Progressive Corporation (The)

Good morning, and thank you for joining us today for Progressive's first quarter investor event. I'm Doug Constantine, treasury controller, 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 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 personal lines president, and a question and answer session with members of our leadership team. Introductory comments by our personal lines president 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, 2025, as supplemented by Form 10-Q for the first quarter of 2026, where you'll 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'm pleased to introduce our Personal Alliance President, Pat Callahan, who will kick us off with some introductory comments. Pat?

Good morning, and thank you for joining us today. First quarter results were consistent with the last several quarters. Extraordinary profitability and growth well above the industry average. When performance is this strong for this long, it can be easy to take it for granted. So I wanted to take a few minutes to reflect on what the Progressive team has delivered. First, market share. In personal auto, we gained 1.9 points of market share in 2025, moving us up to 18.6% share, our second straight year gaining more than 1.5 points, which no other top 20 company has done, going back to at least 1996. To put the last few years in perspective, it took us 84 years to get to 15.2 points of U.S. auto market share and only two years to add another 23% more on top of that. It's a remarkable achievement. And testament to the value that our offerings bring to consumers seeking high quality and affordable protection products. Growth is great to see, but profitable growth is our objective. And it's important to note that we gained that share while delivering personal auto combined ratios below 90 in 9 of the last 10 quarters. And that's just personal auto. Preliminary industry results for commercial auto suggest the industry combined ratio improved, but once again posted an underwriting loss as it continues to face nuclear verdicts and social inflation. Despite these headwinds, our commercial auto results continue to be excellent as we continued our streak of underwriting profitability well in excess of the industry. And in property, we're building on last year's exceptional profitability while we continue to invest to ensure we have the risk selection and segmentation, geographic distribution, and distribution footprint necessary to start increasing availability. As we mentioned on the last couple of calls, we're slowly starting to increase our appetite for property growth on our own paper, which is helping us find more growth in the important provinces and segments. These results are only possible because of the competitive advantages we built across the organization, and because we employ people who are truly among the best in the industry. While we're certainly pleased with these results, we got here because we're always looking ahead. World events continue to create uncertainty in the global macroeconomic environment, and we remain vigilant about how those changes could affect our business. Given our concentration in vehicle lines, higher fuel prices are top of mind. The direct impact of higher fuel prices on personal auto frequency is difficult to predict because the timing, duration, and magnitude of the price changes matter, as does the broader state of the economy when those price changes happen. Historically, we've seen that when fuel is more expensive, people take fewer discretionary trips, such as cross-country road trips. And while foregoing those trips can reduce total vehicle miles traveled, Those miles do tend to be lower frequency miles, so the effect on lost costs is typically smaller than the overall decline in VMTs. To date, fuel prices haven't been elevated long enough to conclude how much, if at all, elevated fuel prices may affect our lost costs. On the severity side, higher energy costs generally contribute to broader inflationary pressures. However, it takes time for higher costs to make their way through the supply chain and can be partially offset by lower severity, resulting from a lesser mix of higher speed, higher severity highway accidents. In commercial auto, higher fuel prices can immediately pressure trucking margins, adding strain to an industry that has already seen significant change in the post-pandemic environment. As we did in 2021 with higher used vehicle prices and in 2025 with tariffs, we are monitoring the effects of fuel prices closely and incorporating what we observe into pricing as appropriate. While the macro environment could put upward pressure on pricing in the future, today we're still delivering near record personal auto margins and focused on growing as quickly as possible. The environment remains competitive, as it has been for the last five plus quarters, so we continue to execute state and product level plans to maximize PIF growth at target profit margins. On the new business side, in Q1, we increased media spend by 20% versus Q1 2025, making Q1 of 26 the most we've ever spent on media in a quarter. Top of funnel metrics remain robust. with marketplace demand still strong. Our price competitiveness is also strong, as reflected in higher personal auto conversion year to date. Our product teams continue to execute their business plans, with some states taking modest rate decreases when appropriate to capture in-market shoppers. On renewals, we're actively retaining customers through policy reviews, as we've noted over the last couple of quarters. While possibly temporary, we were also pleased to see a lift in the Florida trailing three policy life expectancy during the quarter as customers received their premium credits. At the countrywide level, mixed shifts that arose because of a more aggressive new business posture continue to put downward pressure on PLE, although the year-over-year influence of those changes is abating. In commercial lines, we're also seeing a competitive environment. and we are looking to all avenues to stimulate growth. We're increasing media spend and are looking to reduce rates in some states and business segments where we can bring in business at or below our profit targets. With targeted rate decreases and continued advancements in rolling out our next generation product models across our core commercial auto, medium fleet, and small business lines, we are well positioned for growth. In closing, Our business is in a very strong position. The macroeconomic environment will continue to evolve, but we've proven we thrive during periods of disruption as we're among the best at identifying and quickly adapting to uncertainty and changing business conditions. As we close in on the important milestone of becoming the number one writer of U.S. personal auto, we're not taking our foot off the gas. We'll continue investing in the business and leveraging our scale, advanced analytics, and segmentation leadership as we make progress towards our vision of becoming consumers, agents, and business owners' number one destination for insurance and other financial needs. Thank you again for joining us this morning. 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 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. I also ask that you use restraint in re-entering the queue to ask additional questions. I'll take our first question.