Progressive Ratings Lowered by A.M. Best

June 6, 2000

A.M. Best has lowered the financial strength rating of the Progressive Casualty Pool to A + from A++, reflecting the group’s downturn in its operating earnings, intense price competition in its predominant personal automobile line, increase loss reserve risk and the expectation of modest operating returns. Progressive continues to operate with above-average operating leverage and capital strength that falls below A.M. Best’s capitalization standards for a Superior rating.

Historically, the group’s consistently outstanding underwriting results, with an average combined ratio in the low-to-mid 90s, had compensated for its higher operating leverage relative to its previous A++ financial strength rating assignment. While A.M. Best acknowledges recent premium rate increases filed by Progressive, it believes these increases will not have a favorable impact on underwriting results until late 2000.

Meanwhile, future operating margins will be constrained by ongoing price competition and current claim inflation trends. This makes it difficult for Progressive to return to its historic target of a calendar-year 96 combined ratio within the next few years.

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