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	Patrick Brennan
Mayfield Village, Ohio 44143	(440) 395-2370
http://www.progressive.com

The Company is scheduled to hold a one-hour conference call to address questions on Friday, March 2, 2007, at 9:30 a.m. eastern time, subsequent to the posting of the Company’s 2006 Annual Report online and the filing of its 2006 Annual Report on Form 10-K with the SEC. Registration for the teleconference or webcast is scheduled to be available on the Company’s Web site athttp://investors.progressive.com/events.asp in early February 2007.

FOR IMMEDIATE RELEASE

MAYFIELD VILLAGE, OHIO — January 17, 2007 — The Progressive Corporation today reported the following results for December 2006:

	Month								Quarter
(millions, except per share amounts and ratios)	2006		2005			Change			2006		2005			Change
Net premiums written	$	919.2	$	937.4			(2	)%	$	3,194.2	$	3,251.8			(2	)%
Net premiums earned		1,076.6		1,068.6			1	%		3,508.7		3,481.7			1	%
Net income		138.9		122.9			13	%		400.9		281.6			42	%
Per share		.18		.15			20	%		.53		.35			49	%
Pre-tax net realized gains (losses) on securities		9.4		(4.7	)		NM			14.5		(40.2	)		NM
Combined ratio		86.6		87.2			(.6	) pts.		87.7		90.7			(3.0	) pts.
Average diluted equivalent shares		751.8		795.3			(5	)%		757.3		795.0			(5	)%

NM = Not Meaningful

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

     See the “Income Statements” and “Supplemental Information” for further month and full year results and the “Monthly Commentary” at the end of this release for additional discussion.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
December 2006
(millions – except per share amounts)
(unaudited)

	Current
	Month			Comments on Monthly Results1
Direct premiums written	$	933.3
Net premiums written	$	919.2
Revenues:
Net premiums earned	$	1,076.6
Investment income		55.5		Includes an adjustment in our accounting to accurately reflect the yield of one fixed-income security, resulting in a cumulative reduction of $4.7 million in recurring income.
Net realized gains (losses) on securities		9.4		Includes a $6.7 million gain received as part of a class action litigation settlement from a prior investment as well as $.3 million of write-downs on a security determined to have an other-than-temporary decline in market value.
Service revenues		2.1
Total revenues		1,143.6
Expenses:
Losses and loss adjustment expenses		707.0
Policy acquisition costs		109.3
Other underwriting expenses		116.3
Investment expenses		1.0
Service expenses		1.8
Interest expense		6.3
Total expenses		941.7
Income before income taxes		201.9
Provision for income taxes		63.0
Net income	$	138.9
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding		743.4
Per share	$	.19
Diluted:
Average shares outstanding		743.4
Net effect of dilutive stock-based compensation		8.4
Total equivalent shares		751.8
Per share	$	.18
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 2005 audited consolidated financial statements included in our 2005 Shareholders’ Report, which can be found at www.progressive.com/annualreport.
The following table sets forth the investment results for the month:
Fully taxable equivalent total return:
Fixed-income securities		(.1	)%
Common stocks		1.3	%
Total portfolio		.1	%
Pretax recurring investment book yield		4.8	%

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
Year Ended December 2006
(millions – except per share amounts)
(unaudited)

	Year
	2006			2005			% Change
Direct premiums written	$	14,386.2		$	14,293.4			1
Net premiums written	$	14,132.0		$	14,007.6			1
Revenues:
Net premiums earned	$	14,117.9		$	13,764.4			3
Investment income		647.8			536.7			21
Net realized gains (losses) on securities		(9.7	)		(37.9	)		(74	)
Service revenues		30.4			40.2			(24	)
Total revenues		14,786.4			14,303.4			3
Expenses:
Losses and loss adjustment expenses		9,394.9			9,364.8			0
Policy acquisition costs		1,441.9			1,448.2			0
Other underwriting expenses		1,402.8			1,312.2			7
Investment expenses		11.9			12.1			(2	)
Service expenses		24.4			24.6			(1	)
Interest expense		77.3			82.6			(6	)
Total expenses		12,353.2			12,244.5			1
Income before income taxes		2,433.2			2,058.9			18
Provision for income taxes		785.7			665.0			18
Net income	$	1,647.5		$	1,393.9			18
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding		774.3			787.7			(2	)
Per share	$	2.13		$	1.77			20
Diluted:
Average shares outstanding		774.3			787.7			(2	)
Net effect of dilutive stock-based compensation		9.5			11.6			(18	)
Total equivalent shares		783.8			799.3			(2	)
Per share	$	2.10		$	1.74			21
The following table sets forth the investment results for the year:
	2006			2005
Fully taxable equivalent total return:
Fixed-income securities		5.9	%		3.4	%
Common stocks		16.3	%		7.1	%
Total portfolio		7.4	%		4.0	%
Pretax recurring investment book yield		4.6	%		4.1	%

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
December 2006
($ in millions)
(unaudited)

Current Month

										Commercial
				Personal Lines						Auto			Other			Companywide
	Drive			Direct			Total			Business			Businesses1			Total
Net Premiums Written	$	512.5		$	289.7		$	802.2		$	115.0		$	2.0		$	919.2
% Growth in NPW		(4	)%		1	%		(2	)%		(3	)%	NM				(2	)%
Net Premiums Earned	$	596.2		$	334.7		$	930.9		$	144.0		$	1.7		$	1,076.6
% Growth in NPE		(2	)%		3	%		0	%		8	%	NM				1	%
GAAP Ratios
Loss/LAE ratio		65.5			67.8			66.3			61.3		NM				65.7
Expense ratio		21.9			19.7			21.1			19.9		NM				20.9
Combined ratio		87.4			87.5			87.4			81.2		NM				86.6
Actuarial Adjustments2
Reserve Decrease/(Increase)
Prior accident years																$	7.0
Current accident year																	5.7
Calendar year actuarial adjustment	$	11.2		$	3.9		$	15.1		$	(1.0	)	$	(1.4	)	$	12.7
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	7.0
All other development3																	(27.5	)
Total development																$	(20.5	)
Calendar year loss/LAE ratio																	65.7
Accident year loss/LAE ratio																	63.8
Statutory Ratios
Loss/LAE ratio																	65.8
Expense ratio																	22.2
Combined ratio																	88.0

NM =	Not Meaningful
1	Primarily includes professional liability insurance for community banks and Progressive’s run-off businesses. The other businesses generated an underwriting loss of $.2 million for the month.
2	Represents adjustments solely based on our corporate actuarial reviews.
3	See the Monthly Commentary at the end of this release for discussion.

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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Year Ended December 2006
($ in millions)
(unaudited)

Year

										Commercial
	Personal Lines									Auto			Other			Companywide
	Drive			Direct			Total			Business			Businesses1			Total
Net Premiums Written	$	7,854.3		$	4,354.5		$	12,208.8		$	1,898.0		$	25.2		$	14,132.0
% Growth in NPW		(2	)%		4	%		0	%		5	%	NM				1	%
Net Premiums Earned	$	7,903.6		$	4,337.4		$	12,241.0		$	1,851.9		$	25.0		$	14,117.9
% Growth in NPE		(1	)%		6	%		1	%		11	%	NM				3	%
GAAP Ratios
Loss/LAE ratio		67.8			66.8			67.4			61.0		NM				66.5
Expense ratio		20.3			20.1			20.3			19.2		NM				20.2
Combined ratio		88.1			86.9			87.7			80.2		NM				86.7
Actuarial Adjustments2
Reserve Decrease/(Increase)
Prior accident years																$	158.3
Current accident year																	57.8
Calendar year actuarial adjustment	$	114.0		$	58.9		$	172.9		$	44.4		$	(1.2	)	$	216.1
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment																$	158.3
All other development																	88.6
Total development																$	246.9
Calendar year loss/LAE ratio																	66.5
Accident year loss/LAE ratio																	68.2
Statutory Ratios
Loss/LAE ratio																	66.6
Expense ratio																	19.9
Combined ratio																	86.5
Statutory Surplus3																$	4,963.7

	December		December
Policies in Force	2006		2005		Change
(in thousands)
Drive – Auto		4,433		4,491		(1	)%
Direct – Auto		2,429		2,328		4	%
Special Lines4		2,879		2,675		8	%
Total Personal Lines		9,741		9,494		3	%
Commercial Auto Business		503		468		7	%

NM = Not Meaningful

1	The other businesses generated an underwriting profit of $6.5 million.
2	Represents adjustments solely based on our corporate actuarial reviews.
3	During December, the parent company received $321.5 million of dividends, net of capital contributions, from the insurance subsidiaries.
4	Includes insurance for motorcycles, recreational vehicles, mobile homes, watercraft, snowmobiles and similar items.

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

	December
	2006
CONDENSED GAAP BALANCE SHEET:1
Investments – Available-for-sale, at market:
Fixed maturities (amortized cost: $9,959.6)	$	9,958.9
Equity securities:
Preferred stocks (cost: $1,705.6)		1,724.7
Common equities (cost: $1,469.0)		2,368.1
Short-term investments (amortized cost: $636.8)		637.5
Total investments2		14,689.2
Net premiums receivable		2,498.2
Deferred acquisition costs		441.0
Other assets		1,853.7
Total assets	$	19,482.1
Unearned premiums	$	4,335.0
Loss and loss adjustment expense reserves		5,725.0
Other liabilities2		1,390.0
Debt		1,185.5
Shareholders’ equity		6,846.6
Total liabilities and shareholders’ equity	$	19,482.1
Common Shares outstanding		748.0
Shares repurchased – December		4.5
Average cost per share	$	24.00
Book value per share	$	9.15
Trailing 12-month return on average shareholders’ equity		25.3	%
Net unrealized pre-tax gains on investments	$	918.2
Increase (decrease) from November 2006	$	(63.9	)
Increase (decrease) from December 2005	$	318.1
Debt to total capital ratio		14.8	%
Fixed-income portfolio duration	3.1 years
Weighted average credit quality	AA+
Final 2006 Gainshare factor		1.18

1	Pursuant 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 $361.4 million.
2	Amounts include net unsettled security acquisitions of $41.9 million.

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Monthly Commentary

• The $27.5 million unfavorable prior accident year “all other” development in December reflects a $28.4 million adjustment resulting from a change in procedure made earlier this year which misallocated a portion of our paid loss adjustment expenses to the current accident year as opposed to prior accident years. This adjustment to our current month corrects that misallocation; year-to-date, the total prior year accident development is accurately stated. This change had no effect on calendar year results and, therefore, had no impact on any of the balance sheets or income statements that we have presented regarding our 2006 results.

The Progressive Group of Insurance Companies, in business since 1937, ranks third in the nation for auto insurance based on premiums written and provides drivers with competitive rates and 24/7, in-person and online service. The products and services of the Progressive Direct Group of Insurance Companies are marketed directly to consumers online at www.progressivedirect.com and by phone at 1-800-PROGRESSIVE through the Progressive Direct^® brand. The Drive Group of Progressive Insurance Companies offers insurance through more than 30,000 independent insurance agencies that market their products and services through the Drive^® Insurance from Progressive brand. For more information about Drive Insurance, go towww.driveinsurance.com. The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, are publicly traded at NYSE:PGR. More information, including a guide to interpreting the monthly reporting package, can be found atwww.progressive.com.

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; disputes relating to intellectual property rights; 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 one or more contingencies. Reported results, therefore, may appear to be volatile in certain accounting periods.

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