Progressive Corporation (The)

Welcome to the Progressive Corporation's second quarter investor event. The company will not make detailed comments related to the quarterly results in addition to those provided in its quarterly report on Form 10-Q and the letter to shareholders, which have been posted to the company's website, and will use this event to respond to questions after a prepared presentation by the company. This event is available via a moderated conference call line and a live webcast with a brief delay. Webcast participants will be able to view the presentation live slides live, or download them from the webcast site. Participants on the phone can access the slides from the events page at investors.progressive.com. In the event we encounter any technical difficulty with the webcast transmission, webcast participants can connect through the conference call line. The dial-in information and passcode are available on the events page at investors.progressive.com. Acting as a moderator for the event will be Julia Hornack. At this time, I will turn the event over to Ms. Hornack.

Thank you, Bridget, and good afternoon to all. Today we will begin with the presentation regarding the opportunities in our commercial lines business by John Barbagallo and Karen Bailo. Our presentation will be followed by a Q&A session with our CEO, Tricia Griffith, and our CFO, John Sauerland. Also joining us by phone for Q&A will be our Chief Investment Officer, Bill Cody, and the General Manager of Progressive Home, Dave Pratt. This event is scheduled to last 90 minutes. 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 the event. Additional information concerning those risks and uncertainties is available in our 2018 Annual Report on Form 10-K, 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 investors page of our website, progressive.com. It's now my pleasure to introduce our CEO, Tricia Griffith.

Good afternoon and welcome to Progressive's second quarter webcast. We continue to be thrilled with our results across the board and probably more importantly, our plans to continue to gain market share. That said, if you've been watching the commercial lines results, they are nothing short of phenomenal on both growth and profitability. And in addition, we've taken this last couple of years to really invest in IT and talent. And we're going to talk a lot about that today and the addressable markets that we are really running into and excited about. And we're going to have a couple of guests give you a lot of details on that. This slide might be familiar in a little bit different form, but when we started these webcasts, we really wanted to look at the overall P&C addressable market and understand where Progressive plays and where we win. In the last couple of years, we've really focused mostly on the personal line section, which is more than half of the P&C industry, and more specifically on auto and home, especially as we integrated ASI to Progressive Home. And we've shared with you the four pillars and our cornerstones and really our ability to continue to grow market share on the auto, on the home, and of course in our bundle, the Robinson. And we've proven that we can do that. The great news here is that we are less than 9% share on the personal line side of the whole P&C market. So we still have a lot of runway. And as I'm sure you've read, our highest growing segment is the Robinsons. The other half of this is the commercial lines addressable market, which is nearly half of the overall P&C market at 328 billion. Let's take a look at what we'll call a donut, and I'll walk through in commercial lines where we are going to play and where we believe we're going to win. And I'm going to start with that orange segment, and I'll work counterclockwise. So the orange segment is where we are now. Monoline commercial auto. It's almost a $14.5 billion addressable market. We've been doing really well there for decades. Right now, we are the number one commercial auto rider with 22% market share. And with our advanced segmentation and our talent, we really believe we can even gain more market share. The next tranche to the left of that in green is small fleet. So think of small fleet as vehicles between 6 and 30. In the 6 to 9, we do really well. But we're going to expand to the 10 to 30 vehicle fleets. And Karen's going to talk about how we're going to attack that market. The next sliver, the black sliver at $1.5 billion, is the insured TNC. As you know, we've had a longstanding relationship with Uber, where we insure the drivers on their platform in 13 states. So we want to continue to grow there as well. The next color over in yellow is commercial auto, bundled with GL and BOP. So think of the Robinsons of commercial auto. We just started riding that this year. We're going to expand across the country, and we're really excited about the opportunities here. Again, we're going to be surgical, and we're going to make sure that we don't just grow, but we profitably grow, but we're very excited about this opportunity. Those first four tranches really have the commercial auto at the base. Let's go to the blue section. The blue section is small business with GL and Bob. So think of it's 20 billion addressable opportunities. So we're really excited about that. But think of 30 million small businesses with less than 20 employees. So we think we're going to win and we think we're going to win in a big way. When you look at all five of those sections, it really increases our addressable market to over three times. That's what's so exciting. And the fact that we've done so well in the commercial auto market with really understanding segmentation, we're going to take the same approach to these new areas with a lot of segmentation and less underwriting. So we're very excited. A couple places where we're not going to play in just yet are the gray area, and that is think of hazardous materials, public transportation, and right now businesses with more than 20 employees. Again, we want to get this right, be surgical, be measured, be disciplined, and then we'll consider expanding. The other area that's fairly large is other commercial insurance. Think marine insurance, workers' comp, mortgage guarantee, things like that. But for now, we're really excited about the growth opportunities and excited that the fact that we have been taking a couple of years to really make big investments, and now they're coming to fruition. What you're seeing here, you should recognize, I've showed you this a couple times with private passenger auto. You're seeing the last five years of commercial lines, growth and profitability. Profitability on the x-axis with the combined ratio inverted, so you want to be to the right of 100. Net written premium on the y-axis, so you want to be in that gray shaded area. Progressive is blue, the industry is black, and the nine competitors in any given years are the gray bubbles. And as you can see, we have always been in that gray area. And in fact, the last couple of years by pretty wide margins. That's what excites us about delving into new opportunities in this really vast addressable market. So let's get to the meat of the day with my guests, John Barbogallo and Karen Bailo. You've met both of them over the years in different capacities. Karen started at Progressive in 1990 in the CRM organization. She's had a multitude of jobs in terms of process and claims and product. But for the last 10 years, she's been either a personal lines GM or more recently in charge of agency distribution. In fact, she's been integral in rolling out the platinum program and integrating the sales force of ASI and Progressive. So she's done a phenomenal job. Last year, she was one of the seven people that we did a talent swap with. where she landed in commercial lines control. So I'm really excited to have Karen share with you what they're working on. But first, I'll ask John Barbagallo to come up. John's been with the company since 1983. He started in claims and has done, again, a lot of jobs, whether it's national sales or claims. He left for just a two-year hiatus. We welcomed him back, thank goodness, with open arms. And in the last 10 years, one, he's worked with Karen on the agency distribution. But more importantly, he has been our Commercial Lines Group President. And what you're going to see today is really what John has been working on, seeing the vision of how we can get great at commercial auto, which we are, and then expand. And so I'm really excited to have John share with you his plans for the future. John?