The Progressive Corporation (PGR) 8-K Results of Operations and Financial Condition

Exhibit 99

	NEWS RELEASE
The Progressive Corporation	Company Contact:
6300 Wilson Mills Road	Thomas A. King
Mayfield Village, Ohio 44143	(440) 395-2260
http://www.progressive.com

FOR IMMEDIATE RELEASE

MAYFIELD VILLAGE, OHIO — October 13, 2004 — The Progressive Corporation today reported the following results for September 2004:

	Month								Quarter
(millions, except per share amounts)	2004		2003			Change			2004		2003			Change
Net premiums written	$	1,002.4	$	914.0			10	%	$	3,386.9	$	3,104.9			9	%
Net premiums earned		1,013.2		916.2			11	%		3,277.7		2,927.8			12	%
Net income		120.5		94.2			28	%		388.9		319.8			22	%
Per share		.55		.43			29	%		1.77		1.45			22	%
Combined ratio		88.1		88.3			.2	pts.		86.3		87.9			1.6	pts.
Pre-tax net realized gains (losses)		20.1		(3.2	)		NM			23.9		(4.3	)		NM
Diluted equivalent shares		219.0		220.1			—	%		219.1		220.5			(1	)%

NM = Not Meaningful

See the “Income Statement” for further month and year-to-date information. Detailed quarterly information will be available in the Company’s third quarter 2004 Form 10-Q, which the Company expects to file on or about November 9, 2004.

     Progressive’s Personal Lines business units write insurance for private passenger automobiles and recreation vehicles. Progressive’s Commercial Auto business unit writes primary liability, physical damage and other auto-related insurance for automobiles and trucks owned by small businesses. The Company’s other businesses principally include writing directors’ and officers’ liability insurance and managing the Company’s run-off businesses. See “Supplemental Information” for the month and year-to-date results.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
September 2004
(millions – except per share amounts)
(unaudited)

	Current
	Month		Comments on Monthly Results1
Direct premiums written	$	1,023.7
Net premiums written	$	1,002.4
Revenues:
Net premiums earned	$	1,013.2
Investment income		44.2
Net realized gains (losses) on securities		20.1
Service revenues		3.6
Total revenues		1,081.1
Expenses:
Losses and loss adjustment expenses		687.8	Includes $35.6 million, 3.5 loss ratio points, of hurricane-related losses.
Policy acquisition costs		109.7
Other underwriting expenses		95.2
Investment expenses		2.4	Includes $1.5 million related to the Dutch auction tender offer for its Common Shares, which the Company commenced during the month.
Service expenses		1.5
Interest expense		6.7
Total expenses		903.3
Income before income taxes		177.8
Provision for income taxes		57.3
Net income	$	120.5
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding		215.9
Per share	$	.56
Diluted:
Average shares outstanding		215.9
Net effect of dilutive stock-based compensation		3.1
Total equivalent shares		219.0
Per share	$	.55

¹See the Monthly Commentary at the end of this release for additional discussion. Also see Note 1 to the Company’s 2003 audited consolidated financial statements included in the Company’s 2003 Annual Report, which can be found at progressive.com/annualreport, for a description of the Company’s reporting and accounting policies.

The following table sets forth the total return on investments for the month:

Fully taxable equivalent total return:
Fixed income securities	.3	%
Common stocks	1.3	%
Total portfolio	.4	%

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
September 2004 Year-to-Date
(millions – except per share amounts)
(unaudited)

	Year-to-Date
					%
	2004		2003		Change
Direct premiums written	$	10,273.3	$	9,211.3		12
Net premiums written	$	10,025.8	$	9,007.0		11
Revenues:
Net premiums earned	$	9,605.2	$	8,301.0		16
Investment income		364.4		344.0		6
Net realized gains (losses) on securities		80.0		15.7		410
Service revenues		36.6		30.1		22
Other income1		—		30.8	NM
Total revenues		10,086.2		8,721.6		16
Expenses:
Losses and loss adjustment expenses		6,224.5		5,636.9		10
Policy acquisition costs		1,035.8		915.6		13
Other underwriting expenses		904.1		736.4		23
Investment expenses		10.4		8.3		25
Service expenses		18.0		19.4		(7	)
Interest expense		60.3		71.8		(16	)
Total expenses		8,253.1		7,388.4		12
Income before income taxes		1,833.1		1,333.2		37
Provision for income taxes		597.9		435.6		37
Net income	$	1,235.2	$	897.6		38
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding		216.2		217.5		(1	)
Per share	$	5.71	$	4.13		38
Diluted:
Average shares outstanding		216.2		217.5		(1	)
Net effect of dilutive stock-based compensation		3.4		3.7		(8	)
Total equivalent shares		219.6		221.2		(1	)
Per share	$	5.62	$	4.06		39

NM = Not Meaningful

¹Amount represents estimated interest earned through September 2003 on an income tax refund the Company received in 2004.

The following table sets forth the total return on investments for the year-to-date period:

	2004			2003
Fully taxable equivalent total return:
Fixed income securities		3.3	%		4.7	%
Common stocks		1.4	%		14.8	%
Total portfolio		3.1	%		6.2	%

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
September 2004
($ in millions)
(unaudited)

Current Month

	Personal Lines									Commercial
										Auto			Other			Companywide
	Agency			Direct			Total			Business			Businesses2			Total
Net Premiums Written	$	589.7		$	294.9		$	884.6		$	116.0		$	1.8		$	1,002.4
% Growth in NPW		6	%		16	%		9	%		13	%		(36	)%		10	%
Net Premiums Earned	$	604.2		$	287.0		$	891.2		$	119.6		$	2.4		$	1,013.2
% Growth in NPE		8	%		14	%		10	%		18	%		(31	)%		11	%
GAAP Ratios
Loss/LAE ratio		68.8			68.1			68.5			64.4			.7			67.9
Expense ratio		20.4			19.9			20.3			19.4			28.5			20.2
Combined ratio		89.2			88.0			88.8			83.8			29.2			88.1
Actuarial Adjustments1
Reserve Decrease/(Increase)
Prior accident years																$	2.1
Current accident year																	(5.0	)
Calendar year actuarial adjustment	$	(.8	)	$	(1.2	)	$	(2.0	)	$	(1.0	)	$	.1		$	(2.9	)
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	2.1
All other development																	13.7
Total development																$	15.8
Calendar year loss/LAE ratio																	67.9
Accident year loss/LAE ratio																	69.5
Statutory Ratios
Loss/LAE ratio																	67.9
Expense ratio																	19.8
Combined ratio																	87.7

¹Represents adjustments solely based on the Company’s corporate actuarial review.

² In September 2004, the Company incurred favorable “other development” in its run-off businesses.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
September 2004 Year-to-Date
($ in millions)
(unaudited)

Year-to-Date

	Personal Lines									Commercial
										Auto			Other			Companywide
	Agency			Direct			Total			Business			Businesses			Total
Net Premiums Written	$	5,967.5		$	2,847.4		$	8,814.9		$	1,191.8		$	19.1		$	10,025.8
% Growth in NPW		9	%		16	%		11	%		16	%		(59	)%		11	%
Net Premiums Earned	$	5,776.5		$	2,701.6		$	8,478.1		$	1,101.2		$	25.9		$	9,605.2
% Growth in NPE		13	%		19	%		15	%		24	%		(51	)%		16	%
GAAP Ratios
Loss/LAE ratio		65.8			64.7			65.4			60.1			56.8			64.8
Expense ratio		20.1			20.6			20.3			19.1			46.2			20.2
Combined ratio		85.9			85.3			85.7			79.2			103.0			85.0
Actuarial Adjustments1
Reserve Decrease/(Increase)
Prior accident years																$	31.1
Current accident year																	(24.8	)
Calendar year actuarial adjustment	$	5.3		$	1.3		$	6.6		$	(.3	)	$	—		$	6.3
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	31.1
All other development																	44.3
Total development																$	75.4
Calendar year loss/LAE ratio																	64.8
Accident year loss/LAE ratio																	65.6
Statutory Ratios
Loss/LAE ratio																	64.9
Expense ratio																	19.4
Combined ratio																	84.3
Statutory surplus2																$	4,759.4

	September		September
Policies in Force	2004		2003		Change
(in thousands)
Agency – Auto		4,236		3,920		8	%
Direct – Auto		2,050		1,800		14	%
Other Personal Lines3		2,350		1,985		18	%
Total Personal Lines		8,636		7,705		12	%
Commercial Auto Business		413		356		16	%

¹Represents adjustments solely based on the Company’s corporate actuarial review.

² During September, the insurance subsidiaries paid cash dividends, net of capital contributions, of $979.6 million to the parent company.

³ Includes insurance for motorcycles, recreation vehicles, mobile homes, watercraft, snowmobiles, homeowners and similar items.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions– except per share amounts)
(unaudited)

	September
	2004
CONDENSED GAAP BALANCE SHEET:1
Investments -
Available-for-sale:
Fixed maturities, at market (amortized cost: $9,534.0)	$	9,681.1
Equity securities, at market:
Preferred stocks (cost: $723.4)		747.2
Common equities (cost: $1,312.1)		1,686.7
Short-term investments, at amortized cost (market: $2,204.2)		2,204.2
Total investments2		14,319.2
Net premiums receivable		2,397.6
Deferred acquisition costs		460.5
Other assets		1,318.4
Total assets	$	18,495.7
Unearned premiums	$	4,326.5
Loss and loss adjustment expense reserves		5,156.0
Other liabilities2		1,592.0
Debt		1,290.2
Shareholders’ equity		6,131.0
Total liabilities and shareholders’ equity	$	18,495.7
Common Shares outstanding		217.0
Shares repurchased – September		—
Average cost per share	$	—
Book value per share	$	28.25
Return on average shareholders’ equity		28.6	%
Net unrealized pre-tax gains on investments	$	545.5
Debt to total capital ratio		17.4	%

¹Pursuant to SFAS 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts,” loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $251.7 million.

²Amounts include net unsettled security acquisitions of $101.3 million.

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  Monthly Commentary

• Growth continued to slow in the Company’s Personal Lines businesses. Eight markets had year-to-date net premiums written growth of 20% or greater; these markets represented 14% of the total Personal Lines premiums. Nineteen states (44% of total Personal Lines) grew less than 10%.

• Commercial Auto’s written premium growth was understated in September due to an inventory of unprocessed applications.

• The Company continued to experience strong profitability. Four markets in which the Company writes Personal Lines business were unprofitable for the month; however, excluding the effect of the hurricane-related losses, three of the four markets would have been profitable. For the year-to-date period, all Personal Lines markets were profitable.

• The Company continues to respond to the catastrophic, weather-related claims. As of October 12, 2004, over 80% of the approximately 21,000 reported claims have been paid.

• The pretax recurring book yield of the investment portfolio was 3.9% for the month and 3.8% year-to-date.

• At September month-end, the net unrealized gains in the investment portfolio were $545.5 million, a decrease of $97.9 million from year-end 2003. In the fixed-income portfolio, the duration was 2.9 years and the weighted average credit quality remained AA+.

The Progressive group of insurance companies ranks third in the nation for auto insurance based on premiums written. The companies that offer insurance directly (by phone at 1-800-PROGRESSIVE and online at progressive.com) market their products and services through the Progressive Direct brand, while the companies that offer insurance through more than 30,000 independent agencies and insurance brokers in the U.S. market their products and services through the Drive Insurance from Progressive brand. The Common Shares of The Progressive Corporation, the holding company, are publicly traded 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 accuracy and adequacy of the Company’s pricing and loss reserving methodologies; pricing competition and other initiatives by competitors; the Company’s ability to obtain regulatory approval for requested rate changes and the timing thereof; the effectiveness of the Company’s advertising campaigns; legislative and regulatory developments; the outcome of litigation pending or that may be filed against the Company; 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; the Company’s ability to maintain the uninterrupted operation of its facilities, systems (including information technology systems) and business functions; court decisions and trends in litigation and health care and auto repair costs; and other matters described from time to time by the Company in releases and publications, and in 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 a major contingency. Reported results, therefore, may appear to be volatile in certain accounting periods.

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