S&P Affirms Progressive, Outlook Stable

Standard & Poor’s Ratings Services affirmed its “A+” counterparty credit and senior unsecured debt ratings on Progressive Corp. based on Progressive’s excellent business position, very strong operating performance, extremely strong capitalization, strong liquidity, and strong financial flexibility. Partially offsetting these factors is the group’s recent aggressive premium growth as well as its relatively narrow line-of-business focus.

S&P also said that the outlook on Progressive is stable.

Progressive is the third-largest automobile writer in the U.S. with about a 5 percent market share at year-end 2002. Further enhancing Progressive’s position are its strong franchise, claims-service reputation, and state-of-the-art pricing and IT systems. Management is capable, with a clear vision and strong track record of implementing its goals. Results are monitored aggressively, with compensation tied to profitability targets.

After operating results deteriorated somewhat in 1999 and 2000 (though they were still better than industry auto lines), Progressive has turned around its operating performance. In S&P’s opinion, Progressive’s recent results are a testament of management’s ability to implement rate increases and to restructure its underwriting and claims operations. For year-end 2003 and 2004, S&P expects
Progressive to continue to show strong underwriting performance.

As primarily an automobile writer, Progressive’s business remains subject to the competitive conditions of this sector. However, Progressive’s ability to implement price increases and produce better-than-industry operating results despite difficult market conditions in the recent past does demonstrate that the group has some distinct competitive advantages, which have so far enabled management to execute its strategic plans successfully.