Q2 2025 Progressive Corp Earnings Call

Good morning, and thank you for joining us today for Progressive's second quarter investor event. I am Doug Constantine, Director of Investor Relations, and I will be your 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 Form 10-K, quarterly reports on Form 10-Q, and the letter to shareholders, which have been posted to the company's website.

This quarter includes a presentation on a specific portion of our business, followed by a question-and-answer session with members of our leadership team.

Introductory comments in the presentation were previously recorded.

Upon completion of the previously, recorded remarks, we will use the balance of the 90 minutes, scheduled for this event for live questions and answers with leaders featured in our reporter remarks, as well as other members of our management 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 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 in our annual report on form. 10K for the year. Ended December 31st 2024, a supplemented by our 10q reports for the first and second quarters of 2025, where you will find discussions of the risk factors, affecting our businesses, safe Harvest, statements related to forward-looking statements and other discussions of the challenges we face.

These documents can be found via the investor relations section of our website at investors that progressive.com.

To begin today, I am pleased to introduce our personalized president, Pat Callahan, who will kick us off with some introductory comments. Pat.

Good morning, and thank you for joining us today.

Through the second quarter, 2025 continues to be one of our best years on record by all objective measures.

We delivered strong profitability while simultaneously growing at an incredible Pace, adding over 5 billion dollars in premiums written and nearly 2.4 million additional PS, during the first half of 2025, compared to the first half of last year.

Requires the rare combination of strategic focus and relentless execution that we consider key sources of Progressive's competitive advantage.

Full statutory industry results released in June show that Progressive gained more than 1.5 points in personal auto market share in 2024, while outperforming the industry combined ratio by more than 7 points.

Our 2024 market share increase was the largest share game of any carrier in the past 15 years.

This rare combination of profitable market. Share growth isn't an isolated event for Progressive.

Over the past 15 years, we've increased our auto premium almost fivefold, while simultaneously running close to a 9-point wider underwriting profit margin.

Our performance is the direct result of executing against our Force, strategic pillars.

People and culture product, breadth, brand, and competitive prices.

Today, we'll focus on competitive prices and provide you with some insights into how our ability to predict and price future loss costs.

And to rapidly deploy products and pricing to match our premiums to our costs remain key ingredients of our continued success.

The compounded effect of doing this, with each successive product model, has enabled us to continue to make great progress toward achieving our vision of becoming the number one destination for consumers, agents, and business owners for insurance and other financial needs.

Building on our exceptional underwriting profit performance. We continue to invest to drive continued growth.

Despite seeing greater competition now than we did at the beginning of the year.

Through the second quarter, we continued to see, strong demand for our personal Auto products across both of our distribution channels.

The independent agent channel is a great barometer for the competitive environment where available coverage options across carriers are presented via comparative graders which provide agents and their clients real-time comparisons of how our products compared to those offered by other carriers.

Every indication is that our Auto products have continued doubt performed on a relative basis. As evidenced by strong year-to-date double-digit growth and new applications premiums written and policies and force.

On the direct side, our marketing engine remains highly effective generating high-quality prospects at near record levels.

and our conversion rates indicate that despite the increasing marketing spend,

Our prices are still highly competitive and provide consumers a good value relative to other in-market options.

Year to date. We have spent 2.5 billion dollars on marketing an increase of about 900 million compared to this time last year.

And as our volume denominator grows, achieving year-over-year new application growth becomes more challenging.

But so far we have continued to leverage our scale and identifying new opportunities to refine where and how we invest our marketing spend to drive profitable growth.

Similar to personal lines. We continue to rapidly grow market share in our commercial lines business while consistently beating industry combined ratios, by 8 10. And as much as 20 points over the last 20 years,

This consistent profitability is particularly impressive. When looking at how us Commercial Auto continues to struggle with profitability.

Producing its 14th consecutive unprofitable, calendar year in 2024.

Our success can be attributed in part to the intense focus on Commercial Auto as a core line of business in our commercial lines. Offering

This autofocus, in conjunction with introducing the segmentation of commercial auto into the business market more than 10 years ago, has enabled us to capitalize on meaningful and actionable differences between resulting vehicle types and usage that we can operate as all aspects of the business.

This granular focus has allowed us to quickly develop segment-level insights and execute proactive rate and underwriting actions at the BMT level.

Higher Transportation. We're now extending those capabilities to our expansion product lines, like the business owner policy product.

To support long-term positive contributions from these newer businesses, we leverage established pricing and product delivery capabilities to ensure we have the necessary monitoring and insights. In addition to leading capacity and the delivery agility to bring rapid rate and underwriting adjustments to market.

Leveraging, these proven capabilities should help our expansion commercial businesses deliver the profitable growth. We expect from all of our underwriting businesses,

a significant contributor to delivering our continued profitable growth is the ability to quickly and decisively respond to changes in loss costs to ensure we can remain open for business when inflationary pressures create hard markets and elevated shopping levels,

This is no small fee, especially given the lack of historical precedent for some of the drivers of recent loss cost increases.

Fast forward to today. And we're similarly, working to model first second and third order effects of global tariffs and potential supply chain disruptions to determine the appropriate future rate levels for these emerging macroeconomic events.

Our pricing teams are responsible for translating highly complex and dynamic internal and external data into timely rate, level recommendations.

Each of our product teams are supported by a group of these talented individuals who leverage complex Actuarial methods to understand and Trend our future costs towards our goal of collecting the right premium to cover both. The costs will incur and our Target profit margin.

Today we'll be diving into the details of our personal and Commercial lines, pricing Theory and practices.

Thanks, Pat. And thank you everyone, for joining us this morning.

What is our product?

A property and casualty insurance company such as Progressive doesn't actually manufacture a physical product.

Our product is not tangible.

Instead it is a transfer of risk from insured to insurer.

Changing the small probability of an adverse financial event.

In exchange for the payment of a premium.

that transfer of risk is outlined in our policy contract, and

that transfer of risk is both dependent on when accidents occur or the accident date.

And time bound within our short-term contract links of 6 or 12 months.

Car accidents are not corn flakes.

As opposed to a tangible product like corn flakes.

Where costs are largely known before the product is priced and sold.

Progressive doesn't know for sure what our costs are until long after our product is priced and sold.

That is precisely the transfer of risk from insured to insurer. I just described only now from the perspective of the insurer that risk is now ours, and as we will discuss in a few minutes.

We do many things to mitigate that risk.

Within both our pricing science and our operationalization of getting the right rate to market quickly.

Pricing to expected cost.

First, when we talk about pricing for costs,

we are referring to all parts of our premium dollar losses.

Loss adjustment expenses for laaae.

General expenses and profit.

Reasonable and not excessive, inadequate or unfairly discriminatory. If it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer.

A few things to highlight first. It references the expected value of future costs.

Where actual outcomes could be lower or higher.

Second, it is always forward-looking or prospective.

As it is an estimate of future costs.

Third.

Today's presentation will focus primarily on not excessive and not inadequate, as opposed to not unfairly discriminatory, which is largely in the domain of our product development departments.

So, the field of economics.

And the distinction between macroeconomics.

And the focus is on changes in whole economies and aggregate variables.

And microeconomics.

And the focus on changes in individual firms and consumers.

We will focus today on macro-level pricing.

as opposed to the individual relative risk rating in segmentation of micro level pricing,

and in addition to our approach being aligned with actuarial principles,

It is also well aligned with state regulation.

As nearly all states legally require. That rates are not accessible, not inadequate. And not unfairly discriminatory

And it also fits quite well within Progressive Vision to be consumers' number one choice via competitive rates.

but to do so by growing profitably,

And adhering to our core value of profit.

The fundamental price in questions.

There are two questions that completely underlie our approach.

Number 1.

If we don't do anything to current rates,

what loss?

Plus L AE ratio, should we expect?

In the upcoming rate, revision.

For the policies, we are about to write.

and number 2,

What do we need to do to current rates in order to hit our combined ratio target in the upcoming rate revision for policies? We are about to write.

We refer to these as the fundamental pricing questions.

And in the coming slides, we will build the fundamental pricing equation to answer these questions.

Actuaries develop predictions and minimize bias and variance.

An enormous competitive advantage that Progressive has is the quality, granularity, and quick availability of data.

Our growth and scale have only deepened that advantage.

But if you don't think you have a blind spot, then you have a blind spot.

And with all of this quality data, if we are not careful, we could slice the cake and slice the cake, and slice the cake, until all, we have our crumbs

This is where we in our pricing organizations come in.

Actuaries are experts in matching rates to risk.

Balancing responsiveness and stability.

And maximizing accuracy and precision.

and as we will see, in the coming slides, as we try to price this accident-year, promise our data is trying to fool us

There is no single perfect piece of data.

Our work centers around correcting for bias or...

Accuracy and spread and various precision.

And finding signal through noise.

And bias as used here, refers to statistical bias.

From Wikipedia.

Quote, in the field of Statistics bias is a systematic tendency in which the methods used to gather data and estimate. A sample, statistic present an inaccurate skewed or distorted biased. Depiction of reality end quote.

Every month, Progressive releases financial information.

Publicly describing our underwriting performance by line of business.

To align with generally accepted accounting principles.

View that includes incurred activity on all losses and LAE, regardless of date of occurrence.

For the purposes of rate making. However,

we are attempting to price for the accident year. That is ensuring that we have the correct rates at the time, the accidents occur.

Which I'll explain further in the next few slides.

Calendar year incurred losses are a combination of paid losses and change in reserves.

They can also be subdivided to show contribution to.

that calendar year of current accident year versus all prior accident years.

We will now use a historical example, derived from a Progressive, personal auto state comprehensive coverage.

To demonstrate how we can effectively answer, the fundamental pricing questions.

All amounts are in thousands of dollars.

The first piece of data, we readily have

Is trailing 12. Calendar year, incurred losses.

43.24 million.

as we just stated,

Calendar. Year incurred losses can also be subdivided to show contribution of current accident year.

Versus all prior accident years, as can be seen here, we see the same paid loss plus change in reserves pattern for both the current accident year and all prior accident years.

We will now use our simple example to fill in values for each element of the formulas.

And in this example, when we isolate the contribution of this accident year to the current calendar year incurred losses of $43.24 million,

We see that the current accident year incurred losses are $43.56 million.

the other element of calendar year incurred losses is the contribution of Prior accident Years, also known, as prior accident year, runoff,

Which in this case is -$327,000.

The 43.56 million.

Current accident year losses, is what we need to start to answer the fundamental pricing questions.

Unbiased ultimate accident year losses. Equal accident year incurred losses, times loss development factor.

Loss reserving goals are to set financial reserves to be adequate with minimal variation from the date of loss until final settlement.

We examine the development over time of historical accident year losses.

As claims are reported and settled across the columns of a loss development triangle.

As can be seen in the upper right?

That is known as a loss development factor.

In this case the reserve set by claims and loss reserving have historically been adequate in our example that loss development factor is then slightly less than 1 at 0.99.

At this point, we can also bring in another piece of data that we readily have.

Trailing 12 calendar year earned premium of $61.14 million.

Loss adjustment expenses are correlated with losses.

Loss adjustment expenses can be divided into defense and cost containment, or DCC, which is defense. Litigation and medical cost containment expenses, whether internal costs or external fees.

And adjusting in other or AO.

Which is adjusting and other overhead expenses, whether internal costs or external fees.

Both can change in the short term and long term.

Depending on a number of factors, including attorney representation rates, statutory and regulatory changes, changes in efficiency in our claims organization, among other possible causes.

In general, we tend to move with losses.

In this example, we have selected Lae to be 12% of losses.

A portion of our costs.

Are mean reverting.

Forecasting elements of the fundamental pricing equation deals with 2 distinct forms of Time series.

Series with stationery.

The graph on the left.

This series tends to revert to a historical mean, and requires a longer experience period to provide an effective future forecast.

Weather is a prime example of where this approach is warranted.

Care must be taken to decide whether such historical mean needs to be slightly adjusted going forward due to environmental changes in our future pricing period.

Time series without stationarity, the graph on the right.

That series does not revert to a historical mean.

It is dominated by Trend and seasonality.

We will discuss this further when we examine frequency trend, severity trend, and premium trend.

In this example, the last year contained $14 million of wind, flood, and hail losses, well above our long-term expected average.

therefore restating to the long-term expectation implies, a weather factor of 0.926

For commercial lines, an additional area where we must consider this paradigm of reversion to the mean is in the treatment of large losses, as with whether care must be taken to decide whether such historical mean needs to be slightly adjusted going forward.

Due to environmental changes in our future pricing period.

Frequency and severity of losses change over time.

What changes each over time?

Essentially, this is time as a segmentation variable.

It helps to separate the multiplicative components of losses, as the drivers of each can be different.

Frequency is the probability of having a claim.

Severity is the dollar amount of the claim itself.

Factors that can affect frequency include vehicle technology and safety laws.

Product mix, for example, deductibles or tiers.

Statements on new business, growth, retention, and weather.

Seasonality.

Underwriting and billing.

Apart from the magnitude of the trend itself.

The number of months that we need to trend is important to.

that is a function of

time to price.

File, get approval and elevate.

Policy term and rate revision length.

Remember the bullseye slide from earlier?

The Precision of our estimates.

Decline, meaning we have a greater spread the further into the future. We have to estimate

That is of particular importance in commercial auto, as they have a preponderance of annual policies, which increases the number of months into the future. We must trend.

In our example, we have estimated the frequency trend to be plus 1% annually. That needs to be applied for approximately 16 months from the midpoint of the historic period.

To the future, average accident date of our prospective pricing period.

The faster we can analyze our data, the shorter we can make our policy terms, and the more frequently we can elevate rate revisions.

The fewer months we need to trend, the more we can reduce the spread of outcomes and increase precision in our forecasts.

The process.

It's similar for severity factors that can affect severity, including vehicle technology, safety laws, product mix, for example, limits.

Statements regarding medical inflation, used car values, car part inflation, body shop labor rates.

Whether seasonality?

Claims Staffing.

In our example, we have estimated the severity trend to be plus 7% annually.

As with frequency trends that need to be applied for approximately 16 months from the midpoint of the historic period to the future average accident date of our prospective pricing period.

The further into the future, we have to estimate the wider, the spread of future possible outcomes.

Progressive changes rates frequently.

Looking towards answering the fundamental pricing question.

Of determining what we need to do to current rates.

Progressive changes rates a lot.

Consequently, any recent historical period of earned premium will include premium written at varying rate levels.

This phenomenon is further, exacerbated by the presence of varying policy. Terms 6 months, and 12 months.

So we need to adjust this historical premium entirely to today's current rate level.

In our example, we have elevated two rate decreases in the last year.

That means our current rate level factor is 0.958.

Controlling for the effect of product mix shifts on loss trend.

A frequency or severity trend that is caused by a product mix shift will not necessarily mean our rate adequacy position, as seen by our fundamental pricing equation, will shift.

For example, Progressive has been shifting to Robinson's for several years.

In isolation, what would we expect to happen to frequency and severity losses?

Frequency would decrease significantly due to more lower-risk drivers in our book.

Severity would increase, reliability coverages.

Due to higher purchased limits of liability.

Overall, losses per exposure would decrease as the frequency declines, which would overwhelm the severity increase.

But we would also be collecting less premium per exposure, as we charge less for Robinson's for exposure.

We control for the effect of product mix shifts on our frequency and severity via premium trend.

Which measures changes in average earned premium at current rate level over time.

We must put all premiums at a common rate level, as only looking at changes in average earned premium over time would be confounded by Progressive's frequent rate changes.

The graphs of bodily injury or the premium on this slide illustrate this.

While Progressive's average earned premium per exposure has increased.

a rate increases in recent years.

The average earned premium per exposure.

When controlling for that.

IE at current rate, level has declined.

The net effect of the rate increase is and product mixture.

Still to have increasing bodily injury average earned premium per exposure.

and therefore, a product mix shift, will not necessarily mean our rate adequacy position would shift,

it would only change if we are shifting into a part of our book that has a different relative level of profitability.

Into a part of our book, that is less profitable, the rate need as indicated. By the fundamental pricing equation would go up as frequency slash severity would rise more than premium and we would need more rate.

If we are shifting into a part of our book that is more profitable.

The rate need, as indicated by the fundamental pricing equation, would go down.

As frequency severity would rise, less than premium.

And we would need a lower rate.

In our example here.

In contrast to the graphs of progressive bodily injury, annual premium trend is actually positive eighteen plus 5%.

And like frequency and severity Trend that needs to be applied for approximately 16 months from the midpoint of the historic period to the Future, average accident date of our prospective pricing period.

What Target loss plus LAE ratio would meet our underwriting profit target?

First, we determine a forward-looking estimate of expense ratio.

Second, we work backwards to determine our Target loss ratio which is equal to 1. Minus the expense ratio minus profit.

In our example, the expense ratio is 17.7% premium.

78.3%.

Some elements are correlated.

While we have detailed the elements of the fundamental pricing equation individually. We do not assume the correlations, do not exist between elements.

Some examples are losses and Lae.

Premium trend.

And frequency trend.

Premium Trend or product, mix and severity trend.

L a e and severity trend.

Loss, development factors, and severity trend.

Premium Trend or product. Mix and expenses via the budgetary loss and loss adjustment expense ratio.

Understanding these patterns can inform our predictions of each element and improve accuracy and precision of the fundamental pricing equation.

Balancing responsiveness with stability.

Remember the bullseye diagram from earlier?

We always see.

Truth.

But observe data.

Which is truth.

Plus random noise.

Credibility, also known as the crown jewel of casualty actual science.

Helps us ultimately deliver the best minimum variance unbiased estimate or as close to the bullseye pattern in the lower right hand corner as possible. And allows us to slice the cake. Optimally to balance responsiveness and stability, and Achieve forecasts that minimize both bias and variance.

We want to emphasize recent data such that random noise is kept to an acceptable level.

and we want to emphasize that recent data because it is closest to what we can expect in our future pricing period in terms of our book of business and the external environment

But there can be a trade-off there as that data can be thinner and noisier and we need to make adjustments to account for that noise.

Credibility is the number between and including 0 and 1 that we use to weight our data.

The higher credibility is the more weight we attached to our data and the fundamental pricing equation.

Example of experience reaches full credibility.

So, credibility equals 1.

If we have enough claims that 90% of the time, our experience is within plus, or minus 5% of the True Value.

Standard for full credibility for each coverage is determined through complex. Actuarial formulas and increases as the variability of experience increases.

In our example, the standard for full credibility is 4,559 claims.

We have over 27,000 claims in our experience, period.

So we have full credibility and credibility equals 1 or 100%.

Our growth in scale has significantly enhanced our credibility and our ability to best react to changes in our environment and in general for personal Auto. We have achieved that full credibility with 1 year of data, in the overwhelming majority of our state channel coverage combinations.

We now have developed the fundamental pricing equation, where we can answer the First. Fundamental pricing question, if we don't do anything to current rates, what loss plus Lae ratio, should we expect in the upcoming rate revision for the policies? We are about to write.

So that's our experienced loss, plus Lae ratio.

We can also answer the second fundamental pricing. Question, what do we need to do to current rates in order to hit our combined ratio Target in the upcoming rate? Revision for policies? We are about to write

That's our experience loss. Plus Lae ratio divided by our budgetary loss plus Lae ratio.

And one final step is to weigh our estimate with a compliment via credibility.

So the experience loss plus Lae ratio divided by the budgetary loss plus Lae ratio times credibility

Plus a complement of credibility times 1 minus credibility.

Fundamental pricing equation.

That augments the fundamental pricing equation with an estimate of future net trend.

In our example, we use a complement of credibility of Plus 2.4%.

The final product is what we refer to as a credibility. Weighted rate level indication.

Here that is, Plus 1.3%.

This concludes the theory of price pricing. As you can see it's complex with many variables and considerations and thus many ways to go astray.

This is really, really hard to do successfully.

We have been at this for decades and combined with the availability quality scope and size of our data. It is really really hard to replicate this at our scale.

And to be as accurate, and precise, as possible. When we apply this theory in practice, we have many additional considerations which Jen qubit will discuss in the next section.

Jen.

Thank you, Brad for explaining the theory, behind the calculations to the 2, fun pricing questions. If we don't do anything to current rates, what loss plus L ratio, should we expect in the upcoming rate revision for the policies? We are about to write.

And what do we need to do to current rates in order to hit our combined ratio Target in the upcoming rate? Revision for policies? We are about to write

So now let's discuss how we answer these questions at Progressive, and how the answers influence, customers rates and Future profitability.

This rate making process at Progressive side was last shown in the 2021. Fourth quarter, investor relations call with John Curtis and conic Varma.

This process is utilized in all our lines of business at Progressive.

The product R&D pricing and product management. Teams collaborate to determine the rate, need to support our operational goals, grow as fast as you can at, or below a 96 combined ratio.

Additional teams join these three to deploy the final rate changes to the marketplace.

Once deployed a consumer's quoted premium reflects, the revised rates.

Let's focus in on the 3, that collaborate to determine our rate need.

There are 2 broad areas of rate, need segment, level and aggregate rate.

In this presentation, Brad went in depth into the best Actuarial science. We use in pricing to evaluate the aggregate rate need in the future revision, to hit the target, our budgetary loss and Lae ratio.

Product R&D, calculates the segment rate need or the relative rate need across variables used in the product design.

And product managers leverage. These Aggregate and segment level rate needs along with their knowledge of the local market dynamics to set the pricing strategy for their respective States.

They decide if the segmentation aggregate rate level or both need to be revised.

a product manager strategy is ensures that we seek to not only hit rate, revision targets

But also our calendar year goal to grow as fast as we can at or below a 96 combined ratio.

At Progressive. We believe that our rate making process is effective because of the knowledge at the local level combined with the advanced and accurate view of segment level and aggregate rate. Need

and we strive to maximize its Effectiveness by analyzing the rate. Need often and bringing revised rates to Market quickly.

In personal Auto pricing, we frequently evaluate the expected loss and Le ratio in the future revision.

We complete rate level indication analysis on 51 states.

With each agency and direct distribution Channel, done individually.

Also, there are 12 to 15 coverages, analyzed separately.

For example, the bodily injury liability and comprehensive physical damage coverages. Each have their own indicated aggregate rate need because the data patterns are different such as frequency and severity trends.

These analyses are completed 3 or 4 times per year and discuss with the product manager of the specific State and channel along with their team.

So that's 4,000 times our pricing teams are analyzing how losses will develop to Ultimate costs and 4,000 times. We're discussing with product managers, how losses will Trend into the future rate revision, period.

In commercial Auto pricing, our data set is smaller. However, we're still analyzing the aggregate rate, meet quarterly And discussing with the product management teams.

We aggregate Most states together to improve the credibility of our Progressive data. The largest 4 states are analyzed individually.

Rate revision and calendar year combined ratio results for smaller states are monitored.

Rates are revised at the state level because of insurance regulation.

And for rate revisions, we complete a rate level indication that uses state-specific data.

We evaluate our aggregate rate needs separately for our five Business Market targets.

Differences by BMT and how losses present and how they develop and frequency and severity Trends over time, affect the estimated loss ratio in the future revision.

And finally, there are 9 coverages analyzed separately in commercial auto rate level indications.

Overall, we're analyzing and discussing at least 900 fundamental pricing equations in a year.

The regular Cadence of these complex analyses in both personal lines and Commercial Lines. Auto is so important. In understanding the aggregate rate need and being responsive to changes in the data.

But it's not enough to analyze the rate need often to truly respond to the changing data, we need to deploy rate changes to the market quickly.

This chart shows the number of rate revisions that are deployed each year over the past 5 years and our personal Lines Auto and Commercial Lines Auto products.

We deploy many rate changes to Market to adjust either the segment level or aggregate rates or both.

And we have the capabilities that Progressive to increase the number of revisions deployed.

For example, in 2023, both the personal lines and Commercial Lines Auto rate revision teams responded quickly and often to increase in loss costs and loss development in our underlying data.

These rate, revision capabilities are very important to our success at Progressive moving. Quickly is important because of the time needed for some states regulatory approval of rate changes, and because of the premium earnings Cadence,

A policy written today at the new rate level will have earned premium in each month that it's enforced or for the next 6 or 12 months depending on the policy term.

So it takes many months for the earn premium in the denominator of our calendar year, combiner ratio to fully reflect the new rate level.

We are confident in our pricing teams aggregate rate level recommendations using our robust data sets.

And we have an official process to deploy rate changes to the insurance Market.

However, there are times we must respond to changes and intervene in our fundamental pricing equation because historical data may not be informative.

Recall that car accidents are not corn flakes. We are selling a promise to pay for claims in the future policy terms.

For example, changes in tariffs on Imports may impact the payments on claims or loss payments in the future.

Our role in the pricing teams, is to answer the 2, fundamental pricing questions for the policies. We are about to write in the upcoming rate revision.

But we have no previous loss payment experience with the changes to tariffs.

Consistent with the casualty Actuarial societies statement of principles on rate making. We answer these 2 questions with an actuarially, sound estimate of the expected value of all future costs including changes in tariffs,

Calculating the expected value of the future loss payments from changes to tariffs is not straightforward because Auto claims are not all the same.

Broadly speaking, we split the loss payments into claims for damage Vehicles versus injuries.

And these 2 categories can be further split into similar types of costs.

Starting with damaged vehicles.

If it is repairable, the loss payment includes the cost of labor and parts and materials.

If the repair is more costly than the value of the vehicle, less anticipated, Salvage, recoveries. Then it is declared a total loss and the claimant is paid the value.

Data.

for example, the labor parts and materials the value of a vehicle and Salvage, recoveries

This is because the cost in this granular level of data are more similar. Also, we consider the insurance coverage to the calculation of the expected value of the future loss payments from changes to tariffs.

Collision and comprehensive coverage for our customers damaged vehicle. Usually has a deductible for the first 500,000 or $1,000, but the maximum payment is unlimited.

Compare this to property damage liability coverage for a claimant's damaged vehicle. It has a limit to the maximum payment, for example, 25,000 on a personal Lines, Auto policy

for injuries to claimants or our customers. The loss payment includes the cost of medical treatment. The loss payment may also include General, damages such as pain and suffering.

again, we analyze how the changes to tariffs may affect these 2 different types of costs included in injury loss payments and we consider the insurance coverage

Insurance coverage for injuries usually has a limit to the maximum payment per claim.

For example, $50,000 per injured person and for all injured, claimants on a personal Lines Auto policies, bodily injury liability coverage.

a commercial auto policy often carries significantly, higher bodily injury and property damage liability coverage, for example, 1 million dollars, combined single limit,

but the pricing team is not working alone.

We believe our analyses are improved by collaborating across functions at Progressive.

We leverage subject, matter expertise to calculate the expected value of the future loss payments from changes to tariffs.

The economic team within Progressive Capital Management functions provides interpretation on the federal government's actions and timing for implementation.

They also share insights and external economic indices related to tariffs and imports.

Members of the claims functions process and control teams provide subject. Matter expertise on the categories of loss payments described in the previous slide to evaluate. If they are impacted by tariffs

They provide the necessary granular data.

The pricing team Aggregates this information from the economics and claims teams to calculate the expected value of future loss payments, including changes to tariffs.

We then incorporate this expected value of loss payments. Within the fundamental pricing equation to calculate the expected loss and Le ratio in the upcoming revision for the policies, we will write

Progressive has multiple pricing teams within the personal lines and Commercial lines functions.

Personal lines is also split by Auto home and special lines.

In addition to collaborating with economics and claims, we also collaborate among the pricing groups to share and debate methodologies and assumptions.

Despite all the best Actuarial methods for evaluating the aggregate rate. Need communicating with product managers and deploying quickly to Market, predicting the future is impossible. So our initial expected value of future loss payments including changes in tariffs will be wrong.

The fundamental pricing equation requires us to estimate future loss, payments, and other costs.

All our future predictions are wrong to some degree, and the probability of being wrong increases with changes that have minimal historic precedents.

Such as inflationary impacts when an economy emerges from a pandemic or the frequently changing impacts of tariffs.

Pricing claims and economics teams are working together to monitor the actual change and loss payments from implemented changes to tariffs.

The scale and quality of our data at Progressive allows us to quickly identify the change in the actual loss payments and compare it to our expected value.

This leads to refining our calculations a robust data, set at Progressive, and the expertise of multiple teams contributes to our speed through this, iterative cycle of estimate Monitor and refine. We are moving quickly to the center of the bullseye from Brad's slides, where our expected value of future loss payments from changes in tariffs are accurate and precise.

Updated aggregate rate. Level advice to product managers, so they can recognize the differences in the refined expected value of the future loss payments.

And we have the capability to deploy necessary rate changes quickly, the speed of estimating monitoring and refining, our rate, level indications, and deploying the right rate, changes important to deliver on our profit targets.

And we want to write more business when we have accurate rates relative to the expected cost.

Changes in tariffs are not our first intervention. To the fundamental pricing equation. Our combined ratio results show that we have moved quicker than the industry. To recognize increasing costs, raise rates and deliver on our operational goal of at or below a 96 combined ratio in personal Auto, the standard deviation of our annual combined ratios. In this 11 years from 2014, through 2024 is half of the average standard deviation, from the other, top 10 carriers.

So, we are responding quicker and making smart interventions.

Pricing collaboration with subject matter, experts and other Progressive functions along with the infrastructure to analyze rate. Need often and deploy rate changes quickly, has proven effective in responsiveness and stability of our combined ratio. It is a major contributor to our outperformance of the industry.

This concludes the previously recorded portion of today's event. We now have members of our management team available live to answer questions, including presenters Brad Granger and Jen Qubit, who are available to answer questions about the presentation. The Q&A session will be audio only, and questions can only be submitted over the phone by pressing star, 1, 1 on your keypad.

in order to get to, as many questions as possible. Please limit yourself to 1 question and 1 follow-up. We also ask that you use restraint and re-entering the queue to ask additional questions.

We will now take the first question.

Our first question comes from the line of Rob Cox of Goldman Sachs. Please go ahead Rob.

Hey, thanks. Good morning. Uh, yeah, just first question on, uh, quote volume growth. Uh, I was just looking at quote, volume growth and it looks like direct quote. Volume increases have have really taken off all Agency. Quote volume has not seen exactly the same acceleration, so I'm curious if the actions you're taking in the property. Book are limiting Agency quote volume and would you expect to see a Tailwind uh in Agency quote volume as you wind down? Those actions in the property book?

Yeah, thanks Rob. Um, you know, 1, uh, our direct quote volume, uh, reflects our increase in advertisement. But also, when you're thinking about property quote, yes, there's a difference in agency, so you're going through an agency, you have 1 offering with Progressive and that's Progressive home. When you go through direct, we have many unaffiliated partners so we can write with them. So if it doesn't fit our appetite need, it can fit an appetite need of 1 or 1 of our unaffiliated partners. So we feel like, uh, with where what we've done in the past couple of years, there will be some nice Tailwind in both the agency and direct Channel, because we're in such a better position in our property book as far as less volatile areas and clearly our combined ratio,

Thank you, that's helpful.

And then, I just wanted to follow up on, uh, Florida. Can you help us think through the potential size of the Florida? Refund, uh, related to the excess profitability. Um, and how are you thinking about pricing, moving forward in Florida, given where the profits are

I'll take the

further question.

First, so we've reduced rates.

24 to twice in the last year. 8% in December, another 6% in June, uh, we care deeply about Florida, where the number 1 Rider. And, you know, when the insurance reform passed in 2023 House, Bill 837, we were really hopeful that that would uh it would reduce loss cost and it has done just that. Uh so I do want to take I I don't know that I have said this before but um these reforms and and you know my our hope is that they continue have really made a difference for pheons and uh and you know, hats off to commissioner warski and Governor de santis for writing that and sticking to it because it really has, um, been incredible, uh, for does have an excess profit statute. That are enrolling 3 year basis. So think of 23/24 and 25. So, without having half a 25 I couldn't, uh, give you a guest estimate with any accuracy, especially as we head into hurricane season. Um, but if our profits from those periods exceed, the statutory limit,

With the provisions and give that money back to policy holders at that time. So we're watching that closely. We have an internal estimate but it could change dramatically. Um given hurricane season

Thank you. Our next question comes from the line of Bob Jean, hang up, Morgan Stanley. Please go ahead. Bob,

Hi. Good morning. Uh, looking at your 10q uh you talked about uh policy life expectancy for personal Auto decline 5% due to uh do impart to business, mix shift, um, is this the same business mix you, you talked about in the other parts of 10 Q, or your shifting towards the Robinsons, And the rights intuitively intuitively. I thought those should have higher policy life expectancy. Can you help us? Think about that.

Yeah, you know it the mix shift has changed dramatically because of what happened with inflation in 2023. And so we closed down, we, you know, our underwriting, um, uh, appetite and brought in a lot more preferred business. Mix since we've opened up, um, as you can see, especially, uh, in, in the well actually both channels. We have a variety, a lot more sounds, which is lower ple. We expect that we know that we have a history of that. As long as we make our profit Target, margins, on the spams, it is great. So a couple different things on autopilot that I would talk about this is probably a little bit redundant from last quarter, but, you know, there's a lot of shopping going on. So in a, in a hard

Hard Market that's going to happen is that necessarily you know bad? No because if the price isn't right in our book and people shopping can get a lower price um we believe as you just heard from um both Brad and Jen that we priced pretty darn accurately. We have a rate revision machine so it could be adverse selection. It could be going to someone who hasn't got the right price on the street.

But, secondly, uh, the mix shift that you're seeing in the PLS is with Sams. So it's, you know, compared to the base of the preferred business, we put on the, uh, the books, a few years ago. And then, lastly, when people do shop, we talked about this last quarter, you know, we will um, take look, look at their policy, do a policy review. Look at Bill plans and different things that could cause us to, uh, rewrite with us starting the clock ticking over. So, although we keep that customer, you'll see the decline in ple, um, I have reasons to believe that, you know, that will start to turn around. But again, that will will, you know, see as the day to, you know, comes out, I would point you to and I and we're not going to necessarily share this all the time but we have an internal measure of household life expectancy which gives us a 30-day ability to rewrite and our household life expectancy is up. So that's kind of my reason to believe that a plague could follow again. A lot of people.

Has to do with mix how long the hard Market continues the shopping behavior of consumers, which could, you know, maybe dramatically change in this, last 2, or 3 years based on all the inflationary measures. So a lot of data going into that, but, um, hopefully that gives you a little bit more color.

Great. Thank you. Um, second question is is on tariff. Um, again, this is something that I, I, I think the right way to think about it, is it introduces uncertainty? Um, but maybe on the personal auto side if we remove the tariffs as a headwind, is it fair to say that you, uh, you you should be able to grow much more aggressively or reduce your pricing significantly? Um, is that essentially the only thing that kind of keeps you away from reducing pricing further

Well, you know, we wanted to be conservative because of the uncertainty around tariffs. We every day that passes. We, we get more certainty around that. Here's how we look at it. We look at every state new and renewal every product. Um, look at the margin, look at our ability to grow. And we'll always try to grow as fast as we can at a 96. So, we've, you know, uh, we're we're states where we need a little rate, we'll go up a little bit where states, that we believe, we can grow like a Florida will reduce rates. And, um, we're, we're back to where we want to be and that's taking small bites of the apple on either end and that allows us to keep rates stable and competitive for our customers, which we talked about as 1 of our key strategic pillars. So,

If we feel like we can grow and we have the margin and we have more certainty, we'll absolutely do whatever it needs, whatever we need to grow and grow profitably.

Thank you. Our next question comes from the line of lease Greenspan of Wells Fargo. Please go ahead, Elise.

Earlier, but as you think about going forward, um, how do you expect? I guess policies in force growth to Trend given, you know, these Trends combined with the fact, right? Um, You guys called out, right? You took a around less than 1% rate decline in the quarter and personal Auto, and you're still increasing ad spend. So I'm just trying to get a forward view on on pip growth, um, with all these things to consider,

Yeah, I mean, it's hard to compare 2025, which was has been incredible all by the 2024, which was the best year in the history of progressive, but the fact is, we grew over 5 million Pips, uh, year-over-year and a million, and P just in this quarter. So, we believe there's an opportunity to continue to grow. We believe we're in a really great position, and I think where we feel like we're in even a better position, is to now grow that Robinson book, so we feel like we're in a different, uh, position in our property. Uh and uh, have a lot of plans to continue to work out the blueprint and ultimately open up a bit and because we have all those Auto policies, we have those future Robinsons or Robinson's um that, you know, have have an auto and home but not home with us. So I think the opportunity really lends itself um to grow more preferred, we have, I think we have a lot of opportunity in that area and that will be our Focus. Again, we'll be strategic. We're not going to swing the pendulum. The other way. We've

Certainly learned a lot about the property book and the volatility across the country in the last, you know, 5 to ten years. But we're really well. Positioned and the fact that we have all that auto business on the book, I think is really important. There's a lot of market share for us to capture so I I can, I remain. Bullish comparisons are more difficult when you're comparing to the best year in the history of progressive.

Thanks. And then my second question. Um, you know, Trisha and your letter, you mentioned. Um, there were some comments on Capital. Um, and just, you know, obviously holding Capital as a detriment, um, you know, to your return. Um, you could just expand on that and I guess if you guys are thinking, um, about incremental Capital return, I know there's a balance with using capital for growth, is that a reference? Just to, you know, you guys normally have a special dividend later on a year or would you consider incremental repurchases? I'm just hoping to flush out that comment a little bit. Thank you. Yeah, we'll continue, you know, we needed a lot of capital and have needed a lot of capital to grow. So we have our regulatory base and then our our contingency layer and and and extreme contingency. So we continue to model that out. And then we have 3 ways to return Capital the first and our our preferred way is to grow the business and we've been doing that, we'll continue to do that. And then we uh, we buy back shares of stock, um, to reduce uh, the dilution from our stock based compensation. And we've done that, we will buy more

Stock back, if it's under our intrinsic value. So we look at that model. Um constantly and then yes usually typically in December is when the board of directors um name if we have 1 a variable dividend. And so we've started modeling out that now and I say we John Bower John Sellers, and I start thinking about, you know, how to, um, present that to the board. Ultimately, it will be their decision. And again, we have a lot of your left with, uh, a storm season's coming up. But that would be another opportunity. Should the board decide to, um, give Capital back in the form of a variable dividend.

Thank you. Our next question comes from the line of Josh chancre a Bank of America. Please go ahead. Josh.

Yeah, thank you for taking my question, you know, following up on allowed, to talk around plea and taking out a lot of Sam's, I'm just wondering if you did nothing. Um, uh, particular to improve the, um, PL of the company. But just let the excess Sams who came on board, um, Bake Off on their own regular timeline would retention just improve naturally with the company by the passage of time. And if so uh when might we see that uh that inflection take place given all the business you added in 2024

I hope I understand your question. I mean, I do want to say that Sams have always had a lower PLA, and we actually further segment different Sams. I won't go into all the details. If Sams ran off because they were shopping and leaving, yes, our retention would go up. But again, we like to have as many of our Sams as possible; they were sort of our upbringing, so we love having Sams on the book as long as we meet our calendar year and our lifetime profit targets on that. Did I understand your question, Josh?

To your normal mix of Sams and dian's and Robinson's. That means that that I guess ple would just go naturally up because your new customer acquisition wasn't decidedly. Sam oriented? Is that is that is that a correct way to think about things? Yeah, that's a good way to think about. I think a lot could happen though. I I talked a little bit. I think during Lees question. I I I believe our our Bobs about us wanting to grow Robinson. So it depends on other segments, we bring on. It depends on competitor's rates and and what our customers do. And again there is some noise I think in our data for sure and I believe others with people shopping, but shopping with their current company because they don't necessarily want to leave and even though that starts the time clock over that customer didn't leave. We just did a policy review. So there's a little bit of noise in there, um, but I think the way, if if, if all things were stable the way you're saying that would play out, I just don't think all things will be stable.

And then uh look obviously you're fantastically profitable right now. You're also spending a lot on ads. If those ads are procuring, a lot of Sams,

Uh, are is, is the ad spend, um, for low duration or low policy. If it's actually expecting customers Justified or are, you know, are, are you expecting that? You would only have those policies for 6 months or 12 months, and it's working out exactly as planned.

Yeah, we we look at we won't try to bring on any customer and any of our segments on the book, If we don't believe it to be to reach our our Target profit margins, as long as our across for sales under attack, which it is will continue to spend and grow in every segment that we can because again, some of those Sams, you know, are going to be future Robinsons at some point they'll turn into dian's and they'll get a, you know, renters policy or as, you know, we're growing a lot in renters policy. They'll eventually buy a home and the likelihood of them sticking with Progressive for a home is high. So again, um, uh, we want to bring everybody in but we look at that totally from the target acquisition cost of each segment.

I'd love to hear more about uh Sam's turning into uh, Robinson's in the future. So we'll stay tuned. Thank you. I'll do that at some point. Josh. I

14 or 2000? I'm aging myself. But we start thinking about that and that's 1 of the reasons why we really started. Um, uh, looking at the construct of the 3 horizontal products that our customers need Jon sarlin. I remember vividly did an IR presentation on. We want people to come in and if they say, do you have that product? Do you have, you know, X product life insurance, um, jewelry insurance. We could say, yeah. We have that. Maybe not all of it will be on our paper, but to be able to have that, uh, type

Type of portfolio of products for every customer as their insurable need changes and um we could redo that because I'm sure some things change, but we sort of would would um put them through, like Diane is renter and then she gets engaged and she needs her ring insurance and go on and on then we can tell you the likelihood of the of the PO with that. But um, I'll put that on the list of a deep dive topic for our future for sure. Thanks Josh. Thank you.

Thank you.

Our next question comes from the line of Gregory Peters of Raymond James. Please go ahead, Gregory

Hi, good morning everyone. I guess. Um, I'd like to go back to the the pricing Theory portion of the presentation.

And during the I, and I understand it was a theory discussion, but you used a factor of 12% for Lae.

And I I don't I'm going to pick that Lae number is just sort of if you could give us some perspective of how Lae has trended for your business, the last couple years.

And I guess more importantly, I'm I'm sure you're using some technology to improve those costs relative to earn premium. Can you talk about what kind of Leverage you have for further Improvement in Lae? You know, as we look out the next 24 to 36 months.

Technology changes process changes, people changes that we can do to continue to uh lower. Um, both our expense ratio on actually across the board. It's really important to because our customers to maintain those competitive prices. So I've been very happy with our reduction, uh, the board, not just in in Lae, but in our expense ratio overall Nar, should say, uh, in the last, uh, 10 years and we'll continue to focus on that we believe. Uh, we have a lot of opportunity, especially with technology and I, I think the 12% Brad used was an example, but I'll, I'll let you elaborate on that. Uh, Brad. Yeah, thanks, thanks Trisha. Um, yes, the 12% was an example. It's actually considerably lower. When you measure the cost of Lae in relation to premium, but to add to what Tricia said, um, we also are very careful to both. Look at his recent historic Lae performance but also to take a future for

forward-looking view of it to to ensure that we are, um, ahead of the curve for any changes, any efficiencies that the business creates

Thank you.

Okay, thanks for that answer. Um, I guess I the other question I had just as I was listening presentation and your comments, your your comments about the rate Cuts in Florida, brought up uh, a concept. And I'm not sure it's valid. So I thought I'd ask you for your opinion, normally, you know, when you, you know, get to price increases because of inflation and other other factors that can be disruptive to your retention ratios. And I'm curious if price decreases can also be disruptive to retention triggering shopping. I'm curious about your perspectives on that.

I mean, I think the shopping, the last several years have been just so volatile because of changes, because of the extraordinary, uh, inflation, that happened in 2023. And actually before then, um, typically when, um, you know, the you have a price decrease it, it wouldn't necessarily, uh, increase shopping, although it has a lot. There's lots of external things too, in terms of advertising and, and, and other things that happen. Um, so I wouldn't, I wouldn't necessarily say that, I think there's a lot of different variables depending on. Also, the speed of what's happened in the industry, which is what I think Jen talked about was just responding quickly to get accurate rates is what we want to do. Um, you know, uh, we spur on with, with decreases, you're really, you know, typically adding on new business growth. Um, and that's depending on

On if people are shopping their carrier or, like I said with ours, our people are looking at a policy review to see if they can make changes in their policy to decrease their rates, if that makes sense.

Thank you. Our next question comes from the line of Jimmy Bulow.

Of JP Morgan. Your line is open. Jimmy.

Hey, good morning. So um just first start a question on, uh, how the you view the competitive environment to be in personal Auto and it's seems like everybody's margins of improved. Um and in most cases at the sort of upper end of their historical ranges um and more more and more companies are talking about wanting to grow as opposed to improve margins. And just wondering if you've seen that in competitive Behavior overall and how that affects your view of uh, margins and growth perspective for Progressive.

Yeah, we definitely have seen the environment become more and more competitive and and you know, um we were thankful to get out ahead of the rates and so we've been able to put on the amount of growth we put on in terms of of policies and force. Uh, like I said, you know, comparisons will be difficult because you were comparing on incredible numbers in 2024 and and frankly incredible numbers. The first half of 2025 that said that's our sweet spot. We love that. We love the competitiveness, it's great for consumers, it's great, just making all of us better.

So, um, our goal will will remain to grow as fast as we can and make our Target profit margin. Um, we, you know, we are doing great on both right now. I, I think I started in my letter talking about that and uh, net premium written as our Trifecta and we'll continue to do that. It's going to get more competitive. But again, that's what makes this business, fun.

Over the next. If you were to look forward over the next 5 to 10 years or so,

Yeah, we're actually doing that exercise right now. We've been doing that exercise for the last you know, 10 or 15 years.

the first time we,

In an investor relations call was 2013 and then again in 2017. So, we're always looking at sort of this, this cone of uncertainty or certainty. And we look at conservative pessimistic middle of the road. I will say, we have even our most pessimistic view, we were way under. So we did not, you know, believe the addressable Market would grow at the rate has grown. So we continue to. Look at that. We're revising. What we call Runway right now, to look at our addressable Market. Of course, you know, uh, Vehicle Safety comes into play. And if you think about um, the Adas systems that have come into play in the last 10 or 15, 20 years, yes, it reduces frequency as you see in the frequency decline, uh, in the past 50 or 60 years continues, but it's typically offset by severity. It takes a while for, um, the severity that that the cost to be actually um, you know, acceptable by by consumers. So it takes a while. In addition to that when you think about tech

Technology and cars, and the lifespan of cars. It's now up to about 13 years. So, when you think about the addressable Market, even as cars get safer, it does take a while for the fleet to grow into that system and so, um, we believe that, you know, uh 1 we think safer cars is great for society and we want that to happen, it's really important. Um and so we're very uh um uh we we want that to happen. Um that said it does take a while to for the severity Trends to offset the frequency Trends. So I guess what I'm trying to say is we think there's a lot of addressable Market to be had in the in the next 5 to ten years and especially as we Diversified across all 3 Horizons and I had talked about before the opportunity around, um, a bundling more of that business that auto home bundle, we call our Robinsons,

thank you.

Thank you. Our next question comes from the line of David motivated have the evercore isi. Please go ahead. David.

Hey, thanks. Good morning. Um,

Trisha. I'm I'm just hoping to unpack a little bit, just on the poles and the retention. Um, just how much is is the mixed Dynamic versus how much is more?

Competition. Um, so I was hoping maybe you could just talk about how retention looked by customer segment to kind of isolate. Um, you know, take the mixed Dynamic out of it.

We don't typically share that. I think it's, you know, I think shopping is a lot, um, our, our customers shopping with us is more than it's ever been. It's, I think we're, it's slowing a little bit because I think things are getting more competitive and then the mix is always going to influence it. I mean, at some point, we could index it and show you a little bit of the difference. And maybe I think Josh had asked to talk about, uh, the Sams and future Robinsons. We could probably weave that into there because that's part of the formula, but we don't typically unpack all of that because even underneath every 1 of our segments, there's multiple ways we look at those segments, uh, depending on channel. Uh, are they, uh, is it auto home with an unaffiliated partner versus us? So it's it's, there's a lot of detail in that.

Got it now. Okay. That's

That's helpful. Um and then maybe if I could just follow up, um, just just on the frequency so that that continues to come in, um, pretty favorable. It's been, you know, almost 2 years now that we've been in negative territory

um,

could you just talk about, if you're seeing any Dynamic, you know, it looks like first party Collision claims or down by more than, than property damage. Um, are you seeing any impact? Just from customers? That might not be filing claims and sort of with the deductible, just sort of eating the claims. And, um, I guess I'm trying to just isolate how much is, uh, maybe that Dynamic versus just greater penetration of eidos and some of these collision avoidance systems that might also be putting downward pressure on frequency. Yeah. I think for, I mean, it's hard Collision in TD, are always hard because there's the timing and subregion and, um, and the different amounts that we paid Depend and, and Jen had gone over that, a little bit. Most of this has been our difference in mix and, uh, the continued vehicle miles traveled. And so we're watching that closely, we're seeing, you know, we continue to see that. So that's really where the majority of our frequency decline has has, uh, been

Thank you. Our next question comes from the line of Katie sakis of autonomous research. Your line is open Katie.

Um, first, I I wanted to ask on the, you know, 16 months Trend time that you guys use when when thinking about the various factors and the pricing adequacy model, how has that time frame shifted um you know, coming out of the pandemic. Are you guys assuming slightly more months? Was it potentially higher in the past than it is now and how might you expect that to Trend going forward? Yeah. I'll let um, Brad Andor Jen comment on that but we do try to, um, we try to be flexible depending on what's Happening and what's needed in the current environment. Uh, and so, if you guys want to add anything on that,

Yeah, thanks, Trisha. I don't think it's changed that much. Um, you know, it's a function of, you know, as we talked about, um,

you know how how um,

How far back you're looking in your data period. So our growth helps there. Um, if we only have to look back 1 year instead of 2 years, you don't have to Trend as far um in the in the history to today. Um, also, you know, as we we pointed out too, it it's also a factor of um how quickly you can do rate revisions, um get them priced, get them filed, get them approved but also how many you can do. So um the fact that we are able to increase our rate revision capacity quickly if we need to helps to also reduce um the number of months we have to Trend into the future.

Oh, well, thank you. And then, press is a follow-up. I, I know we spoke about Florida earlier in Q&A, but are there any other states where you may potentially have process, uh, profits that are exceeding statutory limits and might have to consider issuing, um, a refund to policy holders? No, I don't think there's any other excess profit statutes other than Florida.

Got it. Thank you. Thank you, Katie.

Thank you. Our next question comes from the line of Mike zerky a BMO, please go ahead. Mike

Hey, thanks. Um

In the letter, Tricia, you mentioned that the 8.9 product model.

In about 50% of uh your premiums um is demonstrating favorable conversion results and elasticity. Um any

Any willingness to kind of unpack that a bit, I, I don't feel like we we're seeing it in some of the 10 Q, kpis. Although, some of them do have tough comps. Um, it's my first question.

Yeah, I mean, I I think, you know, every product model we look at we have is very specific segmentation schematic in that and to grow and especially in the preferred business. Uh, Pat, if you want to comment on, 89 in particular because we're already on 900 because I'm trying to think about 9 hour and our other ones, um, and it takes them a while to, I think build into it.

Yeah, the only thing that I would add is there's a lot of moving parts as we elevate product models into states, and we are taking rates either up or down while we simultaneously elevate the segmentation. So while we look in aggregate at what the contribution happens, pre-post a model change, you know, there's a lot of moving parts in the market as well. But as Trisha mentioned, we recently elevated 900 in our first date.

Continue to bring new segmentation that we think better matches rate to risk to the market and creates that adverse selection, leading to more competitive prices for more consumers.

As we, uh, bring on new product models, we're getting more and more competitive on the more preferred end of the spectrum.

And that is where our market share is lowest. So that creates greater runway for us in terms of growing share across the board across those, uh, consumer marketing tears. So yeah, well, and and lastly, we have our 5o property product model in about 75% of our uh uh out of our net, written premium and about 29 States. So that along with the continued segmentation of the auto side, really gives us um, the ability to, to get those bundled customers. And I would say with our current market share and our our base of Auto, um, paths, uh, we're just getting started.

That's helpful. Um, and my last follow-up is um, just kind of seeing the force for the trees on chopping levels. I think there was different, uh, comments made during this call. Previously, I, I just want to understand our, our shopping level, still materially above kind of what you, what Progressive, what consider the the normal long-term trend line or have they already kind of come down, uh, to to closer to normal, or maybe below given the, um, softish kind of pricing environment.

I would say, um, shopping levels are still high ambient.

For this um, a hard Market because people people are still shopping. Um, and that's, you know, we talked a little bit about that with our PE, but yeah, for now shopping remains High.

And just a with shopping normalized. Just as long as you know, incomes keep increasing and auto auto rights. Don't go back up to high singles. Is that how we should think about it? Like it takes a couple years to normalize.

You know, typically it has, in the past—I don't know, it's easy to shop—so I don't know if the pandemic and subsequent events have forever changed shopping behavior. Well, you know, that'll unfold as these next couple of years unfold. But that has been how it typically has worked in markets in the past.

Thank you. Thank you.

Back over to you for the closing scripts.

That concludes the Progressive Corporation second quarter investor event. Information about a replay of the event will be available on the investor relations section of Progressive's website for next year. You may now disconnect.