Press Release - MAY 11, 2017
A.M. Best Affirms Credit Ratings of The Progressive Corporation and Its Subsidiaries
FOR IMMEDIATE RELEASE
OLDWICK - MAY 11, 2017
The ratings of the Progressive auto writers (Progressive and National Continental) reflect their strong operating performance, adequate risk-adjusted capitalization and sustainable competitive advantages. Progressive’s risk-adjusted capitalization has benefited from consistently favorable underwriting results, consistent investment income and significant realized and unrealized capital gains in its investment portfolio given the favorable performance of equity markets in more recent years, though tempered somewhat over the past year. Progressive continues to benefit from a stable management team, brand name recognition, a multiple channel distribution platform, and innovative underwriting and claims handling technology. In addition, Progressive’s direct operations have continued to witness favorable growth, reflective of its improving brand recognition. Progressive’s auto results have outperformed competitors in recent years despite the impacts of frequency and severity throughout the automobile insurance industry, due mainly to their sophisticated data mining and pricing techniques.
These positive rating factors are offset partially by Progressive’s high underwriting leverage relative to industry averages. However, Progressive has operated historically with elevated underwriting leverage while consistently generating favorable underwriting results.
Progressive’s debt-to-adjusted capitalization remains within A.M. Best’s expectation consistent with the holding company’s current rating level. As of Dec. 31, 2016, the most recently available year-end data, The Progressive Corporation, along with its subsidiaries, had $33.4 billion in total assets and approximately $7.9 billion in total shareholder equity.
While Progressive’s ratings are well-positioned at the current rating level, negative rating actions could occur if operating performance and consequently risk-adjusted capitalization fall below A.M. Best’s expectation for its current ratings. In addition, negative rating actions could occur if capital erosion occurs due to investment volatility or increased risk appetite, or if there is a significant decline in the quality of support it receives from its parent. Alternatively, positive rating actions could occur if operating performance consistently exceeds its peer group by a significant margin over the next several years, and risk-adjusted capitalization improves significantly.
The FSR of A+ (Superior) and the Long-Term ICRs of “aa” have been affirmed for the following members of Progressive Agency Pool:
The FSR of A+ (Superior) and the Long-Term ICRs of “aa” have been affirmed for the following members of Progressive Direct Pool:
The FSR of A+ (Superior) and the Long-Term ICRs of “aa” have been affirmed for the following members of Progressive Commercial Auto Group:
The FSR of A (Excellent) and the Long-Term ICR of “a+” have been affirmed for National Continental Insurance Company.
The Long-Term ICR of “a” and the following Long-Term IRs of The Progressive Corporation have been affirmed:
The Progressive Corporation—
— “a” on $300 million 6.625% senior unsecured notes, due 2029
— “a” on $400 million 6.250% senior unsecured notes, due 2032
— “a” on $500 million 3.75% senior unsecured notes, due 2021
— “a” on $350 million 4.35% senior unsecured debentures, due 2044
— “bbb+” on $1 billion 6.7% junior subordinated debentures, due 2067 (of which $594.6 million remains outstanding)
— “a” on $400 million 3.7% senior unsecured notes, due 2045
— “a” on $500 million 2.45% senior unsecured notes, due 2027
— “a” on $850 million 4.125% senior unsecured notes, due 2047
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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