Best Affirms Progressive Cas. Pool

A.M. Best Co. affirmed the financial strength rating of “A+” (Superior) for the Progressive Casualty Pool, Mayfield Village, Ohio, and assigned an “a+” senior debt rating to Progressive Corp.’s existing debt securities and an indicative rating of “a+” to senior debt under the company’s $500 million shelf registration, of which $150 million remains.

The rating reflects Progressive’s solid capitalization, historically outstanding operating returns and sustainable competitive advantages, which have enabled it to become a market leader in the private passenger automobile insurance industry. Progressive continues to benefit from an innovative management team with creative operating strategies; brand-name recognition; a dynamic, multiple-channel distribution platform, and extensive utilization of cutting-edge underwriting and claims-handling technology.

The company benefits from its extensive data-mining capabilities and technology advantages that enable detailed pricing of various risk classes and distribution sources. Historical underwriting results reflect Progressive’s innovative approach to claims handling—which emphasizes prompt contact and settlement with each insured—and its efficient expense operating platform.

The positive ratings are partially offset by the recent earnings fluctuation, intense price competition in personal automobile and rising loss costs. Moreover, Progressive continues to operate with above-average underwriting leverage that has been compensated by favorable long-term operating earnings. In 1999 and 2000, Progressive’s earnings deteriorated, driven by adverse loss-reserve development, rate decreases, a deterioration in claims-handling efficiency and higher-than-expected loss-cost trends. Results improved in 2001 after management implemented corrective actions that included rate increases, shortened policy terms, greater emphasis on the claims function and reduced expense levels.