EARNINGS
Progressive Sets Advertising Spending Record, Gains 1.6 Million Policies in Force, CEO Says
MAYFIELD VILLAGE, OHIO //BestWire// - With its underwriting margin more than doubling this year, Progressive Corp. spent a record amount in the third quarter for advertising and added nearly 1.6 million policies in force, according to President and Chief Executive Officer Tricia Griffith.
Tricia GriffithThat set a record for growth, she said during the company's third quarter investor call, and raised the number of policies added across lines this year to about 4.2 million. About 80% of the growth for both periods was in personal automobile.
Progressive reported a 10.9% underwriting margin for the first nine months of the year, more than double the 5.1% posted in the prior-year period and far greater than its 4% perennial target.
Personal Lines President Pat Callahan said the outsized growth was unexpected when 2024 started and the company rolled back some underwriting actions taken to achieve targeted profitability last year.
This year it lowered rates a “small amount in a number of states” and offered what he called more competitive billing options. Now it will keep expanding as quickly as staffing and service levels allow, said Callahan.
Last year, Progressive Insurance Group was the second-largest all-private passenger auto writer in the United States with a 15.20% market share based on direct premiums written, according to BestLink.
“With competitors raising rates and restricting access to new business, your media (spend) becomes really efficient when there’s not a lot of people competing for the clicks or in markets with competitive rates for the shoppers,” Callahan said.
Progressive doubled its third-quarter net income to $2.33 billion from $1.21 billion a year earlier. Net premiums written rose to $19.46 billion from $15.6 billion. The combined ratio improved to 89 from 92.4 (BestWire, Oct. 15, 2024).
Griffith said the company capitalized on “very high levels of ambient shopping” in personal auto. Strong conversion rates are evidence Progressive is well-priced in comparison to competitors, she added.
While it reduced rates in some states, it also continued to raise them in others, and prior rate hikes in auto and other lines continues to earn in, said Griffith.
Overall, she said 2024 is shaping up to be one of Progressive’s best non-pandemic years.
Personal auto claims frequency declined 5%, which the company attributed in part to a shift to more preferred business. Bodily injury claims severity rose 7%, although overall severity decreased 1%.
Griffith said bodily injury severity has risen on higher large losses and more attorney-represented soft-tissue injuries.
“We feel like we have our arms around the BI trend,” she said, contrasting the more gradual increase to the earlier steep jump in used car prices as supply chain shortages and economic inflation bumped collision costs higher.
Progressive posted favorable development on storms in first half of the year while continuing to reduce homeowners exposure in more catastrophe-exposed states and seeking growth in other areas.
Property policies in force rose 19% in states in which Progressive seeks growth and declined 9% in volatile states, part of the company’s “robust de-risking program,” said Griffith.
Last year, it decided to exit 115,000 homeowners policies in Florida. It is also broadly exiting fire coverage for non-owner-occupied housing after receiving regulatory approval in 22 states with other requests pending, the CEO said.
Hurricanes Helene and Milton recently made landfall less than two weeks apart, but during different quarters, on Florida’s west coast. They damaged many of the same vehicles, Progressive said, so it reported estimated combined losses of about $600 million, of which $401 million was incurred in the third quarter.
Company-wide, it reported an estimated $563 million in catastrophe losses from Helene, about half in auto and the remainder split between property and special lines products.
Boat losses accounted for about 60% of special lines losses. Progressive said it is mitigating hurricane/coastal exposure with underwriting restrictions limiting insured value and length of boats. compared with non-hurricane exposed areas. It also raised deductibles for named storms.
Underwriting entities of Progressive Corp. currently have Best's Financial Strength Ratings of A+ (Superior) and A (Excellent).
Shares of Progressive Corp. (NYSE: PGR) traded on the afternoon of Nov. 5 at $246.55, up 2.10% from the previous close.
(By Renée Kiriluk-Hill, senior associate editor, BestWire: Renee.Kiriluk-Hill@ambest.com)