Q4 2020 Progressive Corp Earnings Call
Welcome to the Progressive Corporation's fourth quarter Investor event the.
The company will not make detailed comments related to quarterly results. In addition to those provided and its annual report on form 10-K, and the letter to shareholders, which has been posted to the company's website and will use this event and to respond to questions.
Acting as moderator for day events will be progressive director of Investor Relations, Doug constantly at this time I will turn the call over to Mr. Constantine.
Thank you, Chris and good afternoon.
Although our quarterly Investor relations events typically include the presentation on a specific portion of our business. We will instead use the 60 minutes scheduled for today's event and for introductory comments by our CEO and our question and answer session with members of our leadership team questions can only be asked by telephone dial in participants the dial in instructions may be found at investors that for.
Crescive dotcom forward slash events and as always discussions and this event may include forward looking statements. These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today's event.
Additional information concerning those risks and uncertainties is available and our and our annual report on form 10-K for the year ended December 31, 2020, where you'll find discussions of the risk factors affecting our businesses safe Harbor statements related to forward looking statements and other discussions of the challenges we face for go into our first question from the conference call line, our CEO and Tricia.
Griffith will make some introductory comments tricia.
Good afternoon, and welcome to Progressive fourth quarter Conference calls and we appreciate you joining us as we stated during the past few quarters 2020 was an extremely trying ear for many reasons from the global pandemic to the emotional toll caused by social unrest.
As I reflect on the year, we just closed I couldn't be more proud of the way progressive rose to these challenges by delivering fantastic results, while supporting its customers employees communities and partners. During these unprecedented times.
The annual report and theme of resilience truly defines how we approached every obstacle during this past year.
And just prior quarters, the fourth quarter profitability continues to benefit from reduction in frequency, which was partially offset by an increase in severity.
Miles driven continues to be lower than the fourth quarter last year.
We continue to react to the changes and driving behavior caused by the pandemic.
In addition to the over $1 billion given to customers in the form of credits early on and the pandemic. We also filed personal auto rate changes that average a decrease of approximately 3% between April and December and over 40 states that represent approximately 85 per cent of our country wide premiums, thereby providing our customers and aggregate annualized.
And as savings estimated at about $800 million.
There is much uncertainty about reopening as vaccine distribution and if and when we will return to pre pandemic driving patterns and our product teams are staying abreast of the situation and continue to adjust rates to related risks which include risks such as weather.
We continue to recognize both policy and premium growth and the fourth quarter, which combined with the rest of the year resulted in 2020, having an increase from two point for a million policies and force and 3 billion more net premiums written over the prior year.
This was our fourth consecutive year of double digit Pip growth, while all of our segments contributed to this growth our agency auto business was more heavily impacted by the federal state and local social distancing and shelter and place restrictions that were put in place to start for Splunk ourselves.
We'll slow the spread of COVID-19, which resulted in a decrease and new applications year over year.
Our commercial lines business saw significant growth in the for hire transportation business and for demand for shipping services grew as a result of the pandemic.
Other hand, or Uber and Lyft premiums took a hit during the year as miles driven decreased with restrictions in place and our premiums are based on actual and estimated miles over the policy terms.
And our property business had a profitable fourth quarter, but with a 2020 Atlantic Hurricane season, and being the most active on record and recognize and underwriting loss for the full year growth continues to be strong with our bundled Robinson does that's growing faster than any other segment, we're confident that we and the pricing and product enhancements and face to get closer to our TARP.
Net margins and we'll continue to make changes as we grow.
Despite the challenges faced in light of the pandemic, our combination of strong growth and profitability in 2020 suggest for imagine the situation well.
Throughout the year, we continue to vest and are investing in our personal auto product. Our first day. It was elevated for our newest product model in January.
As part of our April and relief program. We also launched a temporary change to snapshot that allows existing non snapshot customers to receive a snapshot adjusted rate after and just 30 days and monitoring as opposed to the normal six months then.
In addition to snapshot road test, which we had available for several months gives consumers the ability to see their snapshot right before purchasing a policy.
And while not available countrywide, where it is available. We believe this is a perfect opportunity for some customers to lower their rates based on either their driving behavior or frequency of their driving habits that have changed as a result of the pandemic.
We're also investing and our commercial lines business. Our BOP product is now active in 18 States, Illinois went live last week and during the fourth quarter was added to our business quote explorer platform and the direct channel.
And so smart haul our UBI program for truckers continues to see excellent adoption rates and is a great asset and the for hire trucking market and snapshot probe you, which expands our UBI offerings beyond truck is now available and 45 states.
Looking into 2020, one I'm happy to report and we're well positioned for further growth as reflected in our January results.
We continue to make investments and pricing segmentation and cost efficiency accurate claims handling and expense management and most importantly, we've supported our people and maintained our culture, which we know will pay huge dividends going forward.
Another exciting thing about 2020 one is that in April we will celebrate our 15th anniversary and becoming a public company a fun fact, if you bought 100 shares at our IPO and 19 and 71. It would have cost you $200 at the end of 2020 that initial investment would have grown to be worth over 19 million.
A 20.5 compounded annual return.
Not a bad investment, especially if you compare it to the 9.9 return by the S&P 500 over that same period.
I just wanted to take this opportunity to say, thank you to all of our shareholders, both past and present for investing and us over the years.
Before I open it up for question.
I'd like to express how pleased and excited I am about the agreement with protective insurance Corporation, we've been very impressed with protective products employees and culture as he said in the past commercial lines is our greatest opportunity to grow and we're excited to expand our capabilities with the expertise protective offers and larger fleet and affinity programs.
And by providing additional breadth of product lines and you know.
The acquisition is subject to customary closing conditions and I'm sure. You can appreciate that we're not able to share additional information at this time, we pull will provide additional information and thoughts after the transaction closes and Chris I think we can open up for questions now.
To be added to the question and Q Press Star one on your phone and order to get to as many questions as possible. Please limit yourself to one question and one follow up.
Our first question is from Mike as Arensky with Credit Suisse. Your line is open.
Hey, great good afternoon.
Yes, I think first question maybe on telematics.
And Tricia listen to some of your comments you used the word and kind of reacting to changing driving patterns, you talked about uncertainty I think about future driving patterns and.
And you know I think we all know that People's workplace settings will probably continue to adjust.
And to the coming year or so.
Or so so just kind of curious and is there is there any ways or initiatives and the company that kind of scope more all in on and kind of telematics given it feels like it could be more important than ever and in order to better understand how to how to price risk.
He is a great question, Mike and actually what I just talked about when I did my opening remarks was something that came out of a discussion that John Sauerland, and Pat Callahan and John Murphy and I had when we were talking about the desired to have people have the rates for risk be really relevance and people that are driving loss and so.
So we really in record time created the April and relieve snapshot program and because time is of the essence and and maybe people are going back to work, maybe they're partially and work partially not we wanted to be able to provide our UBI program with a shortened monitoring periods. So that 30 day period is really important so we've sent out to our current.
Customers have millions of emails and for those where we don't have the email we're sending out an actual U S. P. S mail to alert our customers all of this offering and make sure that if they are driving loss and I do want to receive a discount or their frequency and severity of of driving goes down they can offer.
This option and we think that's a fantastic addition to the credits that we gave early on and the rate reductions and our road tests option for our consumers.
Okay.
If you flush that out.
Okay. My final question is specifically on <unk>.
Direct to consumer advertising and I think you know.
And we get a lot more questions. These days about kind of.
Ensure tech firms and even incumbents kind of pushing into that sandbox progressive is clearly a leader you guys are growing fast but curious if.
And if youre seeing any of.
Of these kind of new entrants marketing spend influence any of the economics of AR and the marketplace and how to think about kind of you know influencing.
Influencing progressive ability to win and the space at least incrementally.
Yeah, I mean, I think over the years, we've seen and not just our competition that we've had for a long term, but a lot of the insurer tax going into the space, where we feel like we have an advantage of course is we buy a large portion of our media and house and and we make sure that debt when.
When we.
Quire, a customer that is under our allowable costs are at or under our allowable cost and so I can't go into a lot of the proprietary ways with which we do that but we believe that allows us to have very reasonable acquisition costs, which we believe are much lower that and ensure attack.
So that I would add you've you've noted our advertising costs are going up for many of our spend is going up.
And really spend where we believe and sufficient so we have and allowable acquisition cost by segment and we spend up to that so generally speaking if you're seeing our advertising spend and go up.
You should assume that it's continuing to be very efficient.
And getting us to the customers that we are after a very effectively across all of the medium. So I would say in aggregate.
Spend level, we really haven't seen much impact from the newer entrants and the advertising space.
Thank you.
Our next question is from Jimmy <unk> with J P. Morgan Your line is open.
Hi, I had a question first just on personal auto pricing and frequency and it.
It seems like many of your competitors, especially the larger ones are much more focused on sort of reviving growth and market share because margins have been good for everybody. So what are you seeing in terms of pricing and are you concerned that maybe pricing continues to soften as frequency begins to pick up as we go through the rest of the year.
Well I think all of US here and tried to do the right thing by consumers and initially and so whether it was crowded for give backs et cetera, I think that was an important part and now and you know for for Progressive for sure. We went in and surgically to give discounts I talked about on average, 3% and realize that is on average so we.
We are looking very seriously at each stage channel and and product to get the right discounts to make sure we manage that trade off between growth.
Growth and profitability, so and I think that you know I'm, assuming and competitor doing similar things for us. It really is about that balance of growth and profitability and so we're pretty proud of the fact that Ah in 2020, even with the reduced rates and shopping down substantially during the first part.
Of the pen down like that we were able to grow both in prospects and sales and a full year. So that's really our concentration we obviously look across our our competitor sad to see if if prices are down John correct me, if I'm wrong, but I think this last February and we look and a few big comps.
<unk> racers are our prices are still down premiums down about 1.7 per cent.
And so yeah I think on a continued to be a challenge for Grubhub, we're up for that challenge as you can see by our January results.
Okay, and then you highlighted protective and your comments, but where should we see more of an immediate impact on their business from from the deal and sort of what are your longer term aspirations and what you can do with the business.
Yeah I'm sure you can appreciate that I can't go into a lot of details until the transaction closes, but suffice it to say and it gives us access to a larger addressable market and affinity programs and we were impressed with the culture and the people of protective.
Okay, and then maybe just one more on <unk>.
Texas have you disclosed anything or are you able to disclose anything in terms of your exposure.
Uh huh.
And the losses are coming in and obviously it was and it was a big store and what I can say is that I'm, Gary tradeoffs team is working to kind of understand our ultimate reserves, but I'm confident at this juncture with the data and how that it will Pierce our 80 million dollar retention thresholds.
And on our reinsurance mhm.
Our next question is from Michael Phillips with Morgan Stanley. Your line is open.
Thanks, Good morning, or good afternoon, I guess, just more and commercial lines can you talk about your either given what you currently have your either your need or maybe your willingness to.
And do more acquisitions to continue to expand and the commercial lines business.
Yeah, we we always look you know where we have not been a big acquirer of companies and we always look at both in terms of do we buy build or partner and for the most part whether it's and private passenger auto or commercial line as we've tried to build or buy or and you know.
And depending on if it got us something faster and we we prefer to grow organically obviously the air ex acquisition had a lot to do with access to customers, who wanted to be able to have those robinsons are in the agency side and when we looked at acquisitions across the commercial landscape.
And we thought the protective why and got us to a larger addressable market that that we may or may not have gotten to at a certain point, we have a lot of irons and the fire right now, though and commercial as well in terms of growth and in fact over the years I think we've talked about the horizons and horizon. Two is our biggest growth opportunity and so right now our focus.
There's really to continue to grow with our BOP product, which I talked about we just rolled out and 18 States. We went from a fleet of less than 10 vehicles to 40 and that continues to grow our small business and then of course.
Our relationship with a few different companies and and transportation network company. So that's really our focus we have so many exciting things going on in horizon two to grow if we see something that makes sense. We'll obviously look at it obviously I can't talk about that and if we would but we really do prefer to grow organically and have done so.
And for the past 80 plus years.
Okay. Thanks for.
And one for me is on homeowners and property and business you mentioned and the Internet.
I guess can you just talk about how I guess, how satisfied you are with the results there.
In terms of profitability.
And then related.
Somewhat related can you give us an update on the reception and the market for your home coal from them.
Homework for.
Yeah, Yeah, let me well I was very satisfied with the property results in January and the fourth quarter.
And that of course has not taken for the whole year and yeah.
And if you take out weather related including cats and other weather, we feel like we're in a good position and so we've taken rates up substantially we've changed our product model, we continue to have deeper segmentation fed.
February is not going to be a great February and that can be a great month for the industry because of the winter storm and and we you know we tried to obviously put a load in for those for those events and last year wasn't and another unprecedented here of Hurricanes and so I'm I'm I'm happy with the product and <unk>.
With our continued ability to segment and I'm happy with the fact that we're growing robinsons across the board and both direct and the agency channel we've increased our platinum agents and I think youre, referring to the home quote explore very happy there. So we saw progressive home along with many other unaffiliated partners and that's that's been.
A higher growth than even the agency channel and we're very excited about that and it's our highest growing segment and when you think about having customers for life that was that was really our our basis for acquiring are access to make sure that we had those auto home bundled one to allow us to extend our auto.
Policy life expectancy, and so on retention and of course as the Holy Grail, but also have those customers for life and so as their needs change we had them. We didn't we didn't want to be the training wheels. When people wanted at home. So those customers, we see add on toys and life and other products and we're able to offer either on net.
Our paper or not and I would tell you, although we don't.
Talk about this externally the policy life expectancy on a robinson versus some of the other segments are extraordinarily higher and so we're we're very happy with that growth and we will continue to invest in that area.
And we are taking the action of progressive home team Uh Huh.
For the ability so well last year, we took rates up for our property products, 11.5%. Obviously those are annual policies that all hasn't earned and <unk>.
Also taken steps to better balance, where we're writing homes to ensure our store and risk is diversified and we've taken actions in terms of policy coverage as well to ensure that our interests are more aligned with our insurers when it comes to storm losses. So I think we've taken a lot of actions that share.
Show benefits.
Benefits coming into this year I expect we'll continue to take up rates this year, but as Tricia noted.
It's not surprising and out of it.
February will be a.
For a start to the for the year, but again I think the progressive home team has taken the right actions to get profit really where we want it for home and as Tricia noted we are writing a lot more auto because we have a home and the agency channel.
And over a billion.
A very profitable auto insurance that we believe we would not have had its reagents and whatnot.
For the opportunity to bundle with progressive.
Great. Thanks for the color guys I appreciate it.
Thank you.
Our next question is for them and Gary Ransom with Dowling and partners. Your line is open.
Yes.
Yes, I wanted to follow up on Robinson and I.
And I saw that you increased platinum agents and I saw that the well it's actually the 12 month policies are up to 12 per cent of the independent agent channel, which I assume is a proxy for the.
The bundles, there, but I guess I was trying to get a sense of what's going on and the drug side, because you're apparently growing.
Bundles there also.
Can you give us a sense for that.
Yeah, and in fact for growing bundles, even more rapidly on the direct side and remember those bundles and some of them are with progressive home and summer with unaffiliated partners. So we continue to grow both Robinson and rights and the direct channel, we continue to invest and having the right partnerships to make sure.
And that like John said that we expand our our ability to have robinson and throughout the country and b and not be so concentrated in the states. So that we were there when we first started the acquisition, but we're happy with the growth and the direct side very happy.
Just to clarify.
You're right to think of the annual policies just being written by platinum agents are those that are.
Or and not exclusively a robinson as they are by far and Hawaii predominantly Robinsons book.
And so were platinum kenwright annual policies with non Robinson customers, but it's certainly not the part of the majority of there and it was direct channel, we do not offer there and more policy.
For auto.
We call those that segment and if you recall, we had the sans Diane's rights and Robinson the rights are where it's our auto policy and another home and affiliate partners right. Okay.
And then can you.
Talk a little bit about for platinum agents too and I think you've disclosed that for the last three years now and I mean, it's been kind of a steady increase is there a <unk>.
Interest among the agencies agents that you deal with them just trying to get a sense of the underlying trends that are going on there for you.
Yeah, and when we first rolled it out we really sort of went in and with a scarcity model and as we've grown and developed we realize that and and and we want to make sure that when we when we make the effort to give you the ability to writing annual policies and more commission et cetera that you're able to have progressive hauling.
And then progressive ought to be like the number one or two choice and your agency are well.
What we realized though is around the country. There are some places that and some agencies that are really willing and wanting to write robbins and but we didn't necessarily make them platinum agents because they might be a smaller agency, but what comes and the door. They want to write off and with progressive and so that's really been the reason and that.
Desire why we've expanded the number of platinum agents.
And Gary we are as you saw but.
Close to 4000 platinum agents and in a couple of hundred this year, probably a bit.
Lower than we would've otherwise had we not had COVID-19 going on.
But if you're wondering if platinum agents grew are growing faster than the rest of the agent population and the answer is definitely yes.
And we don't share that number regularly but I believe we share that in our previous investor Pres.
Presentation and.
I would tell you the trend in terms of relative growth.
And for planning range.
And so excuse me.
Great. Thank you very much thanks, Gary.
Our next question is from Tracy <unk> with Barclays. Your line is open.
Me too.
And we talk about your targeted 96% combined ratio just thinking about risk adjusted returns on capital I would assume that's not static across business line and you just provided some color on homeowners and commercial line. So how would you characterize your targeted combined ratio.
Oh, it's for businesses that are higher severity.
Yeah. We obviously are 96 and you talked about this a fair amount is in aggregate. So we look at the 96 across products across new and renewal business across different channels, because the acquisition costs being different and then we also look at the ROE on every one of our <unk>.
Alex as well and try to understand how and how those two interact together and so although we don't share anything other than and 96 week. We keep we think about the risk adjusted rate of return as we develop our targets for each of those combined ratios.
Just to elaborate a little we we have share previously and investor call for.
Ranges of combined ratios that we're targeting.
For each product line and you're correct, it's not only the severity of claims, but it's generally the volatility and results.
And that drives well relatively speaking and amount of capital we.
We need to hold against that product line and we also take into account that there's longer tails and some of those lines and so there are different and investing returns across lines of business and we bring all that together and generally speaking our target income and Oh, it's not perfect.
And those combined ratios that we've targeted by <unk>.
Products are definitely.
Driven by our perception of our O E byproduct line.
Okay. Thank you and I guess I'm familiar with that slide I guess looking for some I guess underlying guidance, but you said you don't disclose that so I'll move on I know that you don't really want to talk about protected all dance around it and debt and recognize that.
And that does bring in workers comp business I'm, just curious more broadly what your risk appetite is and when.
And looking at workers comp.
Yeah, again, I I I'm excited to talk about that once we close the transaction and what I'll commit to all of you is that all have and a subsequent quarterly call Karen Bayle, our president of commercial lines come in and talk about it but you know we talked about progressive strengths are in the complementary lines of business and coverages.
For the transportation industry, where we have been successful in the past and and that was a big selling point for us as well as their affinity programs and that's really all I can say until the transaction closes.
Okay and look for and smoking.
Great.
And I'll go ahead.
I was just can offer generically.
We are in complementary lines in order to write more vehicle business is the way to think about it right. So for a long time, we said we weren't going to go into home.
We recognize the opportunity through independent agents, where we from that we had to have our own product in order to.
Trade for Robinson, and marketing and independent agents, so that probably wouldn't have been our preferred route and we didn't take it until we absolutely saw the necessity to do so to continue to grow rapidly and that vehicle line. So I think you should think about other lines of business.
And to some degree being complimentary in order to continue to grow the business as fast as we can.
Thank you that's helpful.
Our next question is from so need to come up with Citi. Your line is open.
Thanks.
Did you say in your prepared remarks, what the take up rate has been in terms of the 30 day snapshot and Relatedly how far through the book are you in terms of offering that that feature.
It's pretty new and we started offering it in February I think it's been sent out to maybe 5 million customers and I want to say so far we've had 9000 and have gone through and gotten the just kind of might be off on a little bit of a number so its relatively new and again.
Again, we had to file that so we arent through every state regulators to get that approved and in some states you can't eat and we don't have UBI, but we're pretty excited about that because I think it really puts on you know the in the hands of our customers the ability to lower their rates, if they're driving loss will have more on that next quarter. Once it's.
On a flow through the system.
Got it and then my second question is I believe.
And one of these calls last year you guys spent a lot of time talking about some updates to your homeowners.
Predictive models and out.
'twenty was kind of an odd year, but just any sense in terms of how the new models held up if you can say anything given and the odd last year was.
And when you're saying models are you talking about like the models, we look at for weather or overall like our segmentation models internally the former related to weather. So I think that was what you guys were highlighting.
Yeah, you know and and it's sad to say and actually we have hired a new risk and reinsurance leader, who is really going to be focusing on you know looking at our risk appetite and and being more holistic across the enterprise and then he one of his big big opportunities to look at is assessing our reliance on models and our usage and so a little bit more.
To come on that and I think being more plan for and coordinated with our placements of reinsurance. So I know, it's a little bit off off of that but we are we rely on the Karen Clark model. These these these storms have bad and you know a pretty unprecedented I hate using that word again, but the hurricane season last year was.
Was.
You know and and mens in terms of numbers and the numbers that made landfall and then of course it rarely do you get a winter storm like we had a few weeks ago. So and the models are done always take those into account having somebody.
And with Brandon's death, I think will really help us to understand and fine tune our reliance on those models do and add anything John.
Yeah.
Yeah.
Okay. Thanks.
Yeah.
Our next question is from Adam Klauber with William Blair. Your line is open.
How is the rollout coming are you at the point, where you can get more aggressive with it.
And at what point will that actually start moving the needle.
Yeah. So we just rolled out our 18th day and I would say yeah. We are at the point, where it's our thought process of working with Karen and her team to get more aggressive with it because it is an exciting new product. We've obviously invested in it over the last couple of years, So while I can't give you the.
The exact state rollout I think the word you use is accurate and we do you want to get aggressive with our rollout of Bob as the year Progressive last year. There was so much going on and so much noise and the system and we have a lot going on a commercial side, but I know Karen has really excited to move on that.
Great and then tenants who was obviously down last year for for obvious reasons.
And have miles driven and started picking up and that more recently.
Somewhat and to not to where it was pre pandemic and we're watching that really closely and of course, we have a great relationship with both Uber and Lyft and and we work with them on the race and and watching that driving behavior and of course, it differs by state as well, but it's not up to pre pandemic level.
Okay, and then sorry last question.
You do a lot of digital and digital marketing and get a lot of customers that way.
And as the amount of cluster of customers, whether it's auto or through home actually doing the full flow from quote to bind and increasing or is it still mainly more of a shopping vehicle.
No that's been increasing over the years I don't have the exact percentage on and if you do jamba and that's been increasing over the years, because I think a lot of people.
Shop that way and want to buy and that way and in fact, we've invested a lot on that with our quoting on HQ acts and we have a more ability than ever to be able to bind and buy online both auto and home and also on the on the agency channel and we've had portfolio quoting and which allows them to do that as well so.
Yeah, well one of our strategic pillars is broad coverage be aware of when and how customers want to shop. So if I'm on my phone and I want to be able to bind or with an agent or online. So that continues to increase as well.
Okay. Thanks, a lot and thank you.
Just a reminder, that if you would like to ask a question you May Press Star one on your phone. Our next question is from James Mark with <unk>. Your line is open.
So so just looking beyond the obvious growth drivers like the favorable rate environment can you explain more specific for progressive how important the product launches and the sustained investment and those launches is to growth and possibly enhancing that moving forward and also how immediate is and to pay off.
For those kind of investments and those product rollouts.
Well I think I think as we talk about our rollouts, whether its been and horizon, one or two I think the product launches are really important and you know when we when we look at our what we believe is a strength of ours and industry, leading segmentation. We believe that will continue to.
And it'd be a strength of ours and so we just you know we're finishing our eight six product are in the midst of debt I should say and we rolled out on the auto side eight southern and January and that gives us greater segmentation and wishes, which is again the right rate for the right risk and and so I think the product models have always been our store.
<unk> Ah we feel the same way on the product side, we are rolling out our nextgen for for Dato product model and and you know it is always in flux. So it's we never we never say, here's a product model and we'll roll it out and not try and make it better we try to make it better. So there's little we can have oh.
And things along the way that will add into the product models. Once we see if it adds value to get them more consumers that are profitable consumer so that product model period is really important and it's one of our when we think about competitive prices, which of course. This is such a price sensitive industry.
Cos and segmentation are a big advantage for us and very important.
Just a debt we see the change in customer mix as an example, immediately so we've been predominantly enhancing our segmentation towards the preferred and of the marketplace and every time, we introduce a new product model, we are seeing a further and shift towards more preferred.
Customer set and so.
It is a huge part of our business. It's a huge competitive advantage. We believe we've invested a lot to ensure that we are very fast to market when we fund.
New rating variables or underwriting approaches and again, we see the benefit very quickly and in terms of who we are writing and who are converting at a higher rate.
Yeah.
I'll add onto that with Ah Robinson and say you know a few years ago, we had an internal goal to at some point get a million Robinson is on the book and we are well in excess of that and and it just continues to gain momentum.
Yeah.
Our next question is from Robert talks with Goldman Sachs. Your line is open.
Hey, Thanks for taking my question.
So I noticed that the percentage of commercial lines premium written through the agency channel increased a bit and 2020 and I was wondering how you would characterize the demand you're seeing from small business owners purchasing on a direct basis.
You know as I said, the direct basis is pretty new so it's on a lower a lower base and and spend and the history would tell you that the majority of our commercial lines has been through the agency channel and we did see a shift in 2020 based on the fact that a lot of agencies for clothes and with our investment in.
And <unk> business quota ex floor on the direct side. So we have seen a little bit of a shift and the majority of it is still through agents and some of the products can be complex and people want to be able to have that guidance and that counseling and but we're also innovating and investing for the future to again fulfill our strategic.
Pillar of broad coverage, where what and how consumers want to shop, including our commercial and consumer so while it is still the majority and the agency channel. We've invested in and will continue we believe to see increase in small business Bob G. L on the direct side.
Okay, great. Thank you and me.
I opened my remarks, I said, we we had added BOP and the direct side and that happened and fourth quarter last year.
And just a reminder, if you would like to ask a question you May Press Star one on your phone. Our next question is from Elyse Greenspan with Wells Fargo. Your line is open.
Hi, Thanks, and my first question on you know you. Obviously you guys reported monthly results. We can look at the policy trends and I know you often say right not to put too much and a focus on one month, but and we look at your policies and force them, you know and December trends and what kind of flat and then we saw I'm talking.
And you know sequential December versus November we saw good pick up in January and I'm, just trying to get a sense of like the underlying trends within both on new business and renewal as you think about the impact of the pandemic and not as much we're taking and the market and how we could think about potential policy.
Well from here, sorry, I know, that's a kind of a couple part question. Thank you.
So I'll talk a little bit about the calendar effect and then go into how we think about growth and then John and you can add anything you want so remember we have a different calendar. We don't go by the Gregorian calendar in 2019, if youre looking at new apps in particular.
A 53 week here in quarter four was a 14.
Weak quarter. So when you look at our new App growth both year to date or I should say and agency in the fourth quarter was down maybe one for somebody was up on the direct side about 3%. If you look at last year for the quarter for quarter three it was down and agency about 4% and up indirect about eight per cent.
These are new apps in particular, you've seen our retention statistics, we're very proud of the fact that our intent. Our retention continues to increase we also know part of that is because of the moratoriums and non canceled. So we know a portion of that has to do with the pandemic, but we also believe that both what we're doing on the nature and nurture.
Syed will continue to reap benefits on on the retention side, when I think of growth.
You know, it's it's you know we look at obviously, a pip growth as our preferred measure because trends are going to change.
Change up and down depending on things, obviously, the pandemic was dramatic Ah and.
And and we can't you know we have to react to trends and like I said at the beginning even though and no. One took rates up last year. We were continued to be able to grow new sales and prospects.
How we think about it and on the auto side and of course on and thought the commercial line side that I've talked about is we're really going to focus on our four strategic pillars. The first one our people and our culture, we're going to make sure. We have the best work environment ever people that want to serve our customers and in turn they reward us with their loyalty and we're going to focus on.
And our brand so whether it's mass media digital and making sure that we send out a message of savings and protection and we've continued that this year I've talked a little bit about competitive prices, we care deeply about cost and taking cost out of the system. So that when people do shop us because they love our brands and we convert and of course, our industry leading segments.
And I talked about the broad coverage. So we're going to continue to focus on that.
And you know we this year is going to be again, another year, where it's going to be really hard to compare because the odds are that the denominate or in March and April because there was relatively no shopping is pretty low.
With that you know might might comment I don't know exactly when the timing will hit our income tax returns more stimulus payments and we're ready and able to write those consumers. So there's going to be a lot of change I think what we have to be is well positioned and nimble as things change and that's really what my team and I talk about.
And all the time are we ready for this and so we will constantly adjust our rate level to make sure we're competitive but also profitable which is one of our core values.
Talked about the different product models that will roll out and some of the other items that we've done like our snapshot a brand and other things to do to make sure. Our customers are taken care of I know our CRM organization has something in place right now called them more time to pay where they really tried to personalize.
And that experience if someone just needs a little bit more time or need some adjustments on their pay plan. Because we know retention is important and we know it's important for our customers. So that's a long weighted answer.
And I think theres going to be a lot of variables. This year and a lot of it will depend on as states open and if frequency happens I mean, you don't know, what's gonna happen and I think of the last pandemic and when will the Roaring 'twenty 'twenty, one 2020 Tuesday will people be out driving more and we just have to watch the data and we're going to react really quickly.
To it.
How much on the book has moratoriums or non cancels Ani.
And how much of the book has moratoriums or non council for most most states have lifted the requirement to have moratoriums and I. Thank all states have lifted debt. We were maybe a couple of people want it but by and large.
For the extent, we're accommodating people who might be hard and payment plans.
That is our own choice and it is a fairly small portion of our book.
At this time, Okay. That's that's helpful. And then my follow up for you.
Looking to me.
Any changes on your book.
Insurance coverage this year.
Oh, you know, what I talked about having a new leader and risk and reinsurance and.
Partly our our property cat program in particular.
We were considerate of the minority shareholders and air acts and with his upcoming renewable no renewal that's still a lot of our consideration and so we'll take that and consideration and.
And as you've noticed over the years, we've been moving up our retention and we expect our attention off and this year's renewal to be at least 100 million. So I know that's a change that is on the books other than that I know brand and is working with our reinsurers as they come on our renewals.
If you look and the K, you'll see a deeper description of our reinsurers and we did raise our retention this year on the aggregate as well so tricia was referring to our retention on a named storm coverage.
And we also increased our aggregate retention to a $475 million up from 375 last year.
So adding to the top of our tower and some of this is simply because we're growing our total insured value.
But we're also as Tricia said with our new risk and reinsurance leader getting a little more holistic in terms of our risk appetite.
And making some changes.
Coming to recognize a little more holistic perspective there.
And you might recall, we retained luxury for the reinsurance program and our property business.
For years, because we had a minority interest there remaining.
And there are.
Buyout was a function of book value. So there were some interest there and not raising net retention.
And our size and balance sheet.
Could raise that and not incur and the material risk to our balance sheet.
That's helpful. Thanks for the color.
That appears to have been our final questions. So that concludes our event, Chris I will hand, the call back over to you for closing scripts.
That concludes the progressive Corporation's fourth quarter Investor event information about a replay of the event will be available on the Investor Relations section of participants website for the next year you may now disconnect.
Yeah.
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