The Progressive Corporation

Good morning and thank you for joining us today for Progressive's fourth quarter investor event. I'm Doug Constantine, Director of Investor Relations, and I will be 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 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. The introductory comments and 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 the leaders featured in our recorded 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 10-K for the year ended December 31st, 2024, where you will find discussions of the risk factors affecting our businesses, safe harbor statements related to forward-looking statements, and other discussions of the challenges we face. These documents can be found via the investor relations section of our website at investors.progressive.com. To begin today, I am pleased to introduce our CEO, Tricia Griffith, who will kick us off with some introductory comments. Tricia?

Good morning, and thank you for joining us today. As we usually do for our calls after even-numbered quarters, today we will have a presentation that dives into a certain aspect of our business. Today we'll speak to two of our strategic pillars, people and culture, where everything starts for us, and competitive prices, with a focus on technology investments in our claims process. To present these topics today, we've enlisted two experts from within Progressive. First, we have John Murphy, claims president. John assumed the role of claims president in December 2021 after spending nearly seven years as Progressive's customer relationship management president. In this role, he's responsible for all aspects of claims strategy and resolution across all product lines. John joined Progressive as a claims representative in 1992. During his initial tenure in claims, he held various strategy, process, and operations roles across the country, including regional claims manager, national implementation leader, claims business leader, and physical damage process business leader. After John, we have Matt White joining us today. Matt has been our claims business leader for data and analytics since May of 2022, after spending six years in personal lines managing our technology and innovation team in direct acquisition. In this role, he's responsible for our claims data science, business intelligence, and data strategy teams that build solutions for all aspects of claims handling. Matt joined Progressive in 2014 as an IT manager after serving in the Coast Guard. His military career took him from various leadership positions on ships patrolling in the Caribbean and Eastern Pacific to Washington, D.C., where he worked on Capitol Hill in budget and program management. He was the director of operations in Key West, Florida, and ultimately to Cleveland, where he oversaw several business lines across the Great Lakes region. Again, thank you for joining us this morning, and I will now pass it on to John. John?

Thank you, Tricia. Good morning, and thank you for joining us today. Over the next 40 minutes, you're going to hear a quick recap of 2024, which was a tremendous year for Progressive. We'll dive into two of our strategic pillars. First, people and culture, which is where our long history of success starts, and then competitive pricing, where we'll focus on the critical role that claims plays in creating a competitive advantage that helps fuel business growth. And finally, we'll share just one of the many examples where the effective use of data and technology at Progressive enhances our claims team's accuracy and efficiency. Now, before I get to the topics at hand, I wanted to acknowledge the devastating wildfires that ravaged the Los Angeles area in January. Our thoughts and prayers remain with those affected by this event. In that vein, we know our customers want and expect action to support their recovery. Our Catastrophe Services team responded quickly with empathy and respect to meet their needs. And while the majority of the claims we received are now resolved, our team continues to assist our customers however they can. I also wanted to acknowledge our human resources and local leadership teams who responded quickly to support our employees who were impacted by these fires. As a senior leader in this organization, the urgency, empathy, and care that our collective team has shown here is an excellent example of our core values in action and fills me with incredible pride. Quickly recapping 2024, in short, this was arguably the greatest year in the 87-year history of Progressive. Net premiums written grew approximately 21% year over year, finishing the year at $74.4 billion. In absolute dollars, premium grew by nearly $13 billion in this single calendar year. Now let me try and put that in perspective. That nearly $13 billion net written premium increase in 24 is equivalent to adding the premium of the eighth largest auto insurer in the calendar year of 2023. For those who have been following us for a while, the premium growth in 24 is about a billion more than we wrote for the entire calendar year of 2003. Average written premium increases provided a little bit of a tailwind here, but the majority of this premium growth comes from customer growth, which is our preferred measure, and 2024 was a record year here as well. We increased active policies by more than 5 million this year, which is more than twice the previous highest annual rate of policy growth in our history. Growth is one important objective for us and profitability is the other. You're well aware of our stated calendar year goal of a 96 combined ratio or below. And in 2024, we produced a CR of 88.8, well below the 96 and also about six points lower than 2023. We often say that growing or generating a profit individually is fairly straightforward. To do both simultaneously and at the performance levels that we did in 2024 is significantly more challenging. In true progressive fashion, more than 65,000 of us work diligently together to deliver what may very well be the best combination of growth and profitability in the industry. While we celebrate these successes, our excellence core value challenges us to continually improve for our teammates, our customers, partners, and investors. I believe strategic investments in our people, data, processes, and technology position us to perhaps have an even better 2025. The four cornerstones is a construct that we've shared in the past. It's how we think about competitive advantage and defines how we win and win in the right way. We start with our core values or who we are. These are unifying statements that provide the very foundation of our company culture since the late 1980s. Next is our purpose or why we're here. We evolved this statement in 2022 to build on the legacy of our core values and our history of challenging the status quo to accelerate progress. Then we have our vision or where we're headed. This company-wide objective highlights the constituents that we feel so fortunate to serve and our never-ending pursuit of becoming the number one destination. Finally is our strategy or how we'll get there. These are the four important pillars of this strategy and two of them will be the focus of today's discussion. people and culture, which are collectively our most powerful source of competitive advantage, and competitive pricing, which is driven by industry-leading segmentation, claims accuracy, and operational efficiency. Progressive people and culture are collectively our most powerful source of competitive advantage. A very well-known and respected brand, a routinely recognized top work environment, and sustained business success makes us an attractive option for folks in market looking for jobs. While our growth rate in staff over the past 10 years lags PIF growth and premium growth, it has been substantial. Our outstanding talent acquisition group generates robust candidate pools for our roles, from which we then choose top talent with personal values that align with our core values. Due to the very significant number of people interested in working at Progressive, we're able to be highly selective. In fact, we hire less than 3% of people who apply for jobs at Progressive. This scale advantage allows us to bring additive skills and experiences to our team, ensuring that we're always growing and always evolving. Our culture is built on the foundation of our core values, and it has evolved beautifully with our people growth over several years. A transparent, inclusive, and forward-thinking environment ensures our people feel empowered, welcomed, valued, and respected. A development focus allows our people to build careers and become talented business leaders who can drive enduring success for decades to come. Gallup is a multinational analytics and advisory company well known for its public opinion polls and surveys conducted worldwide. In an article published on January 14th of 2025, Gallup reported that US employee engagement sank to a 10 year low. That is not the case at Progressive. At Progressive, 2024 marked a significant year of achievement, where engagement has surpassed previous records. Progressive ranks in the 98th percentile of engagement and the 99th percentile in overall satisfaction. These results have us in the top 10 and top 5, respectively, for U.S. companies in Gallup's client database. As we look a level deeper into our 2024 survey results, we see year-over-year increases in every single question and in every tenure bucket. As we explore the tens of thousands of comments from our team, responses to the question, the one thing I like most, generates themes of a positive work environment, care for customers and colleagues, strong leadership and support, career growth and development, flexibility and values. You can see just a few of the comments here on this slide. Once again, consistent with our excellence core value and our desire to consistently improve, we also ask about things that should change. The data that we collect from that question, really all others, are rich and guide our efforts to further nurture our special culture. We believe firmly that the investments we've made in our people and culture have fueled our growth and success for several years now. We'll continue to care for both to position us to be even better in the future. In prior presentations, we've discussed our ability to rapidly deploy risk selection and new product models, our segmentation excellence, as well as efficient media and agency compensation, each of which has had a positive impact on rate competitiveness. Claims plays a very important role here as well. The combination of loss costs and loss adjustment expenses typically represents between 70% and 75% of our total company expenditures. So we focus heavily on producing accurate claim outcomes while optimizing efficiency, customer experiences, and employee engagement. We refer to these as our four guiding principles, and they have helped inform our daily efforts, investments, and priorities in claims for more than two decades. On the left and right, you see the two key constituencies that we are privileged to serve. In the middle are the two items that have the most linear connection to our combined ratio and ultimately the rates that we then have in market. If we don't deliver here, we simply can't compete at the level we've become accustomed to and continue to aspire to. This chart is our theoretical cost curve and gives insight into how we approach our work. The x-axis represents loss adjustment expenses, or LAE, essentially what we spend to operate the claims organization. The y-axis represents loss costs, claims payments and reserves, plus LAE. Much like my commentary earlier about growth and profitability, being accurate or being efficient individually are straightforward. Doing both at the same time is a far greater challenge, and we believe we do it better than anyone in the industry. Now, there are downsides to focusing too much on either side of this curve. If the sole objective was to be the lowest cost, we couldn't make the investments in people, data, and technology that enable us to pay the right amount. Quality would suffer, cycle time would increase, rentals would extend, and ultimately, lost costs would rise. Likewise, if accuracy was the sole objective, you would need to overspend to eliminate the potential for errors, likely spend on non-value added activities, and end up with a cost structure that would be uncompetitive. We leverage operational excellence to drive us down this curve. This is where having the best people in the industry who are willing to get into the details, investigate tirelessly and effectively, and make the right decisions around coverage, liability, and damages really pays dividends and moves us down the left side of this curve. Empowering them with the right data, processes, and tools increases their efficiency and throughput, moving us down the right side of this curve. This view of driving down total cost is more about the journey and the incremental gains that come with it than any theoretical destination, because no matter how good we get, we will always seek to be better. Within the claims organization, we constantly measure accuracy and efficiency, so we always know how we're doing. Objective assessments of the work provide valuable insights into how and where we can be even better. And while we're always trying to find the optimal spot on this curve, we also strategically target efforts to shift the curve to a better position for us and for our customers. You'll hear from Matt White shortly about how we invest in new technology, data, and processes to shift this curve. And this is what driving down and shifting the curve looks like in practical application, using perhaps the best measure of success for claims, which is total cost. While claims supports all manufactured products across auto, special lines, commercial lines, and home, I use private passenger auto data here because it offers the cleanest comparison relative to industry. This graph is a visual representation of the competitive advantage our claims organization, in conjunction with all other business areas, brings to Progressive and shows why we're able to grow faster and with better margins than the industry as a whole. Total cost is a combination of loss costs, which tie directly to accuracy, and LAE, which is our primary efficiency metric. This slide compares progressive, reflected by the blue line, to the industry ex-progressive, which is in orange, and shows that we've maintained an advantage for more than a decade. More recently though, you can see the gap widening. And while we don't have complete 2024 statutory data for the industry yet, we have loss ratio data through the first three quarters of 24 and we maintain a seven point advantage in loss ratio alone. As we compare our own results for 2024 to 2023 for total indemnity, we see a near nine point improvement and finished the most recent year sub 70%. Back to our full set of guiding principles, I'm proud to say that in 2024, our claims organization had the highest engagement in our history. the lowest LAE ratio in our history, improved accuracy, and generated the best customer satisfaction and retention that we have in several years. These results don't just happen, and they don't happen overnight. This culture of execution excellence has been developed over years and isn't easily replicable, but we believe it can be improved upon. And now Matt White, our acclaimed business leader of data and analytics, is going to share with you how we use data and technology to enable and enhance our human capital. While the efficiency and cost wins you'll hear about are very significant, it's our intentionality around also increasing accuracy that makes these efforts really valuable. Matt?