2015 INVESTOR RELATIONS MEETING 2014 PPA RESULTS
12% PGR Direct RELATIVE Esurance: +14.6% NWP, CR= 117.6 GEICO 2014 PPA RESULTS PERFORMANCE California State Auto (AAA) 8% USAA Progressive 12% PGR Direct RELATIVE Esurance: +14.6% NWP, CR= 117.6 Erie State Farm CinFin MEASURES GEICO Liberty Mutual Mercury PGR Agency California State Auto (AAA) Industry PERFORMANCE Auto Owners 8% 4% USAA Progressive Allstate (ALL-Brand) Encompass (ALL-IA) Hartford MEASURES State Farm CinFin Erie American Family Metlife Liberty Mutual Industry Mercury PGR Agency Chubb Auto Owners Nationwide 4% Allstate (ALL-Brand) Travelers (IA only) Hartford 0% Encompass (ALL-IA) Infinity American Family MetlifeThe Hanover Group Chubb Nationwide Travelers (IA only) 0% Infinity Written Premium Growth Premium Written The Hanover Group -4% Farmers/21st Written Premium Growth Premium Written State Auto -4% Farmers/21st -8% State Auto -8% 112 108 104 100 96 92 112 108 104 100 96 92 Combined Ratio - Inverted Scale Combined Ratio - Inverted Scale
PGR results are reflective of a 53-week year in 2014 PGR results are reflective of a 53-week year in 2014 Source:Source: GAAP GAAP Financial Financial Statements Statements and Statutory and Data Statutory from SNL Data from SNL
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 1 Q1 2015 3-YEAR AVG 5-YEAR AVG 10-YEAR AVG SELECTED Combined Ratio 92.7 93.7 93.4 92.1 NWP Growth 8% 7% 6% 3% PPA Agency PIF Growth/ (3%) 1% 2% 1% PERFORMANCE PPA Direct PIF Growth 7% 5% 7% 8%
MEASURES Q1 2015 3 YEAR 5 YEAR 10 YEAR
AVG. Comprehensive ROE 19.6% (a) 18.9% 18.8% 19.1% Comprehensive Income $322 MM $3,679 MM $6,002 MM $11,412 MM (a) Trailing-12 month measure
Q1 2015 3-YEAR TOTAL 5-YEAR TOTAL 10-YEAR TOTAL
Dividends Declared Per Share — $3.46 $5.27 $7.64 Share Repurchases as % of Shareholders’ Equity 1% 11% 31% 93%
Q1 2015 2014 2010 2005
DWP Agency % PL 52% 54% 58% 66% DWP Direct % PL 48% 46% 42% 34%
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 2 Build on Claims advantage Customer Relationship NAIL THE BIG 4: Management WORK ENVIRONMENT, SELECTED Price to Risk ACCURACY, EFFICIENCY & CUSTOMER SERVICE TRANSACTION FOCUS CONTINUOUS PRODUCT OPERATIONAL DEVELOPMENT LIFECYCLE INVEST IN SCIENCE AND RELATIONSHIP FOCUS INSIGHT MORE GAS ON USAGE COST AND PERFORMANCE COMMENTARY BASED MAX SERVICE CENTER MEASURES ASSET EVEN MORE EFFECTIVE MATCHING RATE
Capital & Investments Systems & Technology Consumer/Customer Marketing DISCIPLINE IS GREAT - CONTINUOUS INVESTMENTS READY FOR PAY-OFF IN DATA & BUSINESS ANALYTICS ENHANCE BRAND POSITIONING CAPITAL HUSBANDRY FOCUS ON QUALITY PROSPECT GENERATION DELIVERABLES
SCIENCE AND EFFECTIVE INTEGRATION VS DEVELOP MEDIA USE SKILL FOCUS RELATIONSHIP FOCUS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 3 BASE LAYER FOR STRATEGIC FRAMEWORK
- Actionable segmentation - Overlay of Market Segments - Mapped to strategic actions - Highlighted boundary conditions as a focus - More explicit acknowledgement of “white space”
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 4 EVALUATING THE “WHITE SPACE”
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 5 THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 6 PAT CALLAHAN
Current results look like the tale of two distribution channels — Direct has momentum and Agency slowing — you say “Not to underestimate Progressive in Agency” — what does that mean?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 7 AGENCY
BOTH CHANNELS POLICIES IN FORCE CONTINUE 6 TO GROW— AGENCY STALLED 4
LATELY WHILE MILLIONS DIRECT CONTINUES 2 TO THRIVE
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
AGENCY AUTO PIFS DIRECT AUTO PIFS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 8 AGENCY THE AGENCY PERSONAL LINES BY CHANNEL CHANNEL AGENCY THE AGENCY 70% REMAINS PERSONAL LINES BY CHANNEL CHANNEL 50% 70% STRONG REMAINS 50% STRONG 30% MARKET SHARE
30% $90 BILLION MARKET SHARE 35% HOME & AUTO OF PL PREMIUMS COVERAGE 10% CONTROLLED BY $90 BILLION WRITTEN35% BY HOME & AUTO OF PL PREMIUMS INDEPENDENT COVERAGE 10% INDEPENDENTCONTROLLED BY AGENCIES WRITTEN BY AGENCIESINDEPENDENT INDEPENDENT AGENCIES AGENCIES 1995 2000 2005 2010 2011 2012 2013 2014 EST. 1995 2000 2005 2010 2011 2012 2013 2014 EST.
CAPTIVE AGENCIES CAPTIVEINDEPENDENT AGENCIES AGENCIESINDEPENDENT AGENCIESDIRECT DIRECT
Source: SNL data,Source: PGR SNL data,analysis, PGR analysis, and IIABA and IIABA market market share share report report
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 9 AGENCY
2014 AGENCY NEW BUSINESS SALES DECOMPOSITION
WE 1.2x UNDERSTAND WHAT’S DRIVING OUR AGENCY 1.1x BUSINESS SALES NEW BUSINESS DECLINE 1.0x 2013 ACCOUNT QUOTE CONVERSION 2014 SALES RESTRICTIONS DECLINE DECLINE SALES
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 10 AGENCY
NATIONAL ACCOUNTS: CALL CENTERS AND BANKS RESTRICTIONS TO AGENCY VOLUME AND NEW BUSINESS COMBINED RATIO RESTORE MARGINS 2.0x 1.15x REDUCED VOLUME FROM SPECIFIC 1.5x ACCOUNTS QUOTES AGENCY NEW BUSINESS COMBINED RATIO COMBINED NEW BUSINESS 1.0x 1.00x
JAN 2014 MAR 2014 JUN 2014 SEP 2014 DEC 2014 FEB 2015
% of AGENCY QUOTES NEW BUSINESS COMBINED RATIO COMBINED RATIO TARGET
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 11 AGENCY THE AGENCY CHANNEL IS HYPERCOMPETITIVE WITH TECHNOLOGY ACCELERATING THE RATE AUCTION ...
QUOTE MIX BY PLATFORM REAL-TIME RATER : FOR AGENTS ONLY CONVERSION
80% 29% 27% 60% 25% 40% 23% 21% 20% 19% 0% 17% 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
FOR AGENTS ONLY REAL-TIME COMPARATIVE RATER
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 12 AGENCY AND, WE RAISED RATES TO ENSURE PROFITABILITY ... DRIVING DOWN CONVERSION AND SALES
AGENCY WEEKLY NEW QUOTE COUNTS CONVERSION ON REAL-TIME QUOTES VS. RATE CHANGE PPA CHANNEL SHARE 14x 10x 12x 8x 10x 2x 6x 8x
6x 4x CONVERSION
CUMULATIVE RATE CHANGE RATE CUMULATIVE 4x 2x 2x 1x JAN MAR JUN SEPT DEC DEC 2011 JUN 2012 DEC 2012 JUN 2013 DEC 2013 JUN 2014 DEC 2014
CONVERSION CUMULATIVE RATE CHANGE 2013 T6 2014 T6
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 13 AGENCY AGENCY DESPITE DESPITERECENT CHALLENGES,RECENT CHALLENGES, WE HAVE WE THE HAVE FOUNDATION THE FOUNDATION IN PLACE IN PLACE TO RESTORETO RESTORE AGENCY AGENCYGROWTH GROWTH PERSONAL LINESPERSONAL CARRIERS LINES USED CARRIERS BY USED BY PROGRESSIVE AGENCYPROGRESSIVE VS. COMPETITORS AGENCY VS. COMPETITORS INDEPENDENT AGENTSINDEPENDENTDESPITE IN PAST RECENT AGENTS 12 MONTHS IN CHALLENGES, PAST 12 MONTHS WE HAVEIN THE THE INDEPENDENT FOUNDATIONIN THE AGENCY INDEPENDENT IN CHANNEL PLACE AGENCY CHANNEL TO RESTORE AGENCY GROWTH 35% 35% PROGRESSIVE PROGRESSIVE PERSONAL LINES CARRIERS USED BY PROGRESSIVE AGENCY VS. COMPETITORS INDEPENDENT AGENTS IN PAST 12 MONTHS 30% IN THE30% INDEPENDENT AGENCY CHANNEL 35% PROGRESSIVE 25% 25% SAFECO SAFECO 30% 20% 20% 25% SAFECO TRAVELERS TRAVELERS 15% 20% 15% EXPENSE RATIO EXPENSE RATIO EXPENSE RATIO TRAVELERS 10% 15% 10% EXPENSE RATIO EXPENSE RATIO 10% THE HARTFORD THE HARTFORD 5% 5% THE HARTFORD 5%
1x 2x1x 3x1x 2x 2x 4x 3x 3x 5x 4x 4x 5x 5x 6%2% 6%2% 6%2% 18%14%10% 18%14%10% 18%14%10% MARKETMARKET SHARE SHARE MARKET SHARE
Source: Marketvision Progressive market research PGR COMPETITORS Source: SNL data and Progressive analysis Source: Marketvision ProgressiveSource: market Marketvision research Progressive market research PGR COMPETITORSPGR Source:COMPETITORS SNL data and ProgressiveSource: analysis SNL data and Progressive analysis
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 14 AGENCY THE AGENCY SHARE OF THE AUTO MARKET IS SLOWLY DECLINING, BUT OUR PIVOTAGENCY TO BUNDLED HOME AND AUTO CREATES NEW OPPORTUNITY THE AGENCY SHARE OF THE AUTO MARKET IS SLOWLY DECLINING, BUT PRIVATE PASSENGER AUTO CHANNEL SHARE HOMEOWNERS CHANNEL SHARE
70% OUR PIVOT TO BUNDLED HOME AND60% AUTO CREATES NEW OPPORTUNITY
PRIVATE PASSENGER AUTO CHANNEL SHARE HOMEOWNERS CHANNEL SHARE
50% 70% 60% 40% 50% 30% 40%
30% 20% 20% 10% 10% 1995 2000 2005 2010 2014 EST. 2006 2008 2010 2012 1995 2000 2005 2010 2014 EST. 2006 2008 2010 2012 2014 EST 2014 EST
CAPTIVE AGENCIESCAPTIVE AGENCIESINDEPENDENTINDEPENDENT AGENCIES AGENCIES DIRECTDIRECT Source: SNL data, Progressive analysis, and IIABA market share report Source: SNL data, Progressive analysis, and IIABA market share report
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 15 AGENCY AGENTS AREN’T USING US FOR THEIR MORE PREFERREDAGENCY CUSTOMERS TODAY
STANDARD & NONSTANDARDAGENTS AREN’T USING US FOR THEIR AUTO BUSINESS PLACEMENTMORE PREFERRED CUSTOMERS PREFERREDTODAY AUTO BUSINESS PLACEMENT 80% 100% STANDARD & NONSTANDARD AUTO BUSINESS PLACEMENT PREFERRED AUTO BUSINESS PLACEMENT 80% 60% 80% 100%
80% 60% 60% 40% 60% 40% 40% 20% 40% 20% 20% 20%
PROGRESSIVE TRAVELERS SAFECOPROGRESSIVE LIBERTY TRAVELERS AUTO-OWNERS SAFECO LIBERTY AUTO-OWNERS PROGRESSIVEPROGRESSIVE TRAVELERS TRAVELERS SAFECO SAFECO LIBERTY LIBERTY AUTO-OWNERSAUTO-OWNERS MUTUAL MUTUAL MUTUALMUTUAL
2013 2014 Source: Marketvision Progressive agency usage study 2013 2014 Source: Marketvision Progressive agency usage study
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 16 AGENCY
EXPANDING AGENT LOYALTY TRACKING SURVEY AGENCY Offer a competitive UP-MARKET homeowners/renters product to all agents WILL REQUIREEXPANDING AGENT LOYALTY TRACKING SURVEY UP-MARKET Offer a competitive ENHANCING Offer competitivehomeowners/renters rates/discounts product to all agents WILL REQUIRE for customers OUR CUSTOMERENHANCING Offer competitive rates/discounts for customers AND AGENT OUR CUSTOMER Offer rewards/bonuses as incentives to increase business AND AGENT Offer rewards/bonuses VALUE PROPOSITION as incentives to increase business VALUE PROPOSITION 20% 40% 60% 80% 100% 20% 40% 60% 80% 100%
Source:Source: Progressive Progressive market market research research
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 17 AGENCY OUR NEW PRODUCT LOWERS RATES FOR ROBINSONS … AGENCYAND ADDS SEGMENTATION TO SAMS -4.1% DECREASE OUR NEW PRODUCT LOWERS RATESAUTO FOR PRODUCT ROBINSONS NEW BUSINESS … RATE CHANGE DISTRIBUTION SAM AND ADDS SEGMENTATION TO SAMS -4.1% (NOP, CLEAN, -6.4% 20% >25, PIF) DECREASE DECREASE AUTO PRODUCT NEW BUSINESS RATE CHANGE DISTRIBUTION SAM (NOP, CLEAN, ROBINSONS-6.4% 20% 15% >25, PIF) (POP, CLEAN,DECREASE ADV SHOP, HO) ROBINSONS 15% 10% (POP, CLEAN, ADV SHOP, HO) +3.0% -4.6% 10% +3.0% INCREASE -4.6%DECREASE 5% INCREASE SAM DECREASE 5% SAM (NOP, 25-44, ROBINSONS AVG CREDIT) (NOP, 25-44, ROBINSONS(POP, CLEAN, MULTI CAR) AVG CREDIT) (POP, CLEAN, MULTI CAR)
-10% -5% -10% 0 -5%5% 10%0 5% 10%
Note: POP=Prior POP=Prior insurance, insurance, NOP=No NOP=No Prior, Prior, POP NOPPOP (SAM) NOP (SAM) Clean=Driving record, record, HO=Homeowner, HO=Homeowner, PIF=Paid in PIF=Paid full in full
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 18 AGENCY RESULTS FROM OUR FIRST STATE ARE VERY ENCOURAGING
MISSOURI COMPARATIVE RATER RANKING MISSOURI AGENCY
4x 3x
3x 2x
FREQUENCY 2x NEW BUSINESS MIX NEW BUSINESS 1x
1x
JUN 14 AUG 14 OCT 14 DEC 14 FEB 15 PREFERRED HOMEOWNER MULTI CAR ADV SHOP
RANKINGS 1 2 3 4 PRIOR PRODUCT NEW PRODUCT
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 19 AGENCY AGENTS USE SOME OF OUR PREFERRED PRODUCTS TODAY … BUT OUR PROPERTYAGENCY SOLUTION LAGS THE COMPETITION % OF AGENTS SELLING AGENTSRECREATIONAL USE SOME OF OUR PREFERRED% OF AGENTS PRODUCTS SELLING PROPERTY TODAY AND … PRODUCTS INSURANCE UMBRELLA INSURANCE 100% BUT OUR PROPERTY SOLUTION100% LAGS THE COMPETITION
% OF AGENTS SELLING RECREATIONAL % OF AGENTS SELLING PROPERTY AND 80% PRODUCTS INSURANCE 80% UMBRELLA INSURANCE 100% 100%
60% 80% 60% 80%
40% 60% 40% 60%
40% 40% 20% 20% 20% 20%
PROGRESSIVE TRAVELERS SAFECO LIBERTY MUTUAL AUTO-OWNERS THE HARTFORD PROGRESSIVE TRAVELERS SAFECO LIBERTY MUTUAL AUTO-OWNERS THE HARTFORD PROGRESSIVE TRAVELERS SAFECO LIBERTY MUTUAL AUTO-OWNERS THE HARTFORD PROGRESSIVE TRAVELERS SAFECO LIBERTY MUTUAL AUTO-OWNERS THE HARTFORD
MOTORCYCLE BOAT MOTORCYCLE RV BOAT RV HOME HOMERENTERS RENTERSUMBRELLAUMBRELLA
Source:Source: Marketvision Marketvision survey survey
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 20 AGENCY PRODUCT AVAILABILITY IS THE FOUNDATION OF OUR BUNDLING STRATEGY
>90% OF U.S. POPULATION PHA COVERAGE BY END OF 2015
10 PROGRESSIVE HOME ADVANTAGE® ADDITIONAL PRIOR TO 2015 2015 POST 2015 PHA STATES IN 2015
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 21 AGENCY RENTERS DEEPENS OUR RELATIONSHIP WITH FUTURE ROBINSONS
24 ADDITIONAL RENTERS STATES BY END OF 2015
85% OF RENTERS PIFS PRIOR TO 2015 2015 POST 2015 ALSO HAVE AUTO WITH PROGRESSIVE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 22 AGENCY
REWARDING THE ASI/PROGRESSIVE PREFERENCE COMBINATION RECOGNIZING IS A CATALYST TO PARTNERSHIP BUILDING WRITING TRUE BUNDLES
PREFERRED rime ENCOURAGING TRIAL DELIVERING VALUE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 23 Restoring growth in Agency is a top priority. Our focus is on leveraging the ASI acquisition and our new Auto product design to deliver greater consumer and agent value.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 24 JOHN SAUERLAND
There is no shortage of news on macro trends in the auto insurance business—which ones have your attention and excite or concern you?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 25 MACRO TRENDS VEHICLE TECHNOLOGY; aka THE JOURNEY TO SELF-DRIVING CARS
2005 2007 2009 2011 2013 2015 2005 2007 2009 2011 2013 2015 GOOGLE NEWS HEADLINES AUTONOMOUS CAR SELF-DRIVING CAR
AUTONOMOUS CAR SELF-DRIVING CAR
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 26 MACRO TRENDS
TRANSPORTATIONMACRO TRENDS NETWORK COMPANIES & NUMBER OF NEW U.S. DRIVER-PARTNERS TRANSPORTATION 40,000 CAR-SHARENETWORK GROWTH COMPANIES & NUMBER OF NEW U.S. DRIVER-PARTNERS 40,000 CAR-SHARE GROWTH 30,000
30,000 20,000 Per Month 20,000 Per Month 10,000 10,000
JUL 2012 JAN 2013 JUL 2013 JAN 2014 JUL 2014 JAN 2015 JUL 2012 JAN 2013 JUL 2013 JAN 2014 JUL 2014 JAN 2015
Source: Hall, Hall, Krueger Krueger January January 2015 2015
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 27 MACRO TRENDS
WEEKLY U.S. REGULAR ALL FORMULATIONS MACRO TRENDS GAS PRICE RETAIL GASOLINE PRICES $5 CHANGES WEEKLY U.S. REGULAR ALL FORMULATIONS GAS PRICE RETAIL GASOLINE PRICES $4 CHANGES $5
$3$4
$2$3 Dollars Per Gallon $2
Dollars Per Gallon $1 $1 0 0 2004 2006 2008 2010 2012 2014 2004 2006 2008 2010 2012 2014
Source: U.S. U.S. Energy Energy Information Information Administration Administration
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 28 MACRO TRENDS YIELDS REMAIN VERY LOW 3.00%
2.50% 5-YEAR TREASURY
2.00%
1.50%
1.00% 5-Year Treasury Yield .50%
0% MAR 2009 MAR 2010 MAR 2011 MAR 2012 MAR 2013 MAR 2014 MAR 2015
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 29 MACRO TRENDS
LONG-TERM VIEW OF INFLATION-ADJUSTED MARKET GROWTH AND GROWTH FACTORS
MACRO TRENDS TWO PPA MARKET (IN $2011) ACCIDENT FREQUENCY (ALL COVERAGES) $200 25% LONG-TERM VIEW OF INFLATION-ADJUSTED MARKET GROWTH AND GROWTH FACTORS YEARS AGO $160 20% TWO PPA MARKET (IN $2011) ACCIDENT FREQUENCY (ALL COVERAGES) $120 15% $200 25%
Billions $80 Up 10% Down YEARS AGO $160 % 20% % $40$120 90 15% 5% 22
Billions $800 Up 10% 0 Down 1982 1986 1990 1994 1998% 2002 2006 2010 1982 1986 1990% 1994 1998 2002 2006 2010 $40 90 5% 22 0 0 NUMBER1982 1986 OF 1990 DRIVERS 1994 1998AND 2002VEHICLES 2006 2010IN U.S. 1982 1986ACCIDENT 1990 1994 SEVERITY 1998 2002 (IN 2006 $2011) 2010 300 $3500 NUMBER OF DRIVERS AND VEHICLES IN U.S. ACCIDENT SEVERITY (IN $2011) 250 $3000 300 $3500 $2500 200 250 $3000 $2000 $2500 150200
Millions % Growth in Vehicles $2000 $1500 100150 53 Up VEHICLES $1000 Millions % Growth in Vehicles $1500 % 100 53 % Growth in Drivers Up 50 41 VEHICLES DRIVERS$1000 $500 % 56 % Growth in Drivers 50 41 DRIVERS $500 56 0 0 0 1982 1986 1990 1994 1998 2002 2006 2010 0 1982 1986 1990 1994 1998 2002 2006 2010 1982 1986 1990 1994 1998 2002 2006 2010 1982 1986 1990 1994 1998 2002 2006 2010
Sources:Sources: Best’s Best’s Aggregates Aggregates and andAverages, Averages, Bureau Bureau of Labor of Statistics, Labor Statistics, Property Casualty Property Insurers Casualty Association Insurers of America, Association USDOT of F America,ederal Highway USDOT Administration Federal Highway Administration
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 30 MACRO TRENDS FREQUENCY REDUCING TECHNOLOGY IS PENETRATING THE FLEET
ELECTRONIC STABILITY FORWARD COLLISION CONTROL WARNING
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 31 MACRO TRENDS
%REGISTERED VEHICLES WITH TECHNOLOGY AVAILABLE AVAILABLE = STANDARD + OPTIONAL EQUIPMENT FLEETMACRO TRENDS 100% PENETRATION %REGISTERED VEHICLES WITH TECHNOLOGY AVAILABLE AVAILABLE = STANDARD + OPTIONAL EQUIPMENT FLEET 80% IS SLOWPENETRATION 100% IS SLOW 60%80%
40%60%
40% 20%
20% 0 0 INTRODUCED +10 YEARS +20 YEARS +30 YEARS +40 YEARS +50 YEARS INTRODUCED +10 YEARS +20 YEARS +30 YEARS +40 YEARS +50 YEARS
ELECTRONIC STABILITY ELECTRONIC STABILITY FORWARD COLLISION FORWARD COLLISION ELECTRONICCONTROL STABILITYACTUAL ELECTRONICCONTROL STABILITY PREDICTED FORWARD COLLISIONPREVENTION ACTUALFORWARD COLLISIONPREVENTION PREDICTED CONTROL ACTUAL CONTROL PREDICTED PREVENTION ACTUAL PREVENTION PREDICTED
Source: Highway Highway Loss Loss Data Data Institute Institute
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 32 MACRO TRENDS LONG-TERM GRADUAL FREQUENCY REDUCTION, NEAR-TERM PRICING ELECTRONIC STABILITY FORWARD COLLISION OPPORTUNITY CONTROL WARNING
- First pricing approach— - Early Results Quite Promising “one-way” or direct pricing - Frequency Down, Severity Up -> - Additional insights varied Better Loss Ratio pricing by vehicle type - FCW With Automated Braking - Now have robust enough Especially Effective data at model level - Interactions likely matter
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 33 MACRO TRENDS TNC & CAR-SHARING STILL SMALL
IMPACT? Likely, but very small
TNCS CAR SHARING FLEET
~0.2% U.S. Drivers ~0.02% U.S. Vehicles ~0.5% miles driven in U.S.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 34 MACRO TRENDS
IN DISCUSSIONS WITH LONGER-TERM PRIMARY PLAYERS POTENTIAL 9:41 AM 100%
TNC MODEL 9:41 AM 100% 9:41 AM 100%
PGR UNDERSTANDS USAGE & FREQUENCY
- Merged Apps - Proper Cost Allocation Benefit To TNCs - Risk Management Tool For TNCs
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 35 MACRO TRENDS
GASOLINE DEMANDED (SEASONALLY ADJUSTED) GAS MACRO TRENDS 9.20 DEMAND GASOLINE DEMANDED GAS (SEASONALLY ADJUSTED) IS UP 9.16 DEMAND 9.20 IS UP 9.129.16
9.089.12 Daily Average— 9.08
Daily Average— 9.04 9.04 Millions of Barrels Gasoline Supplied 9.00 Millions of Barrels Gasoline Supplied 9.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
TR 12 MO AVG MONTHLY POINTS TR 12 MO AVG MONTHLY POINTS
Source: U.S. U.S. Energy Energy Information Information Administration Administration
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 36 MACRO TRENDS
VEHICLEMACRO MILES TRENDS TRAVELED MOVING 12-MONTH TOTAL ON ALL ROADS VEHICLE MILES 3,100 NATURALLY MOVING 12-MONTH TOTAL ON ALL ROADS TRAVELED 3,100 FOLLOWEDNATURALLY FOLLOWED Vehicle Distance Traveled (Billion Miles) 2,800 Vehicle Distance Traveled (Billion Miles) 2,800 20042005 2006 2007 2008 2009 2010 20112012 2013 2014 2015 20042005 2006 2007 2008 2009 2010 20112012 2013 2014 2015
Source: U.S. U.S. DOT DOT
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 37 MACRO TRENDS HOW ABOUT ACCIDENT FREQUENCY?
BRAKES PER TRIP MILE MIX > 15 MILES 1000 MILES TRAVELED
55% 2x - Incremental discretionary miles have different frequency - We’re proactively 1x pricing this in
48% 0 JAN DEC LESS THAN 5-15 15-30 GREATER THAN 5 MILES MILES MILES 30 MILES
2013 2014 2015
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 38 MACRO TRENDS YIELDS REMAIN 3.00% 3.5
VERY LOW DURATION 3.0 2.50% 5-YEAR TREASURY PGR Well Positioned 2.5 From a Duration & 2.00% Quality Perspective 2.0 1.50% 1.5 1.00%
5-Year Treasury Yield 1.0 .50% PGR Fixed-Income Duration .05
0% 0 MAR 2009 MAR 2010 MAR 2011 MAR 2012 MAR 2013 MAR 2014 MAR 2015
PGR Fixed-Income Average Credit Quality AA+ AA AA- AA- AA- AA- A+
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 39 MACRO TRENDS
RELATIVE RETURNS TOTAL RETURN SINCE JAN 2009 45% REASONABLE 40% VERSUS “PASSIVE” 35% 30% APPROACH 25% 20% 15% % 10% ~5.4 5% ANNUALIZED RETURN 0% -5% MAR 2009 MAR 2010 MAR 2011 MAR 2012 MAR 2013 MAR 2014 MAR 2015
BARCLAYS INTERMEDIATE GOVERNMENT/CREDIT INDEX PGR FIXED-INCOME (FTE)
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 40 MACRO TRENDS
LONG-TERM VIEW OF INFLATION-ADJUSTED MARKET GROWTH AND GROWTH FACTORS
SO WHERE MACRO TRENDS PPA MARKET (IN $2014) ACCIDENT FREQUENCY (ALL COVERAGES) ARE WE $200 LONG-TERM VIEW OF INFLATION-ADJUSTED25% MARKET GROWTH AND GROWTH FACTORS SO$160 WHERE 20% TODAY? $120 PPA MARKET (IN $2014) 15% ACCIDENT FREQUENCY (ALL COVERAGES) $200 25% $80 10% AREBillions WE Up Down $160 20% $40 % 5% % TODAY? $120 103 15% 22 0 $80 0 10% Billions Up Down 1982 EST.% 2014 1982 % 2014 $40 103 5% 22 NUMBER OF DRIVERS0 AND VEHICLES IN U.S. ACCIDENT0 SEVERITY (IN $2014) 1982 EST. 2014 1982 2014 300 $4000 NUMBER OF DRIVERS AND VEHICLES IN U.S. ACCIDENT SEVERITY (IN $2014) 250 $3500 300 $3000 $4000 200 250 $2500 $3500 150 $2000 $3000 % Growth200 in Vehicles $2500 Millions $1500 Up 100 58 150 $2000 % Growth in Vehicles $1000 % 50 Millions Growth100 in Drivers58 $1500 Up % $500 58 42 $1000 % 0 50 42% Growth in Drivers 0 $500 58 1982 0 EST. 2014 1982 0 2014 1982 EST. 2014 1982 2014
VEHICLES DRIVERS VEHICLES DRIVERS
Sources: Best’s Aggregates and Averages,Sources: Bureau Best’s ofAggregates Labor Statistics, and Averages, Property Bureau Casualty of Labor Statistics, Insurers Property Association Casualty of InsurersAmerica, Association USDOT ofFederal America, Highway USDOT F Administration,ederal Highway Administration, Progressive Progressive Estimates Estimates
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 41 WEB & MOBILE MIGRATION CONTINUE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 42 MACRO TRENDS MOBILE SHIFT CONTINUES
PAYMENTS (TRL 12 MONTHS) DIRECT AUTO QUOTES (TRL 12 MONTHS) EXCLUDES AGENT PORTAL, EFT, PAPER
10 X 25 X
8 X 20 X
6 X 15 X
4 X 10 X
2 X 5 X
0 0
JUN 2012 FEB 2013 OCT 2013 JUN 2014 FEB 2015 JUN 2012 FEB 2013 OCT 2013 JUN 2014 FEB 2015
MOBILE DESKTOP PHONE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 43 MACRO TRENDS WE CONSTANTLY ARE IMPROVING OUR EXPERIENCE AND FUNNEL IN MOBILE
DIRECT AUTO MOBILE CONVERSION/ INET DESKTOP CONVERSION
9:41 AM 100% 9:41 AM 100% 100%
0 NOV 2010 MAY 2012 NOV 2013 FEB 2015
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 44 MACRO TRENDS
ONLINE DESKTOP PROPERTY ONLINEMACRO PROPERTY TRENDS QUOTE STARTS 2000 700 ONLINE DESKTOP PROPERTY IN ITS INFANCYONLINE PROPERTY QUOTE STARTS IN ITS INFANCY 2000 700 PGR 1000 ~ONE-THIRD 350 PGR 1000 SHARE OF 350
Industry (Thousands) ~ONE-THIRD SHARE OFONLINE Progressive (Thousands) Industry (Thousands)
ONLINEPROPERTY Progressive (Thousands) PROPERTY 0 0 0 0 1H 2011 2H 2014 1H 2011 2H 2014
INDUSTRY PROGRESSIVE INDUSTRY PROGRESSIVE
Source: comScore comScore
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 45 MACRO TRENDS PROPERTY GOING MOBILE 9:41 AM 100% 9:41 AM9:41 AM 100%100% 9:41 AM 100%
EASE OF USE IMPROVING
- Datafill - Pictures as answers
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 46 9:41 AM 100% 9:41 AM 100%
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 47 MACRO TRENDS
PPA MARKET & PGR SHARE
$200 9% $180 8% $160 7% $140 6% $120 5% $100 4% $80 $60 3% PGR Personal Lines Share $40 2% PPA Market In Billions ($2014) $20 1% 0 0 1982 1990 1998 2006 EST. 2014
PROGRESSIVE INDUSTRY
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 48 TRICIA GRIFFITH
How happy are you with progress on the agenda you outlined to reach the Robinsons?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 49 THE ROBINSONS
THEROBINSONS: ROBINSONS PROGRESSIVE SHARE BY SEGMENT STILL A HUGE SAM ROBINSONS: PROGRESSIVE SHARE BY SEGMENT STILLOPPORTUNITY A HUGE SAM OPPORTUNITY DIANE DIANE
WRIGHTS
WRIGHTS market) (within entire Segment Share Segment Share (within entire market) (within entire Segment Share ROBINSONS ROBINSONS 0 2 4 6 810 12 14 16 18 20 0 2 4 6 810 12 14 16 18 20
Progressive Market ShareProgressive (within segment) Market Share (within segment)
BasedBased on on U.S. U.S. households, households, 2014. Progressive2014. Progressive analysis from analysis various from internal various and external internal sources and external sources
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 50 THE ROBINSONS
THE ROBINSONS ROBINSON POLICIES IN FORCE 24% WE’RE GROWING ANNUAL GROWTH OUR ROBINSON (CAGR) ROBINSON POLICIES IN FORCE 24% WE’RE GROWING ANNUAL GROWTH OURBOOK ROBINSON QUICKLY (CAGR) BOOK QUICKLY BUT, WE CAN BUT,DO MORE WE CAN ... DO MORE ...
2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Based on on U.S. U.S. households, households, 2014. 2014.Progressive Progressive analysis fromanalysis various from internal various and external internal sources and external sources
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 51 THE ROBINSONS
THE BUSINESS ASSETS SKILLS REQUIREMENTS
MODEL AdditionalAdditional life-event and and Leading pre-Robinson Brand-consistent product needs-basedneeds-based productproduct “demand” generation presentation and experiences portfolioportfolio
Brand relevance and Brand-consistent product Customer data repository recognition for provider relationships above current capabilities future Robinsons
Effective & selective customer In-houseIn-house agencyagency expansion expansion to Operations and cost relationship management structure in place testto test and andsupplement supplement online onlinepresentation presentation
Marketing skills to current Distribution plurality customers matching those to broad market Increased “plug & play” inclusion of external quote and buy capabilities Consumer acceptance of single portal, multi- CustomerCustomer datadata segmentationsegmentation provider relationships skillsskills toto match current current strength strength in in ratingrating and media media segmentation segmentation
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 52 THE ROBINSONS
GROWINGTHE ROBINSONS ROBINSONS ROBINSON GROWTH DECOMPOSITION 2014 IS A BIT DIFFERENT GROWING ROBINSONS ROBINSON GROWTH DECOMPOSITION 2014 ISFROM A BIT OURDIFFERENT TRADITIONAL FROMAPPROACH OUR TRADITIONAL APPROACH(acquisitions) (acquisitions) In Force Policies
IN OTHER In Force Policies INSEGMENTS OTHER ... SEGMENTS ...
ROBINSONS +GRADUATES +NEW -DEFECTORS -DEFECTORS ROBINSONS ROBINSONS +GRADUATESend of ‘13 +NEW -DEFECTORS ROBINSONS-DEFECTORS(leave Progressive)ROBINSONS (unbundled) end of ‘14 end of ‘13 ROBINSONS (leave Progressive) (unbundled) end of ‘14
Based on on U.S. U.S. households, households, 2014. 2014.Progressive Progressive analysis fromanalysis various from internal various and external internal sources and external sources
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 53 THE ROBINSONS
WE NEED TO ANNUAL ROBINSON GRADUATION RATE
UNDERSTAND SAM WHO IS MOST LIKELY TO GRADUATE DIANE
WRIGHTS
0x 1x 2x 3x 4x 5x 6x 7x
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 54 THE ROBINSONS
A CLOSER LOOK ANNUAL ROBINSON GRADUATION RATE AT DIANE ...
DIANE AVG/POOR FINANCIAL RESPONSIBILITY
DIANE GOOD FINANCIAL RESPONSIBILITY
0x 1x 2x 3x 4x 5x 6x 7x
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 55 THE ROBINSONS
EXPECTEDTHE ROBINSONS TIME ANNUAL ROBINSON GRADUATION RATE BY AGE AND SEGMENT TO GRADUATE FOR 5x EXPECTED TIME ANNUAL ROBINSON GRADUATION RATE 4x BY AGE AND SEGMENT GOODTO GRADUATE FINANCIAL FOR 5x RESPONSIBILITYGOOD FINANCIAL (FR) 4x 3x 3x DIANESRESPONSIBILITY & WRIGHTS (FR) Rate Graduation 2x
DIANES & WRIGHTS Rate Graduation 2x 1x 1x 0x 0x 16 26 36 46 56 66 16 26 36 46 56 66 Age Age DIANE DIANE WRIGHTSDIANE DIANE SAM WRIGHTS GOOD FR AVG/POORSAM FR GOOD FR AVG/POOR FR
Source:Source: Progressive Progressive internal internal data, data,2014 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 56 THE ROBINSONS
OPPORTUNITIES ROBINSON GRADUATION RATES 7x
ARISE AS WE ADD 6x
SEGMENTATION 5x
4x
3x
2x
1x
0x SAM DIANE DIANE WRIGHTS AVG/POOR FR GOOD FR
<35 +MULTI CAR +HIGH LIMITS +FULL COVERAGE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 57 THE ROBINSONS
ROBINSON “GRADUATION RATES” BY FOCUSING AMONG FUTURE ROBINSON CUSTOMERS ON BIGGEST OPPORTUNITIES
WE’RE BEGINNING Rate Graduation TO IMPROVE OUR GRADUATION RATE 2011 2012 2013 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 58 THE ROBINSONS ADVANTAGE PRODUCT PROPERTY & CASUALTY LIFE & HEALTH Home Term Life Condo Universal Life OFFERINGS Renters Final Expense Classic Car Health Pet Health
Travel
Flood
Event/Wedding
AUTO RELATED FINANCIAL SERVICES
Mechanical Repair Plan Identity Theft Protection
PRIVATE-LABELED CO-BRANDED
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 59 THE ROBINSONS
THEUNDERSTANDING ROBINSONS OUR TRADITIONAL VIEW: AUTO ONLY MARKETPLACE & UNDERSTANDING OUR TRADITIONAL VIEW: AUTO ONLY MARKETPLACEOPPORTUNITIES & OPPORTUNITIES
= HOUSEHOLDS WITH PGR AUTO POLICY
= HOUSEHOLDS WITH PGR AUTO= POLICY HOUSEHOLDS WITH AT LEAST ONE VEHICLE = HOUSEHOLDS(105 WITH MILLION) AT LEAST ONE VEHICLE (105 MILLION)= TOTAL U.S. HOUSEHOLDS = TOTAL U.S. HOUSEHOLDS(116 MILLION) (116 MILLION) 9 MILLION 9 MILLION
ProgressiveProgressive data data for 2014for 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 60 THE ROBINSONS
THEUNDERSTANDING ROBINSONS OUR TRADITIONAL VIEW: AUTO ONLY MARKETPLACE & UNDERSTANDING OUR new view: with additional pgr products OPPORTUNITIES MARKETPLACE & INCREMENTAL 3 MILLION OPPORTUNITIES POLICIES
= HOUSEHOLDS WITH PGR POLICY (AUTO OR OTHER) = HOUSEHOLDS WITH FROM NON-AUTO PGR AUTO POLICY PROGRESSIVE PRODUCT = HOUSEHOLDS WITH PGR AUTO POLICY (9 MILLION)= HOUSEHOLDS WITH AT LEAST ONE VEHICLE = HOUSEHOLDS(105 WITH MILLION) AT LEAST ONE VEHICLE (105 MILLION)= TOTAL U.S. HOUSEHOLDS = TOTAL U.S. HOUSEHOLDS(116 MILLION) (116 MILLION) 12 MILLION 9 MILLION
ProgressiveProgressive data data for 2014for 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 61 THE ROBINSONS
THEUNDERSTANDING ROBINSONS OUR TRADITIONAL VIEW: AUTO ONLY MARKETPLACE & OPPORTUNITY TO CROSS new view: with additional pgr products SELLOPPORTUNITIES AUTO TO PGR 3 MILLION PGR POLICY CUSTOMERS WHO 3 MILLION PGR POLICY HAVE A
= HOUSEHOLDS WITH OPPORTUNITY TO CROSS SELL PGR POLICY (AUTO OR OPPORTUNITY TO CROSS SELL NON-AUTO POLICY OTHER) AUTOAUTO TOTO PGRPGR CUSTOMERSCUSTOMERS WHOWHO = HOUSEHOLDS WITH (12 MILLION) DO NOT CURRENTLY HAVE A PGR AUTO POLICY DO NOT CURRENTLY HAVE A PGR AUTO POLICY = HOUSEHOLDS WITH PGR AUTO POLICY PGR AUTO POLICY (9 MILLION)= HOUSEHOLDS WITH AT LEAST ONE VEHICLE = HOUSEHOLDS(105 WITH MILLION) AT LEAST ONE VEHICLE (105 MILLION)= TOTAL U.S. HOUSEHOLDS = TOTAL U.S. HOUSEHOLDS(116 MILLION) (116 MILLION) 9 MILLION
ProgressiveProgressive data data for 2014for 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 62 THE ROBINSONS
THEUNDERSTANDING ROBINSONS OUR TRADITIONAL VIEW: AUTO ONLY MARKETPLACE & UNDERSTANDING OUR new view: with additional pgr products MARKETPLACEOPPORTUNITIES & OPPORTUNITIES 8 MILLION PGR POLICY = HOUSEHOLDS THAT HOLD PGR AUTO & AT LEAST ONE OTHER POLICY (1 MILLION)
= HOUSEHOLDS WITH PGR POLICY (AUTO OR OPPORTUNITY TO CROSS SELL OTHER) = HOUSEHOLDS WITH other pgr products to (12 MILLION) PGR AUTO POLICY existing pgr auto = HOUSEHOLDS WITH customers PGR AUTO POLICY (9 MILLION)= HOUSEHOLDS WITH AT LEAST ONE VEHICLE = HOUSEHOLDS(105 WITH MILLION) AT LEAST ONE VEHICLE (105 MILLION)= TOTAL U.S. HOUSEHOLDS = TOTAL U.S. HOUSEHOLDS(116 MILLION) (116 MILLION) 9 MILLION
ProgressiveProgressive data data for 2014for 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 63 THE ROBINSONS
Countrywide destination scorecard
2015 MEETS RANGES JAN FEB MAR PENETRATION WE’RE THINKING Products per Total Household All customers x.xx x.xx x.xx FUTURE ROBINSONS/ROBINSONS x.xx x.xx x.xx
xx.x% xx.x% xx.x% ABOUT OUR MARKET xx.x% xx.x% xx.x% VOLUME Future Robinsons/Robinsons New Business App Growth FUTURE ROBINSONS/ROBINSONS x% to x% x.x% -x.x% x.x% Future Robinsons/Robinsons PLE (absolute) TOTAL PERSONAL AUTO xx.x xx.x xx.x DIFFERENTLY Future Robinsons/Robinsons PLE Growth TOTAL PERSONAL AUTO -x.x% -x.X% -x.x% Future Robinsons/Robinsons PLE (absolute) (000) TOTAL PERSONAL AUTO XXX,XXX XXX,XXX XXX,XXX Future Robinsons/Robinsons LEP Growth TOTAL PERSONAL AUTO XX.X% X.X% X.X% Gross Service Revenue $/Direct Auto PIF (Trl 12 data) DIRECT AUTO $XX to $XX $X.XX $X.XX $X.XX BRAND NPS Score Robinsons/Future Robinsons (YTD as of current Month End) TOTAL PERSONAL AUTO XX to XX XX.X XX.X XX.X AND WE HAVE NEW NPS Score Multi-Product Household (YTD as of curent Month End) TOTAL PERSONAL AUTO XX to XX XX.X XX.X XX.X AGENCY XX to XX xx.x xx.x xx.x DIRECT XX to XX XX.X XX.X XX.X Future Robinsons/Robinsons Non-Customer Consideration METRICS, TOO TOTAL PERSONAL AUTO XX% to XX% XX.X% XX.X% XX.X% Future Robinsons/Robinsons Customer Preference TOTAL PERSONAL AUTO XX% to XX% XX.X% XX.X% XX.X% EXPERIENCE PAA Yield versus Partner Call Center (Trl 3) TOTAL PERSONAL AUTO XXX% to XXX% XX.X% XX.X% % DNQ (HD) TOTAL PERSONAL AUTO XX% to XX% XX.X% XX.X% AGENCY # PHA Agencies TOTAL PERSONAL AUTO X,XXX to X,XXX X,XXX X,XXX X,XXX # PHA Prime Agencies TOTAL PERSONAL AUTO XXX to XXX COMING SOON # Homeowner Prime Bundles In-Force TOTAL PERSONAL AUTO XX,XXX to XX,XXX XX,XXX XX,XXX XX,XXX # Renters Bundles In-Force TOTAL PERSONAL AUTO YEAR END GOAL XXX X,XXX X,XXX XX,XXX to XX,XXX
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 64 THE ROBINSONS
PROGRESSIVE HOME ADVANTAGE ®/PROGRESSIVE ADVANTAGE AGENCY
SPECIALTY MANUFACTURED NONSTANDARD STANDARD PREFERRED ULTRA HOME PREFERRED
Property with unique Coverage specifically Customers or their Basic coverage needs Enhanced coverage Customer with high risk factors, such as for homes that are properties have higher and average risk needs and low risk value property and coastal location or factory built. than average risk profile. attributes. extensive assets. home-based business. factors.
~5% ESTIMATED MARKET ~5% ESTIMATED MARKET ~20% ESTIMATED MARKET ~45% ESTIMATED MARKET ~20% ESTIMATED MARKET ~5% ESTIMATED MARKET
VARIABLE HOME VALUE $30,000 AVERAGE $50,000 AVERAGE $150,000 AVERAGE $300,000 AVERAGE >$750,000 AVERAGE HOME VALUE HOME VALUE HOME VALUE HOME VALUE HOME VALUE 2 PARTNERS 1 PARTNER + PROGRESSIVE 4 PARTNERS 9 PARTNERS 6 PARTNERS 1 PARTNER
ABILITY TO MEET THE NEEDS OF MANY
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 65 THE ROBINSONS 2014 – 2015 PROGRESSIVE ADVANTAGE AGENCY GROWTH 6x 10x 9x 5x 8x 7x 4x 6x 3x 5x Quote Starts Quote
Does Not Qualify 4x 2x 3x 2x 1x 1x 0x 0x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2013 2014 2015
QUOTE STARTS SALES REPRESENTATIVES DOES NOT QUALIFY YIELD
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 66 THE ROBINSONS ROBINSON WRAP-UP INVISIBLE BALANCE SHEET
PROGRESSIVE UNEARNED LIFETIME EARNED PREMIUM 2014 AUTO BUSINESS TOTAL AUTO 5x
4x
3x $ Billions
Robinson Mix Robinson 2x
1x
0x 2010 2011 2012 2013 2014 NEW APP MIX ULEP MIX
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 67 THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 68 JEFF CHARNEY
Progressive is now a consumer brand of some note, how should we expect it to develop and reach targets going forward?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 69 THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 70 SUPERSTORE ANCHOR PROGRAMMING
HERO FOIL ENSEMBLE
SET CHANGES SPIN-OFFS NEW WORLDS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 71 THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 72 THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 73 6CS NETWORK PRINCIPLES: SIMPLIFIED
CONTENT & CONTEXT
CONSUMERS CUSTOMERS
CONNECTION & CONFIDENCE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 74 CONTENT: INVERTED PYRAMID
CORE SUPERSTORE FLO & FRIENDS SUPERSTORE SPINOFFS YOUNG FLO, SUPERWORLD, & FLO’S FAMILY DIRECT RESPONSE THE BOX DELAYED RESPONSE THE APRON MINI-SERIES RATE SUCKERS DIGITAL ONLY EVENTS/CAMEOS BABY MAN FLOBRON, MARSHAWN, ETC.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 75 6CS NETWORK PRINCIPLES: SIMPLIFIED
CONTENT & CONTEXT
CONSUMERS CUSTOMERS
CONNECTION & CONFIDENCE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 76 BABY MAN FLOBRON
ADOPT ADAPT
MARSHAWN GAMING
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 77 CONTEXT: SPRINKLES ARE FOR WINNERS RIGHT CONTENT IN THE RIGHT CONTEXT
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 78 CONTEXT: SPRINKLES ARE FOR WINNERS
SPRINKLES NATIONAL CHAMPIONSHIP ARE FOR GRAMMYS WINNERS
TWITTER ACTIVITY ROSE BOWL JAN – MAR 2015 OSCARS
TV ONLY TV + SOCIAL CONTENT ALTERNATE COMMERCIAL
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 79 IMS NMMA
LIVE
RV SHOW MC RALLY
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 80 NETWORK RATINGS: SUPERSTORE
SUPERSTORE YEARLY AVERAGES
HAS NETWORK RATINGS: SUPERSTORE 80 RUNWAY 70 SUPERSTORE 60 HAS YEARLY AVERAGES 5080
RUNWAY 4070 60 30
% OF RESPONDENTS 50 2040 30 % OF RESPONDENTS 10 20
10 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
FLOFLO LIKEABILITY LIKEABILITY LIKELIHOOD TO QUOTELIKELIHOOD TO QUOTE
Source: Ipsos ASI Source: Ipsos ASI
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 81 NETWORK RATINGS: BRAND A LEADER IN CORE BRAND DIMENSIONS
MAKES INSURANCE EASIER SAVES CUSTOMERS MONEY NETWORK RATINGS: BRAND
40 45 A35 LEADER IN CORE BRAND DIMENSIONS 40 30 35 MAKES INSURANCE EASIER SAVES CUSTOMERS MONEY 25 30 40 45 2035 40 25 30 35 15 20 % OF RESPONDENTS 25 30 % OF RESPONDENTS 1020 25 15 15 20 % OF RESPONDENTS 5 % OF RESPONDENTS 10 10 15 5 10 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
PROGRESSIVE PROGRESSIVESTATE FARM GEICO STATE FARMALLSTATE GEICO ALLSTATE
Source: Millward Brown National Tracking Study Source: Millward Brown National Tracking Study
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 82 NETWORK RATINGS: BRAND
GROWING 40
BRANDNETWORK RATINGS: BRAND QUALITY 35 GROWING 30 40 BRAND 25 QUALITY 35 2030
25
% OF RESPONDENTS 15 20 10
% OF RESPONDENTS 15
10 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015
PROGRESSIVEPROGRESSIVE STATE FARM STATE FARMGEICO ALLSTATEGEICO ALLSTATE
Source: Millward Brown National Tracking Study Source: Millward Brown National Tracking Study
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 83 NETWORK RATINGS: MEDIA
MEDIA SPEND: 1.60
EFFICIENTNETWORK RATINGS:AND MEDIA 1.40
GROWING 1.20 MEDIA SPEND: EFFICIENT AND 1.001.60 1.40 .80 GROWING 1.20
GROWTH INDEX .601.00
.40.80
GROWTH INDEX .60 .20 .40
.20 2012 2013 2014 2015 2012 2013 2014 2015
COSTCOST PER PROSPECT PER PROSPECTMEDIA SPEND MEDIA SPEND
Source: Internal data. 2015 levels expected based on current plans and year-to-date results. Source: Internal data. 2015 levels expected based on current plans and year-to-date results.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 84 6CS NETWORK PRINCIPLES: SIMPLIFIED
CONTENT & CONTEXT
CONSUMERS CUSTOMERS
CONNECTION & CONFIDENCE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 85 CONNECTION: CUSTOMER COMMUNICATIONS REPROGRAMMING EVERYTHING
DAY 0 DAY 1 DAY 10 DAY 20 DAY 48 DAY 62 DAY 95 DAY 103 DAY 125 DAY 135 DAY 150 DAY 171
DAY 9 DAY 80 DAY 136 DAY 157
DAY 55 DAY 97
DAY 15 DAY 35 DAY 83 DAY 180
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 86 CONNECTION: CUSTOMER COMMUNICATIONS REPROGRAMMED EVERYTHING
WELCOME AFFIRM EXTEND RENEW
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 87 CONNECTION: CUSTOMER COMMUNICATIONS
iPad 9:45 AM 100% iPad 9:45 iPadAM 100% 9:45 AM 100% iPad 9:45 AM 100%
PAYMENT SCHEDULED NOTIFICATION
BEFORE AFTER
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 88 CONNECTION: CUSTOMER COMMUNICATIONS
iPad 9:45 AM 100% iPad 9:45 AMiPad 100% 9:45 AM 100% iPad 9:45 AM 100%
ACTION NEEDED REMINDER
BEFORE AFTER
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 89 6CS NETWORK PRINCIPLES: SIMPLIFIED
CONTENT & CONTEXT
CONSUMERS CUSTOMERS
CONNECTION & CONFIDENCE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 90 CONFIDENCE: LIFE EVENTS
LIFE EVENTS: JOURNEY TO 100% CONFIDENCE 9:45 AM iPad
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 91 PHA TESTIMONIAL LOYALTY
MOTORCYCLE CLAIMS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 92 NETWORK RATINGS: CUSTOMER COMMUNICATIONS
CUSTOMER TOUCHPOINTS:
NPS 3/1 RETENTION LOGINS INBOUND CALLS CLICK RATE NPS 3/1 RETENTION LOGINS INBOUND CALLS CLICK RATE
44 89 14 .04 54 44 89 14 .04 54
42 12 52 42 12 52 88 .03 88 .03 10 50 10 50 40 40 8 48 8 48 38 87 .02 38 87 .02 6 46 6 46 MEASURE & 36 36 4 44 4 44 86 .01 86 .01 34 2 42 34 2 42
32 85 0 0 40 32 85 0 0 40
CHALLENGER CONTROL CHALLENGER CONTROL
REMEASURE NPS 3/1 RETENTION LOGINS INBOUND CALLS CLICK RATE NPS 3/1 RETENTION LOGINS INBOUND CALLS CLICK RATE 44 89 14 .04 54 44 89 14 .04 54
42 12 52 42 12 52 88 .03 88 .03 10 50 10 50 40 40 8 48 8 48 38 87 .02 38 87 .02 6 46 6 46 36 36 4 44 4 44 86 .01 86 .01 34 2 42 34 2 42
32 85 0 0 40 32 85 0 0 40
CHALLENGER CONTROL CHALLENGER CONTROL
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 93 RIGHT CONTENT, RIGHT CONTEXT
THE NETWORK WORKS
CREATING CONNECTION, WINNING CONFIDENCE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 94 TRICIA GRIFFITH
Your shareholder letter states in part: “simple math skills will quickly highlight the difference between additions and the net increase in policies … there remains significant opportunity to retain at levels we know are possible, but to-date have not been a hallmark of Progressive.” What are you doing to improve retention?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 95 RETENTION
PLE IS SLOWLY POLICY LIFE EXPECTANCY (PLE) INCREASING TRAILING 12 MoNTHS ENDING MARCH BUT, WE CAN DO MORE ...
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
DIRECT AUTO AGENCY AUTO
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 96 RETENTION
WE THINK ABOUT POLICY LIFE EXPECTANCY RETENTION IN TERMS 7x 6x
OF OUR FOUR 5x
CONSUMER 4x SEGMENTS 3x
2x OUR ACTIONS TO 1x IMPROVE PLE 0x VARY BY SEGMENT SAM DIANE WRIGHTS ROBINSONS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 97 RETENTION
SAM STRATEGY: PROGRESSIVE SAM CUSTOMERS TODAY KEEP ON SEGMENTING
NEWEST PRODUCT 60% REMAIN 40% EARLY MODEL IS MORE Relative to other Sams, these Sams: DEFECTORS
Policy Life Expectancy COMPETITIVE FOR 17x Greater
New Business Loss MANY SAMS Ratio Significantly Better
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 98 RETENTION DIANE STRATEGY:
FREQUENCY OF SHOPPING LIFE EVENTS STYLIZED DECAY CURVE RELATIVE TO MOVING MONTH LENGTHEN 100% STAY WITH US % Retained
-6 -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5 Time Since Policy Inception MONTHS ADD AUTO ONLY ADD RENTERS Shopping Before Moving Shopping After Moving HOMEOWNERS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 99 RETENTION
WRIGHTSRETENTION STRATEGY: HOUSEHOLDS BY TYPE, 1970 TO 2012
Other Non-family Households 1.7 3.6 4.6 5.0 5.7 5.6 6.2 6.1 UNDERSTANDING Women Living Alone 11.5 14.0 14.9 14.7 HOUSEHOLDS BY TYPE, 1970 TO 201214.8 15.3 14.8 15.2 WRIGHTS STRATEGY: Men Living Alone 5.6
8.6 Other Non-family Households 1.7 Other Family Households 3.610.6 4.6 5.0 9.75.7 10.25.6 6.2 6.1 CHANGING 10.7 11.3 11.9 12.3 UNDERSTANDING Women Living Alone 11.5 14.0 14.9 12.9 14.7 14.8 15.3 14.8 15.2 Men Living Alone 5.6 14.8 15.6 16.0 16.7 8.6 17.4 17.8 Other Family Households 10.6 DEMOGRAPHICS 9.7 10.2 10.7 11.3 CHANGING Married Couples 30.3 11.9 12.3 without Children 12.9 14.8 15.6 29.9 16.0 16.7 17.4 17.8 DEMOGRAPHICS 29.8 Married Couples 28.9 30.3 28.7 without Children 28.3 28.8 29.1 29.9 29.8 28.9 28.7 28.3 Married Couples 28.8 29.1 with Children 40.3 30.9 Married Couples 26.3 25.5 24.1 22.9 20.9 with Children 40.3 19.6 30.9 26.3 25.5 24.1 22.9 20.9 19.6 1970 1980 1990 1995 2000 2005 2010 2012 1970 1980 1990 1995 2000 2005 2010 2012
Source: U.S. U.S. Census Census Bureau, Bureau, Current Current Population Population Survey, Annual Survey, Social Annual and Economic Social and Supplement, Economic selected Supplement, years, 1970 selected to 2012 years, 1970 to 2012
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 100 RETENTION
RETENTIONWRIGHTS STRATEGY: DISTRIBUTION OF U.S. HOUSEHOLDS UNDERSTANDING WRIGHTS STRATEGY: DISTRIBUTION OF U.S. HOUSEHOLDS CHANGING UNDERSTANDING FAMILY HOUSEHOLDS at least one child under 18 NON-FAMILY CHANGINGDEMOGRAPHICS HOUSEHOLDS FAMILY HOUSEHOLDS at least one child under 18 NON-FAMILY DEMOGRAPHICS HOUSEHOLDS
FAMILY HOUSEHOLDS no child under 18 FAMILY HOUSEHOLDS no child under 18
Source: U.S. U.S. Census Census Bureau, Bureau, Current Current Population Population Survey, Annual Survey, Social Annual and Economic Social and Supplement, Economic and Supplement,American Community and American Survey, 2011 Community Survey, 2011
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 101 RETENTION
new progressive product SINGLE STATE EARLY RESULTS ROBINSONS Quote Changes Sales Changes Conversion Changes Rate Changes (Seasonally-Adjusted) (Seasonally-Adjusted) (Seasonally-Adjusted) (Seasonally-Adjusted)
STRATEGY: MC PREFERRED SC PREFERRED BETTER RATES TOT PREFERRED POP MC HO -10% POP SC HO For customers who own a TOT POP HO home and have multiple carS
POP MC NoHO 10% RATE DECREASE BETTER RATES: POP SC NoHO TOT POP NO AND BIG EARLY INCREASES IN Our latest product is CONVERSION. NoP MC HO showing significant NoP SC HO improvements for TOTAL NoP HO NoP MC NoHO certain Robinson / NoP SC NoHO “preferred” subsegments TOT NoP NoHO
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 102 RETENTION
Rate changes for Progressive customers ROBINSONS from a big product change in a state AFTER RATE STABILITY STRATEGY: 7x STABLE RATES 6x 5x
4x
3x Number of Customers 2x
1x
0x < -10% -10% 0% 0% 10% >10%
Rate Changes
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 103 RETENTION FOR ALL SEGMENTS:
COMPETITIVE EXPENSE RATIO (ER) LOSS ADJUSTMENT EXPENSE RATIO (LAE) COST TOTAL AUTO TOTAL AUTO
1.7 1.0 STRUCTURE POINTS POINTS
We continue to make progress in lowering our expenses—ER & LAE 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 104 RETENTION
PATH TO 1.5x PLE RETENTION PATH FORWARD
By pursuing our segment-focused strategy, we see a path forward to a significant increase in retention and PLE over time PLE
PLE TODAY SAM DIANEWRIGHTS ROBINSONS COST PATH TO STRUCTURE 1.5x PLE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 105 THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 106 JOHN SAUERLAND
Homeowners—Why, Why Now, & Where does this take you?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 107 HOMEOWNERS
PROGRESSIVE SHARE BY SEGMENT
SHAREHOMEOWNERS OF SAM ROBINSONS PROGRESSIVE SHARE BY SEGMENT SHARE OF IS LOWROBINSONS SAM IS LOW DIANE DIANE WRIGHTS
WRIGHTS
AGENCY DIRECT Segment Share (within entire market) (within entire Segment Share
ROBINSONS AGENCY DIRECT Segment Share (within entire market) (within entire Segment Share ROBINSONS
0 5 10 15 20 0 5 10 15 20 Progressive Market Share (within segment) Progressive Market Share (within segment)
Source:Source: Based Based on on U.S. U.S. households, households, 2014. 2014. Progressive Progressive analysis from various sources. analysis from various sources.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 108 HOMEOWNERS ROBINSONS’
HOUSEHOLD DIRECT ROBINSONS AGENCY ROBINSONS
ECONOMICS 4x 4x
3x 3x
2x 2x Lifetime Profit Lifetime Profit 1x 1x
0 0 AUTO AUTO + AUTO + AUTO + AUTO AUTO + AUTO + AUTO + HOMEOWNERS HOMEOWNERS + HOMEOWNERS + HOMEOWNERS HOMEOWNERS + HOMEOWNERS + MOTORCYCLE MOTORCYCLE + MOTORCYCLE MOTORCYCLE + BOAT BOAT
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 109 HOMEOWNERS DIRECT PROGRESS HAS BEEN GOOD
DIRECT
20%
15%
10%
5%
0
JAN 2008 MAR 2015
SPECIAL LINESS + AUTO PROGRESSIVE HOME ADVANTAGE + AUTO UMBRELLA + AUTO 3+ PGR PRODUCTS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 110 HOMEOWNERS
EXPANDING OUR PHA UNDERWRITERS 12 DIRECT MODEL PROGRESSIVE HOME ADVANTAGE POLICIES IN FORCE (PIF) 10 STILL VERY 50x THIRD-PARTY 45x 8 40x FOCUSED 35x 30x 25x 4 PHA PIF 20x 3 3 15x 10x 1 1 5x 0 2007 2008 2009 2010 2011 2012 2013 2014
PHA PIF PHA UNDERWRITERS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 111 HOMEOWNERS AGENCY PROGRESS HAS BEEN SLOWER
DIRECT AGENCY
20% 20%
15% 15%
10% 10%
5% 5%
0 0
JAN 2008 MAR 2015 JAN 2008 MAR 2015
SPECIAL LINESS + AUTO PROGRESSIVE HOME ADVANTAGE + AUTO UMBRELLA + AUTO 3+ PGR PRODUCTS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 112 HOMEOWNERS
AUTO+HOMEOWNERS:HOMEOWNERS ESTIMATED INDUSTRY PREMIUM ($BIL)
ROBINSONSAUTO+HOMEOWNERS: ESTIMATEDAUTO INDUSTRY + HOMEOWNERS PREMIUM ($BIL)
CAPTIVE INDEPENDENT > HALF OFROBINSONS IA CHANNEL OPPORTUNITY AUTOAGENT + HOMEOWNERSAGENT DIRECT TOTAL CAPTIVE INDEPENDENT > HALF OF IA CHANNEL OPPORTUNITY AGENT AGENT DIRECT TOTAL SAM $5 $9 $4 $18
SAM $5 $9 $4 $18 DIANE $18 $12 $16 $46
DIANE $18 $12 $16 $46 WRIGHTS $26 $22 $12 $60 WRIGHTS $26 $22 $12 $60
ROBINSONS $77 $50 $13 $140 ROBINSONS $77 $50 $13 $140
TOTALTOTAL $126$126 $93 $93 $45 $45 $264 $264
Source: AM Best, Progressive Estimates Source: AM Best, Progressive Estimates
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 113 HOMEOWNERS
HOMEOWNERS AND PPA (AUTO) IMPROVING HOMEOWNERS AVERAGE WRITTEN PREMIUM (AWP) FUNDAMENTALS $1,200 HOMEOWNERS AND PPA (AUTO) IMPROVING AVERAGE WRITTEN PREMIUM (AWP) FUNDAMENTALS $1,200 $800 Average Written Premium 2003-2014 (CAGR) $800 % Average PPA: 0 Written Premium 2003-2014 (CAGR)$400 % % HO: 5 PPA: 0 $400 %
HO: (per year) Premium Written Average 5
0 (per year) Premium Written Average 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ES 2014 ES 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ES 2014 ES HO AWP PPA AWP Per Vehicle HO AWP PPA AWP Per Vehicle
Source: Ohio Insurance Institute (2014Source: NAIC Ohio data Insurance and InstituteODI). Avg. (2014 premiums NAIC data areand ODI).on a Avg.per yearpremiums basis. are Data on a perabove year isbasis. Country-wide Data above is da Country-wideta. data.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 114 HOMEOWNERS
THE HOMEOWNERSBEST PROFITABILITY ANALYSIS AMONG DO WELL TOP 50 HOMEOWNER WRITERS THE BEST (NET BASIS, 2010-2014) PROFITABILITY ANALYSIS AMONG DO WELL QUINTILETOP 50 HOMEOWNER 5-YRWRITERS CR 5-YR LR 5-YEAR NWP ($000s) (NET BASIS, 2010-2014)
1QUINTILE 5-YR CR97.5 5-YR LR 50.0 5-YEAR NWP ($000s)17,652,490
21 97.5 99.6 50.0 58.7 17,652,490 107,386,252
32 99.6 103.5 58.7 63.6 107,386,252 115,486,237
3 103.5 63.6 115,486,237 4 102.3 68.1 35,241,078
4 102.3 68.1 35,241,078 5 115.8 79.7 20,045,777 5 115.8 79.7 20,045,777
TOTAL 102.4 62.6 295,811,834 TOTAL 102.4 62.6 295,811,834
Source:Source: Statutory Statutory Data Data from from SNL SNL
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 115 HOMEOWNERS ATTRACTIVE RETURNS ARX SELECTED FINANCIAL INFORMATION ($ in Millions) (unaudited) DIRECT NET NET GAAP PREMIUMS PREMIUMS PREMIUMS COMBINED COMPREHENSIVE WRITTEN WRITTEN EARNED RATIO INCOME
2010 $662 $369 $323 73.2 $73 2011 725 410 380 93.0 50 2012 873 532 466 88.7 59 2013 1,023 671 602 74.8 95 YTD 2014 (THROUGH 9/30) 875 554 536 86.5 75
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 116 HOMEOWNERS
ATTRACTIVEHOMEOWNERS RETURNS ATTRACTIVE Combined Ratio RETURNS 80% 85% 90% 95% 100% 105% Combined Ratio 1.0 80%17% 85%13% 90%10% 95%7% 100%3% 105% 0% 1.5 24% 19% 14% 9% 4% -1% 2.01.0 17%31% 13%24% 10% 17% 7% 11% 3% 4%0% -3% 2.51.5 24%38% 19%3o% 14% 21% 9% 13% 4% 4%-1% -4% 2.0 31% 24% 17% 11% 4% -3% 3.0 45% 35% 25% 15% 5% -5% 2.5 38% 3o% 21% 13% 4% -4% Premium / Surplus Premium 52% 41% 29% 17% 5% -6% 3.53.0 45% 35% 25% 15% 5% -5%
Premium / Surplus Premium 3.5 52% 41% 29% 17% 5% -6%
Illustrative:Illustrative: Key Key Assumptions: Assumptions: Investment Investment income incomereturn 3.5%. return Income 3.5%. tax rateIncome 33%. taxInvestments rate 33%. 70% Investments of total assets. 70% of total assets.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 117 ROBUST REINSURANCE
- Target Retention of Less Than 10% of ARX Surplus Per Occurrence - Reinsurance Premium Protection - Highly Diversified Program - Virtually All A or Better AMBest Rated - Multi-Year Contracts
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 118 HOMEOWNERS
HOUSEHOLD ROBINSONS UNDERWRITING
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 119 HOMEOWNERS REPORTING: WHAT TO EXPECT
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 120 PAT CALLAHAN
Do you see big data and advanced segmentation as eroding or expanding competitive advantage?
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 121 ANALYTICS EMERGING DATA AND ANALYTICAL TOOLS CREATE OPPORTUNITY FOR PROGRESSIVE
1,826 3.6 MILLION 13 BILLION 600 68% 1.9 11.2 70 VEHICLE PETABYTES MEGABYTES MILES GIGABYTES OF PEOPLE BILLION PETABYTES TERABYTES OF DATA PRODUCED PER DAY WILL SHARE TRIPS OF STORAGE OF CLAIMS TRAVELED THE INTERNET BY A TYPICAL OF DATA TO SAVE AVAILABLE NOTES CARRIES DAILY OFFICE FROM EACH WORKER CONNECTED IN 2015 CAR
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 122 ANALYTICS
BETTER DATA AND TOOLS HELP US IMPROVE ACCURACY, INCREASE EFFICIENCY, AND LOWER COSTS
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 123 ANALYTICS PRICE MORE ACCURATELY—WEATHER
ENHANCING OUR WEATHER UNDERSTANDING IMPROVES BUSINESS PERFORMANCE
- Extraordinary weather impedes our ability to assess underlying performance - Isolating and removing these effects enables more accurate trend selection ... removing noise from the trend signal - Accurate trends enable stable rates, better retention and more consistent growth
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 124 ANALYTICS PRICE MORE ACCURATELY—WEATHER 1.0 MODEL - Daily summarized temperature and precipitation data from 300 NOAA stations - Solved monthly and applied across 300 territories - Model significantly improved trend accuracy
2.0 MODEL - Aggregates hourly temperature and precipitation data from 3x the number of stations and applies across 100x more territories - Solved daily rather than monthly, dramatically improving accuracy - Continuous temperature model enables advanced learnings - Potential for frequency reduction through early warning of localized severe weather
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 125 ANALYTICS
PRICE MORE PREDICTIVE POWER OF AUTO RATING FACTORS ANALYTICSACCURATELY—ANALYTICS ENHANCING UBI PREDICTIVEPREDICTIVE POWERPOWER OFOF AUTOAUTO RATINGRATING FACTORSFACTORS PRICEPRICE MOREMORE 2.5x
ACCURATELY—ACCURATELY—MODELING THRU 2.0x PRICING POWER ENHANCINGENHANCINGADDITIONAL UBIUBI 1.5x 2.5x2.5x DATA 1.0x MODELINGMODELING THRUTHRU 2.0x2.0x PRICING POWER PRICING POWER ADDITIONALADDITIONAL1 MONTH 9 HOURS 1.5x1.5x UBI POINTS VAR 3 VAR 4 VAR 5 VAR 6 VAR 7 VAR 8 VAR 9 VAR 10 PROCESSING THE TO ANALYZE DATA IN THE NEW THE SAME DATA 1.0x1.0x DATADATAALGORITHM IN HADOOP PRIOR UBI MODEL NEW UBI MODEL OTHER VARIABLES
11 MONTHMONTH 99 HOURSHOURS UBIUBI POINTS POINTS VAR VAR 3 3 VAR VAR 4 4 VARVAR 5 5 VAR VAR 6 6 VAR VAR 7 7 VAR VAR 8 8 VAR VAR 9 9 VAR VAR 10 10 PROCESSINGPROCESSING THE THE TOTO ANALYZE ANALYZE DATADATA IN IN THE THE NEW NEW THETHE SAME SAME DATA DATA ALGORITHMALGORITHM ININ HADOOP HADOOP PRIORPRIOR UBI UBI MODEL MODEL NEWNEW UBI UBI MODEL MODEL OTHER OTHER VARIABLES VARIABLES
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 126 ANALYTICS
EXAMPLE MEDIA CHANNEL—BID IMPACT IMPROVE MEDIA 5x
EFFICIENCY— 3x
FEDERAL 1x 10,000 GOVERNMENT DATA INCREMENTAL SALES % BID INCREASE % SALES INCREASE AT ALLOWABLE ACQUISITION COST - Hypothesis that external GOVERNMENT DATA VS. INSURANCE SHOPPING government data might be predictive of insurance shopping 4x 1.3x - Data acquisition/correlations 3x 1.2x established 2x 1.1x US GOVT DATA US GOVT - Opportunistically bidding PGR SHOPPING aggressively when shopping 1x 1.0x is elevated TIME U.S. GOVERNMENT DATA PROGRESSIVE SHOPPING
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 127 ANALYTICS BIG DATA UNCOVERS COMPLEX INTERACTIONS IN CLAIMS DATA …
CONNECTION
CLAIM 2
CONNECTION CLAIM 5
CONNECTION
CLAIM 1
CLAIM 4 CLAIM 3
CONNECTION
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 128 ANALYTICS
THEORETICAL FRAUD REDUCTION MODEL PERFORMANCE
100%
… LOWERING BOTH LAE 75% AND PAID LOSSES, AND KEEPING RATES LOW FOUND FRAUD 50% 25%
5% 25% 50% 75% 100%
CLAIMS INVESTIGATED
NEW PROCESS CURRENT PROCESS SAMPLED AT RANDOM
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 129 ANALYTICS LEVERAGING DATA … A SUSTAINABLE COMPETITIVE ADVANTAGE
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 130 BIOGRAPHIES
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 131 BIOGRAPHIES
GLENN RENWICK PRESIDENT AND CHIEF EXECUTIVE OFFICER
Glenn started with Progressive in 1986 and has led the company since January 2000. He’s responsible for product and claims development and delivery, the customer service and sales efforts of both our agency and direct distributions, and the technology to support all of Progressive’s operations.
Prior to assuming the CEO role, Glenn served as Business Technology Leader from 1998 through 2000, and earlier led the company’s consumer marketing efforts in developing and communicating Progressive’s consumer proposition and brand.
Glenn has an undergraduate degree in mathematics and economics from the University of Canterbury, Christchurch, New Zealand. He also has a master’s degree in engineering from the University of Florida, Gainesville.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 132 BIOGRAPHIES
JOHN TRICIA SAUERLAND GRIFFITH CHIEF FINANCIAL OFFICER PERSONAL LINES CHIEF OPERATING OFFICER
John became Chief Financial Officer in April 2015. Tricia Griffith was appointed Personal Lines Chief Operating Officer, responsible for the Company’s Personal Lines, Claims and Customer Relationship Management groups, in John joined Progressive in 1990 as a summer intern before starting full time in 1991 April 2015. as an Assistant Product Manager in Cleveland, Ohio. Since then, he served as Product Manager for, at various times, Iowa, Kansas, South Dakota, and Pennsylvania. He also Tricia joined Progressive as a Claims Representative in 1988 and held several served as General Manager for Mississippi and later as General Manager for Minnesota managerial positions in the Claims division before being named Chief Human and Wisconsin. John was the Claims General Manager responsible for the delivery of Resources Officer in 2002. In 2008, she returned to Claims as the Group President, 24/7 Progressive Claims Service for eight Midwestern states. In 2006, he was named overseeing all Claims functions. Before her current position, Tricia served as President President of Progressive’s Direct business and, after the combination of our Agency and of Customer Operations, overseeing Claims and the Customer Management group, Direct businesses, he served as President of Personal Lines for eight years. which comprises the company’s Contact Center group (Sales and Delivery), as well as the Customer Experience, Systems Experience, and Workforce Management groups. 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 2015 INVESTOR RELATIONS MEETING 133 BIOGRAPHIES
PAT JEFF CALLAHAN CHARNEY PRESIDENT, PERSONAL LINES CHIEF MARKETING OFFICER
Pat was named President of Progressive’s Personal Lines Group in April 2015. Jeff joined Progressive in 2010 from insurance company Aflac, where he was Senior Vice President and Chief Marketing Officer. He previously held CMO posts at Pat joined Progressive more than 12 years ago and has held various product and multimedia retailer QVC and Homestore.com (now Move.com) and was President of general management responsibilities, including Personal Lines Acquisition Leader and Fringe Ventures, an experiential digital/marketing and consulting company General Manager of Special Lines. he founded. Prior to joining Progressive, he managed engineering projects and plant operations Since joining Progressive, he was named “Brand Genius: Marketer of the Year” for Kimberly Clark and co-founded an online distributor of recycled OEM auto parts. by Adweek, honored as one of the nation’s “Top 100 Creative People in Business” Pat holds a bachelor’s degree in mechanical engineering from Lafayette College and by Fast Company, and named to the “Creativity 50” by Advertising Age. an MBA from Northwestern’s Kellogg School of Management. Jeff holds a bachelor’s degree in journalism with a focus on advertising and public relations from the University of South Carolina and a master’s degree in journalism from The Ohio State University.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 134 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; our ability to reinsure against catastrophic events and to collect under any such reinsurance; 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 2015 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 INVESTOR jurisdictions and for requested rate changes and the timing thereof; 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 RELATIONS 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; MEETING 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.
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 135 LEE FRIEDLANDER: AMERICA BY CAR
JEFF CHARNEY JOHN SAUERLAND PAT CALLAHAN TRICIA GRIFFITH
There is no shortage of Current results look like Progressive is now a How happy are you with news on macro trends in the tale of two distribution consumer brand of some progress on the agenda you the auto insurance channels — Direct has note, how should we expect outlined to reach the business—which ones momentum and Agency it to develop and reach Robinsons? have your attention and slowing — you say “Not to targets going forward? excite or concern you? underestimate Progressive in Agency” — what does that mean?
Montana, 2008 (Page 7) Cleveland, Ohio, 2009 (Page 25) Savannah, Georgia, 2008 (Page 49) Pennsylvania, 2007 (Page 69)
TRICIA GRIFFITH
Your shareholder letter JOHN SAUERLAND states in part: “simple math skills will quickly highlight PAT CALLAHAN Homeowners—Why, the difference between Why Now, & Where does additions and the net Do you see big data and this take you? increase in policies … there advanced segmentation remains significant as eroding or expanding opportunity to retain at competitive advantage? levels we know are possible, but to-date have not been a hallmark of Progressive.” What are you doing to improve retention?
Mississippi, 2008 (Page 95) New York City, 2002 (Page 107) Montana, 2008 (Page 121)
THE PROGRESSIVE CORPORATION 2015 INVESTOR RELATIONS MEETING 136