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Form 8-K PROGRESSIVE CORP/OH/ For: Mar 18

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March 18, 2015 8:54 AM EDT

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 8-K

CURRENT REPORT

 
 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 18, 2015

 
 

THE PROGRESSIVE CORPORATION
(Exact name of registrant as specified in its charter)

 
Ohio
1-9518
34-0963169
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer
Identification No.)
 
 
 
6300 Wilson Mills Road, Mayfield Village, Ohio
 
44143
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code (440) 461-5000

Not Applicable
(Former name or former address, if changed since last report)

 
 
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 




- 1 -


Item 7.01 Regulation FD Disclosure.

On March 18, 2015, The Progressive Corporation issued a news release containing financial results for the Company and its consolidated subsidiaries for the month of, and year-to-date period ended, February 2015. A copy of the news release is attached hereto as Exhibit 99.


Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

See exhibit index on page 4.

- 2 -


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: March 18, 2015
THE PROGRESSIVE CORPORATION



By: /s/ Jeffrey W. Basch
Name: Jeffrey W. Basch
Title: Vice President and
Chief Accounting Officer

- 3 -


EXHIBIT INDEX



Exhibit No. Under Reg. S-K Item 601
 
Form 8-K Exhibit No.
 

Description
99
 
99
 
News release dated March 18, 2015, containing financial results of The Progressive Corporation and its consolidated subsidiaries for the month of, and year-to-date period ended, February 2015.


- 4 -


 
 
NEWS RELEASE
 
 
 
 
The Progressive Corporation
 
 
Company Contact:
6300 Wilson Mills Road
 
 
Julia Hornack
Mayfield Village, Ohio 44143
 
 
(440) 395-2164
 
 
 
 
 
 
 

PROGRESSIVE REPORTS FEBRUARY RESULTS

MAYFIELD VILLAGE, OHIO -- March 18, 2015 -- The Progressive Corporation (NYSE: PGR) today reported the following results for February 2015:
(millions, except per share amounts and ratios; unaudited)
February
 
February
 
Change
 
2015
 
2014
 
 
 
 
 
 
 
 
Net premiums written
$
1,686.9

 
$
1,538.7

 
10
 %
Net premiums earned
$
1,438.9

 
$
1,352.9

 
6
 %
Net income
$
85.5

 
$
47.0

 
82
 %
Per share
$
0.14

 
$
0.08

 
84
 %
Total pretax net realized gains (losses) on securities
 
 
 
 
 
(including net impairment losses)
$
30.4

 
$
5.7

 
433
 %
Combined ratio
94.8

 
97.2

 
(2.4) pts.

Average diluted equivalent shares
591.4

 
597.6

 
(1)
 %
 
 
 
 
 
 

(thousands; unaudited)
February
 
February
 
Change
 
2015
 
2014
 
Policies in Force:
 
 
 
 
 
Agency – auto
4,758.2
 
4,860.2
 
(2) %
Direct – auto
4,635.4
 
4,299.4
 
8 %
Total personal auto
9,393.6
 
9,159.6
 
3 %
Total special lines
4,026.4
 
3,977.5
 
1 %
Total Personal Lines
13,420.0
 
13,137.1
 
2 %
Total Commercial Lines
517.9
 
508.0
 
2 %
 
 
 
 
 
 

Progressive offers insurance to personal and commercial auto drivers throughout the United States. Our Personal Lines business writes insurance for personal autos and recreational vehicles. Our Commercial Lines business writes primary liability, physical damage, and other auto-related insurance for autos and trucks owned and/or operated predominantly by small businesses.

See the “Comprehensive Income Statements” and “Supplemental Information” for further month and year-to-date information and the "Monthly Commentary" at the end of this release for additional discussion.


- 1 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENT
February 2015
(millions)
(unaudited)

 
Current Month
 
Comments on Monthly Results1
 
 
 
 
Net premiums written
$
1,686.9

 
 
 
 
 
 
Revenues:
 
 
 
Net premiums earned
$
1,438.9

 
 
Investment income
34.7

 
 
Net realized gains (losses) on securities:
 
 
 
Other-than-temporary impairment (OTTI) losses:
 
 
 
Total OTTI losses
0

 
 
Non-credit losses, net of credit losses recognized
 
 
 
on previously recorded non-credit OTTI losses
0

 
 
Net impairment losses recognized in earnings
0

 
 
Net realized gains (losses) on securities
30.4

 
 
Total net realized gains (losses) on securities
30.4

 
 
Fees and other revenues
22.8

 
 
Service revenues
5.0

 
 
Total revenues
1,531.8

 
 
 
 
 
 
Expenses:
 
 
 
Losses and loss adjustment expenses
1,069.8

 
 
Policy acquisition costs
116.9

 
 
Other underwriting expenses
200.6

 
 
Investment expenses
1.4

 
 
Service expenses
4.6

 
 
Interest expense
11.1

 
 
Total expenses
1,404.4

 
 
 
 
 
 
Income before income taxes
127.4

 
 
Provision for income taxes
41.9

 
 
Net income
85.5

 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
Net unrealized gains (losses) on securities:
 
 
 
Net non-credit related OTTI losses, adjusted for
 
 
 
valuation changes
0

 
 
Other net unrealized gains (losses) on securities
53.6

 
 
Total net unrealized gains (losses) on securities
53.6

 
 
Net unrealized gains on forecasted transactions
(0.1
)
 
 
Foreign currency translation adjustment
(0.3
)
 
 
Other comprehensive income
53.2

 
 
Total comprehensive income
$
138.7

 
 
 
 
 
 

1For a description of our reporting and accounting policies, see Note 1 to our 2014 audited consolidated financial statements included in our 2014 Shareholders’ Report, which can be found at www.progressive.com/annualreport.

- 2 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENTS
February 2015
(millions)
(unaudited)


 
Year-to-Date
 
 
 
2015
 
2014
 
% Change
 
 
 
 
 
 
Net premiums written
$
3,460.5

 
$
3,117.1

 
11
 
 
 
 
 
 
Revenues:
 
 
 
 
 
Net premiums earned
$
3,208.9

 
$
3,027.4

 
6
Investment income
67.0

 
67.3

 
0
Net realized gains (losses) on securities:
 
 
 
 
 
Other-than-temporary impairment (OTTI) losses:
 
 
 
 
 
Total OTTI losses
0

 
0

 
NM
Non-credit losses, net of credit losses recognized
 
 
 
 
 
on previously recorded non-credit OTTI losses
0

 
0

 
NM
Net impairment losses recognized in earnings
0

 
0

 
NM
Net realized gains (losses) on securities
23.2

 
80.8

 
(71)
Total net realized gains (losses) on securities
23.2

 
80.8

 
(71)
Fees and other revenues
49.8

 
49.7

 
0
Service revenues
12.2

 
6.0

 
103
Total revenues
3,361.1

 
3,231.2

 
4
 
 
 
 
 
 
Expenses:
 
 
 
 
 
Losses and loss adjustment expenses
2,354.7

 
2,219.2

 
6
Policy acquisition costs
261.4

 
254.4

 
3
Other underwriting expenses
446.4

 
426.7

 
5
Investment expenses
3.8

 
2.7

 
41
Service expenses
11.4

 
6.2

 
84
Interest expense
21.3

 
17.8

 
20
Total expenses
3,099.0

 
2,927.0

 
6
 
 
 
 
 
 
Income before income taxes
262.1

 
304.2

 
(14)
Provision for income taxes
87.2

 
101.4

 
(14)
Net income
174.9

 
202.8

 
(14)
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
Net unrealized gains (losses) on securities:
 
 
 
 
 
Net non-credit related OTTI losses, adjusted for
 
 
 
 
 
valuation changes
0

 
0

 
NM
Other net unrealized gains (losses) on securities
54.9

 
25.5

 
115
Total net unrealized gains (losses) on securities
54.9

 
25.5

 
115
Net unrealized gains on forecasted transactions
(8.6
)
 
(.2
)
 
NM
Foreign currency translation adjustment
(0.4
)
 
0

 
NM
Other comprehensive income
45.9

 
25.3

 
81
Total comprehensive income
$
220.8

 
$
228.1

 
(3)
 
 
 
 
 
 
 
 
 
 
 
 
NM = Not Meaningful
 
 
 
 
 


- 3 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE
&
INVESTMENT RESULTS
February 2015
(millions – except per share amounts)
(unaudited)




The following table sets forth the computation of net income per share and comprehensive income per share:
 
 
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
Month
 
2015
 
2014
 
 
 
 
 
 
 
 
Net income
$
85.5

 
$
174.9

 
$
202.8

 
Per share:
 
 
 
 
 
 
Basic
0.15

 
0.30

 
0.34

 
Diluted
0.14

 
0.30

 
0.34

 
 
 
 
 
 
 
 
Comprehensive income
$
138.7

 
$
220.8

 
$
228.1

 
Per share:
 
 
 
 
 
 
Diluted
0.23

 
0.37

 
0.38

 
 
 
 
 
 
 
 
Average shares outstanding - Basic
587.9

 
588.0

 
594.5

 
Net effect of dilutive stock-based compensation
3.5

 
3.4

 
3.7

 
Total equivalent shares - Diluted
591.4

 
591.4

 
598.2

 
 
 
 
 
 
 
 



The following table sets forth the investment results for the period:
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
 
Month
 
2015
 
2014
 
 
Fully taxable equivalent (FTE) total return:
 
 
 
 
 
 
 
Fixed-income securities
0%
 
0.7%
 
1.1 %
 
 
Common stocks
5.9%
 
2.9 %
 
1.3 %
 
 
Total portfolio
0.8%
 
0.9 %
 
1.1 %
 
 
 
 
 
 
 
 
 
 
Pretax annualized investment income book yield
2.3 %
 
2.3 %
 
2.5 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




- 4 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
February 2015
($ in millions)
(unaudited)



Current Month
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Other
Companywide
 
Agency
Direct
Total
Business
Businesses1
Total
Net Premiums Written
$
785.0

$
743.4

$
1,528.4

$
158.5

$
0

$
1,686.9

% Growth in NPW
3
%
16
%
9
%
13
%
NM

10
%
Net Premiums Earned
$
692.0

$
603.6

$
1,295.6

$
143.3

$
0

$
1,438.9

% Growth in NPE
2
%
11
%
6
%
7
%
NM

6
%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
72.8

77.6

75.1

67.7

NM

74.3

Expense ratio
19.2

21.6

20.3

21.9

NM

20.5

Combined ratio
92.0

99.2

95.4

89.6

NM

94.8

 
 
 
 
 
 
 
Actuarial Adjustments2
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
4.5

Current accident year
 
 
 
 
 
0.3

Calendar year actuarial adjustment
$
2.8

$
1.9

$
4.7

$
0.1

$
0

$
4.8

 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
4.5

All other development
 
 
 
 
 
27.5

Total development
 
 
 
 
 
$
32.0

 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
74.3

Accident year loss/LAE ratio
 
 
 
 
 
76.5

 
 
 
 
 
 
 
Statutory Ratios
 
 
 
 
 
 
Loss/LAE ratio
 
 
 
 
 
74.4

Expense ratio
 
 
 
 
 
18.5

Combined ratio
 
 
 
 
 
92.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 

1 The other businesses generated an underwriting loss of $0.2 million for the month. Ratios and % growth are not meaningful (NM) due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

2 Represents adjustments solely based on our corporate actuarial reviews.

- 5 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
February 2015
($ in millions)
(unaudited)



Year-to-Date
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Other
Companywide
 
Agency
Direct
Total
Business
Businesses1
Total
Net Premiums Written
$
1,609.9

$
1,499.9

$
3,109.8

$
350.7

$
0

$
3,460.5

% Growth in NPW
5
%
17
%
10
%
16
%
NM

11
%
Net Premiums Earned
$
1,547.4

$
1,340.3

$
2,887.7

$
321.2

$
0

$
3,208.9

% Growth in NPE
2
%
11
%
6
%
6
%
NM

6
%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
73.1

76.7

74.7

61.3

NM

73.4

Expense ratio
19.4

21.4

20.4

21.9

NM

20.5

Combined ratio
92.5

98.1

95.1

83.2

NM

93.9

 
 
 
 
 
 
 
Actuarial Adjustments2
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
10.1

Current accident year
 
 
 
 
 
(0.9
)
Calendar year actuarial adjustment
$
5.7

$
0.8

$
6.5

$
2.7

$
0

$
9.2

 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
10.1

All other development
 
 
 
 
 
55.4

Total development
 
 
 
 
 
$
65.5

 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
73.4

Accident year loss/LAE ratio
 
 
 
 
 
75.4

 
 
 
 
 
 
 
Statutory Ratios
 
 
 
 
 
 
Loss/LAE ratio
 
 
 
 
 
73.4

Expense ratio
 
 
 
 
 
19.5

Combined ratio
 
 
 
 
 
92.9

 
 
 
 
 
 
 
Statutory Surplus
 
 
 
 
 
$
6,675.0

 
 
 
 
 
 
 
NM = Not Meaningful
 
 
 
 
 
 
 
 
 
 
 
 
 

1 Year to date, the other businesses generated an underwriting profit of $0.1 million.

2 Represents adjustments solely based on our corporate actuarial reviews.

- 6 -

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

 
February
 
2015
CONDENSED GAAP BALANCE SHEET:
 
Investments – Available-for-sale, at fair value:
 
Fixed maturities1 (amortized cost: $13,469.3)
$
13,676.0

Equity securities:
 
Nonredeemable preferred stocks1(cost: $606.7)
847.9

Common equities (cost: $1,279.2)
2,534.5

Short-term investments (amortized cost: $2,570.2)
2,570.2

Total investments2
19,628.6

Net premiums receivable
3,654.1

Deferred acquisition costs
471.1

Other assets3
2,787.3

Total assets
$
26,541.1

 
 
Unearned premiums
$
5,699.2

Loss and loss adjustment expense reserves3
8,958.8

Other liabilities2
2,206.5

Debt
2,559.9

Shareholders' equity
7,116.7

Total liabilities and shareholders' equity
$
26,541.1

 
 
 
 
Common shares outstanding
588.2

Shares repurchased - February
0.9

Average cost per share
$
26.59

Book value per share
$
12.10

Trailing 12-month return on average shareholders' equity
 
Net income
18.3
%
Comprehensive income
19.6
%
Net unrealized pretax gains (losses) on investments
$
1,656.6

Increase (decrease) from January 2015
$
82.4

Increase (decrease) from December 2014
$
84.4

Debt-to-total capital ratio
26.5
%
Fixed-income portfolio duration
1.6 years

Weighted average credit quality
A+

Year-to-date Gainshare factor
0.58


1 As of February 28, 2015, we held certain hybrid securities and recognized a change in fair value of $46.6 million as a realized gain during the period we held these securities.

2 At February 28, 2015, we had $163.8 million of net unsettled security transactions, including collateral on open derivative positions.

3 Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $1,197.4 million, which are included in "other assets."


- 7 -



Monthly Commentary
•
As discussed previously, monthly results often show more variability in written premium growth rates and, therefore, it may be more prudent to analyze written premium growth on a quarterly basis. February 2015 included written premium from the first few days of March, which historically are higher premium volume days; these days were in fiscal calendar March last year. 
Events
We plan to release March results on Wednesday, April 15, 2015, before the market opens.

About Progressive
The Progressive Group of Insurance Companies makes it easy to understand, buy and use auto insurance. Progressive offers choices so consumers can reach it whenever, wherever, and however it’s most convenient—online at http://www.progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.

Progressive offers insurance for personal and commercial autos and trucks, motorcycles, boats and recreational vehicles, as well as home insurance from select carriers. It’s the fourth largest auto insurer in the country, the largest seller of motorcycle insurance, and a leader in commercial auto insurance. Progressive also offers car insurance online in Australia at http://www.progressiveonline.com.au.

Founded in 1937, Progressive continues its long history of offering shopping tools and services that save customers time and money, like Name Your Price®, Snapshot®, and Service Centers.

The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, trade publicly 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 possible failure of one or more governmental, corporate, or other entities to make scheduled debt payments or satisfy other obligations; the potential or actual downgrading by one or more rating agencies of our securities or governmental, corporate, or other securities we hold; the financial condition of, and other issues relating to the strength of and liquidity available to, issuers of securities held in our investment portfolios and other companies with which we have ongoing business relationships, including reinsurers and other counterparties to certain financial transactions; the accuracy and adequacy of our pricing and loss reserving methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to attract and retain more customers; initiatives by competitors and the effectiveness of our response; our ability to obtain regulatory approval for the introduction of products to new jurisdictions, for requested rate changes and the timing thereof and for any proposed acquisitions; the effectiveness of our brand strategy and advertising campaigns relative to those of competitors; legislative and regulatory developments at the state and federal levels, including, but not limited to, matters relating to vehicle and homeowners insurance, health care reform and tax law changes; the outcome of disputes relating to intellectual property rights; the outcome of litigation or governmental investigations that may be pending or filed against us; weather conditions (including the severity and frequency of storms, hurricanes, floods, snowfalls, hail, and winter conditions); changes in driving patterns, including vehicle usage as influenced by the level of oil and gas prices, among other factors; our ability to accurately recognize and appropriately respond in a timely manner to changes in loss frequency and severity trends; technological advances; acts of war and terrorist activities; our ability to maintain the uninterrupted operation of our facilities, systems (including information technology systems), and business functions, and safeguard personal and sensitive information in our possession; our continued access to and functionality of third-party systems that are critical to our business; court decisions, new theories of insurer liability or interpretations of insurance policy provisions and other trends in litigation; changes in health care and auto and property repair costs; and other matters described from time to time in our releases and publications, and in our 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. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.


- 8 -


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