The Progressive Corporation Q4 FY2025 earnings call

• John Sauerland reviewed strong 2025 results: $9B net premiums written, ~3.7M policies in force, ~18.5% private passenger auto market share, ~$13B comprehensive income, 40% comprehensive return on equity. • Focus on 4 strategic pillars to win and grow at ≤96 combined ratio. • Operating leverage increased to 3.5:1 premiums to surplus for core vehicle lines. • Maureen Spooner discussed financial policies: ensuring capital for profitable insurance, capital allocation including corporate development, share repurchases, dividends, and maintaining debt-to-capitalization below 30%. • Jonathan Bauer talked about investment portfolio: ~95% fixed income actively managed, ~5% equities passive replication, 7.33% return in 2025, guidelines for allocation, duration, credit rating, and financial leverage. • Andrew Quigg introduced himself, mentioned background and experience, and discussed Three Horizons strategy for future positioning.

In 2025, Progressive added almost $9 billion in net premiums written and almost 3.7 million additional policies in force. Statutory results for the private passenger auto market through the third quarter showed close to a 2-point increase in market share to around 18.5%. Personal vehicles led policy in force growth at 12% (almost 3.5 million more policies). Property profitability was strong due to a lighter-than-average catastrophe year and risk management. Commercial Lines had PIF growth from business auto and contractor risks, with trucking facing challenges but overall excellent profitability. Personal vehicles contributed significantly to revenue, with property and commercial lines also important in terms of revenue contribution.

• John Sauerland mentioned focus on comprehensive ROE, operating leverage increase, variable dividend of $13.50 per share in January, and intent to move closer to 3.5 premiums to surplus ratio. • Maureen Spooner noted goal of staying below 30% debt-to-capitalization ratio and trend below historic range due to income generation. • Jonathan Bauer emphasized Progressive's focus on growing at ≤96 combined ratio and how higher operating leverage, appropriate financial leverage, and conservative investment portfolio contribute to strong financial results.

• Uncertainty in broader geopolitical and macroeconomic changes. • Operating and investment volatility, financial leverage, and potential opportunity deployment. • Reinsurance program being integral to contingent capital layer but retentions and catastrophe limits need to be managed. • Changes in autonomous vehicle technology and its impact on loss costs, frequency, and severity in insurance modeling. • Regulatory changes in various states affecting underwriting and affordability.

Q: Thoughts on severity?

A: Severity isn't as concerning, relatively flat, watch BI severity with attorney reps, larger loss costs, parts prices increasing.

Q: Navigating autonomous in insurance?

A: Andrew to discuss, using Three Horizons, focusing on execute, adjacent products, and further field products.

Q: Premiums for Personal Lines policy?

A: Slightly negative due to competition and Florida price reductions, adjusting rates, mix shift, selling 6-month policies.

Q: Technology and combined ratio?

A: Working on AI, history of innovation, using AI for efficiencies, forming AI Strategy Council.

Q: Regulatory environment and Florida?

A: Support regulatory changes for affordability, reduced rates 3x in Florida, watching combined ratio and modeling closely