8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 3, 2006

THE PROGRESSIVE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	1-9518	34-0963169
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

6300 Wilson Mills Road, Mayfield Village, Ohio 44143

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code 440-461-5000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]	Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-10(A) 2006 Gainsharing Plan

EX-10(B) 2006 Information Technology Incentive Plan

EX-10(C) 2006 Progressive Capital Management Bonus Plan

EX-10(D) 2006 Director Compensation Schedule

Item 1.01 Entry Into a Material Definitive Agreement.

On February 3, 2006, the Compensation Committee (the “Committee”) of the Board of Directors of The Progressive Corporation (the “Company”) took the actions described below.

2005 Bonus Payments to Named Executive Officers. The 2005 bonuses for the named executive officers under The Progressive Corporation 2004 Executive Bonus Plan (“Executive Bonus Plan”) were tied to the growth and profitability of either (i) the “Core Business”, defined as the Agency, Direct and Commercial Auto businesses (with minor modifications from the publicly reported results for those businesses) weighted according to the net earned premiums for each business during the year, or (ii) a combination of the Core Business and the executive’s assigned business unit weighted on a basis determined by the Committee. At the February 3^rd meeting, the Committee certified the 2005 performance results for the Agency, Direct and Commercial Auto businesses, and thus for the Core Business as a whole. As a result of these certifications and the bonus calculations required by the Executive Bonus Plan, cash bonuses were awarded to the named executive officers under the plan, as follows:

		2005 Executive
		Bonus Plan
Name	Title	Payment*
Glenn M. Renwick	President and Chief Executive Officer	$	1,731,375
W. Thomas Forrester	Vice President and Chief Financial Officer	$	767,728
Alan R. Bauer	Direct Group Business	$	476,211**
Brian J. Passell	Claims Group President	$	620,633
Robert T. Williams	Drive Group President	$	694,739

*	The operation of the Executive Bonus Plan is described in more detail below. For an additional discussion, see the Company’s Proxy Statement dated March 11, 2004, Item 3, at pp. 30-36.
**	In 2005, Mr. Bauer also had a 25% cash bonus target under a component of the Company’s 2005 Gainsharing Plan, which resulted in an additional bonus payment to him in the amount of $128,235.

2006 Bonus Plans. The Committee approved the following employee cash bonus plans, each of which has at least one executive officer as an eligible participant:

• The Progressive Corporation 2006 Gainsharing Plan (the “2006 Gainsharing Plan”), a copy of which is attached hereto as Exhibit 10(A);

• The Progressive Corporation 2006 Information Technology Incentive Plan (the “2006 IT Incentive Plan”), a copy of which is attached hereto as Exhibit 10(B); and

• 2006 Progressive Capital Management Bonus Plan (the “2006 PCM Bonus Plan”), a copy of which is attached hereto as Exhibit 10(C).

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2006 Salary and Variable Compensation Targets for Named Executive Officers. The Committee determined that the salary and variable compensation targets for the Company’s named executive officers for 2006 would be as follows:

			2006 Cash			2006 Equity
	2006		Bonus Target**			Grant Target***
Name	Salary*		(% of Salary)			(% of Salary)
Glenn M. Renwick	$	750,000		150	%		1000	%
W. Thomas Forrester	$	500,000		100	%		175-225	%
Alan R. Bauer	$	440,000		100	%		175-225	%
Brian J. Passell	$	425,000		100	%		175-225	%
Robert T. Williams	$	480,000		100	%		175-225	%

*	Salary changes typically become effective in February of each year and, therefore, may not match calendar-year salary data disclosed in the Company’s Proxy Statement.
**	Under the Company’s Executive Bonus Plan, the named executives can earn a cash bonus ranging from 0 to 2 times the target bonus amount (i.e., salary times cash bonus target), under objective standards determined in advance by the Committee. See below for the bonus criteria that will be used to determine the actual cash bonus and for additional information.
***	The figure shown for each executive, when multiplied by his salary, represents the aggregate dollar value (or a range of dollar values, subject to a final determination by the CEO) on the date of grant of time-based and performance-based restricted shares that will be granted to the named executive officers under The Progressive Corporation 2003 Incentive Plan. Equity grants are typically awarded in March of each year.

The table below shows the Committee’s determination of the percentage of each named executive officer’s 2006 cash bonus that will derive, respectively, from the Core Business, Agency business or Direct business, in accordance with the Executive Bonus Plan:

	Core			Agency			Direct
Name	Business			Business			Business
Glenn M. Renwick		100	%		0	%		0	%
W. Thomas Forrester		100	%		0	%		0	%
Alan R. Bauer		50	%		0	%		50	%
Brian J. Passell		100	%		0	%		0	%
Robert T. Williams		50	%		50	%		0	%

2006 Bonus Criteria. The performance of the Agency and Commercial Auto businesses will be determined by comparing actual growth and profitability results for 2006 to performance standards approved by the Committee under the following criteria (in each case, a “Standard Performance Calculation”):

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Performance
Criteria	Description
Growth	Year-over-year change in net earned premiums
Profitability	Combined ratio determined in accordance with accounting principles generally accepted in the United States (GAAP)

For the Direct business, 50% of its performance score will be based on a Standard Performance Calculation as described above, and 50% will be based on a modified calculation, comparing actual performance results with standards approved by the Committee using the following criteria:

Performance
Criteria	Description
Growth	Change in lifetime earned premiums on new policies written during the year in the Direct business only, as compared with 2005
Profitability	Lifetime combined ratio for new policies written during the year in the Direct business only

Lifetime earned premium is the Company’s calculation of the premiums that are expected to be earned over the lifetime of new policies written by the Direct business during the year, based on the number of new policies written, average premium and the Company’s recent retention experience. Lifetime combined ratio is the Company’s calculation of the expected profitability on those same new policies, using current GAAP combined ratios for new and renewal business projected over the lifetime of the new policies.

The Company’s other executive officers will have their 2006 bonuses determined under one or more of the 2006 Gainsharing Plan, the 2006 IT Incentive Plan or the 2006 PCM Bonus Plan.

2006 Director Compensation. The Committee and the Board of Directors also approved a revised director compensation schedule for 2006. Beginning in April 2006, each Director (other than the non-executive Chairman) will be compensated by an annual lump sum grant of restricted stock under The Progressive Corporation 2003 Directors Equity Incentive Plan, with a dollar value on the date of grant determined according to such Director’s then current Committee assignments. The Chairman will receive restricted stock with a value equal to $200,000 on the date of grant. The restricted stock grants will generally vest 11 months from the date of the award, subject to forfeiture provisions under the plan and each Director’s right to defer receipt of such awards under the Company’s Directors Restricted Stock Deferral Plan. The restricted stock grants are typically approved by the Committee at its meeting held on the day before the Company’s Annual Meeting of Shareholders. Separate cash retainer and meeting fees will no longer be paid to Directors. The revised 2006 Director compensation schedule is attached hereto as Exhibit 10(D).

Item 1.02 Termination of a Material Definitive Agreement.

2005 Bonus Plans. February 3, 2006, the Committee terminated the following employee cash bonus plans:

• The Progressive Corporation 2005 Gainsharing Plan;

• The Progressive Corporation 2005 Information Technology Incentive Plan; and

• 2005 Progressive Capital Management Bonus Plan.

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Each of the foregoing plans were attached as exhibits to the Company’s Current Report on Form 8-K filed on February 1, 2005.

Director Compensation. In addition, effective April 2006, the Committee terminated the schedule of non-employee director compensation that was put in place in December 2005 and was filed on the Company’s Current Report on Form 8-K on December 13, 2005.

Item 9.01 Financial Statements and Exhibits.

(c)	Exhibits
	See exhibit index on page 7.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: February 9, 2006
	THE PROGRESSIVE CORPORATION
	By:	/s/ Jeffrey W. Basch
	Name: Title:	Jeffrey W. Basch Vice President and Chief Accounting Officer

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EXHIBIT INDEX

Exhibit No.
Under Reg.	Form 8-K
S-K Item 601	Exhibit No.	Description
(10)	10(A)	The Progressive Corporation 2006 Gainsharing Plan
(10)	10(B)	The Progressive Corporation 2006 Information Technology Incentive Plan
(10)	10(C)	2006 Progressive Capital Management Bonus Plan
(10)	10(D)	2006 Director Compensation Schedule

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EX-10.A

Exhibit No. 10(A)

THE PROGRESSIVE CORPORATION
2006 GAINSHARING PLAN

1. The Progressive Corporation and its subsidiaries (collectively “Progressive” or the “Company”) have adopted The Progressive Corporation 2006 Gainsharing Plan (the “Plan”) as part of their overall compensation program. The Plan is performance-based and is administered under the direction of the Compensation Committee of the Board of Directors of The Progressive Corporation (the “Committee”).

2. Plan participants for each Plan year shall be selected by or under the direction of the Committee from those officers and regular employees of Progressive who are assigned primarily to the Core Business (as defined below), another operating business unit or a corporate support function. The gainsharing opportunity, if any, for those executive officers who participate in The Progressive Corporation 2004 Executive Bonus Plan (“Executive Plan”) will be provided by and be a component of that plan, although participants in the Executive Plan may also participate in this Plan if and to the extent determined by the Committee. Plan years will coincide with Progressive’s fiscal years.

3.	Annual Gainsharing Payments under the Plan will be determined by application of the following formula:
	Annual Gainsharing Payment = Paid Earnings x Target Percentage x Performance Factor

4.	Paid Earnings for any Plan year shall mean and include: (a) regular, used Earned Time Benefit, sick, holiday, funeral and overtime pay received by the participant during the Plan year for work or services performed during the Plan year as an officer or employee of Progressive, and (b) retroactive payments of any of the foregoing items relating to the same Plan year.
	For purposes of the Plan, Paid Earnings shall not include any short-term or long-term disability payments made to the participant, the earnings replacement component of any workers’ compensation award, payments from the discretionary cash fund or any other bonus or incentive compensation awards and unused Earned Time Benefit.
	Notwithstanding the foregoing, if at the end of the 24th pay period of a Plan year, any Plan participant’s then current annual salary exceeds his or her salary range maximum plus $105, then for purposes of computing his or her Annual Gainsharing Payment under the Plan, his or her Paid Earnings (including regular, used Earned Time Benefit, sick, holiday and funeral pay) for any bi-weekly pay period during the Plan year will not exceed 1/26th of his or her annual salary range maximum (as in effect as of the end of the applicable pay period). Without regard to that limitation, such participant’s Paid Earnings for the full Plan year will include the full amount of the following items, if any, received by such participant for that Plan year: (a) overtime pay, and (b) retroactive payments of regular, used Earned Time Benefit, sick, holiday, overtime and funeral pay.

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5. Target Percentages vary by position. Target Percentages for Plan participants typically are as follows:

POSITION	TARGET %
Senior Executives, Executive Level Managers and Business Leaders		60-150	%
Directors of Large Functional Areas		35-60	%
Senior Managers		20-35	%
Middle Managers		15-20	%
Senior Professionals and Entry Level Managers		9 - 20	%
Administrative Support and Entry Level Professionals		0 - 8	%

Target Percentages will be established within the above ranges by, and may be changed with the approval of, the following officers of The Progressive Corporation (collectively, the “Designated Executives”): (a) the Chief Executive Officer, and (b) either the Chief Human Resource Officer or the Chief Financial Officer. Target Percentages also may be changed from year to year by the Designated Executives.

6. The Performance Factor

A. General

The Performance Factor shall consist of one or more Profitability and Growth Components, as described below (“Performance Components”). The Performance Components may be weighted to reflect the nature of the individual participant’s assigned responsibilities. The weighting factors may differ among participants and will be determined, and may be changed from year to year, by or under the direction of the Committee.

B. Profitability and Growth Components

The Profitability and Growth Components measure the overall operating performance of Progressive’s Core Business (including the Drive Business Segment, the Direct Business Segment and the Commercial Auto Business Segment, but excluding Midland Financial Group, Inc. and other businesses in

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run-off), or a designated Business Segment, for the Plan year for which an Annual Gainsharing Payment is to be made. For purposes of computing a Performance Score for these Components, operating performance results are measured by one or more Performance Matrices, as established by or under the direction of the Committee for the Plan year, which assign a Performance Score to various combinations of profitability and growth outcomes. Except as provided below, under the Performance Matrices, profitability is measured by the GAAP Combined Ratio and growth is based on the year-to-year change in Net Earned Premiums.

For 2006, and for each Plan year thereafter until otherwise determined by the Committee, separate Performance Scores will be determined, and separate Gainsharing Matrices will be used, for the Drive Business Segment, the Direct Business Segment and the Commercial Auto Business Segment. For purposes hereof, the Drive Business Segment includes Drive Auto, including Strategic Alliances Drive Auto and Drive Special Lines. The Direct Business Segment includes Auto and Special Lines business produced by phone or over the Internet. For purposes of this Plan, the results of the Midland Financial Group, Inc. and other businesses in run-off are excluded from the Drive, Direct and Commercial Auto Business Segments and, thus, from Core Business results. Net operating gains/losses from other Core products, if any, will be apportioned among the Drive, Direct and Commercial Auto Business Segments in accordance with the respective amount(s) of Net Earned Premiums generated by such products in each such Business Segment and the apportioned gains/losses will be included in the calculation of the Combined Ratio.

The GAAP Combined Ratio will be separately determined for each of the Drive Business Segment, the Direct Business Segment and the Commercial Auto Business Segment. The GAAP Combined Ratio of each such Business Segment will then be matched with growth in Net Earned Premiums for such Business Segment using the applicable Gainsharing Matrix, to determine a Performance Score (“Standard Performance Computation”).

For 2006 and for each Plan year thereafter until otherwise determined by the Committee, the operating performance of the Direct Business Segment will be measured in part by the Standard Performance Computation and in part by the modified profitability and growth criteria described below (“Modified Performance Computation”).

For purposes of the Modified Performance Computation:

(i) Profitability is measured by the Lifetime Combined Ratio for new Auto and Special Lines policies written by the Direct Business Segment during the Plan year, as compared to a range of possible outcomes set forth in a Performance Matrix approved by or under the direction of the

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Committee. The Lifetime Combined Ratio, which projects the profitability over time of new policies written by the Direct Business during the Plan Year, will be calculated using the GAAP new and renewal Combined Ratios for the Plan Year for all Direct Business Segment earned premium, weighted by the expected new/renewal Lifetime Earned Premium mix, determined by formula approved by or under the direction of the Committee.

(ii)

Growth is measured by the year-to-year change in Lifetime Earned Premium (as defined below) for new business written by the Direct Business Segment. Lifetime Earned Premium, which incorporates a measure of customer retention into the growth computation, is the amount of earned premium that the Company is projected to generate over time with respect to new policies written by the Direct Business Segment during a given Plan Year (including any subsequent renewals thereof), as determined by a formula, to be approved by or under the direction of the Committee, that is developed utilizing a combination of historical experience data and statistical analysis.

C. Component Weighting

For most participants, the Performance Factor will be determined solely by the performance results for the Core Business, consisting of the Drive, Direct and Commercial Auto Business Segments. The Performance Score for the Drive and Commercial Auto Business Segments will be separately determined by application of the Standard Performance Computation. The Performance Score for the Direct Business Segment will be based 50% on the Standard Performance Computation and 50% on the Modified Performance Computation. The resulting Performance Scores for each of the Drive, Direct and Commercial Auto Business Segments will then be multiplied by a weighting factor (based on the percentage of Net Earned Premiums generated by each such Business Segment during the Plan year), the weighted Performance Scores will be combined and the sum of the weighted Performance Scores will be the Performance Score for the Core Business.

As noted above, for most participants, the Performance Factor will be the Performance Score for the Core Business. For certain employees designated by or under the direction of the Committee, however, the Performance Factor will be based on the Performance Scores for both the Core Business, as a whole, and their assigned Business Segment. Generally, for these employees, the Performance Factor will be based 50% on the Core Business Performance Score and 50% on their assigned Business Segment’s Performance Score. For example, for the members of the Direct Business Leadership Group (as defined below), the Performance Factor will be based 50% on the Core Business Performance Score and 50% on the Performance Score for the Direct Business Segment.

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The Direct Business Leadership Group includes the Direct Business Leader, the IT Director for the Direct Business Segment and all other employees assigned primarily to the Direct Business Segment who are eligible to participate in the Company’s equity incentive plans and have been designated by the Direct Business Leader.

With respect to each of the IT Business Leaders selected by the Designated Executives, the Performance Factor will be based on both the Core Business Performance Score and the Business Segment Performance Score of his or her assigned Business Segment, in such ratio or otherwise weighted as shall be determined by or under the direction of the Committee.

The Performance Score for each Performance Component will be multiplied by the assigned weighting factor to produce a Weighted Performance Score. The sum of the Weighted Performance Scores equals the Performance Factor. The final Performance Factor can vary from 0 to 2.0, based on actual performance versus the pre-established objectives. The Performance Factor cannot exceed 2.0, regardless of results.

7.

Subject to Paragraph 9 below, no later than December 31 of each Plan year, each participant will receive an initial payment in respect of his or her Annual Gainsharing Payment for that Plan year equal to 75% of an amount calculated on the basis of Paid Earnings for the first 24 pay periods of the Plan year, estimated earnings for the remainder of the Plan year, performance data through the first 11 months of the Plan year (estimated, if necessary) and forecasted operating results for the remainder of the Plan year. No later than February 15 of the following year, each participant will receive the balance of his or her Annual Gainsharing Payment, if any, for such Plan year, based on his or her Paid Earnings and performance data for the entire Plan year.

Any Plan participant who is then eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) may elect to defer all or a portion of the Annual Gainsharing Payment otherwise payable to him/her under this Plan, subject to and in accordance with the terms of the Deferral Plan.

8.

If, for any Plan year, an employee has been selected to participate in both the Plan and another incentive plan offered by the Company, then with respect to such employee, the Gainsharing formula set forth in Paragraph 3 hereof shall be appropriately adjusted by applying a weighting factor to reflect the proportion of the employee’s total annual incentive opportunity that is being provided by the Plan. The Committee shall have full authority to determine the incentive plan or plans in which any employee will participate during any plan year and, if an employee is selected to participate in more than one plan, the weighting factor that will apply to each such plan.

9.

Unless otherwise determined by the Committee, and except as expressly provided herein, in order to be entitled to receive an Annual Gainsharing Payment for any Plan

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year, the participant must be assigned to the Core Business or a participating business unit or support function, and be an active employee of the Company, on November 30 of the Plan year (“Qualification Date”). Individuals who are hired on or after December 1 of any Plan year are not entitled to an Annual Gainsharing Payment for that Plan year.

Any participant who is on a leave of absence covered by the Family and Medical Leave Act of 1993, personal leave of absence with the approval of the Company, military leave or short or long-term disability on the Qualification Date with respect to any Plan year will be entitled to receive an Annual Gainsharing Payment for such Plan year, calculated as provided in Paragraphs 3 through 6 above and based on the amount of Paid Earnings received by such participant during the Plan year.

Annual Gainsharing will be net of any legally required deductions for federal, state and local taxes and other items.

10. The right to any Annual Gainsharing Payment hereunder may not be sold, transferred, assigned or encumbered by any participant. Nothing herein shall prevent any participant’s interest hereunder from being subject to involuntary attachment, levy or other legal process.

11.	The Plan shall be administered by or under the direction of the Committee. The Committee shall have the authority to adopt, amend, revise and repeal such rules, guidelines, procedures and practices governing the Plan as it shall, from time to time, in its sole discretion, deem advisable.
	The Committee shall have full authority to determine the manner in which the Plan will operate, to interpret the provisions of the Plan and to make all determinations hereunder. All such interpretations and determinations shall be final and binding on Progressive, all Plan participants and all other parties. No such interpretation or determination shall be relied on as a precedent for any similar action or decision.
	Unless otherwise determined by the Committee, all of the authority of the Committee hereunder (including, without limitation, the authority to administer the Plan, select the persons entitled to participate herein, interpret the provisions thereof, waive any of the requirements specified herein and make determinations hereunder and to select, approve, establish, change or modify Performance Components and their respective formulae, weighting factors, performance targets and Target Percentages) may be exercised by the Designated Executives. In the event of a dispute or conflict, the determination of the Committee will govern.
12.	The Plan may be terminated, amended or revised, in whole or in part, at any time and from time to time by the Committee, in its sole discretion.
13.	The Plan will be unfunded and all payments due under the Plan shall be made from Progressive’s general assets.

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14.	Nothing in the Plan shall be construed as conferring upon any person the right to remain a participant in the Plan or to remain employed by Progressive, nor shall the Plan limit Progressive’s right to discipline or discharge any of its officers or employees or change any of their job titles, duties or compensation.
15.	Progressive shall have the unrestricted right to set off against or recover out of any Annual Gainsharing Payment or other sums owed to any participant under the Plan any amounts owed by such participant to Progressive.
16.	This Plan supersedes all prior plans, agreements, understandings and arrangements regarding bonuses or other cash incentive compensation payable to participants by or due from Progressive. Without limiting the generality of the foregoing, this Plan supersedes and replaces The Progressive Corporation 2005 Gainsharing Plan (the “Prior Plan”), which is and shall be deemed to be terminated as of December 31, 2005 (the “Termination Date”); provided, that any bonuses or other sums earned and payable under the Prior Plan with respect to any Plan year ended on or prior to the Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.
17.	This Plan is adopted, and is to be effective, as of January 1, 2006, which is the commencement of Progressive’s 2006 fiscal year. This Plan shall be effective for the 2006 Plan year (which coincides with Progressive’s 2006 fiscal year) and for each Plan year thereafter unless and until terminated by the Committee.
18.	This Plan shall be interpreted and construed in accordance with the laws of the State of Ohio.

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EX-10.B

Exhibit No. 10(B)

THE PROGRESSIVE CORPORATION
2006 INFORMATION TECHNOLOGY INCENTIVE PLAN

1. The Progressive Corporation and its subsidiaries (“Progressive” or the “Company”) have adopted The Progressive Corporation 2006 Information Technology Incentive Plan (the “Plan”) as part of their overall compensation program for employees assigned to the Company’s Information Technology Organization (“IT Organization”).

2. There is a strong correlation between computer systems availability and the economic performance of the Company. All 3 sales channels, customer service and claims handling are dependent on electronic systems. When systems are down, Progressive incurs lost productivity costs and, in some cases, may forfeit revenue opportunities. The Plan is designed to incent employees within the IT Organization to find creative ways to eliminate scheduled and unscheduled system downtime, and shift the risk associated with technology changes away from times when downtime is most costly to the business.

3. A significant aspect of the Plan is that it encourages continuous improvement. Each year, the complexity of the Progressive computing environment increases, as we introduce new applications and increasingly target systems to the end consumer. The target payout for the Plan will be set at the amount of “up time points” earned the previous year (adjusted proportionately for any change in the duration of the current Plan year). In order to receive a payout above the target, the performance achieved needs to exceed the previous year’s performance level (as so adjusted) in a more complex environment. Plan years will coincide with Progressive’s fiscal years.

4. All regular employees of Progressive (including managers) who are assigned primarily to the IT Organization are eligible to be selected for participation in the Plan. The Chief Executive Officer, after consulting with the Chief Human Resource Officer, (collectively, the “Designated Officers”) shall have the authority to select Plan participants for any given Plan year.

5. Annual payments under the Plan will be determined by application of the following formula:

     Annual IT Incentive Payment = Paid Earnings x Target Percentage x IT Performance Factor.

     The Annual IT Incentive Payment payable to any participant with respect to any given Plan year will not exceed $75,000.00.

6. Paid Earnings for any Plan year means and includes the following items: (a) regular, used Earned Time Benefit, sick, holiday, funeral and overtime pay paid to a participant during the Plan year for work or services performed as an officer or employee of Progressive during the Plan year, and (b) retroactive payments of any of the foregoing items relating to the same Plan year.

     For purposes of the Plan, Paid Earnings shall not include any short-term or long-term disability payments, the earnings replacement component of any worker’s compensation award, any lump sum merit awards, payments from the discretionary cash fund or any other bonus or incentive compensation awards or any unused Earned Time Benefit.

     Notwithstanding the foregoing, if at the end of the 24^th pay period of a Plan year, any Plan participant’s then current annual salary exceeds his or her salary range maximum plus $105, then for purposes of computing his or her Annual IT Incentive Payment under the Plan, his or her Paid Earnings (including regular, used Earned Time Benefit, sick, holiday and funeral pay) for any bi-weekly pay period during the Plan year will not exceed 1/26^th of his or her annual salary range maximum (as in effect as of

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the end of the applicable pay period). Without regard to that limitation, such participant’s Paid Earnings for the full Plan year will include the full amount of the following items, if any, received by such participant for that Plan year: (a) overtime pay, and (b) retroactive payments of regular, used Earned Time Benefit, sick, holiday, overtime and funeral pay.

7. Target Percentages vary by position and shall be determined on an annual basis by the Designated Officers.

8. In the discretion of the Designated Officers, participants in this Plan may also participate in The Progressive Corporation 2006 Gainsharing Plan, or any successors thereto.

9. The IT Performance Factor

     The IT Performance Factor is based on application availability and accuracy measured on a point system, and may vary from 0 to 2.0. Points are awarded for every day that production systems, both mainframe and client/server, are outage free. If there is an outage in any production system, all of the points relating to that application are lost for that day. Measured applications, measured hours, outage definitions, point values and administrative guidelines will be defined on an annual basis by or under the direction of the Designated Officers. A Performance Matrix approved by the Designated Officers will assign a Performance Score to various point levels that may be achieved.

     For 2006, and for each Plan year thereafter until otherwise determined by the Designated Officers, the applicable Plan rules shall be as set forth in Schedule I attached hereto.

     The best possible score in any given week is 10 points per application. Attached hereto as Schedule II is the 2006 Performance Matrix with the breakdown of scores and related outcomes. For 2006, a target of 1.00 will be achieved by earning between 10,240 and 10,244 points out of a possible 10,660 points. The Designated Officers will establish the applicable performance targets, the performance scores that will be awarded for various point levels achieved and the maximum potential points that may be earned and the resulting performance score for subsequent Plan years.

10. If, for any Plan year, an employee has been selected to participate in both the Plan and another incentive plan offered by the Company, then with respect to such employee, the Annual IT Incentive Payment formula set forth in Paragraph 5 hereof will be appropriately adjusted by applying a weighting factor to reflect the proportion of the employee’s total annual incentive opportunity that is being provided by the Plan. The Designated Officers shall have full authority to determine the incentive plan or plans in which any employee shall participate during any plan year and, if an employee is selected to participate in more than one plan, the weighting factor that will apply to each such plan.

11. Subject to Paragraph 12 below, no later than December 31 of each Plan year, each participant will receive an initial payment in respect of his or her Annual IT Incentive Payment for that Plan year equal to 75% of an amount calculated on the basis of Paid Earnings for the first 24 pay periods of the Plan year, estimated earnings for the remainder of the Plan year, performance data through the first 24 pay periods of the Plan year and forecasted performance results for the remainder of the Plan year. No later than February 15 of the following year, each participant shall receive the balance of his or her Annual IT Incentive Payment, if any, for such Plan year, based on his or her Paid Earnings and performance data for the entire Plan year.

12. Unless otherwise determined by the Committee (as defined below), and except as expressly provided herein, in order to be entitled to receive an Annual IT Incentive Payment for any Plan year, the participant must be assigned to the IT Organization and be an active employee of the Company on November 30 of that Plan year (“Qualification Date”). Individuals who are hired on or after December 1 of any Plan year are not entitled to receive an Annual IT Incentive Payment for that Plan year.

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     Any participant who is on a leave of absence covered by the Family and Medical Leave Act of 1993, personal leave of absence approved by the Company, military leave or short or long-term disability on the Qualification Date with respect to any Plan year will be entitled to receive an Annual IT Incentive Payment for that Plan year, calculated as provided in Paragraphs 5 and 11 above and based on the amount of Paid Earnings received by such participant for the Plan year.

     Annual IT Incentive Payments will be net of any legally required deductions for federal, state and local taxes and other items.

13. The right to any Annual IT Incentive Payment hereunder may not be sold, transferred, assigned
or encumbered by any participant. Nothing herein shall prevent any participant’s interest hereunder from being subject to involuntary attachment, levy or other legal process.

14. The Plan shall be administered by or under the direction of the Compensation Committee of the Board of Directors of The Progressive Corporation (“Committee”). The Committee shall have the authority to adopt, alter, modify, amend and repeal such rules, guidelines, procedures and practices governing the Plan as it shall, from time to time, in its sole discretion, deem advisable.

     The Committee shall have full authority to determine the manner in which the Plan will operate, to interpret the provisions of the Plan and to make all determinations hereunder. All such interpretations and determinations shall be final and binding on Progressive, all Plan participants and all other parties. No such interpretation or determination shall be relied on as a precedent for any similar action or decision.

     Unless otherwise determined by the Committee, all of the authority of the Committee hereunder (including, without limitation, the authority to administer the Plan, select participants in the Plan, interpret the provisions of the Plan, waive any of the requirements specified herein and make determinations hereunder and to establish, change or modify performance targets and measures) may be exercised by the Designated Officers. In the event of a dispute or conflict, the determination of the Committee will govern.

15. The Plan may be terminated, amended or revised, in whole or in part, at any time and from time to time by the Committee, in its sole discretion.

16. The Plan will be unfunded and all payments due under the Plan shall be made from Progressive’s general assets.

17. Nothing in the Plan shall be construed as conferring upon any person the right to remain a participant in the Plan or to remain employed by Progressive, nor shall the Plan limit Progressive’s right to discipline or discharge any of its employees or change any of their job titles, duties or compensation.

18. Progressive shall have the unrestricted right to set off against or recover out of any Annual IT Incentive Payment or other sums owed to any participant under the Plan any amounts owed by such participant to Progressive.

19. This Plan supersedes any and all prior plans, agreements, understandings and arrangements regarding bonuses or other cash incentive compensation payable to participants by or due from Progressive and relating to the availability of computer systems. Without limiting the generality of the foregoing, this Plan supersedes and replaces The Progressive Corporation 2005 Information Technology Incentive Plan (the “Prior Plan”), which is and shall be deemed to be terminated as of December 31, 2005 (the “Termination Date”); provided, that any bonuses or other sums earned and payable under the Prior Plan with respect to any Plan year ended on or prior to the Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.

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20. This Plan is adopted, and is to be effective, as of January 1, 2006, which is the commencement of Progressive’s 2006 fiscal year. This Plan shall be effective for the 2006 Plan year (which coincides with Progressive’s 2006 fiscal year) and for each Plan year thereafter unless and until terminated by the Committee.

21. This Plan shall be interpreted and construed in accordance with the laws of the State of Ohio.

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Schedule I

Information Technology Incentive Plan
2006 Rules

1. System Measurements
The intent of this program is to ensure that incidents that have major business impact are counted as an outage. An outage is defined as an event (excluding a telecommunication failure) that prevents 100 or more customers from using an application for more than 15 minutes. We define a customer as an agent, policyholder, claimant, quote requester, body shop personnel, or internal user.

The measured hours are 24 hours a day, Monday through Saturday. All day Sunday is measured with the exception of our weekly system maintenance window which is from 3:30am until 8:00am EST and, also, one (1) Sunday a quarter from Midnight to 8:00am EST.

Individual application service level agreements (SLAs) will take precedent over these time frames. See chart below:

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System	Additional Outage Clarifications
Cash Disbursements (CDS)	An outage is defined for Monday through Friday as anytime the system is not available by 7 am. An exception would be any requested Saturday or Sunday access requested by the system owner 24 hours in advance.
Claims Mycars
Claims Decision Point
Claims PACMan	PACMan is scheduled for maintenance from Midnight to 8:00am every Sunday. In addition, they are scheduled for an “as needed” maintenance window on the second Thursday of the month from 3:30am until 6:00am. An outage for start of day, for the Thursday maintenance window, would be anytime PACMan is not available by 6:00am.
Claims Web Tracker
ClaimStation
Commercial Auto (PRAT/WFC)
DirectPro 1/1/2006 — 6/30/2006	An outage is defined as an event (excluding call routing licensing issues) preventing quoting and/or selling. An exception would be one (1) Sunday a month (Sunday before Month End) from 3:30am until 5:30am EST.
	We recognize at times, an individual state or states may not be available for quoting or selling. There is not a clear cut method to measure the business impact. In these cases, the business will be consulted to determine the impact.
FAO	An outage is defined as an agent’s inability to process transactions, exclusive of quoting. Transactions included in the FAO outage calculation are the highest volume transactions performed by agents. These vital business transactions include logging into the website, making payments, making policy changes, viewing/printing policy documents, and viewing policy, claims and financial reports. An exception would be one (1) Sunday a month (Sunday before Month End) from 3:30am until 5:30am EST.
Internet Special Lines	An outage is defined as an event (excluding call routing licensing issues) preventing quoting and/or selling. An exception would be one (1) Sunday a month (Sunday before Month End) from 3:30am until 5:30am EST.
Internet Auto	An outage is defined as an event (excluding call routing licensing issues) preventing quoting and/or selling. An exception would be one (1) Sunday a month (Sunday before Month End) from 3:30am until 5:30am EST.
Internet Comparison	An outage is defined as an event preventing quoting of both the Comparison and Progressive rates and/or the selling of the Progressive rate, once the quote has entered the Internet Comparison application. This excludes intentional DNQ (Do Not Quote) situations for competitors driven by competitor eligibility rules and call routing licensing issues. An exception would be one (1) Sunday a month (Sunday before Month End) from 3:30am until 5:30am EST, and quarterly scheduled extended Maintenance times.
Personal Progressive
Ownership Work Bench (OWB)
POLARIS Billing System / ProBill	An outage for the start of day is defined as anytime the POLARIS transactions are not available by 6:00am Monday through Saturday.

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System	Additional Outage Clarifications
Policy Services Work Flow (POWR)	An outage is defined as anytime their scanning system is totally unavailable (both locations down) for more than 30 minutes excluding their daily batch window between midnight and 4:00am EST.
ProRater Uploads
PROTEUS (Atlantic, Gulf, Midwest, Pacific)	An outage for start of day is defined as anytime the 30 minute back-up occurs after 6:00am, or causes the application to be unavailable over 30 minutes.
Server Based Rating (SBR)	An outage is defined as an event (excluding call routing licensing issues) preventing quoting and/or selling. An exception would be one (1) Sunday a month (Sunday before Month End) from 3:30am until 5:30am EST.
Call Flow	A call routing outage is defined as anytime 100 unique customers calls are not successfully completed to Progressive (i.e., fast busy, non-working number recording) within a 15 minute period due to a Progressive error.
Speech Self Service	An outage is defined as an application or infrastructure event impacting 100 unique callers in a 15 minute period that prevents the application from responding to calls, receiving menu transactions, or successfully completing a requested transaction.
	Exceptions would include customer disconnects, call recording failures, a 10 minute daily window between 2 a.m. — 4 a.m. for ProBill file switching, and scheduled monthly and quarterly maintenance windows (monthly from 3:30 – 8am EST and quarterly from midnight to 8:00am EST).

• Baseline Connect for 2007 inclusion

2. Customer Experience (Retention)
An incident impacting 100 or more customers is defined as any of the following:

• The business issues an ACC/Letter because of an IT related problem

• E-mails are sent multiple times to the same person

• EFT (electronic fund transfers) incorrectly occur multiple times

• Bills are sent to the wrong person

• Billing is incorrect by more than $1.00

• Documents are retransmitted (post office, fax or email) for any of the conditions below:

o Print was incorrect

o Forms were missing

o Forms were sent in error

• Policyholder personal information is compromised by sharing or sending forms to the wrong person or agent.

3. Availability of an Application
There can be times when an application is available but a particular transaction could be out of service or malfunctioning. For our measurement purposes, this would typically be counted as an outage.

We recognize there could be an occasion where the unavailable transaction represents insignificant lost functionality and may affect less than 100 customers. These transactions being unavailable would not be counted as an outage.

4. Vendor Service Outages
Vendors are a critical component to our service delivery. We work with three types of vendors, Transaction Service Vendors (Equifax, Choicepoint, Discover, State MVR Centers, etc.), Infrastructure Vendors (IBM, Microsoft, Oracle, etc.), and Hosting Vendors (Convergys). It is the responsibility of the appropriate I/T group to manage and evaluate the quality of service received from these vendors.

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For purposes of this program, service disruptions caused by a Transaction Service Vendor or a Hosting Vendor site not being available, that is entirely a vendor issue, will not be counted as an outage. However, we have several arrangements for conversion to an alternate vendor or alternate vendor site during an outage. If we are unable to execute the conversion because of a Progressive related issue, this would be counted as an outage.

For purposes of this program, service disruptions caused by an Infrastructure Vendor will be counted as an outage.

5. Slow Response Time
Occasionally an application is available but the response time is poor. Slow response time will not be counted as an outage.

6. Scheduled Maintenance
Occasionally, system or facility work needs to be performed that cannot be completed during our normal maintenance hours (see rule #1 for maintenance hours). In spite of this downtime being scheduled in advance with our customers, it will be counted as an outage.

7. IT Performance and Retention Point Values
IT Performance
Any day without an outage will be awarded the maximum number of points for that day. Point values per day are weighted to correspond with the value to the business based on the volume of transactions. The maximum number of points earned per week is 10 points per application defined in Rule#1. The point value maximum, by day, is outlined in the following table:

Day	Points per Application		# of Applications	Maximum Points Per Day
Monday		2.0	21*	42
Tuesday		2.0	21*	42
Wednesday		1.5	21*	31.5
Thursday		1.5	21*	31.5
Friday		1.5	21*	31.5
Saturday		1.0	21*	21
Sunday		0.5	21*	10.5
Total		10.0	21*	220

• # of applications will be 21 until 7/1/2006 when Direct Pro is removed from the list. At that time the # of applications will be reduced to 20 and the maximum points per day will be reduced as well.

Point values will not be adjusted for holidays. In other words, if a holiday is celebrated on a Monday it will be given a 2 point value.

IT Customer Experience (Retention)
Outages that negatively affect customers will be assessed a 1.0 point loss per incident defined in Rule #2, regardless of the day it occurred.

8. Communications of Status
On a daily basis, we will communicate any outage in the Morning Status Report issued Monday through Friday by ETG. The outage will be highlighted in red.

Each Monday, ETG will distribute to all IT staff, the “Weekly IT Performance Report”, indicating the previous week’s results as well as the annualized point factor. In addition, a monthly report with year-to-date information will be distributed to all IT staff by the first Friday of the fiscal month.

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9. Appeal Process
Anyone within the organization has the right to appeal an outage. All appeals should be made by email to Ed Locker. Ed will ensure the appeal is presented in the Post Mortem review of the incident. If the outage was misrepresented, a reversal will be carried in the Weekly IT Performance Report and all associated status reports.

If the outage requires a judgment call, it will be reviewed by Jerry Winchell, Tom Cunningham, Scott McPherson, and Molly Gessler who will act as the Ruling Committee. All judgments made by the Ruling Committee are final.

10. Earned Points Chart for 2006
The attached 2006 Earned Points Chart correlates annual points earned to the IT Performance Factor.

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Schedule II

INFORMATION TECHNOLOGY INCENTIVE PLAN
2006 EARNED POINTS CHART

ANNUAL POINTS EARNED			IT PERFORMANCE
Minimum	Maximum		FACTOR
0		9,743		0.00
9,744		9,749		0.01
9,750		9,754		0.02
9,755		9,759		0.03
9,760		9,765		0.04
9,766		9,770		0.05
9,771		9,775		0.06
9,776		9,781		0.07
9,782		9,783		0.08
9,784		9,786		0.09
9,787		9,791		0.10
9,792		9,797		0.11
9,798		9,802		0.12
9,803		9,807		0.13
9,808		9,813		0.14
9,814		9,818		0.15
9,819		9,823		0.16
9,824		9,829		0.17
9,830		9,834		0.18
9,835		9,839		0.19
9,840		9,845		0.20
9,846		9,850		0.21
9,851		9,855		0.22
9,856		9,860		0.23
9,861		9,866		0.24
9,867		9,868		0.25
9,869		9,871		0.26
9,872		9,876		0.27
9,877		9,882		0.28
9,883		9,887		0.29
9,888		9,892		0.30
9,893		9,898		0.31
9,899		9,903		0.32
9,904		9,908		0.33
9,909		9,914		0.34
9,915		9,919		0.35
9,920		9,924		0.36
9,925		9,930		0.37
9,931		9,935		0.38

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ANNUAL POINTS EARNED			IT PERFORMANCE
Minimum	Maximum		FACTOR
9,936		9,940		0.39
9,941		9,946		0.40
9,947		9,951		0.41
9,952		9,954		0.42
9,955		9,956		0.43
9,957		9,962		0.44
9,963		9,967		0.45
9,968		9,972		0.46
9,973		9,978		0.47
9,979		9,983		0.48
9,984		9,988		0.49
9,989		9,994		0.50
9,995		9,999		0.51
10,000		10,004		0.52
10,005		10,010		0.53
10,011		10,015		0.54
10,016		10,020		0.55
10,021		10,026		0.56
10,027		10,031		0.57
10,032		10,034		0.58
10,035		10,036		0.59
10,037		10,042		0.60
10,043		10,047		0.61
10,048		10,052		0.62
10,053		10,058		0.63
10,059		10,063		0.64
10,064		10,068		0.65
10,069		10,074		0.66
10,075		10,079		0.67
10,080		10,084		0.68
10,085		10,090		0.69
10,091		10,095		0.70
10,096		10,100		0.71
10,101		10,106		0.72
10,107		10,111		0.73
10,112		10,116		0.74
10,117		10,119		0.75
10,120		10,122		0.76
10,123		10,127		0.77
10,128		10,132		0.78
10,133		10,138		0.79
10,139		10,143		0.80
10,144		10,148		0.81
10,149		10,154		0.82
10,155		10,159		0.83
10,160		10,164		0.84
10,165		10,170		0.85
10,171		10,175		0.86
10,176		10,180		0.87

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ANNUAL POINTS EARNED			IT PERFORMANCE
Minimum	Maximum		FACTOR
10,181		10,186		0.88
10,187		10,191		0.89
10,192		10,196		0.90
10,197		10,202		0.91
10,203		10,204		0.92
10,205		10,207		0.93
10,208		10,212		0.94
10,213		10,218		0.95
10,219		10,223		0.96
10,224		10,228		0.97
10,229		10,234		0.98
10,235		10,239		0.99
10,240		10,244		1.00
10,245		10,247		1.01
10,248		10,250		1.02
10,251		10,252		1.03
10,253		10,255		1.04
10,256		10,260		1.05
10,261		10,263		1.06
10,264		10,266		1.07
10,267		10,268		1.08
10,269		10,271		1.09
10,272		10,274		1.10
10,275		10,276		1.11
10,277		10,282		1.12
10,283		10,284		1.13
10,285		10,287		1.14
10,288		10,290		1.15
10,291		10,292		1.16
10,293		10,295		1.17
10,296		10,298		1.18
10,299		10,303		1.19
10,304		10,306		1.20
10,307		10,308		1.21
10,309		10,311		1.22
10,312		10,314		1.23
10,315		10,316		1.24
10,317		10,319		1.25
10,320		10,322		1.26
10,323		10,324		1.27
10,325		10,330		1.28
10,331		10,332		1.29
10,333		10,335		1.30
10,336		10,338		1.31
10,339		10,340		1.32
10,341		10,343		1.33
10,344		10,346		1.34
10,347		10,351		1.35
10,352		10,354		1.36

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ANNUAL POINTS EARNED			IT PERFORMANCE
Minimum	Maximum		FACTOR
10,355		10,356		1.37
10,357		10,359		1.38
10,360		10,362		1.39
10,363		10,364		1.40
10,365		10,367		1.41
10,368		10,370		1.42
10,371		10,372		1.43
10,373		10,378		1.44
10,379		10,380		1.45
10,381		10,383		1.46
10,384		10,386		1.47
10,387		10,388		1.48
10,389		10,391		1.49
10,392		10,393		1.50
10,394		10,399		1.51
10,400		10,401		1.52
10,402		10,404		1.53
10,405		10,407		1.54
10,408		10,409		1.55
10,410		10,412		1.56
10,413		10,415		1.57
10,416		10,420		1.58
10,421		10,423		1.59
10,424		10,425		1.60
10,426		10,428		1.61
10,429		10,431		1.62
10,432		10,433		1.63
10,434		10,436		1.64
10,437		10,439		1.65
10,440		10,441		1.66
10,442		10,447		1.67
10,448		10,449		1.68
10,450		10,452		1.69
10,453		10,455		1.70
10,456		10,457		1.71
10,458		10,460		1.72
10,461		10,463		1.73
10,464		10,468		1.74
10,469		10,471		1.75
10,472		10,473		1.76
10,474		10,476		1.77
10,477		10,479		1.78
10,480		10,481		1.79
10,482		10,484		1.80
10,485		10,489		1.81
10,490		10,492		1.82
10,493		10,495		1.83
10,496		10,497		1.84
10,498		10,500		1.85

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ANNUAL POINTS EARNED			IT PERFORMANCE
Minimum	Maximum		FACTOR
10,501		10,511		1.86
10,512		10,521		1.87
10,522		10,532		1.88
10,533		10,543		1.89
10,544		10,553		1.90
10,554		10,564		1.91
10,565		10,575		1.92
10,576		10,585		1.93
10,586		10,596		1.94
10,597		10,607		1.95
10,608		10,617		1.96
10,618		10,628		1.97
10,629		10,639		1.98
10,640		10,649		1.99
10,650		10,660		2.00

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EX-10.C

Exhibit No. 10(C)

2006 PROGRESSIVE CAPITAL MANAGEMENT
BONUS PLAN

1.	The Progressive Corporation and its subsidiaries (collectively “Progressive” or “Company”) have adopted the 2006 Progressive Capital Management Bonus Plan (“Plan”) as part of their compensation program for the Company’s investment professionals. The Plan is performance-based and is administered under the direction of the Compensation Committee of the Board of Directors of The Progressive Corporation (“Committee”).
2.	Progressive employees who are assigned primarily to the Company’s capital management function are eligible to be selected for participation in the Plan. Eligible employees may be selected by the Chief Executive Officer (“CEO”) and Chief Human Resource Officer (“CHRO”), acting jointly (collectively, the “Designated Executives”) to participate in the Plan for one or more Plan years. Participants may also participate in other gainsharing, bonus or incentive compensation plans maintained by Progressive, if so determined by the Designated Executives. Plan years shall coincide with Progressive’s fiscal years. For 2006, and each Plan year thereafter until otherwise determined by the Designated Executives, the following individuals will be entitled to participate in the Plan: William Cody, David Benson, Anthony Grandolfo, Dominic Visco, Eleanora Crosby, Nhu Bragg, Loren Letteau and Sandy Richards. Other eligible employees of the Company may be selected for participation in the Plan for or at any time during a Plan year by the Designated Executives. In such cases, the Designated Executives will determine whether the newly selected participant will be eligible to receive a Portfolio Performance Bonus, to participate in the Discretionary Bonus Pool or both and the Target Percentage and other terms of participation which will be applicable to such participant.
3.	The Plan offers participants the opportunity to earn bonus compensation through two (2) separate components: the Portfolio Performance Component and the Discretionary Bonus Pool Component, as described in Sections 4 and 5 below (“Bonus Components”). The term “Annual Bonus,” as used herein, shall mean the aggregate of all bonuses earned by or awarded to a participant under the two (2) Bonus Components.
4.	The Portfolio Performance Component

A.	The amount of the Portfolio Performance Bonus earned by any participant under the Plan for any Plan year will be determined by application of the following formula:
	Portfolio Performance Bonus = Paid Earnings x Target Percentage x Portfolio Performance Factor
B.	For purposes of the Plan, “Paid Earnings” shall include (a) regular, used Earned Time Benefit, sick, holiday, funeral and overtime pay received by the participant during the Plan year for work or services performed by the participant during the Plan year as an officer or employee of Progressive, and (b) retroactive payments of any of the foregoing relating to the same Plan year.

1

	For purposes of the Plan, Paid Earnings shall not include any (a) short-term or long-term disability payments, (b) lump sum merit awards, (c) payments from the discretionary cash fund, (d) any other discretionary or other bonus or incentive compensation awards, (e) the earnings replacement component of any workers’ compensation award or (f) any unused Earned Time Benefit. If an additional participant is added during the course of a given Plan year, his or her Portfolio Performance Bonus will be based on the portion of his or her salary earned during the part of the Plan year during which he or she participated in the Plan.
	Notwithstanding the foregoing, if at the end of the 24th pay period of a Plan year, any Plan participant’s then current annual salary exceeds his or her salary range maximum plus $105, then for purposes of computing his or her Portfolio Performance Bonus under the Plan, his or her Paid Earnings (including regular, used Earned Time Benefit, sick, holiday and funeral pay) for any bi-weekly pay period during the Plan year will not exceed 1/26th of his or her annual salary range maximum (as in effect as of the end of the applicable pay period). Without regard to that limitation, such participant’s Paid Earnings for the full Plan year will include the full amount of the following items, if any, received by such participant for that Plan year: (a) overtime pay, and (b) retroactive payments of regular, used Earned Time Benefit, sick, holiday, overtime and funeral pay.
C.	The Target Percentages for participants in the Plan shall be determined by or under the direction of the Committee, but will not exceed 125% for any participant. Target Percentages may vary among Plan participants and may be changed from year to year by or under the direction of the Committee. For 2006, and each Plan year thereafter until otherwise determined by the Committee, the Target Percentages for the Plan participants shall be as follows:
	(Information Omitted)

D.	Portfolio Performance Factor
	The Portfolio Performance Factor is determined by comparing the actual performance of designated segments of Progressive’s investment portfolio (“Portfolio Segments”) against the risk-adjusted returns of specified external benchmarks (“Investment Benchmarks”).
	The applicable Portfolio Segments, the weighting of the applicable Portfolio Segments for any participant, the related Investment Benchmarks and the funds,

2

investments or indexes which comprise the Investment Benchmarks will be designated, and may be changed from year to year, by or under the direction of the Committee.

The Portfolio Performance Factor is based on the Plan year performance of each designated Portfolio Segment of Progressive’s investment portfolio. Investment results are marked to market in order to calculate total return, which is then compared against the risk-adjusted return(s) of the designated Investment Benchmark (or the investments that make up such Benchmark) to produce a Performance Score for the applicable Portfolio Segment.

For 2006, and for each Plan year thereafter until otherwise determined by the Committee, for purposes of the Plan, performance shall be measured on the basis of a single Portfolio Segment: the fixed income portfolio (“Fixed Income Portfolio”).

Fixed Income Portfolio. At the conclusion of a Plan year, the returns achieved by the various investments that comprise the selected Investment Benchmark for the Fixed Income Portfolio will be risk-adjusted through application of the Modigliani & Modigliani formula for measuring risk-adjusted performance (“Modigliani Formula”) in accordance with the provisions of Exhibit I hereto, and ranked according to their respective risk-adjusted returns for the Plan year. In applying the Modigliani Formula to the Investment Benchmark for the Fixed Income Portfolio, risk-adjusted returns are calculated using the standard deviation of three years of quarterly returns (i.e. 12 data points).

The investment performance achieved by the Fixed Income Portfolio for the Plan year will then be compared against the risk-adjusted returns of the various investments which comprise the applicable Investment Benchmark to determine where the Fixed Income Portfolio’s performance falls when compared to the risk-adjusted returns of the investments which comprise the Investment Benchmark (“Performance Ranking”). The Portfolio Performance of the Fixed Income Portfolio is determined by its Performance Ranking for the Plan year.

For purposes of computing performance of the Fixed Income Portfolio under the Plan, results will include the benefit of any state premium tax abatements for municipal securities held in the Portfolio which are realized by the Company for the Plan Year. The method to be used to calculate Interpolated Values, Linear Performance Targets and the Portfolio Performance Factor for purposes of this Plan is attached hereto as Exhibit II.

Performance of the Fixed Income Portfolio shall be measured against the risk-adjusted return(s) of any one, or a combination of any two or more, of the following Investment Benchmarks, or such other benchmark or benchmarks, as shall be designated by or under the direction of the Committee for the designated Plan year:

3

Rogers Casey Intermediate Fixed Income Funds

Rogers Casey Limited Duration Fixed Income Funds

Lehman Intermediate Corp./Gov. Index

The applicable Investment Benchmark(s), or combination thereof, will be selected, and may be changed on an annual or quarterly basis, by or with the approval of the Committee. For 2006, and for all subsequent Plan years until otherwise determined by the Committee, the performance of the Fixed Income Portfolio will be measured against the Rogers Casey Intermediate Fixed Income Funds benchmark. In the event that different Investment Benchmarks are applicable to different quarterly periods within a given Plan year, the quarterly performance results will be combined and the arithmetic mean of such results will equal the Performance Score for the Plan year.

The Portfolio Performance Factor for any participant can vary from 0 to 2.0, based on actual performance versus the pre-established Investment Benchmarks.

5. Discretionary Bonus Pool Component

A.

For each Plan year, a pool of bonus money will be objectively determined and made available to the Chief Investment Officer (“CIO”) to distribute among designated participants in his or her sole discretion, subject to approval by either the CEO, CHRO or the Chief Financial Officer. The Designated Executives shall designate the individuals, if any, who are eligible to participate in the Discretionary Bonus Pool for a given Plan year. For 2006, and each Plan year thereafter until otherwise determined by the Designated Executives, the eligible participants for the Discretionary Bonus Pool will be David Benson, Anthony Grandolfo, Loren Letteau and Dominic Visco, as well as any other participants who may be so designated by the Designated Executives during the course of a Plan Year. The CIO is not obligated to disburse all of the funds in the bonus pool, and may not disburse more than the value of the pool. Undisbursed funds will not be carried over to future years.

B.

The Discretionary Bonus Pool is based on the Fixed Income Portfolio performance and is calculated by adding the product of each participant’s Paid Earnings multiplied by the target percentage designated by the Designated Executives for the purpose of determining the amount of the Discretionary Bonus Pool for the Plan year (not to exceed 20%), multiplied by the performance score of the Fixed Income Portfolio, which can range from 0 to 2. The Discretionary Bonus Pool will be calculated using the amount of salary actually paid to eligible participants during the course of the Plan year.

6. After the end of each Plan year, and after the investment results have been determined and Benchmark data for such Plan year have become available, the bonuses earned by each participant pursuant to the provisions of Sections 4 and 5 of this Plan will be

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	calculated and then aggregated to determine the Annual Bonus earned by each participant in the Plan. Subject to the following paragraph and Paragraph 7 below, the Annual Bonuses for a Plan year will be paid to Plan participants as soon as practicable thereafter, but no later than March 15th of the following year.
	Any Plan participant who is eligible to participate in The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) may elect to defer all or any portion of his or her annual Portfolio Performance Bonus otherwise payable under this Plan, subject to and in accordance with the terms of the Deferral Plan. Bonuses based on the Discretionary Bonus Pool Component are not eligible for deferral under the Deferred Plan.
7.	Unless otherwise determined by the Committee, and except as otherwise provided herein, in order to be entitled to receive an Annual Bonus for any Plan year, the participant must be an active employee of Progressive on the last day of such Plan year (“Qualification Date”). Any participant who is on a leave of absence covered by the Family and Medical Leave Act of 1993, personal leave approved by the Company, military leave or short or long-term disability on the Qualification Date relating to any Plan year will be entitled to receive an Annual Bonus for the Plan year based on the Paid Earnings received by the participant during the Plan year. Annual Bonus payments made to participants will be net of any legally required deductions for federal, state and local taxes and other items.
8.	If, for any Plan year, an employee has been selected to participate in both this Plan and another incentive plan offered by the Company, then with respect to such employee, the Portfolio Performance Bonus formula set forth in Paragraph 4 hereof will be appropriately adjusted by applying a weighting factor to reflect the proportion of the employee’s total annual incentive opportunity that is being provided by this Plan. The Designated Executives shall have full authority to determine the incentive plan or plans in which any employee shall participate during any Plan year and, if an employee is selected to participate in more than one plan, the weighting factor that will apply to each such plan.
9.	The right to any Annual Bonuses hereunder may not be sold, transferred, assigned or encumbered by any participant. Nothing herein shall prevent any participant’s interest hereunder from being subject to involuntary attachment, levy or other legal process.
10.	The Plan will be administered by or under the direction of the Committee. The Committee will have the authority to adopt, alter, amend, modify and repeal such rules, guidelines, procedures and practices governing the Plan as it, from time to time, in its sole discretion deems advisable.
	The Committee will have full authority to determine the manner in which the Plan will operate, to interpret the provisions of the Plan and to make all determinations thereunder. All such interpretations and determinations will be final and binding on Progressive, all Plan participants and all other parties. No such interpretation or determination may be relied on as a precedent for any similar action or decision.

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	Unless otherwise determined by the Committee, all of the authority of the Committee hereunder (including, without limitation, the authority to administer the Plan, select the persons entitled to participate herein or with respect to the various Bonus Components provided for herein, interpret the provisions hereof, waive any of the requirements specified herein and make determinations hereunder and to establish, approve, change or modify Bonus Components, Component weightings, Investment Benchmarks, Performance Targets and Target Percentages) may be exercised by the Designated Officers, acting jointly. If either of said officers is unavailable or unable to participate, or if either of such positions are vacant, the Chief Financial Officer may act instead of such officer.
11.	The Plan may be terminated, amended or revised, in whole or in part, at any time and from time to time by the Committee, in its sole discretion.
12.	The Plan will be unfunded and all payments due under the Plan will be made from Progressive’s general assets.
13.	Nothing in the Plan shall be construed as conferring upon any person the right to remain a participant in the Plan or to remain employed by Progressive, nor shall the Plan limit Progressive’s right to discipline or discharge any of its officers or employees or change any of their job titles, duties or compensation.
14.	Progressive shall have the unrestricted right to set off against or recover out of any bonuses or other sums owed to any participant under the Plan any amounts owed by such participant to Progressive.
15.	This Plan supersedes all prior plans, agreements, understandings and arrangements regarding bonuses or other cash incentive compensation payable or due to any participant from Progressive with respect to the performance of Progressive’s investment portfolio. Without limiting the generality of the foregoing, this Plan supersedes and replaces the 2005 Progressive Capital Management Bonus Plan (the “Prior Plan”), which is and shall be deemed to be terminated as of December 31, 2005 (the “Termination Date”); provided, that any bonuses or other sums earned and payable under the Prior Plan with respect to any Plan year ended on or prior to the Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.
16.	This Plan is adopted and, is to be effective, as of January 1, 2006, which is the commencement of Progressive’s 2006 fiscal year. This Plan shall be effective for the 2006 Plan year (which coincides with Progressive’s 2006 fiscal year) and for each Plan year thereafter unless and until terminated by the Committee.
17.	This Plan shall be interpreted and construed in accordance with the laws of the State of Ohio.

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EXHIBIT I

Method Used to Calculate the Bonus Compensation for PCM Fixed Income Portfolio

The Portfolio Performance Factor used to determine the bonus component of PCM compensation depends on the ranking of the PCM Fixed Income Portfolio Segment’s total return for the Plan year compared to the respective risk-adjusted total returns of its peers from the Rogers-Casey survey of Intermediate Fixed Income Fund managers (“R-C Survey”). Because the R-C Survey is only conducted quarterly, we must use quarterly data for a return’s standard deviation. The annual returns are calculated from the 4 quarterly returns of the year, but the standard deviation calculation is derived from the most recent 12 quarters (3 years) and converted to annual terms. A fund must have return data for all 12 quarters to be included in the comparison sample.

In calculating the PCM Fixed Income Portfolio’s total return, results will include the benefit of any state premium tax abatements for municipal securities held in the Portfolio which are realized by the Company during the Plan year. To calculate the ranking of PCM returns relative to the returns of the fund managers in the R-C Survey, we adjust the individual R-C fund managers’ returns to match the risk of the PCM Fixed Income Portfolio Segment by applying the Modigliani & Modigliani (M2) formula. Thus, the raw PCM return and the risk-adjusted PCM return will be identical, while the individual R-C fund manager returns will be adjusted according to how much risk each has undertaken relative to PCM. The formula and definitions are set forth below:

RA Return (fund) = [STDpgr/STDfund] * [Raw Return (fund) – Rf] + Rf

STDpgr = Sample Standard Deviation of PCM Quarterly Returns (Annualized) for 3 Years (i.e., 12 data points)
STDfund = Sample Standard Deviation of R-C Fund Manager’s Quarterly Returns (Annualized) for 3 Years (i.e., 12 data points)
Raw Return (fund) = Total Return of Individual R-C Fund Manager for 4 Quarters (Annual return)
Rf = “Risk-free rate” 90-day LIBOR Rate at Beginning of Each Quarter for 4 Quarters (Annual return)

Example 1:	Example 2:
Fund had more risk than PCM	Fund had less risk than PCM
STDpgr = 15%	STDpgr = 15%
STDfund = 20%	STDfund = 10%
Raw Return (fund) = 8%	Raw Return (fund) = 8%
Rf = 4%	Rf = 4%
RA Return (fund) = [15% / 20%]*[8% — 4%] + 4%	RA Return (fund) = [15% / 10%]*[8% — 4%] + 4%
RA Return (fund) = 7%	RA Return (fund) = 10%
Because the fund was riskier, its RA return is lower	Because the fund was less risky, its RA return is higher

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EXHIBIT II

Method Used to Calculate Interpolated Values, Linear Performance Targets and Portfolio Performance Factor

Once all the M2 returns are calculated, the data is sorted in descending order from highest to lowest risk-adjusted return. From here, the process to compute the Portfolio Performance Factor is employed.

INTERPOLATED VALUES FOR SETTING TOP AND BOTTOM 5% LEVELS
The top 5% and bottom 5% risk-adjusted total return rankings are computed based on the total number of participants, excluding the PCM return. For example, if there were 90 participants, the return required to earn a 2.0 portfolio performance factor would be determined by interpolating between the fourth and fifth firm’s returns, since 5% of 90 = 4.50. The same procedure would be used to determine the 0.0 portfolio performance factor.

The total returns, computed by Investment Accounting, for the interpolated positions are calculated as follows (ex. 90 survey participants):

Interpolated Value = Member 4 return – ((Member 4 Return- Member 5 Return)*0.50)
Member 4 = 5.30%
Member 5 = 5.10%

Member 4.5 (Interpolated Value) = 5.30% – ((5.30%-5.10%)*0.50) = 5.20%

Once the two groups are computed, top and bottom 5%, the remainder of the Portfolio Performance targets are calculated as follows:

Portfolio Performance target variance = (2.00) / Number of positions from first participant after the top 5% ranking to the 1^st participant in the bottom 5% ranking. In the case of 90 participants, the number of positions to divide the 2.00 performance factors by would be 83.

The calculation for the Portfolio Performance target variance from 2.00 – 0.00 would be:

2.00 / 83 = .024096 per position for the 90 participant level.

In the case of a tie in risk-adjusted total returns between participants, each participant will have the same Portfolio Performance Factor. The next lowest position would then be stepped down by a factor based on the number of participants who tie. In the case of a

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tie between two firms, the step down will be twice the Portfolio Performance target variance to maintain the proper stepping to the 0.00 Portfolio Performance Factor level.

Example: If member return number 5 and 6 each had the same score in the 90 participant example, then 5 and 6 would have a Portfolio Performance Factor of 1.97504, which is 2.00 — .024096. The number 7 position in this example would have a Portfolio Performance Factor of 1.926848, which is the required step down from 5 to 7.

In addition, if the returns are tied between the interpolated value set for the 2.00 Portfolio Performance Factor and any position below the 2.00 level, those lower positions will also be set to a 2.00 Portfolio Performance Factor. The step down factor in the Portfolio Performance targets will work similarly as noted in the example above. For the last 5% group, all firms with risk adjusted total returns equaling the last interpolated total return value would have the same Portfolio Performance Factor as the interpolated value, all others in the last 5% group would have a 0.00 Portfolio Performance Factor.

Once all the Portfolio Performance targets have been created, from 2.00 to 0.00, PCM’s return is compared to the rankings to determine its Portfolio Performance Factor. If the PCM return is not in the top or bottom 5% and does not match the return of any participant, the Portfolio Performance Factor is an interpolated value between the firms with the next highest and next lowest returns.

The interpolation computation for the Portfolio Performance Factor based on PCM’s return is as follows:

Portfolio Performance Factor of return below PCM return + (PCM’s Return – Return below PCM) / (Return above PCM – Return below PCM) * (Portfolio Performance Factor of return above PCM – Portfolio Performance Factor of return below PCM)

For the 90 participants example, the calculation of PCM’s Portfolio Performance Factor is:
1.8554 + ((5.47-5.32) / (5.63-5.32) * (1.8795-1.8554) = 1.867061

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EX-10.D

Exhibit No. (D)

2006 Board of Directors Compensation

Compensation Component	Amount
Board Retainer	$	110,000
Audit Committee Chair Retainer	$	65,000
Audit Committee Member Retainer	$	45,000
Compensation Committee Chair Retainer	$	45,000
Compensation Committee Member Retainer	$	40,000
Investment Committee Chair Retainer	$	45,000
Investment Committee Member Retainer	$	40,000
Additional Committee Chair Retainer*	$	15,000
Additional Committee Member Retainer*	$	10,000
Chairman of the Board	$	200,000

* Excludes Executive Committee.

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