Progressive Corporation (The)

Welcome to the Progressive Corporation's Third 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, although CEO Tricia Griffith will make a brief statement. The company will then use the remainder of the event to respond to questions. Acting as moderator for the event will be Progressive Director of Investor Relations, Doug Constantine. At this time, I will turn the event over to Mr. Constantine.

Doug Constantine Thank you, DeShondra, and good morning. Although our quarterly investor relations events typically include the presentation on a specific portion of our business, we will instead use the 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. 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 on our annual report on Form 10-K for the year ended December 31, 2020, as supplemented by our 10 key reports for the first, second, and third quarters of 2021, 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. Before going to our first question from the conference call line, our CEO, Tricia Griffiths, will make some introductory comments. Tricia?

Thanks, Doug. Good morning, and welcome to Progressive's third quarter conference call. We appreciate you joining us. During our second quarter call, we discussed the challenges we were facing as our customers returned to normal driving habits as the country opened from the pandemic and as supply constraints contributed to an unprecedented increase in vehicle valuations. In the third quarter, those challenges continued with the added effect of the most expensive storm in Progressive's history, Hurricane Ida. The result of these challenges is our first quarter with an above 100 CR in 20 years. In true Progressive fashion, we are facing these challenges head on to do what's needed to meet our publicly stated goal of a 96 combined ratio on an annual basis. As part of our efforts to ensure we meet our 96 targets, we are taking rate increases across our product lines. While objections and regulator scrutiny are part of the revision process, the pressures on the insurance pricing are real. The entire industry has been buffeted by the headwinds of higher severity, post-pandemic increased frequency, and weather-related catastrophes. Regulators take their mandate of adequate rates seriously. And as such, we've been able to work with regulators to increase rates to meet the rising costs. Year-to-date through the third quarter, we have placed in-market increases an aggregate of five points in personal auto, three points in commercial lines, and eight points in property. In personal auto during the third quarter, rate increases were effective in 20 states, which had an average increase of about 6%. So we're taking the changes in the environment seriously and reacting decisively. We have more revisions in process across our suite of products as we work to ensure the rest of 2021 and 2022 meet our calendar year objectives. Underwriting is another lever that we are using to address profitability. We continue to use this lever in commercial and personal lines to ensure we write exposures accurately and that meet our underwriting targets. In personal auto, our 8.7 model, which is now in states representing about 40% of our premium, further advances the science of underwriting. In homeowners, where profitability has been under pressure for several quarters, we are taking additional steps to hasten our progress to meet our profit objectives. In states with high CAT exposure, we've changed our underwriting rules to reduce our exposure, including targeted non-renewals. While non-renewals are not our preferred path, there are times where we need to use non-traditional methods to meet our targets. While we take steps on the profitability side of the business, we continue to see strong growth. Personal lines written premiums grew 7%, while commercial lines and homeowners both saw double-digit year-over-year written premium growth in the third quarter. Personal lines and homeowners recorded PIF growth of 8% and 13% in the quarter, respectively. Commercial auto continues to capitalize on the macroeconomic environment with its third straight quarter of double-digit PIF growth, largely due to growth in the four higher trucking segments. Though our underwriting actions often have the unfortunate side effect of reducing growth, our product managers continue to scour the competitive landscape to find profitable growth opportunities. Finally, I'd like to take this opportunity to once again thank Mike Seeger, our claims president, and Jeff Charney, our chief marketing officer, for their contributions to Progressive and to offer my congratulations on their planned retirement. While I'm confident that their replacements are up to the task, Mike and Jeff's presence will be greatly missed. Thank you, and I'm ready to take the first question.