Progressive Corporation (The)

Welcome to the Progressive Corporation's first quarter investor event. The company will not make detailed comments related to quarterly results in addition to those provided in its quarterly report on Form 10Q and the letter to shareholders, which has been posted on 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's Director of Investor Relations, Doug Constantine. At this time, I will turn the event over to Mr. Constantine.

Thank you, Emily, and good morning. 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 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 events. additional information concerning those risks and uncertainties is available in our annual report on form 10k for the year ended december 31st 2021 as supplemented by our 10q reports for the first quarter of 2022 where you'll 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 before going to our first question from the conference call line our ceo trisha griffith will make some introductory comments trisha thanks doug

Good morning, and thank you for joining us today. Anniversaries are a natural time to look back on the past, and since this is the first investor call of Progressive's 85th year, I wanted to do just that. We have grown from a scrappy startup trying to find a foothold in the Great Depression to the 10th largest homeowner's carrier, the third largest personal auto carrier, and the number one commercial auto carrier. In just the last five years, our total company-wide written premium has nearly doubled. Nowhere has growth been more remarkable than in commercial lines, which just passed the major milestone of over $9 billion in written premiums on a trailing 12-month basis. We grew commercial auto premiums over 200% in the last five years, all while generally achieving a better-than-average industry profit margin, and ended March just shy of 1 million commercial lines policies in force, It has truly been an incredible run with significant opportunities still waiting to be captured. Congratulations to the commercial lines team and thank you to all progressive employees and customers who have made the last 85 years so extraordinary. Throughout our 85 year history, we've worked through many hard and soft markets and we continue to address the hard market we're in today. While some indices suggest the value of used vehicles is leveling or even beginning to decline, used vehicle values are still significantly above those of early 2021. Steady but increasing trend in bodily injury severity has also contributed to the increase in loss costs we've experienced. Further, as the country emerged from the Omicron wave, we saw personal auto vehicle miles traveled recover to fourth quarter 2021 levels, which were in the 9% to 10% range below the pre-pandemic baseline. Our response to these trends have been to reduce marketing expenses, increase underwriting scrutiny, limit bill plan options, and in the first quarter, we implemented rate increases of seven points in personal auto that still need to earn in, which is in addition to the eight points we took in 2021. While we're making progress, we still have more work to do to ensure all of our states reach rate adequacy. Our rate and non-rate actions have had the expected effect on personal auto growth. While personalized PIF growth is still positive on a year-over-year basis, sequential PIF growth is negative. New applications are down year-over-year, and our policy life expectancy is also declining. When we look across all the metrics we track, it seems likely that we're ahead of our competitors in increasing rates, which explains a large part of our slowdown in growth. As we look forward to the rest of 2022, we're optimistic. As more states reach rate adequacy, we expect to be able to increase marketing spend and re-engage the growth engine. Because of the advantages we believe we have in the way we buy media, we can adjust marketing spend at the local and segment level, and in such a way to ensure the new business we write meets our economic goals. And since we believe we're ahead of the competitors in taking rate action, we hope to continue our long-term trend of writing more than our fair share of quotes. Even as we face these macroeconomic pressures, we have not slowed our pursuit of segmentation superiority. Our U.S. personal auto product model is now available in over half the states and is showing early promising results, especially among more preferred segments. We have also further expanded the footprint of our 4.1 homeowners product into four additional states in the first quarter, bringing the total to 12. Our new normal since the onset of the pandemic has been disruptions in the economy that has buffeted our business. While there are many paths the future can take, I'm confident in our strategy and our people and believe our greatest successes are still to come in the next 85 years. Thank you, and I'll take your questions.