The Progressive Corporation

Which have been posted to the company's website. Thank you. Thank you. Thank you. 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, 2025, where you 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 investor relations section of our website at investors.progressive.com. To begin today, I'm pleased to introduce our CFO, John Sauerland, who will kick us off with some introductory comments. John?

Thanks, Doug, and good morning, everyone. While we're already in March, I would like to take a couple of minutes to review the very strong year that we had in 2025. Following a year of incredible growth in 2024, we added almost $9 billion in net premiums written in 2025 and almost 3.7 million additional policies in force. When we look at statutory results for the private passenger auto market through the third quarter of 2025, we believe we picked up close to an additional two points of market share versus last year to move to around 18.5% market share. However, what made 2025 even more exceptional was that along with that growth came remarkable profitability. We earned almost $13 billion in comprehensive income across our operating and investing units, our comprehensive return on equity of 40%. Profitability across our businesses was excellent. and policy-enforced growth was also positive across all the businesses, with personal vehicles leading at 12% or almost 3.5 million more policies than last year. That equates to almost 5.5 million more vehicles insured by Progressive versus year-end 2024. Property profitability was the beneficiary of a lighter-than-average catastrophe year and is also a reflection of the significant work we've done to manage the risk in this product. As we indicated in our Q2 2025 investor call, we're much more comfortable with the property line and are actively looking for ways to increase growth in property through bundling. In commercial lines, PIF growth was primarily from business auto and contractor risks, while growth in trucking was challenging as the industry continued to face headwinds. Commercial lines also had an excellent profitability in contrast to what we believe was an underwriting loss for the commercial auto insurance industry. As you know, Progressive is very focused on our underwriting operations, and we believe this is the primary driver of our success. We focus on our four strategic pillars to win in the marketplace and grow as fast as we can at less than or equal to a 96 combined ratio at the enterprise level, as long as we can provide high-quality customer service. These four pillars have served us quite well since we established them formally as our strategy in 2015. Our culture and our focus on the growth and profitability operating mandate are supported by a very efficient capital model and strong risk-adjusted portfolio returns. This leads to high comprehensive returns on equity over the medium and longer term. Review our comprehensive return on equity, along with growth, to be the ultimate measures of our financial success. And we believe success on these measures drives higher multiples for progressive stocks. As you can see from the slide, return on equity in our industry is correlated with price to book ratio. Additionally, we believe growth plays a considerable role in our multiple being substantially above the line derived from the large public property and casualty competitors. Comprehensive return on equity is a function of the operating discipline we so frequently discuss in these calls and also very much a function of discipline around our financial policies. Today's discussion will go deeper on those policies, highlighting recent changes in operating leverage, providing insight around our variable dividend, and detailing our approach to managing our nearly $100 billion portfolio at year-end. At the same time we execute our capital-efficient strategy, we need to ensure that we give ourselves maximum flexibility as we encounter uncertainty. While we believe strongly in our operating model, we are unable to predict broader geopolitical and macroeconomic changes with certainty. Therefore, we have set up a model that allows for flexibility in both our capital allocation and our investment risk. Since we run with higher operating leverage and a fair amount of financial leverage, we need to make sure that we can retain more capital when we believe it is beneficial to the business. We believe that our variable dividend policy and a liquid, more conservative investment portfolio give us the capital we need to grow when growth is significant and an off-ramp when we hit periods of volatility. As an example of how our model balances these goals, if we look back to the 2022 to 2023 period, progressives saw faster premium growth that required a significant amount of capital. On top of that, margins were volatile due to the surge of auto-related inflation. Further, that same inflation drove significant investment market volatility. In response, we were able to significantly reduce share repurchases and variable dividend payments, take down investment risk, and raise debt capital in order to ensure the fuel for our strong organic growth in 2022 and beyond. This flexibility allows us to aim for strong growth while also operating with a high degree of capital efficiency. More recently, capital generation has been very strong. In 2025, we earned almost $13 billion in comprehensive income across our operating and investing units. Our below 90 combined ratio, along with more than a 7% return on the investment portfolio, drove historically high profits for Progressive. The combination of the strong capital position in which we entered 2025, robust income generation, and increased operating leverage allowed for Progressive to reward our shareholders with a $13.50 per share variable dividend in January. This came on top of modestly higher pace of share repurchases in recent months. Given this pace of income generation, the variable dividend, and the announced change in our operating leverage last year, we thought this would be a good time for us to review with you how we think about capital, leverage, capital allocation, and investment risk at Progressive. While we focus on comprehensive ROE, for the purpose of benchmarking, I want to share the history of results around ROE. Over the medium and longer term, our model has produced returns on capital that have outperformed not only our P&C peers, but most other financial firms. In order to achieve this continued outperformance, we have to not only be disciplined on the operating side, but also with our investments and our capital allocations. A key consideration around capital allocation is our operating leverage or, in other words, premium to surplus ratios at our insurance companies. As we conveyed in our Form 10-Q for the third quarter of 2025, we have received approval from our regulators that oversee most of our operating entities to move our operating leverage up to a maximum of 3.5 to 1 premiums to surplus. As a reminder, the Progressive Corporation is a holding company. and we own 45 insurance entities and some non-insurance companies. Insurance companies follow statutory accounting rules and are subject to regulation in their state of domicile. Surplus in statutory accounting is essentially equivalent to equity in gap accounting. Statutory accounting differs slightly from gap accounting, primarily around recognition of expenses more in line with cash flow, And investment-grade bonds are valued at amortized cost versus marked-to-market. Regulators have numerous tests to monitor and regulate insurance company solvency. Premiums divided by surplus is one ratio for which limitations are set by regulators to ensure that insurance companies have the capital necessary to pay out policyholders when needed. For our core vehicle lines of business, we have always believed that based on our rigorous underwriting acumen, conservative investment posture, and relatively modest reserve development, that we did not need to hold as much capital as regulators were expecting us to. Those same factors are generally considered in risk-based capital ratios that regulators use to monitor solvency and, in extreme cases, to force changes in the management of insurance companies. Our risk-based capital ratios are very good in most of our insurance companies, and this fact helped us receive approval to hold less capital or surplus at most of our operating subsidiaries. We hold a significant amount of capital outside the insurance companies as well, and we'll talk more about that in future slides. As you can see, there's a wide range of operating leverage models in the property and casualty insurance industry. Progressive, with our consistent operating results, is normally near the top. This exhibit shows just the surplus in our insurance subsidiaries relative to net premiums written. As noted previously, the Progressive Corporation is a holding company, and we hold surplus in the insurance companies and generally balance those insurance companies to our target premiums to surplus ratios towards the end of each year. At year end, we generally hold contingent and additional capital at the holding company level. At year end 2025, we held around $13 billion in an investment subsidiary of the holding company. In January, we paid almost $8 billion in a variable dividend out of that $13 billion. Naturally, the next question is what this change in operating leverage means for our overall capital positions. We think of capital in terms of three different layers, which are regulatory, contingent, and additional capital. As I previously mentioned, our regulatory capital is overseen by our state regulators. However, our contingent capital layer is fully determined by our risk appetite and controls. It is currently set at an amount in which it would take a one in 200 year modeled scenario to go from the top of our contingent capital to our regulatory layer. As the name is contingent, our goal is for that layer to generally not be fully eroded to the point of reaching the regulatory layer. So we normally hold some level of capital above the contingent layer. How much additional capital we hold on an ongoing basis is a function of factors such as operating and investment volatility, financial leverage, and the potential opportunity to deploy capital towards investments, acquisitions, or share repurchases. While we will always be open to holding on to additional capital for future opportunities, management is very focused on progressives' return on equity over the medium and longer term. We won't do a deep dive on our reinsurance program today, but it is certainly worth noting that our reinsurance program is integral to the size of our contingent capital layer. Relative to our balance sheet, we have fairly modest retentions in our reinsurance program, and our catastrophe limits are relatively high. This naturally allows us to need to hold a lower level of contingent capital, all else equal. As you can see from the graphic on this slide, the change in our premiums to surplus means lower capital needs at our insurance subsidiaries, but does not require us to hold any more capital at either our contingent or additional layers. Therefore, this move has the potential to incrementally raise progressive return on equity due to the lower capital needs. I will also note that the incremental $1.6 billion freed up in 2025 resulted in our premiums to surplus ratio at the enterprise level to move closer to three relative to an average of 2.8 over the previous five years. Our insurance company subsidiaries are subject to numerous regulations on capital beyond net premiums written to surplus. So while we may have approval from the state of domicile to move to 3.5 for the net premiums to surplus ratio, additional regulations may limit at what pace we may move to that ratio and how close exactly we get to that ratio. Our intent is to work to move closer to 3.5 going forward. Our operating leverage has historically helped us to achieve industry-leading returns on equity, and this change will naturally further that positioning. And while operating leverage is important, it is only one element of our capital model. Now, to continue the discussion on financial leverage and capital allocation, I will pass it along to our treasurer, Maureen Spooner. Before I do that, allow me to give a brief bio on Maureen and our chief investment officer, Jonathan Bauer. Maureen has been with Progressive more than 20 years and has previous experience in treasury at another public company, as well as public accounting. During her tenure at Progressive, she has held controller roles in our special lines and IT groups, managed our comparison rating offering in our direct group, served as our Ohio auto product manager and most recently, our audit business leader. Jonathan Bauer has been with Progressive almost 20 years, all within our investment management group, and has previous experience in investment banking in New York and London. Thank you again for your time this morning, and now to you, Maureen.

Thanks, John. While operating leverage is important, it does not tell the full financial or capital picture. First, because it only reflects the capital needs at our insurance subsidiaries. Second, it does not differentiate between equity and debt capital, so it does not consider financial leverage. And finally, it doesn't include our capital allocation policy, or it does not consider where we can invest. So, I will briefly review our financial policies while sharing our capital allocation process. First, we want to ensure we have the capital we need to write as much profitable insurance as we can. This is our best use of capital. We want to ensure we have the regulatory surplus plus contingency capital to grow our business at less than or equal to a 96 combined ratio. While our decisioning is not linear, we have a decision tree on the next few slides to demonstrate how we think about capital allocation. Once we have determined we have excess capital over and above our operating needs. If we have excess or additional capital, we then consider how we would deploy that excess capital, and we consider the valuation of each opportunity. We consider three areas of potential investment. Additional capital may be deployed for corporate development or acquisitions and strategic investments, for share repurchase, or for increased investment risk. Jonathan Bauer, our Chief Investment Officer, will be covering investment risk here shortly. In all three instances, we evaluate the investment and valuation and determine if the return is attractive for the investment. With respect to corporate development, we introduced our three horizon framework to you back in 2019, which covers our strategic approach, including acquisitions. Horizon one, our products within our current constellation of businesses. Horizon two, our products that are adjacent to our current product footprint. Then horizon three includes businesses outside of the PNC insurance landscape that we currently play in. We continue to fully integrate and optimize our previous two acquisitions, and we have continued to work on our skill set throughout the organization in preparing for future investments. Secondly, we may use excess capital to repurchase shares. Our policy is to repurchase shares to neutralize the impact of employee stock compensation. We also consider repurchasing shares if the share price is attractive to what we believe is our intrinsic value. We have not repurchased a significant number of shares over recent years, even though we have board authorization to repurchase 25 million shares annually for the past nine years. In some recent periods, our growth rate was high enough that we needed to preserve capital to support growth. At other times over recent years, we had additional capital available to repurchase shares, but we did not view the market price of our shares to be attractive or below our view of intrinsic value. Over the past few months, we have begun to be more active with repurchases, but obviously not yet at a significant level. As highlighted in the chart, in January 2026, in one month, we repurchased shares at a value similar to the repurchases made for all of 2025, as we felt the share price was attractive. Once we have exhausted considering capital needs for both business growth and investments, we consider returning underleveraged capital to shareholders via dividends. For greater flexibility, we modified our dividend policy in 2019, moving to a modest quarterly fixed dividend of $0.10 per share and an annual variable dividend that is no longer formulaic and is completely variable. Before 2019, we tied the annual variable dividend to our gain share factor, which is a score we use internally to calculate annual cash bonuses for all progressive employees. We made the change because there were times that the formulaic approach had us returning capital via dividends and at the same time needing to raise capital to support growth. The annual variable dividend is entirely at the discretion of the Board, which considers current capital levels relative to prospective expected capital needs and determines, generally in December of each year, if to pay a variable dividend and if so, how much. The $13.50 annual variable dividend declared in December and paid in January 2026 largely reflected robust capital generation in 2025 from both underwriting and investments, along with the shift to higher operating leverage at our insurance subsidiaries. As John noted, we held $13 billion of capital at the holding company level at our year-end, and naturally, none of the declared dividend that number was $5 billion. There is obviously judgment here, and we believe it prudent to retain some capital above our operating needs for growth above our expectations, stock repurchases, investment risk, other strategic opportunities, or contingency growth. And the $5 billion, along with our ongoing earnings, certainly provides us that flexibility. Once we have determined how much capital we are retaining for operating growth and investing, we need to consider what is the right mix of equity and debt. We have a publicly stated guideline of keeping our leverage under a debt-to-capitalization ratio of 30%. That does not mean that we will take any dramatic action if it drifts over that level, but that our intention will be to have it under 30% over the longer term. You might ask why 30% is the right limit. Given Progressive's very steady stream of earnings and cash flow generation, we could likely support a more leveraged balance sheet. While we always keep challenging ourselves as part of Progressive's culture, at the current moment, we believe that the 30% level strikes the right balance between efficiency and having a strong balance sheet, which gives us strong debt ratings and allows us to prosper through economic cycles. When reviewing our historical monthly financial leverage ratio, we did surpass the 30% guideline of debt to total capital during the financial crisis and then again briefly in 2022, largely due to unrealized losses in our investment portfolio. However, in both instances, we brought the ratio in line with our guidelines through the normal course of business. While we have a goal of staying below 30%, we do not have a policy regarding a minimum amount of leverage as we want to give ourselves maximum flexibility. Over the last 18 months, you can see that we have been trending below our historic range. The main drivers of that decrease have been significant income generation in 2024 and 2025 from both our underwriting business and investment portfolio. Also, when you look at our financial leverage relative to our stock insurance company competitors, you'll note it is broadly in a similar range. Ultimately, we believe that an appropriate amount of financial leverage will help ensure a strong balance sheet and, along with our now higher operating leverage, maintain our industry-leading return on equity. In summary, while operating leverage is important, Strong financial discipline is also a focus. We ensure we have enough capital for our operating growth or to write as much insurance as possible at less than or equal to a 96 combined ratio. We allocate additional capital where it can be beneficial to the business in corporate development, share repurchases, or increased investment risk, while also neutralizing impact of employee stock compensation. We look to return underleveraged capital to shareholders via dividends. And we maintain a debt-to-total capital target below 30%. That covers our financial policies at a high level, and I'll now turn it over to Jonathan Bauer, our Chief Investment Officer, to discuss our close to $100 billion investment portfolio.