PART I—FINANCIAL INFORMATION Item 1. Financial Statements. This section presents unaudited consolidated financial statements and detailed notes on reporting, investments, debt, taxes, and segment performance Consolidated Statements of Comprehensive Income The company reported significant year-over-year growth in revenues, net income, and comprehensive income for both the three and six months ended June 30, 2025, driven by increased net premiums earned and investment income Consolidated Statements of Comprehensive Income (Unaudited) | Metric (millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $22,004 | $18,134 | $42,413 | $35,377 | | Total expenses | $18,022 | $16,274 | $35,195 | $30,577 | | Income before income taxes | $3,982 | $1,860 | $7,218 | $4,800 | | Provision for income taxes | $807 | $401 | $1,476 | $1,010 | | Net income | $3,175 | $1,459 | $5,742 | $3,790 | | Other comprehensive income (loss) | $429 | $108 | $1,328 | $(100) | | Comprehensive income (loss) | $3,604 | $1,567 | $7,070 | $3,690 | | Basic: Earnings per common share | $5.42 | $2.49 | $9.80 | $6.45 | | Diluted: Earnings per common share | $5.40 | $2.48 | $9.77 | $6.42 | Consolidated Balance Sheets The company's total assets and shareholders' equity increased significantly from December 31, 2024, to June 30, 2025, primarily driven by growth in available-for-sale securities and retained earnings Consolidated Balance Sheets (Unaudited) | Metric (millions) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :-------------- | :---------------- | :-------------- | | Total assets | $115,480 | $105,745 | $97,893 | | Total liabilities | $82,876 | $80,154 | $74,553 | | Total shareholders' equity | $32,604 | $25,591 | $23,340 | | Available-for-sale securities | $84,375 | $75,947 | $68,222 | | Equity securities | $4,235 | $4,303 | $4,134 | | Unearned premiums | $26,335 | $23,858 | $23,681 | | Loss and loss adjustment expense reserves | $41,154 | $39,057 | $36,605 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased substantially for the three and six months ended June 30, 2025, primarily due to net income and other comprehensive income, partially offset by common share dividends and treasury share purchases Consolidated Statements of Changes in Shareholders' Equity (Unaudited) | Metric (millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Balance, beginning of period (Retained Earnings) | $26,732 | $21,020 | $24,283 | $18,801 | | Net income | $3,175 | $1,459 | $5,742 | $3,790 | | Cash dividends declared on common shares | $(58) | $(58) | $(117) | $(117) | | Other comprehensive income (loss) | $429 | $108 | $1,328 | $(100) | | Total shareholders' equity (end of period) | $32,604 | $23,340 | $32,604 | $23,340 | - All outstanding Serial Preferred Shares, Series B, were redeemed in February 20246 Consolidated Statements of Cash Flows Net cash provided by operating activities increased significantly for the six months ended June 30, 2025, compared to the prior year, while net cash used in investing and financing activities also increased Consolidated Statements of Cash Flows (Unaudited) | Metric (millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $9,183 | $7,502 | | Net cash used in investing activities | $(6,381) | $(6,387) | | Net cash used in financing activities | $(2,821) | $(1,113) | | Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | $(19) | $2 | | Cash, cash equivalents, restricted cash, and restricted cash equivalents – June 30 | $135 | $102 | Notes to Consolidated Financial Statements These notes provide detailed explanations of accounting policies, investment portfolio, fair value, debt, income taxes, loss reserves, and segment performance 1. BASIS OF REPORTING AND ACCOUNTING This note outlines the consolidation principles, the nature of interim period adjustments, and details the changes in the allowance for credit losses on premiums receivable. No new material accounting standards were adopted during the period Allowance for Credit Losses on Premiums Receivable (millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Allowance for credit losses, beginning of period | $473 | $328 | $460 | $369 | | Increase in allowance | $176 | $128 | $329 | $235 | | Write-offs | $(148) | $(128) | $(288) | $(276) | | Allowance for credit losses, end of period | $501 | $328 | $501 | $328 | - No new accounting standards were adopted during the three and six months ended June 30, 2025, and none are expected to materially impact financial condition or results of operations17 2. INVESTMENTS The investment portfolio's fair value increased significantly, with detailed breakdowns of fixed maturities and equity securities. The company reported net realized gains on securities for Q2 and YTD 2025, a notable improvement from losses in the prior year, and no material credit losses on fixed-maturity securities Total Investment Portfolio Fair Value (millions) | Date | Total Portfolio Fair Value | | :--- | :------------------------- | | June 30, 2025 | $88,610 | | June 30, 2024 | $72,356 | | December 31, 2024 | $80,250 | Net Realized Gains (Losses) on Securities (millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net realized gains (losses) on security sales | $19 | $(227) | $20 | $(373) | | Net holding period gains (losses) | $368 | $100 | $155 | $402 | | Total net realized gains (losses) on securities | $387 | $(127) | $175 | $29 | - No allowances for credit losses or write-offs for uncollectible credit losses were recorded during the first six months of 2025 or 2024, and no material credit loss allowance balance existed as of June 30, 20252528 Net Investment Income (millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Investment income | $871 | $685 | $1,685 | $1,303 | | Investment expenses | $(9) | $(7) | $(16) | $(13) | | Net investment income | $862 | $678 | $1,669 | $1,290 | - Investment income increased 27% and 29% for the three and six months ended June 30, 2025, respectively, primarily due to growth in invested assets and an increase in recurring investment book yield from investing in higher coupon rate securities33 3. FAIR VALUE This note details the fair value hierarchy (Level 1, 2, and 3) used for financial instruments, with the majority of the investment portfolio classified as Level 1 or Level 2. It also provides a summary of changes in fair value for Level 3 assets and quantitative information about Level 3 measurements Total Portfolio Fair Value by Level (millions) | Date | Level 1 | Level 2 | Level 3 | Total | | :--- | :------ | :------ | :------ | :---- | | June 30, 2025 | $52,426 | $36,078 | $106 | $88,610 | | June 30, 2024 | $44,877 | $27,378 | $101 | $72,356 | | December 31, 2024 | $50,128 | $30,017 | $105 | $80,250 | - Vendor-quoted prices represented 93% of Level 1 classifications (excluding short-term investments valued at original cost) and 99% of Level 2 classifications at June 30, 20253940 - Level 3 securities, which are more subjective in nature, represent a small portion of the total portfolio, and changes in their valuation would not materially impact net or comprehensive income5256 4. DEBT The company's debt consists solely of long-term Senior Notes with various interest rates and maturity dates. The line of credit with PNC Bank was renewed, with no borrowings outstanding during the reported periods Senior Notes (millions) | Principal Amount | Interest Rate | Maturity Date | Carrying Value (June 30, 2025) | Fair Value (June 30, 2025) | | :--------------- | :------------ | :------------ | :----------------------------- | :------------------------- | | $500 | 2.45% | 2027 | $499 | $488 | | $500 | 2.50% | 2027 | $499 | $487 | | $300 | 6 5/8% | 2029 | $298 | $324 | | $550 | 4.00% | 2029 | $548 | $547 | | $500 | 3.20% | 2030 | $498 | $477 | | $500 | 3.00% | 2032 | $497 | $456 | | $400 | 6.25% | 2032 | $397 | $438 | | $500 | 4.95% | 2033 | $497 | $511 | | $350 | 4.35% | 2044 | $347 | $299 | | $400 | 3.70% | 2045 | $396 | $310 | | $850 | 4.125% | 2047 | $843 | $699 | | $600 | 4.20% | 2048 | $591 | $493 | | $500 | 3.95% | 2050 | $491 | $392 | | $500 | 3.70% | 2052 | $494 | $373 | | Total | | | $6,895 | $6,294 | - The Progressive Corporation renewed its $300 million line of credit with PNC Bank, National Association, expiring April 2026, with no borrowings outstanding during the reported periods61 5. INCOME TAXES The effective tax rate decreased for the three and six months ended June 30, 2025, primarily due to tax benefits from deferred compensation distributions. Management believes deferred tax assets will be realized, and no valuation allowance was needed Effective Tax Rate (%) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months Ended June 30, | 20.3% | 21.6% | | Six Months Ended June 30, | 20.4% | 21.0% | - The decrease in effective tax rate is primarily due to tax benefits associated with distributions of deferred compensation during Q2 202562 - Net current income taxes recoverable were $115 million at June 30, 2025, compared to net current income taxes payable in prior periods64 6. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES The company experienced significant favorable reserve development of $607 million during the first six months of 2025, primarily driven by personal auto and personal property, a substantial increase from $63 million in the prior year Loss and Loss Adjustment Expense Reserves Activity (millions) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Balance at January 1 | $39,057 | $34,389 | | Net balance at January 1 | $34,570 | $29,600 | | Total incurred | $26,409 | $23,567 | | Total paid | $23,725 | $21,077 | | Net balance at June 30 | $37,254 | $32,090 | | Balance at June 30 | $41,154 | $36,605 | - Favorable reserve development of $607 million during the first six months of 2025, compared to $63 million in 202466 - Drivers of Favorable Reserve Development (YTD June 30, 2025): * Approximately $400 million attributable to accident year 2024, $115 million to accident year 2023, and the remainder to 2022 and prior * Personal auto products: $520 million, primarily due to lower than anticipated loss severity and frequency in Florida and lower litigation defense costs * Personal property products: $50 million, from favorable development on 2024 catastrophe events * Commercial Lines: $45 million, mainly from lower than anticipated severity in transportation network company business67 7. SUPPLEMENTAL CASH FLOW INFORMATION This note provides details on the composition of cash and cash equivalents, restricted cash, and non-cash and paid activities for the period Non-Cash and Paid Activities (millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Non-cash activity: | | | | Common share dividends (declared but unpaid) | $58 | $58 | | Operating lease liabilities (from obtaining right-of-use assets) | $63 | $47 | | Paid amounts: | | | | Income taxes | $1,644 | $1,351 | | Interest | $138 | $138 | | Operating lease liabilities | $45 | $43 | - Cash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments. Restricted cash includes collateral for unpaid deductibles and funds for flood claims68 8. SEGMENT INFORMATION The company operates through Personal Lines, Commercial Lines, and Service businesses. Both Personal Lines and Commercial Lines segments demonstrated strong underwriting profitability for Q2 and YTD 2025, with significant improvements in underwriting margins and combined ratios compared to the prior year Pretax Underwriting Profit (Loss) by Segment (millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Personal Lines | $2,448 | $1,083 | $4,831 | $3,124 | | Commercial Lines | $364 | $304 | $702 | $513 | | Other | $(4) | $(1) | $(8) | $(1) | | Total pretax underwriting profit (loss) | $2,808 | $1,386 | $5,525 | $3,636 | Underwriting Margins and Combined Ratios by Segment (%) | Segment | Q2 2025 Underwriting Margin | Q2 2025 Combined Ratio | Q2 2024 Underwriting Margin | Q2 2024 Combined Ratio | YTD 2025 Underwriting Margin | YTD 2025 Combined Ratio | YTD 2024 Underwriting Margin | YTD 2024 Combined Ratio | | :-------------------------------- | :-------------------------- | :--------------------- | :-------------------------- | :--------------------- | :--------------------------- | :---------------------- | :--------------------------- | :---------------------- | | Personal Lines | 14.0% | 86.0 | 7.4% | 92.6 | 14.1% | 85.9 | 11.1% | 88.9 | | Commercial Lines | 13.2% | 86.8 | 11.4% | 88.6 | 12.9% | 87.1 | 9.8% | 90.2 | | Total underwriting operations | 13.8% | 86.2 | 8.1% | 91.9 | 13.9% | 86.1 | 10.9% | 89.1 | 9. DIVIDENDS This note summarizes common and preferred share dividends declared and/or paid during the six months ended June 30, 2025 and 2024 Common and Preferred Share Dividends (millions — except per share amounts) | Dividend Type | Declared Date | Payable Date | Per Share | Amount Accrued/Paid | | :-------------------------------- | :------------ | :----------- | :-------- | :------------------ | | Common – Annual-Variable | December 2024 | January 2025 | $4.50 | $2,637 | | Common – Annual-Variable | December 2023 | January 2024 | $0.75 | $439 | | Common – Quarterly | May 2025 | July 2025 | $0.10 | $58 | | Common – Quarterly | March 2025 | April 2025 | $0.10 | $59 | | Common – Quarterly | December 2024 | January 2025 | $0.10 | $58 | | Common – Quarterly | May 2024 | July 2024 | $0.10 | $58 | | Common – Quarterly | March 2024 | April 2024 | $0.10 | $59 | | Common – Quarterly | December 2023 | January 2024 | $0.10 | $59 | - All outstanding Serial Preferred Shares, Series B, were redeemed in February 202476 10. OTHER COMPREHENSIVE INCOME (LOSS) The company reported a significant increase in total other comprehensive income (loss) for the three and six months ended June 30, 2025, primarily driven by net unrealized gains on fixed-maturity investment securities Components of Other Comprehensive Income (Loss) (millions) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Total other comprehensive income (loss) | $429 | $1,328 | | Total net unrealized gains (losses) on securities | $428 | $1,327 | | Net unrealized losses on forecasted transactions | $1 | $1 | | Foreign currency translation adjustment | $0 | $0 | | Balance at June 30, 2025 (after tax) | $(95) | $(95) | - The balance of accumulated other comprehensive income (loss) improved from $(1,423) million at December 31, 2024, to $(95) million at June 30, 202578 11. LITIGATION The company faces various lawsuits, including class actions on total loss claims valuation, with potential material financial impact, though losses are currently deemed reasonably possible but not estimable - Key Litigation Areas: * Class/collective actions alleging improper valuation of total loss claims by applying a negotiation adjustment in Alabama, Arkansas, Colorado, Georgia, Indiana, North Carolina, Ohio, Pennsylvania, and South Carolina * Lawsuits alleging improper calculation of basic economic loss related to wage loss coverage in New York * Lawsuits alleging improper reduction or denial of personal injury protection benefits when medical expenses are paid by health insurance in Arkansas8283 - Losses from these lawsuits are reasonably possible but neither probable nor reasonably estimable, other than for immaterial accruals already established83 OVERVIEW The company achieved substantial year-over-year growth in premiums and policies in force during Q2 2025, driven by strong Personal Lines performance and improved underwriting profitability Key Performance Indicators (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------- | :------ | :------ | :--------- | | Net Premiums Written | $20.1 billion | $17.9 billion | +12% | | Net Premiums Earned | $20.3 billion | $17.2 billion | +18% | | Policies in Force (June 30) | 37.3 million | 32.3 million | +15% | | Underwriting Profit Margin | 13.8% | 8.1% | +5.7 pts | | Net Income | $3,175 million | $1,459 million | +$1,716 million | | Total Capital (June 30) | $39.5 billion | $30.2 billion | +$9.3 billion | - Personal Lines segment experienced strong year-over-year growth in Q2 2025, with net premiums written increasing 15% and policies in force up 16%, primarily driven by personal auto products due to increased advertising, competitive pricing, and agency incentive programs87 - Commercial Lines experienced a 6% decrease in net premiums written in Q2 2025, despite a 6% increase in policies in force, mainly due to changes in policy terms and renewal timing for transportation network company (TNC) business policies88 - In Q2 2025, personal auto rates decreased less than 1%, personal property rates increased about 4%, and core commercial auto rates increased about 3% in aggregate89 - The company anticipates potential higher loss costs and the need for additional rate increases throughout 2025 and 2026 due to the dynamic international trade environment and tariffs90 II. FINANCIAL CONDITION A. Liquidity and Capital Resources Progressive's insurance operations generated strong positive cash flows, with total capital increasing significantly. The company maintains a conservative and liquid investment portfolio, adhering to its debt-to-total capital ratio policy. Capital is returned to shareholders via dividends and share repurchases, and the company has access to additional capital if needed Operating Cash Flows (millions) | Period | Net Cash Provided by Operating Activities | | :----- | :-------------------------------------- | | Six Months Ended June 30, 2025 | $9,183 | | Six Months Ended June 30, 2024 | $7,502 | Total Capital (millions) and Debt-to-Total Capital Ratio (%) | Date | Total Capital (millions) | Debt-to-Total Capital Ratio (%) | | :--- | :----------------------- | :------------------------------ | | June 30, 2025 | $39,500 | 17.5% | | December 31, 2024 | $32,500 | 21.2% | | June 30, 2024 | $30,200 | 22.8% | - The company held $48.9 billion in short-term investments and U.S. Treasury securities at June 30, 2025, representing about 55% of its total portfolio, ensuring sufficient liquidity117 - The Board of Directors approved a new authorization in May 2025 to repurchase up to 25 million common shares, replacing the previous authorization236 - The company may need to pay back profits to Florida personal auto policyholders if its profit for 2023-2025 exceeds the statutory limit, with an estimated exposure to be reasonably estimable by Q4 2025127129 III. RESULTS OF OPERATIONS – UNDERWRITING A. Segment Overview Progressive's underwriting operations are segmented into Personal Lines (primarily personal auto and residential property) and Commercial Lines (primarily core commercial auto and TNC business). Personal auto accounts for about 90% of Personal Lines net premiums written, while core commercial auto accounts for about 80% of Commercial Lines net premiums written - Personal Lines segment primarily focuses on personal auto (about 90% of net premiums written) and personal residential property insurance128 - Commercial Lines segment primarily focuses on core commercial auto products (about 80% of net premiums written) and TNC business (about 15%)132 Companywide Net Premiums Written by Segment (Q2 2025 vs Q2 2024) | Segment | Q2 2025 | Q2 2024 | | :------ | :------ | :------ | | Personal Lines | 88% | 86% | | Commercial Lines | 12% | 14% | | Total | 100% | 100% | B. Profitability Underwriting profit margin significantly increased year-over-year for Q2 2025, driven by a decrease in the loss and LAE ratio due to lower catastrophe losses and favorable prior accident years reserve development. Advertising spend increased, partially offset by lower non-acquisition expenses Underwriting Profit (Loss) (millions) and Margin (%) | Segment | Q2 2025 Profit (millions) | Q2 2025 Margin (%) | Q2 2024 Profit (millions) | Q2 2024 Margin (%) | YTD 2025 Profit (millions) | YTD 2025 Margin (%) | YTD 2024 Profit (millions) | YTD 2024 Margin (%) | | :-------------------- | :------------------------ | :----------------- | :------------------------ | :----------------- | :------------------------- | :------------------ | :------------------------- | :------------------ | | Personal Lines | $2,448 | 14.0% | $1,083 | 7.4% | $4,831 | 14.1% | $3,124 | 11.1% | | Commercial Lines | $364 | 13.2% | $304 | 11.4% | $702 | 12.9% | $513 | 9.8% | | Total underwriting operations | $2,808 | 13.8% | $1,386 | 8.1% | $5,525 | 13.9% | $3,636 | 10.9% | Combined Ratios by Segment (%) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Personal Lines | 86.0% | 92.6% | 85.9% | 88.9% | | Commercial Lines | 86.8% | 88.6% | 87.1% | 90.2% | | Total Underwriting Operations | 86.2% | 91.9% | 86.1% | 89.1% | - The companywide loss and LAE ratio decreased 6.1 points in Q2 2025 YoY and 4.1 points YTD 2025 YoY, primarily due to lower catastrophe losses and favorable prior accident years reserve development93138143 - Advertising spend increased 35% (0.7 points impact on expense ratio) in Q2 2025 YoY and 57% (1.5 points impact) YTD 2025 YoY94139162 Losses and Loss Adjustment Expenses (LAE) Total incurred losses and LAE increased, but the LAE ratio decreased due to lower catastrophe losses and favorable prior accident year reserve development. Personal auto severity increased due to medical costs and litigation, while frequency decreased due to business mix shift and lower miles traveled. Core commercial auto severity increased, and frequency decreased Total Incurred Losses and LAE (millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total incurred losses and LAE | $13,605 | $12,595 | $26,409 | $23,567 | Catastrophe Losses Incurred (millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Personal Lines | $688 | $1,243 | $1,142 | $1,581 | | Commercial Lines | $19 | $26 | $24 | $35 | | Total net catastrophe losses incurred | $707 | $1,269 | $1,166 | $1,616 | - Favorable prior accident years development of $607 million during the first six months of 2025, primarily from personal auto (lower severity/frequency in Florida, lower litigation costs) and personal property (2024 catastrophe events)6667160 Personal Auto Incurred Severity YoY Change (%) | Coverage Type | Q2 2025 | YTD 2025 | | :------------ | :------ | :------- | | Bodily injury | 12% | 10% | | Collision | 1% | 3% | | Personal injury protection | (3)% | (6)% | | Property damage | 4% | 3% | | Total | 6% | 5% | Personal Auto Incurred Frequency YoY Change (%) | Coverage Type | Q2 2025 | YTD 2025 | | :------------ | :------ | :------- | | Bodily injury | (1)% | 0% | | Collision | (6)% | (6)% | | Personal injury protection | (3)% | (2)% | | Property damage | (3)% | (2)% | | Total | (4)% | (3)% | - Core commercial auto products' trailing 12-month incurred severity increased 7% and frequency decreased 8% through Q2 2025152154 Underwriting Expenses The underwriting expense ratio increased due to higher advertising spend, partially offset by a decrease in non-acquisition expenses in the personal vehicle business - Underwriting expense ratio increased 0.4 points in Q2 2025 YoY and 1.1 points YTD 2025 YoY, primarily due to increased advertising spend162 - Non-acquisition expense ratio (NAER) decreased 0.4 points in the personal vehicle business in Q2 2025 YoY, while increasing in personal property and core commercial auto businesses165 C. Growth The company achieved strong growth in net premiums written and earned, and policies in force, companywide. Personal Lines showed significant growth, while Commercial Lines experienced a decrease in net premiums written Net Premiums Written (millions) | Segment | Q2 2025 | Q2 2024 | % Growth Q2 | YTD 2025 | YTD 2024 | % Growth YTD | | :-------------------- | :------ | :------ | :---------- | :------- | :------- | :----------- | | Personal Lines | $17,713 | $15,393 | 15% | $35,986 | $30,607 | 18% | | Commercial Lines | $2,363 | $2,508 | (6)% | $6,296 | $6,256 | 1% | | Total underwriting operations | $20,076 | $17,902 | 12% | $42,282 | $36,864 | 15% | Net Premiums Earned (millions) | Segment | Q2 2025 | Q2 2024 | % Growth Q2 | YTD 2025 | YTD 2024 | % Growth YTD | | :-------------------- | :------ | :------ | :---------- | :------- | :------- | :----------- | | Personal Lines | $17,544 | $14,545 | 21% | $34,254 | $28,136 | 22% | | Commercial Lines | $2,765 | $2,664 | 4% | $5,464 | $5,222 | 5% | | Total underwriting operations | $20,310 | $17,209 | 18% | $39,719 | $33,358 | 19% | Policies in Force (thousands) | Segment | June 30, 2025 | June 30, 2024 | % Growth | | :-------------------- | :------------ | :------------ | :------- | | Personal Lines | 36,126 | 31,192 | 16% | | Commercial Lines | 1,189 | 1,118 | 6% | | Companywide total | 37,315 | 32,310 | 15% | D. Personal Lines Personal Lines saw overall growth in policies and new business applications, primarily in personal auto, though personal property applications declined due to profitability initiatives, and retention measures decreased - Personal auto new and renewal applications increased 8% and 22% respectively in Q2 2025 YoY, driven by increased advertising and market competitiveness98 - Personal property new business applications decreased over 50% in Q2 2025 YoY, due to a focus on improving profitability, reducing exposure in volatile weather-related markets, and prioritizing bundled policies99100 - Average written premium per policy decreased 1% in personal auto and 6% in personal property in Q2 2025 YoY, influenced by rate changes and business mix shifts103 - Trailing 12-month total personal auto policy life expectancy was down 5% YoY, and personal property was down 17% YoY in Q2 2025, attributed to mix shifts, increased shopping, and non-renewals108109 E. Commercial Lines Core commercial auto new application growth was positive in most BMTs, except for-hire transportation. Written premium per policy decreased due to business mix shifts and policy term changes. Policy life expectancy increased in most BMTs, reflecting moderation of rate increases and improved competitiveness - Core commercial auto new application growth was 3% in Q2 2025 YoY, with positive growth in tow, contractor, and business auto BMTs, but a decline in for-hire transportation due to challenging freight market conditions102187 - Core commercial auto written premium per policy decreased 6% in Q2 2025 YoY, primarily due to decreased demand in for-hire transportation/specialty BMTs and a shift to 6-month policies in contractor and business auto BMTs105188 - Core commercial auto trailing 12-month policy life expectancy increased 5% YoY, attributed to the moderation of rate increases compared to competitors and various initiatives like payment and renewal reminders110189 IV. RESULTS OF OPERATIONS – INVESTMENTS A. Investment Results The investment portfolio's fair value increased significantly. Recurring investment income book yield increased due to investing in higher coupon rate securities. FTE total return for the total portfolio, fixed-income, and common stock portfolios all increased year-over-year for Q2 2025 Investment Portfolio Fair Value (millions) | Date | Fair Value | | :--- | :--------- | | June 30, 2025 | $88,610 | | December 31, 2024 | $80,250 | Pretax Recurring Investment Book Yield (Annualized) (%) | Period | 2025 | 2024 | | :----- | :--- | :--- | | Three Months | 4.2% | 3.9% | | Six Months | 4.2% | 3.8% | FTE Total Return (%) | Portfolio | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Fixed-income securities | 1.7% | 0.8% | 4.3% | 1.2% | | Common stocks | 10.9% | 3.6% | 5.3% | 13.8% | | Total portfolio | 2.1% | 0.9% | 4.3% | 1.7% | B. Portfolio Allocation The investment portfolio maintains a conservative allocation with a high percentage in fixed-income securities and a weighted average credit quality of AA-. Duration increased slightly. Unrealized losses on fixed-maturity securities decreased significantly due to valuation increases across various sectors Portfolio Composition (June 30, 2025) | Security Type | Fair Value (millions) | % of Total Portfolio | Duration (years) | Average Rating | | :-------------------- | :-------------------- | :------------------- | :--------------- | :------------- | | Fixed-income securities | $84,875 | 95.8% | 3.4 | AA | | Common equities | $3,735 | 4.2% | na | na | | Total portfolio | $88,610 | 100.0% | 3.4 | AA | - The fixed-income portfolio had a weighted average credit quality of AA- at June 30, 2025, and a duration of 3.4 years, within the acceptable range of 1.5 to 5.0 years114202203 - Total after-tax net unrealized losses on the fixed-maturity portfolio decreased to $0.1 billion at June 30, 2025, from $1.7 billion at June 30, 2024, due to valuation increases across all fixed-maturity sectors196 Fixed-Income Securities The fixed-income portfolio is managed internally with a focus on interest rate risk (duration), credit risk (maintaining an A minimum weighted average rating), concentration risk, prepayment and extension risk, and liquidity risk. The portfolio remains highly liquid - The fixed-income portfolio's duration was 3.4 years at June 30, 2025, within the acceptable range of 1.5 to 5.0 years202 - The weighted average credit quality rating for the fixed-income portfolio was AA- at June 30, 2025203 - The overall portfolio remains very liquid, with approximately $3.8 billion (10%) of principal repayment expected from the fixed-income portfolio during the remainder of 2025205 Asset-Backed Securities The asset-backed securities portfolio, comprising residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and other asset-backed securities (OABS), showed an increase in RMBS exposure in high-quality investment-grade securities, stable CMBS allocation with no delinquencies, and selective additions to OABS in highly rated debt tranches Asset-Backed Securities Composition (June 30, 2025) | Type | Fair Value (millions) | Net Unrealized Gains (Losses) (millions) | % of Asset Backed Securities | Duration (years) | Average Rating | | :-------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------- | :--------------- | :------------- | | Residential mortgage-backed securities | $2,660 | $14 | 18.5% | 2.5 | AA+ | | Commercial mortgage-backed securities | $5,049 | $(276) | 35.2% | 1.6 | AA | | Other asset-backed securities | $6,650 | $(18) | 46.3% | 1.1 | AA | | Total asset-backed securities | $14,359 | $(280) | 100.0% | 1.6 | AA | - The RMBS portfolio increased exposure through purchases of high-quality investment-grade securities in Q2 2025209 - CMBS allocation remained relatively stable, with a focus on high-quality securities in sectors like apartments, grocery-anchored shopping centers, logistics, and self-storage; no delinquencies were reported at June 30, 2025210 - The OABS portfolio selectively added securities in the automobile and equipment categories, predominantly in highly rated, senior, and short-tenor debt tranches213 State and Local Government Obligations The municipal securities portfolio, composed of general obligations and revenue bonds, saw credit spreads widen and then tighten in Q2 2025, with selective additions of short-duration bonds State and Local Government Obligations (June 30, 2025, millions) | Average Rating | General Obligations | Revenue Bonds | Total | | :------------- | :------------------ | :------------ | :---- | | AAA | $728 | $514 | $1,242 | | AA | $538 | $1,028 | $1,566 | | A | $0 | $156 | $156 | | Total fair value | $1,266 | $1,698 | $2,964 | - Municipal bond credit spreads widened at the beginning of Q2 2025 but tightened by quarter-end; short-duration bonds were selectively added to the portfolio216 Corporate and Other Debt Securities The corporate and other debt portfolio increased in size and saw a slight increase in duration, with selective additions of securities during periods of attractive credit spreads Corporate and Other Debt Securities (June 30, 2025, millions) | Average Rating | Consumer | Industrial | Communication | Financial Services | Technology | Basic Materials | Energy | Total | | :------------- | :------- | :--------- | :------------ | :----------------- | :--------- | :-------------- | :----- | :---- | | AAA | $38 | $0 | $0 | $0 | $0 | $0 | $32 | $70 | | AA | $93 | $0 | $0 | $1,041 | $0 | $0 | $44 | $1,178 | | A | $810 | $512 | $165 | $2,945 | $60 | $148 | $566 | $5,206 | | BBB | $3,824 | $1,695 | $393 | $2,176 | $1,590 | $85 | $1,447 | $11,210 | | Non-investment grade/non-rated | $298 | $74 | $60 | $2 | $11 | $7 | $6 | $458 | | Total fair value | $5,063 | $2,281 | $618 | $6,164 | $1,661 | $240 | $2,095 | $18,122 | - The corporate and other debt portfolio increased to $18.1 billion at June 30, 2025, from $16.0 billion at March 31, 2025, with its duration increasing slightly to 2.8 years217 Nonredeemable Preferred Stocks The nonredeemable preferred stock portfolio experienced a slight decrease in fair value due to calls during the quarter. The majority of these securities have fixed-rate dividends until a call date, then convert to floating-rate, and all are expected to pay dividends in full and on time Nonredeemable Preferred Stocks by Sector and Rating (June 30, 2025, millions) | Average Rating | U.S. Banks | Foreign Banks | Insurance | Other Financial | Industrials | Utilities | Total | | :------------- | :--------- | :------------ | :-------- | :-------------- | :---------- | :-------- | :---- | | BBB | $226 | $14 | $64 | $32 | $0 | $39 | $375 | | Non-investment grade/non-rated | $65 | $0 | $20 | $23 | $17 | $0 | $125 | | Total fair value | $291 | $14 | $84 | $55 | $17 | $39 | $500 | - The nonredeemable preferred stock portfolio fair value slightly decreased to $0.5 billion at June 30, 2025, from $0.6 billion at March 31, 2025, primarily due to calls during the quarter221 - Approximately 97% of nonredeemable preferred stocks pay dividends with tax preferential characteristics, and all are expected to pay their dividends in full and on time220 Common Equities The common equities portfolio primarily consists of individual holdings selected based on their correlation with the Russell 1000 Index, with GAAP income total return within the targeted tracking error for the year-to-date period Common Equities Composition (millions) | Type | June 30, 2025 | % of Total Common Equities | | :-------------------- | :-------------- | :------------------------- | | Common stocks | $3,703 | 99.1% | | Other risk investments | $32 | 0.9% | | Total common equities | $3,735 | 100.0% | - The company held 685 out of 1,015 (67%) of the common stocks comprising the Russell 1000 Index at June 30, 2025, making up 93% of the index's total market capitalization222 Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 This cautionary statement outlines various risks and uncertainties that could cause actual results to differ materially from forward-looking statements, which are not guarantees of future performance - Key Risks and Uncertainties: * Ability to underwrite and price risks accurately and charge adequate rates * Ability to establish accurate loss reserves * Impact of severe weather, catastrophe events, and climate change * Effectiveness and availability of reinsurance programs * Secure and uninterrupted operation of critical systems * Impacts of security breaches or cyberattacks * Ability to maintain a recognized brand and reputation * Effectiveness of innovation and response to competitors * Management of complexity in product development and customer experience * Highly competitive nature of property-casualty insurance markets * Accuracy of claims adjustment * Compliance with complex and changing laws and regulations * Impact of misconduct or fraudulent acts * Ability to attract, develop, and retain talent * Litigation challenging business practices * Success of business strategy and new product/market entry * Impact of intellectual property rights * Success of new technology development and use * Performance of investment portfolios * Impact of ESG and public policy matters on investment returns * Ability to access cash and convert investments to cash * Risk of non-performance by significant contract parties * Legal restrictions on insurance subsidiaries' dividend payments * Ability to obtain capital when necessary * Evaluations and ratings by credit rating agencies * Variable nature of common share dividend policy * Returns from tax-advantaged projects * Impact of not managing to short-term earnings expectations * Impacts of epidemics, pandemics, or other widespread health risks226 - The company undertakes no obligation to update any forward-looking statements, except as required by applicable law224 Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section provides quantitative and qualitative disclosures about market risk, specifically interest rate risk and equity market risk, noting no material impact compared to the prior annual report - The duration of financial instruments subject to interest rate risk was 3.4 years at June 30, 2025227 - The weighted average beta of the equity portfolio was 1.1 at June 30, 2025227 - No material impact has been experienced when compared to the tabular presentations of interest rate and market risk sensitive instruments in the 2024 Annual Report on Form 10-K227 Item 4. Controls and Procedures. Management, including the Chief Executive Officer and Chief Financial Officer, reviewed and evaluated the company's disclosure controls and procedures, concluding they were effective as of the end of the reporting period. There have been no material changes in internal control over financial reporting - Disclosure controls and procedures were effectively serving their stated purposes as of June 30, 2025229 - There have been no material changes in internal control over financial reporting during the most recent fiscal quarter230 PART II—OTHER INFORMATION Item 1. Legal Proceedings. This section incorporates by reference the discussion of legal proceedings from Note 11 to the consolidated financial statements - Discussion of legal proceedings is incorporated by reference from Note 11 – Litigation to the consolidated financial statements233 Item 1A. Risk Factors. This section states that there have been no material changes in the risk factors from those discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes in risk factors from those discussed in the 2024 Annual Report on Form 10-K234 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. This section details the company's common share repurchases during the second quarter of 2025 and the Board of Directors' approval of a new authorization to repurchase up to 25 million common shares Issuer Purchases of Equity Securities (Q2 2025) | 2025 Calendar Month | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------ | :------------------------------- | :--------------------------- | | April | 9,183 | $267.93 | | May – prior authorization | 6,000 | $282.61 | | May – current authorization | 15,795 | $280.87 | | June | 14,367 | $272.33 | | Total | 45,345 | $275.78 | - In May 2025, the Board of Directors approved an authorization for the company to repurchase up to 25 million common shares, terminating the previous authorization236 Item 5. Other Information. This section states that no director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the second quarter of 2025, and references the CEO's quarterly letter to shareholders - No director or executive officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025238 Item 6. Exhibits. This section provides an index of all exhibits filed with the Quarterly Report on Form 10-Q, including certifications, the CEO's letter to shareholders, and XBRL documents - The exhibit index lists various documents filed, including certifications (Rule 13a-14(a)/15d-14(a) and Section 1350), the CEO's letter to shareholders, and XBRL interactive data files240245
Progressive(PGR) - 2025 Q2 - Quarterly Report