Q1 2025 Progressive Corp Earnings Call
Good morning, and thank you for joining us today for Progressive's first quarter investor event. I'm the Constantine Director of Investor Relations, and I'll be a moderator for today's event.
The company will not make detailed comments related to its results in addition to those provided in its annual report on from 10K or the reports on from 10Q in the letter to shareholders which have been posted to the company's website.
Although our quarterly investor-relation events often include a presentation of a specific portion of our business, we will instead use the 60 minutes scheduled for today's call for introductory comments by our CEO and a question and answer session with members of our leadership team.
The introductory comments by our CEO were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 60 minutes scheduled for this event for live questions and answers with numbers of our leadership team.
As always, discussions in this event may include forward-looking statements. These statements are based on management's current expectations and are subject to many risks on us, certain needs that can cause actual events and results of different materially from those discussed during today's event.
Additional information concerning those risks and uncertainties is available in our annual report on form 10K for the year ended December 31st, 2024
As supplemented by a form 10Q for the first quarter of 2025, we will find discussions of the risk factors affecting our business, safe harbor statements related to forward-looking statements, and other discussions of the challenges we face. These documents can be found via the Invest Relations sections or our website at investors.progressives.com
Speaker Change: To begin today, I am pleased to introduce our CEO , Trisha Griffith, who will kick us off with some introductory talents. Trisha?
Good morning and thank you for joining us today.
Speaker Change: Since the pandemic started in March of 2020, we've hosted 20 investor relations calls, and the common theme of those calls has been how our business is weathering uncertain and unique, macroeconomic environment.
Speaker Change: The last five years have shown challenge after challenge with us, and through it all, Progressive is not merely survived but thrived [inaudible]
Speaker Change: As more challenges arise, including in the form of the macroeconomic effects of tariffs, I feel very confident in progress's ability to face the issues head on.
Speaker Change: The momentum we had in 2024, carried us into 2025 and during the first quarter we added new policies below our target acquisition costs.
Speaker Change: and continued moving full speed ahead on growth with the focus on realizing our vision of becoming consumers, agents and business owners, number one destination for insurance and other financial needs.
Speaker Change: Even though our competitors have reported improved profitability of the last couple of quarters, the shopping environment and personal auto has remained very favorable to Progressive [inaudible]
Speaker Change: Well, I'm proud to say that the first quarter 2025 personal auto-new applications surpassed the previous record by over 20%. Our results achieved because of both more quotes and a higher conversion of those quotes to a sale.
[inaudible]
Speaker Change: More year-to-year quotes mean our customer acquisition machine is running efficiently and strong conversion in both channels suggests a very good price competitiveness.
Speaker Change: Grover's match is happening in personal auto. In property, we increased homeowner's policies enforced in the less volatile states and reduced policies enforced in the more volatile states. [inaudible]
We're also continuing to significantly grow our renters business
Speaker Change: In commercial lines, although the trucking space continues to be challenging . . .
Speaker Change: Commercial Auto, New Applications are up 8% year-over-year, and are business auto and contractor BMTs experiencing significant growth in new applications.
Speaker Change: In addition to growth, our personal auto and property products as well as commercial lines have your-to-date combined ratios below 90, a significant achievement considering the industry's challenges in property and commercial auto.
Speaker Change: Despite the significant turmoil in financial markets in recent weeks as investors react to tariff and other news, I'm pleased to report that our balance sheet has remained strong.
Speaker Change: We are still in the early days of the terror, as soon as the effects may not be known until sometime in the future [inaudible]
Speaker Change: The interconnectedness of global trade makes it even more difficult to predict where and how quickly the impact of tariffs will work their way through supply chain and ultimately our lost cost.
Speaker Change: Determining our rate levels is a prospective exercise where we try to predict future lost trends and other cross to be able to set appropriate rates to achieve our underwriting profitability goals.
Speaker Change: In our fourth quarter, 2021 IR panel, we talked about our ability to gather data quickly, process it effectively, and react to it decisively.
Speaker Change: More recently, the inflationary environment of 2021 through 2023 proved that we were able to manage through rapid, unpredictable increases in law's cost and manage our calendar year combined ratio.
Speaker Change: I think that we have the tool, system, and most importantly, the people to react quickly and effectively during times of market disruption.
Speaker Change: While I can't know what the future holds, I believe the odds are strongly in favor of Progressive to once again manage through whatever lies ahead better than anyone else in the industry. [inaudible]
Speaker Change: Thank you again for joining us today, and I will now take your questions [inaudible]
Speaker Change: This concludes the previous recorded portion of today's event. We now have members and a management team available live to answer questions. Questions can only be submitted over the phone by pressing star one on your T-pad.
Speaker Change: In order to get to as many questions as possible, please welcome yourself to one question and one follow-up. We also ask that you use restraint and re-entering the Q to ask additional questions. We will now take our first question.
Speaker Change: The first question is from the line of Bob Hong with Morgan Stanley , you may proceed.
Bob Hong: All right, good morning, everybody. My first question is on auto rates.
Speaker Change: So obviously auto profitability has been pretty incredible, well ahead of your targeted 96% now taking care of uncertainties into consideration
Speaker Change: Do you plan to take rate decreases in order to accelerate growth, or do you think that it's better just to keep rates static to maintain the current earnings profile?
Speaker Change: Good morning, Bob. Well, as you know, we look state by state, product by product, and we look at rates. And in fact, the last quarter, we took about a dozen states, rates up and a dozen states, rates down, but mainly flats. So we're going to do all we can to continue the growth engine. And so we monitor that at a very granular level. Obviously, we're sitting on some nice margin with an 86 combined ratio in the first quarter. And with the unknowns around [inaudible]
And the
Speaker Change: I think the good thing is that we are back to where we we wanted to be in terms of what we call small bites at the apple. We know that our insured like stable raised we're going to do our best to keep it that way but also continue with our growth engine.
www.unc.org.au
Speaker Change: Okay, thank you for that. My second question is on advertising, right? You significantly ramped up your ad spending for the quarter.
Speaker Change: If we think about the three major advertising channels, TV, digital, radio, and I can't believe I'm saying radio, but like, where is the most add spending growth should come from going forward?
Speaker Change: Specific ads channel that you think might be overly saturated and spending there might not be worth the dollars, is curious to your view on advertising spending as well as a competitive environment there.
Speaker Change: Yeah, we always look at that. We have, you know, several business reviews a year, but one big one when we talk about all the different ways with which we want to spend clearly digital has been, you know, up in the last several years because that makes sense where people go. You know, you said that about radio, but it works. So we look at, we look at everything. In fact, the funny thing you say is every time we have a business review, I talk about direct mail, but if it works and it's efficient, we use it. So we look at all of that. We are.
Speaker Change: Got it. I'll be looking for the progressive mail in my mail box. You got it.
Take care.
Rob Cox: The next question is from the line of Rob Cox with Goldman Sachs, you may proceed
Hey, thanks.
Speaker Change: The first question I had for you was on new business penalty. I was just hoping you guys could talk about the impact of the new business penalty today in personal auto and the magnitude of if that magnitude of that penalty has kind of changed over time and I'm curious because
Speaker Change: It seems almost indistinguishable in the result of current combined ratios or maybe it's being masked by mixed shifts or something else.
Speaker Change: Yeah, I think we definitely, when we reopen for business, I should say, when we sort of tind up for business, we did see an increase in the preferred market, but I'll let Pat talk about this a little bit if he wants to but I feel like, you know, we're always going to have the new business sort of penalty quote unquote on the direct side because of the way we expense our business and our advertising upfront so that, you know, first term is going to look much [inaudible]
Douglas Constantine, Patrick Callahan
Patrick Callahan: Yeah, the only thing I'd add is, you know, first quarter is typically a strong growth quarter for us, and, you know, baked into our acquisition costs.
Speaker Change: is the lifetime expense to bring a policy on board. So, you know, we are continuing to price to our lifetime cost. And, you know, yeah, when you grow quickly, there's a slightly higher combined ratio due to the basis.
Speaker Change: It's not materially different, I don't think, then sort of what we've seen in the past when we've grown on new apps, 30% in a porter.
Okay, got it. Appreciate the color.
Speaker Change: The second one I had for you was on a policy life expectancy. You mentioned the strong growth in the quarter.
Speaker Change: and that was despite policy life expectancy a little bit lighter versus the last time you reported it. Is that just more reflective of the increase?
Shopping Environment and that's more of an industry dynamic .
or is that being driven by something else?
Speaker Change: Yeah, that's definitely a part of it, Robert. What I would say is that, you know, PLA, PLE is pretty complex and there's a lot of things that can affect it. What I would say, here's a couple of inputs as we've sort of decombed it.
Speaker Change: Morton Gromelmicks would be. So think of Sam's that are inconsistently insured. [inaudible]
Speaker Change: and as long as it economically makes sense for both us and the insured, then we will rewrite that which kind of starts to clock ticking over. I think that's an important piece.
Speaker Change: We're going to continue to concentrate on policy life expectancy, continue to concentrate on making sure that we are obsessive with our customer service, both on the CRM side and the claim side.
Speaker Change: The next question is from the line of Mike Zaremski with the BMO, you may proceed.
www.unc.org.au
Speaker Change: Hey, good morning. My questions are on auto loss costs in the letter.
Speaker Change: You point out that part of the frequency decreases are due to mix towards the more preferred customer base.
I'm curious.
You don't call out severity being hired. You're hired.
Unknown Executive, John Murphy, Douglas Constantine, Patrick Callahan
Speaker Change: No, I think I think you're thinking about that right in terms of severity and more coverage. Not necessarily expensive cars, but you have more coverage. What I would say, let's go back to frequency. What I would say with frequency is, as we sort of decomp that, there's a little bit of noise. And of course, it's a quarterly data. But when we look at
Speaker Change: and this would be something to watch. Our OBD data from our UBF, from our usage-based insurance, the dongle on the car, showed for the first time since 2019, so take away 2020, because a lot of people were driving. Since 2019, that vehicle miles traveled decreased, especially in strips that were over 100 miles. I think that's an interesting, one data point for one quarter economically to look at.
Speaker Change: Severity, I feel like we're right in line with competitors on Severity. If you look at our collision, it looks higher based on some sub and salvage recoveries that were very high in Q1 of 24. So if you take that out, it's about 2% gross recovery. So I would say the collision is in line with our PD on the Severity piece.
Speaker Change: Okay, that's helpful color. I guess just a follow up on severity. You may have kind of answered it now, but if we [inaudible]
We think about the very long-term severity trend.
I think it's Lodermit Singles. I think it's Lodermit Singles.
Speaker Change: You know, if you just progressives when I have a view of kind of new normal glide path is about the same over time or do you think it's? [inaudible]
Speaker Change: A bit higher due to a lawsuit inflation or just a mixed shift or just courage to give any kind of long-term views on severity.
Speaker Change: You know, we talk about it a lot and obviously we react to the data as it comes in and there's been so much volatility.
Speaker Change: over the last five years that we've really had to react to it, especially with inflation. I would have never predicted that would have happened, but again, we reacted to that. Terels will be another, you know, sort of unknown, but we'll react to that and react to that quickly. Should we need to? I think the one place where we've seen severity increase across the industry is more on the bodily injury side, with, you know, just inflation, more attorney reps, higher medical bills, sort of the social inflation that we talk about a lot.
Speaker Change: and so we try to build that into our mouths as we think about the future as well.
Thank you. Thank you.
www.unc.org.au
Speaker Change: The next question comes from the line of Alex Scott with Mark Leeds. You may proceed.
Alex Scott: Hi, good morning. I wanted to see if you could dig a little bit more into the potential impact from tariffs, just to kind of frame for us how much that may or may not ultimately increase.
Laws Costs Trend, and interview. [inaudible]
Alex Scott: particularly touch on on how you're viewing auto parts and just repair costs in general.
Alex Scott: Yeah, absolutely. And this will probably be a longer answer to the question, but I wanted to give, I want to give you an insight of kind of how we're looking at the complexity of tariffs at such a granular level and so stick with me. So I talked in February about, you know, tariffs are inflationary and they're one sided to loss costs and we care deeply about trying to understand the impact on our book of business. Oddly, last Monday, I spent
Alex Scott: We spent an hour with our national auto pricing manager. We went over the inputs and the outputs to the tariffs and had a great conversation. The work is extremely well done.
Alex Scott: and then Tuesday, the White House said there was often some of the tariffs, so change things in terms of stacking the steel and aluminum with the imported vehicles as well as some rebates on foreign parts that are assembled in the U.S. So that immediately changed some of the dynamics with what we were working on. So we take a bunch of raw data, so think of probability of occurrence which is very high this juncture, start date, market lag, time to full effect in the tariff rate.
Alex Scott: and then we take some components. So clearly, USMCA compliance is a big one, price umbrella, parts sourcing, per-coverage cost decomps. So that is just a handful of some of the inputs that we put into our model.
Alex Scott: Then we ran our entire fleet through the U.S. MTA compliance to understand each vehicle and what we think the cost could come to. So let me walk you through a couple examples. I won't give you the exact car, but car A basically assembled outside the U.S. 1% U.S. Canada content, the rest is German and from Poland and a couple of other countries. So it's not U.S. MTA compliant. So quick math on that is that 99% of
and Patrick Callahan.
Mexican Contents, so it is the USMCA compliant. So,
Speaker Change: As of last Monday, it would have been 25% eligible to be tariff. [inaudible]
Alex Scott: As of Tuesday, that first 15% was eligible for the rebate, so the effective tear of rate is 10%.
Speaker Change: That's how surgical we're getting with our models and it's a moving target but we have to be nimble and I think you know what the big thing here is that the key is we got to recognize as soon as possible when we see the data and take action accordingly I do have to take a moment to shout out a couple of people we've many many people working on this but a couple of people from our pricing teams have done an incredible job Brad and Bruce [inaudible]
Speaker Change: and Wensha and Nick from our economics team have been working feverishly as things evolve and so we will be ready for whatever comes our way but we have put a lot of thought and a lot of modeling into this and a lot of scenario planning so I believe we are prepared as anyone.
That's really helpful. Thank you Um...
Next one I have these on...
Speaker Change: Disruption in certain states around homeowners markets and how it may benefit or detract from Pipcroft.
Speaker Change: and I was hoping maybe you could talk about Florida and just sort of the healing process in homeowners and
Speaker Change: and the impact that's happening on TIFF there, and sort of the opposite in California where it looks like things may get more difficult.
Speaker Change: Yeah, so I gave you a little bit of a sort of five-point plan for the blueprint for the future. We feel really good about where we're at, especially on the combined ratio side. We are a sub 90 and Q1 in property growing a lot in renters. And obviously we're taking our time to grow, because we want to do this in the right way. And John and his team have done a fabulous job with that. Florida, we're still in the midst of non-renewing, the 115,000 policies that we talked about.
Speaker Change: We talked about a few years ago, it's been a little bit more time consuming just because of moratoriums, but we will send out our last notifications by this May, so we're feeling we're in a much better position in Florida.
Speaker Change: We have very little market share in California, and so that will be a place where I will tip toe in, but I would say that where we stand today with more bundling, with cost sharing, with exiting our DP3 program, with our ancient incentives, we feel like we are in a much different position, and we're going to be able to open up the growth machine in areas where we think it's beneficial, we're going to show it more, because...
Kethel Spandold.
Got it. Thank you.
Speaker Change: The next question is from the lawn of Elyse Greenspan with Wells Fargo. You may proceed.
www.unc.org.au
Thanks. Good morning. Good morning.
Speaker Change: My first question, I guess it's just a hypothetical based on tariffs, if there's a state that's operating in a mid to high 80s combined ratio
Speaker Change: and we're assuming right tariffs have a mid-single-digit impact on severity, all else equal. How would you guys look to respond in?
Speaker Change: In that state, would you or could you get rate approval given that's a pretty high level of profitability?
Speaker Change: That's a great question, Elyse. I think one of the things that I did mention is that we also have reached out to a couple of insurance departments because I think because our models are so granular and so refined, we want to make sure that they understand and can contemplate that for each state. Here's what I would say is we make a lot of decisions based on combinatorial, but is that state growing? Is it not growing? How can you know her? So it's a to me if there's a state in. [inaudible]
Speaker Change: in the mid-80s and there's not growth, I would say that we could pressure test that to grow a little bit, but obviously we have here in the back of our mind and we know that that is something we'll have to react to, and we'll have to react to it differently in different states depending on where that combined racial falls. [inaudible]
Speaker Change: Thanks. And then my second question. I was just interested if you could just, you know, provide, you know, kind of just some color on just the monthly cadence, you know, of your retention, as you guys have been, you know, putting on new business and the industry, you know, has obviously been getting more competitive with the people to grow as well. Any color, just as you think about monthly retention levels that you can provide? Yeah.
Speaker Change: Yeah, I mean, I talked a little bit about that before, you know, we publicly talked about trailing three and trailing twelve. I never like to see retention decline, but I think with some of the things we're doing is it's...
Speaker Change: It's going to decline. So just opening it up to our fans and making sure that some of our customers, where we do policy reviews, rewrite those things we're going to have.
Speaker Change: Negative implication for the PLE actual number itself, but not negative implications for our PIF growth. And I think that's what we have to kind of balance out. Like I said, we do have some data at a household level and that continues to improve. Again, I want to see that that trailing three for sure move the other direction so we'll continue to do what we can. But it's a really big shopping environment right now. I think that's good for customers. And. Yeah.
Thank you.
Speaker Change: The next question is from the lawn of Michael Phillips with Up and Hammer, you may proceed.
Speaker Change: Thanks, good morning. I guess at the risk of the tariff topic being too much for one more on this one. I guess, Trisha, I want to kind of hear how you think about the balancing of. [inaudible]
Speaker Change: Maintenance stability and rates for customers versus reactant fast, two chairs. And when I hear you say earlier today and throughout this conversation, you know, continue in the growth engine and grow as fast as we can, it makes it seem like
Speaker Change: that maybe you're more inclined to keep the rates stable and let there be a margin impact versus reacting and taking rate increases.
Speaker Change: Yeah, it's a good question, because all those things come into play. So, I think what I think about stability of rates, I think about just those small bites of the apple. Like I said, we took, you know, rates down in about a dozen states, rates up in about a dozen states, but kind of, you know, flat from the perspective of a point of points. So, you know, it depends on each state, and if we think we can grow, and we look at that across the country, and [inaudible]
Speaker Change: Each one of our product managers has a mandate to grow as fast as we can at or below a 96. We obviously that tariffs are always going to be...
Speaker Change: Front and center, because I don't want to have to increase rights like we had do a few years ago based on the inflationary factors that came into play with use car prices and parts. So it's a balance. We work on this literally every day to try to figure out the right way.
Speaker Change: to grow and to capture this, capture the market share while there's this competitive rate.
Speaker Change: You know, we obviously that we'd like to be able to have those margins and still growth with that balancing and sort of with stability, tariffs, growth and combined ratio, it's just a math equation that we constantly work on a state level of product level
Speaker Change: Okay, thank you. It's a question in the agency channel you've talked about, maybe for a little bit, kind of a ship in 12 months, a system of policies. And I wonder, is that it's just a result of the increased shopping and different customer base, maybe Sam versus the right rabbit in the sewer, or is that something intentional you're trying to push through?
Speaker Change: The agents that we work with, the Platinum agents that we work with in order to bundle auto and home.
www.unc.org.au
Okay, thank you.
Speaker Change: The next question is from the law of Jimmy Bhullar with the JPMorgan. You may proceed.
Speaker Change: Hey, good morning. So Trisha, it seems like your comments prepared remarks and answers to a question.
Speaker Change: have been fairly optimistic on cryptic growth. But if we think about the fact that most of your competitors had been raising prices a lot and a lot more than you were raising prices, they were limiting marketing and now at least all the public guys are back in sort of growth mode. [inaudible]
Speaker Change: Why is it not reasonable to assume that you would see a slowdown in PIFCO, even if it remains strong, maybe not as strong as it has been?
Speaker Change: You know, well, I think what you will see is a much more difficult comparison because if you look at the last three quarters of 2024, we grew a massive amount. That said, we're in a really good position and, you know, we talked about with our acquisition machine, we're going to continue that. You saw what we spent in the first quarter. We're going to continue to spend as long as it's efficiency and our proper sales under our target acquisition.
Speaker Change: We have a machine that works really well in both channels and so we're going to push them up as much as we can to grow. So I am bullish and I'm very optimistic and if I had to put a buck down on a horse and be progressive.
Speaker Change: And then just obviously there's a lot of hope that's with your firm on auto, both personal and commercial. Can you talk about your long term aspirations and in the homeowners business and then in commercial lines outside of auto just the trends in those businesses and where you see the best growth opportunity?
Speaker Change: Yes. I mean, I think homeowners, we've talked about a lot in terms of our blueprint. We feel like we're in a much better position and we know people are stickier when they bundle their auto and home. So we're going to continue with that. The great thing about homeowners is that about half our business is on progressive paper on anti-paper and half our business. We work on the direct side with honestly partners. And so I think that is a nice balance to be able to have some on our paper and some not.
Speaker Change: and deep in our level of segmentation like we do on the private passenger autoside. So I feel like we're turning a corner there for sure. On the commercial autoside, you know what I love about our whole commercial lines organization is that it's very diverse in terms of our business marketing tier targets. And so I think we have a lot of opportunities. So when you see economically things change in as an example for [inaudible]
Air Trucking for Higher Specialty. We can then grow in our business auto contractor segment. We have a robust transportation network business. [inaudible]
Speaker Change: and we now have our business owners policy in 46 states. So we have a lot of different lovers to grow and commercial lines and that's really actually a very exciting part of the whole progressive portfolio. In fact, years ago,
Speaker Change: When my team and I sat down and thought about our growth prospects and our strategy, a lot of the focus, you know, one the focus was, let's grow the heck out of private passenger auto, let's game market share, let's grow the heck out of commercial auto, even though we've been number one for a while, and let's figure out homeowners. But then, and that was kind of horizon one, in horizon two, we said, what are some businesses that, you know, we can evolve with, and most of them fell on the commercial line side. So, think of, [inaudible]
Speaker Change: Earthly Business as an example, we used to ensure a 10 or fewer power units, we went up to 40, we bought protective to kind of fill out that portfolio. We created Bob, we have what we call. [inaudible]
Committee of the Year 2024 in the commercial auto business. It's over 111 combined ratio. We're ours in sub 90s. So, you know, people are going to have to take rate and it may take longer because the
Speaker Change: I could add to that answer in saying, you asked about our homeowner appetite.
Speaker Change: We think of it as our personal lines appetite, over half of the personalized marketplace bundles home and auto, and our entry into home was to continue to grow in auto. So, today we have no single digit market share of the Robinson segment, and that is around half of the entire marketplace. So, our appetite in the home is focused on growing personalized households, which gives us a lot more runway in the personalized space.
Tricia's point on the commercial side. [inaudible]
Speaker Change: BOP is a marketplace that is several times the size of our commercial auto marketplace. We are number one in commercial auto by a large factor and in BOP we could have a runway that is
Speaker Change: Very significant, beyond commercial autos, so both of those entries we think create a runway for us for growth for decades.
Thank you
Speaker Change: The next question is from the lawn of David Motemaden with Evercore. You may proceed.
Thanks, good morning. I had a question.
Speaker Change: Just, if you could help me think through the improvement in renewal applications growth.
Speaker Change: That's come at the same time that we've seen a decline in the policy life expectancy on a trailing three and two or trailing 12-month basis.
Speaker Change: Is that just the mixed impact that you were talking about earlier, Trisha, where like we're seeing the PLE's come down but then...
Tricia Griffith: Overall, the retention is still OK, given that call it roughly 20% growth in renewal apps.
Speaker Change: Yeah, and I think that's part of it and I think just the stability of the race kind of leveling out. I think like I did say before we had the pressure on renewals just because of shopping but the renewals, you know, from not having to take big increases I think has been helpful as well. Do you want anything Pat to that? [inaudible]
in that period. And PLE is a forward-looking projection. . . .
Speaker Change: So, that moves differently than the units that you see within our world, and then maybe just a question on the competitive environment.
Speaker Change: So Trish, I think you mentioned that competitors are in a good spot as well increasing advertising spend. I guess my question is
Speaker Change: Are we close to a point where the market gets more competitive, like we saw back in 2018 when I think that was the last time you guys and some of your peers started putting through price cuts?
Speaker Change: Or is there enough uncertainty out there where you think that that won't be the case? I'm just sort of interested in terms of how you're thinking about the competitive environment right now.
Speaker Change: Yeah, there's still a lot of ambient shopping. So a lot of shopping is taking place, which is why we want to take advantage of our ability to spend on advertising and have that acquisition machine work. It is more competitive. We took great well in advance of the competition and now the majority of the competitors, I think, are in a good position. So I think that we're going to continue to push on advertising. We're going to continue to continue to push on advertising. We're going to continue to push on advertising and have that acquisition machine work.
Speaker Change: Discipline is going to be a big part of it because I think that will help continue to fuel our growth as well as some of the investments we've made in technology to become a more efficient organization. So, I feel like it is really competitive. Like I said, that's kind of where the fun begins. And, you know, we're going to do our best to continue to push on this growth. [inaudible]
Thank you. Thanks.
[inaudible]
Speaker Change: The next question is from the lawn of Josh Shanker with Bank of America. You may proceed.
Josh Shanker: Yeah, thank you for taking my question. I noticed your comedy spent more on advertising in 1Q25 and it didn't 4Q24. Always there's a nice surge in 1Q seasonally at things for a procurement of customers, but we only see the net numbers.
Speaker Change: and Retention is getting worse. Is the efficacy of the spend the same as it was in 2024 or are you seeing diminishing returns even if they're above your targets right now for what you need to acquire new customers?
Speaker Change: Yeah, we typically the first quarter of any year is a high shopping season, so we want to make sure we leverage that. We don't share our target acquisition cost or our cost for sale, but it continues to be efficient. I'm clearly with competitors coming in. It'll get a little bit tougher, but we still feel like we're an efficient machine. We're going to have a little bit more.
Speaker Change: Do you expect to spend about as much in the remainder of the year on media and advertising you did in the last 12 months of 2024?
Speaker Change: We will spend as long as we believe we can grow and do the decision cost and as you've seen over the years that's a lever that we can add in flow depending on where we're at from a profitability perspective but as you can see sitting at 86 combined ratio for the first quarter we're sitting in a really great position to be able to continue to spend to acquire more customers. . .
Speaker Change: And I can sneak one more in, you know, we do talk about how retention has changed and we don't really know what absolute retention is. I feel like 2025 feels a lot like at 2019 in many ways.
How does the retention right now compare to past periods?
Speaker Change: when industry had adequate pricing and there was a great deal of competitiveness in the market and willingness to accept new business from competitors. Are we at the same level we were in that time, or are you better now than you were five years ago? [inaudible]
Speaker Change: Well, so about our mix has changed with more of a preferred mix. And so when we look at retention, you know, we look at it very granularly in terms of our mix of business, I would say we're probably, I don't have the date in front of me, probably about even.
Okay, thank you very much for the answers.
Thanks, Josh
www.unc.org.au
Speaker Change: The next question is from the line of Meyer Shields with KBW. You may proceed.
Alon: Great, thank you so much and good morning. Trish, you've talked about spending more on advertising, including paying off. When you have more competitors looking to grow, does the cost per unit of advertising go up or is it just a matter of more advertising overall?
Alon: Well, there's more people in assistance, say, on digital auction, you're going to have more competitiveness, so we just have to be where we think we should be to get new customers and not overpay for those. And so, from that bidding perspective, yeah, it gets a little bit more pressure on when competitors are in, but we know that data very well and we are able to bid on and efficiently spend to get new customers. [inaudible]
Okay, no, that's helpful.
Speaker Change: A second question. I think I'm just missing a step. Like you've talked about just still being a lot of shopping, clearly competitive rate increases are slowing down. Why do you think there is, I don't know if it's as much shopping as last year, or in the absence of significant rate increases? What?
Promoting More Sobbing Beheder.
Speaker Change: I think it's just easier to shop, and I think with all the other inflationary items out there, people are looking to figure out a way to save money, so whether it's at the eggs in the grocery store or insurance, and so people, because it is easy and you can easily shop and if the price is right, which I think customers are just trying to figure out how to balance their own budgets. [inaudible]
Great. Thank you so much.
Thank you.
www.unc.org.au
Speaker Change: The next question is from the long of Andrew Andersen with Jeffries. You may proceed.
Andrew Anderson: Hey, good morning. Just looking within the property segment, I think you've made a note that like 30% of that business is going direct now. You maybe just talk about the customer appetite to go through that direct channel. I'm not sure if that was driven by a change in business mix, but it seems that that's up about five points year over year.
with you today.
Andrew Anderson: Our product, plus the product of unaffiliated partners, so we feel great about the growth there because again we get a commission on those policies and those customers retain longer. So we have about half of our Robinson's or Progressive and half are with our partner carriers and we feel really good about that. And we have great partners and it's a win for them and a win for us. So we'll continue that growth on both our paper.
Andrew Anderson: and within our Progressive Advantage Agency we continue to add new partners to make sure that we give our customers the ability to bundle the auto home.
Andrew Anderson: The Property Business, the Progressive Rights, as Trisha was mentioning, we have unfiliated their party carriers that we work with through our direct channel, and that is a very significant business and growing rapidly as well. So when we talk about the policies and force of Robinson's, we skew direct, that is where we started bundling with those third party carriers, and increasingly we have offered the progressive product there as well, but by far and the way.
Andrew Anderson: I think the majority of what we're selling direct is actually the third party business, so the 30% is what is underwritten by progressive going direct.
Andrew Anderson: Hey, if I could jump in just quickly on that with the industry trend.
Speaker Change: So, your observation about, you know, direct to consumer home, and I think the question is, you know, is their growth indirect to consumer home? Our answer is absolutely into John's point. That's where we're investing. So, today roughly 30% of auto insurance is sold direct to consumer and less than 15% of property insurance is sold direct to consumer. So, that gap exists in part due to distribution channel, but also complexity of the product. So, that's where we're going. So, that's where we're going.
Speaker Change: Meaning Holmes don't have vines, they're harder to quote in an easy direct to consumer experience. And we're investing to change that and to close that gap and we think as consumers find an easy to use direct to consumer home option that affords the depth. [inaudible]
Speaker Change: of coverage and breadth of carriers. We think we will capture an outsized portion of that growth going forward. So we're investing there and we do expect it to continue to drive growth. Let's go.
Speaker Change: Thanks for that. And then, you know, as we kind of go into a second half here and into 26 and an increasingly competitive auto market,
Speaker Change: Does it change kind of where a dollar of capital is better deployed, whether that be the agency channel or direct, because I suppose direct has been outgrowing agency for a couple of years now.
Speaker Change: Yeah, I think direct, you know, the influence largely by our media spend. We want to grow across the board. And so, you know, that will, the timing could be different based on the competitive nature out there. And so, you know, clearly, if you go into an agency office, you have a lot more choices, which we think is really great for consumers. We're going to continue to drive growth. We are the largest independent agent company out there. And so that's been a big...
Douglas Constantine, Patrick Callahan, John Murphy, Douglas Constantine, Patrick Callahan,
Speaker Change: Patrick Callahan, John Murphy, Douglas Constantine, Patrick Callahan, Douglas Constantine, Patrick
Thank you. Thank you.
Speaker Change: The next question is from the law of Gregory Peters with Raymond James, you may proceed.
Gregory Peters: Good morning. So here it's been tremendously impactful for you guys. The last couple years is just the investment income growth and we didn't spend any time in the Q&A section talking about it. So.
Gregory Peters: Maybe you can give us some perspective on where you are with new money yields and book yields and how you're thinking about asset allocation as we look forward considering your comments about the choppy market conditions. [inaudible]
Speaker Change: Yeah, I'm going to let John Bauer who runs our Progressive Capital Management answer that, but the short answer is we, you know, we definitely have had new money come in that we can invest in greater yielding securities and that's been part of it. I think a little bit about it in my letter, my opening comments, but John , do you want to give Gregory a little bit more color on that? I'm going to give you a little bit more color on that we can invest in greater yielding securities and that's been part of it.
John Bauer: Sir, yeah, thanks so much for the question. You know, I would just start with it's really important.
Speaker Change: to understand with Progressive's model what we're aiming for from a management and board perspective, which is...
to drive our return on equity over time. [inaudible]
Speaker Change: and so we think about that by starting with our operating business growth fastest we can at the 96th.
Speaker Change: And then we think about assuming we have the strong capital we need, we're in a good efficient capital structure position, what type of investment risk do we want to be taking to drive performance over the long term?
and for us over the last year, so, valuations.
Tricia Griffith: We're not particularly attractive and therefore you saw as we came into this year we had one of our more conservative allocations that we have with a significant amount of cash and treasuries and as Trisha mentioned earlier a very low amount of equities. [inaudible]
Tricia Griffith: as we've moved through last year and so this year we did raise. Thank you.
Tricia Griffith: Our interest rate risk up a little bit, which you could see through our duration up from...
3 years to 3.4 years. [inaudible]
Tricia Griffith: So as we sit now as a company we feel like we're in an incredibly strong capital position with a portfolio that if opportunities strike we'll have the ability to take advantage of those but at the moment we're incredibly patient but what's been great with all of that is through
Tricia Griffith: The strong growth of the operating business, as well as the increase in yields in the market through risk-free yields moving higher and credit spreads moving wider. That's given us an opportunity to generate more and more investment income and you've seen our book yield rise.
Tricia Griffith: But I do want to point out different from many of our competitors. We don't really target a book yield. We're looking to drive a strong, a total return as we can over time. And having that long-term focus really allows us to go through a period like 2024 where we can have a very conservative. [inaudible]
Tricia Griffith: conservative allocation to risk and wait for opportunities to come our way. Does that answer your question?
Speaker Change: Yeah, there's obviously more detail in there, but not appropriate for this conference call.
Speaker Change: I want to go back is just the last question for me, the senior in your comments you mentioned the dongle.
and Staff Shodd.
Speaker Change: is prominently featured. And I guess this is like a technology related issue. How many people are still using the Dangle? It I feel like a number of competitors have switched.
Speaker Change: from the dongle to like apps on the phone, the track movement.
you know, data.
Speaker Change: as well if not better, but I just am, you know, I'm surprised that dongles still there. Maybe you can give us enough, how much of the dongles being used, the snapshot product is being used, and I know you're rolling out your new 8.9 model, so some additional color that would be helpful.
Speaker Change: I'm not sure that the majority of our new businesses are in our mobile device.
Speaker Change: But we still do have some on the dongle, which is helpful, you know, for, because it's getting data directly from the car, so it really helps us to tune and refine our models a little bit differently than the mobile device. But most of the news that is coming through mobile, Pat, you know, what? [inaudible]
Pat: Yeah, I don't have the exact percentage or a mix on it, but you're right. When given the choice, consumers opt for the mobile app and that does give us additional information beyond the hardware device and lowers the cost and that we're not shipping out devices and paying for a cell chip in all those monitored vehicles.
Well, we are seeing a higher take rate.
Pat: Particularly in the direct channel where we optimize the experience and where consumers are interested in...
You know, saving money and getting rewarded for safe for driving. [inaudible]
Pat: So we think UBI as our most powerful and predictive variable continues to be a differentiator for us in market and we continue to invest leverage our scale and leverage the technology to drive adoption and help that price more accurately.
Got it, thanks for the answers [inaudible]
Thank you [inaudible]
Speaker Change: Those in the queue appear to be those who already asked questions, so that concludes our event. Kia will hand the call back over to you for the closing scripts.
Speaker Change: Thank you. That concludes the Progressive Corporation, First Quarter Investor Event. Information about a replay of the event will be available on the Investor Relations section of Progressive's website for the next year. You may now disconnect.