Progressive Corporation (The)

Good morning and thank you for joining us today for Progressive's fourth quarter investor event. I am Doug Constantine, Director of Investor Relations, and I will be moderator for today's event. The company will not make detailed statements related to its results in addition to those provided in its annual report on Form 10-K and the letter to shareholders, which have been posted to the company's website. This quarter includes a presentation on a specific portion of our business, followed by a question and answer session with members of our leadership team. The introductory comments and the presentation were previously recorded. Upon completion of the previously recorded remarks, we use the balance of the 90 minutes scheduled for this event for live questions and answers with the leaders featured in our recorded remarks, as well as other members of our management 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 31, 2023, 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 Investor Relations section of our website at investors.progressive.com. To begin today, I am pleased to introduce our Customer Relationship President, Laurie Niederst, who will kick us off with some introductory comments. Laurie?

Good morning, and thank you for joining us today. As Doug said, my name is Laurie Niederst, and I'm excited to be the first to participate in our new format. Traditionally, Tricia provides the opening comments for these presentations, but going forward, members of her leadership team will have the opportunity to speak to topics in our area of responsibility and introduce the talented individuals executing on these initiatives that we highlight during the event. In previous presentations, we've discussed our strategic pillars, which serve as the foundation of our vision. Today we're focusing on one of those pillars serving the broad needs of our customers, this pillar is synonymous with our strategy to become a destination company. Providing products that meet our customers changing needs throughout their lifetime we seek to instill customer confidence in both the products and the prices that we offer. To set the stage for today's presentation, I thought it'd be helpful to recap the history of Progressive's evolution as a destination company. Back in 2008, we publicly introduced our now ubiquitous customer segments, Sam's, Diane's, Wright's, and Robinson's. In 2014, we first spoke of our destination strategy, stating our intention to invest in the products, services, and experiences to better serve customers from all four segments. Since then, we've had relentless focus on not only maintaining and growing the Sams, Dianes, and Wrights who have always been well-served by Progressive, but significantly increasing our market share with Robinsons, which we estimate represent just under half of the personal insurance direct written premium in the United States. We've been very successful growing Robinson's who in December of 2023 accounted for just under 13% of our direct written premium. Countless efforts have contributed to Robinson's being our fastest growing segment, but it was two strategic decisions that really drove our success. Even before the introduction of the destination strategy, in 2006, we began offering homeowners insurance from other carriers in our Progressive Advantage Agency, or PAA. What began as a small endeavor has evolved into HomeQuote Explorer, or HQX, where we now offer customers competitive homeowner rates from a lineup of reputable carriers. This success in direct and our desire to grow Robinsons in the independent agent channel led Progressive to purchase a stake and eventually fully acquire American Strategic Insurance. ASI, now branded Progressive Home, has enabled us to offer both underwritten home and auto bundles as well as partner bundles to significantly increase our appeal to the rights in Robinsons. We've since leveraged our learnings and success in bundling personal insurance products in the commercial market, where we continue to be an industry leader. In 2018, we first introduced Business Quote Explorer, or BQX, which enabled direct customers to purchase a variety of commercial insurance products from other carriers and bundle with our commercial auto and BOP coverages. More recently, we're exploring this winning strategy in personal auto with AutoQuote Explorer, or AQX, which enables customers to compare rates and purchase products from other personal auto carriers on Progressive.com. This gives us another avenue to serve more customers and cross-sell from our expanding portfolio of products. Customer bundling doesn't end with home and personal auto or commercial auto and BOP. We have a whole suite of offerings, which includes progressive, underwritten special lines, renters, and umbrella products. By expanding our portfolio of products, we have continued to increase our addressable market and capture new business. The result of these efforts has been pretty incredible. We now estimate that 19% of households in the United States have at least one Progressive Sold product, an increase of over 80% in the last 10 years. The benefits of these efforts on our business are far reaching. The top line growth from increased sales of Progressive underwritten products and commissions earned from sales of partner products is just the beginning. The more products a customer purchases from Progressive, the stickier the customer becomes, leading to higher lifetime profits and lower per policy acquisition costs, fueling the virtuous cycle that results in greater market share. But it's not just Progressive that benefits. We're making insurance easier for customers by providing options to meet their insurance and other financial needs now and in the future. Additionally, our industry-leading brand and acquisition engine provides growth opportunities for our partners, making this destination strategy a win-win-win. It's important to note that today we're talking about the direct channel. Like many efforts Progressive has undertaken, we often leverage the direct channel to test, learn, and perfect new ideas. While doing so, we're always looking for ways to deploy our successes in direct to benefit our independent agents. For decades, the agency channel has been vital to Progressive's growth, and independent agents will continue to be the face of Progressive for millions of customers. While we're focusing on direct today, we fully recognize that Robinsons are the largest segment of consumers served by independent agents in the United States. And we have a number of significant investments underway to continue our leadership in this channel and our partnership with our 40,000 plus independent agents. For a deeper dive into our evolution as a destination company, I'd like to introduce Kathy Lemieux, a 42-year Progressive Veteran and our Business Leader for CRM Sales Experience. Kathy will share more detail on how we're leveraging our HQX, BQX, and AQX platforms to provide choice and build customer confidence. Our second speaker is Sean Freeman. Sean is a business leader of our comparison rating experience and direct property quoting who's been with Progressive for 14 years. He'll demonstrate the benefits of bundling and multi-product households and explain how these efforts will continue to drive Progressive's growth and profitability. Again, thank you for joining us today. And I'll now hand it over to Kathy.

Hello. I appreciate the opportunity to deliver some highlights on our progress toward achieving our destination company vision. Today, we'll focus on how the Progressive Advantage Agency is becoming a primary source for insurance products for consumers who prefer the direct channel. We strive to provide access to a broad portfolio of products so customers begin and then keep their relationship with us without the need to look elsewhere. Let me begin by introducing the journey of Sam and Ashley, two actual Progressive customers. Back in 2009, when Sam first contacted Progressive, he was seeking insurance for his 1999 Saturn. Eventually, he bought a motorcycle, which needed insurance as well. Later, he married Ashley, and together they acquired renter's insurance until eventually they bought a home, which required homeowner's insurance. Both their renters' and homeowners' insurance policies were purchased through the Progressive Advantage Agency. In the case of Sam and Ashley, we were able to offer them different products as life events triggered the need for additional and more complex insurance coverage. We would have loved to sell a Progressive Manufactured Property product to the couple, but that wasn't the right solution for them, so we had other options ready. Let's talk more about that approach. Our multi-carrier marketplace for property and small business insurance products allows us to meet the needs of more and more customers. We are leveraging the progressive brand, building on our industry-leading digital tools, and working with a growing number of reputable carriers to make buying and maintaining insurance easier. This recipe is proving very successful, delivering 200% growth in premiums written through our agency in less than a decade. Over the years, we've evolved the comparison shopping experience from property to commercial lines, from one carrier to many, from the phone to the online channel, and from quote to also buy without agent intervention. While the large majority of our insurance customers start their shopping experience online, Using our Home Quote Explorer or Business Quote Explorer digital experiences, which launched after our shop-by-phone-only models, the majority work with our team of knowledgeable in-house agents to customize their policy before purchasing. As you've come to expect from Progressive, we continue to invest in improving the quote-and-buy experience, always focusing on the needs of our customers. We introduced a digital multi-carrier quote experience, which we call Home Quote Explorer, in 2017. Over the course of the next several years, we made enhancements and introduced new features to improve the quoter experience and the platform's efficiency. These efforts have generated close to a 10% increase in quote completions over early HQX results. One of our most recent changes was the introduction of a quick quote experience, which displays pre-filled data from third-party providers up front so that customers can easily review and edit. Leveraging our proprietary models, we customized prompts and details to assist customers in selecting coverages and qualifying for discounts. This change alone decreased quote time by 20%, reducing the effort for customers and increasing their likelihood to purchase as a result. This is just one example of our work to simplify what has traditionally been a complicated shopping experience for both homeowners and small business owners. Our dedication to continuous improvement is bolstered by a rigorous A-B testing approach aimed at making a fully digital quote and purchase available to more shoppers. However, our in-house agents are always here to provide guidance and instill customer confidence. The investments in our HQX and BQX platforms only produce value when they're backed by a broad portfolio of products underwritten by reputable brands. Both the breadth of carriers in our network and the depth of their product suite have grown over the last decade. Presently, 13 carriers comprise our Home Quote Explorer portfolio and 9 for Business Quote Explorer. There are major benefits to having a large contingent of carriers in the PAA, which Sean will get into later, but there is also a risk because we are exposing progressive customers and thus the progressive brand to the services of another carrier. To protect our customers and the progressive brand, we are selective about the carriers we partner with. They must meet our standards for customer care, they must offer a quality product at fair price, pass our information security assessments, and they must have the financial strength and standing to uphold the promise we make to customers that we'll be there when they need us most. Additionally, we'll consider a carrier's technological capabilities so that we can provide a seamless, integrated digital customer experience for quoting and servicing. Also worthy of note is that our carrier networks include a number of companies that provide both property and small business insurance offers in HQX and BQX. We take pride in this fact as it demonstrates the strength of our mutually beneficial relationships. The benefits of our multi-carrier model extend far beyond quote and buy and are evident throughout the customer insurance journey. For significant life changes, such as Sam and Ashley getting married and buying a house, perhaps experiencing a future job relocation, or if they eventually need to insure their teenage driver, our agency is ready with the products they need and the customer service to help them navigate these events. Recall that Sam and Ashley added a home policy underwritten by one of our network carriers several years after acquiring their progressive auto insurance and built a bundle, becoming one of the more than a million Robinsons we insure through the PAA. The portfolio of products and carriers who underwrite them that are available to our customers allows us to grow more bundles over time. But Even when the event isn't life-changing, for example, a policy renewal accompanied by a steep rate increase, we're presented with an opportunity to support our customers by offering options which gives us the chance to retain the customer. Often, we're able to anticipate customer shopping by leveraging our proprietary data models and proactively reach out to offer assistance. Even subtle nudges, such as the email presented here, reinforce the value our in-house agency offers. That leaves our longest-running product comparison experience, auto insurance. More than 30 years ago, we introduced auto comparison rating as a fee-based service in California. Insurance products were much simpler in those days, so at the time, rates were manually calculated by a team of progressive people who reverse-engineered them from public filings. This industry-altering idea proved to be a winner with customers, prompting us to make the service available countrywide and to build our brand on comparison rates. Our early marketing messages combined the ease and savings from one-stop rate comparison with a message of transparency. If our rate isn't the lowest, we'll tell you whose is. And challenging the status quo, not what you'd expect from an insurance company, as early brand differentiators. As Progressive and competitors advanced their products, adding credit, underwriting, and tiering, our precision in providing comparison rates declined. Consumers saw decreasing value in the range of rates we provided to adjust to these conditions. The next evolution of comparison rates came in 2016 when we began purchasing discrete auto rates from a third party. This model has proven to be a lower-cost way to provide a service that is, to this day, valuable to our customers. Over the past five years, we've conducted dozens of tests, leveraging comparison rates to improve customer experiences, increase progressives conversion, and monetize click referrals. Our decades of experience led us to take the next step in the auto rate comparison journey. AutoQuote Explorer. Bringing our CRE, HQX, and Consumer Insights together, we've been piloting a multi-carrier auto-quoting experience since the third quarter of 2022. We launched a quote and buy experience over the phone first and have refined the delivery with our in-house agents through several iterations. We're ready to introduce the AQX experience online soon. The screens that you see on this page were developed using focus group and agent feedback when testing with prototypes. Early results give us confidence that the comparison quote and purchase experience with a reputable set of carriers will give us the opportunity to better meet consumer needs, starting new customer relationships in those cases where insurance shoppers would not purchase a Progressive policy, getting their auto insurance needs met elsewhere. Progressive continues to be known for providing comparison rates, but our launch of AQX provides an opportunity to refine our brand positioning. The key is to generate interest by conveying that we've taken the hassle out of shopping for car insurance while giving customers confidence in the products, prices, and providers that we offer. But just like HQX and BQX, the customer value of AQX extends beyond the purchase, and we continue to refine the benefit statements, taking advantage of our market research. Thank you again for the opportunity to speak today. I'll now hand it over to Sean. Sean?