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Form 8-K PROGRESSIVE CORP/OH/ For: Dec 12

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December 12, 2018 8:17 AM EST
 
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) December 12, 2018 (December 6, 2018)

 
 

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§204.12b-2 of this chapter).
Emerging Growth Company
¨
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

 

- 1 -

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) On December 6, 2018, William M. Cody notified the company that he has decided to retire in January 2020. Mr. Cody has served as the company’s Chief Investment Officer for over 15 years and is one of its named executive officers. This notice allows lead time for the company to conduct a search for Mr. Cody’s replacement and to assist with the orderly transition of duties to his successor.

Item 7.01 Regulation FD Disclosure.

On December 12, 2018, 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, November 2018;
•
an announcement of the Board of Directors' declaration of the Company's variable dividend for 2018 and the procedures related thereto;
•
an announcement of the Board of Directors' termination of the current annual variable dividend policy and the adoption of a new common share dividend policy; and
•
an announcement of the Board of Directors setting the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting of shareholders.

The announcements related to the dividend matters are included in the Monthly Commentary at the end of the release. A copy of the news release is attached hereto as Exhibit 99.1 and a New Dividend Policy Q&A is attached hereto as Exhibit 99.2.

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:
December 12, 2018
 
 
 
 
 
THE PROGRESSIVE CORPORATION
 
 
 
 
 
 
 
 
 
 
 
By: /s/ Jeffrey W. Basch
 
 
 
Name: Jeffrey W. Basch
 
 
 
Title: Vice President and Chief Accounting Officer
 
 
 
 

- 3 -

EXHIBIT INDEX





- 4 -
Exhibit 99.1
image0a04a01a44.jpg
 
 
NEWS RELEASE
 
 
 
 
The Progressive Corporation
 
 
Company Contact:
6300 Wilson Mills Road
 
 
Julia Hornack
Mayfield Village, Ohio 44143
 
 
(440) 395-2164
 
 
 
 
 
 
 

PROGRESSIVE REPORTS NOVEMBER RESULTS AND ANNOUNCES DIVIDEND INFORMATION AND
2019 ANNUAL MEETING RECORD DATE

MAYFIELD VILLAGE, OHIO -- December 12, 2018 -- The Progressive Corporation (NYSE: PGR) today reported the following results for November 2018:

 
November
 
November
 
 
(millions, except per share amounts and ratios; unaudited)
2018
 
2017
 
Change
 
 
 
 
 
Net premiums written
$
2,328.0

 
$
2,022.1

 
15
%
Net premiums earned
$
2,530.0

 
$
2,113.5

 
20
%
Net income attributable to Progressive
$
242.4

 
$
154.9

 
56
%
  Per share available to common shareholders
$
0.41

 
$
0.26

 
55
%
Total pretax net realized gains (losses) on securities
$
18.5

 
$
0.7

 
NM

Combined ratio
91.3

 
90.9

 
0.4 pts.

Average diluted equivalent common shares
586.7

 
585.7

 
0
%
NM = Not Meaningful

(thousands; unaudited)
November
 
November
 
 
 
2018
 
2017
Change
Policies in Force
 
 
 
 
 
Vehicle businesses:
 
 
 
 
 
  Agency – auto
6,330.0
 
5,627.4
 
12 %
  Direct – auto
6,973.6
 
5,980.3
 
17 %
  Total personal auto
13,303.6
 
11,607.7
 
15 %
  Total special lines
4,392.0
 
4,373.2
 
0 %
  Total Personal Lines
17,695.6
 
15,980.9
 
11 %
  Total Commercial Lines
697.0
 
644.6
 
8 %
Property business
1,915.4
 
1,436.5
 
33 %
 
 
 
 
 
 

Progressive offers personal and commercial insurance throughout the United States. Our Personal Lines business writes insurance for personal autos and special lines products. 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. Our Property business writes residential property insurance for homeowners, other property owners, and renters.

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
November 2018
(millions)
(unaudited)

 
Current Month
 
Comments on Monthly Results1
Net premiums written
$
2,328.0

 
 
 
 
 
 
Revenues:
 
 
 
Net premiums earned
$
2,530.0

 
 
Investment income
81.1

 
 
Net realized gains (losses) on securities:
 
 
 
Net realized gains (losses) on security sales
(9.5
)
 
 
Net holding period gains (losses) on securities
28.0

 
 
Net impairment losses recognized in earnings
0

 
 
Total net realized gains (losses) on securities
18.5

 
 
Fees and other revenues
45.1

 
 
Service revenues
12.5

 
 
Total revenues
2,687.2

 
 
 
 
 
 
Expenses:
 
 
 
Losses and loss adjustment expenses
1,796.9

 
 
Policy acquisition costs
212.4

 
 
Other underwriting expenses
346.0

 
 
Investment expenses
2.5

 
 
Service expenses
10.3

 
 
Interest expense
15.9

 
 
Total expenses
2,384.0

 
 
 
 
 
 
Income before income taxes
303.2

 
 
Provision for income taxes
60.6

 
 
Net income
242.6

 
 
Net (income) loss attributable to noncontrolling interest (NCI)
(0.2
)
 
 
Net income attributable to Progressive
242.4

 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
Changes in:
 
 
 
Total net unrealized gains (losses) on securities
49.8

 
 
Net unrealized losses on forecasted transactions
0.1

 
 
Other comprehensive income (loss)
49.9

 
 
Other comprehensive (income) loss attributable to NCI
(0.5
)
 
 
Total comprehensive income attributable to Progressive
$
291.8

 
 
 
 
 
 
1 See the Monthly Commentary at the end of this release. For a description of our financial reporting and accounting policies, see Note 1 to our 2017 audited consolidated financial statements included in our 2017 Shareholders’ Report, which can be found at www.progressive.com/annualreport.

- 2 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENTS
November 2018
(millions)
(unaudited)


 
Year-to-Date
 
 
 
2018
 
2017
 
% Change
Net premiums written
$
30,247.5

 
$
25,159.8

 
20
 
 
 
 
 
 
Revenues:
 
 
 
 
 
Net premiums earned
$
28,379.1

 
$
23,585.2

 
20
Investment income
734.6

 
509.7

 
44
Net realized gains (losses) on securities:
 
 
 
 
 
Net realized gains (losses) on security sales
181.8

 
126.1

 
44
Net holding period gains (losses) on securities
(207.5
)
 
(1.4
)
 
NM
Net impairment losses recognized in earnings
(49.0
)
 
(62.5
)
 
(22)
Total net realized gains (losses) on securities
(74.7
)
 
62.2

 
(220)
Fees and other revenues
434.5

 
341.2

 
27
Service revenues
145.7

 
115.2

 
26
Other gains (losses)
0

 
(1.0
)
 
(100)
Total revenues
29,619.2

 
24,612.5

 
20
 
 
 
 
 
 
Expenses:
 
 
 
 
 
Losses and loss adjustment expenses
19,937.5

 
17,288.0

 
15
Policy acquisition costs
2,359.8

 
1,946.5

 
21
Other underwriting expenses
3,869.6

 
3,204.8

 
21
Investment expenses
22.9

 
22.1

 
4
Service expenses
123.5

 
99.5

 
24
Interest expense
150.7

 
141.4

 
7
Total expenses
26,464.0

 
22,702.3

 
17
 
 
 
 
 
 
Income before income taxes
3,155.2

 
1,910.2

 
65
Provision for income taxes
588.5

 
574.6

 
2
Net income
2,566.7

 
1,335.6

 
92
Net (income) loss attributable to noncontrolling interest (NCI)
(5.4
)
 
(4.7
)
 
15
Net income attributable to Progressive
2,561.3

 
1,330.9

 
92
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
Changes in:
 
 
 
 
 
Total net unrealized gains (losses) on securities
(242.8
)
 
336.1

 
(172)
Net unrealized losses on forecasted transactions
0.7

 
(5.5
)
 
(113)
Foreign currency translation adjustment
0

 
1.1

 
(100)
Other comprehensive income (loss)
(242.1
)
 
331.7

 
(173)
Other comprehensive (income) loss attributable to NCI
4.9

 
(1.8
)
 
(372)
Total comprehensive income attributable to Progressive
$
2,324.1

 
$
1,660.8

 
40
 
 
 
 
 
 
NM = Not Meaningful

 
 
 
 
 


- 3 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE
&
INVESTMENT RESULTS
November 2018
(millions – except per share amounts)
(unaudited)




The following table sets forth the computation of per share results:
 
 
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
Month
 
2018
 
2017
 
 
 
 
 
 
 
 
Net income attributable to Progressive
$
242.4

 
$
2,561.3

 
$
1,330.9

 
Less: Preferred share dividends
2.2

 
19.1

 
0

 
Net income available to common shareholders
$
240.2

 
$
2,542.2

 
$
1,330.9

 
Per common share:
 
 
 
 
 
 
Basic
$
0.41

 
$
4.37

 
$
2.29

 
Diluted
$
0.41

 
$
4.33

 
$
2.27

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Progressive
$
291.8

 
$
2,324.1

 
$
1,660.8

 
Less: Preferred share dividends
2.2

 
19.1

 
0

 
Comprehensive income (loss) attributable to common shareholders
$
289.6

 
$
2,305.0

 
$
1,660.8

 
Per common share:
 
 
 
 
 
 
Diluted
$
0.49

 
$
3.93

 
$
2.84

 
 
 
 
 
 
 
 
Average common shares outstanding - Basic
582.8

 
582.3

 
580.8

 
Net effect of dilutive stock-based compensation
3.9

 
4.4

 
4.9

 
Total average equivalent common shares - Diluted
586.7

 
586.7

 
585.7

 
 
 
 
 
 
 
 


The following table sets forth the investment results for the period:
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
 
Month
 
2018
 
2017
 
 
Fully taxable equivalent (FTE) total return:
 
 
 
 
 
 
 
Fixed-income securities
0.3%
 
0.8%
 
2.9%
 
 
Common stocks
2.1%
 
5.1%
 
20.5 %
 
 
     Total portfolio
0.5%
 
1.3%
 
4.9 %
 
 
 
 
 
 
 
 
 
 
Pretax annualized investment income book yield
3.0%
 
2.8%
 
2.3 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




- 4 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
November 2018
($ in millions)
(unaudited)



Current Month
 
Vehicles
 
 
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Property
Companywide
 
Agency
Direct
Total
Business
Business
Total
Net Premiums Written
$
976.6

$
966.6

$
1,943.2

$
268.1

$
116.7

$
2,328.0

% Growth in NPW
12
%
15
%
13
%
24
%
29
%
15%
Net Premiums Earned
$
1,050.7

$
1,063.4

$
2,114.1

$
301.3

$
114.6

$
2,530.0

% Growth in NPE
15
%
21
%
18
%
28
%
31%
20%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
70.7

74.3

72.5

60.6

71.3
71.0

Expense ratio
19.2

19.8

19.5

21.0

32.91
20.3

Combined ratio
89.9

94.1

92.0

81.6

104.21

91.3

 
 
 
 
 
 
 
Actuarial Adjustments2
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
(5.9
)
Current accident year
 
 
 
 
 
4.0

Calendar year actuarial adjustment
$
(4.6
)
$
(3.8
)
$
(8.4
)
$
8.6

$
(2.1
)
$
(1.9
)
 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
(5.9
)
All other development
 
 
 
 
 
(3.1
)
Total development
 
 
 
 
 
$
(9.0
)
 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
71.0

Accident year loss/LAE ratio
 
 
 
 
 
70.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1 Included in both the expense ratio and combined ratio is 5.2 points of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Excluding these additional expenses, the Property business would have reported an expense ratio of 27.7 and a combined ratio of 99.0.

2 Represents adjustments solely based on our actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.






- 5 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
November 2018
($ in millions)
(unaudited)



Year-to-Date
 
Vehicles
 
 
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Property
Companywide
 
Agency
Direct
Total
Business
Business
Total
Net Premiums Written
$
12,571.4

$
12,599.4

$
25,170.8

$
3,741.8

$
1,334.9

$
30,247.5

% Growth in NPW
16
%
21
%
18
%
29
%
34
%
20%
Net Premiums Earned
$
11,960.4

$
11,945.6

$
23,906.0

$
3,306.9

$
1,166.2

$
28,379.1

% Growth in NPE
17
%
21
%
19
%
29
%
30%
20%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
69.7

71.2

70.5

67.5

73.6
70.3

Expense ratio
19.2

20.3

19.7

20.4

34.31
20.4

Combined ratio
88.9

91.5

90.2

87.9

107.91

90.7

 
 
 
 
 
 
 
Actuarial Adjustments2
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
(11.9
)
Current accident year
 
 
 
 
 
23.9

Calendar year actuarial adjustment
$
1.5

$
21.4

$
22.9

$
1.3

$
(12.2
)
$
12.0

 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
(11.9
)
All other development
 
 
 
 
 
(61.7
)
Total development
 
 
 
 
 
$
(73.6
)
 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
70.3

Accident year loss/LAE ratio
 
 
 
 
 
70.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 

1 Included in both the expense ratio and combined ratio is 5.7 points of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Excluding these additional expenses, the Property business would have reported an expense ratio of 28.6 and a combined ratio of 102.2.

2 Represents adjustments solely based on our actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.






- 6 -

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

 
November 2018
CONDENSED GAAP BALANCE SHEET:
 
Investments, at fair value:
 
Available-for-sale securities:
 
Fixed maturities1 (amortized cost: $28,456.2)
$
28,129.4

Short-term investments (amortized cost: $1,874.2)
1,874.2

Total available-for-sale securities
30,003.6

Equity securities:
 
Nonredeemable preferred stocks (cost: $879.3)
938.6

Common equities (cost: $1,139.0)
2,889.4

Total equity securities
3,828.0

Total investments2
33,831.6

Net premiums receivable
6,678.6

Deferred acquisition costs
966.0

Goodwill and intangible assets
753.3

Other assets3
4,817.2

Total assets
$
47,046.7

 
 
Unearned premiums
$
10,909.9

Loss and loss adjustment expense reserves3
15,240.2

Other liabilities2
4,193.3

Debt
4,404.7

Total liabilities
34,748.1

Redeemable noncontrolling interest (NCI)
212.5

Shareholders' equity
12,086.1

Total liabilities, NCI, and shareholders' equity
$
47,046.7

 
 
 
 
Common shares outstanding
583.2

Common shares repurchased - November
0

Average cost per common share
$
0

Book value per common share
$
19.88

Trailing 12-month return on average common shareholders' equity
 
Net income attributable to Progressive
27.0
%
Comprehensive income attributable to Progressive
24.9
%
Net unrealized pretax gains (losses) on fixed-maturity securities
$
(315.8
)
Increase (decrease) from October 2018
$
63.0

Increase (decrease) from December 2017
$
(307.4
)
Debt-to-total capital ratio4
26.7
%
Fixed-income portfolio duration
2.8

Weighted average credit quality
AA-

Year-to-date Gainshare factor
1.90

1 As of November 30, 2018, we held certain hybrid securities and recognized a change in fair value of $11.0 million as a realized loss during the period we held these securities.
2 At November 30, 2018, we had $92.2 million of net unsettled security transactions classified in "other liabilities."
3 Loss and loss adjustment expense reserves are stated gross of reinsurance recoverables on unpaid losses of $2,540.1 million, which are included in "other assets." During November, we recorded a $70 million recoverable under our catastrophe reinsurance program related to gross losses and LAE from Hurricane Michael exceeding our retention threshold of $60 million.
4 Ratio reflects debt as a percent of debt plus shareholders' equity; redeemable noncontrolling interest is not part of this calculation.

- 7 -



Monthly Commentary
•
During November, on a companywide basis, we incurred about $46 million, or 1.8 loss ratio points, of catastrophe losses, compared to about $21 million, or 1.0 point last year. Approximately $13 million of the current month catastrophe losses were from our vehicle businesses and $33 million were from our Property business (28.8 points on our Property business combined ratio). The California wildfires accounted for just over 75% of the total catastrophe losses. Our year-to-date total catastrophe losses were approximately $567 million, or 2.0 points, compared to $814 million, or 3.4 points, last year.
•
On December 7, 2018, the Board of Directors declared an annual variable dividend to be paid on February 11, 2019, to shareholders of record at the close of business on February 4, 2019 (ex-dividend date of February 1, 2019). The amount of the dividend will be determined based on the Company’s 2018 financial results and the following formula:
 
 
After-Tax
 
33-1/3%
 
 
Dividend
 
Underwriting
X
Target
X
Gainshare
Amount Per
=
Income
 
Percentage
 
Factor
Share
 
Common Shares Outstanding on 12/31/18
 
 
 
 
 
 
 
Year-to-date through November 2018, the Company’s after-tax underwriting income was $2,090.9 million, after-tax comprehensive income was $2,324.1 million, and the Gainshare Factor was 1.90. Consistent with the Company’s policy of not providing projections of its financial results, the Company is not providing an estimate of the 2018 dividend at this time. Investors who choose to calculate or project a dividend amount based on interim results are cautioned, however, that any such estimates may vary from the dividend that may ultimately be paid on the basis of the Company’s full-year results and the final Gainshare Factor, as well as the impact of changes in the valuation of our portfolio on the Company’s comprehensive income. In accordance with the policy, no variable dividend will be paid if the Company’s after-tax comprehensive income is less than its after-tax underwriting income for the year or if the Company experiences an after-tax underwriting loss for 2018. For a detailed discussion of the Company’s annual variable dividend policy, please go to http://investors.progressive.com/phoenix.zhtml?c=81824&p=irol-dividends. The amount of the dividend will be announced in the Company’s year-end earnings release, which is currently scheduled for January 23, 2019.
•
Also on December 7, 2018, the Board terminated the Company’s current annual variable dividend policy. This change will be effective beginning in 2019, after payment of the 2018 annual variable dividend discussed above. In lieu of the annual variable dividend policy, beginning in 2019, the Board expects to declare regular, quarterly common share dividends and, on at least an annual basis, consider declaring an additional common share dividend. The ultimate amount of the quarterly dividends, which the Board is initially targeting to be about $0.10 per quarter, will be determined by the Board. In addition, the Board will determine the annual dividend amount, if any, based on relevant facts and circumstances and not solely based on a specific formula or calculation. For additional information, see the “New Dividend Policy Q&A,” which is being furnished today in a Current Report on Form 8-K and can be found on the investor relations section of our website at http://investors.progressive.com/phoenix.zhtml?c=81824&p=irol-dividends.
•
Lastly, on December 7, 2018, the Board set the close of business on March 15, 2019, as the record date for the determination of shareholders entitled to notice of, and to vote at, Progressive’s Annual Meeting of Shareholders, which will be held on May 10, 2019.

Events
We plan to release December results on Wednesday, January 23, 2019, 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 us whenever, wherever and however it's most convenient - online at progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.


- 8 -



Progressive provides insurance for personal and commercial autos and trucks, motorcycles, boats, recreational vehicles, and homes. Home insurance is underwritten by select carriers, including American Strategic Insurance Corp. and subsidiaries (ASI), our majority owned subsidiaries.
 
Progressive is the third largest auto insurer in the country; a leading seller of motorcycle and commercial auto insurance; and through ASI, one of the top 20 homeowners insurance carriers.

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 HomeQuote Explorer®.

The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, trade publicly at NYSE:PGR.

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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that certain statements in this report not based upon historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements often use words such as “estimate,” “expect,” “intend,” “plan,” “believe,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Forward-looking statements are based on current expectations and projections about future events, and are subject to certain risks, assumptions 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 general 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; our ability to access capital markets and financing arrangements when needed to support growth or other capital needs, and the favorable evaluations by credit and other rating agencies on which this access depends; 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 or under certain government programs; the accuracy and adequacy of our pricing, loss reserving, and claims 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; severe weather conditions and other catastrophe events; the effectiveness of our reinsurance programs; changes in vehicle usage and driving patterns, which may be influenced by oil and gas prices, changes in residential occupancy patterns, and the effects of the emerging “sharing economy”; advancements in vehicle or home technology or safety features, such as accident and loss prevention technologies or the development of autonomous or partially autonomous vehicles; 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, whether from cyber attacks, other technology events or other means; our continued access to and functionality of third-party systems that are critical to our business; our continued ability to access cash accounts and/or convert securities into cash on favorable terms when we desire to do so; restrictions on our subsidiaries' ability to pay dividends to The Progressive Corporation; possible impairment of our goodwill or intangible assets if future results do not adequately support either, or both, of these items; 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.








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Exhibit 99.2

NEW DIVIDEND POLICY Q&A
(December 2018)

What is Progressive’s capital management philosophy?
Effective capital management is an important component of our financial brand. When considering how to deploy capital, we look first to invest to support the growth of our current and future earnings power. We seek to run an efficient balance sheet that grows with the business and that delivers a return on equity over time that exceeds our cost of equity. If we have capital beyond what is needed to fund growth and innovation, that is, when we have “underleveraged capital,” we will return it to shareholders. This philosophy has allowed us to achieve industry-leading returns on equity over time.
dwpa01.jpg
Note: Top 10 Personal Lines Carriers, which are determined by Direct Written Premiums for
Personal Lines over the twelve months ended September 30, 2018, exclude Progressive results.
Source: Company reports for Progressive, SNL for Industry and Top 10

roea01.jpg
Note: Arithmetic average of quarterly annualized returns as of September 30, 2018
Source: Company reports for Progressive, Bloomberg for indices






divsrepr.jpg
Source: Company reports, as of September 30, 2018

divrepnumbers.jpg
Source: Company reports, as of September 30, 2018


Why is the Company changing its common share dividend policy?
After extensive review within Progressive’s management team and with our Board of Directors as well as outside consultation, we determined that this was the right time for Progressive to change its dividend policy.

In addition to the substantial opportunity we have to execute around growing our core business, we believe that we have a variety of exciting opportunities to expand beyond our core and explore other opportunities to grow our long-term value. Because of this, we see the value in having greater flexibility in our dividend plan. While the mechanics of our common share dividend are changing, our capital management philosophy is not.

What is the Company’s fiscal year 2018 dividend policy?
Our existing policy is to pay an annual, variable cash dividend on our common shares. The amount of the dividend is determined by a formula equal to our after-tax underwriting income times our Gainshare factor times a Board-selected target percentage, which for 2018 is 33-1/3%. While the Board has ultimate discretion on the amount we pay, the Board has declared a dividend which will be determined based on full-year 2018 financial results following this formula, subject to the constraints that no dividend will be paid if:

•
After-tax comprehensive income is less than after-tax underwriting income, or
•
Underwriting income is negative, or
•
The Gainshare factor is zero.




When will the new common share dividend policy go into effect?
As announced, the new policy will go into effect in 2019. This means that our variable dividend in its current form will be discontinued after we pay our annual variable dividend in February 2019. The initial quarterly dividend under the new policy is expected to be declared by the Board in the first quarter 2019 and paid early in the second quarter 2019. The initial variable dividend for calendar year 2019, if any, will be declared during the fourth quarter 2019 to be paid at or shortly after the end of 2019.

How does this new dividend policy differ from the current policy?
The new dividend policy will differ in two main ways from our current policy. First, we will be initiating a regular quarterly dividend. Second, while we expect to maintain the annual variable dividend concept, it will no longer be determined based on the formula that is currently used.

How will the dividend be determined under the new policy?
In addition to regular quarterly dividends, the Board will consider a variable dividend payment at least annually. While the Board will have the discretion to implement such a payment at any time, its meeting in December will be targeted as the regular time for this discussion. The total amount paid under our dividend policy will be determined by the Board after considering our existing capital resources and current and future capital needs. Among the items that affect our capital needs are:

•
Growth and profitability and related regulatory and ratings agency capital requirements
•
The performance of our investment portfolios
•
The amount of capital already distributed to shareholders in the form of regular quarterly dividends or deployed for common share repurchases
•
Other potential uses for our capital, such as share repurchases and strategic investments
•
Significant external events or disruptions in capital markets

Will the new variable dividend carry forward the constraint that after-tax comprehensive income must exceed after-tax underwriting income in order for a dividend to be payable?
No, the new dividend policy will not have this "trigger" mechanism found in the current policy. As highlighted in the current calendar year, this trigger mechanism can present a capital management challenge as its binary nature suggests variable dividend payouts ranging from nothing to a payout potentially exceeding a billion dollars. However, after-tax comprehensive income and after-tax underwriting income are expected to be among the factors considered by the Board when deciding whether or not to declare dividends.

Will the Board of Directors retain the discretion to modify or suspend the common share dividend to be paid under the new policy in any given year?
Yes, consistent with current practice and best practices in corporate governance, the Board of Directors must make the final decision. Each quarter the Board will decide, based on relevant facts and circumstances, whether or not to declare a dividend and, if the Board determines that a dividend is appropriate, the amount of the dividend. Although we expect to follow the approach described above, and we currently anticipate that we would pay a variable dividend every year, the Board must retain this discretion to act in the best interests of the Company and its shareholders.

What effect will the variable dividend policy have on your monthly financial statements?
Neither the variable dividend nor the quarterly dividend will have a direct effect on net income or earnings per share. In the period a dividend is declared by the Board, the Company will recognize a reduction in shareholders’ equity.

What will be the Federal income tax consequences of the variable dividend for individual shareholders?
We can’t give tax advice and each shareholder’s tax situation is different. In addition, Federal tax laws, regulations and interpretations are subject to change, so shareholders should consult with personal tax advisors for additional information. Generally (under Federal laws and regulations in effect in December 2018), we expect that an individual shareholder receiving dividends under our new policy would pay Federal income taxes on those dividends at the same rate as the individual pays on dividends under our current policy. Corporate and foreign taxpayers may be subject to different rules.





Could changes in the taxation of dividends under Federal law change the Company’s view of its dividend policy?
Yes. The Company views its dividend policy as an attractive additional way to manage the accumulation of capital and provide a return to shareholders based, in part, on current Federal tax policy. If the Federal tax rules relating to dividends were to change, the Company could reconsider the new dividend policy and would have the discretion to change or terminate the policy at any time.

Will the Company continue to repurchase its shares?
The new dividend policy is just one capital management method that the Company has available to deploy when the circumstances are appropriate. Subject to the Board’s approval, the Company will continue to have the discretion under our capital management policies to repurchase our shares when warranted in view of the Board’s and management’s assessment of our capital needs, business prospects and share price. As mentioned above, repurchases of our shares could impact the amount of dividends that the Board ultimately declares. At a minimum, we continue to maintain our financial policy to neutralize dilution from equity-based compensation in the year of issuance through repurchases of our common shares. Our most recent share repurchase authorization of 25 million common shares, dated May 11, 2018, has 24.3 million shares remaining as of November 30, 2018.




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