1
Exhibit No. 99
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Consolidated Balance Sheets as of December 31, 1998 and 1997,
and the Consolidated Statements of Income
for each of the three years in the period ended December 31, 1998
2
The Progressive Corporation and Subsidiaries
Consolidated Balance Sheets
(millions)
December 31, 1998 1997
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ASSETS
Investments:
Available-for-sale:
Fixed maturities, at market (amortized cost: $4,171.6
and $3,836.8) $4,219.0 $3,891.4
Equity securities, at market:
Preferred stocks (cost: $374.3 and $333.9) 376.5 348.8
Common stocks (cost: $512.2 and $501.9) 636.9 620.8
Short-term investments, at amortized cost (market:
$441.9 and $409.4) 441.9 409.4
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Total investments 5,674.3 5,270.4
Cash 18.6 23.3
Accrued investment income 53.1 44.3
Premiums receivable, net of allowance for doubtful
accounts of $34.0 and $32.4 1,456.2 1,160.8
Reinsurance recoverables 281.0 317.5
Prepaid reinsurance premiums 77.7 79.8
Deferred acquisition costs 299.1 259.6
Income taxes 192.9 116.5
Property and equipment, net of accumulated
depreciation of $194.1 and $158.3 376.2 260.4
Other assets 34.0 27.0
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Total assets $8,463.1 $7,559.6
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LIABILITIES AND SHAREHOLDERS' EQUITY
Unearned premiums $2,329.7 $1,980.1
Loss and loss adjustment expense reserves 2,188.6 2,146.6
Policy cancellation reserve 29.1 34.7
Accounts payable and accrued expenses 582.0 486.4
Debt (Note 1) 776.6 775.9
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Total liabilities 5,906.0 5,423.7
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Shareholders' equity:
Common Shares, $1.00 par value (authorized 300.0,
issued 83.1, including treasury shares of
10.6 and 10.8) 72.5 72.3
Paid-in capital 448.3 412.8
Accumulated other comprehensive income:
Net unrealized appreciation on investment securities 113.3 122.3
Other (9.6) (6.3)
Retained earnings 1,932.6 1,534.8
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Total shareholders' equity 2,557.1 2,135.9
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Total liabilities and shareholders' equity $8,463.1 $7,559.6
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3
The Progressive Corporation and Subsidiaries
Consolidated Statements of Income
(millions - except per share amounts)
For the years ended December 31, 1998 1997 1996
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NET PREMIUMS WRITTEN $5,299.7 $4,665.1 $3,441.7
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REVENUES
Premiums earned $4,948.0 $4,189.5 $3,199.3
Investment income 294.8 274.9 225.8
Net realized gains on security sales 11.4 98.5 7.1
Service revenues 38.2 45.3 46.2
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Total revenues 5,292.4 4,608.2 3,478.4
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EXPENSES
Losses and loss adjustment expenses 3,376.3 2,967.5 2,236.1
Policy acquisition costs 659.9 607.8 482.6
Other underwriting expenses 495.8 336.0 208.5
Investment expenses 7.4 9.9 6.1
Service expenses 30.8 43.9 41.9
Interest expense 61.1 64.6 61.5
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Total expenses 4,631.3 4,029.7 3,036.7
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NET INCOME
Income before income taxes 661.1 578.5 441.7
Provision for income taxes 204.4 178.5 128.0
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Net income $ 456.7 $ 400.0 $ 313.7
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COMPUTATION OF EARNINGS PER SHARE
Net income $ 456.7 $ 400.0 $ 313.7
Less: Preferred Stock dividends -- -- (3.5)
Excess Preferred Stock liquidation
price over cost basis -- -- (2.9)
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Income available to common shareholders $ 456.7 $ 400.0 $ 307.3
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Basic:
Average shares outstanding 72.5 72.0 71.6
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Per share $ 6.30 $ 5.56 $ 4.29
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Diluted:
Average shares outstanding 72.5 72.0 71.6
Net effect of dilutive stock options 2.2 3.3 2.6
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Total equivalent shares 74.7 75.3 74.2
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Per share $ 6.11 $ 5.31 $ 4.14
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
During 1998, there were no bank borrowings outstanding. Debt includes amounts
the Company has borrowed and contributed to the capital of its insurance
subsidiaries or borrowed for other long-term purposes.
Debt at December 31 consisted of:
(millions)
1998 1997
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Market Market
Cost Value Cost Value
7.30% Notes, due 2006 (issued: $100.0, May 1996) $ 99.7 $109.5 $ 99.7 $105.3
6.60% Notes, due 2004 (issued: $200.0, January 1994) 199.1 199.4 198.9 200.7
7% Notes, due 2013 (issued: $150.0, October 1993) 148.4 157.2 148.4 154.4
8 3/4% Notes, due 1999 (issued: $30.0, May 1989) 29.9 30.4 29.7 30.9
10% Notes, due 2000 (issued: $150.0, December 1988) 149.8 162.7 149.6 164.6
10 1/8% Subordinated Notes, due 2000 (issued: $150.0, December 149.7 162.4 149.6 164.6
1988)
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$776.6 $821.6 $775.9 $820.5
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All debt is noncallable with interest payable semiannually.
In May 1990, the Company entered into a revolving credit arrangement with
National City Bank, which is reviewed by the bank annually. Under this
agreement, the Company has the right to borrow up to $10.0 million. By selecting
from available credit options, the Company may elect to pay interest at rates
related to the London interbank offered rate, the bank's base rate or at a money
market rate. A commitment fee is payable on any unused portion of the committed
amount at the rate of .125 percent per annum. The Company had no borrowings
under this arrangement at December 31, 1998 or 1997.
In addition, the Company may issue from time to time, in one or more
transactions, up to $300 million of its debt securities under an outstanding
shelf registration which became effective in 1998.
Aggregate principal payments on debt outstanding at December 31, 1998, are $30.0
million for 1999, $300.0 million for 2000, $0 for 2001, 2002 and 2003, and
$450.0 million thereafter.