Exhibit 99
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News Release dated July 16, 2003,
containing financial results
of The Progressive Corporation
PROGRESSIVE
NEWS
RELEASE
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The Progressive Corporation COMPANY CONTACT:
6300 Wilson Mills Road Thomas A. King
Mayfield Village, Ohio 44143 (440) 395-2260
http://www.progressive.com
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The Company will hold a one-hour conference call on Thursday, July 17, 2003,
beginning at 11:00 a.m. eastern time. At that time, the Company will discuss
results and address questions. Visit the Company's Web site at
http://www.progressive.com/investors/events.asp to register and receive the
details for the teleconference or webcast. An instant replay of the conference
call will be available until August 1, 2003 by calling 1-800-839-4844
or until July 18, 2004 on our Web site at
http://www.progressive.com/investors/archive.asp.
FOR IMMEDIATE RELEASE
MAYFIELD VILLAGE, OHIO --July 16, 2003-- The Progressive Corporation today
reported second quarter 2003 net income of $286.3 million, or $1.29 per share,
compared to $160.4 million, or $.71 per share, in the second quarter last year.
Included in net income are net realized gains on securities of $23.1 million, or
$.07 per share, for the second quarter 2003 and net realized losses on
securities of $3.0 million, or $.01 per share, for the same period last year.
Net premiums written and earned increased 27% and 30% to $3,022.8 million and
$2,774.9 million, respectively, as compared to the second quarter last year. The
Company produced a GAAP combined ratio of 88.8, compared to 93.4 in the same
period last year. During the second quarter 2003, the Company had catastrophe
losses of $34.1 million, $.10 per share or 1.2 points, compared to $12.0
million, $.03 per share or .6 points, in the same period last year. Recurring
investment income was $112.5 million before taxes and $83.6 million after taxes,
compared to $117.0 million before taxes and $82.6 million after taxes for the
second quarter 2002. See the "Operations Summary" for further information.
During the second quarter 2003, in light of recent views expressed by
the Securities and Exchange Commission over the use of non-GAAP financial
measures, the Company elected to discontinue disclosing operating income
(defined by the Company as net income excluding net realized gains and losses on
securities and nonrecurring items; the Company had no nonrecurring items during
2003 or 2002).
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 lenders' collateral protection and
directors' and officers' liability insurance and providing insurance-related
services, primarily processing business for Commercial Auto Insurance Procedures
(CAIP), which are state supervised plans serving the involuntary market. See
"Supplemental Information" for second quarter 2003 underwriting results.
During the second quarter 2003, the Company repurchased 1,342,000 of
its Common Shares at an average cost of $69.62 per share.
The Progressive group of insurance companies ranks third in the nation
for auto insurance based on premiums written, offering its products by phone at
1-800-PROGRESSIVE, online at progressive.com and through more than 30,000
independent insurance agencies. The Progressive Corporation, the holding
company, is publicly traded at NYSE:PGR.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: STATEMENTS IN THIS RELEASE AND DURING THE COMPANY'S CONFERENCE CALL 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 EFFECTIVENESS OF THE
COMPANY'S ADVERTISING CAMPAIGNS; THE ACCURACY AND ADEQUACY OF THE COMPANY'S
PRICING METHODOLOGIES; PRICING COMPETITION AND OTHER INITIATIVES BY COMPETITORS;
ABILITY TO OBTAIN REGULATORY APPROVAL FOR REQUESTED RATE CHANGES AND THE TIMING
THEREOF; LEGISLATIVE AND REGULATORY DEVELOPMENTS; THE OUTCOME OF LITIGATION
PENDING 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; 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 MAY THEREFORE
APPEAR TO BE VOLATILE IN CERTAIN ACCOUNTING PERIODS.
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
OPERATIONS SUMMARY
June 30, 2003
(millions - except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------- ----------------------------------------
% %
2003 2002 Change 2003 2002 Change
----------- ------------ ---------- ----------- ------------ ---------
Direct premiums written $3,101.3 $2,433.6 27 $6,040.9 $4,671.4 29
=========== ============ =========== ============
Net premiums written $3,022.8 $2,375.4 27 $5,902.1 $4,562.2 29
=========== ============ =========== ============
Revenues:
Premiums earned $2,774.9 $2,136.0 30 $5,373.2 $4,103.5 31
Recurring investment income(1) 112.5 117.0 (4) 228.5 225.1 2
Net realized gains (losses) on securities 23.1 (3.0) NM 20.0 (17.8) NM
Service revenues 10.5 8.8 19 19.3 16.6 16
----------- ------------ ----------- ------------
Total revenues 2,921.0 2,258.8 29 5,641.0 4,327.4 30
----------- ------------ ----------- ------------
Expenses:
Losses and loss adjustment expenses 1,920.3 1,519.3 26 3,653.8 2,876.7 27
Policy acquisition costs 306.6 252.1 22 594.3 486.1 22
Other underwriting expenses 236.5 224.7 5 468.7 414.4 13
Investment expenses 2.3 2.3 -- 5.6 5.3 6
Service expenses 6.8 5.4 26 12.7 10.5 21
Interest expense 23.7 18.1 31 47.8 36.2 32
----------- ------------ ----------- ------------
Total expenses 2,496.2 2,021.9 23 4,782.9 3,829.2 25
----------- ------------ ----------- ------------
Income before income taxes 424.8 236.9 79 858.1 498.2 72
Provision for income taxes 138.5 76.5 81 280.3 161.6 73
----------- ------------ ----------- ------------
Net income $286.3 $160.4 78 $577.8 $336.6 72
=========== ============ =========== ============
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding 217.6 219.8 (1) 217.8 220.1 (1)
=========== ============ =========== ============
Per share $1.32 $.73 81 $2.65 $1.53 73
=========== ============ =========== ============
Diluted:
Average shares outstanding 217.6 219.8 (1) 217.8 220.1 (1)
Net effect of dilutive stock options 3.9 4.6 (15) 3.7 4.5 (18)
----------- ------------ ----------- ------------
Total equivalent shares 221.5 224.4 (1) 221.5 224.6 (1)
=========== ============ =========== ============
Per share(2) $1.29 $.71 82 $2.61 $1.50 74
=========== ============ =========== ============
NM = Not Meaningful
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(1)The following table sets forth the investment yields for the periods ended
June 30:
Three Months Six Months
------------------------------ -----------------------------
2003 2002 2003 2002
-------------- --------------- --------------- -------------
Pretax recurring investment book yield 4.2% 5.4% 4.4% 5.3%
Weighted average fully taxable equivalent (FTE) book yield 4.8% 5.9% 5.0% 5.8%
FTE total return:
Fixed income securities 2.6% 3.7% 4.1% 4.2%
Common stocks 15.1% (13.4)% 11.6% (12.7)%
Total portfolio 4.3% 1.3% 5.2% 1.8%
Note: The Company is reporting total return yields to more accurately reflect
the management of the portfolio and evaluation of the investment results. The
FTE total return includes recurring investment income, net realized gains
(losses) on securities and changes in unrealized appreciation/depreciation on
investment securities.
(2)If the Company recorded compensation cost based on the fair-value based
accounting method under Statement of Financial Accounting Standards (SFAS)123,
"Accounting for Stock-Based Compensation," diluted earnings per share would have
been reduced $.03 for the six months ended June 30, 2003, compared to $.03 per
share last year.
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
June 30, 2003
(millions)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2003 2002 Change 2003 2002 Change
---------- ------------ ----------- ----------- ----------- ---------
NET PREMIUMS WRITTEN
Personal Lines - Agent $1,834.8 $1,473.3 25% $3,586.2 $2,813.5 27%
Personal Lines - Direct 799.4 614.5 30% 1,594.7 1,199.6 33%
---------- ------------ ----------- -----------
Total Personal Lines 2,634.2 2,087.8 26% 5,180.9 4,013.1 29%
Commercial Auto Business 369.8 261.5 41% 684.0 492.7 39%
Other businesses 18.8 26.1 (28)% 37.2 56.4 (34)%
---------- ------------ ----------- -----------
Companywide $3,022.8 $2,375.4 27% $5,902.1 $4,562.2 29%
========== ============ =========== ===========
NET PREMIUMS EARNED
Personal Lines - Agent $1,705.1 $1,336.2 28% $3,305.6 $2,577.7 28%
Personal Lines - Direct 755.7 565.2 34% 1,462.8 1,082.2 35%
---------- ------------ ----------- -----------
Total Personal Lines 2,460.8 1,901.4 29% 4,768.4 3,659.9 30%
Commercial Auto Business 295.6 208.4 42% 568.3 387.0 47%
Other businesses 18.5 26.2 (29)% 36.5 56.6 (36)%
---------- ------------ ----------- -----------
Companywide $2,774.9 $2,136.0 30% $5,373.2 $4,103.5 31%
========== ============ =========== ===========
PERSONAL LINES - AGENT CR
Loss and loss adjustment expense 70.5 72.5 2.0 pts. 68.9 71.5 2.6 pts.
ratio
Underwriting expense ratio 19.0 21.9 2.9 pts. 19.3 21.2 1.9 pts.
---------- ------------ ----------- -----------
89.5 94.4 4.9 pts. 88.2 92.7 4.5 pts.
========== ============ =========== ===========
PERSONAL LINES - DIRECT CR
Loss and loss adjustment expense 69.6 67.9 (1.7) pts. 68.1 67.6 (.5) pts.
ratio
Underwriting expense ratio 20.1 23.3 3.2 pts. 20.1 23.3 3.2 pts.
---------- ------------ ----------- -----------
89.7 91.2 1.5 pts. 88.2 90.9 2.7 pts.
========== ============ =========== ===========
PERSONAL LINES - TOTAL CR
Loss and loss adjustment expense 70.2 71.1 .9 pts. 68.6 70.3 1.7 pts.
ratio
Underwriting expense ratio 19.4 22.4 3.0 pts. 19.6 21.9 2.3 pts.
---------- ------------ ----------- -----------
89.6 93.5 3.9 pts. 88.2 92.2 4.0 pts.
========== ============ =========== ===========
COMMERCIAL AUTO BUSINESS - CR
Loss and loss adjustment expense 62.3 72.4 10.1 pts. 63.5 69.7 6.2 pts.
ratio
Underwriting expense ratio 20.3 20.5 .2 pts. 19.8 20.7 .9 pts.
---------- ------------ ----------- -----------
82.6 92.9 10.3 pts. 83.3 90.4 7.1 pts.
========== ============ ========== ===========
OTHER BUSINESSES - CR
Loss and loss adjustment expense 45.0 62.1 17.1 pts. 56.0 58.8 2.8 pts.
ratio
Underwriting expense ratio 39.0 34.9 (4.1) pts. 42.2 36.0 (6.2)pts.
---------- ------------ ----------- -----------
84.0 97.0 13.0 pts. 98.2 94.8 (3.4)pts.
========== ============ =========== ===========
COMPANYWIDE GAAP CR
Loss and loss adjustment expense 69.2 71.1 1.9 pts. 68.0 70.1 2.1 pts.
ratio
Underwriting expense ratio 19.6 22.3 2.7 pts. 19.8 21.9 2.1 pts.
---------- ------------ ----------- -----------
88.8 93.4 4.6 pts. 87.8 92.0 4.2 pts.
========== ============ =========== ===========
COMPANYWIDE STATUTORY CR
Loss and loss adjustment expense 69.3 71.0 1.7 pts. 68.1 70.1 2.0 pts.
ratio
Underwriting expense ratio 18.7 20.8 2.1 pts. 18.7 20.5 1.8 pts.
---------- ------------ ----------- -----------
88.0 91.8 3.8 pts. 86.8 90.6 3.8 pts.
========== ============ =========== ===========
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
ADDITIONAL SUPPLEMENTAL INFORMATION
(millions)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------- -----------------------------------------
2003 2002 Change 2003 2002 Change
---------- ------------ ----------- ----------- ----------- ----------
COMPANYWIDE CALENDAR YEAR
Loss and loss adjustment expense 69.2 71.1 1.9 pts. 68.0 70.1 2.1 pts.
ratio
========== ============ =========== ===========
COMPANYWIDE ACCIDENT YEAR
Loss and loss adjustment expense 69.6 70.7 1.1 pts. 67.5 70.0 2.5 pts.
ratio
========== ============ =========== ===========
ACTUARIAL ADJUSTMENTS -
Reserve Decrease/(Increase)
Prior accident years $(9.0) $(2.6) $(3.8) $11.3
20.0
Current accident year (10.7) 19.8 (11.5)
---------- ------------ ----------- -----------
Calendar year actuarial adjustment $(19.7) $17.2 NM $(15.3) $31.3 NM
========== ============ =========== ===========
PRIOR ACCIDENT YEARS DEVELOPMENT -
Favorable/(Unfavorable)
Actuarial adjustment $(9.0) $(2.6) $(3.8) $11.3
All other development 21.4 (6.1) (22.8) (16.9)
---------- ------------ ----------- -----------
Total development $12.4 $(8.7) NM $(26.6) $(5.6) 375%
========== ============ =========== ===========
June 30,
----------------------------
POLICIES IN FORCE (in thousands) 2003 2002 Change
------------ ----------- -----------
Agent - Auto 3,797 3,108 22%
Direct - Auto 1,732 1,386 25%
Other Personal Lines (1) 1,884 1,566 20%
------------ -----------
Total Personal Lines 7,413 6,060 22%
============ ===========
Commercial Auto Business 336 259 30%
============ ===========
NM = Not Meaningful
(1) Includes insurance for motorcycles, recreation vehicles, mobile homes,
watercraft, snowmobiles, homeowners and similar items.
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions- except per share amounts)
JUNE 30,
-------------------------------
2003 2002
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CONDENSED GAAP BALANCE SHEETS:(1)
Investments -
Available-for-sale:
Fixed maturities, at market (amortized cost: $7,760.8 and $6,662.7) $8,108.7 $6,820.7
Equity securities, at market
Preferred stocks (cost: $773.7 and $682.4) 813.4 714.5
Common equities (cost: $1,591.3 and $1,412.8) 1,719.4 1,325.5
Short-term investments, at amortized cost (market: $1,123.6 and $449.3) 1,123.6 449.3
------------ ---------------
Total investments(2) 11,765.1 9,310.0
Net premiums receivable 2,045.0 1,734.0
Deferred acquisition costs 418.7 364.8
Other assets 1,072.5 1,088.4
------------ ---------------
Total assets $15,301.3 $12,497.2
============ ===============
Unearned premiums $3,853.1 $3,194.0
Loss and loss adjustment expense reserves 4,152.1 3,436.6
Other liabilities(2) 1,426.1 1,391.1
Debt 1,489.4 1,096.0
Shareholders' equity 4,380.6 3,379.5
------------ ---------------
Total liabilities and shareholders' equity $15,301.3 $12,497.2
============ ===============
Common Shares outstanding 217.4 218.3
Book value per share $20.15 $15.48
Return on average shareholders' equity 26.3% 19.8%
Statutory surplus $4,069.1 $2,837.4
(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 $205.8
million at June 30, 2003 and $167.9 million at June 30, 2002.
(2) Amounts include net unsettled security acquisitions of $258.2 million and
$378.5 million at June 30, 2003 and 2002, respectively.