	2,706.0
Total liabilities	22,159.4
Redeemable noncontrolling interest (NCI)	470.1
Shareholders' equity	7,319.9
Total liabilities, NCI, and shareholders' equity	$	29,949.4


Common shares outstanding	584.3
Shares repurchased - January	0.8
Average cost per share	$	30.97
Book value per share	$	12.53
Trailing 12-month return on average shareholders' equity
Net income attributable to Progressive	17.3		%
Comprehensive income attributable to Progressive	13.6		%
Net unrealized pretax gains (losses) on investments	$	1,166.1
Increase (decrease) from December 2015	$	(81.7	)
Debt-to-total capital ratio⁴	27.0		%
Fixed-income portfolio duration	1.9
Weighted average credit quality	A+
Year-to-date Gainshare factor⁵	1.01

¹As of January 31, 2016, we held certain hybrid securities and recognized a change in fair value of $0.4 million as a realized gain during the period we held these securities.

²Total investments exclude $195.0 million of net unsettled security transactions that are included in "other assets" as of January 31, 2016.

³Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $1,452.2 million, which are included in "other assets."

⁴Ratio reflects debt as a percent of debt plus shareholders' equity; redeemable noncontrolling interest is not part of this calculation.

⁵The Gainshare factor excludes the results of our Property business.

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Monthly Commentary

•

In January, we experienced unfavorable prior accident year reserve development of 3.3 points. The unfavorable development was the result of more December claims being reported in January than were anticipated in our year-end reserves. In January, incurred but not reported on December 2015 accidents are reflected in prior year development, rather than development in the current accident year as is the case for the remaining eleven months of the year.

Events

We plan to release February results on Wednesday, March 16, 2016, before the market opens.

Progressive is 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 is available 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 American Strategic Insurance and subsidiaries (ASI), our majority owned subsidiaries.

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 report 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 reinsurers and other 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 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; 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, 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 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, 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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The Progressive Corporation (PGR) 8-KProgressive Reports January Results