Progressive Corporation (The)

Good morning, and thank you for joining us today for Progressive's first quarter investor event. I'm Doug Constantine, Director of Investor Relations, and I will be moderator for today's event. The company will not make detailed comments related to its results in addition to those provided in its annual report on Form 10-K, quarterly reports on Form 10-Q, and a letter to shareholders, which have been posted to the company's website. Although our quarterly investor-relation events often include a presentation on a specific portion of our business, we will instead use the 60 minutes scheduled for today's call for introductory comments by our CEO and a question and answer session with members of our leadership team. The introductory comments by our CEO were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 60 minutes scheduled for this event for live questions and answers with members of our leadership 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 31st, 2024, as supplemented by our Form 10-Q for the first quarter of 2025. We will 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. These documents can be found via the investor relations sections of our website at investors.progressive.com. To begin today, I'm pleased to introduce our CEO, Tricia Griffith, who will kick us off with some introductory comments. Tricia?

Good morning, and thank you for joining us today. Since the pandemic started in March of 2020, we've hosted 20 investor relations calls, and the common theme of those calls has been how our business is weathering uncertain and unique macroeconomic environments. The last five years has thrown challenge after challenge at us, and through it all, Progressive has not merely survived, but thrived. Following a fantastic 2024, we just delivered one of our best quarters ever with near-record margins coupled with record growth. As more challenges arise, including in the form of the macroeconomic effects of tariffs, I feel very confident in Progressive's ability to face the issues head-on. The momentum we had in 2024 carried us into 2025 and during the first quarter, we added new policies below our target acquisition costs and continued moving full speed ahead on growth with a focus on realizing our vision of becoming consumers, agents, and business owners' number one destination for insurance and other financial needs. Even though our competitors have reported improved profitability over the last couple of quarters, The shopping environment in personal auto has remained very favorable to Progressive. You may recall that the first quarter 2023 set the record for the most new personal auto applications of any other first quarter in our history. Well, I'm proud to say that the first quarter 2025 personal auto new applications surpassed the previous record by over 20%. Our results achieved because of both more quotes and a higher conversion of those quotes to a sale. More year-over-year quotes mean our customer acquisition machine is running efficiently, and strong conversion in both channels suggests very good price competitiveness. Growth is not just happening in personal auto. In property, we increased homeowners' policies and forests in the less volatile states and reduced policies and forests in the more volatile states. We are also continuing to significantly grow our renters' business. In commercial lines, although the trucking space continues to be challenging, core commercial auto new applications are up 8% year over year, and our business auto and contractor BMTs experience significant growth in new applications. In addition to growth, our personal auto and property products, as well as commercial lines, have year-to-date combined ratios below 90. a significant achievement considering the industry's challenges in property and commercial auto. Despite the significant turmoil in financial markets in recent weeks, as investors react to tariff and other news, I'm pleased to report that our balance sheet has remained strong. At quarter end, common equities were only 4% of our total portfolio, and thus far it has been largely insulated from stock market volatility. Additionally, we have been generating capital at a brisk pace, both from strong underwriting profitability and investment returns. For the quarter, our investment portfolio generated investment income that was 32% greater than the first quarter last year and averaged over $270 million a month year-to-date. We are still in the early days of the tariffs, and the effects may not be known until sometime in the future. The interconnectedness of global trade makes it even more difficult to predict where and how quickly the impact of tariffs will work their way through supply chains and ultimately our lost costs. Determining our rate levels is a prospective exercise where we try to predict future loss trends and other costs to be able to set appropriate rates to achieve our underwriting profitability goal. Since late 2024, our talented team of pricers, modelers, analysts, and actuaries have been modeling various scenarios to allow us to assess the impact of potential tariffs on our business to help us to be prepared to react as quickly as possible. In our fourth quarter 2021 IR call, we talked about our ability to gather data quickly, process it effectively, and react to it decisively. I believe we're better at this than anyone else in the industry. And proof of this is that over the last 20 years, periods of macroeconomic turmoil have often directly coincided with progressive, most successful periods. More recently, the inflationary environment of 2021 through 2023 proved that we were able to manage through rapid, unpredictable increases in loss costs and manage our calendar year combined ratio. I think that we have the tools, systems, and most importantly, the people to react quickly and effectively during times of market disruption. While I can't know what the future holds, I believe the odds are strongly in favor of Progressive to once again manage through whatever lies ahead better than anyone else in the industry. Thank you again for joining us today, and I will now take your questions.

This concludes the previously recorded portion of today's event. We now have members of our management team available live to answer questions. Questions can only be submitted over the phone by pressing star 1 on your keypad. In order to get to as many questions as possible, please limit yourself to one question and one follow-up. We also ask that you use restraint in reentering the queue to ask additional questions. We will now take our first question.