2022 Third Quarter Report
Nine Months Ended
(billions – except per share amounts)
Net premiums written
Growth over prior period
Net premiums earned
Growth over prior period
Net income (loss)
Per common share
(billions – except shares outstanding, per share amounts, and polic
ies in force)
Common shares outstanding (millions)
Book value per common share
Consolidated shareholders’ equity
Common share close price
Retuon average common shareholders’ equity
Comprehensive income (loss)
Policies in force (thousands)
Agency – auto
Direct – auto
Total Personal Lines
Growth over prior period
Growth over prior period
Growth over prior period
Growth over prior period
Private passenger auto insurance market1
Stock Price Appreciation (Depreciation)3
Letter to Shareholders
Third Quarter 2022
The third quarter was looking terrific on so many levels until Hurricane Ian entered the scene during the last few days of September. What otherwise would have been a relatively calm month quickly became anything but that. We rapidly initiated our catastrophe response plan, which we have used and improved over many years, and worked tirelessly to take a horrific situation for our impacted customers and employees and tuit into an opportunity to show how much we truly care about them.
Throughout this letter, I will share just a few of the many stories that I’ve received to help bring our culture and this event to life.
Tanya, who is a new employee in our Spanish speaking customer services group, was able to experience first-hand what we are all about as she began onboarding into the Progressive family.
I have not been with Progressive long. I am still training with Seguros. I just wanted to mention that I have never been taken care by a company that goes so far to help and serve. It is the first hurricane I experienced since arriving here 2-years ago from
Bryn, a claim representative working in the
Yesterday at the Insurance Village I had a father and daughter walk into the village. The daughter was our policyholder, and her father was there for support. The daughter brought pictures showing a power line down on her house from a fence falling on her house, her roof was mostly gone, and her siding was almost entirely gone from the winds. The insured evacuated with her two kids to her father’s house during the storm and was just now able to get back into the property. We sat and talked for about 45 minutes about her loss and her home, her father expressed how thankful he was for us to just sit and listen.
We offered the insured some snacks and water which she happily accepted and asked for a few extra bags of pretzels as she lost all of her food and was hungry. She had a bag with her from one of our vendors and we told her to fill it up and take as much as she wanted. She expressed numerous times how she was struggling to feed her family and was unable to restock her groceries. We then offered the insured a small advance on her loss which would help her restock her fridge at which time she became visually emotional and thanked us numerous times. Her father thanked us over and over and stated we just set a very high bar and he asked how he could reach out to Progressive to purchase a policy.
Now, onto the numbers. We ended the third quarter 2022 with 5% net premiums written (NPW) growth at a combined ratio (CR) of 99.2, bringing year-to-date (YTD) NPW growth to 8% at a 96.5 CR, which is slightly over our stated goal of 96. Our catastrophe losses, which reflect reinsurance and exclude loss adjusting expenses, were
7.1 points and 4.3 points for the quarter and YTD, respectively, with Hurricane Ian being the biggest contributor to the losses.
During the quarter, Personal Lines grew NPW by 9% and ended the quarter with 17.4 million personal auto policies in force and 5.6 million special lines policies in force. Personal Lines had a 100 CR for the quarter, with about 3 points due to underwriting losses in our special lines products. While our quarterly personal auto CR was about 1 point above our 96 target, it included about 3.2 points related to Hurricane Ian, which made multiple landfalls during the quarter. Excluding the catastrophe losses from Ian, we were achieving our profit target margins as we benefited from our prior period rate increases earning in.
While we don’t normally comment on our special lines products separately, I thought that it would be prudent to do so this quarter based on the impact that Hurricane Ian had on these products. For the quarter, we estimate the catastrophe losses from Ian to be about
Excluding the impact of the catastrophe losses, our underlying average loss costs continue to increase due to higher severity, which reflects general economic inflation, and despite calendar-year frequency becoming more stable quarter to quarter and running below pre-pandemic levels. Our product management teams continue to manage rate level to respond to these factors. During the third quarter, we raised rates in 20 states, which represented an average increase of about 2% on a countrywide basis. Year to date, we have increased rates nearly 12% countrywide and continue to closely monitor frequency and severity trends to ensure we stay focused on our stated goal of profitable growth.
As our non-catastrophe personal auto profitability improved, we shifted focus in the quarter to evaluating underwriting restrictions, bill plans, and media spend to identify growth opportunities. During the third quarter, quoting increased more than 20% in both channels and total auto new business applications grew 20%. As competitors report higher than expected combined ratios and announced tactics to address these issues, they are filing rate increases in many states that improved our competitive positioning, which we believe is evidenced in our new business application growth.
Total auto policies in force declined 1%, compared to the end of the third quarter last year. When compared to the end of
We elevated our newest personal auto product model 8.8 in
In Commercial Lines, during the third quarter, our CR of 89.7 remained below target, while NPW declined 13%. The decrease in premium primarily reflects the timing of renewal events for certain transportation network company (TNC) policies on a year-over-year basis and a shift in the length of the policy terms. During
Our Commercial Lines business experienced minimal impact from Hurricane Ian. This is not unusual for our commercial auto business for several reasons. For this product, physical damage, and in particular comprehensive coverage, is a much smaller part of our premium. Not all of our customers choose physical damage coverage and, as a result, many customers move their vehicles out of the path of the storm to protect the vehicle and ultimately their business. We also find that commercial vehicles don’t tend to be garaged close to the coastline where storm impact can be more severe.
As noted last quarter, we are seeing growth headwinds in our Commercial Lines business. Premiums written in our for-hire transportation business market target (BMT) are down for the quarter, given both the slowdown in the overall rate of economic activity and growth in this business during 2021. While we are seeing a reduction in shopping across our primary BMTs, renewal business premium growth is still positive and total policies in force are up 9% year over year.
We continue to invest in our business to improve experiences, advance our pricing and segmentation, and expand our product offerings. During the third quarter, we rolled out our 8.0 commercial auto product along with our new policy administration system in three additional states. At the end of the quarter, we had 33 states on our new system, representing 80% of commercial auto premium and more than 60% of commercial auto policies in force. We’ve continued to grow our usage-based insurance business and between our two programs – Smart Haul® and Snapshot ProView® – collectively, our premiums are up 5% in the quarter and 20% year to date. We are pleased with our leadership position and the traction we are getting with our Commercial Lines usage-based programs. These programs allow us to understand specific differences in driving behaviors across various business classes and relate them to loss behaviors. This ultimately enables us to provide better rates in the form of discounts to more customers.
Product expansion efforts continue on two fronts. As of quarter end, our business owners policy (BOP) product was in 37 states, and we have more than doubled our agent footprint in the last year. Ongoing focus on underwriting innovation and efficiencies have allowed us to expand our appetite to meet agent and customer needs while still mitigating risk. By the end of the quarter, we have increased to nearly 70% the number of our BOP policies that are being sold without an underwriting review. We also successfully elevated Heavy Truck Roadside Assistance in seven additional states during the third quarter. At quarter end, this coverage was available in 18 states where 30% of eligible preferred truck customers have selected the coverage at new business.
Property NPW were up 3% in the quarter and 8% YTD. For the third quarter of 2022, our total Property combined ratio was 125.1. In the third quarter, we had 16 weather events, of which Hurricane Ian was the only named storm. Our current estimate of Ian’s ultimate loss and allocated loss adjustment expenses for our Property business is
From a growth perspective, on a year-over-year basis, Property policies in force grew 4%, which is slowing from the previous quarter’s 6%. This slowdown was expected as we continued to limit our growth and exposure in catastrophe exposed states and shifted our mix of business towards less volatile geographic regions. We are seeing progress in 2022 on this multiyear goal to reduce our geographic concentration. We are also continuing efforts in cost-sharing initiatives and improved pricing to market. Through the end of the third quarter 2022, we have rolled out to 41 states our 4.0 or 4.1 product model and we are seeing an increase in competitiveness in newer homes, newer roofs, and older homes with recently replaced roofs.
The third quarter total retuon our investment portfolio was -1.9%, as the early quarter optimism of an economic soft landing faded by September as monetary policy remained very aggressive. Our fixed-income portfolio returned -1.8% in the third quarter as inflation concerns drove higher interest rates and wider credit spreads. The combination of geopolitical and inflation risks has led to significant volatility across financial markets. Our equity portfolio returned -4.5% in the third quarter as the increased probability of an economic recession has lowered corporate earnings expectations. We expect the current uncertainty to eventually lead to interesting investment opportunities for our portfolio, but currently we are continuing to maintain a very conservative investment posture.
It’s been incredible to watch the partnership between the
In our customer relationship management group alone, over 200 of our employees signed up to work in a different workgroup than their assigned function to aide those other areas. In addition, over 1,000 of our employees picked up extra hours every day as the storm unfolded to assist both their peers and our customers. Our real estate team jumped into action, partnering with claims and human resources to distribute gas, bottled water,non-perishablefood, cleaning supplies, and toiletries out of our Fort Myers Claims Office. And, of course, the catastrophe teams continue to work tirelessly to take care of our customers in their greatest time of need.
Below are a couple more amazing stories that people have shared with me that I am in tusharing to give you a greater sense of the lengths that our employees go in order to do the right thing.
Embrace Pet Insurance Teams Up with Best Friends Animal Society to Cover Adoption Fees Now Through the End of the Year
WORLD INSURANCE ASSOCIATES UNVEILS NEW POWERHOUSE BRAND “NOVATAE RISK GROUP” FOR ITS WHOLESALE BUSINESS
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