Progressive Corporation (The)

Welcome to the Progressive Corporation's fourth quarter investor event. The company will not make detailed comments related to quarterly results in addition to those provided in its annual reports on Form 10-K and the letter to shareholders, which has been posted to the company's website and will use this event to respond to questions. Acting as moderator for the event will be Progressive's Director of Investor Relations, Doug Constantine. At this time, I will turn the call over to Mr. Constantine.

Thank you, Chris, and good afternoon. Although our quarterly investor relations events typically 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 CEO and a question-and-answer session with members of our leadership team. Questions can only be asked by telephone dial-in participants. The dial-in instructions may be found at investors.progressive.com forward slash events. 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 31, 2020, 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. Before going to our first question from the conference call line, our CEO, Tricia Griffith, will make some introductory comments. Tricia?

Good afternoon and welcome to Progressive's fourth quarter conference call. We appreciate you joining us. As we've stated during the past few quarters, 2020 was an extremely trying year for many reasons, from the global pandemic to the emotional toll caused by social unrest. As I reflect on the year we just closed, I couldn't be more proud of the way Progressive rose to these challenges by delivering fantastic results while supporting its customers, employees, communities, and partners during these unprecedented times. The annual report theme of resilience truly defines how we approached every obstacle during this past year. As with prior quarters, the fourth quarter profitability continued to benefit from reduction in frequency, which was partially offset by an increase in severity. Miles driven continued to be lower than the fourth quarter last year. We continue to react to the changes in driving behavior caused by the pandemic. in addition to the over $1 billion given to customers in the form of credits early on in the pandemic. We also filed personal auto rate changes that averaged a decrease of approximately 3% between April and December in over 40 states that represent approximately 85% of our countrywide premium, thereby providing our customers an aggregate annualized savings estimated at about $800 million. There's much uncertainty about reopenings, vaccine distribution, and if and when we'll return to pre-pandemic driving patterns. Our product teams are staying abreast of the situation and continue to adjust rates to related risks, which include risks such as weather. We continue to recognize both policy and premium growth in the fourth quarter, which combined with the rest of the year resulted in 2020 having an increase of 2.4 million policies in force and 3 billion more net premiums written over the prior year. This was our fourth consecutive year of double-digit PIP growth. While all of our segments contributed to this growth, our agency auto business was more heavily impacted by the federal, state, and local social distancing and shelter-in-place restrictions that were put in place to stop or slow the spread of COVID-19, which resulted in a decrease in new applications year over year. Our commercial lines business saw significant growth in the for-hire transportation business as the demand for shipping services grew as a result of the pandemic. On the other hand, our Uber and Lyft premiums took a hit during the year as miles driven decreased with restrictions in place, and our premiums are based on actual and estimated miles over the policy term. Our property business had a profitable fourth quarter, but with the 2020 Atlanta hurricane season being the most active on record, it recognized an underwriting loss for the full year. Growth continues to be strong with our bundled Robinson business growing faster than any other segment. We're confident that we have the pricing and product enhancements in place to get closer to our target margins and will continue to make changes as we grow. Despite the challenges faced in light of the pandemic, our combination of strong growth and profitability in 2020 suggests we are managing the situation well. Throughout the year, we continue to invest in our personal auto product. Our first state was elevated to our newest product model in January. As part of our apron relief program, we also launched a temporary change to snapshot that allows existing non-snapshot customers to receive a snapshot adjusted rate after just 30 days of monitoring as opposed to the normal six months. This, in addition to snapshot road tests, which we had available for several months, gives consumers the ability to see their snapshot rate before purchasing a policy. While not available countrywide, where it is available, we believe this is a perfect opportunity for some customers to lower their rates based on either their driving behavior or frequency of their driving habits that have changed as a result of the pandemic. We're also investing in our commercial lines business. Our BOP product is now active in 18 states. Illinois went live last week. And during the fourth quarter, it was added to our business, quote, explorer platform in the direct channel. Also, SmartHaul, our UBI program for truckers, continues to see excellent adoption rates and is a great asset in the for-hire trucking market. And Snapshot ProView, which expands our UBI offerings beyond truck, is now available in 45 states. Looking to 2021, I'm happy to report that we are well-positioned for further growth as reflected in our January results. We continue to make investments in pricing segmentation, cost efficiency, accurate claims handling, and expense management. Most importantly, we've supported our people and retained our culture, which we know will pay huge dividends going forward. Another exciting thing about 2021 is that in April, we will celebrate our 50th anniversary of becoming a public company. A fun fact, if you bought 100 shares at our IPO in 1971, it would have cost you $1,800. At the end of 2020, that initial investment would have grown to be worth over $19 million, a 20.5 compounded annual return. Not a bad investment, especially if you compare it to the 9.9 return by the S&P 500 over that same period. I just want to take this opportunity to say thank you to all of our shareholders, both past and present, for investing in us over the years. Before I open it up for questions, I'd like to express how pleased and excited I am about the agreement with Protective Insurance Corporation. we've been very impressed with protective products employees and culture as we've said in the past commercial lines is our greatest opportunity to grow and we're excited to expand our capabilities with the expertise protective offers in larger fleet and affinity programs and by providing additional breadth of product lines as you know the acquisition is subject to customary closing conditions and i'm sure you can appreciate that we're not able to share additional information at this time We will provide additional information, thoughts, after the transaction closes. Chris, I think we can open it up for questions now.