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Bryan Mathews


									                                          Page 1                                 6/25/2012

                                    Progressive Corporation
                                        By: Bryan Mathews

Company Background
Progressive Corporation is an insurance holding company founded in 1937 by Joseph Lewis and
Jack Green. Progressive Corporation is located in Mayfield Village Ohio and was incorporated
in February of 1965 in the state of Ohio. They are a part of the property and casualty insurance
industry and focus primarily on personal auto insurance.
         “Progressive has 67 subsidiaries and 1 mutual insurance company affiliate. The
        Company’s property-casualty insurance products protect its customers against collision
        and physical damage to their motor vehicles, uninsured and underinsured bodily injury,
        and liability to others for personal injury or property damage arising out of the use of
        those vehicles. Progressive’s non-insurance subsidiaries support its insurance and
        investment operations.”1
Progressive’s line of products includes personal insurance on automobiles, RV’s, motorcycles,
boats, snowmobiles and Segways®, in addition Progressive also offers homeowners and renters
insurance. Progressive has followed the ideology of approaching auto insurance in an innovative
way since its conception by its. Throughout the years Progressive has focused on its innovative
business practices and in recent years has applied that innovation toward becoming a leader in
the industry with regards to information technology. Some of Progressives innovations in the
last 20 years have been its Immediate Response® claims service in 1990, the Immediate
Response® claims vehicle in 1994 and 1-800-AUTO-PRO an auto insurance claims comparison
line before the internet provided any of these features.2 It has been through innovative ideas such
as these and more that Progressive has been able to succeed as a company for 70 years.
Progressive is currently the number three auto insurance group in the United States thanks to an
average growth rate of 17% from 1996 to 20052. Through the millennium Progressive Corp. has
continued to grow and be a leader in technology innovation within the auto insurance industry.

Financial Summary as of 10/16/2007

Stock Price:          $19.70
EPS:                  1.81
P/E Ratio:            10.96
Market Cap:           14,337M
# of Shareholders:    3,927
Net Income:           1,647M
Total Assets:         19,482M
Total Liabilities:    12,635M

Progressive has grown substantially over the past 20 years in 1996 Progressive was a $3.4
billion dollar company and by 2006 Progressive has grown into a $14 billion dollar company.
They have continued to pay dividends for the past 35 years to their shareholders and have shown
a consistent return on investment. The following graph shows the change in stock price of
Progressive (blue line) with comparisons to the S&P 500(red), Allstate Financial(Orange) and
Nationwide Financial Services(Green) for the time period April 18,1997 to Oct 15 2007.
                                              Page 2                             6/25/2012

Clearly Progressive has seen growth outpacing its competitors over the past decade. Although
its competitors have grown at a consistent pace and Progressive has seen some spikes in its stock
price, it continues to outpace the market and its competitors.

Key Ratios:
RoE%:                                24.06%
RoA%:                                8.46%
Gross Margin:                        0.017
Total Debt/Equity:                   0.17
Long Term Debt to Assets:            0.06
Revenues/Total Assets:               0.76
Numbers are from

        Progressive has shown a high return on equity for its shareholders over the years as well
as an average return on assets. They have a very low gross margin which is indicative of the
industry and not the company. They also have a very low debt to equity ratio which shows that
they have not leveraged their recent growth with debt and are a fairly safe investment.

Makeup of Progressive
        As stated before, Progressive has 67 subsidiaries and 1 mutual insurance Company. They
sell their insurance through two different channels. The first channel is the direct sales channel,
Progressive sells its insurance through direct phone lines as well as through
The second channel is through Progressive is also in the business of selling
Commercial insurance and reinvestment of its cash. They have approximately 27,778 employees
throughout the country. As stated before, the culture of Progressive is to be an innovative
company. They also follow 5 core values, those core values are Integrity, Golden rule,
Objectives, Excellence and Profit. They are a rewards based on results company and promote
based on those results. Progressive shows a commitment to their customers as well as to the

Glenn M. Renwick - President/CEO/Director
Brian C. Domeck – Chief Financial Officer, Vice President
John A. Barbagallo – President Agency Group
                                                   Page 3                        6/25/2012

Brian J. Passell – Group President – Claims
John P. Sauerland – President – Direct Group
William M. Cody – Chief Investment Officer
Raymond M. Voelker – Chief Information Officer

The management of Progressive is relatively young compared to some organizations with the
CEO only 51 years of age and the youngest John P. Sauerland at 42 years old. They promote
many of their executive employees from within the organization.

The insurance industry is a very risk industry and is dependant on firms such as Progressive
being able to cut underwriting costs at every possible chance. Large national disasters can cause
a firm such as Progressive to suffer during that fiscal year due to the mass payouts to its
customers. In addition, in the auto insurance industry there is continued risk from uninsured
drivers, lawsuits and more issues that can raise the Progressives costs.

Progressive was recently caught “spying on a couple in church” they hired private investigators
who joined a church in order to discredit a couple who were suing the
spying-on-couple-in-church.php?googleid=11153) There have been other lawsuits against
Progressive recently that may hurt its image. None of these lawsuits have garnished national
long term media attention but they do cost the company money and time which affects its
shareholders and other customers.

On October 10, 2007 Progressive announced its Q3 earnings which declined 27% from the
previous year. There is no current explanation for this reduction in Net Income and may be a
symbol of the industry or there could be problems within Progressive.

Information Systems at Progressive
The insurance industry as a whole depends heavily on IS and Progressive Corp. exemplifies this
dependency. Progressive corp. has always been on the forefront of technology with regards to IS
in the insurance industry and continues to do so. The corporation uses IS strategically
throughout the entire company and a failure of its information systems would mean a half of
operations for the company. A direct quote from Progressive’s 2006 form 10-k:

       Our business depends on the uninterrupted operation of our facilities, systems and
       business functions, including our information technology and other business systems.
       Our business is highly dependent upon our employees’ ability to perform, in an efficient
       and uninterrupted fashion, necessary business functions, such as Internet support and 24-
       hour call centers, processing new and renewal business, and processing and paying
       claims. A shut-down of or inability to access one or more of our facilities, a power
       outage, or a failure of one or more of our information technology, telecommunications or
       other systems for any reason, including failures that might occur as existing systems are
       replaced or upgraded, could significantly impair our ability to perform such functions on
       a timely basis.
                                                       Page 4                   6/25/2012

There is no question about the reliance of the organization on its information technology and the
role of information technology within Progressive. In addition, Progressive outlines its
Information Technology Incentive Plan in its 10k. This plan rewards Progressive employees for
outstanding performance in its applications and not having outages. Employees who are part of
this incentive plan can earn bonuses based off of their base pay if they continue to keep the
systems running for Progressive and its customers.

Progressive has won several awards due to its performance in IT and specifically consumer
facing applications such as Keynote Systems and the Webby People’s Voice
Award have voted as the number one insurance web site on the internet. This
was for 2007 and in the past 7 years has won awards every single year. More
awards for advancements in Progressive’s technology and company can be found at: has numerous features that are top tier in the industry and some of them
industry firsts. One of these industry firsts was the rate ticker which has an up to the minute
display of Progressive’s rates vs. other top insurance companies. They also use VoIP technology
to talk to customer service agents while on their site. Customers can report claims, manage their
policy, create a policy, locate and agent and get instant quotes on Progressive
also created a site specifically for its agents located at This site allowed
Progressive agents to have the latest information and quotes for Progressive customers directly
from the source. Progressive utilizes web technology vastly in order to cut costs, communicate
with its customers and agents and provide features for all.

CIO Background
The Chief Information Officer of Progressive is Raymond M. Voelker who leads their
centralized IT organization. His business areas encompass Enterprise Technology, Application
Development, IT Human Resources/Training and IT Controls. Raymond joined Progressive in
1985 and held various positions throughout the years within the IT business area as well as
application development and infrastructure technology. He has been at the CIO role since April
2000 (he was 36 when he reached CIO) and graduated with a bachelors degree in Computer
Engineering from Case Western Reserve University and an MBA from their Weatherhead
School of Management.

For More Information
Visit and click on investors in order to learn more about the company and
view its annual reports and SEC filings.
Also visit, and in order to learn more about
Progressive Corp, its competitors and industry forecasts.


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