EXHIBIT 99
[PROGRESSIVE LOGO]
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
PROGRESSIVE RELEASES AUGUST RESULTS AND ANNOUNCES DUTCH
AUCTION TENDER OFFER FOR 17.1 MILLION SHARES
MAYFIELD VILLAGE, OHIO -- September 13, 2004 -- The Progressive Corporation
today reported the following results for August 2004:
August August
($ in millions, except per share amounts) 2004 2003 Change
--------- ---------- ------
Net premiums written $ 1,085.7 $ 978.8 11%
Net premiums earned 1,007.4 901.6 12%
Net income 100.3 83.7 20%
Per share .46 .38 21%
Combined ratio 89.2 89.9 .7 pts.
Results for August 2004, include $13.3 million, 1.3 loss ratio points, of
catastrophic losses incurred due to Hurricane Charley. See the Monthly
Commentary at the end of this release for further discussion on the losses due
to Hurricane Charley and Hurricane Frances. See the "Income Statement" for
further month and year-to-date information.
The Progressive Corporation also announced today that it is commencing a
modified "Dutch auction" tender offer to purchase up to 17.1 million of its
outstanding Common Shares, $1.00 par value. Under the terms of the offer, which
expires at 12:00 midnight, New York City time on Friday, October 15, 2004
(unless extended), shareholders of the Company may tender some or all of their
shares at prices not greater than $88.00 nor less than $78.00 per share. At the
close of the tender offer, the Company will determine the lowest per share price
in that range which will result in the purchase of 17.1 million shares or such
lesser number of shares as may be properly tendered. If the offer is
oversubscribed, the Company has the right to purchase up to approximately 4.4
million additional shares without extending the offer, and the Company may
select a higher purchase price within the range for all shares purchased
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pursuant to the tender offer, if necessary, to purchase such additional shares.
All shareholders whose shares are accepted in the offer will receive the
purchase price determined by the Company, even if their shares were tendered at
a lower price.
As of September 10, 2004, the Company had approximately 217.0 million
Common Shares outstanding. The closing price of the Common Shares on the New
York Stock Exchange on September 10, 2004 was $79.25 per share. The 17.1 million
shares proposed to be purchased in the Dutch auction tender offer represent
approximately 7.9% of the Common Shares outstanding as of September 10, 2004.
The Company intends to pay for tendered shares with cash generated by the sale
of securities in the Company's investment portfolios.
After evaluating the Company's financial condition, business prospects and
capital needs, the Board of Directors has determined that the Company currently
has a significant amount of capital on hand in excess of what is needed to
support its insurance operations, fund its corporate obligations and prepare for
various contingencies. In view of this situation and the Company's publicly
stated policy to return capital to shareholders when appropriate, the Board
determined that this tender offer would be a prudent use of the Company's excess
capital and an efficient means to return capital to shareholders who choose to
participate. The tender offer thus represents an opportunity for the Company to
return capital to shareholders who elect to tender their shares, while at the
same time increasing nontendering shareholders' proportionate interests in
Progressive.
The Company believes that after completing the tender offer, its remaining
capital on hand and cash flows from operations will be sufficient to support the
Company's insurance operations, corporate obligations and risk contingencies,
including the catastrophic, weather-related losses discussed above.
The Company has been advised by its directors and executive officers that
they will not tender any shares in the tender offer, other than Peter B. Lewis,
the Chairman of the Board of Directors, who has advised the Company that he
intends to tender 1.1 million shares. Mr. Lewis will not tender his shares at a
specified price, but will accept the price determined by the Company pursuant to
the Dutch auction tender offer process. Mr. Lewis has also notified the Company
that he has terminated his Rule 10b5-1 trading plans under which an aggregate of
2,392,000 shares could be sold over a two-year period ending July 2006. Prior to
termination and as previously disclosed, 446,300 shares had been sold under the
plans. Mr. Lewis currently owns beneficially 8.4% of the Company's common shares
outstanding. In the event that the Company purchases all 1.1 million shares
tendered by Mr. Lewis and the Company purchases a total of 17.1 million shares
in the tender offer, Mr. Lewis will own beneficially approximately 17.2 million
of the Company's common shares, or approximately 8.6% of the shares outstanding,
after completion of the tender offer.
Details of the offer will be mailed to the Company's shareholders
within the next few days. This announcement is neither an offer to purchase nor
a solicitation of an offer to sell shares.
THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE TO BE DATED SEPTEMBER
14, 2004, AND THE RELATED LETTER OF TRANSMITTAL AND ANY RELATED AMENDMENTS OR
SUPPLEMENTS THERETO, WHICH CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER AND THE
COMPANY THAT SHOULD BE READ BEFORE TENDERS ARE MADE. SHAREHOLDERS WILL BE ABLE
TO OBTAIN THE OFFER TO PURCHASE, THE LETTER OF TRANSMITTAL AND RELATED MATERIALS
FOR FREE: (1) AT THE SEC'S WEB SITE AT WWW.SEC.GOV; (2) FROM THE INFORMATION
AGENT FOR THE TENDER OFFER, MORROW & CO., INC., BY CALLING (800) 607-0088; OR
(3) DIRECTLY FROM THE COMPANY BY MAIL AT THE PROGRESSIVE CORPORATION, INVESTOR
RELATIONS, 6300 WILSON MILLS ROAD, BOX W33, MAYFIELD VILLAGE, OHIO 44143; BY
E-MAIL AT INVESTOR_RELATIONS@PROGRESSIVE.COM; OR BY TELEPHONE AT (440) 395-2258.
Additional information concerning the tender offer can also be obtained
from the information agent at the number set forth above, or from J.P. Morgan
Securities Inc., which is serving as the dealer manager for the offer, by
calling (800) 262-0777.
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None of the Company, the information agent or the dealer manager is making
any recommendation to shareholders as to whether to tender or refrain from
tendering their shares into the tender offer or as to the purchase price or
prices at which a shareholder may choose to tender its shares. Shareholders must
decide how many shares they will tender, if any, and the price within the stated
range at which they will offer their shares for purchase by the Company.
The Company's Board of Directors also confirmed that the tender offer will
not reduce the number of shares available for repurchase, in the open market or
otherwise, pursuant to the resolution approved by the Board in April 2003. The
Board reaffirmed that the Company has the authority to repurchase the remaining
10,188,101 shares authorized in April 2003 and that the Company may continue to
repurchase shares under this authority after the completion of the tender offer,
subject to applicable laws.
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
AUGUST 2004
(millions - except per share amounts)
(unaudited)
Current
Month Comments on Monthly Results(1)
-------- ------------------------------
Direct premiums written $1,107.8
========
Net premiums written $1,085.7
========
Revenues:
Net premiums earned $1,007.4
Investment income 40.6
Net realized gains on securities 4.4
Service revenues 3.8
--------
Total revenues 1,056.2
--------
Expenses:
Losses and loss adjustment expenses 687.9 Includes $13.3 million, 1.3 loss ratio points, of catastrophic
losses related to Hurricane Charley.
Policy acquisition costs 109.0
Other underwriting expenses 101.4
Investment expenses .3
Service expenses 2.1
Interest expense 6.7
--------
Total expenses 907.4
--------
Income before income taxes 148.8
Provision for income taxes 48.5
--------
Net income $ 100.3
========
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding 216.0
========
Per share $ .46
========
Diluted:
Average shares outstanding 216.0
Net effect of dilutive stock-based
compensation 2.9
--------
Total equivalent shares 218.9
========
Per share $ .46
========
- ----------
(1) See the Monthly Commentary at the end of this release for additional
discussion. Also see the Company's 2003 Annual Report at
progressive.com/annualreport for a complete description of its 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 1.4%
Common stocks .6%
Total portfolio 1.3%
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
INCOME STATEMENTS
AUGUST 2004 YEAR-TO-DATE
(millions - except per share amounts)
(unaudited)
Year-to-Date
------------
%
2004 2003 Change
-------- -------- ------
Direct premiums written $9,249.6 $8,277.7 12
======== ========
Net premiums written $9,023.4 $8,093.0 11
======== ========
Revenues:
Net premiums earned $8,592.0 $7,384.8 16
Investment income 320.2 302.4 6
Net realized gains on securities 59.9 18.9 217
Service revenues 33.0 26.7 24
Other income(1) -- 30.6 NM
-------- --------
Total revenues 9,005.1 7,763.4 16
-------- --------
Expenses:
Losses and loss adjustment expenses 5,536.7 5,019.1 10
Policy acquisition costs 926.1 814.9 14
Other underwriting expenses 808.9 646.3 25
Investment expenses 8.0 7.4 8
Service expenses 16.5 17.1 (4)
Interest expense 53.6 63.8 (16)
-------- --------
Total expenses 7,349.8 6,568.6 12
-------- --------
Income before income taxes 1,655.3 1,194.8 39
Provision for income taxes 540.6 391.4 38
-------- --------
Net income $1,114.7 $ 803.4 39
======== ========
COMPUTATION OF EARNINGS PER SHARE
Basic:
Average shares outstanding 216.3 217.6 (1)
======== ========
Per share $ 5.15 $ 3.69 40
======== ========
Diluted:
Average shares outstanding 216.3 217.6 (1)
Net effect of dilutive stock-based
compensation 3.4 3.7 (8)
-------- --------
Total equivalent shares 219.7 221.3 (1)
======== ========
Per share $ 5.07 $ 3.63 40
======== ========
- ----------
NM= Not Meaningful
(1) Amount represents estimated interest earned through August 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 3.0% 2.4%
Common stocks .0% 16.0%
Total portfolio 2.7% 4.3%
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
AUGUST 2004
($ in millions)
(unaudited)
CURRENT MONTH
- -----------------------------------------------------------------------------------------------------------------------
PERSONAL LINES COMMERCIAL
--------------------------------- AUTO OTHER COMPANYWIDE
AGENCY DIRECT TOTAL BUSINESS BUSINESSES(2) TOTAL
-------- -------- -------- -------- ------------- -----------
Net Premiums Written $ 644.4 $ 316.1 $ 960.5 $ 123.0 $ 2.2 $1,085.7
% Growth in NPW 7% 15% 10% 18% NM 11%
Net Premiums Earned $ 602.1 $ 284.7 $ 886.8 $ 118.1 $ 2.5 $1,007.4
% Growth in NPE 9% 16% 11% 20% (60)% 12%
GAAP Ratios
Loss/LAE ratio 69.2 68.2 68.9 64.9 22.4 68.3
Expense ratio 20.8 20.5 20.7 20.0 117.1 20.9
-------- -------- -------- -------- -------- --------
Combined ratio 90.0 88.7 89.6 84.9 139.5 89.2
======== ======== ======== ======== ======== ========
Actuarial Adjustments(1)
Reserve Decrease/(Increase)
Prior accident years $ .8
Current accident year (2.6)
--------
Calendar year actuarial adjustment $ .4 $ .1 $ .5 $ (2.8) $ .5 $ (1.8)
========
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment $ .8
All other development 15.4
--------
Total development $ 16.2
========
Calendar year loss/LAE ratio 68.3
========
Accident year loss/LAE ratio 69.9
========
Statutory Ratios
Loss/LAE ratio 68.4
Expense ratio 19.4
--------
Combined ratio 87.8
========
NM = Not Meaningful
(1) Represents adjustments solely based on the Company's corporate actuarial
review.
(2) In August 2004, the Company established a $1.8 million premium deficiency
reserve (i.e. expected losses in excess of unearned premium balance)
related to a portion of its other businesses.
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THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
AUGUST 2004 YEAR-TO-DATE
($ in millions)
(unaudited)
YEAR-TO-DATE
- ----------------------------------------------------------------------------------------------------------------
PERSONAL LINES COMMERCIAL
--------------------------------- AUTO OTHER COMPANYWIDE
AGENCY DIRECT TOTAL BUSINESS BUSINESSES TOTAL
--------- -------- -------- ---------- ---------- -----------
Net Premiums Written $5,377.8 $2,552.5 $7,930.3 $1,075.8 $ 17.3 $9,023.4
% Growth in NPW 9% 16% 11% 17% (61)% 11%
Net Premiums Earned $5,172.3 $2,414.6 $7,586.9 $ 981.6 $ 23.5 $8,592.0
% Growth in NPE 14% 20% 16% 25% (53)% 16%
GAAP Ratios
Loss/LAE ratio 65.4 64.3 65.1 59.5 62.4 64.4
Expense ratio 20.1 20.6 20.2 19.1 47.9 20.2
-------- -------- -------- -------- -------- --------
Combined ratio 85.5 84.9 85.3 78.6 110.3 84.6
======== ======== ======== ======== ======== ========
Actuarial Adjustments(1)
Reserve Decrease/(Increase)
Prior accident years $ 29.0
Current accident year (19.8)
--------
Calendar year actuarial adjustment $ 6.1 $ 2.5 $ 8.6 $ .7 $ (.1) $ 9.2
========
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment $ 29.0
All other development 30.6
--------
Total development $ 59.6
========
Calendar year loss/LAE ratio 64.4
========
Accident year loss/LAE ratio 65.1
========
Statutory Ratios
Loss/LAE ratio 64.5
Expense ratio 19.4
--------
Combined ratio 83.9
========
Statutory surplus $5,591.3
========
August August
2004 2003 Change
----- ----- -----
Policies in Force
(in thousands)
Agency - Auto 4,216 3,859 9%
Direct - Auto 2,029 1,770 15%
Other Personal Lines(2) 2,332 1,968 19%
----- -----
Total Personal Lines 8,577 7,597 13%
===== =====
Commercial Auto Business 413 349 18%
===== =====
(1) Represents adjustments solely based on the Company's corporate actuarial
review.
(2) Includes insurance for motorcycles, recreation vehicles, mobile homes,
watercraft, snowmobiles, homeowners and similar items.
-7-
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions - except per share amounts)
(unaudited)
AUGUST
2004
----
CONDENSED GAAP BALANCE SHEET:(1)
Investments -
Available-for-sale:
Fixed maturities, at market (amortized cost: $10,162.0) $10,346.6
Equity securities, at market:
Preferred stocks (cost: $825.2) 840.4
Common equities (cost: $1,606.7) 1,962.7
Short-term investments, at amortized cost (market: $1,403.0) 1,403.0
---------
Total investments(2) 14,552.7
Net premiums receivable 2,392.5
Deferred acquisition costs 461.8
Other assets 1,288.6
---------
Total assets $18,695.6
=========
Unearned premiums $ 4,340.3
Loss and loss adjustment expense reserves 5,076.3
Other liabilities(2) 1,968.2
Debt 1,290.1
Shareholders' equity 6,020.7
---------
Total liabilities and shareholders' equity $18,695.6
=========
Common Shares outstanding 216.9
Shares repurchased - August .2
Average cost per share $ 76.61
Book value per share $ 27.76
Return on average shareholders' equity 28.7%
Net unrealized pre-tax gains on investments $ 555.8
Debt to total capital ratio 17.6%
- --------------------------
(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 $253.6 million.
(2) Amounts include net unsettled security acquisitions, including repurchase
commitments, of $314.7 million.
MONTHLY COMMENTARY
- - In the Company's Personal Lines businesses, nine 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%.
- - The Company continued to experience strong profitability. Seven markets in
which the Company writes Personal Lines business were unprofitable for the
month; for the year-to-date period, all Personal Lines markets were
profitable.
- - To date, the Company incurred approximately 6,600 claims, at an average
cost per claim of approximately $2,000, as a result of Hurricane Charley.
As of September 12, 2004, over 90% of the reported claims have been paid.
- - As of September 12, 2004, the Company has incurred approximately 3,100
claims as a result of Hurricane Frances. The average incurred amount on
claims from Hurricane Frances thus far have been about $2,400. Based on
the number and cost of claims received to date from Hurricane Frances, the
Company has no reason to believe that the total cost of losses from
Hurricane Frances will vary significantly from the total cost of those
incurred due to Hurricane Charley, although Hurricane Frances affected a
larger geographic area.
- - The pretax recurring book yield of the investment portfolio was 3.6% for
the month and 3.8% year-to-date.
- - At August month-end, the net unrealized gains in the investment portfolio
were $555.8 million, a decrease of $87.6 million from year-end 2003. In
the fixed-income portfolio, the duration was 3.0 years and the weighted
average credit quality changed to AA+.
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 agencies and insurance brokers. 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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