INVESTOR RELATIONS MEETING 2014 STATE OF PROGRESSIVE
GLENN RENWICK
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 1 STATE OF PROGRESSIVE
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 2 PRICE TO RISK
Efficient Markets Will Punish Poor Skills
100%
THE MOST ESSENTIAL OF ALL SKILLS—PRICE MATCHING RISK CONTINUES TO BE A PRIMARY FOCUS WITH VEHICLE TELEMATICS MORE THAN AN INCREMENTAL CONTRIBUTION. CUMULATIVE LOSSES 0% 0 20 40 60 80 100 HIGH RISK LOW RISK
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 3 GOOD TO ADVANTAGED
A Delicate But Massive Economic Balance
“Can Claims create a sustainable pricing advantage?”
CLAIMS SETTLEMENT QUALITY
ORGANIZATION EFFICIENCY
ORGANIZATION EFFECTIVENESS
CUSTOMER SATISFACTION TOTAL LOSS COSTS & LAE
LOSS ADJUSTMENT EXPENSES (LAE)
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 4 MANY WILL COME— INCREASINGLY MORE WILL STAY
Changing The Shape And Expanding The Tail Of Our Policy Life Estimation Is A Welcome Challenge 100% CONCERTED ACTIONS
ENTRY MIX
MULTI-PRODUCT PENETRATION
ACTIVE PRICING TREND
ADVANCED/LOW TRANSFERRED PLE PRICING
0% 1 yr 25 yr t
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 5 NON-LOSS, NON-ACQUISITION COSTS
Scale Yields Have Been Small, But Real Consumer Technology Will Provide Greater Leverage
10%
Total CRM IT
NON-ACQ. EXPENSE RATIO (ER) CONTRIBUTION* 0% t *Personal Auto
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 6 MANAGED MEDIA & CHANNEL EQUITY
30% ACQUISITION OF CUSTOMERS IS OUR 25% GOAL—JUST NOT AT 20% THE WRONG PRICE
15%
10% % EARNED PREMIUM 5% Acquisition ER Direct Acquisition ER Agency 0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20112012 2013
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 7 PEOPLE & MONEY—ONE IS FUNGIBLE
A Potentially Underestimated Balance Of Marketable Talent With A Culture That Provides A Retention Glue 100%
80%
60% 6% Agree: I plan to be working at 40% Progressive % EMPLOYEES % EMPLOYEES in the next 12 3% 20% months (left axis) Attrition of 0% 0% non-entry 2009 2010 2011 2012 2013 level roles (right axis)
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 8 BRAND: ELUSIVE ... INTERESTING ... ASSET
ONE OF THE MOST DRAMATIC Superstore “Tired Of Seeing” DIFFERENCES IN PROGRESSIVE TODAY VERSUS A DECADE OR SO AGO, AND CERTAINLY FOR THE BETTER, IS OPERATING WITH THE UMBRELLA OF A HIGH PROFILE BRAND % OF RESPONDENTS
2008 2014
*No SS ads tracked in Q1'12 **Methodology changed from Q4'11 to Q2'12
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 9 BALANCED CAPITAL MANAGEMENT
Active Management Of Capital And Capital Composition Is Central To Our Business Model 10
8 Variable Dividend + Share Repurchase
Variable + Special Dividend + Share Repurchase 6
4 Layer 1 $ BILLION Layers 2&3 2
0
JUN 09 DEC 09 JUN 10 DEC 10 JUN 11 DEC 11 JUN 12 DEC 12 JUN 13 DEC 13
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 10 THE INVISIBLE BALANCE SHEET ENTRY OUR BUSINESS STRATEGY IS ONLY
Cust. incept.
(t) PARTIALLY REFLECTED ?
? x IN ANNUAL GAAP LEP Balance Incepted = ? PLE AWP (t) REPORTING $65 REPORTED $60 INCOME MIX UNEARNED UNEARNED PER YEAR PROFILE LEP LEP LEP / LEP $55
$50 $1,000 Sam $1,000 $0 0% $45 43% $40 $1,000 Diane $2,500 $1,500 60% 78%
UNEARNED LEP BALANCE ($B) $35
$30 $1,000 Robinsons $10,000 $9,000 90% 2009 2010 2011 2012 2013
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 11 PROGRESSIVE VIEWED IN ERAS
20 DESTINATION ERA RETAILER
10
MANUFACTURER/ WHOLESALER WRITTEN PREMIUM ($B)
2
1985 1990 1995 2000 2005 2010 2013 2020
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 12 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 13 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 14 THE BUSINESS MODEL ASSETS SKILLS REQUIREMENTS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 15 THE BUSINESS MODEL ASSETS SKILLS REQUIREMENTS
Leading pre-Robinson Brand-consistent product Additional life-event and “demand” generation presentation and experiences needs-based product portfolio Brand relevance and Brand-consistent product recognition for future provider relationships Customer data repository Robinsons Effective and selective above current capabilities customer relationship Operations and cost In-house agency expansion management structure in place to test and supplement Marketing skills to current online presentation Distribution plurality customers matching those to broad market Increased “Plug & Play” Consumer acceptance of inclusion of external quote single portal, multi-provider Customer data segmentation and buy capabilities relationships skills to match current strength in rating and media segmentation
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 16 / MEET THE ROBINSONS JOHN SAUERLAND, DAN WITALEC, TRICIA GRIFFITH / POLICY LIFE EXPECTANCY BRIAN DOMECK / ADVANCED ANALYTICS STEVE BROZ / PERSONAL LINES SANJAY VYAS / COMMERCIAL LINES UPDATE JOHN BARBAGALLO
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING AGENDA 17 MEET THE ROBINSONS
JOHN SAUERLAND / DAN WITALEC / TRICIA GRIFFITH
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 18 CONSUMER SEGMENTS
SAM DIANE WRIGHTS ROBINSONS
Inconsistently Consistently Homeowner, Homeowner, insured insured, Renter Auto/Home Auto/Home separate bundled
1.0x 1.5x – 2.0x 2.0x – 3.0x 3.0x – 4.0x+ Lifetime Earned Lifetime Earned Lifetime Earned Lifetime Earned Premium Relativity Premium Relativity Premium Relativity Premium Relativity
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 19 SEGMENT & CHANNEL SHARE—ROBINSONS & AGENTS DOMINATE
SEGMENT SHARE
100 5% 90 2% 6% 80 11% 70 12% 60 7% 50 5% 9% 40 Direct 30 22% Independent Agent 20 Captive
SHARE BY CHANNEL WITHIN SEGMENT 12% 7% 10 2% 0 SAM DIANE WRIGHTS ROBINSONS
Based on U.S. households, 2013. Progressive analysis from various sources.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 20 ROBINSONS PRESENT A HUGE GROWTH OPPORTUNITY
PROGRESSIVE SHARE BY SEGMENT
10x 9x 8x 7x 6x 5x 4x 3x 2x 1x 0x SAM DIANE WRIGHTS ROBINSONS
Based on U.S. households, 2013. Progressive analysis from various sources.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 21 ROBINSONS ARE RELATIVELY INERT
THEY ARE VERY LOYAL THEY SHOP THE LEAST
SHOPPED FOR AUTO INSURANCE WITHIN THE LAST YEAR are extremely or % somewhat likely to renew with their 89 current insurer
have a 5+ year % tenure with their 67 current insurer SAM DIANE WRIGHTS ROBINSONS
Source: Millward Brown
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 22 OPPORTUNITY: DEVELOP ROBINSONS
WE DEVELOPED ALMOST 2 OUT OF 3 OF OUR ROBINSONS
SAM DIANE WRIGHTS ROBINSONS
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ORIGINAL SEGMENT OF CURRENT ROBINSONS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 23 OPPORTUNITY: TARGET YOUNGER ROBINSONS FOR ACQUISITION
THEY SHOP MORE THEY LIKE US
SHOPPED FOR AUTO INSURANCE WITHIN THE LAST YEAR PREFERENCE FOR PROGRESSIVE
ROBINSONS <35 ROBINSONS 35+ ROBINSONS <35 ROBINSONS 35+
Source: Millward Brown
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 24 WE INSURE THE ROBINSONS OF TOMORROW
AGE PROFILE MEDIAN AGE SINGLE/MARRIED 13 75+
PROGRESSIVE 36 51 / 49
U.S. POPULATION 51 38 / 62
MAJOR COMPETITOR 54 38 / 62
Source: JD Power & Associates Auto Insurance Survey, Spring 2012
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 25 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 26 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 27 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 28 STRATEGY
DEVELOP DIANE THROUGH LIFE EVENTS
- Extend Brand Preference
- Cross-Sell Aggressively
- Target Life Events
- Expand Product Availability
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 29 1 EXTEND BRAND PREFERENCE WITH DIANES
INDEX TO TOTAL FACEBOOK MOBILE APPS
AWARE 1.04
CONSIDER 1.14
PREFER 1.16
SHOP 1.09 DESKTOP BANNERS
Source: Millward Brown
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 30 1 CROSS-SELL AGGRESSIVELY TO DIANES AND TARGET LIFE EVENTS
CROSS-SELL LIFE EVENTS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 31 1 EXPAND PRODUCT AVAILABILITY: WHERE, WHEN, AND HOW
HOMEOWNER/RENTER CHANNELS
LOCAL AGENT PHONE DESKTOP MOBILE
PHA HO— PARTNER CALL MULTI-PRODUCT MULTI-PRODUCT LIMITED DISTRIBUTION CENTER QUOTING (MPQ) QUOTING (MPQ)
PGR RENTERS— MULTI-PRODUCT NON-MPQ NON-MPQ BROAD DISTRIBUTION SALES TEAM
IN-HOUSE AGENCY
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 32 1 PROGRESSIVE RENTERS WITH ASI ROLL OUT
Q2 2014 Q3/4 2014 2015 2016
HI AK
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 33 1 EXPAND PRODUCT AVAILABILITY: WHERE, WHEN, AND HOW
HOMEOWNER/RENTER CHANNELS
LOCAL AGENT PHONE DESKTOP MOBILE
PHA HO— PARTNER CALL MULTI-PRODUCT MULTI-PRODUCT LIMITED DISTRIBUTION CENTER QUOTING (MPQ) QUOTING (MPQ)
PGR RENTERS— MULTI-PRODUCT NON-MPQ NON-MPQ BROAD DISTRIBUTION SALES TEAM
IN-HOUSE AGENCY
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 34 1
IN-HOUSE AGENCY MULTI-CARRIER PLATFORM
Company A Company B Company C Company D Company E
$1,500 $1,250 $1,400 $2,100 $1,800
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 35 1 EXPAND PRODUCT AVAILABILITY: WHERE, WHEN, AND HOW
HOMEOWNER/RENTER CHANNELS
LOCAL AGENT PHONE DESKTOP MOBILE
PHA HO— PARTNER CALL MULTI-PRODUCT MULTI-PRODUCT LIMITED DISTRIBUTION CENTER QUOTING (MPQ) QUOTING (MPQ)
PGR RENTERS— MULTI-PRODUCT NON-MPQ NON-MPQ BROAD DISTRIBUTION SALES TEAM
IN-HOUSE AGENCY
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 36 1 PROGRESSIVE HOME ADVANTAGE ® (PHA) IS THE LEADER FOR DESKTOP QUOTING
SHARE OF DESKTOP RENTERS QUOTES
PROGRESSIVE HOME ADVANTAGE
COMPETITOR 1
COMPETITOR 2
COMPETITOR 3
COMPETITOR 4
OTHER
0 5% 10% 15% 20% 25% 30% 35% 40%
Source: comScore Property Insurance Benchmarker, Q3-Q4 ’13
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 37 1 EXPAND PRODUCT AVAILABILITY: WHERE, WHEN, AND HOW
HOMEOWNER/RENTER CHANNELS
LOCAL AGENT PHONE DESKTOP MOBILE
PHA HO— PARTNER CALL MULTI-PRODUCT MULTI-PRODUCT LIMITED DISTRIBUTION CENTER QUOTING (MPQ) QUOTING (MPQ)
PGR RENTERS— MULTI-PRODUCT NON-MPQ NON-MPQ BROAD DISTRIBUTION SALES TEAM
IN-HOUSE AGENCY
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 38 1 PROPERTY IS GOING MOBILE AS WELL
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 39 1 PHA RENTERS => PHA HOMEOWNERS
PHA HO CONVERSION FOR RENTERS QUOTING HO
8x
7x
6x
5x
4x
3x
2x
1x
0x NEW TO PHA CURRENT PHA RENTERS CUSTOMER
Conversion data among all personal auto policies as of Feb. 2014 who had quoted PHA within the last 12 months.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 40 1 DEVELOPING DIANES
DECAY CURVE: % OF CUSTOMERS WHO REMAIN OVER TIME
100% % LIFE EVENT -35 (1st home, marriage, move)
WHEN DIANES GO THROUGH A MAJOR LIFE EVENT, IN THE PAST WE LOST ABOUT 35% OF THEM
0% TIME
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 41 1 DEVELOPING DIANES
DECAY CURVE: % OF CUSTOMERS WHO REMAIN OVER TIME
100% $140 – $ 230 Mil Incremental LEP/Yr IMPROVED RETENTION
IMPROVING OUR RETENTION THROUGH THESE LIFE EVENTS— ESPECIALLY DEVELOPING MORE LIFE EVENT DIANES TO ROBINSONS—COULD (1st home, marriage, move) INCREASE OUR OVERALL LEP BY $140 – $230 MILLION/YEAR 0% TIME
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 42 INCREMENTAL LEP/YEAR => CALENDAR YEAR RESULTS
CALENDAR ASSUMPTIONS 2014 2015 2016 2017 2018 2019
INCREMENTAL LEP/YR: 2014 $40 $40 $40 $40 $40
$200 MILLION 2015 $40 $40 $40 $40 $40
2016 $40 $40 $40 $40 POLICY LIFE EXPECTANCY: 5 YEARS COHORT 2017 $40 $40 $40 2018 $40 $40
2019 $40 Hypothetical, Directional Data Only
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 43 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 44 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 45 STRATEGY
CROSS-SELL PROGRESSIVE HOME ADVANTAGE ®
- Homeowner Capacity
- Agent Acceptance
- Marketing to Existing Customers
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 46 HOMEOWNER CAPACITY 2 WE HAVE A STRONG POOL OF HOMEOWNER COMPANIES WHO UNDERWRITE PROGRESSIVE HOME ADVANTAGE (PHA) FOR US LARGE GROUP RELATIVELY PROFITABLE FINANCIALLY STABLE
5-YEAR HOMEOWNER COMBINED RATIO
110%
11 100% PHA COMPANIES 90% 1.4 PREMIUM/SURPLUS 80% RATIO FOR PHA REPRESENT COMPANIES 70% (ALL P/C) % 6 60% OF TOTAL U.S. HOMEOWNER MARKET 50% PHA Companies Total Homeowner Market Combined Ratio data from 2009 – 2013. Premium/Surplus ratio is a simple average of P/S ratios for PHA companies as of 2013 year end.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 47 2 HOMEOWNER CAPACITY AGENCY PHA EXPANDING THROUGH ASI
WA ME MT ND OR VT ID MN NH SD WI NY MA WY MI RI PA CT IA NJ NV NE OH UT IL IN DE CA CO WV MD KS MO VA KY NC TN CW Share AZ OK NM AR SC 2009 14%
MS AL GA 2010 22% TX LA 2011 35% 2012 52% FL 2013 60% HI AK 2014 84%
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 48 2 AGENT ACCEPTANCE AGENTS VIEW US AS MORE PREFERRED, AND GIVE US MORE SHOTS
% OF AGENTS WHO PUT “PREFERRED” AGENCY QUOTE MIX CUSTOMERS WITH PROGRESSIVE SHARE OF WRIGHTS & ROBINSONS
+6 pts
2012 2013 2007 2008 2009 2010 2011 2012 2013 2014
Source: Annual Agent Usage & Sat Study, 2013. De-branded survey (i.e., agent does not know survey is sponsored by Progressive). Survey question: “Which type of customers do you primarily bring to Progressive’s business?” Percent of agents who answered “Preferred” is shown above. Agency quote mix excludes National Account agencies and California Agency.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 49 2 MARKETING TO EXISTING CUSTOMERS AWARENESS OF OUR HOMEOWNER PROGRAM GROWING
PROGRESSIVE HOMEOWNERS INSURANCE AWARENESS AMONG PROGRESSIVE CUSTOMERS
100%
80%
60%
40%
20%
0% 2009 2010 2011 2012 2013
Source: Millward Brown
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 50 MARKETING TO EXISTING CUSTOMERS 2 IMPROVING AWARENESS OF PHA (AND SNAPSHOT® ) INCREASES THEIR PROGRESSIVE CONSIDERATION
PROGRESSIVE CONSIDERATION
23% AWARE OF PHA ONLY 13% 28% NOT AWARE OF PHA NOR AWARE OF PHA SNAPSHOT & SNAPSHOT + 20% AWARE OF SNAPSHOT ONLY
Source: Millward Brown
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 51 2
MARKETING TO EXISTING CUSTOMERS MARKET PHA WHEN THEY SERVICE THEIR AUTO/SPECIAL LINES POLICY
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 52 MARKETING TO EXISTING CUSTOMERS 2 EMAIL MARKETING
EMAILS TO EXISTING AUTO CUSTOMERS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 53 MARKETING TO 2 EXISTING CUSTOMERS DIRECT MAIL MARKETING USING HOMEOWNER EXPIRATION DATE
USING HOMEOWNER POLICY EXPIRATION DATE (X-DATE) WHEN CROSS-SELLING HOMEOWNERS MAKES IT MUCH MORE EFFICIENT
>3x BETTER RESPONSE RATE X SLIGHTLY BETTER CONVERSION = ~70% LOWER COST PER HOMEOWNER SALE PHA RESPONSE RATE PHA CONVERSION COST PER SALE (Quotes/Pieces Mailed) (Sales/Quotes)
HOMEOWNER HOMEOWNER HOMEOWNER X-DATE X-DATE X-DATE
OTHER OTHER OTHER
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 54 2 CROSS-SELL PROGRESS GROWTH OF OUR “MULTI-PRODUCT” BUSINESS
% OF AUTO CUSTOMERS WITH MORE THAN ONE PRODUCT
DIRECT AGENCY 18% 18%
12% 12%
6% 6%
0% 0% JAN 08 MAR 14 JAN 08 MAR 14
Special Lines +Auto Progressive Home Advantage +Auto Umbrella +Auto 3+ Progressive Products
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 55 2 BUNDLING WRIGHTS WHAT’S IT WORTH?
DECAY CURVE: % OF CUSTOMERS WHO REMAIN OVER TIME
$ $ 100% 9 0 – 170 Mil IMPROVED RETENTION Incremental LEP/Yr
INCREASING OUR CROSS-SELL RATE COULD INCREASE OUR LEP BY $90 – $170 MILLION/YEAR Robinsons 0% Wrights TIME
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 56 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 57 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 58 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 59 STRATEGY
ACQUIRE YOUNG ROBINSONS
- Digital Target Marketing
- Online Homeowner Quoting
- Compelling Product Features
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 60 DIGITAL TARGET MARKETING 3 TARGETING THE ROBINSONS WITH MEDIA AND MESSAGING SEGMENT MIX OF QUOTES, DIRECT AUTO
100% 90% 80% 70% 60% 50% 40% 30% Sam 20% Diane 10% Wrights Robinsons 0% GENERAL TARGETED ONLINE ADS ONLINE ADS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 61 ONLINE HOMEOWNER QUOTING 3 WE’RE LEADING THE WAY
SHARE OF DESKTOP HOMEOWNER QUOTES
PROGRESSIVE HOME ADVANTAGE
COMPETITOR 1
COMPETITOR 2
OTHER
0 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60%
Source: comScore Property Insurance Benchmarker, Q3 – Q4 ‘13
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 62 ONLINE HOMEOWNER QUOTING 3 MULTI-PRODUCT QUOTING FOR AUTO & HOME
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 63 3 ONLINE HOMEOWNER QUOTING “BUNDLED COMPARISON RATES” EXTENDS A KEY AUTO PRODUCT FEATURE
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 64 24 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 65 COMPELLING PRODUCT FEATURES SNAPSHOT ALIGNS WELL 3 WITH THE YOUNG ROBINSONS
POLICY LIFE EXPECTANCY*
1.20
40% 1.15 of new Robinson customers* choose Snapshot 1.10
Enrollees stay 1.05 11% longer 1.00 Those that get discount .95 19% longer .90 No Snapshot Enroll Enroll+Discount
*Among Direct Auto Robinson customers.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 66 COMPELLING PRODUCT FEATURES OUR UMBRELLA PRODUCT IS AN IMPORTANT PIECE OF THE 3 INSURANCE PUZZLE TO YOUNG ROBINSONS
UMBRELLA CUSTOMERS ARE UMBRELLA RETENTION LIFT MORE THAN 3X MORE LIKELY TO BE A YOUNG ROBINSON +34% 25%
20%
15%
10% POLICY LIFE EXPECTANCY
5%
0% HIGH LIMIT AUTO, HIGH LIMIT AUTO HIGH LIMIT HIGH LIMIT AUTO NON-UMBRELLA & UMBRELLA AUTO & UMBRELLA CUSTOMERS CUSTOMERS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 67 ACQUIRING YOUNG ROBINSONS 3 WHAT’S IT WORTH?
YOUNG ROBINSONS NEW POLICIES
$ $ 4 5 – 100 Mil Incremental LEP/Yr
INCREASING OUR TRAJECTORY ON ACQUIRING YOUNG ROBINSONS COULD INCREASE OUR LEP BY $45 – $100 MILLION/YEAR
2010 2011 2012 2013
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 68 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 69 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 70 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 71 STRATEGY
RETAIN THE ROBINSONS
- Responsive Products and Services - Continued Investment in Mobile - Low-Cost Structure - Care for Customers Marketing
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 72 WE KNOW BUNDLERS RETAIN LONGER, 4 AND ARE MORE SATISFIED WITH US
AUTO RETENTION* FOR SINGLE VS. AUTO NPS** FOR SINGLE VS. MULTI-PRODUCT CUSTOMERS MULTI-PRODUCT CUSTOMERS
BUBBLE SIZE = # OF POLICIES 60 BUBBLE SIZE = # NPS SURVEYS 2x 50 3+ Products 3+ Products 3+ Products 2 Products 3+ Products 2 Products 40 2 Products 2 Products 1x AUTO PLE AUTO NPS
30
20 ALL AUTO CUSTOMERS AUTO CUSTOMERS WHO ALL AUTO CUSTOMERS AUTO CUSTOMERS WHO OWN A HOME OWN A HOME
*Auto Retention here defined by Policy Life Expectancy (PLE) **NPS= Net Promoter ® score, a measure of customer satisfaction
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 73 WE ARE IMPROVING THE EXPERIENCE OF BUNDLERS ... 4 EARLY RESULTS OF ‘PREFERRED CUSTOMER CARE PILOT’
NET PROMOTER® SCORE
+5 PTS
CONTROL PREFERRED
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 74 ALL CUSTOMERS EXPECTING MORE 4 ‘DIGITALLY-RESPONSIVE SERVICE’
PAYMENTS TO PROGRESSIVE–MOBILE SHARE BY SEGMENT 25%
20% Diane Young Robinsons 15% Mature Robinsons
10%
5%
0%
MAR 2012 SEPT 2012 MAR 2013 SEPT 2013 MAR 2014
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 75 WE ARE IMPROVING THE EXPERIENCE OF BUNDLERS ... BY MAKING ALL OF THEIR PRODUCTS EASILY ACCESSIBLE 4 ONLINE (INCLUDING ON MOBILE)
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 76 ... AND EVEN MAKING CLAIMS REPORTING AS EASY AS PULLING OUT YOUR SMARTPHONE
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 77 WE’VE RAISED CONSUMER AWARENESS AND INCREASED 4 USAGE OF SERVICE CENTERS
SERVICE CENTER CUSTOMERS PER DAY
1,600 +62%
1,200
800
CUSTOMERS PER DAY 400
0 APR 2012 OCT 2012 APR 2013 OCT 2013 MAR 2014
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 78 EXCELLENT CLAIMS SERVICE IS 4 IMPORTANT TO ROBINSONS, AND THEY APPRECIATE OUR OFFERING TODAY
SERVICE CENTER USAGE CLAIMS NPS
30% 70
25% 65
20% 60
15% 55
10% 50
5% 45
0% OTHER CUSTOMERS ROBINSONS OTHER CUSTOMERS ROBINSONS
Source: Progressive internal data and claims satisfaction surveys, 2012-13. Among all states that have Service Centers.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 79 4 OUR ADVERTISING IS HELPING, TOO
DEFECTION SURVEY–WANTED TO BUY ALL FROM ONE COMPANY
16% 14%
12%
10%
8%
6% 4%
2% 0% NOV 2008 DEC 2009 APR 2011 AUG 2012 DEC 2013
Source: Progressive survey of customers who left Progressive. Survey question: What motivated you to shop for insurance quotes? Data is trailing 3-month average.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 80 COST STRUCTURE OBVIOUSLY MATTERS–AS WE KNOW, THE ‘WINNING’ COMPANIES HAVE LOW EXPENSE RATIOS 4 AND LOW LOSS ADJUSTMENT EXPENSE RATIOS
DWP GROWTH VS. EXPENSE RATIO, DWP GROWTH VS. LOSS ADJUSTMENT 2009 – 2013 EXPENSE RATIO, 2009 – 2013
BUBBLE SIZE = 2013 DWP BUBBLE SIZE = 2013 DWP
10% 10% USAA 8% 8% USAA GEICO 6% GEICO 6% PROGRESSIVE LIBERTY MUTUAL PROGRESSIVE LIBERTY MUTUAL 4% 4% 2% 2% STATE FARM STATE FARM ALLSTATE 0% TRAVELERS 0% 10% 15% 20% ALLSTATE 25% 30% 35% 10% 11% 12% 13% 14% 15% TRAVELERS -2% -2% AMERICAN FAMILY NATIONWIDE NATIONWIDE AMERICAN FAMILY FARMERS FARMERS DIRECT PREMIUM GROWTH (CAGR) DIRECT PREMIUM GROWTH (CAGR) -4% -4%
EXPENSE RATIO LAE RATIO
Source: Statutory data. Growth data are CAGRs (Compounded Annual Growth Rate) from 2009 to 2013. Expense Ratio and Loss Adjustment Expense Ratio data are 5-year averages for each company from 2009 – 2013.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 81 ESPECIALLY EXCITING FOR US ... WE KNOW THAT OUR 4 EXPENSE RATIO (ER) IS EVEN LOWER FOR ROBINSONS
LIFETIME ER BY SEGMENT
DIRECT AUTO, 2013
OVERALL LIFETIME DIRECT ER
ROBINSONS WRIGHTS DIANE SAM
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 82 WE’RE BALANCING OUR BRAND WITH ADDITIONAL 4 MESSAGES BEYOND SAVINGS LONGITUDINALCUSTOMER PERCEPTION MAP MAP
40 State Farm 2005 2013 Goal Allstate
20 GEICO QUALITY
Nationwide
Esurance
0 20 40 Source: Millward Brown VALUE
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 83 RETAINING ROBINSONS 4
$190 – $ 390 Mil DECAY CURVE: % OF CUSTOMERS WHO REMAIN OVER TIME Incremental LEP/Yr 100%
80%
60%
IMPROVING OUR ROBINSONS 40% RETENTION WITH ACTIVITIES WE 20% OUTLINED COULD IMPROVE OVERALL LEP/YEAR BY $190 – $390 MILLION/YEAR TIME Robinsons Robinsons +
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 84 TOTAL BENEFIT ACROSS ALL 4 INITIATIVES 4
$465 – $ 890 Mil Incremental LEP/Yr Graduating Dianes Bundling Wrights Acquiring Young Robinsons Retaining Robinsons WE THINK THE FOUR TOPICS WE DESCRIBED TODAY COULD GENERATE INCREMENTAL LEP IN THE BALLPARK OF $465 – $890 MILLION PER YEAR, ABOVE AND BEYOND WHAT WE’RE DOING TODAY
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 85 4
DIANE 2014 Age: 29 Auto
40 months PLE $4,600 LEP
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 86 DIANE DIANE DIANE 2015 2016 2017 44 months PLE 51 months PLE 62 months PLE $5,000 LEP $8,200 LEP $9,400 LEP DIANE & DIANE & DIANE & JAMES JAMES $ JAMES 2018 2019 2020 63 months PLE 75 months PLE 79 months PLE $13,200 LEP $15,300 LEP $16,400 LEP DIANE & DIANE & DIANE & JAMES JAMES JAMES 2021 2022 2023 81 months PLE 85 months PLE 88 months PLE $17,200 LEP $18,000 LEP $18,500 LEP
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 87 A DECADE WITH DIANE ...
PLE & LEP ESTIMATES FOR DIANE (& JAMES) THROUGH VARIOUS LIFE STAGES AND INSURANCE EVENTS
100 $20,000 90 $18,000 80 $16,000 70 $14,000 60 $12,000 50 $10,000 40 $8,000 30 $6,000 20 POLICY LIFE EXPECTANCY (PLE) POLICY LIFE EXPECTANCY $4,000 LIFETIME EARNED PREMIUM (LEP) 10 $ $2,000 0 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 PLE LEP
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 88 OUR OPPORTUNITY FOR GROWTH IS WITH THE ROBINSONS 4
PROGRESSIVE SHARE BY SEGMENT
10x 9x 8x 7x 6x 5x 4x
3x $5 BILLION OPPORTUNITY 2x 1x 0x SAM DIANE WRIGHTS ROBINSONS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 89
` / POLICY LIFE EXPECTANCY BRIAN DOMECK / ADVANCED ANALYTICS STEVE BROZ / PERSONAL LINES SANJAY VYAS / COMMERCIAL LINES UPDATE JOHN BARBAGALLO
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING LIGHTNING90 MEASURING POLICY LIFELIFE EXPECTANCY (PLE)
BRIAN DOMECK
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 91 MEASURING RETENTION Our favored measure of retention or customer persistency is Policy Life Expectancy (PLE) - Comprehensive view of retention expectations - Helps forecast policies in force and PLE DECAY CURVE implications for staffing needs - Helps us to identify acquisition cost thresholds 100%
HISTORICAL EXTRAPOLATED 0% 60 300 MONTHS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 92 MONTH 1 RETENTION RATIOS - Of policies that were incepted, the proportion that remained at the end of one month
100 FEB 2012 JUN 2011 JAN 2012 JUL 2011 MAY 2011 MAY FEB 2014 JAN 2014 DEC 2011 NOV 2011 OCT 2011 SEP 2011 APR 2011 JAN 2011 NOV 2010 OCT 2010 SEP 2010 FEB 2011 MAR 2011 MAR 2012 DEC 2010 AUG 2011 NOV 2013 DEC 2013 APR 2012 OCT 2013 JUN 2012 SEP 2013 2012 MAY JUL 2013 JUL 2012 AUG 2013 APR 2013 FEB 2013 MAR 2013 JAN 2013 SEP 2012 JUN 2013 NOV 2012 MAY 2013 MAY DEC 2012 OCT 2012 AUG 2012 (INCEPTION DATE) MAR 2014 (INCEPTION DATE) (INCEPTION DATE) FEB 2014 (INCEPTION DATE) % RETAINED
0
Recent Cohorts 1 MONTH FROM INCEPTION Earlier Cohorts
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 93 MAY 2012 MAY JUN 2012
RETENTION RATIOS JUL 2012 AUG 2012 SEP 2012 OCT 2012 NOV 2012 DEC 2012 JAN 2013 FEB 2013 MAR 2013
100 APR 2013 MAY 2013 MAY JUN 2013 JUL 2013 AUG 2013 SEP 2013 OCT 2013 NOV 2013 DEC 2013 JAN 2014 FEB 2014 (INCEPTION DATE) MAR 2014 (INCEPTION DATE) % RETAINED
1 2 3 4 5 6 7 MONTHS FROM INCEPTION
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 94 RETENTION RATIOS We use a 12-month moving average of previous retention ratios to establish our future policy life
100 APR 2013 expectations MAY 2013 JUN 2013 JUL 2013
AUG 2013 - Creates a more stable PLE value SEP 2013 OCT 2013 NOV 2013 DEC 2013
JAN 2014 - 12 months addresses seasonality FEB 2014 (INCEPTION DATE) MAR 2014 % RETAINED
1 2 3 4 5 6 7 MONTHS FROM INCEPTION
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 95 RETENTION RATIOS
100 APR 2013 MAY 2013 JUN 2013 JUL 2013 * 7th month is first month after AUG 2013 SEP 2013
OCT 2013 policy renewal NOV 2013 DEC 2013 JAN 2014 FEB 2014 (INCEPTION DATE) MAR 2014 FEB 2014 JAN 2014 % RETAINED DEC 2013 NOV 2013 OCT 2013 SEP 13
1 2 3 4 5 6 7 MONTHS FROM INCEPTION
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 96 RETENTION RATIOS YIELD THE PLE DECAY CURVE
100 APR 2013 MAY 2013 JUN 2013 JUL 2013 AUG 2013 SEP 2013 OCT 2013 NOV 2013 DEC 2013 JAN 2014 FEB 2014 (INCEPTION DATE) MAR 2014 FEB 2014 JAN 2014 % RETAINED DEC 2013 NOV 2013 OCT 2013 SEP 13
1 2 3 4 5 6 7 MONTHS FROM INCEPTION
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 97 T12 PLE In our PLE calculation, we use the 12-month moving average retention ratios for the first 60 months of the forecast period. Beyond 60 months, retention dynamics tend to stabilize. We use retention ratios that reflect longer-term retention patterns for months 61–300. ROBINSONS DECAY CURVE
100% APR 2013 MAY 2013 JUN 2013 JUL 2013 AUG 2013 SEP 2013 OCT 2013 NOV 2013 DEC 2013 JAN 2014 FEB 2014 (INCEPTION DATE) MAR 2014 FEB 2014 JAN 2014 DEC 2013 NOV 2013 OCT 2013 SEP 13
HISTORICAL EXTRAPOLATED 0% 60 300 MONTHS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 98 PLE HAS INCREASED OVER THE PAST 10 YEARS, DESPITE THE SETBACK IN 2012–2013
PLE
1.6x AGENCY AUTO DIRECT AUTO TOTAL AUTO
1.4x
1.2x
1.0x
2005 2006 2007 2008 2009 20102011 2012 2013 2014
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 99 TIME SERIES OF T12 PLE - The primary shortcoming of calculating PLE from a 12-month look back is that it adjusts slowly to changing business dynamics
AGENCY AUTO YOY PLE CHANGE DIRECT AUTO YOY PLE CHANGE
15 15
10 T12 10 T12
5 5
0 0 % %
-5 -5
-10 -10
-15 -15 JUL 2012 JUL 2012 JUL 2013 JUL 2013 JAN 2012 JAN 2012 JAN 2013 JAN 2013 JAN 2014 JAN 2014 JUN 2012 JUN 2012 JUN 2013 JUN 2013 SEP 2012 SEP 2012 SEP 2013 SEP 2013 FEB 2012 FEB 2012 FEB 2013 FEB 2013 FEB 2014 FEB 2014 APR 2012 APR 2012 APR 2013 APR 2013 OCT 2012 OCT 2012 OCT 2013 OCT 2013 MAY 2012 MAY AUG 2012 NOV 2012 DEC 2012 2012 MAY AUG 2012 NOV 2012 DEC 2012 MAY 2013 MAY AUG 2013 NOV 2013 DEC 2013 2013 MAY AUG 2013 NOV 2013 DEC 2013 MAR 2012 MAR 2012 MAR 2013 MAR 2013 MAR 2014 MAR 2014
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 100 RETENTION RATIOS YIELD T3 PLE Using a shorter look back period of 3 months reduces the reporting lag T3 PLE has some shortcomings due to seasonality, but on a year- 100 over-year comparison is more responsive to retention dynamics JAN 2014 FEB 2014 (INCEPTION DATE) MAR 2014 (INCEPTION DATE) FEB 2014 JAN 2014 % RETAINED DEC 2013 NOV 2013 OCT 2013 SEP 13
1 2 3 4 5 6 7 MONTHS FROM INCEPTION
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 101 TIME SERIES OF T12, T3 PLE
AGENCY AUTO YOY PLE CHANGE DIRECT AUTO YOY PLE CHANGE
15 15
10 T12 10 T12 T3 T3 5 5
0 0 % %
-5 -5
-10 -10
-15 -15 JUL 2012 JUL 2012 JUL 2013 JUL 2013 JAN 2012 JAN 2012 JAN 2013 JAN 2013 JAN 2014 JAN 2014 JUN 2012 JUN 2012 JUN 2013 JUN 2013 SEP 2012 SEP 2012 SEP 2013 SEP 2013 FEB 2012 FEB 2012 FEB 2013 FEB 2013 FEB 2014 FEB 2014 APR 2012 APR 2012 APR 2013 APR 2013 OCT 2012 OCT 2012 OCT 2013 OCT 2013 MAY 2012 MAY 2012 MAY AUG 2012 AUG 2012 NOV 2012 DEC 2012 2013 MAY NOV 2012 DEC 2012 2013 MAY AUG 2013 AUG 2013 NOV 2013 DEC 2013 NOV 2013 DEC 2013 MAR 2012 MAR 2012 MAR 2013 MAR 2013 MAR 2014 MAR 2014
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 102 AGENCY AUTO RETENTION MEASURES Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014
BEYOND PLE PLE Change T3 (%) -11% -11% -7% +1% +6% PLE Change T12 (%) -3% -6% -8% -5% -2% In addition to PLE, we plan in future Renewal Ratio T3 (pts) -0.9 -0.6 0.0 +0.8 +0.7 reporting to provide measures Renewal Ratio T12 (pts) -0.1 -0.5 -0.5 -0.1 +0.2 regarding changes in renewal rates % Growth of PIFs 10+ years old +26% +23% +21% +19% +17% - Renewal Ratio T3: (Policies that renewed in past 3 months)/(Policies that were up DIRECT AUTO for renewal in the past 3 months) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 - Renewal Ratio T12: (Policies that PLE Change T3 (%) -10% -8% -2% +8% +12% renewed in past 12 months)/ PLE Change T12 (%) -5% -7% -6% -2% +3%
(Policies that were up for renewal Renewal Ratio T3 (pts) -0.5 -0.1 +0.5 +1.3 +0.9 in the past 12 months) Renewal Ratio T12 (pts) 0.0 -0.3 -0.2 +0.3 +0.7
% Growth of PIFs 10+ years old +38% +31% +29% +27% +24%
Will be included in future external reporting
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 103 THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 104 WE CONTINUE TO A HISTORY OF IMPROVING SEGMENTATION IMPROVE 100% SEGMENTATION Perfect Pricing 90% WITH OUR 80% 2.0 - ca.1994 TRADITIONALADVANCED 70% 4.0 - ca.2000 PRODUCT 60% 50% 8.0 - 2009 Average Pricing ANALYTICS 40% 30% CUMULATIVE % OF LOSSES CUMULATIVE 20%
STEVE BROZ 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
High Risk POPULATION SORTED BY PREDICTED RISK Low Risk
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 105 WE CONTINUE TO A HISTORY OF IMPROVING SEGMENTATION IMPROVE 100% SEGMENTATION Perfect Pricing 90% WITH OUR 80% 8.3 - 2014 2.0 - ca.1994 TRADITIONAL 70% 4.0 - ca.2000 PRODUCT 60% 50% 8.0 - 2009 Average Pricing 40%
30% CUMULATIVE % OF LOSSES CUMULATIVE 20%
10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
High Risk POPULATION SORTED BY PREDICTED RISK Low Risk
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 106 ADDING A HISTORY OF IMPROVING SEGMENTATION SNAPSHOT ® 100% IMPROVES Perfect Pricing 90% SEGMENTATION 80% 8.3 - 2014 2.0 - ca.1994 FURTHER 70% SNAPSHOT - 2014 4.0 - ca.2000 60%
50% 8.0 - 2009 Average Pricing 40%
30% CUMULATIVE % OF LOSSES CUMULATIVE 20%
10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
High Risk POPULATION SORTED BY PREDICTED RISK Low Risk
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 107 SNAPSHOT LEVERAGES MORE DATA THAN TRADITIONAL SEGMENTATION
200
180 160 140 120 100 80
TERABYTES OF DATA 60 40 20 0 2010 2011 2012 2013 2014 2015
SNAPSHOT TRADITIONAL
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 108 NEW APPROACHES ALLOW US TO TEST SNAPSHOT HYPOTHESES FASTER AND MORE CONCURRENTLY
200 25
180 160 20 140 120 15 100 DAYS 80 10
TERABYTES OF DATA 60 40 5 20 0 0 2010 2011 2012 2013 2014 2015
TOTAL SIZE TB PROCESSING TIME DAYS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 109 THE NEW TECHNOLOGY ALSO ALLOWS US TO BRING IN MORE DATA FOR HYPOTHESIS GENERATION...
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 110 PERSONAL LINES
SANJAY VYASVYAS
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 111 CAN YOU PROVIDE SOME COLOR ON PERSONAL AUTO RESULTS IN YOUR KEY STATES?
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 112 -T12 Auto Written Premium (WP): $1.8 Bil +8.2% -T12 CR: 89.3 -0.5 pts -2013 PPA Market Share: 13.1%
Key Issue -2013 Personal Injury Protection (PIP) statute: So far, so good
Key Actions FLORIDA -Lowered rates ~8% in 2013 to match indications and statutory obligation -Monitor litigation regarding PIP statute, prepared to raise rates if adverse development from constitutionality challenges results in higher loss costs - Less uncertainty now than 2 years ago regarding re-opened PIP claims -First opportunity for Florida to obtain bundled product through Progressive
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 113 -T12 Auto WP: $1.3 Bil +4.0% -T12 CR: 96.0 +2.3 pts -2013 PPA Market Share: 8.7%
Key Issue -Growth TEXAS Key Action -Matching rates to indicated rate need resulted in 3% lower rates in 2013, modestly higher rates in Q1’14 -Home insurance carriers’ rate increases causing some market disruption and increased personal lines shopping - Increased local advertising
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 114 -T12 Auto WP: $758 Mil +14.8% -T12 CR: 96.7 -0.4 pts -2013 PPA Market Share: 6.9%
Key Issue -Strong sizable competitor -Aggressive loss trends NEW YORK Key Actions -Matching rate to indications resulted in rate increases of ~5% -Ensuring point-of-sale-accuracy on key rating elements such as proof-of-prior insurance -Product model-upgrade in Q2’13 improved segmentation and reduced complexity
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 115 -T12 Auto WP: $572 Mil +12.0% -T12 CR: 94.9 +0.1 pts -2013 PPA Market Share: 8.2%
Key Issue -Unlimited Personal Injury Protection MICHIGAN Key Actions -Matching rate to indicated rate need over last 3 years drove rate increases of 28%. Competitors reacting recently. -Several major product upgrades in recent years -Participating through trade groups in discussions on statutory reforms
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 116 PROGRESSIVE COMMERCIAL LINES (PCL)(PCL) JOHN BARBAGALLO
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 117 INDUSTRY RESULTS CHALLENGED BY DEVELOPMENT HEADWINDS
COMMERCIAL AUTO GROWTH & COMBINED RATIO (CR)
125% Industry WP Growth 45% 120% PGR WP Growth PGR consistently Industry CR 30% - 115% outperformed industry on PGR CR 110% 15% both top and bottom lines. 105% - T12 WP $1.78B +1% 100% 0% T12 CR 91.5 -4.4 pts 95% STATUTORY CR STATUTORY -15% - Choosing profit over 90% growth drove the recent WP 85% NWP GROWTH YOY STATUTORY -30% slowdown (addressing key states 80% and business segments). 75% -45% 1997 1999 2001 2003 2005 2007 2009 2011 2013 PRELIM.
Source: SNL, Progressive estimates
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 118 COMMERCIAL LINES’ SEGMENTATION APPROACH — BUSINESS MARKET TARGETS (BMT) — CAPTURES MEANINGFUL DIFFERENCES
FOR-HIRE SPECIALTY - Macroeconomic Influences Sand & Gravel, Coal, Logging, - Vehicle Type Debris Removal - Coverages FOR-HIRE TRANSPORTATION - Distribution Freight, Expediters, Non-TruckLoad, BUSINESS AUTO CONTRACTORS - Limit Non-Fleet Retail, Services, Farming, Landscapers, - Business Class Private Trucking Light (carpenters, plumbers), - Work Heavy (concrete, - Trends TOW excavators) Towing Services, - Development Garages, Dealers - Marketing
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 119 PCL GROWTH OF FOR-HIRE TRANSPORTATION (FHT) BMT OCCURRED AT A TUMULTUOUS TIME
ATA TRUCK TONNAGE INDEX VS OUT OF SERVICE ORDERS PER Sustained positive POWER UNIT (<6 POWER UNITS) - PCL FHT BI FREQ frequency trend 135 1.5% 2.15 All insurers, MCs with <6 Power Units - Increased enforcement 130 Incoming Progressive from Other Insurers 1.4% 1.95 from FMCSA 125 1.75 - Missed new business 1.3% 120 segmentation 1.55 115 1.2% - T36 cumulative 1.35 110 rate take 73% 1.1% 1.15 105 - T6 AY CR at target Truck Tonnage Index 1.0% 100 .95 BI Frequency - Transportation market is 95 0.9% .75 still hard 200801 200901 201001 201101 201201 201301 201401 12/2010 03/2011 06/2011 09/2011 12/2011 03/2012 06/2012 09/2012 12/2012 03/2013 06/2013 09/2013 12/2013
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 120 THE LARGEST SEGMENTS PRESENT THE BIGGEST OPPORTUNITY
FOR-HIRE SPECIALTY $1.6B Index High FOR-HIRE TRANSPORTATION Segment WP PCL Share $3.7B BUSINESS AUTO Index High $10.9B CONTRACTORS Index Low $7.3B Index Low
TOW $.6B Index High
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 121 GENERAL LIABILITY (GL) AND BUSINESS OWNERS POLICY (BOP) OFTEN DRIVE PLACEMENT DECISION
PREMIUM DISTRIBUTION PROGRESSIVE COMMERCIAL ADVANTAGE PRODUCT FOOTPRINT AGENT RESEARCH BY BUSINESS CLASS NUMBER OF CARRIER RELATIONSHIPS Q: OVERALL, HOW MUCH DO YOU LIKE 100% PROGRESSIVE’S AGENCY CONCEPT? WA ME 90% MT ND 80% OR VT 80% ID MN NH SD WI NY MA 62% 70% WY MI RI PA CT IA NJ 60% NV NE OH 60% UT IL IN DE CA CO WV MD KS MO VA 50% KY NC Other TN 40% 40% AZ OK Property NM AR SC 0 23% General Liability 30% MS AL GA 1 Commercial LA 2 20% Auto TX 3 20% 12% 10% FL 4 3% AK 0% HI M&F Roof Land Paint 0% Retail Drywall Electric Like Very Like Neither Unfavorable Concrete Plumbing Carpentry Much Somewhat Like Nor - Representative small businesses - Bundled GL/BOP offer increased Dislike where auto is typically less than consideration with contractors and - Channels require different solutions 50% of the insurance spend business auto customers
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 122 BIOGRAPHIES
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 123 GLENN RENWICK BRIAN DOMECK PRESIDENT AND CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
Glenn is President and Chief Executive Officer of Progressive. Prior to being named CEO in Brian joined Progressive in 1987 as Controller for Central States January 2001, Glenn served as Chief Executive Officer–Insurance Operations. In this role, Glenn Division (an Agency business unit). He went on to serve in numerous led the company’s product and claims development and delivery, customer service function, and other roles, including general management, product management, insurance sales efforts (through independent agencies, the Internet, and Direct over the phone). and business controllerships. Prior to becoming CFO in March 2007, Brian served as Demand Manager, overseeing all media buying for Glenn served as Business Technology Leader from 1998 through 2000. Prior to serving as Business Progressive Direct. Technology Leader, Glenn led the company’s Consumer Marketing group in developing and communicating Progressive’s consumer proposition–competitively priced auto insurance that comes Brian holds a bachelor’s degree from Duke University and an MBA with 24/7 in-person services from a company that listens and responds to consumer needs. from the Kellogg School at Northwestern University.
Glenn joined the company in 1986 as Auto Product Manager for Florida. In 1988, he became President of several Mid-Atlantic states, headquartered in Richmond, Virginia. Prior to assuming the Consumer Marketing role, he served as President of the California division in Sacramento, California.
Glenn has an undergraduate degree in mathematics and economics from the University of Canterbury, Christchurch, New Zealand. He has a master’s degree in engineering from the University of Florida, Gainesville.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 124 TRICIA GRIFFITH JOHN SAUERLAND GROUP PRESIDENT, CLAIMS GROUP PRESIDENT, PERSONAL LINES
Tricia was named Progressive’s Claims Group President in March 2008. John joined Progressive in 1990 as a summer intern before starting full time in 1991 as an Assistant Product Manager in Cleveland, Ohio. Since then he has Tricia joined Progressive as a Claims Representative in 1988. She has held a variety of served as Product Manager for, at various times, Iowa, Kansas, South Dakota, and managerial positions in Progressive’s Claims organization, including Unit Supervisor, Pennsylvania. He has also served as General Manager for Mississippi and later Branch Manager, and Auditor. She served as Regional Claims Manager in the Pittsburgh as General Manager for Minnesota and Wisconsin. John was the Midwest Claims area from 1996 to 1998 and became Head of Claims and Regional Sales Manager for General Manager responsible for the delivery of 24/7 Progressive Claims Service in western Pennsylvania in 1999. She later served as a Claims Consultant, collaborating Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio, and Wisconsin. In 2006 he was with claims managers countrywide to improve the claims review process. She also was named President of our Direct business, and following the 2007 reorganization the Process Manager responsible for Subrogation, the National Glass Unit, and the was named President of Personal Lines. 24-Hour Claims Loss Reporting Unit. Before her current position, Tricia served as Chief Human Resources Officer for six years. John has a bachelor’s degree in applied mathematics from UCLA and an MBA from the University of Chicago. Tricia has a bachelor’s degree from Illinois State University.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 125 JOHN BARBAGALLO STEVE BROZ GROUP PRESIDENT, COMMERCIAL LINES PROJECT MANAGEMENT OFFICE LEADER
John has been with Progressive since 1983, when he joined the company as a Steve Broz leads Progressive’s centralized Information Technology (IT) project Claims Adjuster. Since then, he has held management positions in Claims, Sales, management organization. This encompasses IT project, program and portfolio Operations and Marketing. John served as General Manager of the 12-state Great management for the enterprise. Plains Region, and then the Atlantic Region. In 2006 he was named President of Since joining Progressive in 2001, Steve’s held various roles across many business our Agency business, and is now President of Commercial Lines. areas, including Direct Product Manager, Agency Product Manager, Director Of John earned his bachelor’s degree in economics from Union College in Schenectady, Agency Customer Experience, and Regional General Manager. Steve assumed his New York, and his master’s degree in management from Purdue University, West current position in April 2011. Lafayette, Indiana. Steve has a bachelor’s degree in public policy from Princeton University and an MBA from the University of Virginia’s Darden School of Business.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 126 SANJAY VYAS DAN WITALEC PERSONAL LINES GENERAL MANAGER PERSONAL LINES CONTROLLER
Sanjay Vyas is the General Manager for Progressive’s North region in the Personal Dan Witalec is the Controller for Progressive’s Personal Lines business, a role he Lines business, a role he’s held since mid-2011. The North region is comprised of has held since late 2012. 10 states in the northeast U.S. Dan joined Progressive in 2004, and held a series of Product Manager positions, Sanjay joined Progressive in 2003, and has held a series of Product Manager managing P&L responsibility for auto insurance in states including Ohio, positions, managing P&L responsibility for auto insurance in states including Wisconsin, Alabama, North Dakota, and South Dakota. In late 2009 he took on Florida, Alabama, Kentucky, Mississippi, and Arkansas. the role of Media Business Leader, overseeing Progressive’s media budget and advertising placements. Prior to Progressive, Sanjay was a consultant for McKinsey & Company in Houston, Texas. He worked on projects in a variety of industries, including energy, retail and Prior to Progressive, Dan worked as a consultant for the Monitor Group in software. He also worked at CapitalOne. Cambridge, Massachusetts. His work focused on marketing strategy in a wide range of industries. Sanjay has a bachelor’s degree in materials science from Rice University, and a Master of Science from Carnegie Mellon. He has an MBA from The Tuck School Dan has a bachelor’s degree in economics with a minor in mathematics from the at Dartmouth. Massachusetts Institute of Technology and an MBA from the Harvard Business school.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 127 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Statements in this presentation 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 counterparties to certain financial transactions; the accuracy and adequacy of our pricing and loss reserving methodologies; the 2014 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 requested rate changes and the timing thereof; the effectiveness of INVESTOR our brand strategy and advertising campaigns relative to those of competitors; legislative and regulatory developments at the state and federal RELATIONS levels, including, but not limited to, 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 MEETING frequency of storms, hurricanes, snowfalls, hail, and winter conditions); changes in driving patterns and loss trends; 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 and trends in litigation and health care and auto 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.
THE PROGRESSIVE CORPORATION 2014 INVESTOR RELATIONS MEETING 128