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 March 31, 2023

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: 585,366,448 outstanding at March 31, 2023

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

Three Months Ended March 31,	2023		2022
(millions — except per share amounts)
Revenues
Net premiums earned	$	13,533.1	$	11,802.9
Investment income	419.6		242.2
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales	(30.3)		(54.5)
Net holding period gains (losses) on securities	104.4		(388.6)
Net impairment losses recognized in earnings	(2.3)		(2.2)
Total net realized gains (losses) on securities	71.8		(445.3)
Fees and other revenues	206.2		174.0
Service revenues	72.5		67.7
Total revenues	14,303.2		11,841.5
Expenses
Losses and loss adjustment expenses	10,624.0		8,858.4
Policy acquisition costs	1,115.8		963.4
Other underwriting expenses	1,857.9		1,506.3
Investment expenses	5.5		5.7
Service expenses	82.3		63.2
Interest expense	63.3		54.3
Total expenses	13,748.8		11,451.3
Net Income
Income before income taxes	554.4		390.2
Provision for income taxes	106.5		76.3
Net income	447.9		313.9
Other Comprehensive Income (Loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities	603.2		(1,426.9)
Net unrealized losses on forecasted transactions	0.1		0.2
Foreign currency translation adjustment	0		0.2
Other comprehensive income (loss)	603.3		(1,426.5)
Comprehensive income (loss)	$	1,051.2	$	(1,112.6)
Computation of Earnings Per Common Share
Net income	$	447.9	$	313.9
Less: Preferred share dividends1	7.3		6.7
Net income available to common shareholders	$	440.6	$	307.2
Average common shares outstanding - Basic	584.9		584.3
Net effect of dilutive stock-based compensation	2.1		2.0
Total average equivalent common shares - Diluted	587.0		586.3
Basic: Earnings per common share	$	0.75	$	0.53
Diluted: Earnings per common share	$	0.75	$	0.52

1 Changed to a floating dividend rate. See Note 1 – Basis of Presentation for further discussion.

See notes to consolidated financial statements.

1

The Progressive Corporation and Subsidiaries

Consolidated Balance Sheets

(unaudited)

	March 31,				December 31,
(millions — except per share amounts)	2023		2022		2022
Assets
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost: $53,123.9, $48,082.7, and $50,264.0)	$	50,289.2	$	46,316.4	$	46,651.9
Short-term investments (amortized cost: $2,524.1, $529.9, and $2,861.7)	2,524.1		529.9		2,861.7
Total available-for-sale securities	52,813.3		46,846.3		49,513.6
Equity securities, at fair value:
Nonredeemable preferred stocks (cost: $1,197.7, $1,545.5, and $1,364.2)	1,078.8		1,527.5		1,213.2
Common equities (cost: $740.5, $1,281.7, and $826.1)	2,794.3		4,812.6		2,821.5
Total equity securities	3,873.1		6,340.1		4,034.7
Total investments	56,686.4		53,186.4		53,548.3
Cash and cash equivalents	273.7		272.7		203.5
Restricted cash and cash equivalents	14.9		14.6		17.4
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	288.6		287.3		220.9
Accrued investment income	299.5		193.4		282.5
Premiums receivable, net of allowance for credit losses of $340.9, $276.2, and $343.3	12,411.4		10,519.0		10,416.9
Reinsurance recoverables	5,616.2		5,025.0		5,832.1
Prepaid reinsurance premiums	269.6		455.1		295.5
Deferred acquisition costs	1,626.8		1,407.7		1,544.4
Property and equipment, net of accumulated depreciation of $1,576.2, $1,455.7, and $1,551.1	949.0		1,104.4		1,034.0
Goodwill	227.9		452.7		227.9
Intangible assets, net of accumulated amortization of $164.0, $142.2, and $158.6	80.9		102.7		86.3
Net federal deferred income taxes	1,057.0		370.5		1,131.5
Other assets	893.8		825.4		844.7
Total assets	$	80,407.1	$	73,929.6	$	75,465.0
Liabilities and Shareholders’ Equity
Unearned premiums	$	19,844.3	$	16,991.4	$	17,293.6
Loss and loss adjustment expense reserves	31,026.4		26,754.2		30,359.3
Accounts payable, accrued expenses, and other liabilities	6,278.7		6,747.2		5,532.8
Debt1	6,389.3		6,385.6		6,388.3
Total liabilities	63,538.7		56,878.4		59,574.0
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 212.2, 212.7, and 212.7)	585.4		584.9		584.9
Paid-in capital	1,907.7		1,788.6		1,893.0
Retained earnings	16,080.1		15,569.6		15,721.2
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on fixed-maturity securities	(2,183.1)		(1,370.7)		(2,786.3)
Net unrealized losses on forecasted transactions	(14.4)		(14.7)		(14.5)
Foreign currency translation adjustment	(1.2)		(0.4)		(1.2)
Total accumulated other comprehensive income (loss)	(2,198.7)		(1,385.8)		(2,802.0)
Total shareholders’ equity	16,868.4		17,051.2		15,891.0
Total liabilities and shareholders’ equity	$	80,407.1	$	73,929.6	$	75,465.0

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 Ended March 31,	2023		2022
(millions — except per share amounts)
Serial Preferred Shares, No Par Value
Balance, beginning of period	$	493.9	$	493.9
Balance, end of period	493.9		493.9
Common Shares, $1.00 Par Value
Balance, beginning of period	584.9		584.4
Treasury shares purchased	(0.2)		(0.3)
Net restricted equity awards issued/vested	0.7		0.8
Balance, end of period	585.4		584.9
Paid-In Capital
Balance, beginning of period	1,893.0		1,772.9
Amortization of equity-based compensation	15.9		17.3
Treasury shares purchased	(0.8)		(0.8)
Net restricted equity awards issued/vested	(0.7)		(0.8)
Reinvested dividends on restricted stock units	0.3		0
Balance, end of period	1,907.7		1,788.6
Retained Earnings
Balance, beginning of period	15,721.2		15,339.7
Net income	447.9		313.9
Treasury shares purchased	(31.7)		(27.6)
Cash dividends declared on common shares ($0.10 and $0.10 per share)	(58.5)		(58.4)
Reinvested dividends on restricted stock units	(0.3)		0
Other, net	1.5		2.0
Balance, end of period	16,080.1		15,569.6
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period	(2,802.0)		40.7
Other comprehensive income (loss)	603.3		(1,426.5)
Balance, end of period	(2,198.7)		(1,385.8)
Total shareholders’ equity	$	16,868.4	$	17,051.2

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)

Three Months Ended March 31,	2023		2022
(millions)
Cash Flows From Operating Activities
Net income	$	447.9	$	313.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	68.0		71.1
Amortization of intangible assets	5.4		14.6
Net amortization (accretion) of fixed-income securities	(5.0)		27.0
Amortization of equity-based compensation	15.9		17.3
Net realized (gains) losses on securities	(71.8)		445.3
Net (gains) losses on disposition of property and equipment	16.5		3.3
Changes in:
Premiums receivable	(1,994.5)		(1,119.5)
Reinsurance recoverables	215.9		(44.5)
Prepaid reinsurance premiums	25.9		2.5
Deferred acquisition costs	(82.4)		(52.1)
Income taxes	106.6		76.2
Unearned premiums	2,550.7		1,375.6
Loss and loss adjustment expense reserves	667.1		590.1
Accounts payable, accrued expenses, and other liabilities	565.5		545.1
Other, net	(82.2)		236.4
Net cash provided by operating activities	2,449.5		2,502.3
Cash Flows From Investing Activities
Purchases:
Fixed maturities	(6,119.5)		(11,453.4)
Equity securities	(17.8)		(74.3)
Sales:
Fixed maturities	2,202.6		5,889.9
Equity securities	277.3		59.2
Maturities, paydowns, calls, and other:
Fixed maturities	976.0		1,177.6
Equity securities	25.1		39.3
Net (purchases) sales of short-term investments	360.8		413.1
Net change in unsettled security transactions	57.2		212.6
Purchases of property and equipment	(43.2)		(73.0)
Sales of property and equipment	4.3		6.5
Net cash used in investing activities	(2,277.2)		(3,802.5)
Cash Flows From Financing Activities
Dividends paid to common shareholders	(58.5)		(58.5)
Dividends paid to preferred shareholders	(13.4)		(13.4)
Acquisition of treasury shares for restricted stock tax liabilities	(32.7)		(28.7)
Net proceeds from debt issuances	0		1,486.0
Net cash provided by (used in) financing activities	(104.6)		1,385.4
Increase in cash, cash equivalents, restricted cash, and restricted cash equivalents	67.7		85.2
Cash, cash equivalents, restricted cash, and restricted cash equivalents – January 1	220.9		202.1
Cash, cash equivalents, restricted cash, and restricted cash equivalents – March 31	$	288.6	$	287.3

See notes to consolidated financial statements.

4

The Progressive Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1. BASIS OF REPORTING AND ACCOUNTING

The accompanying consolidated financial statements include the accounts of The Progressive Corporation, our wholly owned insurance and non-insurance subsidiaries and affiliates in which we have a controlling financial interest (Progressive).

The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, were necessary for a fair statement of the results for the interim periods presented. The results of operations for the period ended March 31, 2023, are not necessarily indicative of the results expected for the full year. These consolidated financial statements and the notes thereto should be read in conjunction with Progressive’s audited financial statements and accompanying notes included in Exhibit 13 to our Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report to Shareholders).

Insurance Premiums and Receivables

We perform analyses to evaluate our premiums receivable for expected credit losses. See the 2022 Annual Report to Shareholders for a discussion on our premiums receivable allowance for credit loss policy. The following table summarizes changes in our allowance for credit loss exposure on our premiums receivable:

	Three Months Ended March 31,
(millions)	2023		2022
Allowance for credit losses, beginning of period	$	343.3	$	280.4
Increase in allowance1	116.9		93.9
Write-offs2	(119.3)		(98.1)
Allowance for credit losses, end of period	$	340.9	$	276.2

1 Represents the incremental increase in other underwriting expenses.

2 Represents the portion of allowance that is reversed when premiums receivable are written off. Premiums receivable balances are written off once we have exhausted our collection efforts.

Property and Equipment

Included in other assets in the consolidated balance sheets are “held for sale” property. When property is transferred to held for sale, the property is written down to its fair value less estimated costs to sell the property. At March 31, 2023 and 2022, and December 31, 2022, we had held for sale property of $67.8 million, $20.2 million, and $48.7 million, respectively.

Earnings Per Share

Net income is reduced by preferred share dividends to determine net income available to common shareholders, and is used in our calculation of the per common share amounts. Beginning March 15, 2023, the annual dividend rate for our Series B Preferred Shares switched to a floating rate. The floating nature of the dividend rate will impact the amount of the adjustment required to calculate net income available to common shareholders. See Note 9 – Dividends for further discussion.

New Accounting Standards

During the first quarter 2023, the Financial Accounting Standards Board issued an Accounting Standards Update (ASU), which permits an election to amortize the cost of tax equity investments to the provision for income taxes if certain conditions are met. Currently, these investments are accounted for under the equity method of accounting. This ASU will be effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2023 (2024 for calendar-year companies). If elected, this standard must be applied on either a modified retrospective or a retrospective basis. We are still evaluating whether we will elect this new standard, however, we do not expect this standard to have a material impact on our financial position or results of operations

5

2.  INVESTMENTS

The following tables present the composition of our investment portfolio by major security type. Our securities are reported in our consolidated balance sheets at fair value. The changes in fair value for our fixed-maturity securities (other than hybrid securities) are reported as a component of accumulated other comprehensive income (loss), net of deferred income taxes, in our consolidated

balance sheets. The net holding period gains (losses) reported below represent the inception-to-date changes in fair value for the hybrid and equity securities. The changes in the net holding period gains (losses) between periods are recorded as a component of net realized gains (losses) on securities in our consolidated statements of comprehensive income.

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
March 31, 2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	28,490.9	$	68.8	$	(1,209.6)	$	0	$	27,350.1	48.3	%
State and local government obligations	2,222.4		0.9		(161.7)		0		2,061.6		3.6
Foreign government obligations	16.9		0		(1.1)		0		15.8		0.1
Corporate debt securities	11,195.8		45.6		(525.4)		(34.7)		10,681.3		18.8
Residential mortgage-backed securities	655.0		0.2		(16.3)		(8.9)		630.0		1.1
Commercial mortgage-backed securities	5,252.6		1.6		(751.2)		0		4,503.0		7.9
Other asset-backed securities	5,087.8		1.8		(222.5)		(1.3)		4,865.8		8.6
Redeemable preferred stocks	202.5		0		(5.2)		(15.7)		181.6		0.3
Total fixed maturities	53,123.9		118.9		(2,893.0)		(60.6)		50,289.2		88.7
Short-term investments	2,524.1		0		0		0		2,524.1		4.5
Total available-for-sale securities	55,648.0		118.9		(2,893.0)		(60.6)		52,813.3		93.2
Equity securities:
Nonredeemable preferred stocks	1,197.7		0		0		(118.9)		1,078.8		1.9
Common equities	740.5		0		0		2,053.8		2,794.3		4.9
Total equity securities	1,938.2		0		0		1,934.9		3,873.1		6.8
Total portfolio1	$	57,586.2	$	118.9	$	(2,893.0)	$	1,874.3	$	56,686.4	100.0	%

6

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
March 31, 2022
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	20,399.6	$	5.9	$	(876.7)	$	0	$	19,528.8	36.7	%
State and local government obligations	2,236.9		4.4		(97.1)		0		2,144.2		4.0
Foreign government obligations