The Progressive Corporation

Good morning, and thank you for joining us today for Progressive's first quarter investor event. I'm Doug Constantine, Treasury Controller, 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, quarterly reports on Form 10-Q, and a letter to shareholders, which have been posted to the company's website. Although our quarterly investor relations events often include a presentation on a specific portion of our business, we will instead use the 60-minute schedule for today's event for introductory comments by our personal lines president, and a question and answer session with members of our leadership team. Introductory comments by our personal lines president were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 60 minutes scheduled for this event for live questions and answers with members of our leadership team. As always, discussions in this event may include forward-looking statements. These statements are based on management's current expectations and are subject to many risks 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, as supplemented by Form 10-Q for the first quarter of 2026, where you'll find discussions of the risk factors affecting our businesses, safe harbor statements related to forward-looking statements, and other discussions of the challenges we face. 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 Personal Alliance President, Pat Callahan, who will kick us off with some introductory comments. Pat?

Good morning, and thank you for joining us today. First quarter results were consistent with the last several quarters. Extraordinary profitability and growth well above the industry average. When performance is this strong for this long, it can be easy to take it for granted. So I wanted to take a few minutes to reflect on what the Progressive team has delivered. First, market share. In personal auto, we gained 1.9 points of market share in 2025, moving us up to 18.6% share, our second straight year gaining more than 1.5 points, which no other top 20 company has done, going back to at least 1996. To put the last few years in perspective, it took us 84 years to get to 15.2 points of U.S. auto market share and only two years to add another 23% more on top of that. It's a remarkable achievement. and testament to the value that our offerings bring to consumers seeking high-quality and affordable protection products. Growth is great to see, but profitable growth is our objective, and it's important to note that we gained that share while delivering personal auto combined ratios below 90 in nine of the last 10 quarters. And that's just personal auto. Preliminary industry results for commercial auto suggest the industry combined ratio improved, but once again posted an underwriting loss as it continues to face nuclear verdicts and social inflation. Despite these headwinds, our commercial auto results continue to be excellent as we continued our streak of underwriting profitability well in excess of the industry. And in property, We're building on last year's exceptional profitability while we continue to invest to ensure we have the risk selection and segmentation, geographic distribution, and distribution footprint necessary to start increasing availability. As we mentioned on the last couple of calls, we're slowly starting to increase our appetite for property growth on our own paper, which is helping us find more growth in the important provinces and segments. These results are only possible because of the competitive advantages we built across the organization, and because we employ people who are truly among the best in the industry. While we're certainly pleased with these results, we got here because we're always looking ahead. World events continue to create uncertainty in the global macroeconomic environment, and we remain vigilant about how those changes could affect our business. Given our concentration in vehicle lines, higher fuel prices are top of mind. The direct impact of higher fuel prices on personal auto frequency is difficult to predict because the timing, duration, and magnitude of the price changes matter, as does the broader state of the economy when those price changes happen. Historically, we've seen that when fuel is more expensive, people take fewer discretionary trips, such as cross-country road trips. And while foregoing those trips can reduce total vehicle miles traveled, Those miles do tend to be lower frequency miles, so the effect on lost costs is typically smaller than the overall decline in VMTs. To date, fuel prices haven't been elevated long enough to conclude how much, if at all, elevated fuel prices may affect our lost costs. On the severity side, higher energy costs generally contribute to broader inflationary pressures. However, it takes time for higher costs to make their way through the supply chain and can be partially offset by lower severity, resulting from a lesser mix of higher speed, higher severity highway accidents. In commercial auto, higher fuel prices can immediately pressure trucking margins, adding strain to an industry that has already seen significant change in the post-pandemic environment. As we did in 2021 with higher used vehicle prices and in 2025 with tariffs, we are monitoring the effects of fuel prices closely and incorporating what we observe into pricing as appropriate. While the macro environment could put upward pressure on pricing in the future, today we're still delivering near record personal auto margins and focused on growing as quickly as possible. The environment remains competitive, as it has been for the last five plus quarters, so we continue to execute state and product level plans to maximize PIF growth at target profit margins. On the new business side, in Q1, we increased media spend by 20% versus Q1 2025, making Q1 of 26 the most we've ever spent on media in a quarter. Top of funnel metrics remain robust, with marketplace demand still strong. Our price competitiveness is also strong, as reflected in higher personal auto conversion year-to-date. Our product teams continue to execute their business plans, with some states taking modest rate decreases when appropriate to capture in-market shoppers. On renewals, we're actively retaining customers through policy reviews, as we've noted over the last couple of quarters. While possibly temporary, we were also pleased to see a lift in the Florida trailing three policy life expectancy during the quarter as customers received their premium credits. At the countrywide level, mixed shifts that arose because of a more aggressive new business posture continue to put downward pressure on PLE, although the year-over-year influence of those changes is abating. In commercial lines, we're also seeing a competitive environment. and we are looking to all avenues to stimulate growth. We're increasing media spend and are looking to reduce rates in some states and business segments where we can bring in business at or below our profit targets. With targeted rate decreases and continued advancements in rolling out our next generation product models across our core commercial auto, medium fleet, and small business lines, we are well positioned for growth. In closing, Our business is in a very strong position. The macroeconomic environment will continue to evolve, but we've proven we thrive during periods of disruption as we're among the best at identifying and quickly adapting to uncertainty and changing business conditions. As we close in on the important milestone of becoming the number one writer of U.S. personal auto, we're not taking our foot off the gas. We'll continue investing in the business and leveraging our scale, advanced analytics, and segmentation leadership as we make progress towards our vision of becoming consumers, agents, and business owners' number one destination for insurance and other financial needs. Thank you again for joining us this morning. We'll now take your questions.

This concludes the previously recorded portion of today's event. We now have members of our management team available to answer questions. Questions can only be submitted over the phone by pressing star one on your keypad. In order to get to as many questions as possible, please limit yourself to one question and one follow-up. I also ask that you use restraint in re-entering the queue to ask additional questions. I'll take our first question.

Your first question comes from the line of Bob Hung with Morgan Stanley. Your line is open.

Hi, good morning. I want to maybe just unpack some of the prepared remark commentaries a little bit. So regarding the personal auto industry, right, the industry seems to be excessively profitable. And in your shareholder letter, you kind of mentioned about the competitive environment being intense. And just can you maybe help us think about just where do you see all this end for the personal line or personal auto rather going forward as well as for Progressive, both for the industry and for Progressive? Are we in a prolonged soft market just given the profitability environment? Should we think about the industry being more competitive or maybe even profitability declining in 2027? Can you maybe just help us think about the broader environment where progressives are situated in, so to speak?

Yeah, I'll try to unpack your question with a bunch of different answers. We don't know how long the soft market will prevail yet. but we have definitely seen a lot more competition because everyone has great margins and we haven't seen the margins in the industry like we have in 25 and into 26. So that's going to be competitive for all of us, which is great for consumers. So we'll continue to make sure that we reach our target profit margins. Other companies have different targets and run their businesses differently, but we think this is a really great opportunity to continue on our growth trajectory. and continue to get more and more policyholders to achieve what Pat had said, and not just to be number one in private passenger auto, but to be the number one destination. And that's where we'll get and focus on more bundles. But it's probably worth saying that after our best year, which we would say, you know, it was 2024, in 2025, the private passenger auto market grew written premium about $11.8 billion. $8.9 billion of that was us. If you take just the top 10 carriers, that combined growth in 2025 was $10.4 billion. So we were 86% of that growth. And in quarter one, 26, we grew PIFs nearly 1 million, sorry, auto PIFs that were 11% of that. So my point is that our focus, it's hard to say what the industry is going to do, but our focus will be to continue to grow as fast as we can at or below a 96%. Will margins compress? Possibly, because we do look at growth in terms of policies, and we want to make sure we continue to have more and more policies. When we get more customers, we gather more data. When we gather more data, we understand segmentation and risk to rate better, and then we can put that into our next product model. So it's a very nice flywheel that we've used for a long time. What the industry does, I can't foreshadow. But right now, it's competitive. That's good for consumers. And we're excited about what we believe can be our future.

It sounds like from a growth perspective, somebody's hogging all the fun. Maybe other people would ask you to share. But maybe that aside, if we look at personal auto severity, just more of a follow-up, right? You give some commentaries around severity and frequency, right? While higher medical costs, attorney representation still were the call-outs in the 10-Q, it does feel like severity improved notably. In fact, if we look at it, aside from 2024, severity on collision hasn't been this good in five years. Can you maybe help us get a better handle on severity trends, specifically collision? Why is it so good, for lack of a better word? Is this durable as you're growing further and then talking about the 96, so to speak?

Yeah, I'm going to let Andrew Quigg answer that, but you're correct. Severity is about 3% overall. Frequency was flat. And so we feel good about those trends. A lot of things can change, like you said, with bodily injury, specials in general. So I'll have Andrew give a little bit more color to that.

Yeah, thanks for the question, Bob. I'll start on the frequency side. I know you're asking about severity, but of course they're linked. We see frequency moderating a little bit. The trailing 12 has been more negative, and in this quarter, we were more flat for frequency. We had a shift of preferred over the past year, and as we open up underwriting, we're seeing frequency go back to kind of normal. On the severity side, you mentioned BI. Yes, as we mentioned in the queue, large losses and attorney-rep mix have impacted BI severity. For PD and collision, we do see higher parts prices, and so that is impacting. Now we have some offsetting, you know, cost of labor and things like that are not accelerating as fast as parts prices. Going forward for collision severity, it's hard to know. You know, our crystal ball gets cloudy. Certainly, you know, we stay vigilant on what's happening with tariffs, what might happen with the conflict in Iran. All those might impact severity going forward, but You know, we've been able to find ways to, you know, offset severity increases that we see through parts prices by how we manage the claims process. And so it's hard to say on collision going forward, but we feel good about the trends we're seeing today.

Thank you for that. I really appreciate it.

Your next question comes from the line of Tracy Benquini with Wolf Research. Your line is open.

Thank you. Good morning. On the topic of AI disintermediation on brokers, I always felt like if any carrier can bypass brokers on the commercial line side, but given that you guys made so much traction on direct personal lines over the years, I see that your commercial line business, 90% of that is distributed through independent agents. I'm wondering why not more on the direct side? Could that piece grow?

Yeah, we definitely think it can grow Tracy. And that's why we've been investing a lot in that area. I think just like when we went to auto on the internet, it takes a while, especially in the commercial lines product, because they're much more complicated. So think if I'm a small business owner, I want to make sure I'm covered with all the right things. And sometimes I want to sit knee to knee with an agent. You know, we do think that, you know, more and more consumers, whether they're personal, auto, or commercial, will want to do business directly with companies. And that's really what we've been building over the last few years. And so we do feel that we will continue to grow in both channels, in our commercials, lines, business. Pat talked about it a little bit in the opening comments, that we're really well positioned for growth based on our margins and our segmentations.

Great. And one of your larger competitors is getting into the independent agency channel for personal auto. And I noticed that AI is becoming a larger piece of the overall distribution pie. Any update on the competitive landscape on the AI side of personal insurance?

It's hard to say how, you know, with AI, how things are competitive, because all of us, I think, are investing and investing differently. On what I would say to have any competition getting into really any channel, we think that's great because I think it puts more pressure on all of us to be better for consumers and to continue to make sure, like I talked about, having more data, segmenting better, you know, making sure our brand is out there. So while, you know, we just think competition is good, AI, I think, you know, will come in different forms. Whether it's AI that was predictive in the past or generative now, I think we'll start with helping to make sure that all of us are more efficient and can get tasks out of the work that will ultimately lead to more competitive prices. And so that really has been our focus now. But like I said in the last call, from an innovation perspective, we've been working on some form, whether it's a chat bot or a predictive AI and now gen AI for a long, long time. And I think others are starting to invest as well.

Thank you.

Your next question comes from the line of Elise Greenspan with Wells Fargo. Your line is open.

Hi, thanks. Good morning. My first question I wanted to ask on written premium per policy, it continued to go down in agency, kind of flat and direct. I was just hoping to get a little bit more color on just the drivers there and how you would expect, especially as there is less rate through the system, how you would expect the written premium per policy to trend from here.

Yeah, I think it'll be dependent on the pricing actions that we take in order to grow. You know, right now it's been down about one in private passenger auto, 1%. We'll continue to watch that. And like we said in the past, our real measure of growth for long term is is policies enforced. And so we want to make sure we can do that. And with that, you know, we're going to make sure that we do a couple things, have the right rates in the system. But also, in the last year or so, we've opened up our aperture, so you're going to look at different premium per type of customer. So, you know, we were pretty closed when we were trying to get right in the system. Our mix has changed. And so with that mixed change, I think that, you know, you might see some changes. I don't think there's going to be anything dramatic, but we're going to, like we do, we're going to go state by state, channel by channel to make sure that we're priced adequately in order to achieve our goal of growing as fast as we can.

Thanks. And then my second question is on policies enforced, right? Historically, right, the, you know, PIF and just shopping has been more focused, right, during earlier months and a year ago. Obviously, you know, over the last two years, right, there's just been, you know, rate taking in the market and, you know, there's been differing trends. You know, how do you think just policies in force relative to seasonal factors and just overall growth views will trend, you know, over the balance of the year with kind of the seasonality factor in mind?

Yeah, I might have Pat added on that. But what I would say is I think with just so much competition, because it's been a long time since, where the industry has had the profit margins that we've had, and so things have shifted a little bit, and there's a lot of shopping. We've talked a lot about whether it's our customers even reshopping with us or us doing policy reviews. I think that's happening sort of across the industry, so I can foresee that it could continue to happen. We really can't tell, but that's one of the reasons why we wanted to leverage our ability with our brand and our marketing engine to increase our media spend to continue that growth? Do you want to add anything, Pat?

Yeah, sure. You're right. We've seen kind of unprecedented dropping and we don't expect to see it slow down. So historically, there has been a seasonal pop in Q1 and then the echo in Q3 as policies renew. And we're seeing kind of continued strong shopping as inflation and affordability for consumers remains tough and insurance is a higher percentage of their disposable or household income. So we intend to continue to invest while it remains efficient. And we're seeing signs like older shoppers, longer tenured shoppers coming into market in ways that we previously had not seen. And when some of these long tenured shoppers shop, they may not have shopped for ten years previously. Once they do, they realize that the world's changed. And it's relatively easy with high information transparency and low switching costs to change auto insurance in particular providers. And we think that's a good thing. If people can leverage the competitive nature of the voluntary market and save themselves money on quality coverage, that's good for them. And as Tricia mentioned, being a value provider who uses lots of data to ensure we have the best matching of rate to risk, We think we win when more people shop and find the progressive offers a competitive price for the value or coverage they're seeking.

Thank you. Your next question comes to the line of Mike Zaremski with BMO Capital Markets. Your line is open.

Thanks. Good morning. First question is on productivity. This past winter, Tricia, you spoke to productivity gains. I think, you know, I estimate it would allow Progressive to do maybe up to 10% more with the same level of employees. Maybe you can elaborate on what specific technologies are driving those efficiency gains, because I'd love to try to better decipher whether some of those benefits will endure more so to Progressive versus peers as well.

Yeah. I won't go into all the specifics that we're using, We do have several generative AI solutions in production, and we believe they're delivering meaningful benefits that we think will be long-term, and that's across personalized experiences for consumers, agents, business owners, and we're really, I think, just at the tip of that. And it's really a continuation of how we've invested in technology over the years, whether it's from digital ability and claims, or actually in CRM as well. And we're just trying to kind of be where consumers need us to be. And that's one of our strategic pillars, to have broad coverage and be where our customers want to shop, want to be serviced. So we believe, and we just finished our three-year strategic plan and presented it to our board of directors. We believe that we can continue to reduce non-acquisition expense ratio. over the foreseeable future. We do a three-year plan because we think it's really important, even with the margins we have, to continue to have pressure on us to have the most competitive price, but also the right rate to risk. So we believe that we can continue to put pressure on expenses through technology, through process changes, yeah.

Okay, that's helpful. And just switching gears lastly to you, question on capital management. Are you willing to kind of maybe elaborate more on why Progressive chose a very large special dividend earlier this year versus directing more of those excess funds towards a buyback? I don't know if you'd be willing to kind of share some of the math equation or thought that drove that allocation decision. Thanks.

Yeah, I'll have John Bauer from Progressive Capital Management talk about that. But as you know, we've got... Lots of uses for capital. We had a lot of capital last year because of our growth. I'll just start with that. And we need a lot when there's high growth in terms of our regulatory needs and our contingency capital. And then we have to make choices. And we work very closely with our investment and capital team of the board of directors to determine how much we buy back, which we did buy back a fair amount in the first quarter of this year, and what we do with dividends. Ultimately, they make the decision, but maybe I'll just have John Bauer go over a little bit more about our process around how we think about overall capital management. John, maybe even just talk about the debt raise we just did.

Yes. Thanks so much for the question. start by pointing everybody back to our first quarter presentation, where we talk through how we think about capital. And at a high level, we start with, can we reinvest that capital that we have back into the business? For much of the last few years, what Pat was talking about and others, our company was growing so fast, we needed much of the capital we were generating to reinvest in our business to fund that growth. As we've seen over the last You know, 18 to 24 months, uh, the business has been producing prodigious amounts of capital, even as we've continued that growth. And so, as we think about that, what to do with that excess capital, after we get through the initial reinvest in the business, we think about a few different things. So one is Sherry purchases. Another is, uh, potential, uh, corporate development opportunities. and the other is investment risk. And so we look across those three lenses and say, do we see valuable opportunities there? When we think about our share repurchase, we specifically look at a few different measures, the same that we see in many of your reports, things such as price to earnings, price to book, and then we have our own internal model. And we look to see, do we believe our shares are trading cheap to our view of fair value? And then we look to scale the share repurchase plan that we have through 10b5-1s on a going forward basis based on how much of a discount we see that the shares are trading to versus what our view of fair value is. And so you should expect that we will continue to scale that repurchase based on how much excess capital we have, what are the other opportunities we see for that capital, and where we see the valuation of our shares trading in the market versus our view of fair value. And if after the share we purchased, the corporate development and the investment risk decisions, we still have what we deem to be excess capital versus what we need for our business, then we will look to return that as we did with our variable dividend at the end of last year. I will point out with last year, we had something besides just our internal cash flow generation, which was to switch to several of our subsidiaries, three and a half to one premiums to surplus. So that afforded us to have an even greater amount of excess capital that we were able to move up to our non-insurance subsidiary that allowed for both the increase that we saw in our share repurchases in 2025, as well as the large variable dividend that you talked about. I'll briefly just also mention we raised some money in the corporate debt markets this year. We thought that it was a good time to issue. We obviously have a billion dollars of debt maturities coming in 2027. We thought that valuations were attractive in the market. And we saw, as many of you have seen, that our financial leverage, which normally has ranged between 20 and 30 percent, we have our 30 percent limit, had fallen pretty significantly below 20 percent. And so With the issuance that we did in the capital markets, our financial leverage at the end of the quarter moved up over 20% to a more efficient level. But I would, again, just circling back to where I started, point everyone to that first quarter presentation and our focus on driving strong returns for our shareholders. And the way we think about doing that is with that strong return on equity that Progressive has driven over its history. And that means being incredibly efficient with our capital, both the total amount of capital that we are holding, as well as the split of that capital between debt and equity. Let me know if that answered your question.

Yeah, that's helpful. So just I'll need to check. Should we be earmarking some of that debt capital towards buybacks potentially, or am I misinterpreting? Thanks.

Yes, we don't separate out, oh, that debt raise is for share repurchases or for something else. How I would think about it is Progressive is in an incredibly strong capital position, even after the dividend, the share repurchases that we've done, and even pre that debt raise. Even after that debt raise, we feel like we're even in a stronger capital position. We have the opportunity to invest that capital in all of the elements that I talked about, share repurchase being one of them. And we will continue to look at what the split is between our view of fair value and where our shares are trading. And if we think that we should be repurchasing a greater amount of shares, we will. But for us, it's very important to determine how big of a discount to fair value our shares are trading at.

Thank you.

Your next question comes from the line of Rob Cox with Goldman Sachs. Your line is open.

Hey, thanks. Maybe I'll just follow up on the capital management discussion. Progressive has disclosed that the firm can get to a maximum three and a half times premium to surplus on a statutory basis. From the outside, it seems like maybe you're not comfortable going that high. How should we think about your criteria for premiums to surplus on a gap basis, and should we expect that to trend upwards towards like the three times range?

John, do you want to take that? And if John Sauerland, either one of you, because you were both involved in those conversations.

Sure. I will start, and then, John, I'm happy for you to add on to anything there. we got the approval at several of our subsidiaries to move to three and a half to one from the three to one. It was not across all of our insurance subsidiaries, but a significant amount of them. So this approval only came in 2025. So we moved the capital up that we could within the course of 2025 to move up that premiums to surplus to as efficient as we could be in 2025. We will continue to look in 2026 and 2027 to optimize that premiums to surplus at our operating subsidiaries because we feel a huge amount of confidence in the underwriting business that Pat talked about that we are holding more capital there than we need for the risk that we have. So we will continue to optimize that over time. Our overall premiums to surplus, including our non-insurance subsidiaries will include the capital that we're holding for other things that we just talked about, share repurchases, corporate development, investment risk, contingent capital, and things like that. That capital will continue to be optimized, but we will also look to withhold some of that capital for future opportunities. So the goal is to optimize the capital at those insurance subsidiaries as much as we can over time. And then the capital that we hold at our non-insurance subsidiary will go up and down based on opportunities we see to use that capital and if we are looking to hold back certain capital for future opportunities. John, I don't know if you want to add anything to that.

Yeah, I would, as John Bauer did, refer folks back to our first quarter presentation where we detailed our financial policies, our capital structure, as well as the change in premium surplus targets So we got approval to go to three and a half to one, and by far the majority of our operating entities. That said, we were not able to move as far as we desired in 2025 through those ratios. Our aspiration is to continue to move premium to surplus ratios up in those entities in which we have received approval. I would also highlight that we received approval largely because our risk-based capital ratios are exceptional in those operating entities. So we have a great track record, especially in personal auto and underwriting margin. We have a conservative investment portfolio. We have, relatively speaking, little loss reserve development. All those factors go into the risk-based capital ratios, which is what at the end of the day I believe regulators look at their comfort level in the solvency of insurance companies. So we fared extremely well on RBCs and those companies, even at the higher premium to surplus ratios. And our aspiration working with regulators is to continue to move those ratios up, which obviously allows us to decrease the total equity we require on a gap basis. which obviously then can lead to higher ROEs. So that is the game plan we laid out in our first quarter call. And as John Bauer did, I would put folks back to that call for more detail.

Thank you both.

Thank you. That's helpful. Maybe just a follow-up on advertising in the competitive environment. You know, we noticed Progressive is accelerating advertising spend and obviously generating significant PIF growth. But it does look like to us that peer ad spend has somewhat flattened out at levels well below progressive. What types of advertising is progressive finding incrementally attractive today to deploy the additional advertising dollars? And why do you think progressive is uniquely able to effectively deploy so much ad spend?

I'll start and then I'll have Pat Callahan add in. You know, like we talk about often, We are not going to advertise unless we think that we will get customers for that. We want to make sure it's efficient, so we'll advertise if our cost for sale is under our target acquisition cost. We target differently depending on the cost. And each year, of course, we have to, we'll pay some upfront costs for media, mass media on TV. You have to do that well in advance. And then we look a lot more – most of our incoming is in the digital area. So we sort of look across the spectrum of all ways with which to get eyes on our brand. And, of course, that's a specific part of it. You can market, but if you don't have a well-thought-out and well-defined brand, you know, it may not work. We obviously do for brands. Over a decade we have, you know, whether it's our characters or our message, you know, ultimately resulting in people wanting to shop and wanting to convert with us when we have competitive prices. That's the key. But I'll have Pat add some knowledge to that.

Yeah, sure. So one of the differentiators, I think, within our customer acquisition marketing media is a really strong in-house media team where we buy virtually all of our media in-house. And what that does is closely couples our media team with our product teams to understand at a more granular level the ultimate cost of a piece of media as it translates through the performance of the media funnel, meaning what the cost per impression is, how well it converts, what the average premium is, and then ultimately what the lifetime profitability on that risk may be. So we've talked for years that segmentations in our blood and segmentation when it comes to media and operating our media buys highly efficiently is what we continue to do. So we continue to add to that team and that team continues to work with media partners to find new ways to efficiently reach customers and ultimately get them to come try what we think is a phenomenal value. in non-insurance protection products. So as Tricia started out with, we will continue to spend as long as it's efficient and we monitor the efficiency of not only what we do from a run the business perspective, but we're constantly testing and learning and scaling winners and shutting off losers. And similar to the flywheel, there's adverse selection in media purchasing, meaning when we bid to a certain extent and back away, and someone else outbids us, we're pretty confident the efficiency of that spend isn't going to return what they expected it would. And we do that in product, and we do that in media, and we do that in other parts of our business.

Thank you very much.

Your next question comes from the line of Josh Shanker with Bank of America. Your line is open.

Yes, thank you for taking my question. If we look at the declining premium per policy in the agency segment, a lot of that seems to be, or at least some of it, the growth rate of Sam's and Diane's relative to Wright's and Robinson's, and you're just growing it faster in a lower premium bucket of consumers. If you're a big believer in Progressive as the signature destination for insurance shoppers, part of that promise is you have to grow the Robinson's and the Wright's. Maybe you have to grow them faster than the Sam's and the Diane's. What are you doing right now to address that imbalance in the growth rates?

Yeah, I think, you know, we are definitely growing Sam's again. And like I've said many times, that is okay because, you know, Sam's were our bread and butter for a lot of years. And as long as we can price them accurately to make sure we have our profit margins that we target, it's important. Now, yes, you hit on something important I've talked about in the last couple of quarters. We definitely, in order to achieve that new goalpost that Pat talked about in the opening comments, we want to be the number one destination, which means private passenger auto is a piece of that. but property has to be another piece of that. So we definitely want to grow more on both the Robinsons and the Wrights. So if you think about our agency channel, that is going to be the progressive home product, and the direct channel will be a stable of companies that are not affiliated. So we've been doing a lot of things. I've talked about the blueprint. I've talked about kind of where we're going. I'll reiterate that and then talk about a couple more things we're doing and then give you some kind of a highlight or a foreshadowing into our Q2 call, our deep dive. So we talked about new business readiness. So that is, do we have the right rate level? Do we have the right segmentation or the product model in play? Do we have cost sharing in the contract? Interstate diversification and what are the regulatory and marketing conditions? You know, we have about 38 of our 47 states have identified where we're in growth mode. We'll add a couple more states in quarter two. So we want to increase availability, expand distribution, and expand our underwriting appetite. A couple of the new things that we are doing in this first quarter into second quarter is we're really trying to, in the agency channel, like you had said, understand and address the barriers to growth and conversion, and what are some agent pain points? So our property team and our agency distribution team have been doing sort of roundtables with our platinum agents. We've done 29 roundtables in quarter one in 13 states, so we'll do another 19 in 10 states in Q2. And we're learning, incorporating feedback, and I'm certain that will ensure changes or revisions to our product going forward because we want to make sure that we do make sure that we have more Robinsons. That will be how we understand how we get to our ultimate destination. And so we're trying to understand that we don't want to swing the pendulum all the way. Obviously, we've had some volatile years, but, yes, we agree with you. That is a big part of our growth strategy. We have a great team on that. Pat talk if he wants any more of that, but I did want to say that our next deep dive will be on both overall property growth and Robinson growth, and so if you could, so that we're able to answer your questions adequately or accurately if there's information that we want to share, get those questions you have on both Robinson growth and property growth overall to Juliana, our new head of investor relations, because she can start to gather those. And as John Curtis, our head of national property, and Jim Curtis, our relationship, our head of auto, they're going to be doing the deep dive next quarter. They can get those questions and try to really, like, be able to answer them in depth. So that's my one ask of you between now, our call will be in August, get those as soon as you can so we can get information sort of gathered to be, you know, adequately address any of those questions. Do you want to add anything else, Pat?

Just a couple quick things, Josh. You mentioned the decline in average premiums in the agency channel, and that's driven by a lot of different things, not just the mixed shift potentially to, you know, some Sam's and Diane's. Part of it is we're writing fewer annual policies than we were previously. not all premium declines are compressing margins. So we see mixed shift to better risks and different states that bring with them potentially a different average premium. So I wouldn't want you to think that it's just a mixed shift to Sam's and Diane's, which there's a little bit of that as we're growing those rapidly. Now we're growing fifths across segments, but we're growing those faster than we are the more preferred segments. And Tricia talked a little bit about that. But I guess I'd close with the focus on unlocking the Robinson's access. We'll spend some time on it in August. And for us, it represents a $40 to $50 billion top line opportunity. So we have roughly 20% share of Sam's, Diane's, and Wright's, and penetrating 40% of the $240 billion U.S. personal lines Robinson's opportunity. is just massive top-line growth, and that's why we're focusing on it, but doing it in a smart way to ensure it's deliberate, it's consistent, and most importantly, profitable growth that we generate from that segment.

I'm very thorough. I'll hesitate to ask a second question, and thank you for taking the time.

Thanks, Josh. Your next question comes from the line of David Montmadden with Evercore ISI. Your line is open.

Hey, thanks. Good morning. Just wanted to just get an update on where cost per sale compares to your targeted acquisition costs now versus three months ago or maybe six months ago and how you're thinking about potentially increasing it by more

um you know over the over the next uh over the next several months or or uh quarters yeah it's still under our target acquisition cost probably a little bit tighter but again we look at that differently depending on the customer that we are acquiring and so sometimes that target could move depending on type of media, type of customer. But so far, we see no reason to stop our current trend of advertising. If we see some decline or some reason, we'll pull back a little bit. But we are pretty excited about continuing our growth. And part of that is our increased media spend.

Got it. Thanks. And then just following up to an answer to a previous question, I think it was Pat who spoke about Um, some shoppers who maybe not have shopped, um, for the past 10 years now, now shopping, um, I'm, I'm assuming those are potentially Robinson customers. Um, so I guess, um, maybe just a high level, you know, is that true? And then just maybe high level, how are you guys thinking about where the book of Robinson stands today as a percentage of the total mix? And as you guys ease some of those property restrictions in certain markets, what's the expected timeline for that to show up in auto PIF and maybe actually a bit on the premium per policy side as there's more bundled auto business?

Yeah, so the comment that I made about longer tenured inert shoppers shopping is coming from Alexis Demand Meter. And it's Interesting data, and it doesn't have necessarily our segment breakdown to know whether they are Robinsons, but I follow your intuition that if they're long tenured, they are likely a more stable insurance risk, whether they choose to place both their auto and home with the same carrier or not. So long tenured and stable risks do overlap well with where we want to go with the Robinson segment. So we're under penetrated. We think there's a massive upside potential in that segment, continue to invest against it, but it's also a pretty competitive segment. It's an area that the captive or exclusive agent companies own a large portion of that market share. And as we know, those companies that are mutuals are in some cases, reciprocals have different objective functions and a different time horizon. for how they think about pricing their products. So we know that competition for those customers is high, will be high, but it's encouraging to see that once those customers seem to get a taste of the competitive market or the ease and savings that comes from the choice model of the independent agency distribution channel, that we see them coming back and realizing that having choice, having breadth and depth of coverages, potentially better meets their needs as an insurance consumer over their buying lifetime. So those are encouraging signs that we see and that's why we continue to invest heavily in the independent agency channel where ease and savings come from the choice model.

Your next question comes from the line of Gregory Peters with Raymond James. Your line is open.

Hey, good morning, everyone. In the limit, just because I know you're running out of time, I'll just ask one question. You know, Tricia, you talked about presenting the three-year plan to the board. And I know almost every quarter you guys give us an updated view on autonomous vehicles. I just want to pull out the growth in your TNC business, which seems to be positive in commercial auto. There's the oncoming wave of Waymos, Teslas that are self-driving, et cetera. So I'm just curious when you map out your three-year plan, how you're thinking your TNC business might evolve over the course of the next couple of years.

Thanks, Gregory. Andrew talked a little bit more about that, but that was a big part of what we updated the board on. I think we've talked about this. Since probably maybe right around 2013 or so, we have what we call a runway model, and we look at the addressable markets. We look at all trends, but obviously we wanted to look at AVs and each level of AV, what that means from a market perspective, a safety perspective. We have relationships with TNC providers. Some of that increase could come from mileage, so there's some different ways that things increase in the TNC space. But we are very close to that data, and we have models that we work in terms of, hey, if this happens conservatively, because I think you can read the articles just like you would read about self-driving cars 10 or 15 years ago, and get a hyped up about it doesn't mean we're putting our head in the sand. What it means is we're watching it closely and understanding very clearly that there's a lot of opportunity to continue to grow and work with a lot of these providers. I think it's going to be great for consumers and very different also depending on state, weather, driving, geofencing, all of that. But, Andrew, you want to give a little bit more insight?

Yeah, it's definitely a topic of conversation with our board. We have an ongoing dialogue about autonomous vehicles and specifically in the TNC space. The only material commercialization right now is from Waymo, and they have a ride sharing service that competes directly with our TNC customers. And so it's something we pay attention to. Right now, Waymos are in many fewer urban areas than our TNC partners, and they are limited in the amount of vehicles that they have there. And so right now, at least from an insurance side, we don't see cannibalization of the opportunity, but we're cognizant of it. And as we plan for the future, of course, we want to be careful on how we do that. We think there's robust demand. There's seasonality that's present in the TNC market. Certainly in winter, people choose TNCs more than they do during nice weather in the summer. When it's raining, there's more choice in the mornings or the evenings. And so there's this variability and seasonality of demand that's present in the TNC space that's hard to solve with a fixed set of vehicles that we might see from Waymo or other AV providers. And so for the long term, we think that there will be a combination of both AVs and TNC companies with human operators, even in the far future. So something we pay attention to, something we think about, Who knows, but we try to be cognizant of the risks that are there and the opportunities.

And I would also add, Gregory, that that's one of the reasons why several years ago, regardless of what happens, we decided to really diversify more in our commercial lines organization. So we've had our five BMTs for a long time, but as we've gone into more fleet, especially medium fleet, our BOP program going direct. So that's one of the reasons why we have been investing and will continue to invest Pat talked about it in his opening comments. We feel like we're in a really pivotal position right now with commercial lines. Industry lack of profit has been around for a long time, even though it's getting a little bit better. I think we think 2025 CR is right, ex-progressive, is right about 105, but we have profit as one of our core values, so we want to make money in all lines. We think we have a really good a point of growth right now in our commercial lines business. So regardless of what happens, and we'll continue to do modeling and be on top of AVs, that's one of the big reasons why we've diversified our product line in our commercial lines organization.

There are approximately five minutes left in the event. We'd like to reserve those five minutes for some closing remarks from Tricia. Those left in the queue with questions can direct them to myself or Juliana directly.

Thank you. I just want to take a few moments. One, I want to welcome Juliana Patera as our new Director of Investor Relations. Many of you have met her. We're super excited to have her on the team. As I said, please give her any questions you have on Robinsons, on property, just so we can really adequately try to address your needs when we do our Q2 call in August. And then hot off the press, I want to congratulate Doug Constantine on his new role in Progressive as IT Controller. We just announced it to the organization yesterday. Typical with Progressive, we love moving people around, so Doug has been in CL, has been in CL, and now he's in our right-hand guy prepping us for these calls for many, many years, and his work has been really appreciated. So thank you so much, and congratulations, Doug. And then lastly, John Saru, and this is his last IR call. He announced that he'd be retiring in July, and he has been instrumental in making these successful and sort of being everyone's right-hand guy. The weekend before we start to get competitor news and different things, I always turn to John to get any answers. And, of course, he's been mentoring Andrew as we pass the baton. So I would like to give, for those of you in the room, give John Sauerland a round of applause.

Thanks, Tricia. Rebecca, I'll hand the call back over to you for the closing scripts.

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