| Document and Entity Information | ||
| 3 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| |
| Document Type | 10-Q | |
| Amendment Flag | false | |
| Document Period End Date | 2010-03-31 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 | |
| Trading Symbol | PGR | |
| Entity Registrant Name | PROGRESSIVE CORP/OH/ | |
| Entity Central Index Key | 0000080661 | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Common Stock, Shares Outstanding | 670,422,678 |
| Consolidated Statements of Income (USD $) | |||||||||||||||||||
| In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
| Revenues | |||||||||||||||||||
| Net premiums earned | 3501.1 | 3406.6 | |||||||||||||||||
| Investment income | 129.8 | 131.5 | |||||||||||||||||
| Other-than-temporary impairment (OTTI) losses: | |||||||||||||||||||
| Total OTTI losses | -9.3 | 0 | |||||||||||||||||
| Less: portion of OTTI losses recognized in other comprehensive income | 6.2 | 0 | |||||||||||||||||
| Net impairment losses recognized in earnings | -3.1 | 0 | |||||||||||||||||
| Net realized gains (losses) on securities | 33.9 | -73.4 | |||||||||||||||||
| Total net realized gains (losses) on securities | 30.8 | -73.4 | |||||||||||||||||
| Service revenues | 4.2 | 3.5 | |||||||||||||||||
| Total revenues | 3665.9 | 3468.2 | |||||||||||||||||
| Expenses | |||||||||||||||||||
| Losses and loss adjustment expenses | 2423.4 | 2,337 | |||||||||||||||||
| Policy acquisition costs | 333.1 | 336.2 | |||||||||||||||||
| Other underwriting expenses | 426.5 | 377.4 | |||||||||||||||||
| Investment expenses | 3.6 | 2.6 | |||||||||||||||||
| Service expenses | 5.2 | 4.6 | |||||||||||||||||
| Interest expense | 35.2 | 33.7 | |||||||||||||||||
| Total expenses | 3,227 | 3091.5 | |||||||||||||||||
| Net Income | |||||||||||||||||||
| Income before income taxes | 438.9 | 376.7 | |||||||||||||||||
| Provision for income taxes | 143.3 | 144.2 | |||||||||||||||||
| Net income | 295.6 | 232.5 | |||||||||||||||||
| Basic: | |||||||||||||||||||
| Average shares outstanding | 661.4 | 668.6 | |||||||||||||||||
| Per share | 0.45 | 0.35 | |||||||||||||||||
| Diluted: | |||||||||||||||||||
| Average shares outstanding | 661.4 | 668.6 | |||||||||||||||||
| Net effect of dilutive stock-based compensation | 5 | 3.4 | |||||||||||||||||
| Total equivalent shares | 666.4 | 672 | |||||||||||||||||
| Per share | 0.44 | 0.35 | |||||||||||||||||
| Dividends declared per share | $0 | [1] | $0 | [1] | |||||||||||||||
| [1]Progressive maintains an annual dividend program. See Note 9 - Dividends for further discussion. | |||||||||||||||||||
| Consolidated Balance Sheets (USD $) | |||||||||||||||||||
| In Millions | Mar. 31, 2010
| Dec. 31, 2009
| Mar. 31, 2009
| ||||||||||||||||
| Investments - Available-for-sale, at fair value: | |||||||||||||||||||
| Fixed maturities (amortized cost: $11,660.4, $10,685.1, and $11,717.0) | 11673.2 | 11563.4 | $10,309 | ||||||||||||||||
| Equity securities: | |||||||||||||||||||
| Nonredeemable preferred stocks (cost: $648.6, $863.5, and $665.4) | 1310.5 | 1255.8 | 815.2 | ||||||||||||||||
| Common equities (cost: $905.1, $284.1, and $598.4) | 1191.4 | 816.2 | 350.4 | ||||||||||||||||
| Short-term investments (amortized cost: $1,389.2, $1,293.8, and $1,078.0) | 1389.2 | 1,078 | 1293.8 | ||||||||||||||||
| Total investments | 15564.3 | 14713.4 | 12768.4 | ||||||||||||||||
| Cash | 155.1 | 160.7 | 134.5 | ||||||||||||||||
| Accrued investment income | 113.6 | 110.4 | 112.9 | ||||||||||||||||
| Premiums receivable, net of allowance for doubtful accounts of $105.3, $105.4, and $116.4 | 2722.9 | 2454.8 | 2516.8 | ||||||||||||||||
| Reinsurance recoverables, including $40.4, $40.7, and $35.4 on paid losses and loss adjustment expenses | 666.2 | 564.8 | 284.5 | ||||||||||||||||
| Prepaid reinsurance premiums | 72.6 | 69.3 | 60.8 | ||||||||||||||||
| Deferred acquisition costs | 428.9 | 402.2 | 427.4 | ||||||||||||||||
| Income taxes | 177.3 | 416.7 | 766 | ||||||||||||||||
| Property and equipment, net of accumulated depreciation of $606.1, $670.4, and $595.8 | 956.3 | 961.3 | 997.5 | ||||||||||||||||
| Other assets | 191.7 | 195.7 | 146.3 | ||||||||||||||||
| Total assets | 21048.9 | 20049.3 | 18215.1 | ||||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||
| Unearned premiums | 4452.6 | 4172.9 | 4290.6 | ||||||||||||||||
| Loss and loss adjustment expense reserves | 6724.5 | 6,653 | 6077.3 | ||||||||||||||||
| Accounts payable, accrued expenses, and other liabilities | 1482.6 | 1297.6 | 1,368 | ||||||||||||||||
| Debt | 2177.7 | [1] | 2177.2 | [1] | 2175.9 | [1] | |||||||||||||
| Total liabilities | 14837.4 | 14300.7 | 13911.8 | ||||||||||||||||
| Common Shares, $1.00 par value (authorized 900.0; issued 797.8, 797.8, and 797.8, including treasury shares of 127.3, 117.1, and 125.2) | 670.5 | 672.6 | 680.7 | ||||||||||||||||
| Paid-in capital | 949.9 | 939.7 | 901.3 | ||||||||||||||||
| Retained earnings | 3942.5 | 3683.1 | 2,925 | ||||||||||||||||
| Accumulated other comprehensive income (loss): | |||||||||||||||||||
| Net unrealized gains (losses) on securities | 640.6 | 456.3 | -227.8 | ||||||||||||||||
| Portion of OTTI losses recognized in other comprehensive income | -14.3 | -26.1 | 0 | ||||||||||||||||
| Total net unrealized gains (losses) on securities | 626.3 | 430.2 | -227.8 | ||||||||||||||||
| Net unrealized gains on forecasted transactions | 20.8 | 21.6 | 24.1 | ||||||||||||||||
| Foreign currency translation adjustment | 1.5 | 1.4 | 0 | ||||||||||||||||
| Total accumulated other comprehensive income (loss) | 648.6 | 453.2 | -203.7 | ||||||||||||||||
| Total shareholders' equity | 6211.5 | 5748.6 | 4303.3 | ||||||||||||||||
| Total liabilities and shareholders' equity | 21048.9 | 20049.3 | 18215.1 | ||||||||||||||||
| [1]Consists of long-term debt. See Note 4 - Debt. | |||||||||||||||||||
| Consolidated Balance Sheets (Parenthetical) (USD $) | |||
| In Millions, except Per Share data | Mar. 31, 2010
| Dec. 31, 2009
| Mar. 31, 2009
|
| Fixed maturities, amortized cost | 11660.4 | $11,717 | 10685.1 |
| Nonredeemable preferred stocks, cost | 648.6 | 665.4 | 863.5 |
| Common equities, cost | 905.1 | 598.4 | 284.1 |
| Short-term investments, amortized cost | 1389.2 | 1,078 | 1293.8 |
| Premiums receivable, allowance for doubtful accounts | 105.3 | 116.4 | 105.4 |
| Reinsurance recoverables, paid losses and loss adjustment expenses | 40.4 | 35.4 | 40.7 |
| Property and equipment, accumulated depreciation | 606.1 | 595.8 | 670.4 |
| Common Shares, par value | $1 | $1 | $1 |
| Common Shares, authorized | 900 | 900 | 900 |
| Common Shares, issued | 797.8 | 797.8 | 797.8 |
| Common Shares, treasury shares | 127.3 | 125.2 | 117.1 |
| Consolidated Statements of Cash Flows (USD $) | |||||||||||||||||||
| In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
| Cash Flows From Operating Activities | |||||||||||||||||||
| Net income | 295.6 | 232.5 | |||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||
| Depreciation | 21.4 | 20.6 | |||||||||||||||||
| Amortization of fixed-income securities | 57 | 59.9 | |||||||||||||||||
| Amortization of stock-based compensation | 10.2 | 9.3 | |||||||||||||||||
| Net realized (gains) losses on securities | -30.8 | 73.4 | |||||||||||||||||
| Net loss on disposition of property and equipment | 0.4 | 0 | |||||||||||||||||
| Changes in: | |||||||||||||||||||
| Premiums receivable | -268.1 | -108.2 | |||||||||||||||||
| Reinsurance recoverables | -101.4 | 4 | |||||||||||||||||
| Prepaid reinsurance premiums | -3.3 | 1.6 | |||||||||||||||||
| Deferred acquisition costs | -26.7 | -13.4 | |||||||||||||||||
| Income taxes | 133.7 | 124.6 | |||||||||||||||||
| Unearned premiums | 279.7 | 114.7 | |||||||||||||||||
| Loss and loss adjustment expense reserves | 71.5 | -100.1 | |||||||||||||||||
| Accounts payable, accrued expenses, and other liabilities | 229.9 | 104.5 | |||||||||||||||||
| Other, net | 0.9 | 18 | |||||||||||||||||
| Net cash provided by operating activities | 670 | 541.4 | |||||||||||||||||
| Purchases: | |||||||||||||||||||
| Fixed maturities | -948.3 | -4383.7 | |||||||||||||||||
| Equity securities | -315.2 | -0.2 | |||||||||||||||||
| Sales: | |||||||||||||||||||
| Fixed maturities | 740.7 | 3898.3 | |||||||||||||||||
| Equity securities | 52.9 | 353.4 | |||||||||||||||||
| Maturities, paydowns, calls, and other: | |||||||||||||||||||
| Fixed maturities | 223.2 | 121.7 | |||||||||||||||||
| Net purchases of short-term investments - other | (311) | -140.3 | |||||||||||||||||
| Net unsettled security transactions | 45.5 | -235.6 | |||||||||||||||||
| Purchases of property and equipment | (17) | -21.2 | |||||||||||||||||
| Sales of property and equipment | 0.2 | 0.2 | |||||||||||||||||
| Net cash used in investing activities | (529) | -407.4 | |||||||||||||||||
| Cash Flows From Financing Activities | |||||||||||||||||||
| Proceeds from exercise of stock options | 4 | 4 | |||||||||||||||||
| Tax benefit from exercise/vesting of stock-based compensation | 0.2 | -1.3 | |||||||||||||||||
| Dividends paid to shareholders | -108.2 | [1] | 0 | [1] | |||||||||||||||
| Acquisition of treasury shares | -42.6 | -5.1 | |||||||||||||||||
| Net cash used in financing activities | -146.6 | -2.4 | |||||||||||||||||
| Effect of exchange rate changes on cash | 0 | 0 | |||||||||||||||||
| Increase (decrease) in cash | -5.6 | 131.6 | |||||||||||||||||
| Cash, January 1 | 160.7 | 2.9 | |||||||||||||||||
| Cash, March 31 | 155.1 | 134.5 | |||||||||||||||||
| [1]Progressive maintains an annual dividend program. See Note 9 - Dividends for further discussion. | |||||||||||||||||||
| Basis of Presentation | |
| 3 Months Ended
Mar. 31, 2010 | |
| Basis of Presentation | Note 1 Basis of Presentation The consolidated financial statements include the accounts of The Progressive Corporation, its subsidiaries, and affiliate. All of the subsidiaries and the mutual company affiliate are wholly owned or controlled. Under the current accounting guidance, which became effective January1, 2010, we are able to demonstrate that we have a controlling financial interest in our affiliate, which requires us to consolidate this entity. Prior to adopting this new guidance, we consolidated our mutual company affiliate based on evidence that we achieved control of this affiliate through a 100% reinsurance contract and a management service contract between a wholly-owned insurance subsidiary and such affiliate. These consolidated financial statements and the notes thereto should be read in conjunction with Progressives audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December31, 2009. The consolidated financial statements reflect all normal recurring adjustments which, in the opinion of management, were necessary for a fair statement of the results for the interim periods presented. The results of operations for the period ended March31, 2010, are not necessarily indicative of the results expected for the full year. |
| Investments | |
| 3 Months Ended
Mar. 31, 2010 | |
| Investments | Note 2 Investments The following table presents the composition of our investment portfolio by major security type consistent with our internal classification of how we manage, monitor, and measure the portfolio: ($ in millions) Cost Gross Unrealized Gains Gross Unrealized Losses Net Realized Gains (Losses)1 Fair Value % of Total Fair Value March31, 2010 Fixed maturities: U.S. government obligations $ 4,566.2 $ 17.2 $ (100.1 ) $ 0 $ 4,483.3 28.8 % State and local government obligations 1,676.4 53.3 (1.4 ) 0 1,728.3 11.1 Corporate debt securities 1,619.2 70.3 (6.7 ) .4 1,683.2 10.8 Residential mortgage-backed securities 579.4 4.8 (60.6 ) 0 523.6 3.4 Commercial mortgage-backed securities 1,686.1 57.9 (12.8 ) 0 1,731.2 11.1 Other asset-backed securities 870.7 9.2 (2.1 ) (.1 ) 877.7 5.6 Redeemable preferred stocks 661.3 25.4 (41.9 ) 0 644.8 4.2 Other debt obligations 1.1 0 0 0 1.1 0 Total fixed maturities 11,660.4 238.1 (225.6 ) .3 11,673.2 75.0 Equity securities: Nonredeemable preferred stocks 648.6 664.8 0 (2.9 ) 1,310.5 8.4 Common equities 905.1 288.9 (2.6 ) 0 1,191.4 7.7 Short-term investments - other 1,389.2 0 0 0 1,389.2 8.9 Total portfolio2,3 $ 14,603.3 $ 1,191.8 $ (228.2 ) $ (2.6 ) $ 15,564.3 100.0 % ($ in millions) Cost Gross Unrealized Gains Gross Unrealized Losses Net Realized Gains (Losses)1 Fair Value % of Total Fair Value March31, 2009 Fixed maturities: U.S. government obligations $ 4,495.6 $ 26.0 $ (21.6 ) $ 0 $ 4,500.0 35.3 % State and local government obligations 2,714.1 68.1 (54.0 ) 0 2,728.2 21.4 Foreign government obligations 16.2 .1 0 0 16.3 .1 Corporate debt securities 650.3 1.8 (52.9 ) 0 599.2 4.7 Residential mortgage-backed securities 730.2 2.0 (156.7 ) 0 575.5 4.5 Commercial mortgage-backed securities 1,562.0 2.1 (171.8 ) 0 1,392.3 10.9 Other asset-backed securities 133.4 1.4 (3.9 ) 0 130.9 1.0 Redeemable preferred stocks 381.2 28.2 (45.8 ) 0 363.6 2.8 Other debt obligations 2.1 .9 0 0 3.0 0 Total fixed maturities 10,685.1 130.6 (506.7 ) 0 10,309.0 80.7 Equity securities: Nonredeemable preferred stocks 8 |
| Fair Value | |
| 3 Months Ended
Mar. 31, 2010 | |
| Fair Value | Note 3 Fair Value We have categorized our financial instruments, based on the degree of subjectivity inherent in the method by which they are valued, into a fair value hierarchy of three levels, as follows: Level 1: Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. government obligations and active exchange-traded equity securities). Level 2: Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i)quoted prices for similar instruments in active markets, (ii)quoted prices for identical or similar instruments in markets that are not active, (iii)inputs other than quoted prices that are observable for the instruments, and (iv)inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3: Inputs that are unobservable. Unobservable inputs reflect our subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments). Pursuant to generally accepted accounting principles, which require us to evaluate whether a market is distressed or inactive in determining the fair value for our portfolio, we review certain market level inputs to evaluate whether sufficient activity, volume, and new issuances existed to create an active market. Based on this evaluation, we concluded that there was sufficient activity related to the sectors and securities for which we obtained valuations. The composition of the investment portfolio by major security type was: Fair Value (millions) Level 1 Level 2 Level 3 Total Cost March31, 2010 Fixed maturities: U.S. government obligations $ 4,483.3 $ 0 $ 0 $ 4,483.3 $ 4,566.2 State and local government obligations 0 1,728.3 0 1,728.3 1,676.4 Corporate and other debt securities 0 1,654.3 30.0 1,684.3 1,620.3 Subtotal 4,483.3 3,382.6 30.0 7,895.9 7,862.9 Asset-backed securities: Residential mortgage-backed 0 450.1 73.5 523.6 579.4 Commercial mortgage-backed 0 1,710.2 21.0 1,731.2 1,686.1 Other asset-backed 0 871.5 6.2 877.7 870.7 Subtotal asset-backed securities 0 3,031.8 100.7 3,132.5 3,136.2 Redeemable preferred stocks: Financials 21.0 248.4 0 269.4 272.2 Utilities 0 69.2 0 69.2 69.6 Industrials 0 306.2 0 306.2 319.5 Subtotal redeemable preferred stocks 21.0 623.8 0 644.8 661.3 Total f |
| Debt | |
| 3 Months Ended
Mar. 31, 2010 | |
| Debt | Note 4 Debt Debt consisted of: March31, 2010 March31, 2009 December31, 2009 Carrying Fair Carrying Fair Carrying Fair (millions) Value Value Value Value Value Value 6.375% Senior Notes due 2012 $ 349.3 $ 378.4 $ 349.0 $ 357.7 $ 349.2 $ 375.1 7% Notes due 2013 149.5 164.8 149.3 154.0 149.5 166.9 6 5/8% Senior Notes due 2029 294.7 318.6 294.6 262.8 294.7 317.9 6.25% Senior Notes due 2032 394.2 409.2 394.0 331.7 394.1 409.4 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 990.0 981.9 989.0 469.5 989.7 884.9 Total $ 2,177.7 $ 2,252.9 $ 2,175.9 $ 1,575.7 $ 2,177.2 $ 2,154.2 On December31, 2009, we entered into an amendment to the 364-Day Secured Liquidity Credit Facility Agreement with PNC Bank, National Association (PNC), successor to National City Bank (NCB), which extended the expiration date of our outstanding credit facility agreement until December31, 2010, unless earlier terminated pursuant to the terms of the agreement. Under this agreement, we may borrow up to $125 million, which may be increased to $150 million at our request but subject to PNCs discretion. The purpose of the credit facility is to provide liquidity in the event of disruptions in our cash management operations, such as disruptions in the financial markets that affect our ability to transfer or receive funds. We may borrow funds, on a revolving basis, either in the form of Eurodollar Loans or Base Rate Loans. Eurodollar Loans will bear interest at one-, two-, three-, or six-month LIBOR (as selected by us), adjusted as provided in the credit facility agreement, plus 50 basis points for the selected period. Base Rate Loans will bear daily interest at the greater of (a)PNCs prime rate for such day, (b)the federal funds effective rate for such day plus 1/2%per annum, or (c)one-month LIBOR, adjusted as provided in the credit facility agreement, plus 2%per annum. Any borrowings under this agreement will be secured by a lien on certain marketable securities held in our investment portfolio. We had no borrowings under this arrangement in 2009 or through the first three months of 2010. |
| Income Taxes | |
| 3 Months Ended
Mar. 31, 2010 | |
| Income Taxes | Note 5 Income Taxes At March31, 2010 and December31, 2009, we determined that we did not need a valuation allowance on our deferred tax asset. Although realization of the deferred tax asset is not assured, management believes it is more likely than not that the gross deferred tax asset will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes. In the first quarter 2009, we recorded a $35.0 million valuation allowance on our deferred tax asset as a result of valuation declines on the common stocks and nonredeemable preferred stocks that we did not have the intent to hold until they substantially recovered in value. At March31, 2009, we did not believe that we had sufficient evidence to support recognizing the full tax benefit related to the decline in value of such securities. Based on the nature of the losses (other-than-temporary impairment (OTTI) vs. unrealized), $27.0 million of the valuation allowance was reflected in our provision for income taxes, while the remaining $8.0 million was a component of net unrealized losses on securities and part of other comprehensive income. The effective tax rate for the quarter ending March31, 2010 was 33%, compared with 38% for the same period last year, primarily reflecting the $27.0 million valuation allowance in the first quarter 2009 discussed above. |
| Supplemental Cash Flow Information | |
| 3 Months Ended
Mar. 31, 2010 | |
| Supplemental Cash Flow Information | Note 6 Supplemental Cash Flow Information Cash includes only bank demand deposits. We paid the following for the three months ended March31: (millions) 2010 2009 Taxes $ 9.0 $ 20.0 Interest 21.1 21.1 |
| Segment Information | |
| 3 Months Ended
Mar. 31, 2010 | |
| Segment Information | Note 7 Segment Information Our Personal Lines segment writes insurance for personal autos and recreational vehicles. Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses in the business auto and truck markets. Our other indemnity businesses primarily include writing professional liability insurance for community banks and managing a small amount of run-off business. Our service businesses provide insurance-related services, including processing CAIP business and serving as an agent for homeowners insurance through our program with three unaffiliated homeowner insurance companies. All revenues are generated from external customers. Following are the operating results for the respective periods: Three Months Ended March31, 2010 2009 (millions) Revenues Pretax Profit (Loss) Revenues Pretax Profit (Loss) Personal Lines Agency $ 1,827.9 $ 196.1 $ 1,817.3 $ 182.8 Direct 1,299.6 70.7 1,171.1 98.7 Total Personal Lines1 3,127.5 266.8 2,988.4 281.5 Commercial Auto 369.2 44.3 412.3 73.8 Other indemnity 4.4 7.0 5.9 .7 Total underwriting operations 3,501.1 318.1 3,406.6 356.0 Service businesses 4.2 (1.0 ) 3.5 (1.1 ) Investments2 160.6 157.0 58.1 55.5 Interest expense 0 (35.2 ) 0 (33.7 ) Consolidated total $ 3,665.9 $ 438.9 $ 3,468.2 $ 376.7 1 Personal auto insurance accounted for 90% of the total Personal Lines segment net premiums earned in both the first quarters of 2010 and 2009; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned. 2 Revenues represent recurring investment income and net realized gains (losses) on securities; pretax profit is net of investment expenses. Progressives management uses underwriting margin and combined ratio as primary measures of underwriting profitability. The underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from insurance operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for our underwriting operations: Three Months Ended March31, 2010 2009 Underwriting Margin Combined Ratio Underwriting Margin Combined Ratio Personal Lines Agency 10.7 % 89.3 % 10.1 % 89.9 % Direct 5.4 94.6 8.4 91.6 Total Personal Lines 8.5 91.5 9.4 90.6 Commercial Auto 12.0 88.0 17.9 82.1 Other indemnity1 NM NM NM NM Total underwriting operations 9.1 90.9 10.5 89.5 1 Underw |
| Comprehensive Income | |
| 3 Months Ended
Mar. 31, 2010 | |
| Comprehensive Income | Note 8 Comprehensive Income Total comprehensive income was: Three Months Ended March31, (millions) 2010 2009 Net income $ 295.6 $ 232.5 After-tax changes in: Net unrealized gains (losses) on securities 184.3 Portion of OTTI losses recognized in other comprehensive income 11.8 Total net unrealized gains (losses) on securities 196.1 (151.0 ) Net unrealized gains on forecasted transactions (.8 ) (.8 ) Foreign currency translation adjustment .1 0 Comprehensive income $ 491.0 $ 80.7 |
| Dividends | |
| 3 Months Ended
Mar. 31, 2010 | |
| Dividends | Note 9 Dividends Progressive maintains a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of the year. This annual variable dividend is based on a target percentage of after-tax underwriting income multiplied by a companywide performance factor (Gainshare factor), subject to the limitations discussed below. The target percentage is determined by our Board of Directors on an annual basis and announced to shareholders and the public. For 2010, the Board has determined the target percentage to be 25% of annual after-tax underwriting income. The Gainshare factor can range from zero to two and is determined by comparing our operating performance for the year to certain predetermined profitability and growth objectives approved by the Board. This Gainshare factor is also used in the variable cash incentive program currently in place for our employees (referred to as our Gainsharing program). Although recalibrated every year, the structure of the Gainsharing program generally remains the same. Through the first quarter 2010, the Gainshare factor was 1.32. Since the final factor will be determined based on our results for the full year, the final factor may vary significantly from the factor at the end of any interim period. Our annual variable dividend program is subject to certain limitations. If the Gainshare factor is zero or if our after-tax comprehensive income (see Note 8 - Comprehensive Income) is less than after-tax underwriting income, no dividend will be paid. While the declaration of the dividend remains within the Boards discretion and is subject to the above limitations, the Board is expected to declare the 2010 annual dividend in December 2010, with a record date in January 2011 and payment shortly thereafter. In February 2010, Progressive paid $.1613 per common share, pursuant to a December 2009 declaration by the Board of Directors under our annual variable dividend policy. No dividend was declared for 2008, since we generated a comprehensive loss for the year. For the three months ended March31, 2010, our after-tax comprehensive income was $491.0 million, which is higher than the $206.8 million of after-tax underwriting income for the same period. |
| Litigation | |
| 3 Months Ended
Mar. 31, 2010 | |
| Litigation | Note 10 Litigation The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies issued by our subsidiaries in the ordinary course of their businesses. All legal actions relating to such insurance claims are considered by us in establishing our loss and loss adjustment expense reserves. In addition, various Progressive entities are named as defendants in various class action or individual lawsuits arising out of the operations of our insurance subsidiaries. These cases include those alleging damages as a result of our use of consumer reports (such as credit reports) in underwriting and related notice requirements under the federal Fair Credit Reporting Act; practices in evaluating or paying medical or injury claims or benefits, including, but not limited to, personal injury protection, medical payments, uninsured motorist/underinsured motorist (UM/UIM) coverage, and bodily injury benefits; rating practices at policy renewal; the utilization, content, or appearance of UM/UIM rejection and other required forms; the practice of taking betterment on boat repairs; labor rates paid to auto body repair shops; and cases challenging other aspects of our claims or marketing practices or other business operations. Other insurance companies face many of these same issues. We plan to contest the outstanding suits vigorously, but may pursue settlement negotiations in some cases, if appropriate. In accordance with accounting principles generally accepted in the United States of America (GAAP), we establish accruals for lawsuits when it is probable that a loss has been incurred and we can reasonably estimate its potential exposure. Pursuant to GAAP, we have not established accruals for those lawsuits where the loss is not probable and/or we are currently unable to estimate our potential exposure. If any one or more of these lawsuits results in a judgment against, or settlement by, our insurance subsidiaries for an amount that is significantly greater than the amount, if any, so accrued, the resulting liability could have a material effect on our financial condition, cash flows, and results of operations. For a further discussion on our pending litigation, see Item 3-Legal Proceedings in our Annual Report on Form 10-K for the year ended December31, 2009. |
