Progressive Corporation (The)

Good morning and thank you for joining us today for Progressive Third Quarter Investor Event. I'm Doug Constantine, Treasury Controller and I'll 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 the letter to shareholders which have been posted to the company's website. 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 CFO and a question-and-answer session with members of our leadership team. The introductory comments by our CFO were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 60-minute schedule 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 can 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, 2024, as supplemented by our Form 10-Q for the first, second, and third quarters of 2025, where you 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 in the investor relations section of our website at investors.progressive.com. To begin today, I'm pleased to introduce our CFO, John Sauerland, who will kick us off with some introductory comments. John?

Good morning, and thank you for joining Progressive's third quarter 2025 investor relations call. We had an excellent quarter with an 89.5 combined ratio, 10% premium growth, and policies enforced growth of 12% versus a year ago. That policies enforced growth equates to 4.2 million more policyholders, or almost 7 million more vehicles enforced than a year ago. While growth is lower than in recent years, we are still gaining significant market share and capitalizing on the opportunities for growth through robust media spend and competitive rates. Year-to-date, our combined ratio is 87.3, with 13% premium growth and comprehensive income of $10 billion, which is over 30% ahead of 2024. Rounding out our key performance metrics, our trailing 12-month comprehensive return on equity stands at 37.1%. Before moving to questions, we'd like to take a moment to offer more commentary on the $950 million estimate for policyholder credit expense for personal auto customers in Florida that we recognized in September. Florida is Progressive's largest market, and we are the leading provider of personal auto insurance in Florida. In 2023, Florida legislators responded to rapidly rising insurance rates by passing House Bill 837, which, among other things, moved Florida to a modified comparative negligence system meaning drivers who are more than 50% at fault for an accident could no longer sue for damages, and disallowed one-way attorney fees. Since House Bill 837 took effect, our average loss costs, or pure premiums, for Florida injury claims are down between 10 and 20%, and the percentage of Florida personal injury protection, or PIP, claims for which we receive lawsuits is down around 60%. While we have been responsive in reflecting these changes in our lost costs through two rate reductions for Florida consumers in the past year and another plan for December, the drop in lost costs was more pronounced than we expected. Additionally, obviously, there is significant risk of very costly storms in Florida, and we have seen virtually none in 2025. The Florida Excess Profits Law calls for the return of profits in excess of 500 basis points better than our filed and approved underwriting profit margin over a three accident year period. And at quarter end, we estimated that liability at $959 million. For perspective, in 2022 alone, inclusive of Hurricane Ian, our personal auto combined ratio was over 100, And those results translated to around a $750 million decrease to the excess profits equation for the periods that included 2022. Our Florida auto business is more than 50% bigger now than in 2022. We applaud the legislative changes in House Bill 837 and the resulting more affordable personal auto insurance premiums for consumers and desire to continue to grow our presence in Florida. Our loss reserves will continue to develop as we handle more claims into the new system. And our estimate for the policyholder credit expense for the 2023 to 2025 period will develop accordingly, with monthly adjustments showing up in the expense line on our income statement. Naturally, going forward, our intent is to manage profitability in Florida to avoid excess profits. And finally, in response to questions we received, While a few other states have statutes covering excess profits, we don't currently foresee other similar exposures. Thank you again for joining us, and we'll 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 your string re-entering the queue to ask additional questions. We will now take our first question.