UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                     

Commission File Number: 001-09518

THE PROGRESSIVE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio			34-0963169
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
6300 Wilson Mills Road,	Mayfield Village,	Ohio	44143
(Address of principal executive offices)			(Zip Code)

(440) 461-5000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $1.00 Par Value	PGR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒  Yes    ☐  No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  ☒  Yes    ☐  No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes   ☒ No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Shares, $1.00 par value: 585,069,712 outstanding at September 30, 2022

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

	Three Months				Nine Months
Periods Ended September 30,	2022		2021		2022		2021
(millions — except per share amounts)
Revenues
Net premiums earned	$	12,398.9	$	11,364.8	$	36,349.7	$	32,767.3
Investment income	333.6		208.9		868.2		639.8
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales	(62.1)		53.9		430.0		607.8
Net holding period gains (losses) on securities	(152.1)		(15.9)		(2,262.9)		479.8
Net impairment losses recognized in earnings	(2.2)		(1.2)		(6.5)		(3.7)
Total net realized gains (losses) on securities	(216.4)		36.8		(1,839.4)		1,083.9
Fees and other revenues	181.4		174.9		531.9		516.8
Service revenues	82.7		73.8		230.5		202.1
Total revenues	12,780.2		11,859.2		36,140.9		35,209.9
Expenses
Losses and loss adjustment expenses	10,018.7		9,250.7		28,298.2		24,767.6
Policy acquisition costs	970.9		951.5		2,867.9		2,754.7
Other underwriting expenses	1,496.4		1,384.4		4,433.9		4,306.0
Investment expenses	5.8		6.6		17.4		18.5
Service expenses	82.8		72.8		221.5		190.0
Interest expense	63.1		54.2		180.4		167.0
Goodwill impairment1	0		0		224.8		0
Total expenses	12,637.7		11,720.2		36,244.1		32,203.8
Net Income (Loss)
Income (loss) before income taxes	142.5		139.0		(103.2)		3,006.1
Provision for income taxes	18.4		20.5		1.7		617.5
Net income (loss)	124.1		118.5		(104.9)		2,388.6
Other Comprehensive Income (Loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities	(920.3)		(129.8)		(3,170.0)		(578.3)
Net unrealized losses on forecasted transactions	0.1		0.1		0.3		0.6
Foreign currency translation adjustment	(0.7)		(0.2)		(0.9)		(0.7)
Other comprehensive income (loss)	(920.9)		(129.9)		(3,170.6)		(578.4)
Comprehensive income (loss)	$	(796.8)	$	(11.4)	$	(3,275.5)	$	1,810.2
Computation of Earnings Per Common Share
Net income (loss)	$	124.1	$	118.5	$	(104.9)	$	2,388.6
Less: Preferred share dividends	6.7		6.7		20.1		20.1
Net income (loss) available to common shareholders	$	117.4	$	111.8	$	(125.0)	$	2,368.5
Average common shares outstanding - Basic	584.5		584.7		584.4		584.7
Net effect of dilutive stock-based compensation	2.6		2.4		2.7		2.6
Total average equivalent common shares - Diluted	587.1		587.1		587.1		587.3
Basic: Earnings per common share	$	0.20	$	0.19	$	(0.21)	$	4.05
Diluted: Earnings per common share	$	0.20	$	0.19	$	(0.21)	$	4.03

1 See Note 12 – Goodwill and Intangible Assets for further discussion.

See notes to consolidated financial statements.

1

The Progressive Corporation and Subsidiaries

Consolidated Balance Sheets

(unaudited)

	September 30,				December 31,
(millions — except per share amounts)	2022		2021		2021
Assets
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost: $48,205.7, $44,556.0, and $43,794.2)	$	44,173.1	$	45,045.7	$	43,873.1
Short-term investments (amortized cost: $4,237.6, $1,088.7, and $942.6)	4,237.6		1,088.7		942.6
Total available-for-sale securities	48,410.7		46,134.4		44,815.7
Equity securities, at fair value:
Nonredeemable preferred stocks (cost: $1,417.6, $1,479.9, and $1,571.8)	1,254.4		1,572.8		1,639.9
Common equities (cost: $803.7, $1,238.4, and $1,264.1)	2,665.3		4,580.2		5,058.5
Total equity securities	3,919.7		6,153.0		6,698.4
Total investments	52,330.4		52,287.4		51,514.1
Cash and cash equivalents	350.9		270.6		187.1
Restricted cash and cash equivalents	14.4		14.9		15.0
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	365.3		285.5		202.1
Accrued investment income	217.4		168.6		181.7
Premiums receivable, net of allowance for credit losses of $295.0, $257.3, and $280.4	10,867.7		10,246.7		9,399.5
Reinsurance recoverables	6,306.8		5,044.9		4,980.5
Prepaid reinsurance premiums	367.5		661.1		457.6
Deferred acquisition costs	1,585.2		1,430.7		1,355.6
Property and equipment, net of accumulated depreciation of $1,499.0, $1,422.2, and $1,407.4	1,067.1		1,161.0		1,137.3
Goodwill	227.9		452.7		452.7
Intangible assets, net of accumulated amortization of $153.1, $369.2, and $383.8	91.8		131.9		117.3
Net federal deferred income taxes	1,269.5		0		0
Other assets	827.6		747.6		1,333.9
Total assets	$	75,524.2	$	72,618.1	$	71,132.3
Liabilities and Shareholders’ Equity
Unearned premiums	$	17,796.9	$	16,671.4	$	15,615.8
Loss and loss adjustment expense reserves	30,631.8		25,926.3		26,164.1
Net federal deferred income taxes	0		110.7		152.9
Accounts payable, accrued expenses, and other liabilities	5,931.9		6,453.4		6,069.1
Debt1	6,387.4		4,898.2		4,898.8
Total liabilities	60,748.0		54,060.0		52,900.7
Serial Preferred Shares (authorized 20.0)
Serial Preferred Shares, Series B, no par value (cumulative, liquidation preference $1,000 per share) (authorized, issued, and outstanding 0.5)	493.9		493.9		493.9
Common shares, $1.00 par value (authorized 900.0; issued 797.6, including treasury shares of 212.5, 212.6, and 213.2)	585.1		585.0		584.4
Paid-in capital	1,839.6		1,735.9		1,772.9
Retained earnings	14,987.5		15,390.0		15,339.7
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on fixed-maturity securities	(3,113.8)		369.0		56.2
Net unrealized losses on forecasted transactions	(14.6)		(15.0)		(14.9)
Foreign currency translation adjustment	(1.5)		(0.7)		(0.6)
Total accumulated other comprehensive income (loss)	(3,129.9)		353.3		40.7
Total shareholders’ equity	14,776.2		18,558.1		18,231.6
Total liabilities and shareholders’ equity	$	75,524.2	$	72,618.1	$	71,132.3

1 Consists of long-term debt. See Note 4 – Debt for further discussion.

See notes to consolidated financial statements.

2

The Progressive Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

	Three Months				Nine Months
Periods Ended September 30,	2022		2021		2022		2021
(millions — except per share amounts)
Serial Preferred Shares, No Par Value
Balance, beginning of period	$	493.9	$	493.9	$	493.9	$	493.9
Balance, end of period	493.9		493.9		493.9		493.9
Common Shares, $1.00 Par Value
Balance, beginning of period	584.9		585.2		584.4		585.2
Treasury shares purchased	(0.4)		(0.7)		(0.7)		(1.8)
Net restricted equity awards issued/vested	0.6		0.5		1.4		1.6
Balance, end of period	585.1		585.0		585.1		585.0
Paid-In Capital
Balance, beginning of period	1,815.2		1,712.3		1,772.9		1,672.9
Amortization of equity-based compensation	26.0		26.0		69.7		68.7
Treasury shares purchased	(1.3)		(2.3)		(2.2)		(5.3)
Net restricted equity awards issued/vested	(0.6)		(0.5)		(1.4)		(1.6)
Reinvested dividends on restricted stock units	0.3		0.4		0.6		1.2
Balance, end of period	1,839.6		1,735.9		1,839.6		1,735.9
Retained Earnings
Balance, beginning of period	14,967.7		15,401.0		15,339.7		13,354.9
Net income (loss)	124.1		118.5		(104.9)		2,388.6
Treasury shares purchased	(47.4)		(68.8)		(75.7)		(160.1)
Cash dividends declared on common shares ($0.10, $0.10, $0.30, and $0.30 per share)	(58.4)		(58.4)		(175.2)		(175.2)
Cash dividends declared on Serial Preferred Shares, Series B ($26.875, $26.875, $26.875, and $26.875 per share)	(13.4)		(13.4)		(13.4)		(13.4)
Reinvested dividends on restricted stock units	(0.3)		(0.4)		(0.6)		(1.2)
Other, net	15.2		11.5		17.6		(3.6)
Balance, end of period	14,987.5		15,390.0		14,987.5		15,390.0
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period	(2,209.0)		483.2		40.7		931.7
Other comprehensive income (loss)	(920.9)		(129.9)		(3,170.6)		(578.4)
Balance, end of period	(3,129.9)		353.3		(3,129.9)		353.3
Total shareholders’ equity	$	14,776.2	$	18,558.1	$	14,776.2	$	18,558.1

There are 5.0 million Voting Preference Shares authorized; no such shares have been issued.

See notes to consolidated financial statements.

3

The Progressive Corporation and Subsidiaries

Consolidated Statements of Cash Flows        

(unaudited)

Nine Months Ended September 30,	2022		2021
(millions)
Cash Flows From Operating Activities
Net income (loss)	$	(104.9)	$	2,388.6
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	227.5		203.9
Amortization of intangible assets	25.5		43.1
Net amortization of fixed-income securities	1.6		97.2
Amortization of equity-based compensation	69.7		68.7
Net realized (gains) losses on securities	1,839.4		(1,083.9)
Net (gains) losses on disposition of property and equipment	5.3		(4.0)
Goodwill impairment	224.8		0
Changes in:
Premiums receivable	(1,468.2)		(1,994.0)
Reinsurance recoverables	(1,326.3)		(573.1)
Prepaid reinsurance premiums	90.1		(278.4)
Deferred acquisition costs	(229.6)		(193.5)
Income taxes	(591.6)		(156.2)
Unearned premiums	2,181.1