Core Viewpoint - Progressive Corporation reported strong Q2 2025 earnings, with significant year-over-year growth in both earnings per share and revenues, driven by higher premiums and investment income [2][3]. Financial Performance - Q2 2025 earnings per share reached $4.88, exceeding the Zacks Consensus Estimate by 10.1% and reflecting an 84.1% increase year over year [2]. - Net premiums written were $20 billion, a 12% increase from $17.9 billion in the previous year, while net premiums earned grew 18% to $20.3 billion, surpassing the Zacks Consensus Estimate of $20.1 billion [3]. - Operating revenues rose 19.5% year over year to $42.2 billion, driven by a 19% increase in net premiums earned and a 29.3% rise in net investment income [3]. Expense Analysis - Total expenses increased by 15.1% to $35.2 billion, influenced by a 12% rise in losses and loss adjustment expenses and a 31.5% surge in other underwriting expenses [4]. - The combined ratio improved by 570 basis points to 86.2, indicating better efficiency in claims and expenses management [4]. Policy Growth - Policies in force in the Personal Lines segment increased by 16% year over year to 36.1 million, with notable growth in both Agency Auto (16% increase) and Direct Auto (21% increase) segments [5]. Financial Health - As of June 30, 2025, Progressive's book value per share was $55.62, a 39.5% increase from $39.85 a year earlier, and return on equity improved to 43.6% from 40.2% [6]. - The total debt-to-total capital ratio improved by 530 basis points to 17.5, indicating a stronger balance sheet [6]. Market Sentiment - Recent estimates for Progressive have shown an upward trend, suggesting positive investor sentiment and expectations for future performance [7][9]. - The stock holds a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [9]. Investment Scores - Progressive has a Growth Score of B and a Value Score of B, placing it in the top 40% for value investors, although it lags in Momentum Score with an F [8].

Core Insights - Progressive Corporation (PGR) is a technology-driven leader in the insurance industry, focusing on innovation to streamline operations, enhance customer service, and maintain competitive pricing [1] - The company is investing in generative AI to refine policy pricing and identify new growth opportunities, particularly through its Snapshot telematics program [1][7] - The U.S. auto insurance industry is expected to grow due to increased awareness, technological advancements, and evolving car ownership trends, positioning Progressive favorably for long-term growth [3] Company Overview - Progressive utilizes advanced digital platforms that allow customers to manage policies, file claims, and obtain quotes seamlessly, appealing to younger, tech-oriented customers [2] - The company employs predictive analytics in claims management to accelerate processing, enhance fraud detection, and improve customer satisfaction [2][7] - PGR's Snapshot program enhances risk segmentation and profitability by using driving behavior data [7] Competitive Landscape - Travelers Companies (TRV) invests over $1 billion annually in technology to improve underwriting, claims, and customer service, reinforcing its competitive edge [4] - Allstate Corporation (ALL) also leverages AI and telematics to refine underwriting and enhance customer engagement through digital tools [5] Financial Performance - PGR shares have gained 2.7% year to date, underperforming the industry [6] - The company has a price-to-book value ratio of 4.37, significantly above the industry average of 1.43, but holds a Value Score of B [8] - Recent estimates for PGR's EPS for the third and fourth quarters of 2025 have increased by 5.3% and 2.9%, respectively, indicating positive momentum [9] Revenue and EPS Estimates - The consensus estimates for PGR's 2025 revenues and EPS indicate year-over-year increases, while the 2026 EPS is expected to decline [10]

Core Insights - Progressive Insurance has demonstrated exceptional stock performance, averaging annual gains of 24% over the past decade, significantly outperforming the S&P 500's 12.5% [2] - A $1,000 investment in Progressive shares would have grown to approximately $10,073, with reinvested dividends yielding an average annual gain of 26% [2] - The company has a technological advantage, having utilized telematics for driver data collection for over 15 years, contributing to its profitability [4] Company Performance - Progressive has surpassed GEICO in market share as of 2023, indicating strong competitive positioning in the insurance industry [4] - The company's recent forward-looking price-to-earnings (P/E) ratio is 15, which is below its five-year average of 19, suggesting potential undervaluation [4] - Progressive offers a growing dividend, with a recent yield of 2%, enhancing its attractiveness to investors [4] Industry Context - The insurance industry is generally resistant to economic downturns and tariffs, making it a stable investment option [4] - Despite the perception that insurance is not an exciting sector, it remains essential for individuals and businesses, ensuring consistent demand [4]

Core Insights - Investment income is a significant yet often understated contributor to Progressive Corporation's growth, complementing its disciplined underwriting and premium expansion strategies [1][2] - In 2024, Progressive's investment portfolio reached $80.3 billion, with 94.6% allocated to fixed-income assets, which played a crucial role in supporting net income growth [2][9] - Interest rate trends are pivotal for Progressive's investment performance, with current elevated rates enhancing reinvestment yields, although future rate cuts may impact this momentum [3][9] Investment Performance - Progressive's investment income saw a 29% year-to-date increase, driven by higher-coupon reinvestments and $175 million in gains from securities [2][9] - The company’s investment strategy focuses heavily on fixed-income securities, ensuring predictable cash flows to meet claims obligations [1][2] Peer Comparison - Travelers Companies has a similar investment strategy with a 94% allocation to fixed maturities, projecting after-tax income of $770 million in Q3 and $805 million in Q4 2025 [4] - Chubb Limited also reports strong investment results, with an 80% allocation to fixed maturities, expecting quarterly adjusted net investment income between $1.72 billion and $1.74 billion for Q3 2025 [5] Stock Performance - Progressive's shares have gained 2.4% year-to-date, aligning with industry performance [8] - The company trades at a price-to-book value ratio of 4.41, significantly above the industry average of 1.5, but holds a Value Score of B [10] Earnings Estimates - The Zacks Consensus Estimate for Progressive's EPS has increased by 5.3% and 2.9% for the second and third quarters of 2025, respectively, with full-year estimates for 2025 and 2026 also showing upward movement [12][13]

Industry Overview - The U.S. auto insurance market is projected to reach $349.37 billion by 2025, with an average spending per capita of $1,020 [1] - The average cost of full coverage car insurance is expected to reach a record high of $2,101 per year [1] - Growth in the auto insurance industry is driven by increased awareness, technological advancements, evolving car ownership trends, rising costs, and the emergence of online platforms [2] Company Analysis: Progressive Corporation (PGR) - PGR is one of the largest auto insurance groups in the U.S., leading in motorcycle and boat policies, commercial auto insurance, and ranking among the top 15 homeowners carriers [3][4] - Personal auto insurance contributes about 90% to Personal Lines net premiums written and 75% of total company premiums, significantly impacting profitability [4] - The Personal Auto segment is expected to grow due to rate increases, higher new applications, increased advertising, and a strong independent agents' network [5] - PGR's Snapshot program enhances personalized pricing, improving customer retention and policy life expectancy [6] - PGR has maintained an average combined ratio under 93% over the past decade, outperforming the industry average of over 100% [7] - The company has shown continuous improvement in net margin, expanding by 950 basis points in the last two years [8] - PGR's return on equity (ROE) stands at 35.4%, significantly higher than the industry average of 7.8% [10][11] - The Zacks Consensus Estimate for PGR's 2025 revenues and EPS implies a year-over-year increase of 16.5% and 24.4%, respectively [17] Company Analysis: Berkshire Hathaway Inc. (BRK.B) - BRK.B is a diversified conglomerate with over 90 subsidiaries, with insurance being the most prominent segment, contributing approximately one-fourth of total revenues [12] - GEICO, a key part of BRK.B's insurance operations, has faced market share pressure but is investing in telematics and technology to regain competitiveness [14] - BRK.B's net margin has improved by 1,650 basis points in the last two years, with a strong cash position of over $100 billion [16] - The Zacks Consensus Estimate for BRK.B's 2025 revenues implies a year-over-year increase of 8.5%, while EPS indicates a decline of 6.7% [19] Comparative Analysis - PGR's solid cash flow supports continuous investment in growth initiatives, enhancing margins and lowering leverage [11] - PGR's price-to-book multiple is 4.37, below its five-year median of 5.37, while BRK.B's price-to-book multiple is 1.53, above its median of 1.48 [20] - PGR has a VGM Score of A and a Zacks Rank of 2 (Buy), while BRK.B has a VGM Score of D and a Zacks Rank of 3 (Hold) [23]

Financial Data and Key Metrics Changes - The company reported strong profitability in Q2 2025, adding over $5 billion in written premiums and nearly 2.4 million additional policies in force compared to the first half of the previous year [4][6][8] - Progressive gained more than 1.5 points in personal auto market share in 2024, outperforming the industry combined ratio by over seven points [6][8] - Year-to-date marketing spend reached $2.5 billion, an increase of approximately $900 million compared to the same period last year [9] Business Line Data and Key Metrics Changes - The Personal Lines segment saw strong demand, with double-digit growth in new applications, written premiums, and policies in force [8][9] - The Commercial Lines business also experienced rapid market share growth while consistently beating industry combined ratios by significant margins [9][10] - The company has focused on commercial auto as a core line of business, which has allowed it to capitalize on market opportunities [10][11] Market Data and Key Metrics Changes - The independent agent channel serves as a barometer for the competitive environment, with Progressive's products outperforming relative to competitors [8] - The company noted that the competitive landscape has intensified, yet demand for personal auto products remains strong across distribution channels [8][9] Company Strategy and Development Direction - Progressive's strategy focuses on achieving profitable growth through a combination of competitive pricing, product breadth, and strong brand presence [7][8] - The company aims to become the number one destination for consumers and agents for insurance and financial needs, leveraging its underwriting profit performance to drive growth [7][8] - The management emphasized the importance of quickly responding to changes in loss costs and market conditions to maintain profitability [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by increased competition but expressed confidence in the company's ability to maintain strong performance [8][9] - The company is closely monitoring the impact of macroeconomic factors, such as tariffs and supply chain disruptions, on future pricing and loss costs [12][66] - Management highlighted the effectiveness of their pricing strategy and the importance of rapid rate adjustments in response to market changes [68] Other Important Information - The company has a robust data set that enhances its credibility and ability to react to changes in the environment [46][68] - Progressive's combined ratio results indicate a quicker response to increasing costs compared to industry peers, contributing to its outperformance [68] Q&A Session Summary Question: On quote volume growth and agency quote volume - Management noted that direct quote volume growth reflects increased advertising, while agency quote volume has not accelerated at the same rate due to differences in offerings [71][72] Question: On Florida's refund related to excess profitability and pricing - Management confirmed that they have reduced rates in Florida twice in the past year and are monitoring profits closely due to the state's excess profit statute [74][75] Question: On policy life expectancy for personal auto - Management explained that the decline in policy life expectancy is due to a shift in business mix and increased shopping behavior in a hard market [80][81] Question: On tariffs and pricing strategy - Management indicated that uncertainty around tariffs has led to a conservative approach in pricing, but they are looking to grow aggressively where possible [85]

Financial Data and Key Metrics Changes - The company reported strong profitability and growth, adding over $5 billion in premiums written and nearly 2.4 million additional policies in force (PIFs) compared to the first half of the previous year [3][4] - Progressive gained more than 1.5 points in personal auto market share in 2024, outperforming the industry combined ratio by over seven points [4][5] - Year-to-date marketing spend reached $2.5 billion, an increase of approximately $900 million compared to the same period last year [8] Business Line Data and Key Metrics Changes - The Personal Lines business saw strong demand, with double-digit growth in new applications, premiums written, and policies in force [6][7] - The Commercial Lines business also experienced rapid market share growth while consistently beating industry combined ratios by significant margins [8][9] - The company has focused on commercial auto as a core line of business, which has allowed it to capitalize on market opportunities [9][10] Market Data and Key Metrics Changes - The independent agent channel serves as a barometer for the competitive environment, indicating that Progressive's auto products continue to outperform relative to competitors [6][7] - The company noted that the U.S. Commercial Auto market continues to struggle with profitability, marking its fourteenth consecutive unprofitable year in 2024 [9] Company Strategy and Development Direction - Progressive's strategy is centered around four pillars: people and culture, product breadth, brand, and competitive pricing [5] - The company aims to become the number one destination for consumers, agents, and business owners for insurance and financial needs [5] - The management emphasized the importance of quickly responding to changes in loss costs to maintain profitability amid inflationary pressures [10][70] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased competition but noted strong demand for personal auto products [6][7] - The company is closely monitoring the impact of global tariffs and potential supply chain disruptions on future rate levels [10][11] - Management expressed confidence in their pricing team's ability to adapt to changing market conditions and maintain a combined ratio at or below 96 [70] Other Important Information - The company has implemented significant rate changes in Florida, reducing rates twice in the past year due to improved loss costs following insurance reforms [78][79] - Progressive's internal estimates regarding excess profits in Florida are subject to change, especially with the upcoming hurricane season [79][80] Q&A Session Summary Question: Quote volume growth and agency quote volume - Management noted that direct quote volume growth reflects increased advertising, while agency quote volume has not accelerated at the same rate due to differences in offerings [74][76] Question: Florida refund related to excess profitability - Management confirmed that they are monitoring profits closely and will comply with the excess profit statute if profits exceed statutory limits [78][79] Question: Policy life expectancy decline - Management explained that the decline in personal auto policy life expectancy is due to a shift towards a more preferred business mix and increased shopping behavior in a hard market [84][86] Question: Impact of tariffs on pricing - Management indicated that uncertainty around tariffs has led to conservative pricing strategies, but they are prepared to grow aggressively if conditions allow [89][90]

Investor Relations Pricing Theory 2025 Q 2 and Practice 1 • our ability to underwrite and price risks accurately and to charge adequate rates to policyholders; • our ability to establish accurate loss reserves; • the impact of severe weather, other catastrophe events and climate change; • the effectiveness of our reinsurance programs and the continued availability of reinsurance and performance by reinsurers; • the secure and uninterrupted operation of the systems, facilities and business functions and the ...

Core Viewpoint - Investors in the Insurance - Property and Casualty sector should consider Progressive (PGR) and Kinsale Capital Group, Inc. (KNSL) for potential undervalued stock opportunities [1] Group 1: Company Rankings and Performance - Progressive has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to Kinsale Capital Group, which has a Zacks Rank of 3 (Hold) [3] - PGR has experienced a more significant improvement in its earnings outlook than KNSL recently [3] Group 2: Valuation Metrics - PGR has a forward P/E ratio of 13.79, while KNSL has a forward P/E of 24.49, suggesting PGR is more attractively valued [5] - The PEG ratio for PGR is 1.44, compared to KNSL's PEG ratio of 1.65, indicating PGR's expected earnings growth is more favorable [5] - PGR's P/B ratio is 4.33, while KNSL's P/B ratio is 6.01, further supporting PGR's valuation advantage [6] Group 3: Value Grades - PGR has a Value grade of B, while KNSL has a Value grade of D, reflecting PGR's stronger valuation metrics [6] - Overall, PGR's stronger estimate revision activity and more attractive valuation metrics suggest it is the superior option for value investors at this time [7]

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements.](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents unaudited consolidated financial statements and detailed notes on reporting, investments, debt, taxes, and segment performance [Consolidated Statements of Comprehensive Income](index=3&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) 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](index=4&type=section&id=Consolidated%20Balance%20Sheets) 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](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) 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 2024[6](index=6&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) 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](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) 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](index=7&type=section&id=1.%20BASIS%20OF%20REPORTING%20AND%20ACCOUNTING) 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 operations[17](index=17&type=chunk) [2. INVESTMENTS](index=8&type=section&id=2.%20INVESTMENTS) 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, 2025[25](index=25&type=chunk)[28](index=28&type=chunk) 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 securities[33](index=33&type=chunk) [3. FAIR VALUE](index=14&type=section&id=3.%20FAIR%20VALUE) 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, 2025[39](index=39&type=chunk)[40](index=40&type=chunk) - 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 income[52](index=52&type=chunk)[56](index=56&type=chunk) [4. DEBT](index=22&type=section&id=4.%20DEBT) 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 periods[61](index=61&type=chunk) [5. INCOME TAXES](index=22&type=section&id=5.%20INCOME%20TAXES) 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 2025[62](index=62&type=chunk) - Net current income taxes recoverable were **$115 million** at June 30, 2025, compared to net current income taxes payable in prior periods[64](index=64&type=chunk) [6. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES](index=23&type=section&id=6.%20LOSS%20AND%20LOSS%20ADJUSTMENT%20EXPENSE%20RESERVES) 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 2024[66](index=66&type=chunk) - **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 business[67](index=67&type=chunk) [7. SUPPLEMENTAL CASH FLOW INFORMATION](index=24&type=section&id=7.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) 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 claims[68](index=68&type=chunk) [8. SEGMENT INFORMATION](index=24&type=section&id=8.%20SEGMENT%20INFORMATION) 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](index=27&type=section&id=9.%20DIVIDENDS) 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 2024[76](index=76&type=chunk) [10. OTHER COMPREHENSIVE INCOME (LOSS)](index=28&type=section&id=10.%20OTHER%20COMPREHENSIVE%20INCOME%20(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, 2025[78](index=78&type=chunk) [11. LITIGATION](index=30&type=section&id=11.%20LITIGATION) 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 Arkansas[82](index=82&type=chunk)[83](index=83&type=chunk) - Losses from these lawsuits are reasonably possible but neither probable nor reasonably estimable, other than for immaterial accruals already established[83](index=83&type=chunk) [OVERVIEW](index=31&type=section&id=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 programs[87](index=87&type=chunk) - 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 policies[88](index=88&type=chunk) - 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 aggregate[89](index=89&type=chunk) - 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 tariffs[90](index=90&type=chunk) II. FINANCIAL CONDITION [A. Liquidity and Capital Resources](index=34&type=section&id=A.%20Liquidity%20and%20Capital%20Resources) 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 liquidity[117](index=117&type=chunk) - The Board of Directors approved a new authorization in May 2025 to repurchase up to **25 million** common shares, replacing the previous authorization[236](index=236&type=chunk) - 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 2025[127](index=127&type=chunk)[129](index=129&type=chunk) III. RESULTS OF OPERATIONS – UNDERWRITING [A. Segment Overview](index=35&type=section&id=A.%20Segment%20Overview) 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 insurance[128](index=128&type=chunk) - Commercial Lines segment primarily focuses on core commercial auto products (about **80%** of net premiums written) and TNC business (about **15%**)[132](index=132&type=chunk) 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](index=36&type=section&id=B.%20Profitability) 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 development[93](index=93&type=chunk)[138](index=138&type=chunk)[143](index=143&type=chunk) - Advertising spend increased **35%** (**0.7 points** impact on expense ratio) in Q2 2025 YoY and **57%** (**1.5 points** impact) YTD 2025 YoY[94](index=94&type=chunk)[139](index=139&type=chunk)[162](index=162&type=chunk) [Losses and Loss Adjustment Expenses (LAE)](index=38&type=section&id=Losses%20and%20Loss%20Adjustment%20Expenses%20(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)[66](index=66&type=chunk)[67](index=67&type=chunk)[160](index=160&type=chunk) 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 2025[152](index=152&type=chunk)[154](index=154&type=chunk) [Underwriting Expenses](index=40&type=section&id=Underwriting%20Expenses) 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 spend[162](index=162&type=chunk) - 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 businesses[165](index=165&type=chunk) [C. Growth](index=41&type=section&id=C.%20Growth) 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](index=42&type=section&id=D.%20Personal%20Lines) 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 competitiveness[98](index=98&type=chunk) - 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 policies[99](index=99&type=chunk)[100](index=100&type=chunk) - 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 shifts[103](index=103&type=chunk) - 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-renewals[108](index=108&type=chunk)[109](index=109&type=chunk) [E. Commercial Lines](index=44&type=section&id=E.%20Commercial%20Lines) 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 conditions[102](index=102&type=chunk)[187](index=187&type=chunk) - 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 BMTs[105](index=105&type=chunk)[188](index=188&type=chunk) - 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 reminders[110](index=110&type=chunk)[189](index=189&type=chunk) IV. RESULTS OF OPERATIONS – INVESTMENTS [A. Investment Results](index=45&type=section&id=A.%20Investment%20Results) 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](index=46&type=section&id=B.%20Portfolio%20Allocation) 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 years**[114](index=114&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - 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 sectors[196](index=196&type=chunk) [Fixed-Income Securities](index=48&type=section&id=Fixed-Income%20Securities) 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 years**[202](index=202&type=chunk) - The weighted average credit quality rating for the fixed-income portfolio was **AA-** at June 30, 2025[203](index=203&type=chunk) - 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 2025[205](index=205&type=chunk) [Asset-Backed Securities](index=49&type=section&id=Asset-Backed%20Securities) 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 2025[209](index=209&type=chunk) - 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, 2025[210](index=210&type=chunk) - The OABS portfolio selectively added securities in the automobile and equipment categories, predominantly in highly rated, senior, and short-tenor debt tranches[213](index=213&type=chunk) [State and Local Government Obligations](index=52&type=section&id=State%20and%20Local%20Government%20Obligations) 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 portfolio[216](index=216&type=chunk) [Corporate and Other Debt Securities](index=52&type=section&id=Corporate%20and%20Other%20Debt%20Securities) 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 years**[217](index=217&type=chunk) [Nonredeemable Preferred Stocks](index=52&type=section&id=Nonredeemable%20Preferred%20Stocks) 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 quarter[221](index=221&type=chunk) - Approximately **97%** of nonredeemable preferred stocks pay dividends with tax preferential characteristics, and all are expected to pay their dividends in full and on time[220](index=220&type=chunk) [Common Equities](index=53&type=section&id=Common%20Equities) 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 capitalization[222](index=222&type=chunk) [Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995](index=54&type=section&id=Safe%20Harbor%20Statement%20Under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) 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 risks[226](index=226&type=chunk) - The company undertakes no obligation to update any forward-looking statements, except as required by applicable law[224](index=224&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) 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, 2025[227](index=227&type=chunk) - The weighted average beta of the equity portfolio was **1.1** at June 30, 2025[227](index=227&type=chunk) - 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-K[227](index=227&type=chunk) [Item 4. Controls and Procedures.](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures.) 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, 2025[229](index=229&type=chunk) - There have been no material changes in internal control over financial reporting during the most recent fiscal quarter[230](index=230&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings.](index=56&type=section&id=Item%201.%20Legal%20Proceedings.) 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 statements[233](index=233&type=chunk) [Item 1A. Risk Factors.](index=56&type=section&id=Item%201A.%20Risk%20Factors.) 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-K[234](index=234&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) 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 authorization[236](index=236&type=chunk) [Item 5. Other Information.](index=56&type=section&id=Item%205.%20Other%20Information.) 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 2025[238](index=238&type=chunk) [Item 6. Exhibits.](index=56&type=section&id=Item%206.%20Exhibits.) 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 files[240](index=240&type=chunk)[245](index=245&type=chunk)