10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2011

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 1-9518

THE PROGRESSIVE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	34-0963169
(State or other jurisdiction 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)

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

Title of each class	Name of each exchange on which registered
Common Shares, $1.00 Par Value	New York Stock Exchange

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

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes    ¨  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    x  No

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    x  Yes    ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2011: $12,567,057,592

The number of the registrant’s Common Shares, $1.00 par value, outstanding as of January 31, 2012: 611,506,847

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2012, and the Annual Report to Shareholders for the year ended December 31, 2011, included as Exhibit 13 to this Form 10-K, are incorporated by reference in Parts I, II, III, and IV hereof.

INTRODUCTION

Portions of the information included in The Progressive Corporation’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2012 (the “Proxy Statement”) have been incorporated by reference herein and are identified under the appropriate items in this Form 10-K. The 2011 Annual Report to Shareholders (the “Annual Report”) of The Progressive Corporation and subsidiaries, which will be attached as an Appendix to the 2012 Proxy Statement, is included as Exhibit 13 to this Form 10-K. Cross references to relevant sections of the Annual Report are included under the appropriate items of this Form 10-K.

PART I

ITEM 1. BUSINESS

(a) General Development of Business

The Progressive insurance organization began business in 1937. The Progressive Corporation, an insurance holding company formed in 1965, currently has 54 subsidiaries and 1 mutual insurance company affiliate. These insurance subsidiaries and affiliate provide personal and commercial automobile insurance and other specialty property-casualty insurance and related services. Our property-casualty insurance products protect our customers against losses due to collision and physical damage to their motor vehicles, uninsured and underinsured bodily injury, and liability to others for personal injury or property damage arising out of the use of those vehicles. Our non-insurance subsidiaries generally support our insurance and investment operations. We operate our businesses throughout the United States and sell personal auto insurance on an Internet-only basis in Australia.

(b) Financial Information About Segments

Incorporated by reference from Note 10 - Segment Information in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

(c) Narrative Description of Business

We offer a number of personal and commercial property-casualty insurance products primarily related to motor vehicles. Net premiums written were $15.1 billion in 2011, compared to $14.5 billion in 2010 and $14.0 billion in 2009. Our combined ratio, calculated on a basis consistent with accounting principles generally accepted in the United States of America (GAAP), was 93.0 in 2011, 92.4 in 2010, and 91.6 in 2009.

Organization

Auto insurance differs greatly by community because legal requirements and decisions vary by state and because, among other factors, traffic, law enforcement, cultural attitudes, insurance agents, medical services, and auto repair services vary by community. To respond to these local differences, we are organized as follows:

• Personal Lines – One Group President manages our Personal Lines business, which includes insurance for personal autos and special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, snowmobiles, and similar items):

• We currently write personal auto insurance in all 50 of the United States, the District of Columbia, and on an Internet-only basis in Australia. Our personal auto management group is organized by state into four geographic regions in the United States, plus a region for Australia. Each region is led by a general manager, as well as a separate manager for our California Agency organization.

• We write the majority of our special lines products in all 50 states. Our special lines management group is organized by product and led by a general manager.

• Commercial Auto – One Group President manages our Commercial Auto business, which offers products in 49 states; we do not currently write Commercial Auto in Hawaii or the District of Columbia. The Commercial Auto business is organized by state, with product managers responsible for local implementation. These state-level managers are led by two regional directors who report to a general manager.

• Claims – One Group President manages our Claims business area, which is organized into four groups. Three of the groups are based on geographic region, and one is a nationwide group that provides various claims-related services, including catastrophe response and special investigations. Each group is headed by a general manager, and each handles both Personal Lines and Commercial Auto claims.

Our customer service groups, located at call centers in Mayfield Village, Ohio; Austin, Texas; Tampa, Florida; Sacramento, California; Tempe, Arizona; and Colorado Springs, Colorado, support our policy servicing, agency distribution, claims, and direct sales operations.

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Our executive management team sets policy and makes key strategic decisions. This team includes the Chief Executive Officer, Chief Financial Officer, Chief Legal Officer, Chief Investment Officer, Chief Information Officer, Chief Human Resource Officer, and Chief Marketing Officer, as well as our three Group Presidents (discussed above). The Group Presidents are responsible for the development and management of our product offerings and customer service processes that are tailored to the unique characteristics and purchasing preferences of customers who shop for and select our insurance products.

Personal Lines

Our Personal Lines segment writes insurance for personal autos and recreational and other vehicles. This business generally offers more than one program in a single state, with each program targeted to a specific distribution channel, market, or customer group. The Personal Lines business accounted for approximately 90% of total net premiums written for each of the last three years. Our strategy is to be a competitively priced provider of a full line of auto insurance products with distinctive service, distributed through whichever channel the customer prefers. Volume potential is driven by our price competitiveness, brand recognition, service quality, and the actions of our competitors, among other factors. See “Competitive Factors” on page 5 of this report for further discussion.

We ranked fourth in market share in the U.S. private passenger auto market for 2010 based on net premiums written and believe that we held that position for 2011. There are approximately 350 competitors in this market. Progressive and the other leading 15 private passenger auto insurers, each of which writes over $1.9 billion of premiums, comprise about 75% of this market. For 2010, the industry net premiums written for private passenger auto insurance in the United States was $158.9 billion, and our share of this market was approximately 8.0%, compared to $156.6 billion and 7.7% in 2009, respectively; comparable industry data is not available for 2011 at this time. All industry data, including ranking and market share, was obtained directly from data reported by either SNL Financial or A.M. Best Company, Inc. (“A.M. Best”), or was estimated using A.M. Best data as the primary source.

The Personal Lines segment consists of our personal auto insurance products, as well as our special lines products.

• Personal auto insurance represented approximately 90% of our total Personal Lines net premiums written for each of the last three years. This business includes Snapshot^®, our usage-based insurance product, which is available to consumers in 39 states and the District of Columbia in our Direct channel, and in 33 jurisdictions in our Agency channel, with continued expansion planned for 2012, depending on regulatory approval and business results. We currently have four patents, and additional patent applications pending, with respect to certain methods and systems of providing usage-based insurance. Certain of our patent rights begin to expire on or about January 29, 2016, while others extend well beyond that date.

• Special lines products include insurance for motorcycles, ATVs, RVs, mobile homes, watercraft, snowmobiles, and similar items, and represent about 10% of our Personal Lines business. Due to the nature of these products, we typically experience higher losses during the warmer weather months. Our competitors are specialty companies and large multi-line insurance carriers. Although industry figures are not available, based on our analysis of this market, we believe that we are one of the largest participants in the specialty personal lines market, and that we have been the market share leader for the motorcycle product since 1998. We also offer a personal umbrella insurance product in 32 states through certain independent agents and to Direct customers via telephone, and plan to continue the roll-out in both channels in 2012.

Our Personal Lines products are sold through both the agency and direct channels:

• The Agency business includes business written by our network of more than 35,000 independent insurance agencies located throughout the United States, including brokerages in New York and California. These independent insurance agents and brokers have the ability to place business with Progressive for specified insurance coverages within prescribed underwriting guidelines, subject to compliance with company-mandated procedures. Our guidelines prescribe the kinds and amounts of coverage that may be written and the premium rates that may be charged for specified categories of risk. The agents and brokers do not have authority on behalf of Progressive to establish underwriting guidelines, develop rates, settle or adjust claims, or enter into other transactions or commitments. The Agency business also writes through strategic alliance business relationships with other insurance companies, financial institutions, and national agencies. The total net premiums written through the Agency business represented 57% of our Personal Lines volume in 2011, compared to 58% in 2010 and 59% in 2009.

• The Direct business includes business written directly by us online and over the phone. The Direct business represented 43% of our Personal Lines volume in 2011, compared to 42% in 2010 and 41% in 2009.

Commercial Auto

The Commercial Auto business writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses and represented approximately 10% of our total net premiums written for each of the last three years. The majority of our Commercial Auto customers insure three or fewer vehicles. The Commercial Auto business, which is primarily distributed through the independent agency channel, operates in the following business market targets:

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• Business auto – autos, vans, and pick-up trucks used by small businesses, such as retailing, farming, services, and private trucking

• Contractor – vans, pick-up trucks, and dump trucks used by small businesses, such as artisan contractors, heavy construction, and landscapers/snowplowers

• For-hire transportation – tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses and non-fleet long-haul operators

• For-hire specialty – dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses, and

• Tow – tow trucks and wreckers used in towing services and gas/service station businesses.

Business auto and contractor are the two largest business market targets, and together account for approximately 60% of our total Commercial Auto premiums and approximately 75% of the vehicles we insure in this business. Although the Commercial Auto business differs from Personal Lines auto in its customer bases and products written, both businesses require the same fundamental skills, including disciplined underwriting and pricing, as well as excellent claims service.

There are approximately 370 competitors in the total commercial auto market. We primarily compete with about 34 other large companies/groups, each with over $130 million of commercial auto premiums written annually. These leading commercial auto insurers comprise about 75% of this market. Our Commercial Auto business ranked fourth in the commercial auto insurance market for 2010, and we believe that we will be in the top four for 2011.

Other Indemnity Businesses

Our other indemnity businesses, which represented less than 1% of our net premiums written in each of the last three years, consist of managing our run-off businesses, including the run-off of our professional liability businesses, which we sold in 2010. Pursuant to our agreement with the purchaser of this business, we will continue to write these policies, principally directors and officers liability insurance for community banks, for an agreed upon period after the closing of the sale. From August 1, 2009 through June 30, 2010, the substantial majority of the business written for these policies was 100% reinsured. Beginning in July 2010, all such new and renewal business is 100% reinsured. As of December 31, 2011, we continued to write this business in only two states and will stop writing all of this business as of April 30, 2012. The sale of these businesses did not have a material effect on our financial condition, results of operations, or cash flows.

Service Businesses

Our service businesses, which represent less than 1% of our total revenues and do not have a material effect on our operations, primarily include:

• Commercial Auto Insurance Procedures/Plans (CAIP) - We are the only servicing carrier on a nationwide basis for CAIP, which are state-supervised plans servicing the involuntary market in 42 states and the District of Columbia. As a service provider, we provide policy issuance and claims adjusting services and collect fee revenue that is earned on a pro rata basis over the terms of the related policies. In 2010, we reached an agreement with AIPSO (the national organization responsible for administering the involuntary insurance market) under which we will receive a supplemental fee, when necessary, to satisfy a minimum servicing fee requirement; this agreement is scheduled to expire on August 31, 2013. We cede 100% of the premiums and losses to the plans. Reimbursements to us from the CAIP plans are required by state laws and regulations. Material violations of contractual service standards can result in ceding restrictions for the affected business. We have maintained, and plan to continue to maintain, compliance with these standards. Any changes in our participation as a CAIP service provider would not materially affect our financial condition, results of operations, or cash flows.

• Progressive Home Advantage^® - Through Progressive Home Advantage, we offer, either directly or through our network of independent agents, new and existing Progressive Agency and Direct customers home, condominium, and renters insurance underwritten by unaffiliated homeowner’s insurance companies. Progressive Home Advantage is not available to customers in Florida and Alaska. For the policies written under this program in our Direct business, we receive commissions, which are used to mitigate the expenses associated with maintaining this program.

• Progressive Commercial Advantage^SM - We currently offer our Commercial Auto customers the ability to package their auto coverage with other commercial coverages that are underwritten by three unaffiliated insurance companies. This program offers general liability coverage in 19 states and workers’ compensation coverage in 14 states as of December 31, 2011. We receive commissions for the policies written under this program, which are used to mitigate the expenses associated with maintaining this program.

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Claims

We manage our claims handling on a companywide basis through approximately 280 claims offices located throughout the United States. In addition, we have in operation 54 service centers, in 41 metropolitan areas across the country, that provide our concierge level claims service, of which 7 have combined our claims offices and service centers to improve our efficiency. These service centers are designed to provide end-to-end resolution for auto physical damage losses. Customers can choose to bring their vehicles to one of these sites, where they can pick up a rental vehicle. Our representatives will then write the estimate, select a qualified repair shop, arrange the repair, including pick-up and delivery of the vehicle, and inspect the vehicle once the repairs are complete. We hold a U.S. patent for this innovative approach to the vehicle repair process, which increases consumer satisfaction and our productivity, and improves the cycle time in comparison to other claims settlement processes. This patent expires on June 5, 2021.

Competitive Factors

The automobile insurance and other property-casualty markets in which we operate are highly competitive. Property-casualty insurers generally compete on the basis of price, consumer recognition and confidence, coverages offered and other product features, claims handling, financial stability, customer service, and geographic coverage. Vigorous competition is provided by large, well-capitalized national companies in both the Agency and Direct channels, and by smaller regional issuers. In the Agency channel, some of our competitors have broad distribution networks of employed or captive agents. Over the last few years, comparative rating services have gained prominence, adding transparency to industry pricing, and many of our competitors have significantly increased their advertising and marketing efforts and/or expanded their online service offerings. These changes have further intensified the competitive nature of the automobile and other property-casualty insurance markets in which we operate.

We rely heavily on technology and extensive data gathering and analysis to segment markets and price accurately according to risk potential. We have remained competitive by refining our risk measurement and price segmentation skills, closely managing expenses, and achieving operating efficiencies. Superior customer service, fair and accurate claims adjusting, and strong brand recognition are also important factors in our competitive strategy.

State Insurance Licenses

Our insurance subsidiaries operate under licenses issued by various state insurance authorities. These licenses may be of perpetual duration or renewable periodically, provided the holder continues to meet applicable regulatory requirements. Our licenses govern the kinds of insurance coverages that may be written by our insurance subsidiaries in the issuing state. Such licenses are normally issued only after the filing of an appropriate application and the satisfaction of prescribed criteria. All licenses that are material to the subsidiaries’ businesses are in good standing.

Insurance Regulation

Progressive’s insurance subsidiaries are generally subject to regulation and supervision by insurance departments of the jurisdictions in which they are domiciled or licensed to transact business. At least one of our insurance subsidiaries is licensed and subject to regulation in each of the 50 states and the District of Columbia. The nature and extent of such regulation and supervision varies from jurisdiction to jurisdiction. Generally, an insurance company is subject to a higher degree of regulation and supervision in its state of domicile. Progressive’s insurance subsidiaries and its affiliate are domiciled in the states of Indiana, Louisiana, Michigan, New Jersey, New York, Ohio, Texas, and Wisconsin. In addition, California and Florida treat certain Progressive subsidiaries as domestic insurers for certain purposes under their “commercial domicile” laws.

State insurance laws impose numerous requirements, conditions, and limitations on the operations of insurance companies. Insurance departments have broad regulatory powers relating to those operations. Regulated areas include, among others:

• Licensing of insurers and agents

• Capital and surplus requirements

• Statutory accounting principles specific to insurance companies and the content of required financial and other reports

• Requirements for establishing insurance reserves

• Investments

• Acquisitions of insurers and transactions between insurers and affiliates

• Limitations on rates of return or profitability

• Rating criteria, rate levels, and rate changes

• Insolvencies of insurance companies

• Assigned risk programs

• Authority to exit a business, and

• Numerous requirements relating to other areas of insurance operations, including: required coverages, policy forms, underwriting standards, and claims handling.

Insurance departments are authorized to conduct periodic and other examinations of regulated insurers’ financial condition and operations to monitor the financial stability of the insurers and to ensure adherence to statutory accounting principles and compliance with state insurance laws and regulations. In addition, in some states, the attorney general’s office may exercise certain supervisory authority over insurance companies and, from time to time, may investigate certain insurance company practices.

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Insurance departments establish and monitor compliance with capital and surplus requirements. Although the ratio of writings to surplus that the regulators will allow is a function of a number of factors (including applicable law, the type of business being written, the adequacy of the insurer’s reserves, and the quality of the insurer’s assets), the annual net premiums that an insurer may write have historically been perceived to be limited to a specified multiple of the insurer’s total surplus, generally 3 to 1. Thus, the amount of an insurer’s statutory surplus, in certain cases, may limit its ability to grow its business. At year-end 2011, we had net premiums written of $15,146.6 million and statutory surplus of $5,269.2 million. The combined premiums-to-surplus ratio for all Progressive insurance companies was 2.9 to 1. In addition, as of December 31, 2011, we had access to $2.0 billion in a non-insurance subsidiary, portions of which could be contributed to the capital of our insurance subsidiaries to support growth as needed. The National Association of Insurance Commissioners (NAIC) also has developed a risk-based capital (RBC) program to enable regulators to take appropriate and timely regulatory actions relating to insurers that show signs of weak or deteriorating financial condition. RBC is a series of dynamic surplus-related formulas that contain a variety of factors that are applied to financial balances based on the degree of certain risks, such as asset, credit, and underwriting risks. Progressive’s RBC ratios are well in excess of minimum requirements.

Insurance companies are generally required to file detailed annual and other reports with the insurance department of each jurisdiction in which they conduct business. These reports include:

• the insurer’s financial statements under statutory accounting principles

• details concerning claims reserves held by the insurer

• specific investments held by the insurer, and

• numerous other disclosures about the insurer’s financial condition and operations.

State insurance laws and insurance departments also regulate investments that insurers are permitted to make. Limitations are placed on the amounts an insurer may invest in a particular issuer, as well as the aggregate amount an insurer may invest in certain types of investments. Certain investments are prohibited.

Insurance holding company laws enacted in many jurisdictions authorize insurance departments to regulate acquisitions of insurers and certain other transactions and to require periodic disclosure of certain information. These laws impose prior approval requirements for certain transactions between insurers and their affiliates and generally regulate dividend and other distributions, including loans and cash advances, between insurers and their affiliates. See the “Dividends” discussion in Item 5(c) herein for further information on these dividend limitations. In December 2010, the NAIC promulgated a revised model holding company act, which, to the extent ultimately adopted by individual state legislatures, will expand the scope of existing insurance holding company regulation.

Under state insolvency and guaranty laws, insurers can be assessed or required to contribute to state guaranty funds to cover policyholder losses resulting from the insolvency of other insurers. Insurers are also required by many states, as a condition of doing business in the state, to provide coverage to certain risks that cannot find coverage in the voluntary market. These “assigned risk” plans generally specify the types of insurance and the level of coverage that must be offered to such involuntary risks, as well as the allowable premium. Many states also have involuntary market plans, which hire a limited number of servicing carriers to provide insurance to involuntary risks. These plans, through assessments, pass underwriting and administrative expenses on to insurers that write voluntary coverages in those states.

Many states have laws and regulations that limit an insurer’s ability to exit a market. For example, certain states limit an automobile insurer’s ability to cancel or non-renew policies. Certain states also prohibit an insurer from withdrawing one or more lines of business from the state, except pursuant to a plan that is approved by the state insurance department. The state insurance department may disapprove a plan that may lead to market disruption. Laws and regulations that limit the cancellation or non-renewal of policies, or that subject program withdrawals to prior approval requirements, may restrict an insurer’s ability to exit unprofitable markets or businesses.

As mentioned above, insurance departments have regulatory authority over many other aspects of an insurer’s insurance operations, including coverages, forms, rating criteria, and rate levels. The ability to implement changes to these items on a timely basis is critical to our ability to compete effectively in the marketplace. Rate regulation varies from “use and file,” to “file and use,” to prior approval.

In a number of states, Progressive’s insurance subsidiaries use financial responsibility or credit information (credit) as part of the underwriting or rating process. This practice is expressly authorized by the federal Fair Credit Reporting Act, and our information demonstrates that credit is an effective predictor of insurance risk. The use of credit in underwriting and rating is the subject of significant regulatory and legislative activity. Regulators and legislators have expressed a number of concerns related to the use of credit, including: questions regarding the accuracy of credit reports, perceptions that credit may have a disparate effect on the poor and certain minority groups, the perceived lack of a demonstrated causal relationship between credit and insurance risk, the treatment of persons with limited or no credit, the impact on credit of extraordinary life events (e.g., catastrophic injury or death of a spouse), and the credit attributes applied in the credit scoring models used by insurers. A number of state insurance

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departments have issued bulletins, directives, or regulations that regulate or prohibit the use of credit by insurers. In addition, a number of states are considering or have passed legislation to regulate insurers’ use of credit information. The use of credit information continues to be a regulatory and legislative issue, and it is possible that the U.S. Congress or one or more states may enact further legislation affecting its use in underwriting and rating.

Regulation of insurance constantly changes as real or perceived issues and developments arise. Some changes may be due to economic developments, such as changes in investment laws made to recognize new investment products or to respond to perceived investment risks, while others reflect concerns about consumer privacy, insurance availability, prices, allegations of discriminatory pricing, underwriting practices and solvency. In recent years, legislation, regulatory measures, and voter initiatives have been introduced, and in some cases adopted, which deal with use of non-public consumer information, use of credit information in underwriting and rating, insurance rate development, rate of return limitations, and the ability of insurers to cancel or non-renew insurance policies. In addition, from time to time, the United States Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act created a new Federal Insurance Office, which is required to collect information about the insurance industry and monitor the industry for systemic risk.

In addition to our U.S. operations, we write personal auto physical damage and property damage liability insurance in Australia through a branch of one of our U.S. insurance subsidiaries. This insurance is offered solely through the Internet. We do not write auto bodily injury liability or medical payment insurance in Australia. There are two primary agencies that regulate insurance in Australia: the Australian Securities and Investment Commission, which regulates customer disclosures, and the Australian Prudential Regulatory Authority, which regulates solvency. Both agencies enforce laws within their jurisdiction, issue regulations, take enforcement actions, and, in general, have broad regulatory powers. Progressive Direct Insurance Company has been issued licenses by both agencies and the licenses are in good standing.

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Statutory Accounting Principles

Our results are reported in accordance with GAAP, which differ in certain respects from amounts reported under statutory accounting principles (SAP) prescribed by insurance regulatory authorities. Certain significant differences are described below:

Category	GAAP Accounting	SAP Accounting
Acquisition Expenses	Commissions, premium taxes, and other variable costs incurred in connection with writing new and renewal business are capitalized and amortized pro rata over the policy term as premiums are earned.	Commissions, premium taxes, and all other acquisition expenses are expensed as incurred.
Non-admitted Assets	Premium receivables are reported net of an allowance for doubtful accounts.	Premium receivables over 90 days past due are “non-admitted,” which means they are excluded from surplus. For premium receivables less than 90 days past due, we also estimate a bad debt reserve.
	Furniture, equipment, application software, leasehold improvements, and prepaid expenses are capitalized and amortized over their useful lives or periods benefited.	Excluding computer equipment and operating software, the value of all other furniture, equipment, application software, leasehold improvements, and prepaid expenses, net of accumulated depreciation or amortization, is non-admitted against surplus. Computer equipment and operating software are capitalized, subject to statutory limitations based on surplus, and depreciated over three years.
	Deferred tax assets are recorded based on estimated future tax effects attributable to temporary differences. A valuation allowance would be recorded for any tax benefits that are not expected to be realized.	The accounting for deferred tax assets is consistent with GAAP, except for certain deferred tax assets that do not meet statutory requirements for recognition, which are non-admitted against surplus.
Reinsurance	Ceded reinsurance balances are shown as an asset on the balance sheet as “prepaid reinsurance premiums” and “reinsurance recoverables.”	Ceded unearned premiums are netted against the “unearned premiums” liability. Ceded unpaid loss and loss adjustment expense (LAE) amounts are netted against “loss and LAE reserves.” Only ceded paid loss and LAE are shown as a “reinsurance recoverables” asset.
Investment Valuation	Fixed-maturity securities, which are classified as available-for-sale, are reported at current fair values.	Fixed-maturity securites are reported at amortized cost or the lower of amortized cost or fair value, depending on the NAIC designation of the security.
	Preferred stocks, both redeemable and nonredeemable, are reported at quoted fair values.	Redeemable preferred stocks are reported at amortized cost or the lower of amortized cost or fair value, depending on the NAIC designation of the security. Nonredeemable preferred stocks are reported at quoted fair value, consistent with GAAP.
Federal Income Taxes	Federal tax expense and tax liability or recoverable balances include current and deferred income taxes.	For income statement reporting, federal tax expense only includes the current tax provision. Deferred taxes are posted to surplus. SAP deferred tax assets are subject to certain limitations on admissibility.

Investments

Our approach to investment and capital management seeks to ensure that we have sufficient capital to support all of the insurance premiums that we can profitably write. Our portfolio is invested primarily in short-term and intermediate-term, investment-grade fixed-income securities. Our investment portfolio had a fair value of $16.0 billion at December 31, 2011, compared to $15.5 billion at December 31, 2010. Investment income is affected by the variability of cash flows to or from the portfolio, shifts in the type and quality of investments in the portfolio, changes in yield, and other factors. Total investment income, including net realized gains (losses) on securities, before expenses and taxes, was $582.6 million in 2011, compared to $616.2 million in 2010 and $534.1 million in 2009. For more detailed discussion, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

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Employees

The number of employees, excluding temporary employees, at December 31, 2011 was 25,007, all of whom were employed by subsidiaries of The Progressive Corporation.

Liability for Property-Casualty Losses and Loss Adjustment Expenses

The consolidated financial statements include the estimated liability for unpaid losses and loss adjustment expenses (LAE) of Progressive’s insurance subsidiaries. Our objective is to ensure that total reserves (i.e., case reserves and incurred but not recorded reserves, or “IBNR”) are adequate to cover all loss costs, while sustaining minimal variation from the time reserves are initially established until losses are fully developed. The liabilities for losses and LAE are determined using actuarial and statistical procedures and represent undiscounted estimates of the ultimate net cost of all unpaid losses and LAE incurred through December 31 of each year. These estimates are subject to the effect of future trends on claims settlement, among other factors. These estimates are continually reviewed and adjusted as experience develops and new information becomes known. Adjustments, if any, relating to accidents that occurred in prior years are reflected in the current year results of operations and are referred to as “development” of the prior year estimates. A detailed discussion of our loss reserving practices can be found in our “Report on Loss Reserving Practices,” which was filed with the Securities and Exchange Commission (SEC) on Form 8-K on June 30, 2011, as well as in section “V. Critical Accounting Policies” of our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K. The accompanying tables present information concerning our property-casualty losses and LAE.

The following table provides a reconciliation of beginning and ending estimated liability balances for the last three years:

RECONCILIATION OF NET RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

(millions)	2011			2010			2009
Balance at January 1	$	7,071.0		$	6,653.0		$	6,177.4
Less reinsurance recoverables on unpaid losses		704.1			529.4			244.5
Net balance at January 1		6,366.9			6,123.6			5,932.9
Incurred related to:
Current year		10,876.8			10,451.7			10,040.9
Prior years		(242.0	)		(320.4	)		(136.0	)
Total incurred		10,634.8			10,131.3			9,904.9
Paid related to:
Current year		7,289.3			6,841.0			6,542.2
Prior years		3,252.3			3,047.0			3,172.0
Total paid		10,541.6			9,888.0			9,714.2
Net balance at December 31		6,460.1			6,366.9			6,123.6
Plus reinsurance recoverables on unpaid losses		785.7			704.1			529.4
Balance at December 31	$	7,245.8		$	7,071.0		$	6,653.0

Our reserves developed favorably in each of the last three years, which is reflected as “Incurred related to prior years” in the table above. Total development consists of net changes made by our actuarial department on prior accident year reserves, based on regularly scheduled reviews, claims settling for more or less than reserved, changes in reserve estimates by claim representatives, and emergence of unrecorded claims at rates different than reserved. The favorable reserve development, for 2011 and 2010 for our Personal Lines business (primarily personal auto) and for the last three years for our Commercial Auto business, reflected the settlement of larger losses for amounts less than we originally reserved. During the last three years, we also experienced lower than expected defense and cost containment costs, reflecting a combination of fewer claims being litigated, as well as the fact that a greater percentage of these cases are now being handled by our in-house counsel, which is a cost-effective alternative to using external law firms. In addition, for 2010, our IBNR reserves developed favorably due to lower severity and frequency of late emerging claims. However, in 2011, the number of late emerging claims increased over 2010 and was greater than anticipated by our carried IBNR; thus, we recognized unfavorable development on our total IBNR reserves.

In establishing loss reserves, we take into account projected changes in claim severity caused by anticipated inflation and a number of factors that vary with the individual type of policies written. These severities are projected based on historical trends adjusted for anticipated changes in underwriting standards, inflation, policy provisions, claims resolution practices, and general economic trends. These anticipated trends are reconsidered periodically based on actual development and are modified if necessary.

We have not entered into any loss reserve transfers or similar transactions having a material effect on earnings or reserves.

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ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSES DEVELOPMENT

(millions)

	2001		2002		2003		2004		2005		2006			2007			2008			2009		2010		2011
LIABILITY FOR UNPAID LOSSES AND LAE - GROSS	$	3,238.0	$	3,813.0	$	4,576.3	$	5,285.6	$	5,660.3	$	5,725.0		$	5,942.7		$	6,177.4		$	6,653.0	$	7,071.0	$	7,245.8
LESS: REINSURANCE RECOVERABLES ON UNPAID LOSSES		168.3		180.9		229.9		337.1		347.2		361.4			287.5			244.5			529.4		704.1		785.7
LIABILITY FOR UNPAID LOSSES AND LAE - NET1		3,069.7		3,632.1		4,346.4		4,948.5		5,313.1		5,363.6			5,655.2			5,932.9			6,123.6		6,366.9		6,460.1
PAID (CUMULATIVE) AS OF:
One year later		1,601.7		1,860.7		2,233.8		2,355.5		2,662.1		2,897.4			3,036.9			3,172.0			3,047.0		3,252.3
Two years later		2,290.7		2,688.9		3,148.1		3,430.6		3,931.0		4,240.4			4,361.4			4,427.8			4,348.4		0
Three years later		2,655.8		3,084.6		3,642.5		3,999.9		4,584.7		4,856.2			4,966.1			5,031.7			0		0
Four years later		2,821.0		3,291.6		3,873.0		4,269.6		4,839.1		5,121.9			5,227.5			0			0		0
Five years later		2,910.2		3,381.7		3,977.1		4,368.6		4,948.7		5,229.0			0			0			0		0
Six years later		2,945.7		3,416.7		4,012.5		4,419.2		4,995.6		0			0			0			0		0
Seven years later		2,959.6		3,428.7		4,034.4		4,445.7		0		0			0			0			0		0
Eight years later		2,962.9		3,440.7		4,047.3		0		0		0			0			0			0		0
Nine years later		2,970.6		3,449.7		0		0		0		0			0			0			0		0
Ten years later		2,976.8		0		0		0		0		0			0			0			0		0
LIABILITY RE-ESTIMATED AS OF:
One year later		3,073.2		3,576.0		4,237.3		4,592.6		5,066.2		5,443.9			5,688.4			5,796.9			5,803.2		6,124.9
Two years later		3,024.2		3,520.7		4,103.3		4,485.2		5,130.5		5,469.8			5,593.8			5,702.1			5,647.7		0
Three years later		2,988.7		3,459.2		4,048.0		4,501.6		5,093.6		5,381.9			5,508.0			5,573.8			0		0
Four years later		2,982.7		3,457.8		4,070.0		4,471.0		5,046.7		5,336.5			5,442.1			0			0		0
Five years later		2,993.7		3,475.4		4,073.7		4,475.5		5,054.6		5,342.8			0			0			0		0
Six years later		3,002.5		3,472.5		4,072.4		4,486.4		5,060.8		0			0			0			0		0
Seven years later		3,000.6		3,470.1		4,080.5		4,486.3		0		0			0			0			0		0
Eight years later		2,995.8		3,477.3		4,077.8		0		0		0			0			0			0		0
Nine years later		3,000.9		3,475.9		0		0		0		0			0			0			0		0
Ten years later		3,000.0		0		0		0		0		0			0			0			0		0
NET CUMULATIVE DEVELOPMENT FAVORABLE/ (UNFAVORABLE)	$	69.7	$	156.2	$	268.6	$	462.2	$	252.3	$	20.8		$	213.1		$	359.1		$	475.9	$	242.0
PERCENTAGE2		2.3		4.3		6.2		9.3		4.7		0.4			3.8			6.1			7.8		3.8
RE-ESTIMATED LIABILITY FOR UNPAID LOSSES AND LAE - GROSS	$	3,204.7	$	3,748.1	$	4,446.2	$	4,984.1	$	5,655.7	$	5,981.4		$	6,083.6		$	6,219.4		$	6,333.4	$	6,876.6
LESS: RE-ESTIMATED REINSURANCE RECOVERABLES ON UNPAID LOSSES		204.7		272.2		368.4		497.8		594.9		638.6			641.5			645.6			685.7		751.7
RE-ESTIMATED LIABILITY FOR UNPAID LOSSES AND LAE - NET1	$	3,000.0	$	3,475.9	$	4,077.8	$	4,486.3	$	5,060.8	$	5,342.8		$	5,442.1		$	5,573.8		$	5,647.7	$	6,124.9
GROSS CUMULATIVE DEVELOPMENT: FAVORABLE/ (UNFAVORABLE)	$	33.3	$	64.9	$	130.1	$	301.5	$	4.6	$	(256.4	)	$	(140.9	)	$	(42.0	)	$	319.6	$	194.4

¹ Represents loss and LAE reserves net of reinsurance recoverables on net unpaid losses at the balance sheet date.

² Cumulative development ÷ liability for unpaid losses and LAE - Net.

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The above table presents the development of balance sheet liabilities for losses and LAE from 2001 through 2010. The top line of the table shows the estimated liability for unpaid losses and LAE recorded at the balance sheet date for each of the indicated years for the property-casualty insurance subsidiaries only. This liability represents the estimated amount of losses and LAE for claims that were unpaid at the balance sheet date, including IBNR. The table also presents the re-estimated liability for unpaid losses and LAE on a gross and net basis, with separate disclosure of the re-estimated reinsurance recoverables on unpaid losses.

The upper section of the table (labeled “Paid (Cumulative) as of:”) shows the cumulative amount paid with respect to the previously recorded liability as of the end of each succeeding year. The lower portion of the table (labeled “Liability Re-estimated as of:”) shows the re-estimated amount of the previously recorded liability based on experience as of the end of each succeeding year. The re-estimated amount is the sum of the paid amounts above and the outstanding reserve for occurrences prior to the reserve date. The estimate is increased or decreased as more information about the claims becomes known for individual years. For example, as of December 31, 2011, our insurance subsidiaries had paid $3,449.7 million of the currently estimated $3,475.9 million of losses and LAE that had been unpaid at the end of 2002; thus, an estimated $26.2 million of losses incurred through 2002 remain unpaid as of the current financial statement date.

The “Net Cumulative Development” represents the aggregate change in the ultimate loss estimate over all prior years. For example, the 2001 liability has developed favorably by $69.7 million over ten years. That amount has been reflected in income over the ten years and had the largest impact on income in calendar year 2003. The effects on income during the past three years due to changes in estimates of the liabilities for losses and LAE are shown in the reconciliation table on page 9 as the “prior years” contribution to incurred losses and LAE.

In evaluating this information, note that each cumulative development amount includes the effects of all changes in amounts during the current year for prior periods. For example, the amount of the development related to losses settled in 2011, but incurred in 2008, will be included in the cumulative development amount for years 2008, 2009, and 2010. Conditions and trends that have affected development of the liability in the past may not necessarily occur in the future. Accordingly, it generally is not appropriate to extrapolate future development based on this table.

For 2001, while we experienced an increase in bodily injury severity, our developed reserves were within 2.5% of our original estimates. Our bodily injury severity change was much lower than we expected between 2002 and 2005; thus, the reserve run-off for these years was very favorable following the end of each year, or about 4% to 9% of our original carried amounts. The reserve development for 2006 and 2007 was less than 4% of our original carried reserves. For both 2008 and 2009, we experienced favorable reserve development of more than 6% of our original estimates, which reflects the decreases in severity we experienced in both our personal auto (about 3.5%) and Commercial Auto (about 5%) businesses through 2011. The favorable development of approximately 4% for 2010 also reflects lower severity estimates for both personal auto and Commercial Auto, but to a lesser extent than the previous two years.

Although the detail is not presented in the table on page 10, we also re-estimate the reinsurance recoverables on unpaid losses each year. The top of the table shows the amount of reinsurance recoverables on unpaid losses that we had at the end of the calendar year, while the bottom shows the reserves re-estimated based on development in subsequent years. For example, at December 31, 2010, we estimated our reinsurance recoverables on unpaid losses to be $704.1 million. During 2011, these reserves developed unfavorably by $47.6 million, bringing the re-estimated reinsurance recoverables on unpaid losses to $751.7 million, as shown at the bottom of the table. Over the last ten years, we experienced unfavorable development in our reinsurance recoverables on unpaid losses. This development primarily reflects our claims organization’s continuing process of re-evaluating Michigan personal injury protection claims that require lifetime reserve estimates. As a result, we increased both our direct reserves and corresponding reinsurance recoverables, since these claims are reinsured through the Michigan Catastrophic Claims Association (MCCA) state-mandated plan. The MCCA is funded through an assessment that insurance companies collect from policyholders in the state; therefore, our exposure to losses from the failure of this reinsurer is minimal.

The Analysis of Loss and Loss Adjustment Expenses Development table on page 10 is constructed from Schedule P, Part-1, from the Consolidated Annual Statements of Progressive’s insurance subsidiaries, as filed with the state insurance departments.

(d) Financial Information About Geographic Areas.

We operate our businesses throughout the United States; we also sell personal auto physical damage insurance via the Internet in Australia. The amount of Australian revenues and assets is insignificant.

(e) Available Information.

Our website is located at progressive.com. As soon as reasonably practicable, we make all documents that we file with, or furnish to, the SEC, including our reports on Form 10-K, Form 10-Q, and Form 8-K, and any amendments to these reports, available free of charge via our website at progressive.com/investors. These reports are also available on the SEC’s website: http://www.sec.gov.

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ITEM 1A. RISK FACTORS

Progressive’s business involves various risks and uncertainties, certain of which are discussed in this section. Management divides these risks into four broad categories in assessing how they may affect our financial condition and operating results, as well as our ability to achieve our business objectives:

• Insurance Risks – risks associated with assuming, or indemnifying for, the losses of, or liabilities incurred by, policyholders

• Operating Risks – the risks stemming from external or internal events or circumstances that directly or indirectly may affect our insurance operations

• Market Risks – changes in the value of assets held in our investment portfolios, which might result from a variety of factors impacting the investment marketplace generally, or the sectors, industries, or individual securities in which we have invested, and

• Credit Risks – the risks that a counterparty to a transaction will fail to perform according to the terms of a contract or that we will be unable to obtain capital when necessary or to pay or otherwise satisfy our obligations when due.

Although we have organized risks generally according to these categories in the discussion below, many of the risks may have ramifications in more than one category. For example, although presented as an Operating Risk below, governmental regulation of insurance companies also affects our investing and financing activities, which are addressed separately under Market Risks and Credit Risks below. These categories, therefore, should be viewed as a starting point for understanding the significant risks facing us and not as a limitation on the potential impact of the matters discussed.

It also should be noted that our business and that of other insurers may be adversely affected by a downturn in general economic conditions and other forces beyond our control. Issues such as unemployment rates, the number of vehicles sold, inflation or deflation, consumer confidence, and construction spending, among a host of other factors, will have a bearing on the amount of insurance that is purchased by consumers and small businesses. In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any such risks or uncertainties, or any of the following risks or uncertainties, develop into actual events, we could experience a materially adverse effect on our business, financial condition, cash flows, or results of operations. In that case, the market price of our common shares or debt securities could decline materially.

This information should be considered carefully together with the other information contained in this report and in the other reports and materials filed by us with the Securities and Exchange Commission (“SEC”), as well as news releases and other information publicly disseminated by us from time to time.

I. Insurance Risks

Our success depends on our ability to underwrite risks accurately and to charge adequate rates to policyholders.

Our financial condition, cash flows, and results of operations depend on our ability to underwrite and set rates accurately for a full spectrum of risks. A primary role of the pricing function is to ensure that rates are adequate to generate sufficient premiums to pay losses, loss adjustment expenses, and underwriting expenses, and to earn a profit.

Pricing involves the acquisition and analysis of historical accident and loss data, and the projection of future accident trends, loss costs and expenses, and inflation trends, among other factors, for each of our products in multiple risk tiers and many different markets. Our ability to price accurately is subject to a number of risks and uncertainties, including, without limitation:

• the availability of sufficient, reliable data

• uncertainties inherent in estimates and assumptions, generally

• our ability to conduct a complete and accurate analysis of available data

• our ability to timely recognize changes in trend and to predict both the severity and frequency of future losses with reasonable accuracy

• our ability to predict changes in operating expenses with reasonable accuracy

• the development, selection, and application of appropriate rating formulae or other pricing methodologies

• our ability to innovate with new pricing strategies, and the success of those strategies

• our ability to implement rate changes and obtain any required regulatory approvals on a timely basis

• our ability to predict policyholder retention accurately

• unanticipated court decisions, legislation, or regulatory action

• the frequency and severity of catastrophic events, such as hurricanes, hail storms, other severe weather, and terrorist events

• our ability to understand the impact of ongoing changes in our claims settlement practices

• changing driving patterns

• advancements in vehicle technology

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• unexpected changes in the medical sector of the economy, including medical costs and systemic changes resulting from national or state health care laws or regulations, and

• unanticipated changes in auto repair costs, auto parts prices, and used car prices.

The realization of one or more of such risks may result in our pricing being based on inadequate or inaccurate data or inappropriate analyses, assumptions, or methodologies, and may cause us to estimate incorrectly future changes in the frequency or severity of claims. As a result, we could underprice risks, which would negatively affect our underwriting profit margins, or we could overprice risks, which could reduce our competitiveness and growth prospects. In either event, our operating results, financial condition, and cash flows could be materially adversely affected. In addition, underpricing insurance policies over time could erode the capital position of one or more of our insurance subsidiaries, thereby constraining our ability to write new business.

Our success depends on our ability to establish accurate loss reserves.

Our financial statements include loss reserves, which represent our best estimate of the amounts that the subsidiaries ultimately will pay on claims that have been incurred, and the related costs of adjusting those claims, as of the date of the financial statements. There is inherent uncertainty in the process of establishing property and casualty insurance loss reserves, which can arise from a number of factors, including:

• the availability of sufficient, reliable data

• the difficulty in predicting the rate and direction of changes in frequency and severity trends, including the effects of future inflation rates, in multiple markets

• unexpected changes in medical and auto repair costs

• unanticipated changes in governing statutes and regulations

• new or changing interpretations of insurance policy provisions and coverage-related issues by courts

• the effects of changes in our claims settlement practices

• our ability to recognize fraudulent or inflated claims

• the accuracy of our estimates regarding claims that have been incurred but not recorded as of the date of the financial statements

• the accuracy and adequacy of actuarial techniques and databases used in estimating loss reserves, and

• the accuracy and timeliness of estimates of total loss and loss adjustment expenses as determined by our employees for different categories of claims.

As a result of these and other risks and uncertainties, the ultimate paid losses and loss adjustment expenses may deviate, perhaps substantially, from point-in-time estimates of such losses and expenses, as reflected in the loss reserves included in our financial statements. Consequently, ultimate losses paid could materially exceed reported loss reserves and have a materially adverse effect on our results of operations, liquidity, or financial position. Further information on our loss reserves can be found in the “Liability for Property-Casualty Losses and Loss Adjustment Expenses” discussion beginning on page 9 of this report, as well as our “Report on Loss Reserving Practices,” which was filed with the SEC on Form 8-K on June 30, 2011.

Our insurance operating results may be materially adversely affected by severe weather conditions or other catastrophic events.

Catastrophes can be caused by natural events, such as hurricanes, tornadoes, windstorms, floods, earthquakes, hailstorms, severe winter weather and fires, or other events, such as explosions, terrorist attacks, riots, and hazardous material releases. The incidence and severity of such events are inherently unpredictable. Moreover, changing climate conditions may increase the frequency and severity of natural disasters.

The extent of insured losses from a catastrophe is a function of both our total net insured exposure in the area affected by the event and the nature and severity of the event. We use catastrophe modeling tools and third-party experts to help estimate our exposures to such events, but those tools and expert opinions are based on historical data and other assumptions and may result in projections that prove to be inaccurate. An increase in the frequency or severity of catastrophes during a given period could materially adversely affect our financial performance, cash flows, and results of operations.

II. Operating Risks

We compete in the automobile insurance and other property-casualty markets, which are highly competitive.

We face vigorous competition from large, well-capitalized national and international companies, as well as smaller regional insurers. Other large national and international insurance or financial services companies also may enter these markets in the future. Many of these companies have substantial resources, experienced management, and strong marketing, underwriting, and pricing capabilities. The automobile insurance industry is a relatively mature industry, in which brand recognition, operational effectiveness (including, for example, rate and claim-paying accuracy, customer experience, and application of information technology), pricing, scale, and cost control are major competitive factors.

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Our business focuses on insurance for personal autos and recreational vehicles and on commercial auto policies for small businesses, all of which are highly competitive businesses. If our competitors offer similar insurance products at lower prices, offer such insurance products bundled with other products or services that we do not offer, or engage in other successful competitive initiatives, our ability to generate new business or to retain a sufficient number of our existing customers could be seriously compromised. In addition, due to our focus on the auto insurance market, we may be more sensitive than other insurers to trends that could affect auto insurance coverages and rates over time. For example, if changing driving patterns, rising gasoline prices, advancements in vehicle technology, or other factors, were to result in decreased auto insurance rates for an extended period, our ability to generate revenue growth could be significantly impaired.

Historically, the auto insurance industry has been known as a cyclical industry, with periods of relatively strong profitability being followed by increased pricing competition among insurers. This price competition, which is sometimes referred to as a “soft market,” can adversely affect revenue and profitability levels. Unexpected increases in the insurers’ underlying costs (such as vehicle repair costs, medical costs, and the expenses to resolve claims) can reduce profits or result in underwriting losses. As the insurers recognize this situation (which can occur at different times for different companies, as a result of varying loss cost experiences and profitability goals), the historical reaction has been for insurers to raise their rates (sometimes referred to as a “hard market”) in an attempt to restore profit to acceptable levels. As more insurers react in this way, profit levels in the industry may increase to a point where some insurers begin to lower their rates, starting the cycle over again. In the past, this cycle has generally played out over a number of years. We cannot determine whether such cyclicality is currently impacting the auto insurance market, nor can we predict whether it will do so in the future.

The highly competitive nature of the insurance marketplace could result in the consolidation of our competition, or in the failure of one or more competitors. The concentration of premium volume in a reduced number of major competitors could significantly alter the competitive landscape in ways that cannot be predicted, but which may or may not be favorable for Progressive’s business prospects at that time. In addition, in the event of a failure of a major insurer or a state-sponsored catastrophic fund, we could be adversely affected, as our company and other insurance companies may be required under the laws of various jurisdictions to absorb the losses of the failed insurer or fund, and we could be faced with an unexpected surge in new business from a failed insurer’s former policyholders, which could strain our service capabilities in the near term.

Our success depends on the ability to innovate effectively, respond to our competitors’ initiatives, and efficiently manage complexity.

From time to time, we undertake strategic initiatives to maintain and improve our competitive position in auto insurance markets. Based on a culture that encourages innovation, these strategies at times involve significant departures from our, and/or our competitors’, then-current or historical modes of doing business, and must be instituted in the context of a complicated regulatory environment. These innovations may also require extensive modifications to our systems and processes, and thus may add to our costs and entail a high degree of complexity and risk, which makes their implementation a challenge. In addition, our efforts may disrupt our relationships with certain of our customers and producers (i.e., agents and brokers). Many of these initiatives are also implemented in cooperation with, or in reliance on, third party vendors and their systems, which may further limit our control of implementation, quality, customer experiences, and successful outcomes. Our efforts ultimately may not achieve the business goals that we have set. Our ability to develop and implement such strategic initiatives that are accepted and valued by our customers and create a sustainable advantage is critical, however, to maintaining or enhancing our competitive position; if we fail to do so, or if we are unable to maintain the advantage over our competition, our business could be materially adversely affected.

At the same time, innovations by competitors or other market participants may increase the level of competition in the industry. These developments can include product, pricing, or marketing innovations, new or improved services, technological advances, or new modes of doing business that enhance the customer’s ability to shop and compare prices from multiple companies, among other initiatives. The growth in mobile communications and the prominence of social media as a source of information for consumers are recent examples of significant developments in the marketplace where we are committing substantial resources. Our ability to react to such advances, develop and maintain winning strategies, and then navigate the new competitive environment is important to our success.

The fast pace of change and innovation in our businesses, combined with ongoing technological, regulatory, and other developments, results in significant levels of complexity in our products and in the systems and processes we use to run our business. The complexity may create barriers to implementing certain new ideas or providing high-quality products and customer experiences, and may lead to the increased possibility of error in executing our business strategies, as well as difficult management decisions regarding the allocation of available resources (such as IT resources) for competing initiatives or projects. Our inability to manage this complexity effectively, to bring new ideas to market, to allocate and prioritize appropriately our resources, or to prevent errors could result in decreased ability to compete effectively for insurance business, poor customer experiences, substantially increased costs, liability to third parties, regulatory investigations and sanctions, and damage to our brand.

We must develop and maintain a brand that is recognized and trusted by consumers.

It is critical to our business that consumers recognize and trust the Progressive brand. We undertake distinctive advertising and marketing campaigns and other efforts to improve brand recognition, generate new business, and increase the retention of our

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current customers. We believe that improving the effectiveness of our advertising and marketing campaigns relative to those of our competitors is particularly important given the significance of brand and reputation in the marketplace and the continuing high level of advertising and marketing efforts and related expenditures within the automobile insurance market. If our campaigns are unsuccessful or are less effective than those of competitors, or if our reliance on a particular spokesperson or character is compromised, our business could be materially adversely affected.

Our brand could also be adversely affected by incidents that reflect negatively on our company. These situations might include, among others, failing to protect sensitive customer information, systems failures, effects of cyber attacks (such as computer hacking, data theft, system disruption, and viruses and malware), errors in handling a customer’s policy, inappropriate handling of claims of policyholders or other parties, misconduct by our officers, directors or employees or others acting on our behalf, inability to service outstanding policies or write new business due to our systems failures or the failure of third-party systems that we use, facility shut-downs or other causes, litigation or regulatory actions challenging our business practices, and actions by our other business partners, including unaffiliated businesses through which we offer bundled products (such as homeowners insurance) and other business partners, and many of the other matters that are discussed in these Risk Factors.

Our ability to attract, develop, and retain talented employees, managers, and executives, and to maintain appropriate staffing levels, is critical to our success.

Our success depends on our ability to attract, develop, compensate, and retain talented employees, including executives and other key managers. Our loss of certain key officers and employees, or the failure to attract or develop talented executives and managers with diverse backgrounds and experiences, could have a materially adverse effect on our business.

In addition, we must forecast sales and claims volume and other factors in changing business environments (for multiple business units and in many geographic markets) with reasonable accuracy and adjust our hiring and training programs and employment levels accordingly. Our failure to recognize the need for such adjustments, or our failure or inability to react appropriately on a timely basis, could lead either to over-staffing (which would adversely affect our cost structure) or under-staffing (impairing quality and our ability to service our ongoing and new business) in one or more business units or locations. In either such event, our financial results, customer relationships, and brand could be materially adversely affected.

Our success also depends, in large part, on our ability to maintain and improve the staffing effectiveness and employee culture that we have developed over the years. Our ability to do so may be impaired as a result of litigation against us, other judicial decisions, legislation or regulations, or other factors in the employment marketplace. In such events, the productivity of certain of our workers and the efficiency of our operations could be adversely affected, which could lead to an erosion of our operating performance and margins.

The Progressive Corporation and its insurance subsidiaries are subject to a variety of complex laws and regulations.

Progressive’s insurance businesses operate in highly regulated environments. Our insurance subsidiaries are subject to regulation and supervision by state insurance departments in all 50 states, the District of Columbia, and Australia, each of which has a unique and complex set of laws and regulations. In addition, certain federal laws impose additional requirements on businesses, including insurers. Our insurance subsidiaries’ ability to implement business plans and remain competitive while complying with these laws and regulations, and to obtain necessary regulatory action in a timely manner, is and will continue to be critical to our success.

Most jurisdictions impose restrictions on, or require prior regulatory approval of, various actions by regulated insurers, which may adversely affect our insurance subsidiaries’ ability to operate, innovate, and obtain necessary rate adjustments in a timely manner. Our compliance efforts are further complicated by changes in laws or regulations applicable to insurance companies, such as, in recent years, legislative and regulatory initiatives concerning the use of nonpublic consumer information and related privacy issues, the use of credit scoring in underwriting, and efforts to freeze, set, or roll back insurance premium rates or limit the rate of return that an insurance company may earn. Insurance laws and regulations may, among other things, limit our insurance subsidiaries’ ability to underwrite and price risks accurately, prevent our subsidiaries from obtaining timely rate changes to recognize increased or decreased costs, restrict our subsidiaries’ ability to discontinue unprofitable businesses or exit unprofitable markets, prevent insurers from terminating policies under certain circumstances, prescribe the form and content of certain disclosures and notices to policyholders, and dictate the types of investments that an insurance company may hold. In addition, laws in certain jurisdictions mandate that insurance companies pay assessments in a number of circumstances, including assessments to pay claims upon the insolvency of other insurance companies or to cover losses in government-provided insurance programs for high risk auto and homeowners coverages. Compliance with laws and regulations often results in increased costs, which can be substantial, to our insurance subsidiaries. These costs, in turn, may adversely affect our profitability or our ability or desire to grow our business in the applicable jurisdictions.

The actual or alleged failure to comply with this complex variety of laws and regulations by us or other companies in the insurance, financial services, or related industries, also could result in actions or investigations by regulators, state attorneys general, or other law enforcement officials. Such actions and investigations, and any determination that we have not complied with an applicable law or regulation, could potentially lead to fines and penalties, adverse publicity and damage to our reputation in the marketplace, and in extreme cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions. In

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addition, The Progressive Corporation and its subsidiaries could face individual and class action lawsuits by insureds and other parties for alleged violations of certain of these laws or regulations.

New legislation or regulations may be adopted in the future which could adversely affect our operations or ability to write business profitably in one or more jurisdictions. From time to time, the United States Congress and certain federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary. For example, in 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which, among other provisions that could impact aspects of our operations, created within the United States Department of the Treasury a new Federal Insurance Office (FIO), whose purpose is (in part) to collect information about the insurance industry and monitor the industry for systemic risk. If the FIO were to recommend to the new Financial Stability Oversight Council (also created by the Dodd-Frank Act) that we are “systemically significant” and therefore require additional regulation, or that the insurance industry as a whole should be regulated at the federal level, our businesses could be affected significantly. We are unable to predict whether any additional federal laws or regulations will be enacted and how and to what extent such laws and regulations would affect our businesses.

Insurance regulation may create risks and uncertainties for Progressive’s insurance subsidiaries in other ways as well. For further information on these risks and uncertainties, see the “Insurance Regulation” discussion beginning on page 5 of this report.

Our success depends on our ability to adjust claims accurately.

We must accurately evaluate and pay claims that are made under our insurance policies. Many factors can affect our ability to pay claims accurately, including the training, experience, and skill of our claims representatives, the extent of and our ability to recognize and respond to fraudulent or inflated claims, the claims organization’s culture and the effectiveness of its management, our ability to develop or select and implement appropriate procedures, technologies, and systems to support our claims functions, and the success of our concierge level claims services program. Our failure to pay claims fairly, accurately, and in a timely manner, or to deploy claims resources appropriately, could result in unanticipated costs to us, lead to material litigation, undermine customer goodwill and our reputation in the marketplace, and impair our brand image and, as a result, materially adversely affect our competitiveness, financial results, prospects, and liquidity.

Lawsuits challenging our business practices, and those of our competitors and other companies, are pending and more may be filed in the future.

The Progressive Corporation and/or its subsidiaries are named as defendants in class action and other lawsuits challenging various aspects of the subsidiaries’ business operations. Other such litigation may arise in the future concerning similar or other business practices. These lawsuits include cases alleging damages as a result of our subsidiaries’ use of credit in underwriting and related requirements under the U.S. Fair Credit Reporting Act; methods used for evaluating and paying certain bodily injury, personal injury protection, and medical payment claims; other claims handling procedures; challenges to our direct repair program and service center program; interpretations of the provisions of our insurance policies; and policy implementation and renewal procedures, among other matters. From time to time, we also may be involved in litigation or other disputes alleging that certain of our subsidiaries’ business practices or systems violate the patent, trademark, or other intellectual property rights of third parties. Additional litigation may be filed against us concerning our employment-related practices, allegations of medical or attorney malpractice, and other general liability causes of action arising from our operations. In addition, lawsuits have been filed, and other lawsuits may be filed in the future, against our competitors and other businesses, and although we are not a party to such litigation, the results of those cases may create additional risks for, and/or impose additional costs, and/or limitations on, our subsidiaries’ business operations.

Lawsuits against us often seek significant monetary damages. Moreover, the resolution of individual or class action litigation in insurance or related fields may lead to a new layer of court-imposed regulation, resulting in material increases in our costs of doing business.

Litigation is inherently unpredictable. Except to the extent we have established reserves with respect to particular lawsuits that are currently pending against us, we are unable to predict the effect, if any, that these pending or any future lawsuits may have on our business, operations, profitability, or financial condition. For further information on pending litigation, see Note 12 – Litigation in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

Our business could be materially and adversely affected by a security breach or other attack involving our computer systems or the systems of one or more of our vendors.

Our business requires that we build and maintain large and complex computer systems to run our operations and to store the significant volume of data that we acquire, including the personal confidential information of our customers and employees and our intellectual property, trade secrets, and other sensitive business and financial information. These systems are subject to attacks by third parties, including sophisticated individuals and groups with substantial computing resources and capabilities. Such attacks may include, among other things, attempts to gain unauthorized access to:

• steal, corrupt, or destroy data

• misappropriate funds

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• disrupt or shut down our systems

• deny customers or others access to our systems, or

• infect our systems with viruses or malware.

Similarly, an employee, consultant, agent, or other person with legitimate access to our systems may take actions, or be the subject of a security breach or cyber attack, which could result in improper or unauthorized access to our systems, and in the loss, corruption, or theft of our intellectual property or the personal information of our customers or employees.

We also conduct significant business functions and computer operations using the systems of third-party vendors, which may provide software, data storage, and other computer services to us (some of which may be referred to as “cloud computing”). These third-party systems may experience similar cyber attacks and other security breaches, along with the possible risk of loss or unauthorized publication of Progressive’s information or the confidential information of our customers and employees. These relationships present further risk management challenges for us, including, among others: confirming and monitoring the third-party’s security measures; the potential for improper handling of or access to our data; and data location uncertainty and the possibility of data storage in inappropriate jurisdictions, where laws or security measures may be inadequate.

We undertake substantial efforts to protect our systems and the sensitive personal information of our customers and employees. These efforts include internal processes and technological defenses that are preventative or detective, and other controls designed to provide multiple layers of security assurance. Examples include physical security measures, access and password policies, firewalls, systems monitoring, malicious code protection, network and host-based intrusion detection and prevention measures, data loss prevention measures, configuration assurance, data encryption, and event management, as well as third party intrusion vulnerability testing. In addition, we seek to assure the security and confidentiality of information provided to our vendors under “cloud computing” or other arrangements through appropriate risk evaluation, security and financial due diligence, contracts designed to set and maintain high security and confidentiality standards, and ongoing testing, auditing, and evaluation of third-party compliance with the required standards. While we expend significant resources on these defensive measures, there can be no assurance that we will be successful in preventing attacks or detecting and stopping them once they have begun.

Our business could be significantly damaged by a security breach, data loss or corruption, or cyber attack. In addition to the potentially high costs of investigating and stopping such an event and implementing necessary fixes, we could incur substantial liability if confidential customer information is stolen or if another party’s systems are adversely affected. In addition, such an event could cause a significant disruption of our ability to conduct our insurance operations, adversely affect our competitive position if material trade secrets or other confidential information are stolen, and have severe ramifications on our reputation and brand, potentially causing customers to refrain from buying insurance from us or other businesses to refrain from doing business with us. We have elected to self-insure these risks at this time. The occurrence of a security breach, data loss or corruption, or cyber attack, if sufficiently severe, could have a materially adverse effect on our business results, prospects, and liquidity.

We also rely heavily on credit card acceptance for payment of premiums and claims deductibles. Data security standards for merchants and service providers that accept credit card payments are prescribed by the Payment Card Industry Security Standards Council (PCI), an independent body formed by an association of the major credit card vendors. These standards are intended to promote a common set of data security measures that companies accepting credit card payments, such as Progressive, must satisfy with respect to the handling of sensitive information. While the PCI standards set a high bar for data security, compliance with them does not alone ensure that sensitive information will be maintained on a secure basis. In September 2011, an independent organization recognized by PCI for such purposes, recertified Progressive as being in compliance with the current PCI standards. The PCI data security standards, however, will likely evolve over time to address emerging payment security risks and other issues, requiring additional compliance efforts by us and annual recertification of our processes. Our intention is to maintain compliance with PCI’s data security standards. The failure to do so could result in contractual fines or disruption of our ability to receive credit card payments.

Our business depends on the secure and uninterrupted operation of our facilities, systems, and business functions.

Our business is highly dependent upon our employees’ ability to perform, in an efficient and uninterrupted manner, necessary business functions (such as Internet support and 24-hour call centers), processing new and renewal business, and processing and paying claims and other obligations. Our facilities and systems could become unavailable, inoperable, or otherwise impaired from a variety of causes, including, without limitation, natural events, such as hurricanes, tornadoes, windstorms, earthquakes, severe winter weather and fires, or other events, such as explosions, terrorist attacks, computer security breaches or cyber attacks (as discussed above), riots, hazardous material releases, medical epidemics, utility outages, interruptions of our data processing and storage systems or the systems of third-party vendors, or unavailability of communications facilities. Likewise, we could experience a failure or corruption of one or more of our information technology, telecommunications, or other systems for various reasons, including failures that might occur as existing systems are replaced or upgraded.

The shut-down or unavailability of one or more of our systems or facilities for any reason could significantly impair our ability to perform critical business functions on a timely basis. In addition, because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or repeated, such events could result in a

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deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner, or perform other necessary business functions. This could result in a materially adverse effect on our business results, prospects, and liquidity, as well as damage to customer goodwill.

Our business is also highly dependent on access to, and the operation of, the financial markets to provide us with the ability to liquidate securities and transfer or receive funds on a timely basis. Disruptions in financial markets, or an interruption or breakdown in the federal wire transfer systems, could limit our ability to meet payment obligations. A mismatch or timing difference between our cash inflows and our cash needs, or the inability to convert investment securities into cash when needed, could also adversely affect our ability to make timely payments.

III. Market Risks

The performance of our fixed-income and equity investment portfolios is subject to a variety of investment risks.

Our investment portfolio is comprised principally of fixed-income securities and common equities. Our fixed-income portfolio is actively managed by our investment group and includes short-term investments, fixed-maturity securities, and preferred stocks. The performance of the fixed-income portfolio is subject to a number of risks, including:

• Interest rate risk – the risk of adverse changes in the value of fixed-income securities as a result of increases in market interest rates.

• Investment credit risk – the risk that the value of certain investments may decrease due to a deterioration in the financial condition, operating performance or business prospects of, or the liquidity available to, one or more issuers of those securities or, in the case of asset-backed securities, due to the deterioration of the loans or other assets that underlie the securities, which, in each case, also includes the risk of permanent loss. In the case of governmental issuers, the risk includes the potential for unbalanced budgets, required austerity measures, debt defaults, or other social or political turmoil.

• Concentration risk – the risk that the portfolio may be too heavily concentrated in the securities of one or more issuers, sectors, or industries, which could result in a significant decrease in the value of the portfolio in the event of a deterioration of the financial condition or performance of, or outlook for, those issuers, sectors, or industries.

• Prepayment or extension risk (applicable to certain securities in the portfolio, such as residential mortgage-backed securities) – the risk that, as interest rates change, the principal of such securities may be repaid earlier than anticipated, or that a security may not be redeemed when anticipated, adversely affecting the value of, or income from, such securities and the portfolio by investing at less attractive rates.

• Liquidity risk – the risk that we will not be able to convert investment securities into cash on favorable terms and on a timely basis, or that we will not be able to sell them at all, when we desire to do so. Disruptions in the financial markets, or a lack of buyers for the specific securities that we are trying to sell, could prevent us from liquidating securities or cause a reduction in prices to levels that are not acceptable to us.

In addition, the success of our investment strategies and asset allocations in the fixed-income portfolio may vary depending on the market environment. The fixed-income portfolio’s performance also may be adversely impacted if, among other factors: there is a lack of transparency regarding the underlying businesses of the issuers of the securities that we purchase; credit ratings assigned to such securities by nationally recognized credit rating agencies are based on incomplete or inaccurate information or otherwise prove unwarranted; or our risk mitigation strategies are ineffective for the applicable market conditions.

The common equity portfolio is primarily managed by a third party to track the Russell 1000 Index, with a small portion actively managed by a separate investment advisory firm using a value-oriented investment approach. Our equity investments are subject to general movements in the values of equity markets and to the changes in the prices of the securities we hold. An investment portfolio that is designed to track an index, such as the Russell 1000, or that follows a specific investment discipline, such as value investing, does not reduce the risks inherent in equity investing and is not necessarily less risky than other equity investment strategies. Equity markets, sectors, industries, and individual securities may be subject to high volatility and to long periods of depressed or declining valuations, and also may be subject to some of the same risks that affect our fixed-income portfolio, as discussed above. For example, a rapid rise in interest rates may cause equity prices to fall, particularly those of interest-sensitive companies. In addition, even though the Russell 1000 Index is broadly diversified, significant portions of the index may be concentrated in one or more sectors, such as the financial services industry, which may adversely affect the performance of our common equity portfolio if such a sector underperforms. A decline in the aggregate value of the equities that make up the index would be expected to result in a commensurate decline both in the value of our common equity portfolio and in our capital. Likewise, the actively managed equity portfolio will be subject to risks arising from the investment decisions of the investment advisor, including sector or industry concentrations, lack of geographic diversification, and the performance of individual issuers.

Both the fixed-income and the common equity portfolios are also subject to risks inherent in the nation’s and world’s capital markets. The functioning of those markets, the values of the investments we hold and our ability to liquidate them when desired may be adversely affected if those markets are disrupted or otherwise affected by significant negative factors, including, without limitation:

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• local, national, or international events, such as regulatory changes, power outages, system failures, wars, or terrorist attacks

• a recession, depression, political or social upheaval, or other development in either the U.S. or other economies that adversely affects the value of securities held in our portfolios

• financial weakness or failure of one or more financial institutions that play a prominent role in securities markets or act as a counterparty for various financial instruments, such as derivative transactions, which could further disrupt the markets or cause us to incur losses if counterparties to one or more of our transactions should default

• inactive markets for specific kinds of securities, or for the securities of certain issuers or in certain sectors, which could result in decreased valuations and impact our ability to sell a specific security or a group of securities at a reasonable price when desired

• the failure, or perceived failure, of governmental attempts to stabilize their budgets or economies through austerity programs, tax increases or other measures, to stabilize specific companies or groups of companies through capital injections, to shore up markets, or otherwise to spur economic recovery or growth, or the failure or refusal of a government to engage in such efforts

• investor fear, whether substantiated or not, causing the market to react irrationally

• a significant change in inflation expectations, or the onset of deflation or stagflation

• a default on sovereign debt, or the perception that such a default is likely, and

• a significant devaluation of governmental or private sector credit, currencies or financial markets, or other factors or events.

If the fixed-income or equity portfolios, or both, were to suffer a substantial decrease in value due to market, sector, or issuer-specific conditions, our liquidity, financial position, and financial results could be materially adversely affected. Under these circumstances, our income from these investments could be materially reduced, and declines in the value of certain securities could further reduce our reported earnings and capital levels. A decrease in value of an insurance subsidiary’s investment portfolio could also put the subsidiary at risk of failing to satisfy regulatory minimum capital requirements and could limit the subsidiary’s ability to write new business. If we, at that time, are unable to supplement the subsidiary’s capital from The Progressive Corporation’s other assets or by issuing debt or equity securities on acceptable terms, our business could be materially adversely affected.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K, for additional discussion of the composition of our investment portfolio as of December 31, 2011, and of the market risk associated with our investment portfolio.

IV. Credit Risks

Our financial condition may be adversely affected if one or more parties with which we enter into significant contracts become insolvent, experience other financial difficulties, or default in the performance of contractual obligations.

Our business is dependent on the performance by third parties of their responsibilities under various contractual or service arrangements. These include, for example, contracts for the acquisition of goods and services (such as telecommunications and information technology facilities, equipment and support, and other systems and services that are integral to our operations), agreements with other insurance carriers to bundle products that we do not offer, and arrangements for transferring certain of our risks (including reinsurance used by us in connection with certain of our insurance products and our corporate insurance policies). In addition, from time to time, we enter into significant financial transactions, such as derivative instruments, with major banks or other financial institutions. If one or more of these parties were to default in the performance of their obligations under their respective contracts or determine to abandon or terminate support for a system, product, or service that is significant to our business, we could suffer significant financial losses and operational interruptions or other problems, which could in turn adversely affect our financial performance, cash flows, or results of operations and cause damage to our brand and reputation.

Our insurance subsidiaries may be limited in the amount of dividends that they can pay to the holding company, which in turn may limit the holding company’s ability to pay dividends to shareholders, repurchase its securities, repay indebtedness, or make capital contributions to its other subsidiaries or affiliate.

The Progressive Corporation is a holding company with no business operations of its own. Consequently, if its subsidiaries are unable to pay dividends or make other distributions to The Progressive Corporation, or are able to pay only limited amounts, Progressive may be unable to pay dividends to shareholders, make payments on its indebtedness, meet its other obligations, repurchase its common shares or other securities, or make capital contributions to or otherwise fund its subsidiaries or affiliate. Each insurance subsidiary’s ability to pay dividends to the holding company may be limited by one or more of the following factors:

• Insurance regulatory authorities require insurance companies to maintain specified minimum levels of statutory capital and surplus

• Insurance regulations restrict the amounts available for distribution based on either net income or surplus of the insurance company

• Competitive pressures require our insurance subsidiaries to maintain high financial strength ratings, or

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• In certain jurisdictions, prior approval must be obtained from regulatory authorities for the insurance subsidiaries to pay dividends or make other distributions to affiliated entities, including the parent holding company.

Further information on insurance laws and regulations that may limit the ability of our insurance subsidiaries to pay dividends can be found in Item 5(c), “Dividends,” of this report.

If we fail to maintain sufficient capital to support our business, our financial condition and our ability to grow could be adversely affected.

We intend to maintain capital levels as necessary to pay all claims and other business expenses, to meet regulatory requirements, to support the growth of our insurance businesses, to provide for additional protection against possible large, unexpected losses, and to provide the necessary resources to pay dividends, repurchase stock or other securities, and fund corporate opportunities. The appropriate level of capital at any time is estimated by management based, in part, on current and anticipated business results and growth prospects, and projections of the levels of capital needed to protect us against unexpected events within a confidence level determined through our risk management process. The amount of capital that we seek to maintain also is driven by our assessment of potential exposures and correlations to our underwriting, investing, and operating risks, including those discussed in these Risk Factors. The estimates for unexpected events are internally produced and are the result of extensive analysis and modeling of the types and magnitude of risks that we are likely to face. While we regularly implement new measures to improve our techniques for estimating our capital needs, our ability to predict accurately the nature, size, and scope of unexpected events is inherently uncertain.

The amount of capital that we hold at any given time is determined by regulatory requirements and the performance of our insurance operations and investment results (including investment income, valuation changes in our portfolio, and the realization of any deferred tax benefits), as well as by our capital management activities, such as the payment of cash dividends, repurchases of our common shares and debt securities, the establishment of credit lines, and the issuance by us of debt, equity, or other securities. If we experience losses in our insurance operations or from our investment portfolio, our capital levels may be reduced, perhaps significantly. If our capital level falls lower than the amount needed at a given time, our ability to grow and successfully operate the insurance business could be constrained until additional sources of capital are secured. Such a deterioration of our financial condition could adversely affect the perception of our company by insurance regulators and other third parties (such as rating agencies, underwriters, institutional and other investors, and our customers), potentially resulting in regulatory actions or our inability to gain access to debt or equity markets at favorable rates, and the price of our common shares or debt securities could fall significantly.

In addition, the recoverability of certain of our deferred tax assets is predicated on the market valuation of our invested assets and certain tax planning strategies that, in part, depend on the substantial recovery to original cost of our fixed-income securities and redeemable preferred stocks. Should fair values of such securities decline or not substantially recover in value, a valuation allowance against the related deferred tax assets may become necessary, which would reduce our capital levels.

Our access to capital markets, ability to enter into new or renew existing financing arrangements, obligations to post collateral under certain derivative contracts, and business operations are dependent on favorable evaluations and ratings by credit and other rating agencies.

Our credit and financial strength are evaluated and rated by various rating agencies, such as Standard & Poor’s, Moody’s Investors Service, Fitch Ratings, and A.M. Best. Progressive and its insurance subsidiaries currently enjoy favorable, stable ratings. Downgrades in our credit ratings could adversely affect our ability to access the capital markets and/or lead to increased borrowing costs in the future (although the interest rates we pay on our current indebtedness would not be affected), as would adverse recommendations by equity analysts at the various brokerage houses and investment firms. Perceptions of our company by investors, producers, other businesses, and consumers could also be significantly impaired. In addition, a downgrade could trigger contractual obligations in certain derivative transactions requiring us to post substantial amounts of collateral, in cash or high-grade assets, for the benefit of the other party to the transaction. Downgrades in the ratings of our insurance subsidiaries could likewise negatively impact our operations, potentially resulting in lower or negative premium growth. In any such event, our financial performance could be materially adversely affected.

The Progressive Corporation’s annual dividend policy will result in a variable payment to shareholders each year, or no payment in some years, and the dividend program ultimately may be changed in the discretion of the Board of Directors.

We have previously announced our intention to pay a dividend to shareholders on an annual basis under a formula that multiplies our annual after-tax underwriting income by a percentage factor set by the Board of Directors (33-1/3% for 2011 and 2012) and then by the Gainshare factor (determined under our employee Gainsharing (cash bonus) plans based on the operating performance of our principal insurance businesses). If our Gainshare factor for the year is zero or after-tax comprehensive income (which includes net investment income, realized investment gains and losses and the change in unrealized investment gains and losses) is less than after-tax underwriting income, no dividend will be paid under our annual variable dividend policy.

Because the dividend calculation is performance-based, the amount (if any) to be paid in any particular year may not be subject to accurate prediction and will likely vary, perhaps significantly, from the amounts paid in the preceding year(s). As a result, the amount paid may be inconsistent with some shareholders’ expectations. In addition, although we have announced our intent to

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repeat the annual dividend in 2012 (to be paid early in 2013), the dividend, if any, would not be declared by the Board until late 2012 or early 2013, and the Board retains the discretion, at any time, to alter our policy or not to pay the annual dividend for 2012 or future years. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in our performance or capital needs, changes in U.S. federal income tax laws, disruptions of national or international capital markets, or other events affecting our liquidity or financial position as described above under “Investing Risks.” Any such change could adversely affect investors’ perceptions of the company and the value of, or the total return of an investment in, our common shares or debt securities.

We do not manage to short-term earnings expectations; our goal is to maximize the long-term value of the enterprise, which at times may adversely affect short-term results.

We believe that shareholder value will be increased in the long run if we meet or exceed the financial goals and policies that we establish each year. We do not manage our business to maximize short-term stock performance or the amount of the dividend that may be paid under our annual variable dividend policy or otherwise. We report earnings and other operating results on a monthly basis. We also do not provide earnings estimates to the market and do not comment on earnings estimates by analysts. As a result, our reported results for a particular period may vary, perhaps significantly, from investors’ expectations, which could result in significant volatility in the price of our common shares or debt securities.

In addition, due to our focus on the long-term value of the enterprise, we may undertake business strategies and establish related financial goals for a specific year that are designed to enhance our longer-term performance, while understanding that such strategies may not always similarly benefit short-term results, such as our annual underwriting profit or earnings per share. Such strategies, for example, may involve a reduction in premiums for certain products or customers, or increases in advertising spend, to support growth or enhance retention of current customers. Consequently, these strategies may adversely affect short-term performance or the amount of our variable dividend for a given year, and may result in additional volatility in the price of our common shares or debt securities.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

We currently do not have any unresolved comments from the SEC staff.

ITEM 2. PROPERTIES

All of our properties are owned or leased by subsidiaries of The Progressive Corporation and are used for office functions (corporate, claims, and business unit), as call centers, for training, for warehouse space, or as service centers that provide our concierge level of claims service.

We own 71 buildings located throughout the United States. These facilities, which contain approximately 4.1 million square feet of space, are not segregated by industry segment.

We lease approximately 3.1 million square feet of space throughout the United States and one location in Australia. These leases are generally short-term to medium-term leases of commercial space.

In addition to our corporate headquarters and another office complex and call center in Mayfield Village, Ohio, we own significant locations in Colorado Springs, Colorado; Tampa, Florida; and Tempe, Arizona.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference from information with respect to executive officers of The Progressive Corporation and its subsidiaries set forth in Item 10 in Part III of this Form 10-K.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information

Progressive’s Common Shares, $1.00 par value, are traded on the New York Stock Exchange under the symbol PGR. The high and low prices set forth below are as reported on the consolidated transaction reporting system.

Year	Quarter		High		Low		Close		Dividends Declared Per Share
2011		1	$	21.24	$	19.12	$	21.13	$	0
		2		22.08		19.79		21.38		0
		3		21.66		16.88		17.76		0
		4		19.74		16.97		19.51		.4072
			$	22.08	$	16.88	$	19.51	$	.4072
2010		1	$	19.69	$	16.18	$	19.09	$	0
		2		20.94		18.67		18.72		0
		3		21.59		18.41		20.87		0
		4		22.13		19.54		19.87		1.3987
			$	22.13	$	16.18	$	19.87	$	1.3987

The closing price of our Common Shares on February 15, 2012, was $21.34.

(b) Holders

We had 3,273 shareholders of record on December 31, 2011.

(c) Dividends

See the table above for the frequency and amount of cash dividends declared on our Common Shares, $1.00 par value, for the last two years.

Progressive maintains a policy of declaring an annual variable dividend, payable shortly after the close of the year. The annual variable dividend is based on a formula that multiplies our annual after-tax underwriting income by a target percentage factor and then by a companywide performance factor (known as our Gainshare factor). The Board determined the target percentage of after-tax underwriting income to be 20% for 2009, 25% for 2010, and 33-1/3% for 2011. This target will remain at 33-1/3% for 2012. The Gainshare factor can range from zero to two and is determined by comparing operating performance for the year to certain predetermined profitability and growth objectives in our insurance businesses. The Gainshare factor is also used in connection with our cash bonus program for employees and is approved by the Compensation Committee of the Board annually. Although recalibrated every year, the structure of the Gainsharing program generally remains the same. Our annual variable dividend program is subject to certain limitations. To the extent the Gainshare factor is zero or if after-tax comprehensive income (net income plus the after-tax change in unrealized gains (losses) during the period, among other items) is less than after-tax underwriting income, no annual variable dividend will be paid.

Although it is our intent to calculate an annual dividend based on the formula outlined above, the Board could decide to alter our policy, or not to pay the annual dividend for 2012 or future years, at any time prior to the declaration of the dividend for the year. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in our performance or capital needs, changes in federal income tax laws, disruptions of national or international capital markets, or other events affecting our business, liquidity, or financial position. In December 2011, the Board of Directors declared an annual dividend, which was paid in February 2012 to shareholders of record at the close of business on January 26, 2012. The amount of the dividend was $.4072 per common share, or $249.4 million. The 2010 annual dividend was declared by the Board in December 2010 and paid to shareholders in February 2011; the total amount of dividends was $263.8 million, or $.3987 per common share. The 2009 annual dividend was declared by the Board in December 2009 and paid to shareholders in February 2010; the total amount of dividends was $108.4 million, or $.1613 per common share. In addition, in 2010, we returned $663.2 million to shareholders via an extraordinary cash dividend of $1.00 per share.

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Consolidated statutory surplus was $5.3 billion on December 31, 2011, and $5.1 billion on December 31, 2010. At December 31, 2011, $472.6 million of consolidated statutory surplus represented net admitted assets of Progressive’s insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of domicile. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the companies are licensed. The companies may be licensed in states other than their states of domicile, however, which may have higher minimum statutory surplus requirements. Based on the dividend laws currently in effect, the insurance subsidiaries could pay aggregate dividends of $1,195.8 million in 2012 without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of previous dividends paid by the applicable subsidiary.

(d) Securities Authorized for Issuance Under Equity Compensation Plans

The following information is set forth with respect to our equity compensation plans at December 31, 2011.

EQUITY COMPENSATION PLAN INFORMATION
Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights			Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders:
Employee Plans:
2010 Equity Incentive Plan		2,390,460	1		NA		15,609,540
2003 Incentive Plan		2,769,862	1		NA		2,532,382
Subtotal Employee Plans		5,160,322			NA		18,141,922
Director Plans:
2003 Directors Equity Incentive Plan		0			0		663,095
1998 Directors’ Stock Option Plan2		36,237		$	12.51		0
Subtotal Director Plans		36,237		$	12.51		663,095
Equity compensation plans
not approved by security holders:
None
Total		5,196,559			NM		18,805,017

NA = Not Applicable

NM = Not meaningful since restricted stock unit awards do not have an exercise price.

¹ Represents restricted stock unit awards, including reinvested dividend equivalents, under which, upon vesting, the holder has the right to receive common shares on a one-to-one basis; there is no exercise price associated with restricted stock unit awards. For further discussion of these awards, see Note 9 - Employee Benefit Plans in Progressive’s 2011 Annual Report to Shareholders.

² This plan has expired and no further awards may be made thereunder.

(e) Performance Graph

Incorporated by reference from the Performance Graph section in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

(f) Recent Sales of Unregistered Securities

None.

24

(g) Share Repurchases

ISSUER PURCHASES OF EQUITY SECURITIES
2011 Calendar Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
October		4,225,100	$	18.00		19,546,591		55,453,409
November		3,100,000		18.69		22,646,591		52,353,409
December		1,681,510		18.94		24,328,101		50,671,899
Total		9,006,610	$	18.41

In June 2011, the Board approved an authorization to repurchase up to 75 million of our common shares; this Board authorization does not have an expiration date. Shares repurchased under this authorization may be accomplished through open market purchases or otherwise, and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. In August 2011, we entered into a 10b5-1 trading plan to permit, under certain circumstances specified in the plan, the repurchase of our common shares during periods that are otherwise restricted under our internal policies; this plan expired in November 2011. During the fourth quarter, we repurchased shares under the 10b5-1 plan, in the open market, and in conjunction with our incentive compensation plans at the then current market prices.

Progressive’s financial policies state that we will repurchase shares to neutralize dilution from equity-based compensation in the year of issuance and to return underleveraged capital to investors. See Note 9 - Employee Benefit Plans, “Incentive Compensation Plans” in our Annual Report, which is included as Exhibit 13 to this Form 10-K, for a summary of our restricted equity grants.

ITEM 6. SELECTED FINANCIAL DATA

(millions - except per share amounts)

	For the years ended December 31,
	2011		2010		2009		2008			2007
Total revenues	$	15,508.1	$	14,963.3	$	14,563.6	$	12,840.1		$	14,686.8
Net income (loss)		1,015.5		1,068.3		1,057.5		(70.0	)		1,182.5
Per share:
Net income (loss)1		1.59		1.61		1.57		(.10	)		1.65
Dividends		.4072		1.3987		.1613		0			2.1450
Comprehensive income (loss)		924.3		1,398.8		1,752.2		(614.7	)		1,071.0
Total assets		21,844.8		21,150.3		20,049.3		18,250.5			18,843.1
Debt outstanding		2,442.1		1,958.2		2,177.2		2,175.5			2,173.9

¹ For 2008, amount represents basic earnings per share, since diluted earnings per share was antidilutive due to the net loss for the year.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Incorporated by reference from Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risk are incorporated by reference from section “IV. Results of Operations – Investments” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, as described in Item 7 above. Additional information is incorporated by reference from the Quantitative Market Risk Disclosures section in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of Progressive, along with the related notes, supplementary data, and report of the independent registered public accounting firm, are incorporated by reference from our Annual Report, which is included as Exhibit 13 to this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Progressive, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

The Chief Executive Officer and the Chief Financial Officer reviewed and evaluated Progressive’s disclosure controls and procedures as of the end of the period covered by this report. Based on that review and evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that Progressive’s disclosure controls and procedures are effectively serving the stated purposes as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting is incorporated by reference from our Annual Report, which is included as Exhibit 13 to this Form 10-K.

The attestation of the independent registered public accounting firm is incorporated by reference from our Annual Report, which is included as Exhibit 13 to this Form 10-K.

There has been no change in Progressive’s internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

26

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to all of the directors, and the individuals who have been nominated for election as directors at the 2012 Annual Meeting of Shareholders of the Registrant, is incorporated herein by reference from the section entitled “Item 1: Election of Directors” in the Proxy Statement.

Information relating to executive officers of Progressive follows. Unless otherwise indicated, the executive officer has held the position(s) indicated for at least the last five years.

Name	Age	Offices Held and Last Five Years’ Business Experience
Glenn M. Renwick	56	President and Chief Executive Officer
Brian C. Domeck	52	Vice President and Chief Financial Officer
Charles E. Jarrett	54	Vice President, Secretary, and Chief Legal Officer
Thomas A. King	52	Vice President and Treasurer
Jeffrey W. Basch	53	Vice President and Chief Accounting Officer
John A. Barbagallo	52	Commercial Lines Group President, including Agency Operations, since September 2007; Agency Group President prior to September 2007
M. Jeffrey Charney	52	Chief Marketing Officer since November 2010; Senior Vice President and Chief Marketing Officer of Aflac Incorporated from November 2008 to October 2010; Senior Vice President and Chief Marketing Officer of QVC, Inc. prior to November 2008
William M. Cody	49	Chief Investment Officer
Susan Patricia Griffith	47	Claims Group President since March 2008; Chief Human Resource Officer prior to March 2008
Valerie Krasowski	46	Chief Human Resource Officer since August 2008; Special Lines General Manager prior to August 2008
John P. Sauerland	47	Personal Lines Group President since September 2007; Direct Group President prior to September 2007
Raymond M. Voelker	48	Chief Information Officer

27

Section 16(a) Beneficial Ownership Reporting Compliance. Incorporated by reference from the “Section 16(a) Beneficial Ownership Reporting Compliance” section of the Proxy Statement.

Code of Ethics. Progressive has a Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and other senior financial officers. This Code of Ethics is available at: progressive.com/governance. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, and waivers from, the provisions of the foregoing Code of Ethics by posting such information on our Internet website at: progressive.com/governance.

Shareholder-Proposed Candidate Procedures. There were no material changes to Progressive’s shareholder-proposed candidate procedures during 2011. The description of those procedures is incorporated by reference from the “Shareholder-Proposed Candidate Procedures” section of the Proxy Statement (which can be found in “Other Board of Directors Information”).

Audit Committee. Incorporated by reference from the “Audit Committee” section of the Proxy Statement.

Financial Expert. Incorporated by reference from the “Audit Committee Financial Experts” section of the Proxy Statement (which can be found in “Audit Committee”).

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from the sections of the Proxy Statement entitled “Compensation Discussion and Analysis,” “Executive Compensation,” “Other Board of Directors Information: Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report.”

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Incorporated by reference from the section of the Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management.”

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Incorporated by reference from the section of the Proxy Statement entitled “Other Board of Directors Information,” subsections “Board of Directors Independence Determinations” and “Certain Relationships and Related Transactions.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference from the section of the Proxy Statement entitled “Other Independent Registered Public Accounting Firm Information.”

28

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Listing of Financial Statements

The following consolidated financial statements included in Progressive’s 2011 Annual Report, which is included as Exhibit 13 to this Form 10-K, are incorporated by reference in Item 8:

• Report of Independent Registered Public Accounting Firm

• Consolidated Statements of Comprehensive Income - For the Years Ended December 31, 2011, 2010, and 2009

• Consolidated Balance Sheets - December 31, 2011 and 2010

• Consolidated Statements of Changes in Shareholders’ Equity - For the Years Ended December 31, 2011, 2010, and 2009

• Consolidated Statements of Cash Flows - For the Years Ended December 31, 2011, 2010, and 2009

• Notes to Consolidated Financial Statements

• Supplemental Information (Unaudited)

(a)(2) Listing of Financial Statement Schedules

The following financial statement schedules, Report of Independent Registered Public Accounting Firm and Consent of Independent Registered Public Accounting Firm are included in Item 15(c):

• Schedule I - Summary of Investments - Other than Investments in Related Parties

• Schedule II - Condensed Financial Information of Registrant

• Schedule III - Supplementary Insurance Information

• Schedule IV - Reinsurance

• Schedule VI - Supplemental Information Concerning Property-Casualty Insurance Operations

• Report of Independent Registered Public Accounting Firm on Financial Statement Schedules

• Consent of Independent Registered Public Accounting Firm

• No other schedules are required to be filed herewith pursuant to Article 7 of Regulation S-X.

(a)(3) Listing of Exhibits

See exhibit index contained herein beginning at page 42. Management contracts and compensatory plans and arrangements are identified in the Exhibit Index as Exhibit Nos. 10.4 through 10.69.

(b) Exhibits

The exhibits in response to this portion of Item 15 are submitted concurrently with this report.

(c) Financial Statement Schedules

29

SCHEDULE I — SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

	December 31, 2011
Type of Investment	Cost		Fair Value		Amount At Which Shown In The Balance Sheet
Available-for-sale
Fixed maturities:
Bonds:
United States Government and government agencies and authorities	$	2,842.7	$	2,963.0	$	2,963.0
States, municipalities, and political subdivisions		1,938.6		2,002.1		2,002.1
Public utilities		97.8		97.5		97.5
Corporate and other debt securities		2,703.7		2,798.7		2,798.7
Asset-backed securities		3,493.6		3,524.1		3,524.1
Redeemable preferred stocks		379.3		373.9		373.9
Total fixed maturities		11,455.7		11,759.3		11,759.3
Equity securities:
Common stocks:
Public utilities		113.7		147.4		147.4
Banks, trusts, and insurance companies		203.0		224.7		224.7
Industrial, miscellaneous, and all other		1,114.3		1,473.5		1,473.5
Nonredeemable preferred stocks		473.7		806.3		806.3
Total equity securities		1,904.7		2,651.9		2,651.9
Short-term investments1		1,551.8		1,551.8		1,551.8
Total investments	$	14,912.2	$	15,963.0	$	15,963.0

¹ Includes $10.0 million in treasury bills issued by the Australian government.

Progressive did not have any securities of any one issuer with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2011.

30

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2011			2010			2009
Revenues
Dividends from subsidiaries	$	875.3		$	1,216.2		$	1,230.6
Undistributed income from subsidiaries		225.7			(73.5	)		(78.7	)
Equity in net income of subsidiaries*		1,101.0			1,142.7			1,151.9
Intercompany investment income*		5.6			6.6			8.5
Net gains (losses) on extinguishment of debt		(.1	)		6.4			0
Total revenues		1,106.5			1,155.7			1,160.4
Expenses
Interest expense		138.0			139.5			146.4
Deferred compensation1		.4			4.3			4.8
Other operating costs and expenses		4.7			3.9			3.3
Total expenses		143.1			147.7			154.5
Income before income taxes		963.4			1,008.0			1,005.9
Provision (benefit) for income taxes		(52.1	)		(60.3	)		(51.6	)
Net income	$	1,015.5		$	1,068.3		$	1,057.5
Other comprehensive income (loss)		(91.2	)		330.5			694.7
Comprehensive income	$	924.3		$	1,398.8		$	1,752.2

* Eliminated in consolidation.

¹  See Note 4 – Employee Benefit Plans in these condensed financial statements.

See notes to condensed financial statements.

31

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CONDENSED BALANCE SHEETS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	December 31,
	2011		2010
Assets
Investment in affiliate	$	1.0	$	1.0
Investment in subsidiaries*		6,179.5		5,984.8
Receivable from investment subsidiary*		2,096.6		2,120.2
Intercompany receivable*		237.6		179.1
Income taxes		52.1		48.7
Other assets		69.0		70.2
Total Assets	$	8,635.8	$	8,404.0
Liabilities and Shareholders’ Equity
Accounts payable, accrued expenses, and other liabilities	$	137.4	$	132.8
Dividend payable		249.6		264.1
Debt		2,442.1		1,958.2
Total liabilities		2,829.1		2,355.1
Common Shares, $1.00 par value (authorized 900.0; issued 797.7, including treasury shares of 184.7 and 135.3)		613.0		662.4
Paid-in capital		1,006.2		1,007.1
Retained earnings		3,495.0		3,595.7
Total accumulated other comprehensive income		692.5		783.7
Total shareholders’ equity		5,806.7		6,048.9
Total Liabilities and Shareholders’ Equity	$	8,635.8	$	8,404.0

* Eliminated in consolidation.

See notes to condensed financial statements.

32

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CONDENSED STATEMENTS OF CASH FLOWS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2011			2010			2009
Cash Flows From Operating Activities:
Net income	$	1,015.5		$	1,068.3		$	1,057.5
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed income from subsidiaries		(225.7	)		73.5			78.7
Amortization of stock-based compensation		2.1			2.4			1.8
Net (gains) losses on extinguishment of debt		.1			(6.4	)		0
Changes in:
Intercompany receivable		(58.5	)		(54.1	)		(22.0	)
Accounts payable, accrued expenses, and other liabilities		4.5			7.3			12.5
Income taxes		(3.4	)		(12.2	)		31.1
Other, net		4.2			(1.9	)		(5.6	)
Net cash provided by operating activities		738.8			1,076.9			1,154.0
Cash Flows From Investing Activities:
Additional investments in equity securities of consolidated subsidiaries		(11.8	)		(3.5	)		(152.4	)
Received from (paid to) investment subsidiary		23.6			122.0			(849.5	)
Net cash provided by (used in) investing activities		11.8			118.5			(1,001.9	)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options		22.4			27.2			18.8
Tax benefit from exercise/vesting of stock-based compensation		6.4			14.0			9.7
Proceeds from debt issuance		497.0			0			0
Reacquisition of debt		(15.0	)		(214.3	)		0
Dividends paid to shareholders		(263.6	)		(763.7	)		0
Acquisition of treasury shares		(997.8	)		(258.6	)		(180.6	)
Net cash used in financing activities		(750.6	)		(1,195.4	)		(152.1	)
Change in cash		0			0			0
Cash, beginning of year		0			0			0
Cash, end of year	$	0		$	0		$	0

See notes to condensed financial statements.

33

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements of The Progressive Corporation (parent company) should be read in conjunction with the consolidated financial statements and notes thereto of The Progressive Corporation and subsidiaries’ Annual Report to Shareholders, which is included as Exhibit 13 to this Form 10-K.

Note 1. Statements of Cash Flows — For the purpose of the Statements of Cash Flows, cash includes only bank demand deposits. The Progressive Corporation does not hold any cash but has unrestricted access to funds maintained in a non-insurance, investment subsidiary to meet its holding company obligations; at year-end 2011 and 2010, $2.0 billion and $2.2 billion, respectively, of marketable securities were available in this company. Non-cash activity includes declared but unpaid dividends. For the years ended December 31, we paid the following:

(millions)	2011		2010		2009
Income taxes, net of refunds	$	435.0	$	434.0	$	461.7
Interest		129.5		138.4		144.7

Note 2. Income Taxes — The Progressive Corporation files a consolidated federal income tax return with all subsidiaries and acts as an agent for the consolidated tax group when making payments to the Internal Revenue Service. Income taxes in the accompanying Condensed Balance Sheets are comprised of the parent company’s net deferred tax assets and the consolidated group’s net income taxes payable/recoverable. The Progressive Corporation and its subsidiaries have adopted, pursuant to a written agreement, a method of allocating consolidated federal income taxes. Amounts allocated to the subsidiaries under the written agreement are included in “Intercompany Receivable” in the accompanying Condensed Balance Sheets.

Note 3. Debt — The information relating to debt is incorporated by reference from Note 4 – Debt in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

Note 4. Employee Benefit Plans — The information relating to incentive compensation plans and deferred compensation is incorporated by reference from Note 9 – Employee Benefit Plans in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

Note 5. Other Comprehensive Income — On the condensed Statements of Comprehensive Income, other comprehensive income (loss) represents activity of the subsidiaries of The Progressive Corporation and includes net unrealized gains (losses) on securities, net unrealized gains on forecasted transactions, and foreign currency translation adjustments.

34

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

			Future
			policy
			benefits,				Other
			losses,				policy						Benefits,		Amortization
	Deferred		claims,				claims						claims,		of deferred
	policy		and				and				Net		losses, and		policy		Other			Net
	acquisition		loss		Unearned		benefits		Premium		investment		settlement		acquisition		operating			premiums
Segment	costs1		expenses1		premiums1		payable1		revenue		income1,2		expenses		costs		expenses			written
Year ended December 31, 2011:
Personal Lines									$	13,431.1			$	9,615.2	$	1,231.9	$	1,664.7		$	13,612.2
Commercial Auto										1,467.1				1,010.7		166.6		156.3			1,534.3
Other indemnity										4.6				8.9		.7		.5			.1
Total	$	433.6	$	7,245.8	$	4,579.4	$	0	$	14,902.8	$	466.5	$	10,634.8	$	1,399.2	$	1,821.5		$	15,146.6
Year ended December 31, 2010:
Personal Lines									$	12,826.9			$	9,159.6	$	1,188.1	$	1,587.1		$	13,024.4
Commercial Auto										1,474.2				958.6		167.9		162.7			1,449.5
Other indemnity3										13.7				13.1		3.9		(9.7	)		2.9
Total	$	417.2	$	7,071.0	$	4,353.8	$	0	$	14,314.8	$	508.2	$	10,131.3	$	1,359.9	$	1,740.1		$	14,476.8
Year ended December 31, 2009:
Personal Lines									$	12,365.9			$	8,847.0	$	1,171.6	$	1,410.2		$	12,453.1
Commercial Auto										1,623.3				1,050.7		187.0		155.8			1,533.9
Other indemnity										23.6				7.2		6.0		1.7			15.9
Total	$	402.2	$	6,653.0	$	4,172.9	$	0	$	14,012.8	$	495.9	$	9,904.9	$	1,364.6	$	1,567.7		$	14,002.9

¹  Progressive does not allocate assets, liabilities, or investment income to operating segments.

²  Excludes total net realized gains (losses) on securities.

³  We sold our professional liability insurance businesses in the first quarter 2010. The gain on the sale is reflected in other operating expenses.

35

SCHEDULE IV — REINSURANCE

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

					Assumed				Percentage
			Ceded to		From				of Amount
	Gross		Other		Other				Assumed
Year Ended:	Amount		Companies		Companies		Net Amount		to Net
December 31, 2011
Premiums earned:
Property and liability insurance	$	15,107.5	$	204.7	$	0	$	14,902.8		0
December 31, 2010
Premiums earned:
Property and liability insurance	$	14,519.2	$	204.4	$	0	$	14,314.8		0
December 31, 2009
Premiums earned:
Property and liability insurance	$	14,199.4	$	186.6	$	0	$	14,012.8		0

36

SCHEDULE VI — SUPPLEMENTAL INFORMATION CONCERNING PROPERTY - CASUALTY INSURANCE OPERATIONS

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

	Losses and Loss Adjustment
	Expenses Incurred Related to					Paid Losses and Loss Adjustment Expenses
Year Ended	Current Year		Prior Years
December 31, 2011	$	10,876.8	$	(242.0	)	$	10,541.6
December 31, 2010	$	10,451.7	$	(320.4	)	$	9,888.0
December 31, 2009	$	10,040.9	$	(136.0	)	$	9,714.2

Pursuant to Rule 12-18 of Regulation S-X. See Schedule III for the additional information required in Schedule VI.

37

Report of Independent Registered Public Accounting Firm on Financial Statement Schedules

To the Board of Directors and Shareholders of The Progressive Corporation:

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 28, 2012 appearing in the 2011 Annual Report to Shareholders of The Progressive Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

February 28, 2012

38

Consent of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of The Progressive Corporation:

We hereby consent to the incorporation by reference in the Registration Statements on:

Form	Filing No.		Filing Date
S-8		333-172663	March 8, 2011
S-8		333-104646	April 21, 2003
S-8		333-104653	April 21, 2003
S-8		333-41238	July 12, 2000
S-8		333-51613	May 1, 1998
S-8		33-57121	December 29, 1994
S-8		33-51034	August 20, 1992
S-8		33-16509	August 14, 1987

of The Progressive Corporation of our report dated February 28, 2012 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 28, 2012 relating to the financial statement schedules, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

February 28, 2012

39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	THE PROGRESSIVE CORPORATION
February 28, 2012	By:	/s/ Glenn M. Renwick
		Glenn M. Renwick
		Director, President, and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

* Peter B. Lewis	Director, Chairman of the Board	February 28, 2012
/s/ Glenn M. Renwick Glenn M. Renwick	Director, President, and Chief Executive Officer	February 28, 2012
/s/ Brian C. Domeck Brian C. Domeck	Vice President and Chief Financial Officer	February 28, 2012
/s/ Jeffrey W. Basch Jeffrey W. Basch	Vice President and Chief Accounting Officer	February 28, 2012
* Stuart B. Burgdoerfer	Director	February 28, 2012
* Charles A. Davis	Director	February 28, 2012
* Roger N. Farah	Director	February 28, 2012
* Lawton W. Fitt	Director	February 28, 2012
* Stephen R. Hardis	Director	February 28, 2012
* Norman S. Matthews	Director	February 28, 2012
* Heidi G. Miller, Ph.D.	Director	February 28, 2012
* Patrick H. Nettles, Ph.D.	Director	February 28, 2012
* Bradley T. Sheares, Ph.D.	Director	February 28, 2012

40

* Charles E. Jarrett, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons.

By:	/s/ Charles E. Jarrett	February 28, 2012
	Charles E. Jarrett
	Attorney-in-fact

41

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
3(i)		3.1	Amended Articles of Incorporation of The Progressive Corporation (as amended April 18, 2008)	Quarterly Report on Form 10-Q (filed on May 6, 2008; Exhibit 3.1 therein)
3(ii)		3.2	Code of Regulations of The Progressive Corporation (as amended April 24, 2009)	Quarterly Report on Form 10-Q (filed on May 11, 2009; Exhibit 3.1 therein)
4		4.1	364-Day Secured Liquidity Credit Facility Agreement dated as of December 31, 2008 between The Progressive Corporation and PNC Bank, National Association (successor in interest to National City Bank) (“PNC Credit Agreement”)	Current Report on Form 8-K (filed on January 7, 2009; Exhibit 4.1 therein)
4		4.2	Amendment No. 1, dated as of December 31, 2009, to PNC Credit Agreement	Current Report on Form 8-K (filed on January 6, 2010; Exhibit 4.1 therein)
4		4.3	Amendment No. 2, dated as of December 31, 2010, to PNC Credit Agreement	Current Report on Form 8-K (filed on January 4, 2011; Exhibit 4 therein)
4		4.4	Amendment No. 3, dated as of December 31, 2011, to PNC Credit Agreement	Current Report on Form 8-K (filed on January 4, 2012; Exhibit 4 therein)
4		4.5	Form of 6.375% Senior Notes due 2012, issued in the aggregate principal amount of $350,000,000 under the 1993 Senior Indenture (see exhibit 4.11 below), as amended and supplemented	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 4.4 therein)
4		4.6	Form of 7% Notes due 2013 issued in the aggregate principal amount of $150,000,000 under the 1993 Senior Indenture, as amended and supplemented	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 4.4 therein)
4		4.7	Form of 3.75% Senior Notes due 2021, issued in the aggregate principal amount of $500,000,000 under the 1993 Senior Indenture, as amended and supplemented	Current Report on Form 8-K (filed on August 22, 2011; Exhibit 4.2 therein)
4		4.8	Form of 6 5/8% Senior Notes due 2029, issued in the aggregate principal amount of $300,000,000 under the 1993 Senior Indenture, as amended and supplemented	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 4.5 therein)
4		4.9	Form of 6.25% Senior Notes due 2032, issued in the aggregate principal amount of $400,000,000 under the 1993 Senior Indenture, as amended and supplemented	Annual Report on Form 10-K (filed on February 27, 2008; Exhibit 4.5 therein)
4		4.10	Form of 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 issued in the original aggregate principal amount of $1,000,000,000 under the Junior Subordinated Indenture (see exhibit 4.18 below), as amended and supplemented	Current Report on Form 8-K (filed on June 22, 2007; Exhibit 4.3 therein)

42

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
4		4.11	Indenture dated as of September 15, 1993 between The Progressive Corporation and State Street Bank and Trust Company (successor in interest to The First National Bank of Boston), as Trustee (“1993 Senior Indenture”) (including table of contents and cross-reference sheet)	Registration Statement No. 333-48935 (filed on March 31, 1998; Exhibit 4.1 therein)
4		4.12	First Supplemental Indenture dated March 15, 1996 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company	Registration Statement No. 333-01745 (filed on March 15, 1996; Exhibit 4.2 therein)
4		4.13	Second Supplemental Indenture dated February 26, 1999 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company, as Trustee	Registration Statement No. 333-100674 (filed on October 22, 2002; Exhibit 4.3 therein)
4		4.14	Third Supplemental Indenture dated December 7, 2001 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company, as Trustee	Registration Statement No. 333-100674 (filed on October 22, 2002; Exhibit 4.4 therein)
4		4.15	Fourth Supplemental Indenture dated November 21, 2002 to the 1993 Senior Indenture between The Progressive Corporation and State Street Bank and Trust Company, as Trustee	Registration Statement No. 333-143824 (filed on June 18, 2007; Exhibit 4.5 therein)
4		4.16	Fifth Supplemental Indenture dated June 13, 2007 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, evidencing the designation of U.S. Bank National Association as successor Trustee under the 1993 Senior Indenture	Registration Statement No. 333-143824 (filed on June 18, 2007; Exhibit 4.6 therein)
4		4.17	Sixth Supplemental Indenture dated August 22, 2011 to the 1993 Senior Indenture between The Progressive Corporation and U.S. Bank National Association, as Trustee	Quarterly Report on Form 10-Q (filed on November 7, 2011; Exhibit 4.1 therein)
4		4.18	Junior Subordinated Indenture dated as of June 21, 2007 between The Progressive Corporation and The Bank of New York Trust Company, N.A., Trustee (“Junior Subordinated Indenture”) (including table of contents and cross-reference sheet)	Current Report on Form 8-K (filed on June 22, 2007; Exhibit 4.1 therein)
4		4.19	First Supplemental Indenture dated June 21, 2007 to the Junior Subordinated Indenture between The Progressive Corporation and The Bank of New York Trust Company, N.A., as Trustee	Current Report on Form 8-K (filed on June 22, 2007; Exhibit 4.2 therein)

43

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
4		4.20	Second Supplemental Indenture dated September 2, 2011, to the Junior Subordinated Indenture dated June 21, 2007, between The Progressive Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee	Current Report on Form 8-K (filed on September 7, 2011; Exhibit 4 therein)
4		4.21	Replacement Capital Covenant dated June 21, 2007, of The Progressive Corporation	Current Report on Form 8-K (filed on June 22, 2007; Exhibit 4.4 therein)
4		4.22	Termination of Replacement Capital Covenant, dated June 23, 2010	Current Report on Form 8-K (filed on June 24, 2010; Exhibit 4 therein)
10(ii)		10.1	Sublease Agreement for Aircraft Hangar dated as of August 21, 2006 between Progressive Casualty Insurance Company and Acme Operating Corporation	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.1 therein)
10(ii)		10.2	First Amendment to Sublease Agreement for Aircraft Hangar dated June 6, 2011 between Progressive Casualty Insurance Company and Acme Operating Corporation	Quarterly Report on Form 10-Q (filed on August 9, 2011; Exhibit 10.1 therein)
10(ii)		10.3	Assignment and Assumption of Lease Agreement dated July 7, 2010, between Acme Operating Company and Acme Acquisition Company	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.2 therein)
10(iii)		10.4	The Progressive Corporation 2010 Gainsharing Plan	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.6 therein)
10(iii)		10.5	First Amendment to The Progressive Corporation 2010 Gainsharing Plan	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.7 therein)
10(iii)		10.6	The Progressive Corporation 2011 Gainsharing Plan	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.8 therein)
10(iii)		10.7	The Progressive Corporation 2012 Gainsharing Plan	Filed herewith
10(iii)		10.8	The Progressive Corporation 2007 Executive Bonus Plan	Filed herewith
10(iii)		10.9	The Progressive Corporation 2003 Incentive Plan	Registration Statement No. 333-104646 (filed on April 21, 2003; Exhibit 4(a) therein)
10(iii)		10.10	First Amendment to The Progressive Corporation 2003 Incentive Plan	Filed herewith
10(iii)		10.11	Second Amendment to The Progressive Corporation 2003 Incentive Plan	Current Report on Form 8-K (filed on February 4, 2010; Exhibit 10.1 therein)

44

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)		10.12	Third Amendment to The Progressive Corporation 2003 Incentive Plan	Current Report on Form 8-K (filed on February 2, 2011; Exhibit 10.2 therein)
10(iii)		10.13	Form of The Progressive Corporation 2003 Incentive Plan Restricted Stock Award Agreement (Time-Based Award) (for March 2007 and thereafter)	Current Report on Form 8-K (filed on March 26, 2007; Exhibit 10.1 therein)
10(iii)		10.14	Form of The Progressive Corporation 2003 Incentive Plan Restricted Stock Award Agreement (Performance-Based Award) (for 2004 through February 2007)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.16 therein)
10(iii)		10.15	Form of The Progressive Corporation 2003 Incentive Plan Restricted Stock Award Agreement (Performance-Based Award) (for March 2007 through February 2009)	Current Report on Form 8-K (filed on March 26, 2007; Exhibit 10.2 therein)
10(iii)		10.16	Form of The Progressive Corporation 2003 Incentive Plan Restricted Stock Award Agreement (Performance-Based Award) (for March 2009 through February 2010)	Quarterly Report on Form 10-Q (filed on May 11, 2009; Exhibit 10.2 therein)
10(iii)		10.17	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2003 Incentive Plan	Current Report on Form 8-K (filed on March 30, 2010; Exhibit 10.1 therein)
10(iii)		10.18	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards under The Progressive Corporation 2003 Incentive Plan	Current Report on Form 8-K (filed on March 30, 2010; Exhibit 10.2 therein)
10(iii)		10.19	The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on February 4, 2010; Exhibit 10.2 therein)
10(iii)		10.20	First Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on March 8, 2010; Exhibit 10.1 therein)
10(iii)		10.21	Second Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on March 11, 2010; Exhibit 10.1 therein)
10(iii)		10.22	Third Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on February 2, 2011; Exhibit 10.1 therein)
10(iii)		10.23	Fourth Amendment to The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on February 2, 2012; Exhibit 10.1 therein)
10(iii)		10.24	Form of Restricted Stock Unit Award Agreement for Time-Based Awards under The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on March 25, 2011; Exhibit 10.1 therein)
10(iii)		10.25	Form of Restricted Stock Unit Award Agreement for Performance-Based Awards under The Progressive Corporation 2010 Equity Incentive Plan	Current Report on Form 8-K (filed on March 25, 2011; Exhibit 10.2 therein)

45

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)		10.26	The Progressive Corporation 2003 Directors Equity Incentive Plan	Registration Statement No. 333-104653 (filed on April 21, 2003; Exhibit 4(a) therein)
10(iii)		10.27	Amendment No. 1 to The Progressive Corporation 2003 Directors Equity Incentive Plan	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.21 therein)
10(iii)		10.28	Amendment No. 2 to The Progressive Corporation 2003 Directors Equity Incentive Plan	Current Report on Form 8-K (filed on February 2, 2012; Exhibit 10.2 therein)
10(iii)		10.29	Form of The Progressive Corporation 2003 Directors Equity Incentive Plan Restricted Stock Award Agreement (for 2004 and thereafter)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.22 therein)
10(iii)		10.30	The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Annual Report on Form 10-K (filed on February 25, 2009; Exhibit 10.24 therein)
10(iii)		10.31	First Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.24 therein)
10(iii)		10.32	Second Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.25 therein)
10(iii)		10.33	Third Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.35 therein)
10(iii)		10.34	Fourth Amendment to The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.36 therein)
10(iii)		10.35	The Progressive Corporation Executive Deferred Compensation Plan (2008 Amendment and Restatement)	Current Report on Form 8-K (filed on December 20, 2007; Exhibit 10.1 therein)
10(iii)		10.36	The Progressive Corporation Executive Deferred Compensation Plan (2010 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.29 therein)
10(iii)		10.37	Form of The Progressive Corporation Executive Deferred Compensation Plan Deferral Agreement (for 2005 through 2009)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.30 therein)
10(iii)		10.38	Form of The Progressive Corporation Executive Deferred Compensation Plan Gainsharing/Bonus Deferral Agreement (for 2010 and thereafter)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.31 therein)

46

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)		10.39	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Deferral Agreement (for 2004)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.32 therein)
10(iii)		10.40	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Deferral Agreement (for 2005)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.33 therein)
10(iii)		10.41	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Deferral Agreement (for 2006 through 2009)	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.43 therein)
10(iii)		10.42	Form of The Progressive Corporation Executive Deferred Compensation Plan Performance-Based Restricted Stock Unit Deferral Agreement (for 2010 and thereafter)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.35 therein)
10(iii)		10.43	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2003)	Annual Report on Form 10-K (filed on February 25, 2009; Exhibit 10.34 therein)
10(iii)		10.44	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2004)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.37 therein)
10(iii)		10.45	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2005)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.38 therein)
10(iii)		10.46	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Deferral Agreement (for 2006 through 2009)	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.48 therein)
10(iii)		10.47	Form of The Progressive Corporation Executive Deferred Compensation Plan Time-Based Restricted Stock Unit Deferral Agreement (for 2010 and thereafter)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.40 therein)
10(iii)		10.48	The Progressive Corporation Executive Deferred Compensation Trust (November 8, 2002 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.41 therein)
10(iii)		10.49	First Amendment to Trust Agreement between Fidelity Management Trust Company and Progressive	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.42 therein)

47

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)		10.50	Second Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Quarterly Report on Form 10-Q (filed on August 2, 2007; Exhibit 10.1 therein)
10(iii)		10.51	Third Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Annual Report on Form 10-K (filed on February 27, 2008; Exhibit 10.54 therein)
10(iii)		10.52	Fourth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Annual Report on Form 10-K (filed on February 25, 2009; Exhibit 10.42 therein)
10(iii)		10.53	Fifth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Quarterly Report on Form 10-Q (filed on May 11, 2009; Exhibit 10.1 therein)
10(iii)		10.54	Sixth Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.47 therein)
10(iii)		10.55	Seventh Amendment to The Progressive Corporation Executive Deferred Compensation Trust	Filed herewith
10(iii)		10.56	The Progressive Corporation Directors Deferral Plan (2008 Amendment and Restatement)	Current Report on Form 8-K (filed on December 20, 2007; Exhibit 10.2 therein)
10(iii)		10.57	The Progressive Corporation Directors Restricted Stock Deferral Plan (2008 Amendment and Restatement)	Current Report on Form 8-K (filed on December 20, 2007; Exhibit 10.3 therein)
10(iii)		10.58	First Amendment to The Progressive Corporation Directors Restricted Stock Deferral Plan (2008 Amendment and Restatement)	Annual Report on Form 10-K (filed on February 25, 2009; Exhibit 10.47 therein)
10(iii)		10.59	Form of The Progressive Corporation Directors Restricted Stock Deferral Plan Deferral Agreement	Annual Report on Form 10-K (filed on March 1, 2010; Exhibit 10.53 therein)
10(iii)		10.60	The Progressive Corporation 1998 Directors’ Stock Option Plan	Annual Report on Form 10-K (filed on February 27, 2008; Exhibit 10.65 therein)
10(iii)		10.61	Director Compensation Schedule for 2010 and 2011	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.64 therein)
10(iii)		10.62	The Progressive Corporation Executive Separation Allowance Plan (2006 Amendment and Restatement)	Annual Report on Form 10-K (filed on March 1, 2011; Exhibit 10.65 therein)
10(iii)		10.63	First Amendment to The Progressive Corporation Executive Separation Allowance Plan (2006 Amendment and Restatement)	Quarterly Report on Form 10-Q (filed on November 1, 2007; Exhibit 10.1 therein)

48

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
10(iii)		10.64	Second Amendment to The Progressive Corporation Executive Separation Allowance Plan (2006 Amendment and Restatement)	Quarterly Report on Form 10-Q (filed on May 9, 2011; Exhibit 10.1 therein)
10(iii)		10.65	Third Amendment to The Progressive Corporation Executive Separation Allowance Plan (2006 Amendment and Restatement)	Quarterly Report on Form 10-Q (filed on May 9, 2011; Exhibit 10.2 therein)
10(iii)		10.66	Employment Offer Letter for Chief Marketing Officer	Filed herewith
10(iii)		10.67	2010 Non-plan Cash Bonus Paid to William M. Cody, Chief Investment Officer	Current Report on Form 8-K (filed on February 2, 2011; description under “Changes to Cash Bonus Plans” therein)
11		11	Computation of Earnings Per Share	Filed herewith
13		13	The Progressive Corporation 2011 Annual Report to Shareholders	Filed herewith
21		21	Subsidiaries of The Progressive Corporation	Filed herewith
23		23	Consent of Independent Registered Public Accounting Firm	Incorporated herein by reference to page 39 of this Annual Report on Form 10-K
24		24	Powers of Attorney	Filed herewith
31		31.1	Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer, Glenn M. Renwick	Filed herewith
31		31.2	Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer, Brian C. Domeck	Filed herewith
32		32.1	Section 1350 Certification of the Principal Executive Officer, Glenn M. Renwick	Furnished herewith
32		32.2	Section 1350 Certification of the Principal Financial Officer, Brian C. Domeck	Furnished herewith
99		99	Letter to Shareholders from Glenn M. Renwick, President and Chief Executive Officer	Furnished herewith

49

EXHIBIT INDEX

Exhibit No. Under Reg. S-K, Item 601	Form 10-K Exhibit No.		Description of Exhibit	If Incorporated by Reference, Documents with Which Exhibit was Previously Filed with SEC
101		101.INS	XBRL Instance Document	Filed herewith
101		101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith
101		101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith
101		101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith
101		101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith
101		101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

No other exhibits are required to be filed herewith pursuant to Item 601 of Regulation S-K.

50

EX-10.7

Exhibit 10.7

THE PROGRESSIVE CORPORATION

2012 GAINSHARING PLAN

1. The Plan. The Progressive Corporation and its subsidiaries (collectively, “Progressive” or the “Company”) have adopted The Progressive Corporation 2012 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”). Plan years will coincide with Progressive’s fiscal years.

2. Participants. Plan participants for each Plan year shall include all officers and regular employees of Progressive, unless determined otherwise by the Committee. The Gainsharing opportunity, if any, for those executive officers who participate in The Progressive Corporation 2007 Executive Bonus Plan (the “Executive Bonus Plan”) will be provided by the Executive Bonus Plan, although participants in that plan may also participate in this Plan if and to the extent determined by the Committee.

3. Gainsharing Formula. Annual Gainsharing Payments under the Plan will be determined by application of the following formula:

Annual Gainsharing = Paid Eligible Earnings x Target Percentage x Performance Factor

Payment

4. Paid Eligible Earnings. Paid Eligible Earnings for any Plan year shall mean and include the following: regular, Earned Time Benefit pay (excluding the payout of unused Earned Time Benefit pay at termination), sick, holiday pay, funeral pay, overtime pay, military make-up pay, shift differential and shift credit, and retroactive payments of any of the foregoing items, received by the participant during the Plan year for work or services performed as an officer or employee of Progressive.

For purposes of the Plan, Paid Eligible Earnings shall exclude all other types of compensation, including, without limitation, any short-term or long-term disability payments made to the participant, the earnings replacement component of any workers’ compensation award, any bonus, Gainsharing or other incentive compensation or equity-based awards, including, without limitation, payments from any discretionary cash fund, any dividend payments and unused Earned Time Benefit.

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

POSITION	TARGET %
Senior Executives and Executive Level Managers		60 - 150%
Business Leaders		35 - 60%
Directors and Senior Directors		20 - 35%
Middle Managers and Senior Managers		15 - 20%
Senior Professionals and Entry Level Managers		8 - 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; provided that the Chief Human Resource Officer may establish appropriate procedures to evaluate the need for, and if appropriate, implement individual exceptions to the foregoing ranges. Target Percentages may be changed from year to year by the Designated Executives. Notwithstanding anything herein to the contrary, only the Committee may establish or modify the Target Percentages for the Company’s executive officers.

If a participant’s Target Percentage changes during a Plan year, the Target Percentages used to calculate such participant’s Annual Gainsharing Payment hereunder shall be weighted appropriately to reflect such participant’s tenure in each such position during the Plan year.

6. The Performance Factor.

A. Core Business Defined

The Performance Factor shall be determined by the performance of the Core Business during the Plan year, pursuant to the procedures and calculations described below. The “Core Business” shall be comprised of the following:

• The Agency Auto business unit, consisting of the auto business produced by independent agents or brokers, including Strategic Alliances Agency auto, but excluding all Agency Special Lines businesses;

• The Direct Auto business unit, consisting of the personal auto business produced by phone, over the Internet, or via a mobile device, but excluding all Direct Special Lines businesses;

• The Special Lines business unit, consisting of Special Lines business generated by agents and brokers or directly by phone, over the Internet, or via a mobile device, but excluding umbrella policies; and

• The Commercial Auto business unit.

Each of the Agency Auto, Direct Auto, Special Lines and Commercial Auto business units is referred to herein as a “Business Unit” or “Unit.” For all purposes under this Plan, the results of the Professional Liability business, the CAIP Servicing Group, the Company’s Australia operations, the Midland Financial Group, Inc., umbrella policies, and other businesses in run-off are excluded from the Core Business results.

Notwithstanding the foregoing, net operating results from any business that is not included in and is not specifically excluded from the descriptions above, if any, will be apportioned among the appropriate Business Units or Sub-units (as defined below) in accordance with the respective amount(s) of net earned premiums generated by each such Business Unit or Sub-unit, and the apportioned net operating results will be included in the calculation of the GAAP combined ratio for such Business Unit(s) or Sub-unit(s). Assigned risk business is not included in determining the growth of any Business Unit or Sub-unit, but the net operating gains/losses for such assigned risk business will be included in determining the GAAP combined ratio for the applicable Business Unit or Sub-unit.

B. Matrices

For purposes of computing a performance score for the Core Business, operating performance results for each Business Unit, or a specified portion of the business written by a Business Unit , as hereafter defined (referred to as a “Business Sub-unit” or a “Sub-unit”), are evaluated using a performance matrix for the Plan year. Each matrix assigns performance scores to various combinations of profitability and growth outcomes for the applicable Business Unit or Sub-unit.

For 2012, and for each Plan year thereafter until otherwise determined by the Committee: (i) the Direct Auto Business Unit will be evaluated according to the performance of its respective “New” and “Renewal” Business Sub-units, using the performance measures further described below; and (ii) each of the Agency Auto, Commercial Auto and Special Lines Business Units will be evaluated according to the performance of the Business Unit as a whole, without regard to any Sub-unit performance. Therefore, separate Gainsharing matrices will be established by the Committee for the following:

• Agency Auto;

• Direct Auto – New Sub-unit;

• Direct Auto – Renewal Sub-unit;

• Special Lines; and

• Commercial Auto.

C. Performance Measures

Growth. The growth measure for the Plan year under all matrices will be based on policies in force (“PIFs”).

For all matrices other than those for the Direct Auto Business Unit, growth will be measured by the percentage change in average PIFs for the Plan year compared to the average PIFs of the immediately preceding fiscal year. Average PIFs for the Plan year and for the immediately preceding fiscal year will be determined by adding the fiscal-month-end number of PIFs for each month during such year and dividing the total by twelve.

For Direct Auto, the following will apply to the matrix for the applicable Business Sub-unit:

(i) For the “New” Business Sub-unit matrix, growth will be measured by the change in (a) the number of new policies written by the Direct Auto Business Unit during the applicable Plan year that remain in force (including, without limitation, as a result of renewal thereof) as of the last day of the Plan year, as compared with (b) the number of new policies written by such Business Unit during the immediately preceding Plan year that remained in force as of the last day of such immediately preceding Plan year.

(ii) For the “Renewal” Business Sub-unit matrix, growth will be measured by the PIF retention rate of the Direct Auto Business Unit for the Plan year – i.e., the percentage of the policies that were in force in such Business Unit on the first day of the Plan year that remain in force (including, without limitation, as a result of renewal thereof) as of the last day of the Plan year.

Profitability. For all Business Unit and Sub-unit matrices, the measurement of profitability will be the GAAP combined ratio for the Plan year for the applicable Unit or Sub-unit.

D. Calculation of Performance Factor

Performance Scores

Using the actual performance results and the Gainsharing matrix for each Business Unit or Sub-unit, as applicable, the GAAP combined ratio for each such Unit or Sub-unit will be matched with the growth levels achieved by such Unit or Sub-unit, to determine the performance score for each such Unit or Sub-unit.

The performance score for each of the Agency Auto, Special Lines and Commercial Auto Business Units, which will be used to calculate the Performance Factor as described further below, can vary from 0 to 2.0 and will be determined by reference to the applicable matrix.

The performance score for the Direct Auto Business Unit used to calculate the Performance Factor will be calculated by:

(i) Weighting the performance scores determined under the matrices for the New and Renewal Direct Auto Sub-units, using the following weighting factors:

• Two-thirds (2/3) from the score determined under the matrix for the Renewal Sub-unit; and

• One-third (1/3) from the score determined under the matrix for the New Sub-unit; and

(ii) Adding the weighted performance scores for the New and Renewal Sub-units to produce the Direct Auto Business Unit performance score.

The performance score for each of the Sub-Units of the Direct Auto Business Unit (and, therefore, for the Direct Auto Business Unit as a whole) can vary from 0 to 3.0. If, however, the performance score for the Direct Business Unit exceeds 2.0, such score shall be rounded down to 2.0 before the calculation of the Performance Factor as described immediately below.

Performance Factor

The resulting performance scores for each of the Agency Auto, Direct Auto, Commercial Auto and Special Lines Business Units will then be multiplied by a weighting factor, which shall be a fraction or decimal equivalent, determined by dividing the net earned premiums generated by such Business Unit during the Plan year by the net earned premiums generated by all of the Business Units comprising the Core Business in the aggregate. The sum of these weighted performance scores will be the Performance Factor for the Plan year.

E. Limitations

The final Performance Factor cannot exceed 2.0, regardless of the results of any individual matrix.

7. Payment Procedures; Deferral. 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 Eligible Earnings for the first 24 pay periods of the Plan year, estimated earnings for the remainder of the Plan year, and performance data through the first 11 months of the Plan year (estimated, if necessary). No later than February 28 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 Eligible 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. Other Plans. If, for any Plan year, an employee has been selected to participate in both this Plan and another cash 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 this 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. Qualification Date; Leave of Absence; Withholding. 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 year, the participant must be an active officer or regular 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, as amended, 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 Eligible Earnings received by such participant during the Plan year.

All payments made hereunder will be net of any legally required deductions for federal, state and local taxes and other items.

10. Non-Transferability. 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. Administration. 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 the Business Units or Sub-units and the Gainsharing formulae, weighting factors, performance targets and Target Percentages) may be exercised by the Designated Executives; provided, however, that only the Committee may take such actions or make such determinations for the Company’s executive officers. In the event of a dispute or conflict, the determination of the Committee will govern.

12. Termination; Amendment. 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. Unfunded Obligations. The Plan will be unfunded and all payments due under the Plan shall be made from Progressive’s general assets.

14. No Employment Rights. 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. Set-Off Rights. 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. Prior Plans. 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 2011 Gainsharing Plan (the “Prior Plan”), which is and shall be deemed to have terminated on the last day of the Company’s 2011 fiscal year (the “Prior Plan Termination Date”); provided, however, 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 Prior Plan Termination Date shall be unaffected by such termination and shall be paid to the appropriate participants when and as provided thereunder.

17. Effective Date. This Plan is adopted, and is to be effective, as of the first day of Progressive’s 2012 fiscal year. This Plan shall be effective for the 2012 Plan year and for each Plan year thereafter unless and until terminated by the Committee.

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

EX-10.8

Exhibit 10.8

THE PROGRESSIVE CORPORATION

2007 EXECUTIVE BONUS PLAN

1. The Plan. The Progressive Corporation and its subsidiaries (“Progressive”) have designed an executive compensation program consisting of three components: salary, annual bonus and equity-based incentives. These components have been structured to reflect the market for executive compensation and to promote both the achievement of corporate goals and performance that is in the long-term interest of shareholders. The annual bonus component of this program is performance-based and focuses on current results.

This 2007 Executive Bonus Plan (the “Plan”) provides, in whole or in part, the annual bonus component of Progressive’s executive compensation program for Plan participants.

2. Administration. The Plan shall be administered by or under the direction of the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of The Progressive Corporation. The Committee will have the authority to adopt, amend, revise 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 hereunder. 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. The Plan will be administered by the Committee in accordance with the requirements of Section 162(m) of the Internal Revenue Code, as amended, and the rules and regulations promulgated thereunder (the “Code”).

3. Participants; Plan Years. Executive officers of Progressive may be selected by the Committee to participate in the Plan for one or more Plan years. Plan participants may also be eligible to participate in other Progressive bonus or Gainsharing plans, as determined by the Committee. Plan years shall coincide with Progressive’s fiscal years.

4. Formula; Maximum Bonus. Subject to the following sentence, the amount of the annual bonus earned by any participant under the Plan for any Plan year (“Annual Bonus”) will be determined by application of the following formula:

Annual Bonus = Paid Salary x Target Percentage x Performance Factor

The Annual Bonus payable to any participant with respect to any Plan year shall not exceed $5,000,000.

5. Paid Salary. The salary rate of each Plan participant for any Plan year shall be established by the Committee no later than ninety (90) days after commencement of such Plan year. For purposes of the Plan, “Paid Salary” shall include regular, used Earned

Time Benefit, sick, holiday and funeral pay, and retroactive payments of any of the foregoing items, received by the participant during the Plan year for work or services performed by the participant as an officer or employee of Progressive, but shall exclude all other types of compensation, including, without limitation: any short-term or long-term disability payments, discretionary or other bonus or incentive payments, any dividend payments, unused Earned Time Benefit, and the earnings replacement component of any workers’ compensation award.

6. Target Percentages. The Target Percentages for the participants in the Plan shall be determined by the Committee, but will not exceed 200% for any participant. Target Percentages may vary among Plan participants and may be changed from year to year by the Committee.

7. The Performance Factor

A. General

The Performance Factor shall consist of one or more of the following components: a Core Business Component, one or more Business Unit Components, an Investment Component or a Net Promoter Score Component (the “Bonus Components” or “Components”). An appropriate combination of Bonus Components will be designated for each participant, and the designated Bonus Components will be weighted, based on such participant’s assigned responsibilities, as determined by the Committee.

The relative weighting of the Bonus Components may vary among Plan participants and may be changed from year to year by the Committee.

For purposes of computing the Performance Factor for any Plan year, a performance score will be calculated for each of the designated Bonus Components, based on the performance of the business(es), product(s) or function(s) being measured by that Component, as described below. The performance score will equal 1.0 if specified performance objectives are achieved, and can vary from 0 to 2.0, based on actual performance versus the pre-established objectives. The performance score achieved for each of the designated Bonus Components will then be multiplied by the applicable weighting factor to produce a weighted performance score for that Component. The sum of the weighted performance scores for the applicable Bonus Components will equal the Performance Factor, which can likewise vary from 0 to 2.0. The Performance Factor cannot exceed 2.0, regardless of results.

Actual performance results achieved for any Plan year, which will be used to calculate the performance score achieved for each of the applicable Bonus Components, must be certified by the Committee prior to payment of the Annual Bonus.

B. Core Business Component

The Core Business Component measures the overall operating performance of Progressive’s Core Business for the Plan year for which an Annual Bonus payment is to be made. The Core Business will consist of the Drive (Agency) business unit, the Direct business unit, the Commercial Auto business unit, the Special Lines business unit and/or such other business unit(s) (as described below), if any, as shall be designated and defined by the Committee for the Plan year (the “Core Business Units”). The performance score for this Component is based on the operating performance results for the Core Business Units for the Plan year in question.

In the discretion of the Committee, the performance score for the Core Business may be determined either by the performance of the Core Business considered as a whole or by the weighted performance results of the individual Core Business Units.

1. Performance Score Determined by Weighted Operating Results of Core Business Units

Each Plan year, one or more separate performance matrices for each Core Business Unit will be established by or under the direction of the Committee. Each such performance matrix will assign a performance score to various combinations of profitability and growth outcomes for the applicable Core Business Unit (or an applicable portion of a Core Business Unit), based on the following performance criteria, as determined by the Committee:

• profitability will be measured by one of the following, as designated by the Committee:

• combined ratio

• weighted combined ratio

• variation in combined ratio from a targeted combined ratio

• cohort combined ratio (the expected lifetime combined ratio for a group of policies commencing during a specified time period)

• return on equity, or

• return on revenue, and

• growth will be measured by changes from year to year or during a Plan year in one of the following, as designated by the Committee:

• policies in force

• vehicles insured

• net earned premiums

• earned premium per policy or per vehicle

• earned car years, or

• net written premiums.

The Committee may select different performance criteria for the various Core Business Units in a single Plan year, and the performance criteria may be changed from year to year by the Committee.

Profitability and growth will be separately determined for each of the Core Business Units (or the applicable portion of a Core Business Unit), using the performance criteria designated by the Committee for the Plan year, and will then be matched using the applicable performance matrix, to determine a performance score for each Core Business Unit (or the applicable portion of a Core Business Unit). Where more than one performance matrix is used for a particular business unit, the performance scores from each portion of such business unit, as determined by the separate performance matrix, will then be combined based on a weighting factor approved by the Committee to determine the performance score for the entire business unit.

The resulting performance scores for each Core Business Unit will then be multiplied by a weighting factor (based on the percentage of the total net earned premiums of the Core Business generated by such Core Business Unit during the Plan year or such other factor(s) as shall be approved by the Committee), the weighted performance scores will be combined and the sum of the weighted performance scores will be the performance score for the Core Business Component.

2. Performance Score Determined by Core Business as a Whole (Single Matrix)

In the discretion of the Committee, the performance score for the overall Core Business for a Plan year may be measured using a single performance matrix, established by or under the direction of the Committee. The performance matrix will assign a performance score to various combinations of profitability and growth outcomes for the Core Business as a whole, based on the performance criteria described above, as selected by the Committee. Profitability and growth for the Core Business Units will be calculated on an aggregate basis for the applicable Plan year, and will then be matched using the performance matrix to determine a performance score for the Core Business for such Plan year.

C. Business Unit Component

The Business Unit Component measures the performance of one or more designated business units (as described below) in terms of any one or more of the following criteria selected by the Committee:

• profitability will be measured by one of the following, as designated by the Committee:

• combined ratio

• weighted combined ratio

• variation in combined ratio from a targeted combined ratio

• cohort combined ratio ( the expected lifetime combined ratio for a group of policies commencing during a specified time period)

• return on equity, or

• return on revenue; and

• growth will be measured by changes from year to year or during a Plan year in one of the following, as designated by the Committee:

• policies in force

• vehicles insured

• net earned premiums

• earned premium per policy or per vehicle

• earned car years, or

• net written premiums.

A business unit may consist of a distribution channel, business group, product, class or type of business (e.g., designated types of policies written in a distribution channel or by a business group), function, process or other business category, such as new or renewal business.

The Committee may designate one or more Business Unit Components for an individual Plan participant for any Plan year and, for each such Component, will determine the applicable criteria by which performance of the unit (or an applicable portion of the business unit) will be measured, the goals to be achieved and the performance scores that will result from various levels of performance, and the relative weighting thereof. The applicable performance criteria, related goals and resulting performance scores may be set forth in one or more performance matrices, or other format approved by the Committee, for such business unit. Business Unit Components, performance criteria, goals, resulting performance scores and relative weightings may vary among participants and may be changed from year to year by the Committee.

D. Investment Component

The Investment Component compares the investment performance of one or more segments of Progressive’s investment portfolio (each, a “Portfolio”) against the performance of selected groups of comparable investment funds, investment managers, indexes or other benchmarks (“Investment Benchmarks”) over such period or periods as shall be determined by the Committee. Such Investment Benchmarks may be risk-adjusted in accordance with such formula or other method as may be approved by the Committee. Investment results are marked to market and adjusted to include the benefit of any state premium tax abatements attributable to the Portfolio, in order to calculate total return, which is then compared against the designated Investment Benchmarks to produce a performance score, pursuant to a formula or other criteria determined by the Committee, for each Portfolio.

The applicable Portfolio or Portfolios will be identified, and the related Investment Benchmarks will be determined, by the Committee and may be changed from year to year by the Committee.

In the event that any participant’s Annual Bonus is to be determined by the performance of two or more Portfolios, the performance scores for each of the Portfolios will be weighted, based on the average amounts invested from time to time in each of such Portfolios during the Plan year or other applicable period, and the weighted performance scores for the applicable Portfolios will be then combined to produce the performance score for the Investment Component. Investment expense is not included in determining such performance score.

E. Net Promoter Score Component

The Net Promoter Score (NPS) Component measures NPS (a survey-based measure of customer satisfaction and loyalty) for the Core Business as a whole or for a business unit (or portion thereof) against objectives, as determined by the Committee. The Committee may determine the applicable criteria by which NPS performance will be measured, the goals to be achieved, the methods to determine NPS performance, the performance scores that will result from various levels of performance and the relative weighting among the NPS results achieved by different business units, if appropriate. NPS performance criteria and goals, and relative weightings, may vary among participants and may be changed from year to year by the Committee.

8. Timing of Payment; Deferral. The Annual Bonus for any Plan year will be paid to participants as soon as practicable after the Committee has certified performance results for the Plan year, but no later than March 15 of the immediately following year. The provisions of this Paragraph shall be subject to Paragraph 9 hereof.

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

9. Qualification Date; Leave of Absence; Tax Withholding. Unless otherwise determined by the Committee, in order to be entitled to receive an Annual Bonus for any Plan year, the participant must be employed by Progressive on November 30^th of the 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 of absence with the approval of Progressive, 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 Bonus payment for such Plan year, calculated as provided in Paragraphs 4 through 7 above and based on the amount of Paid Earnings received by such 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.

10. Non-Assignability. The right to any of the 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.

11. Termination and Amendment. 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; provided that the Committee may not increase the amount of compensation payable hereunder to any participant above the amount that would otherwise be payable upon attainment of the applicable performance goals, or accelerate the payment of any portion of the Annual Bonus due to any participant under the Plan, without discounting the amount of such payment in accordance with Section 162(m) of the Code, and further provided that any amendment or revision of the Plan required to be approved by shareholders pursuant to Section 162(m) of the Code will not be effective until approved by The Progressive Corporation’s shareholders in accordance with the requirements of Section 162(m).

12. Unfunded Obligations. The Plan will be unfunded and all payments due under the Plan will be made from Progressive’s general assets.

13. No Employment Rights. 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, positions, duties or compensation.

14. Recoupment.

A. Progressive shall have the right to recoup any Annual Bonus paid to a participant hereunder (or an appropriate portion thereof, as hereinafter provided) with respect to any Plan year, if: (i) the Annual Bonus payment was predicated upon the achievement during such Plan year of certain financial or operating results (which includes, for purposes hereof, all of the performance criteria that are available to the Committee under Paragraph 7 above); (ii) such financial or operating results were incorrect and were subsequently the subject of a restatement by Progressive within three (3) years after the date on which such Annual Bonus was paid to the participant; and (iii) a lower payment would have been made to the participant if the restated financial or operating results had been known at the time the payment was made. Such recoupment right shall be available to Progressive whether or not the participant in question was at fault or responsible in any way in causing such restatement. In such circumstances, Progressive will have the right to recover from each participant for such Plan year, and each such participant will refund to Progressive, the amount by which the Annual Bonus paid to such participant for the Plan year in question exceeded the lower payment that would have been made based on the restated results, without interest; provided, however, that Progressive will not seek to recover such amounts unless the amount due would exceed the lesser of five percent (5%) of the Annual Bonus previously paid or twenty-thousand dollars ($20,000). Such recovery, at the Committee’s discretion, may be made by lump sum payment, installment payments, credits against future bonus payments, or other appropriate mechanism.

B. Notwithstanding the foregoing subsection A., if any participant engaged in fraud or other misconduct (as determined by the Committee or the Board, in their respective sole discretion) resulting, in whole or in part, in a restatement of the financial or operating results used hereunder to determine the Annual Bonuses for a specific Plan year, Progressive will further have the right to recover from such participant, and the participant will refund to Progressive upon demand, an amount equal to the entire Annual Bonus paid to such participant for such Plan year plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from the date that such bonus was paid to the participant. Progressive shall further have the right to recover from such participant Progressive’s costs and expenses incurred in connection with recovering such Annual Bonus from the participant, including, without limitation, reasonable attorneys fees. There shall be no time limit on the Company’s right to recover such amounts under this subsection B., except as otherwise provided by applicable law.

C. The rights contained in this Section shall be in addition to, and shall not limit, any other rights or remedies that the Company may have under any applicable law or regulation.

15. Right to Set Off. 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, including, without limitation, any amounts owed by such participant under Section 14 above.

16. Shareholder Approval. The Plan is subject to approval by the holders of The Progressive Corporation’s Common Shares, $1.00 par value (“shareholders”) in accordance with the requirements of Section 162(m) of the Code, and no Annual Bonus will be paid hereunder unless the Plan has been so approved. If shareholders do not approve the Plan at the Annual Meeting of Shareholders in April 2007, this Plan shall automatically terminate and be of no further force or effect.

17. Prior Plans. If this Plan is approved by shareholders as provided in Paragraph 16 above, this Plan shall supersede and replace The Progressive Corporation 2004 Executive Bonus Plan, as heretofore in effect (the “Prior Plan”), which is and shall be deemed to be terminated as of December 29, 2006 (the “Termination Date”); provided, that any bonuses or other sums earned under the Prior Plan with respect to any period 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.

18. Effective Date. This Plan is adopted and, subject to the provisions of Paragraph 16 hereof, is to be effective, as of December 30, 2006, which is the commencement of Progressive’s 2007 fiscal year. Subject to the provisions of Paragraph 16, this Plan shall be effective for the 2007 Plan year (which coincides with Progressive’s 2007 fiscal year) and for each Plan year thereafter unless and until terminated by the Committee.

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

EX-10.10

Exhibit 10.10

FIRST AMENDMENT

TO

THE PROGRESSIVE CORPORATION

2003 INCENTIVE PLAN

WHEREAS, The Progressive Corporation 2003 Incentive Plan (the “Plan”) is currently in effect; and

WHEREAS, it is deemed desirable to amend the Plan;

NOW, THEREFORE, the Plan is hereby amended in the respects, and as of the effective dates, hereinafter set forth:

A. Amendment Subject to Shareholder Approval

1. Subject to subparagraph A.2. below, the definition of the term “Performance Goals”, as set forth in Section 1(c) of the Plan, is hereby amended and restated in its entirety to provide as follows:

““Performance Goals” means the performance goals established by the Committee with respect to any Award, which shall be based on one or more of the following measures:

• Profitability, which will be measured by one of the following, as designated by the Committee:

• combined ratio

• weighted combined ratio

• variation in combined ratio from a targeted combined ratio

• cohort combined ratio (the expected lifetime combined ratio for a group of policies commencing during a specified time period)

• return on equity, or

• return on revenue; and

• Growth, which will be measured by changes from year to year or during a Plan year in one of the following, as designated by the Committee:

• policies in force

• vehicles insured

• net earned premiums

• earned premium per policy or per vehicle

• earned car years, or

• net written premiums.

Performance goals may be measured on a company-wide, subsidiary or business unit basis, or any combination thereof. Performance goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure.”

2. The amendment included in Paragraph A.1. above is subject to approval by the holders of The Progressive Corporation’s Common Shares, $1.00 par value (“shareholders”) in accordance with the requirements of Section 162(m) of the Code. If shareholders do not approve such amendment at the

Annual Meeting of Shareholders in April 2007, Paragraph A.1 only of this First Amendment shall automatically terminate and be of no further force or effect.

B. Amendments Not Requiring Shareholder Approval

1. For all Awards (as defined in the Plan) to be made after February 2007, Section 5(b)(8) of the Plan is hereby amended and restated in its entirety to provide as follows:

“Except as provided in this Section 5(b)(8), Section 5(b)(7) or Section 5(b)(9), the Participant shall have, with respect to the shares of Restricted Stock awarded, all of the rights of a shareholder of the Company, including the right to vote the Stock and the right to receive any dividends. However, notwithstanding the preceding provisions of this Section 5(b)(8), each Participant’s rights to receive cash dividends on shares of Restricted Stock awarded on or after March 1, 2007 (“Restricted Cash Dividends”) shall be subject to all the terms and conditions regarding vesting and forfeitability that apply to the shares of Restricted Stock to which such Restricted Cash Dividends relate, as set forth in this Plan and the applicable Award Agreement, and each Participant will be paid such Restricted Cash Dividends only if the Restricted Stock to which the Restricted Cash Dividends relate vests, and all restrictions with respect thereto lapse. In addition, the following provisions shall apply with respect to such Restricted Cash Dividends:

(a) All Restricted Cash Dividends shall accrue interest in accordance with Section 5(b)(8)(D) below for the period beginning on the date such Restricted Cash Dividends otherwise would have been paid, but for the provisions of this Section 5(b)(8), and ending on the payment date described below.

(b) All Restricted Cash Dividends, together with interest calculated in accordance with Section 5(b)(8)(D) below, shall be paid within sixty (60) days following the date the shares of Restricted Stock to which the Restricted Cash Dividends relate vests, and any restrictions with respect thereto lapse. The payment shall be made in cash and will be subject to and reduced by any taxes required to be withheld. To the extent required by Section 409A of the Code, each payment to a Participant who is a “specified employee”, as defined in Section 409A of the Code, shall be delayed for six months following the date such payment otherwise would have been made under the provisions of this Section 5(b)(8).

(c) All Restricted Cash Dividends and interest accrued thereon pursuant to Section 5(b)(8)(D) below, shall be recorded as a liability on the books of the Company. All payments of Restricted Cash Dividends, and interest accrued thereon pursuant to Section 5(b)(8)(D) below, shall be made from the Company’s general funds and in no event shall any Participant or other person have any proprietary rights of any nature with respect to any funds, securities or other property owned by the Company or have any claims or rights to any payment hereunder that are superior to any claims or rights of any general creditor of the Company.

(d) Interest shall accrue on all Restricted Cash Dividends at a rate equal to the one month U.S. Dollar LIBOR, as in effect from time to time, compounded monthly. Under no circumstances may the interest rate applied hereunder exceed a rate that is 120% of the applicable federal long-term rate (monthly) (as determined by the Internal Revenue Service pursuant to Section 1274(d) of the Code).

(e) If any shares of Restricted Stock are forfeited in accordance with the terms of this Plan and the related Restricted Stock Award Agreement, then any Restricted Cash Dividends relating to such shares, and interest accrued thereon, shall also be forfeited.

Stock dividends issued with respect to Restricted Stock shall be treated as additional shares of Restricted Stock that are subject to the same restrictions and other terms and conditions that apply to the shares with respect to which such dividends are issued.

To the extent any provision of this Section 5(b)(8) is subject to Section 409A of the Code, the provision will be construed and interpreted to the maximum extent reasonably possible to comply with Section 409A. Notwithstanding the foregoing, dividends on shares of Restricted Stock awarded to Participants on or after March 1, 2007, shall not be subject to the vesting and forfeitability conditions that apply to the shares of Restricted Stock to which such dividends relate, and such dividends shall be paid in cash to the Participants at the time that cash dividends are paid generally to shareholders of the Company, to the extent that such dividends would otherwise be treated as deferred compensation in excess of the applicable limitation under Section 409A of the Code or other applicable federal law limitations on the amount of deferrals under non-qualified deferred compensation plans.”

2. For all Awards to be made after February 2008, Section 5(b)(13)(D)(i) of the Plan is hereby amended and restated in its entirety to provide as follows:

“(i) Qualified Retirement – any termination of a Participant’s employment with the Company or its Subsidiaries or Affiliates for any reason (other than death, Disability or an involuntary termination for Cause) if, at or immediately prior to the date of such termination, the Participant satisfies both of the following conditions:

(a) the Participant is 55 year of age or older; and

(b) the Participant has completed at least fifteen (15) years of service as an employee of the Company or its Subsidiaries or Affiliates.”

3. For all Awards to be made after February 2007, Section 7(c) of the Plan is hereby amended and restated in its entirety to provide as follows:

“(c) Definition of Potential Change in Control. For purposes of Section 7(a), a “Potential Change in Control” means the acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than the Company or a Subsidiary or any Company employee benefit plan (including any trustee of such plan acting as such trustee)) of securities of the Company representing five percent or more of the combined voting power of the Company’s outstanding securities and the adoption by the Board of a resolution to the effect that a Potential Change in Control of the Company has occurred for purposes of this Plan.”

4. For all Awards to be made after February 2007, a new Subsection (k) is hereby added to Section 10, as follows:

“(k)(i) If (A) Performance-Based Restricted Stock vests hereunder on the basis of the achievement of certain financial or operating results (which includes, for purposes hereof, all of the Performance Goals that are available to the Committee under this Plan), (B) those financial or operating results were incorrect and were subsequently the subject of a restatement by Progressive within three (3) years after the date of vesting, and (C) the vesting event would not have occurred if the actual financial or operating results had been known at the time, then the Company shall have the right of recoupment from any executive officer who received shares of Stock upon such vesting or who elected to defer such shares at vesting; provided, however, that the Company will not have this right of recoupment if the Committee determines that, notwithstanding such restatement, such Performance-Based Restricted Stock would have nonetheless vested thereafter based on the Company’s actual operating or financial results.

The Company will have this right of recoupment whether or not the executive officer in question was at fault or responsible in any way in causing such restatement In such circumstances, the Company will have the right to recover from each executive officer, and each such executive officer will refund to the Company, at the Company’s discretion, either (X) a number of Shares equal to the number of Shares of Performance-Based Restricted Stock which vested, or which such Participant elected to defer, upon the vesting thereof based on the incorrect operating or financial results, or (Y) the dollar equivalent of such number of Shares as of the date of such vesting, without interest. Such recovery, at the Committee’s discretion, may be made by lump sum payment, installment payments, credits against unvested Awards made hereunder, credits against future bonus or other incentive payments or awards, or other appropriate mechanism.

(ii) If any Participant engaged in fraud or other misconduct (as determined by the Committee or the Board, in their respective sole discretion) resulting, in whole or in part, in a restatement of the financial or operating results used to determine the vesting of Performance-Based Restricted Stock hereunder, the Company will have the right to recoup from such Participant, and the Participant will transfer or pay to the Company upon demand, in the Company’s discretion, either (A) a number of shares of Stock equal to the number of Shares of Performance-Based Restricted Stock which vested, or which such Participant elected to defer, upon the vesting thereof based on the incorrect operating or financial results, or (B) the dollar equivalent to such number of shares determined as of the date of such vesting, plus interest at the rate of eight percent (8%) per annum or, if lower, the highest rate permitted by law, calculated from such vesting date. The Company further shall have the right to terminate and cancel any and all Awards previously made to such Participant at any time hereunder that are then unvested, and to recover from such Participant the Company’s costs and expenses incurred in connection with recovering such Shares or funds from Participant and enforcing its rights under this subsection (ii), including, without limitation, reasonable attorneys fees. There shall be no time limit on the Company’s right to recover such amounts under this subsection (ii), except as otherwise provided by applicable law.

(iii) The rights contained in this subsection (k) shall be in addition to, and shall not limit, any other rights or remedies that the Company may have under this Plan or under any applicable law or regulation.

EX-10.55

Exhibit 10.55

SEVENTH AMENDMENT TO THE PROGESSIVE CORPORATION

EXECUTIVE DEFERRED COMPENSATION TRUST

(November 8, 2002 Amendment and Restatement)

THIS SEVENTH AMENDMENT, dated and effective as of the thirteenth day of June, 2011, unless otherwise specified herein, by and between Fidelity Management Trust Company (the “Trustee”) and The Progressive Corporation (the “Company”);

WITNESSETH:

WHEREAS, the Trustee and the Company heretofore entered into a Trust Agreement dated November 8, 2002, with regard to The Progressive Corporation Executive Deferred Compensation Trust (the “Trust”); and

WHEREAS, the Sponsor hereby directs the Trustee, in accordance with Section 5 and 8(g) of the Trust Agreement, as follows: (i) at the close of business (4:00p.m. ET) (“Market Close”) on June 14, 2011, to liquidate all participant balances held in the Vanguard Total International Stock Index Fund Investor Shares at its net asset value on such day, and to invest the proceeds in the Vanguard Total International Stock Index Fund Institutional Shares at its net asset value on such day; (ii) to redirect all participant contributions directed to the Vanguard Total International Stock Index Fund Investor Shares after the Market Close on June 14, 2011 to be invested in the Vanguard Total International Stock Index Fund Institutional Shares; and (iii) to permit no further investments in the Vanguard Total International Stock Index Fund Investor Shares as an investment option for the Plan after the Market Close on June 14, 2011. The parties hereto agree that the Trustee shall have no discretionary authority with respect to this sale and transfer directed by the Sponsor. Any variation from the procedure described herein may be instituted only at the express written direction of the Sponsor; and

WHEREAS, the Trustee and the Company now desire to amend said Trust Agreement as provided for in Section 12 thereof;

NOW THEREFORE, in consideration of the above premises, the Trustee and the Company hereby amend the Trust Agreement by:

(1) Effective at Market Close on June 13, 2011, amending the “investment options” section of Schedule “A” to add the following:

• Vanguard Total International Stock Index Fund Institutional Shares

(2) Effective at Market Close on June 14, 2011, amending the “investment options” section of Schedule “A” to delete the following:

• Vanguard Total International Stock Index Fund Investor Shares

IN WITNESS WHEREOF, the Trustee and the Company have caused this Seventh Amendment to be executed by their duly authorized officers effective as of the day and year first above written. By signing below, the undersigned represent that they are authorized to execute this document on behalf of the respective parties. Notwithstanding any contradictory provision of the agreement that this document amends, each party may rely without duty of inquiry on the foregoing representation.

THE PROGRESSIVE CORPORATION			FIDELITY MANAGEMENT TRUST COMPANY
By:			By:
	Its Authorized Signatory	Date		Its Authorized Signatory	Date

EX-10.66

Exhibit 10.66

Employment Offer Letter for Jeff Charney, Chief Marketing Officer

Dear Jeff:

I am excited to make this offer to you to join our executive team as Chief Marketing Officer (CMO). The title of Group President of Marketing will be an equally acceptable title for use in executing your responsibilities. In this role, you will work out of one of our corporate offices on the east side of Cleveland, Ohio, and you will report directly to me. This letter is intended to outline the initial terms of your employment.

Base Salary

Your starting base salary will be $400,000 per year, payable ratably every two weeks. Consistent with the normal cycle of salary reviews for Progressive in the first quarter of 2011, your base salary will be adjusted to $405,000.

Annual Incentive Compensation

Progressive has a “Gainshare” program for paying annual incentive compensation and every employee is a participant. The program is central to employee compensation, as well as our shareholder dividend policy. Based on some significant underlying detail, the concept is relatively simple – gain is measured by increases in the number of policyholders at predetermined levels of profitability. We evaluate separately our four primary lines of business (Agent Auto, Direct Auto, Special Lines and Commercial Auto), breaking out Direct Auto results further by renewal customers and new customers. Actual results for each are measured against a specific matrix of potential growth and profitability outcomes. The results from each matrix are then rolled up to determine a performance score of between 0.0 and 2.0.

Each employee’s annual bonus payment is determined by multiplying his or her paid eligible earnings for the year times a target percentage times the Gainshare score. Our expectation is to produce an average score of 1.0 over any five year period. Our history has been closer to a 1.27 over the life of the program (est. 1995) and has produced a 0.0 once and a 2.0 twice. Our Gainshare score was .71 in 2009 and is 1.65 as of August 2010.

Your target percentage will be set consistent with most of my other direct reports at 100% of your base salary – meaning that if we achieve a 1.0 Gainshare score, your bonus would equal 100% of your salary. If you are employed for an entire calendar year, therefore, your bonus potential could range from 0 to 2 times your base salary. Your first eligible Gainshare year will be 2011. For Gainshare year 2011 only, your Gainshare will be determined using the greater of the actual Gainshare score for the company or 1.0.

Long-term Compensation

Equity ownership is the basis for our long-term compensation component. Each year, restricted stock units are granted to senior leaders in the company, typically in March of the year. This program is made available to approximately 2% of employees. You will participate consistent with my other direct reports, with a combination of time-based and performance-based restricted stock units with an annual aggregate value that is typically around 200% of your base salary on the date of the award.

Annual time-based awards for my direct reports are currently valued at 100% of base salary. These awards are scheduled to vest ratably on the first day of the year, three, four and five years in the future. 2011 awards will vest in January of 2014, 2015 and 2016.

In addition, annual performance-based awards for my direct reports in recent years have generally been valued at 100% of salary, but can range from 75-125%. Each year, we establish performance vesting requirements that are used for all performance-based program participants – approximately forty key individuals most at significantly lower target levels. We currently expect the 2011 award to be based on three year relative outperformance of our peer group. A 2% growth outperformance at or below our 96 combined ratio would result in vesting at target; additional outperformance could increase the value of the award up to twice the target value. If a performance-based award does not vest within the time period specified in the award (which will be December 31, 2015 for the 2011 awards), the award is forfeited.

Total Compensation

Compensation for senior executives is highly dependent on company performance. The Gainshare payment and stock price performance play a significant role. Using a Gainshare target of 100% of base salary and assuming a 1.0 Gainshare score, and a target of 200% for restricted stock units, the annual compensation package would be targeted at a value of four times your base salary or $1.62 million (using $405,000 for 2011). Obviously, the actual value will depend on company performance.

Initial Compensation Considerations

Recognizing that you will forego potential benefits in your current role and equally our desire to have you accept the role of CMO for Progressive, we offer several initial compensation considerations, as follows:

A. Upon commencement of employment, you will receive an award of 70,000 time-based restricted stock units, with the following vesting schedule:

o 35,000 shares to vest in January 2012; and

o 35,000 shares to vest in January 2013.

This award of restricted stock units has an approximate value of $1,494,500 as of the market close 9/28/2010.

B. In addition, you will receive a $700,000 signing bonus payable as follows:

o $250,000 upon commencement of employment

o $150,000 December 31^st

o $150,000 January 31st

o $150,000 February 28^th

If by your own election you were not to complete the employment period through February 28^th 2011, you would be obligated to refund to Progressive all prior payments made under this schedule. Cash payments from this schedule made in 2011 will not be included in Gainshare calculations for the year.

Additional Consideration

You will be eligible to participate in our comprehensive package of employee health and welfare plans, and company matching contributions to a 401(k) plan, on the same terms and conditions as are available to other employees. For executives, this also includes the ability to defer annual Gainshare payments and awards of restricted stock units under our executive deferred compensation plan.

While clearly our expectations are for a long and productive career with Progressive, should you be asked to leave the company other than “for cause” as defined in our executive separation allowance plan, you will be entitled to the same consideration as other members of my direct report group. Under that plan, the severance payment for any individual in that group would be three times current base salary, plus the continuation of certain health benefits for the period and on the terms set forth in the plan. In this regard, and in the nature of full disclosure, you should also note the following:

• Under our Gainshare plans, an annual Gainshare payment is only earned if you are employed on November 30 of the performance year.

• Any restricted stock units that you have received but that have not vested prior to your leaving the company’s employment will be forfeited and will not vest. This is true of both time-base and performance-based restricted stock units that may be unvested at that time, with limited exceptions that would not be applicable until you have been employed with the company for a number of years.

• In recognition of the compensation provided in the early phase of employment any severance payment required before 1/1/2012, would be capped at one times salary.

You should also be aware that the compensation and target levels and other benefits discussed in this letter are based on and are subject to our compensation plans and policies as of today, which I have only summarized in a general way here. Of course, these plans and policies, and how they affect you, may change over time as market conditions change or our thinking about executive compensation evolves. This is consistent with our treatment of our other executives, none of whom has a separate employment agreement with the company at this time.

Based on our prior conversation, we will cover reasonable costs of moving your personal effects from Georgia to Ohio. And, finally, please note that this offer is contingent on successful completion of your background and reference checks and formal approval by the Compensation Committee of the Board of Directors which we would seek after your indicated willingness to accept.

I look forward, as do all of my direct reports, to your joining Progressive and making the next several years of your career one of the best for you personally and for Progressive’s brand and marketing efforts.

Please sign a copy of this agreement, acknowledging the terms outlined and the variances from our filed plans and procedures.

Sincerely,

/s/ Glenn Renwick         9/29/2010

Glenn Renwick

President and Chief Executive Officer

Accepted:

/s/ Jeff Charney         10/02/2010

Jeff Charney

EX-11

Exhibit 11

THE PROGRESSIVE CORPORATION

COMPUTATION OF EARNINGS PER SHARE

(millions - except per share amounts)

	Years Ended December 31,
	2011		2010		2009
Net Income	$	1,015.5	$	1,068.3	$	1,057.5
Computation of Net Income Per Share
Average shares outstanding - Basic		632.3		657.9		666.8
Net effect of dilutive stock-based compensation		4.6		5.4		5.4
Total equivalent shares - Diluted		636.9		663.3		672.2
Basic: Net income per share	$	1.61	$	1.62	$	1.59
Diluted: Net income per share	$	1.59	$	1.61	$	1.57

EX-13

Exhibit 13

THE PROGRESSIVE CORPORATION

2011 ANNUAL REPORT TO SHAREHOLDERS

App.-A-1

The Progressive Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31,

(millions — except per share amounts)	2011			2010			2009
Revenues
Net premiums earned	$	14,902.8		$	14,314.8		$	14,012.8
Investment income		480.0			520.1			507.0
Net realized gains (losses) on securities:
Other-than-temporary impairment (OTTI) losses:
Total OTTI losses		(6.0	)		(19.1	)		(80.9	)
Non-credit losses, net of credit losses recognized on previously recorded non-credit OTTI losses		.5			5.2			40.1
Net impairment losses recognized in earnings		(5.5	)		(13.9	)		(40.8	)
Net realized gains (losses) on securities		108.1			110.0			67.9
Total net realized gains (losses) on securities		102.6			96.1			27.1
Service revenues		22.8			25.9			16.7
Net gains (losses) on extinguishment of debt		(.1	)		6.4			0
Total revenues		15,508.1			14,963.3			14,563.6
Expenses
Losses and loss adjustment expenses		10,634.8			10,131.3			9,904.9
Policy acquisition costs		1,399.2			1,359.9			1,364.6
Other underwriting expenses		1,821.5			1,740.1			1,567.7
Investment expenses		13.5			11.9			11.1
Service expenses		19.4			21.4			19.4
Interest expense		132.7			133.5			139.0
Total expenses		14,021.1			13,398.1			13,006.7
Net Income
Income before income taxes		1,487.0			1,565.2			1,556.9
Provision for income taxes		471.5			496.9			499.4
Net income		1,015.5			1,068.3			1,057.5
Other Comprehensive Income (Loss), Net of Tax
Net unrealized gains (losses) on securities:
Net non-credit related OTTI losses, adjusted for valuation changes		(3.6	)		13.9			(15.7	)
Other net unrealized gains (losses) on securities		(80.9	)		323.2			712.3
Total net unrealized gains (losses) on securities		(84.5	)		337.1			696.6
Net unrealized gains on forecasted transactions		(6.8	)		(6.9	)		(3.3	)
Foreign currency translation adjustment		.1			.3			1.4
Other comprehensive income (loss)		(91.2	)		330.5			694.7
Comprehensive income	$	924.3		$	1,398.8		$	1,752.2
Computation of Net Income Per Share
Average shares outstanding — Basic		632.3			657.9			666.8
Net effect of dilutive stock-based compensation		4.6			5.4			5.4
Total equivalent shares — Diluted		636.9			663.3			672.2
Basic: Net income per share	$	1.61		$	1.62		$	1.59
Diluted: Net income per share	$	1.59		$	1.61		$	1.57

See notes to consolidated financial statements.

App.-A-2

The Progressive Corporation and Subsidiaries

Consolidated Balance Sheets

December 31,

(millions)	2011			2010
Assets
Investments — Available-for-sale, at fair value:
Fixed maturities (amortized cost: $11,455.7 and $11,630.8)	$	11,759.3		$	11,850.0
Equity securities:
Nonredeemable preferred stocks (cost: $473.7 and $601.3)		806.3			1,157.6
Common equities (cost: $1,431.0 and $1,021.7)		1,845.6			1,425.0
Short-term investments (amortized cost: $1,551.8 and $1,090.8)		1,551.8			1,090.8
Total investments		15,963.0			15,523.4
Cash		155.7			158.9
Accrued investment income		105.7			109.3
Premiums receivable, net of allowance for doubtful accounts of $124.2 and $114.9		2,929.8			2,738.4
Reinsurance recoverables, including $32.3 and $37.4 on paid losses and loss adjustment expenses		818.0			741.5
Prepaid reinsurance premiums		69.8			88.1
Deferred acquisition costs		433.6			417.2
Income taxes		208.0			189.0
Property and equipment, net of accumulated depreciation of $573.8 and $564.3		911.3			932.6
Other assets		249.9			251.9
Total assets	$	21,844.8		$	21,150.3
Liabilities and Shareholders’ Equity
Unearned premiums	$	4,579.4		$	4,353.8
Loss and loss adjustment expense reserves		7,245.8			7,071.0
Accounts payable, accrued expenses, and other liabilities1		1,770.8			1,718.4
Debt2		2,442.1			1,958.2
Total liabilities		16,038.1			15,101.4
Common Shares, $1.00 par value (authorized 900.0; issued 797.7, including treasury shares of 184.7 and 135.3)		613.0			662.4
Paid-in capital		1,006.2			1,007.1
Retained earnings		3,495.0			3,595.7
Accumulated other comprehensive income, net of tax:
Net non-credit related OTTI losses, adjusted for valuation changes		(5.4	)		(1.8	)
Other net unrealized gains (losses) on securities		688.2			769.1
Total net unrealized gains (losses) on securities		682.8			767.3
Net unrealized gains on forecasted transactions		7.9			14.7
Foreign currency translation adjustment		1.8			1.7
Total accumulated other comprehensive income		692.5			783.7
Total shareholders’ equity		5,806.7			6,048.9
Total liabilities and shareholders’ equity	$	21,844.8		$	21,150.3

¹See Note 12 – Litigation and Note 13 – Commitments and Contingencies for further discussion.

²Consists of both short- and long-term debt. See Note 4 – Debt for further discussion.

See notes to consolidated financial statements.

App.-A-3

The Progressive Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

For the years ended December 31,

(millions — except per share amounts)	2011			2010			2009
Common Shares, $1.00 Par Value
Balance, Beginning of year	$	662.4		$	672.6		$	676.5
Stock options exercised		2.0			3.4			3.5
Treasury shares purchased		(51.3	)		(13.3	)		(11.1	)
Net restricted stock awards issued (forfeited)		(.1	)		(.3	)		3.7
Balance, End of year	$	613.0		$	662.4		$	672.6
Paid-In Capital
Balance, Beginning of year	$	1,007.1		$	939.7		$	892.9
Stock options exercised		20.4			23.8			15.3
Tax benefit from exercise/vesting of stock-based compensation		6.4			14.0			9.7
Treasury shares purchased		(80.7	)		(19.3	)		(15.0	)
Net restricted stock awards (issued) forfeited		.1			.3			(3.7	)
Amortization of stock-based compensation		50.3			44.8			39.2
Other		2.6			3.8			1.3
Balance, End of year	$	1,006.2		$	1,007.1		$	939.7
Retained Earnings
Balance, Beginning of year	$	3,595.7		$	3,683.1		$	2,697.8
Cumulative effect of change in accounting principle		0			0			189.6
Net income		1,015.5			1,068.3			1,057.5
Cash dividends declared on common shares ($.4072, $1.3987, and $.1613 per share)		(248.1	)		(924.8	)		(108.5	)
Treasury shares purchased		(865.8	)		(226.0	)		(154.5	)
Other, net		(2.3	)		(4.9	)		1.2
Balance, End of year	$	3,495.0		$	3,595.7		$	3,683.1
Accumulated Other Comprehensive Income, Net of Tax
Balance, Beginning of year	$	783.7		$	453.2		$	(51.9	)
Cumulative effect of change in accounting principle		0			0			(189.6	)
Other comprehensive income (loss)		(91.2	)		330.5			694.7
Balance, End of year	$	692.5		$	783.7		$	453.2
Total Shareholders’ Equity	$	5,806.7		$	6,048.9		$	5,748.6

There are 20.0 million Serial Preferred Shares authorized; no such shares are issued or outstanding.

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

See notes to consolidated financial statements.

App.-A-4

The Progressive Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31,

(millions)	2011			2010			2009
Cash Flows From Operating Activities
Net income	$	1,015.5		$	1,068.3		$	1,057.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		88.5			83.1			87.3
Amortization of fixed-income securities		233.0			229.2			230.8
Amortization of stock-based compensation		50.5			45.9			40.3
Net realized (gains) losses on securities		(102.6	)		(96.1	)		(27.1	)
Net (gains) losses on disposition of property and equipment		8.7			2.3			13.3
Net (gains) losses on extinguishment of debt		.1			(6.4	)		0
Changes in:
Premiums receivable		(191.4	)		(283.6	)		(46.2	)
Reinsurance recoverables		(76.5	)		(176.7	)		(276.3	)
Prepaid reinsurance premiums		18.3			(18.8	)		(6.9	)
Deferred acquisition costs		(16.4	)		(15.0	)		11.8
Income taxes		28.4			48.1			29.7
Unearned premiums		225.6			180.8			(3.0	)
Loss and loss adjustment expense reserves		174.8			418.0			475.6
Accounts payable, accrued expenses, and other liabilities		35.5			210.2			(71.8	)
Other, net		5.9			(10.0	)		(28.2	)
Net cash provided by operating activities		1,497.9			1,679.3			1,486.8
Cash Flows From Investing Activities
Purchases:
Fixed maturities		(6,032.4	)		(4,491.7	)		(10,046.3	)
Equity securities		(582.0	)		(511.4	)		(624.2	)
Sales:
Fixed maturities		4,442.6			3,055.8			7,950.0
Equity securities		423.5			241.9			919.4
Maturities, paydowns, calls, and other:
Fixed maturities		1,540.9			1,341.1			842.5
Equity securities		0			0			15.7
Net sales (purchases) of short-term investments – other		(461.0	)		(11.5	)		75.6
Net unsettled security transactions		(.6	)		(54.0	)		(246.5	)
Purchases of property and equipment		(78.9	)		(64.7	)		(66.6	)
Sales of property and equipment		3.0			8.0			1.8
Net cash used in investing activities		(744.9	)		(486.5	)		(1,178.6	)
Cash Flows From Financing Activities
Proceeds from exercise of stock options		22.4			27.2			18.8
Tax benefit from exercise/vesting of stock-based compensation		6.4			14.0			9.7
Proceeds from debt issuance		491.9			0			0
Reacquisition of debt		(15.0	)		(214.3	)		0
Dividends paid to shareholders		(263.6	)		(763.7	)		0
Acquisition of treasury shares		(997.8	)		(258.6	)		(180.6	)
Net cash used in financing activities		(755.7	)		(1,195.4	)		(152.1	)
Effect of exchange rate changes on cash		(.5	)		.8			1.7
Increase (decrease) in cash		(3.2	)		(1.8	)		157.8
Cash, Beginning of year		158.9			160.7			2.9
Cash, End of year	$	155.7		$	158.9		$	160.7

See notes to consolidated financial statements.

App.-A-5

The Progressive Corporation and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2011, 2010, and 2009

1.  REPORTING AND ACCOUNTING POLICIES

Nature of Operations  The Progressive Corporation, an insurance holding company formed in 1965, owned 54 subsidiaries and had 1 mutual insurance company affiliate (collectively the “subsidiaries”) as of December 31, 2011. Our insurance subsidiaries provide personal and commercial automobile insurance and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles through both an independent insurance agency channel and a direct channel. Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses through both the independent agency and direct channels. We operate our businesses throughout the United States; we also sell personal auto physical damage insurance via the Internet in Australia.

Basis of Consolidation and Reporting  The accompanying consolidated financial statements include the accounts of The Progressive Corporation, its subsidiaries, which are wholly owned, and a mutual company affiliate, for which we have a controlling financial interest. All intercompany accounts and transactions are eliminated in consolidation.

Estimates  We are required to make estimates and assumptions when preparing our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact (e.g., losses are paid), results may, and will likely, differ from those estimates.

Investments  Progressive’s fixed-maturity securities, equity securities, and short-term investments are accounted for on an available-for-sale basis. See Note 2 – Investments for details regarding the composition of our investment portfolio.

Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes, reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.

Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are generally accounted for under the retrospective method. The retrospective method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception of the investment holding period, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The prospective method is used primarily for interest-only securities, non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure or where there is a greater risk of non-performance and where it is possible the initial investment may not be substantially recovered. The prospective method requires a calculation of future expected repayments and resets the yield to allow for future period adjustments; no current period impact to investment income or the security’s cost is made based on the cash flow update. Prepayment assumptions are based on market expectations and are updated quarterly.

Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments and are reported at quoted fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in the current period.

Short-term investments may include Eurodollar deposits, commercial paper, reverse repurchase transactions, and other securities expected to mature within one year. In addition, short-term investments can include auction rate securities (i.e., certain municipal bonds and preferred stocks). Due to the nature of auction rate securities, these securities are classified as short-term based upon their expected auction date (generally 7-49 days) rather than on their contractual maturity date

App.-A-6

(which is greater than one year at original issuance). In the event that an auction fails, the security may need to be reclassified from short-term. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income.

Trading securities are securities bought principally for the purpose of sale in the near term. To the extent we have trading securities, changes in fair value would be recognized in income in the current period. Derivative instruments, which may be used for trading purposes or classified as trading derivatives due to the characteristics of the transaction, are discussed below.

Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements, and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:

• Changes in fair value of an asset or liability (fair value hedge)

• Foreign currency of an investment in a foreign operation (foreign currency hedge), or

• Variable cash flows of a forecasted transaction (cash flow hedge).

To the extent we have derivatives held or issued for general investment purposes, these derivative instruments are recognized as either assets or liabilities and measured at fair value, with changes in fair value recognized in income as a component of net realized gains (losses) on securities during the period of change.

Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:

• Fair value hedge:  changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of change while the hedge is in effect.

• Foreign currency hedge:  changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.

• Cash flow hedge:  changes in fair value of the hedge would be reported as a component of accumulated other comprehensive income and subsequently amortized into earnings over the life of the hedged transaction.

If a hedge is deemed to become ineffective and discontinued, the following accounting treatment would be applied:

• Fair value hedge:  the derivative instrument would continue to be adjusted through income, while the adjustment in the change in value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive income.

• Foreign currency hedge:  changes in the value of the hedged item would continue to be reflected as a change in translation adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income for the current period.

• Cash flow hedge:  changes in fair value of the derivative instrument would be reported in income for the current period.

For all derivative positions, net cash requirements are limited to changes in fair values, which may vary based upon changes in interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same counterparty under a master netting arrangement.

Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio’s value in the near term. We regularly monitor our portfolio for price changes, which might indicate potential impairments, and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors, (ii) market-related factors, such as

App.-A-7

interest rates or equity market declines, or (iii) credit-related losses, where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security.

We analyze our debt securities to determine if we intend to sell, or if it is more likely than not that we will be required to sell, the security prior to recovery and, if so, we write down the security to its current fair value, with the entire amount of the write-down recorded to earnings. To the extent that it is more likely than not that we will hold the debt security until recovery (which could be maturity), we determine if any of the decline in value is due to a credit loss (i.e., where the present value of future cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we recognize that portion of the impairment in the comprehensive income statement, with the difference (i.e., non-credit related impairment) recognized as part of our net unrealized gains (losses) in accumulated other comprehensive income. When an equity security (common equity and nonredeemable preferred stock) in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the comprehensive income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in unrealized gains (losses) as part of accumulated other comprehensive income.

Realized gains (losses) on securities are computed based on the first-in first-out method and include write-downs on available-for-sale securities considered to have other-than-temporary declines in fair value (excluding non-credit related impairments), as well as holding period valuation changes on derivatives, trading securities, and hybrid instruments (securities with embedded call options, where the call option is a feature of the overall change in the value of the instrument).

Insurance Premiums and Receivables  Insurance premiums written are earned into income on a pro rata basis over the period of risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that is applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts and offer a variety of payment plans. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk. We perform a policy level evaluation to determine the extent to which the premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for doubtful accounts based on prior experience.

Deferred Acquisition Costs  Deferred acquisition costs include commissions, premium taxes, and other variable underwriting and direct sales costs incurred in connection with writing business. These costs are deferred and amortized over the policy period in which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these costs. Management believes that these costs will be fully recoverable in the near term. We do not defer any advertising costs.

Loss and Loss Adjustment Expense Reserves  Loss reserves represent the estimated liability on claims reported to us, plus reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are reflected in income currently. Such loss and loss adjustment expense reserves are susceptible to change in the near term.

Reinsurance  Our reinsurance transactions primarily include premiums ceded to state-provided reinsurance facilities (e.g., Michigan Catastrophic Claims Association and North Carolina Reinsurance Facility) and premiums written under state-mandated involuntary plans for commercial vehicles (Commercial Auto Insurance Procedures/Plans – “CAIP”) (collectively, “State Plans”) (see Note 7 – Reinsurance for further discussion). We cede 100% of the premiums written in our professional liability insurance businesses as we continue our exit of these markets. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written.

Income Taxes  The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. The principal items giving rise to such differences are investment securities (e.g., net unrealized gains (losses), write-downs, and derivative instruments), loss and loss adjustment expense reserves, unearned premiums reserves, deferred acquisition costs, property and equipment, and non-deductible accruals. We review our deferred tax assets regularly for recoverability. See Note 5 – Income Taxes for further discussion.

App.-A-8

Property and Equipment  Property and equipment are recorded at cost, less accumulated depreciation, and includes capitalized software developed or acquired for internal use. Depreciation is recognized over the estimated useful lives of the assets using accelerated methods for most computer equipment and the straight-line method for certain computer equipment and all other fixed assets. The useful lives range from 2 to 4 years for computer equipment and laptop computers, 10 to 40 years for buildings and improvements, and 3 to 10 years for all other property and equipment. Land and buildings comprised 75% and 76% of total property and equipment at December 31, 2011 and 2010, respectively.

Total capitalized interest, which primarily relates to capitalized software projects, for the years ended December 31, was:

(millions)	Capitalized Interest
2011	$	.4
2010		1.1
2009		2.6

Guaranty Fund Assessments  We are subject to state guaranty fund assessments, which provide for the payment of covered claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal determination of insolvency has occurred, and we have written the premiums on which the assessments will be based.

Service Revenues and Expenses  Our service businesses provide insurance-related services. Service revenues generated from processing business for involuntary CAIP plans are earned on a pro rata basis over the term of the related policies. Service expenses related to these CAIP plans include acquisition expenses, which are deferred and amortized over the period in which the related revenues are earned. Other service business revenues and expenses are recorded in the period in which they are earned or incurred.

Stock-Based Compensation  We currently issue time-based and performance-based restricted stock unit awards to key members of management as our form of equity compensation, and time-based restricted stock awards to non-employee directors. Prior to 2010, we issued restricted stock awards, instead of restricted stock unit awards, to employees. Collectively, we refer to these awards as “restricted equity awards.” We currently do not issue stock options as a form of equity compensation. Compensation expense for time-based restricted equity awards with installment vesting is recognized over each respective vesting period. For performance-based restricted equity awards, compensation expense is recognized over the respective vesting periods.

We record an estimate for expected forfeitures of restricted equity awards based on our historical forfeiture rates. In addition, we shorten the vesting periods of certain restricted equity awards based on the “qualified retirement” provisions in our incentive compensation plans, under which (among other provisions) the vesting of 50% of outstanding time-based restricted equity awards will accelerate upon retirement if the participant is 55 years of age or older and satisfies certain years-of-service requirements.

The total compensation expense recognized for our stock-based compensation for the years ended December 31, was:

(millions)	2011		2010		2009
Pretax expense	$	50.5	$	45.9	$	40.3
Tax benefit		17.7		16.1		14.1

Net Income Per Share  Basic net income per share is computed using the weighted average number of common shares outstanding during the reporting period, excluding unvested time-based and performance-based restricted equity awards that are subject to forfeiture. Diluted net income per share includes common stock equivalents assumed outstanding during the period. Our common stock equivalents include the incremental shares assumed to be issued for:

• stock option exercises (all employee stock options expired December 31, 2011)

• time-based restricted equity awards, and

• certain performance-based restricted equity awards that satisfied contingency conditions during the period.

App.-A-9

Supplemental Cash Flow Information  Cash includes only bank demand deposits. Non-cash activity includes declared but unpaid dividends. For the years ended December 31, we paid the following:

(millions)	2011		2010		2009
Income taxes, net of refunds	$	435.0	$	434.0	$	461.7
Interest		129.5		138.4		144.7

New Accounting Standards  During 2010, the Financial Accounting Standards Board (FASB) issued an accounting standard update related to the accounting for the deferral of costs associated with the successful acquisition or renewal of insurance contracts. This standard is intended to help reduce diversity in practice and is effective for fiscal years beginning after December 15, 2011 (January 2012 for calendar-year companies). Upon adoption, we will defer less acquisition costs under this new standard. At December 31, 2011, we had approximately $23 million of deferred acquisition costs that no longer met the criteria for deferral as of January 1, 2012. Pursuant to the guidance, we elected to adopt this standard on a prospective basis and, therefore, will recognize the effect of this accounting change into income primarily over the first six months of 2012, consistent with our insurance policy terms.

For the year ended December 31, 2011, we elected to early adopt the accounting standard update for the presentation of other comprehensive income that was issued by the FASB during 2011. This standard, which is effective for fiscal periods that begin after December 15, 2011 (January 2012 for calendar-year companies), requires entities to present items of net income and other comprehensive income in two separate, but consecutive, statements or, as we elected, together in one continuous statement, which we refer to as the Consolidated Statements of Comprehensive Income. There were no changes to the calculation of the components of net income or other comprehensive income as a result of this standard.

Reclassifications  Certain amounts in the Notes to Consolidated Financial Statements were reclassified for 2010 and 2009 in order to conform to current-year presentation requirements.

App.-A-10

2. INVESTMENTS

The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio:

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Fair Value
December 31, 2011
Fixed maturities:
U.S. government obligations	$	2,842.7	$	120.3	$	0		$	0		$	2,963.0		18.6	%
State and local government obligations		1,938.6		64.1		(.6	)		0			2,002.1		12.5
Corporate debt securities		2,801.5		94.3		(6.5	)		6.9			2,896.2		18.1
Residential mortgage-backed securities		452.9		9.3		(35.3	)		0			426.9		2.7
Commercial mortgage-backed securities		1,829.8		52.3		(5.5	)		0			1,876.6		11.8
Other asset-backed securities		1,210.9		11.3		(1.3	)		(.3	)		1,220.6		7.6
Redeemable preferred stocks		379.3		18.6		(24.0	)		0			373.9		2.3
Total fixed maturities		11,455.7		370.2		(73.2	)		6.6			11,759.3		73.6
Equity securities:
Nonredeemable preferred stocks		473.7		342.6		(3.7	)		(6.3	)		806.3		5.1
Common equities		1,431.0		440.0		(25.4	)		0			1,845.6		11.6
Short-term investments:
Other short-term investments		1,551.8		0		0			0			1,551.8		9.7
Total portfolio2,3	$	14,912.2	$	1,152.8	$	(102.3	)	$	.3		$	15,963.0		100.0	%
($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Fair Value
December 31, 2010
Fixed maturities:
U.S. government obligations	$	3,203.2	$	56.3	$	(16.9	)	$	0		$	3,242.6		20.9	%
State and local government obligations		1,955.5		43.0		(9.4	)		0			1,989.1		12.8
Corporate debt securities		2,579.0		78.1		(13.3	)		2.3			2,646.1		17.0
Residential mortgage-backed securities		567.1		17.8		(21.3	)		0			563.6		3.6
Commercial mortgage-backed securities		1,772.1		66.9		(6.9	)		0			1,832.1		11.8
Other asset-backed securities		1,063.9		12.4		(2.2	)		(.1	)		1,074.0		6.9
Redeemable preferred stocks		490.0		29.6		(17.1	)		0			502.5		3.3
Total fixed maturities		11,630.8		304.1		(87.1	)		2.2			11,850.0		76.3
Equity securities:
Nonredeemable preferred stocks		601.3		560.2		0			(3.9	)		1,157.6		7.5
Common equities		1,021.7		406.5		(3.2	)		0			1,425.0		9.2
Short-term investments:
Other short-term investments		1,090.8		0		0			0			1,090.8		7.0
Total portfolio2,3	$	14,344.6	$	1,270.8	$	(90.3	)	$	(1.7	)	$	15,523.4		100.0	%

¹ Represents net holding period gains (losses) on certain hybrid securities (discussed below).

² Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

³ The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

Our other short-term investments include Eurodollar deposits, commercial paper, reverse repurchase transactions, and other investments that are expected to mature within one year. At December 31, 2011 and 2010, we had $10.0 million and $0, respectively, in treasury bills issued by the Australian government, included in other short-term investments.

App.-A-11

Included in our fixed-maturity and equity securities are hybrid securities, which are reported at fair value at December 31:

(millions)	2011		2010
Fixed maturities:
Corporate debt securities	$	234.9	$	176.4
Other asset-backed securities		15.5		14.9
Total fixed maturities		250.4		191.3
Equity securities:
Nonredeemable preferred stocks		14.2		52.8
Total hybrid securities	$	264.6	$	244.1

Certain corporate debt securities are accounted for as hybrid securities since they were acquired at a substantial premium and contain a change-in-control put option (derivative) that permits the investor, at its sole option once the change of control is triggered, to put the security back to the issuer at a 1% premium to par. Due to this change-in-control put option and the market premium paid to acquire these securities, there is the potential that the election to put, upon the change-in-control, could result in an acceleration of the remaining premium paid on these securities, which would result in a loss of $17.4 million as of December 31, 2011, if all of the bonds experienced a simultaneous change-in-control and we elected to exercise all of our put options. We are under no obligation to exercise the put option we hold if a change-in-control occurs. The put feature limits the potential loss in value that could be experienced in the event a corporate action occurs that results in a change-in-control which materially diminishes the credit quality of the issuer.

In our asset-backed portfolio, we hold one hybrid security that was acquired at a deep discount to par due to a failing auction, and contains a put option that allows the investor to put that security back to the auction at par. If the auction is restored, this embedded derivative has the potential to more than double our initial investment yield.

The hybrid securities in our nonredeemable preferred stock portfolio are perpetual preferred stocks that have call features with fixed-rate coupons, whereby the change in value of the call features is a component of the overall change in the value of the preferred stocks.

Our securities are reported at fair value, with the changes in fair value of these securities (other than hybrid securities and derivative instruments) reported as a component of accumulated other comprehensive income, net of deferred income taxes. The changes in fair value of the hybrid securities and derivative instruments are recorded as a component of net realized gains (losses) on securities.

At December 31, 2011, bonds and certificates of deposit in the principal amount of $150.7 million were on deposit to meet state insurance regulatory and/or rating agency requirements. We did not have any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2011 or 2010. At December 31, 2011, we did not have any debt securities that were non-income producing during the preceding 12 months.

Fixed Maturities The composition of fixed maturities by maturity at December 31, 2011, was:

(millions)	Cost		Fair Value
Less than one year	$	1,399.0	$	1,418.8
One to five years		8,582.6		8,850.9
Five to ten years		1,380.9		1,398.0
Ten years or greater		92.5		90.9
Total1	$	11,455.0	$	11,758.6

¹ Excludes $0.7 million of gains on the open credit default swap positions.

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities which do not have a single maturity date are reported at expected average maturity. Contractual maturities may differ from expected maturities because the issuers of the securities may have the right to call or prepay obligations.

App.-A-12

Gross Unrealized Losses  As of December 31, 2011, we had $76.9 million of gross unrealized losses in our fixed-income securities and $25.4 million in our common equities. We currently do not intend to sell the fixed-income securities and determined that it is more likely than not that we will not be required to sell these securities for the period of time necessary to recover their cost bases. A review of our fixed-income securities indicated that the issuers were current with respect to their interest obligations and that there was no evidence of any deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity. In addition, 97% of our common stock portfolio was indexed to the Russell 1000, as such this portfolio may contain securities in a loss position for an extended period of time as long as there is no evidence of an issuer-specific impairment, and we may retain these securities as long as the portfolio and index correlation remain similar. The remaining 3% of our common stocks are part of a managed equity strategy, selected by an external investment advisor. If our strategy were to change and these securities were determined to be other-than-temporarily impaired, we would recognize a write-down in accordance with our stated policy.

The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total Fair Value		Gross Unrealized Losses			Less than 12 Months					12 Months or Greater
(millions)						Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2011
Fixed maturities:
U.S. government obligations	$	0	$	0		$	0	$	0		$	0	$	0
State and local government obligations		93.6		(.6	)		79.5		(.5	)		14.1		(.1	)
Corporate debt securities		262.7		(6.5	)		137.3		(4.6	)		125.4		(1.9	)
Residential mortgage-backed securities		308.7		(35.3	)		34.4		(2.0	)		274.3		(33.3	)
Commercial mortgage-backed securities		203.7		(5.5	)		161.4		(3.5	)		42.3		(2.0	)
Other asset-backed securities		284.2		(1.3	)		259.7		(1.0	)		24.5		(.3	)
Redeemable preferred stocks		191.4		(24.0	)		43.5		(1.5	)		147.9		(22.5	)
Total fixed maturities		1,344.3		(73.2	)		715.8		(13.1	)		628.5		(60.1	)
Equity securities:
Nonredeemable preferred stocks		19.5		(3.7	)		19.5		(3.7	)		0		0
Common equities		214.6		(25.4	)		196.7		(23.1	)		17.9		(2.3	)
Total equity securities		234.1		(29.1	)		216.2		(26.8	)		17.9		(2.3	)
Total portfolio	$	1,578.4	$	(102.3	)	$	932.0	$	(39.9	)	$	646.4	$	(62.4	)
	Total Fair Value		Gross Unrealized Losses			Less than 12 Months					12 Months or Greater
(millions)						Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2010
Fixed maturities:
U.S. government obligations	$	495.3	$	(16.9	)	$	495.3	$	(16.9	)	$	0	$	0
State and local government obligations		461.9		(9.4	)		454.0		(8.7	)		7.9		(.7	)
Corporate debt securities		589.3		(13.3	)		541.3		(11.6	)		48.0		(1.7	)
Residential mortgage-backed securities		314.1		(21.3	)		74.0		(1.0	)		240.1		(20.3	)
Commercial mortgage-backed securities		332.0		(6.9	)		269.7		(3.1	)		62.3		(3.8	)
Other asset-backed securities		214.8		(2.2	)		209.8		(1.1	)		5.0		(1.1	)
Redeemable preferred stocks		216.7		(17.1	)		0		0			216.7		(17.1	)
Total fixed maturities		2,624.1		(87.1	)		2,044.1		(42.4	)		580.0		(44.7	)
Equity securities:
Nonredeemable preferred stocks		0		0			0		0			0		0
Common equities		60.5		(3.2	)		57.3		(3.1	)		3.2		(.1	)
Total equity securities		60.5		(3.2	)		57.3		(3.1	)		3.2		(.1	)
Total portfolio	$	2,684.6	$	(90.3	)	$	2,101.4	$	(45.5	)	$	583.2	$	(44.8	)

App.-A-13

Other-Than-Temporary Impairment (OTTI)  The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined:

	December 31,
(millions)	2011			2010
Fixed maturities:
Residential mortgage-backed securities	$	(44.8	)	$	(44.3	)
Commercial mortgage-backed securities		(1.0	)		(1.0	)
Total fixed maturities	$	(45.8	)	$	(45.3	)

The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2011 and 2010, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Corporate Debt			Total
Beginning balance at January 1, 2011	$	32.3		$	1.0		$	6.5		$	39.8
Credit losses for which an OTTI was previously recognized		1.4			0			0			1.4
Credit losses for which an OTTI was not previously recognized		1.1			.4			0			1.5
Change in recoveries of future cash flows expected to be collected1,2		.8			.3			(6.5	)		(5.4	)
Reductions for previously recognized credit impairments written down to fair value3		(1.1	)		(.4	)		0			(1.5	)
Ending balance at December 31, 2011	$	34.5		$	1.3		$	0		$	35.8

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Corporate Debt		Total
Beginning balance at January 1, 2010	$	41.1		$	.9		$	6.5	$	48.5
Credit losses for which an OTTI was previously recognized		3.0			.3			0		3.3
Credit losses for which an OTTI was not previously recognized		2.4			1.0			0		3.4
Change in recoveries of future cash flows expected to be collected1		(5.3	)		(.4	)		0		(5.7	)
Reductions for previously recognized credit impairments written down to fair value3		(8.9	)		(.8	)		0		(9.7	)
Ending balance at December 31, 2010	$	32.3		$	1.0		$	6.5	$	39.8

¹  Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

²  Includes $2.0 million received on a residential mortgage-backed security in excess of the cash flows expected to be collected at the time of the write-down.

³  Reflects reductions of prior credit impairments where the current credit impairment requires writing securities down to fair value (i.e., no remaining non-credit loss).

Since we determined that it is more likely than not that we will not be required to sell the securities prior to the recovery of their respective cost bases (which could be maturity), in order to measure the amount of credit losses on the securities that were determined to be other-than-temporarily impaired, we considered a number of factors and inputs related to the individual securities. The methodology and significant inputs used to measure the amount of credit losses in our portfolio included: current performance indicators on the underlying assets (e.g., delinquency rates, foreclosure rates, and default rates), credit support (via current levels of subordination), and historical credit ratings. Updated cash flow expectations were also generated by our portfolio managers based upon these performance indicators. In order to determine the amount of credit loss, if any, the net present value of the cash flows expected (i.e., expected recovery value) was calculated using the current book yield for each security, and was compared to its current amortized value. In the event that the net present value was below the amortized value, a credit loss was deemed to exist, and the security was written down.

App.-A-14

Net Realized Gains (Losses) The components of net realized gains (losses) for the years ended December 31, were:

(millions)	2011			2010			2009
Gross realized gains on security sales
Fixed maturities:
U.S. government obligations	$	59.1		$	39.8		$	103.1
State and local government obligations		3.5			10.0			35.2
Corporate and other debt securities		23.0			30.9			20.5
Residential mortgage-backed securities		2.0			0			0
Commercial mortgage-backed securities		.3			1.0			.8
Other asset-backed securities		2.1			.8			0
Redeemable preferred stocks		4.6			8.5			0
Total fixed maturities		94.6			91.0			159.6
Equity securities:
Nonredeemable preferred stocks		148.9			83.6			32.6
Common equities		11.9			13.8			148.5
Subtotal gross realized gains on security sales		255.4			188.4			340.7
Gross realized losses on security sales
Fixed maturities:
U.S. government obligations		(9.3	)		(12.9	)		(2.1	)
State and local government obligations		0			0			(7.6	)
Corporate and other debt securities		(3.5	)		(.5	)		(.5	)
Residential mortgage-backed securities		0			0			(3.2	)
Commercial mortgage-backed securities		0			0			(9.9	)
Other asset-backed securities		0			0			(.7	)
Redeemable preferred stocks		(2.2	)		(5.2	)		0
Total fixed maturities		(15.0	)		(18.6	)		(24.0	)
Equity securities:
Nonredeemable preferred stocks		0			0			(57.3	)
Common equities		(36.5	)		(7.2	)		(40.0	)
Subtotal gross realized losses on security sales		(51.5	)		(25.8	)		(121.3	)
Net realized gains (losses) on security sales
Fixed maturities:
U.S. government obligations		49.8			26.9			101.0
State and local government obligations		3.5			10.0			27.6
Corporate and other debt securities		19.5			30.4			20.0
Residential mortgage-backed securities		2.0			0			(3.2	)
Commercial mortgage-backed securities		.3			1.0			(9.1	)
Other asset-backed securities		2.1			.8			(.7	)
Redeemable preferred stocks		2.4			3.3			0
Total fixed maturities		79.6			72.4			135.6
Equity securities:
Nonredeemable preferred stocks		148.9			83.6			(24.7	)
Common equities		(24.6	)		6.6			108.5
Subtotal net realized gains (losses) on security sales		203.9			162.6			219.4
Other-than-temporary impairment losses
Fixed maturities:
Residential mortgage-backed securities		(3.3	)		(11.1	)		(32.0	)
Commercial mortgage-backed securities		(.6	)		(1.9	)		(.9	)
Redeemable preferred stocks		0			0			(6.1	)
Total fixed maturities		(3.9	)		(13.0	)		(39.0	)
Equity securities:
Nonredeemable preferred stocks		0			0			(158.8	)
Common equities		(.2	)		(.5	)		(10.3	)
Subtotal other-than-temporary impairment losses		(4.1	)		(13.5	)		(208.1	)
Net holding period gains (losses)
Hybrid securities		1.7			5.5			14.5
Derivative instruments		(98.9	)		(58.5	)		1.3
Subtotal net holding period gains (losses)		(97.2	)		(53.0	)		15.8
Total net realized gains (losses) on securities	$	102.6		$	96.1		$	27.1

App.-A-15

Gross realized gains and losses were the result of sales transactions in our fixed-income portfolio, affected by movements in credit spreads and interest rates, rebalancing of our equity-indexed portfolio, tax management, and holding period valuation changes on hybrids and derivatives. Also included are write-downs for securities determined to be other-than-temporarily impaired in our fixed-maturity and/or equity portfolios.

Net Investment Income  The components of net investment income for the years ended December 31, were:

(millions)	2011			2010			2009
Fixed maturities:
U.S. government obligations	$	58.0		$	80.8		$	79.6
State and local government obligations		60.0			65.4			91.9
Corporate debt securities		106.7			84.3			48.2
Residential mortgage-backed securities		18.6			21.7			33.4
Commercial mortgage-backed securities		83.4			99.1			90.7
Other asset-backed securities		24.5			21.8			9.7
Redeemable preferred stocks		33.0			45.5			47.5
Other debt obligations		0			0			.3
Total fixed maturities		384.2			418.6			401.3
Equity securities:
Nonredeemable preferred stocks		57.7			70.6			89.7
Common equities		35.7			27.3			13.3
Short-term investments:
Other short-term investments		2.4			3.6			2.7
Investment income		480.0			520.1			507.0
Investment expenses		(13.5	)		(11.9	)		(11.1	)
Net investment income	$	466.5		$	508.2		$	495.9

Trading Securities  At December 31, 2011 and 2010, we did not hold any trading securities and we did not have any net realized gains (losses) on trading securities for the years ended December 31, 2011, 2010, and 2009.

Derivative Instruments  We have invested in the following derivative exposures at various times: interest rate swaps, asset-backed credit default swaps, U.S. corporate debt credit default swaps, cash flow hedges, and equity options.

For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as an asset and a component of the available-for-sale portfolio, the inception-to-date realized gain on the derivative position at period end would have to exceed any upfront cash received (net derivative asset). On the other hand, a net derivative liability would include any inception-to-date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to their immaterial effect on our financial condition, cash flows, and results of operations.

App.-A-16

The following table shows the status of our derivative instruments at December 31, 2011 and 2010, and for the years ended December 31, 2011, 2010, and 2009; amounts are on a pretax basis:

(millions)								Balance Sheet							Income Statement
	Notional Value1								Assets (Liabilities) Fair Value						Net Realized Gains (Losses) on Securities
	December 31,								December 31,						Years ended December 31,
Derivatives designated as:	2011		2010		2009		Purpose	Classification	2011			2010			2011			2010			2009
Hedging instruments
Closed:
Foreign currency cash flow hedge	$	0	$	0	$	8	Forecasted transaction	Accumulated other comprehensive income	$	0		$	0		$	0		$	0		$	0
Ineffective cash flow hedge		15		223		0	Manage interest rate risk	NA		0			0			.3			5.8			0
Non-hedging instruments
Assets:
Interest rate swaps		0		0		713	Manage portfolio duration	Investments - fixed maturities		0			0			0			0			.1
Corporate credit default swaps		25		35		0	Manage credit risk	Investments - fixed maturities		.7			1.3			(.2)			2.5			0
Liabilities:
Interest rate swaps		1,263		713		0	Manage portfolio duration	Other liabilities		(76.1	)		(41.7	)		(74.0	)		(66.6	)		0
Corporate credit default swaps		0		0		25	Manage credit risk	Other liabilities		0			0			0			0			(.6	)
Closed:
Interest rate swaps		350		0		4,186	Manage portfolio duration	NA		0			0			(25.5	)		0			10.4
Corporate credit default swaps		10		25		7	Manage credit risk	NA		0			0			.5			(.2	)		(.4	)
Equity options2 (177,190 contracts)		NA		NA		NA	Manage price risk	NA		0			0			0			0			(9.1	)
Foreign currency trade		0		0		8	Manage currency risk	NA		0			0			0			0			.9
Total		NA		NA		NA			$	(75.4	)	$	(40.4	)	$	(98.9	)	$	(58.5	)	$	1.3

¹The amounts represent the value held at year-end for open positions and the maximum amount held during the year for closed positions.

²Each contract is equivalent to 100 shares of common stock of the issuer; we had no option activity in 2011 or 2010.

NA = Not Applicable

CASH FLOW HEDGES

During the year ended December 31, 2011, we repurchased $15.0 million principal amount of our 6.70% Junior Subordinated Debentures due 2067 (the “6.70% Debentures”) at or near par in the open market (see Note 4 – Debt for further discussion). We reclassified $0.3 million (pretax) from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the repurchased 6.70% Debentures.

During 2010, we finalized our tender offer for, and repurchased $222.9 million principal amount of, the 6.70% Debentures. We reclassified $5.8 million (pretax) from accumulated other comprehensive income on the balance sheet to net realized

App.-A-17

gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the 6.70% Debentures that were repurchased pursuant to the tender offer.

In anticipation of issuing the 6.70% Debentures in 2007, we entered into a forecasted debt issuance hedge (cash flow hedge) against a possible rise in interest rates. Upon issuance of the 6.70% Debentures, the hedge was closed, and we recognized a pretax gain of $34.4 million, which was recorded as part of accumulated other comprehensive income. The $34.4 million gain, less the $0.3 million and $5.8 million reclassifications mentioned above, was deferred and is being recognized as a decrease to interest expense over the 10-year fixed interest rate term of the 6.70% Debentures.

During 2011, we issued $500 million of 3.75% Senior Notes due 2021 (the “3.75% Senior Notes”) and entered into a forecasted debt issuance hedge (cash flow hedge) against a possible rise in interest rates (see Note 4 – Debt for further discussion). Upon issuance of the 3.75% Senior Notes in August 2011, the hedge was closed and we recognized, as part of accumulated other comprehensive income, a pretax unrealized loss of $5.1 million. The $5.1 million loss was deferred and is being recognized as an increase to interest expense over the life of the 3.75% Senior Notes.

During 2011, 2010, and 2009, we recognized $2.6 million, $2.7 million, and $2.8 million, respectively, as net decreases to interest expense on our closed debt issuance cash flow hedges.

In 2009, we realized a foreign currency trade gain of $0.9 million, reflecting the previously deferred gain on our foreign currency cash flow hedge, which was opened during 2008 and closed in 2009.

INTEREST RATE SWAPS

At December 31, 2011, 2010, and 2009, we invested in interest rate swap positions primarily to manage the fixed-income portfolio duration. During the year ended December 31, 2011, we held a 9-year interest rate swap position (opened in 2009) and two 5-year interest rate swap positions (opened in 2011); in each case, we are paying a fixed rate and receiving a variable rate, effectively shortening the duration of our fixed-income portfolio. We closed a portion of the 9-year position during 2011. The combined open positions have generated an aggregate realized loss, as interest rates have fallen since the inception of these positions. As of December 31, 2011, 2010, and 2009, we delivered $81.7 million, $52.2 million, and $0, respectively, in cash collateral to the applicable counterparty on these positions.

CORPORATE CREDIT DEFAULT SWAPS

Financial Services Sector – At December 31, 2011, 2010, and 2009, we held a position, which was opened during 2008, on one corporate issuer within the financial services sector where we bought credit default protection in the form of a credit default swap for a 5-year time horizon. We hold this protection to reduce some of our exposure to additional valuation declines on a preferred stock position of the same issuer. As of December 31, 2011 and 2010, we received $0.7 million and $0.5 million, respectively, in cash collateral from the counterparty on this corporate credit default swap position. As of December 31, 2009, we delivered $0.6 million in cash collateral to the counterparty on this corporate credit default swap position.

Automotive Sector – During 2011, we closed a position that was opened during 2010 where we sold credit protection in the form of a corporate credit default swap on one issuer in the automotive sector for a 5-year time horizon. We acquired an equal par value amount of U.S. Treasury Notes with a similar maturity to cover the credit default swap’s notional exposure. As of December 31, 2010, we received $1.1 million in cash collateral from the counterparty on this position.

Technology Sector – During 2010, we opened and closed two positions on one corporate issuer within the technology sector for which we bought credit default protection in the form of credit default swaps for 2-year and 4-year time horizons. We paid $0.2 million in upfront cash when we entered into the 4-year exposure position. We held this protection to reduce our exposure to additional valuation declines on a corporate position of the same issuer due to potential future credit impairment. We also opened and closed a position during 2009, for which we bought credit default protection in the form of credit default swaps for a 2-year time horizon on one corporate issuer within the technology sector. We paid $0.6 million in upfront cash when we entered this position.

EQUITY OPTIONS

We held no equity option positions during the years ended December 31, 2011 or 2010. During the year ended December 31, 2009, we opened and closed positions pursuant to which we simultaneously sold and purchased a substantially equivalent amount of call and put options, respectively, on Citigroup common stock, which related to our

App.-A-18

preferred stock holding. The purpose of this transaction was to effect a forward sale of a portion of the common stock we expected to receive from Citigroup resulting from the conversion of our preferred stock holding into common stock pursuant to Citigroup’s exchange that occurred during 2009. This was achieved through matching the strike price and term of the option contracts and was meant to offset the downside price risk of the common stock during the time period pending the exchange. All of the common stock we received from the preferred stock conversion was sold by the end of 2009.

3.  FAIR VALUE

We have categorized our financial instruments, based on the degree of subjectivity inherent in the method by which they are valued, into a fair value hierarchy of three levels, as follows:

• Level 1:  Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. government obligations and active exchange-traded equity securities).

• Level 2:  Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i) quoted prices for similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active, (iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3:  Inputs that are unobservable. Unobservable inputs reflect our subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

Pursuant to generally accepted accounting principles, which require us to evaluate whether a market is distressed or inactive in determining the fair value for our portfolio, we review certain market level inputs to evaluate whether sufficient activity, volume, and new issuances existed to create an active market. Based on this evaluation, we concluded that there was sufficient activity related to the sectors and securities for which we obtained valuations.

App.-A-19

The composition of the investment portfolio by major security type was:

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2011
Fixed maturities:
U.S. government obligations	$	2,963.0	$	0	$	0	$	2,963.0	$	2,842.7
State and local government obligations		0		2,002.1		0		2,002.1		1,938.6
Corporate debt securities		0		2,896.2		0		2,896.2		2,801.5
Subtotal		2,963.0		4,898.3		0		7,861.3		7,582.8
Asset-backed securities:
Residential mortgage-backed		0		364.6		62.3		426.9		452.9
Commercial mortgage-backed		0		1,855.3		21.3		1,876.6		1,829.8
Other asset-backed		0		1,218.0		2.6		1,220.6		1,210.9
Subtotal asset-backed securities		0		3,437.9		86.2		3,524.1		3,493.6
Redeemable preferred stocks:
Financials		24.1		107.2		0		131.3		124.3
Utilities		0		68.1		0		68.1		70.8
Industrials		0		174.5		0		174.5		184.2
Subtotal redeemable preferred stocks		24.1		349.8		0		373.9		379.3
Total fixed maturities		2,987.1		8,686.0		86.2		11,759.3		11,455.7
Equity securities:
Nonredeemable preferred stocks:
Financials		227.9		525.4		0		753.3		433.7
Utilities		0		53.0		0		53.0		40.0
Industrials		0		0		0		0		0
Subtotal nonredeemable preferred stocks		227.9		578.4		0		806.3		473.7
Common equities:
Common stocks		1,834.1		0		0		1,834.1		1,427.3
Other equity-like investments		0		0		11.5		11.5		3.7
Subtotal common equities		1,834.1		0		11.5		1,845.6		1,431.0
Total fixed maturities and equity securities	$	5,049.1	$	9,264.4	$	97.7		14,411.2		13,360.4
Short-term investments:
Other short-term investments1								1,551.8		1,551.8
Total portfolio							$	15,963.0	$	14,912.2
Debt2							$	2,664.7	$	2,442.1

App.-A-20

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2010
Fixed maturities:
U.S. government obligations	$	3,242.6	$	0	$	0	$	3,242.6	$	3,203.2
State and local government obligations		0		1,989.1		0		1,989.1		1,955.5
Corporate debt securities		0		2,616.6		29.5		2,646.1		2,579.0
Subtotal		3,242.6		4,605.7		29.5		7,877.8		7,737.7
Asset-backed securities:
Residential mortgage-backed		0		466.9		96.7		563.6		567.1
Commercial mortgage-backed		0		1,804.6		27.5		1,832.1		1,772.1
Other asset-backed		0		1,069.0		5.0		1,074.0		1,063.9
Subtotal asset-backed securities		0		3,340.5		129.2		3,469.7		3,403.1
Redeemable preferred stocks:
Financials		23.4		172.4		0		195.8		183.8
Utilities		0		71.4		0		71.4		70.2
Industrials		0		235.3		0		235.3		236.0
Subtotal redeemable preferred stocks		23.4		479.1		0		502.5		490.0
Total fixed maturities		3,266.0		8,425.3		158.7		11,850.0		11,630.8
Equity securities:
Nonredeemable preferred stocks:
Financials		490.2		565.1		0		1,055.3		514.3
Utilities		0		67.9		0		67.9		50.8
Industrials		0		34.4		0		34.4		36.2
Subtotal nonredeemable preferred stocks		490.2		667.4		0		1,157.6		601.3
Common equities:
Common stocks		1,413.2		0		0		1,413.2		1,017.6
Other equity-like investments		0		0		11.8		11.8		4.1
Subtotal common equities		1,413.2		0		11.8		1,425.0		1,021.7
Total fixed maturities and equity securities	$	5,169.4	$	9,092.7	$	170.5		14,432.6		13,253.8
Short-term investments:
Other short-term investments1								1,090.8		1,090.8
Total portfolio							$	15,523.4	$	14,344.6
Debt2							$	2,105.7	$	1,958.2

¹  Due to the underlying nature of these securities, cost approximates fair value.

² Debt is not subject to measurement at fair value in the Consolidated Balance Sheets. Therefore, it is not broken out by hierarchy level; fair values are obtained from external sources.

Our portfolio valuations classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources, including: pricing vendors, dealers/market makers, and exchange-quoted prices. During 2011, we had one nonredeemable preferred security with a value of $44.2 million that was transferred from Level 1 to Level 2 due to the lack of an exchange-quoted price at year-end. The exchange price was not available due to illiquidity in the market place that is expected to be temporary. A consistent exchange-quoted price was previously available for this security, and we will continue to monitor the security for future exchange trading volume. We recognize transfers between levels at the end of the reporting period. We did not have any transfers between Level 1 and Level 2 for the year ended December 31, 2010.

With limited exceptions, our Level 3 securities are also priced externally; however, due to several factors (e.g., nature of the securities, level of activity, and lack of similar securities trading to obtain observable market level inputs), these valuations are more subjective in nature. Certain private equity investments and fixed-income investments included in the Level 3 category are valued using external pricing supplemented by internal review and analysis.

At December 31, 2011, vendor-quoted prices represented 59% of our Level 1 classifications, compared to 63% at December 31, 2010. The securities quoted by vendors in Level 1 represent our holdings in U.S. Treasury Notes,

App.-A-21

which are frequently traded and the quotes are considered similar to exchange-traded quotes. The balance of our Level 1 pricing comes from quotes obtained directly from trades made on an active exchange.

At December 31, 2011, vendor-quoted prices comprised 96% of our Level 2 classifications, while dealer-quoted prices represented 4%, compared to 94% and 6%, respectively, at December 31, 2010. In our process for selecting a source (e.g., dealer, pricing service) to provide pricing for securities in our portfolio, we reviewed documentation from the sources that detailed the pricing techniques and methodologies used by these sources and determined if their policies adequately considered market activity, either based on specific transactions for the particular security type or based on modeling of securities with similar credit quality, duration, yield, and structure that were recently transacted. Once a source is chosen, we continue to monitor any changes or modifications to their processes by reviewing their documentation on internal controls for pricing and market reviews.

Our internal pricing policy is to consistently use a single source in order to maintain the integrity established when selecting the source initially. From time to time, we will obtain a quote from more than one source to help us further evaluate the market price of a security. Quotes obtained from the sources are not considered binding offers to transact a trade. Under our policy, when a review of the valuation received from our selected source appears outside what is considered market level activity (which is defined as trading at spreads or yields significantly different than comparable securities or outside the general sector level movement without a reasonable explanation), we may use an alternate source’s price. To the extent we determine that it is prudent to substitute one source’s price for another, we will contact the initial source to obtain an understanding of the factors that may be contributing to the significant price variance, which often leads the source to adjust their pricing input data for future pricing.

To allow us to determine if our initial source is providing a price that is outside of a reasonable range, we review our portfolio pricing on a weekly basis. We frequently challenge prices from our sources when a price provided does not match our expectations based on our evaluation of market trends/activity. Initially, we perform a global review of our portfolio by sector to identify securities whose prices appear outside of a reasonable range. We refine our review to analyze prices by specific criteria, such as whether the security is investment or non-investment-grade, prime or sub-prime, or a consumer product (e.g., auto, credit card). Through this review, we try to determine what contributed to the price variances among sources by analyzing spread movement, comparable security trades, if available, or industry or specific issuer fundamentals. We review quality control measures of our sources as they become available to determine if any significant changes have occurred from period to period that might indicate issues/concerns regarding their evaluation or market coverage. We also review data assumptions as supplied by our sources to determine if that data is relevant to current market conditions. In addition, we independently review each sector for transaction volumes, new issuances, and changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for our market valuations.

During each valuation period, we create internal estimations of portfolio valuation (performance returns), based on current market-related activity (i.e., interest rate and credit spread movements and other credit-related factors) within each major sector of our portfolio. We compare our internally generated portfolio results with those generated based on quotes we received externally and research material valuation differences. In addition, we compare our results to index returns for each major sector adjusting for duration and credit quality differences to better understand our portfolio’s results. Additionally, we review on a monthly basis our external sales transactions and compare the actual final market sales price to a previous market valuation price. This review provides us further validation that our pricing sources are providing market level prices, since we are able to explain significant price changes (i.e., greater than 2%) as known events occur in the market place and affect a particular security’s price at sale.

This analysis provides us additional comfort regarding the source’s process, the quality of their review, and their willingness to improve their analysis based on feedback from clients. We believe this collaborative effort helps ensure that we are reporting the most representative fair values of our securities.

After all the valuations are received and our review is complete, to the extent the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected security valuations to Level 3. At December 31, 2011 and 2010, securities in our fixed-maturity portfolio listed as Level 3 were comprised substantially of securities that were either: (i) private placement deals, (ii) thinly held and/or traded securities, or (iii) non-investment-grade securities with little liquidity. Based on these factors, it was difficult to independently verify observable market inputs that were used to generate the external valuations we received. At December 31, 2011 and 2010, we had one private common

App.-A-22

equity security with a value of $10.2 million that was priced internally. Additionally, at December 31, 2011 and 2010, we had two fixed-maturity securities with an aggregate value of $0.5 million that were priced internally. Despite the lack of sufficient observable market information, based on the valuations received in conjunction with our procedures for evaluating third-party prices, we believe the fair values reported in the financial statements accurately reflect market prices.

The following tables provide a summary of changes in fair value associated with Level 3 assets for the years ended December 31, 2011 and 2010:

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2010		Calls/ Maturities/ Paydowns			Purchases		Sales			Net Realized (Gain)/Loss			Change in Valuation			Net Transfers In (Out)1			Fair value at Dec. 31, 2011
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	96.7	$	(19.5	)	$	0	$	0		$	0		$	.5		$	(15.4	)	$	62.3
Commercial mortgage-backed		27.5		(.3	)		0		0			0			(5.9	)		0			21.3
Other asset-backed		5.0		(2.6	)		0		0			0			.2			0			2.6
Total asset-backed securities		129.2		(22.4	)		0		0			0			(5.2	)		(15.4	)		86.2
Corporate debt securities		29.5		0			0		(27.9	)		(.6	)		(1.0	)		0			0
Other debt obligations		0		0			0		0			0			0			0			0
Redeemable preferred stocks:
Industrials		0		0			0		0			0			0			0			0
Total fixed maturities		158.7		(22.4	)		0		(27.9	)		(.6	)		(6.2	)		(15.4	)		86.2
Equity securities:
Common equities:
Other equity-like investments		11.8		0			0		0			0			(.3	)		0			11.5
Total Level 3 securities	$	170.5	$	(22.4	)	$	0	$	(27.9	)	$	(.6	)	$	(6.5	)	$	(15.4	)	$	97.7

¹ The $(15.4) million was transferred out of Level 3 into Level 2 due to the availability of vendor pricing on a residential mortgage-backed security.

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2009		Calls/ Maturities/ Paydowns			Purchases		Sales			Net Realized (Gain)/Loss		Change in Valuation			Net Transfers In (Out)1			Fair value at Dec. 31, 2010
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	46.1	$	(20.9	)	$	55.6	$	0		$	0	$	4.8		$	11.1		$	96.7
Commercial mortgage-backed		21.6		0			0		0			0		5.4			.5			27.5
Other asset-backed		7.8		(2.6	)		0		0			0		(.2	)		0			5.0
Total asset-backed securities		75.5		(23.5	)		55.6		0			0		10.0			11.6			129.2
Corporate debt securities		28.2		0			0		0			0		1.3			0			29.5
Other debt obligations		1.1		0			0		0			0		(1.1	)		0			0
Redeemable preferred stocks:
Industrials		53.1		0			0		0			0		0			(53.1	)		0
Total fixed maturities		157.9		(23.5	)		55.6		0			0		10.2			(41.5	)		158.7
Equity securities:
Common equities:
Other equity-like investments		12.9		(2.1	)		0		(.3	)		.3		1.0			0			11.8
Total Level 3 securities	$	170.8	$	(25.6	)	$	55.6	$	(.3	)	$	.3	$	11.2		$	(41.5	)	$	170.5

¹ The net $(41.5) million of transfers out of Level 3 included: a $12.1 million transfer into Level 3 and subsequent transfer out of Level 3 at $(15.1) million due to sufficient trade volume, a $(53.1) million transfer out of Level 3 due to the availability of vendor pricing on a redeemable preferred stock, and $14.6 million of transfers into Level 3 due to the lack of trade volume.

App.-A-23

4. DEBT

Debt at December 31 consisted of:

	2011				2010
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
6.375% Senior Notes due 2012 (issued: $350.0, December 2001)	$	350.0	$	350.5	$	349.6	$	369.3
7% Notes due 2013 (issued: $150.0, October 1993)		149.7		162.4		149.6		165.0
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)		497.0		525.3		0		0
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)		295.0		364.4		294.8		329.9
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)		394.4		492.4		394.2		433.3
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued: $1,000.0, June 2007; outstanding: $762.1 and $777.1)		756.0		769.7		770.0		808.2
Total	$	2,442.1	$	2,664.7	$	1,958.2	$	2,105.7

All of the outstanding debt was issued by The Progressive Corporation. Debt includes amounts we have borrowed and contributed to the capital of our insurance subsidiaries or used, or have available for use, for other business purposes. Fair values are obtained from external sources. There are no restrictive financial covenants or credit rating triggers on our debt.

Interest on all debt is payable semiannually at the stated rates. However, the 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “6.70% Debentures”) will only bear interest at this fixed annual rate through, but excluding, June 15, 2017. Thereafter, the 6.70% Debentures will bear interest at an annual rate equal to the three-month LIBOR plus 2.0175%, and the interest will be payable quarterly.

In September 2011, we entered into an agreement with The Bank of New York Mellon Trust Company, N.A., as trustee, modifying the terms of the 6.70% Debentures. Pursuant to that agreement, among other changes, we surrendered our right to temporarily defer the payment of interest on the 6.70% Debentures and terminated a related obligation to reserve 250 million of our unissued common shares as a source of potential funding to pay any such deferred interest. The changes were effective immediately upon execution of the agreement. Prior to this time, and subject to certain conditions, we had the right to defer the payment of interest on the 6.70% Debentures for one or more periods not exceeding ten consecutive years each.

Except for the 6.70% Debentures, all principal is due at the maturity stated in the table above. The 6.70% Debentures will become due on June 15, 2037, the scheduled maturity date, but only to the extent that we have received sufficient net proceeds from the sale of certain qualifying capital securities. We must use our commercially reasonable efforts, subject to certain market disruption events, to sell enough qualifying capital securities to permit repayment of the 6.70% Debentures in full on the scheduled maturity date or, if sufficient proceeds are not realized from the sale of such qualifying capital securities by such date, on each interest payment date thereafter. Any remaining outstanding principal will be due on June 15, 2067, the final maturity date.

The 7% Notes are noncallable. The 6.375% Senior Notes, the 3.75% Senior Notes, the 6 5/8% Senior Notes, and the 6.25% Senior Notes (collectively, “Senior Notes”) may be redeemed in whole or in part at any time, at our option, subject to a “make-whole” provision. The 6.70% Debentures may be redeemed, in whole or in part, at any time: (a) prior to June 15, 2017, at a redemption price equal to the greater of (i) 100% of the principal amount of the 6.70% Debentures being redeemed, or (ii) a “make-whole” amount, in each case plus any accrued and unpaid interest; or (b) on or after June 15, 2017, at a redemption price equal to 100% of the principal amount of the 6.70% Debentures being redeemed, plus any accrued and unpaid interest.

During 2011, we repurchased $15.0 million in aggregate principal amount of our 6.70% Debentures at or near par in the open market. As a result, our debt under these Debentures was extinguished and we incurred a net loss of $0.1 million.

In June 2010, we commenced an offer to purchase for cash (the “Tender Offer”) up to $350 million in aggregate principal amount of our 6.70% Debentures. The Tender Offer expired on July 8, 2010. We received valid tenders from holders of the 6.70% Debentures in the aggregate principal amount of $222.9 million. All of the tendering holders validly tendered by the early tender date of June 23, 2010, and received consideration of $950 per $1,000 principal amount of the 6.70%

App.-A-24

Debentures accepted for purchase, which included an early tender payment of $50 per $1,000 principal amount of 6.70% Debentures accepted. We recognized a net gain on this debt extinguishment of $6.4 million, after deducting expenses and fees associated with the Tender Offer and related Consent Solicitation discussed below.

As a condition of the Tender Offer, we solicited consents (the “Consent Solicitation”) from the holders of our 6.25% Senior Notes to terminate the Replacement Capital Covenant (the “RCC”) relating to the 6.25% Senior Notes. The RCC was originally entered into by Progressive in June 2007 for the benefit of the holders of the 6.25% Senior Notes in connection with the issuance of the 6.70% Debentures. Under the RCC, we agreed that we would not repay, redeem, defease, or purchase all or any part of the 6.70% Debentures before June 15, 2047, unless Progressive was to obtain a specified portion of the funds used in the transaction through the sale of its common shares or certain other equity or equity-like securities. The RCC was terminated on June 23, 2010, the expiration date of the Consent Solicitation, at which time we had received the consent of holders of a majority of the outstanding aggregate principal amount of the 6.25% Senior Notes. Those holders who validly delivered their consent by the expiration date received a consent fee of $5.00 for each $1,000 principal amount of their 6.25% Senior Notes.

Prior to issuance of the Senior Notes and 6.70% Debentures, we entered into forecasted debt issuance hedges against possible rises in interest rates. Upon issuance of the applicable debt securities, the hedges were closed and we recognized unrealized gains (losses) as part of accumulated other comprehensive income. The original unrealized gain (loss) and the unamortized balance at December 31, 2011, on a pretax basis, of these hedges, were as follows:

(millions)	Original Unrealized Gain (Loss)			Unamortized Balance at December 31, 2011
6.375% Senior Notes	$	18.4		$	.2
3.75% Senior Notes		(5.1	)		(5.0	)
6 5/8% Senior Notes		(4.2	)		(3.5	)
6.25% Senior Notes		5.1			4.4
6.70% Debentures		34.4			16.1

The gains (losses) on these hedges are deferred and are being amortized as adjustments to interest expense over the life of the related Senior Notes, and over the 10-year fixed interest rate term for the 6.70% Debentures. In addition to this amortization, during 2011 and 2010, we reclassified $0.3 million and $5.8 million, respectively, on a pretax basis, from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of the 6.70% Debentures repurchased during the periods.

On December 31, 2011, we entered into an amendment to the 364-Day Secured Liquidity Credit Facility Agreement (“Credit Facility Agreement”) with PNC Bank, National Association (PNC), which extended the expiration date of our outstanding credit facility agreement until December 31, 2012, unless earlier terminated pursuant to the terms of the agreement. Under this agreement, we may borrow up to $125 million, which may be increased to $150 million at our request but subject to PNC’s discretion. The purpose of the credit facility is to provide liquidity in the event of disruptions in our cash management operations, such as disruptions in the financial markets or related facilities that affect our ability to transfer or receive funds. Under this credit facility, we may borrow funds, on a revolving basis, either in the form of Eurodollar Loans or Base Rate Loans. Eurodollar Loans will bear interest at one-, two-, three-, or six-month LIBOR (as selected by us) plus 50 basis points for the selected period. Base Rate Loans will bear daily interest at the greater of (a) PNC’s prime rate for such day, (b) the federal funds effective rate for such day plus 1/2% per annum, or (c) one-month LIBOR plus 2% per annum. Any borrowings under this agreement will be secured by a lien on certain marketable securities held in our investment portfolio. Facility fees of $25,000 and $62,500 in 2011 and 2010, respectively, were paid as consideration for this revolving agreement. In addition, in 2011 and 2010, we had $125 million on deposit in an interest-bearing account at PNC, which was transferred to an FDIC-insured, non-interest bearing account in January 2012, to provide us with additional cash availability in the event of such disruption to our cash management operations. Our access to these funds is unrestricted. However, if we withdraw funds from this account for any reason other than in connection with a disruption in our cash management operations, the availability of borrowings under the PNC credit facility will be reduced on a dollar-for-dollar basis until such time as we replenish the funds to the deposit account. There are no rating triggers under the credit agreement. We had no borrowings under this arrangement in 2011 or 2010.

App.-A-25

Aggregate principal payments on debt outstanding at December 31, 2011, is as follows:

(millions) Year	Payments
2012	$	350.0
2013		150.0
2014		0
2015		0
2016		0
Thereafter		1,962.1
Total	$	2,462.1

In January 2012, we retired the entire $350.0 million of our 6.375% Senior Notes at maturity.

5.   INCOME TAXES

The components of our income tax provision were as follows:

(millions)	2011		2010		2009
Current tax provision	$	440.2	$	433.9	$	491.0
Deferred tax expense		31.3		63.0		8.4
Total income tax provision	$	471.5	$	496.9	$	499.4

The provision for income taxes in the accompanying consolidated statements of comprehensive income differed from the statutory rate as follows:

($ in millions)	2011					2010					2009
Income before income taxes	$	1,487.0				$	1,565.2				$	1,556.9
Tax at statutory rate	$	520.5		35	%	$	547.8		35	%	$	544.9		35	%
Tax effect of:
Exempt interest income		(17.5	)	(1	)		(19.4	)	(1	)		(26.7	)	(2	)
Dividends received deduction		(18.2	)	(1	)		(17.2	)	(1	)		(17.9	)	(1	)
Tax credits		(9.1	)	(1	)		0		0			0		0
Tax-deductible dividends		(3.8	)	0			(13.0	)	(1	)		0		0
Other items, net		(.4	)	0			(1.3	)	0			(.9	)	0
Total income tax provision	$	471.5		32	%	$	496.9		32	%	$	499.4		32	%

App.-A-26

Deferred income taxes reflect the effect for financial statement reporting purposes of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. At December 31, 2011 and 2010, the components of the net deferred tax asset were as follows:

(millions)	2011			2010
Deferred tax assets:
Unearned premiums reserve	$	319.1		$	302.3
Investment basis differences		246.1			286.3
Non-deductible accruals		172.1			158.9
Loss and loss adjustment expense reserves		113.6			120.4
Other		5.2			5.0
Deferred tax liabilities:
Net unrealized gains on securities		(367.7	)		(413.2	)
Hedges on forecasted transactions		(4.3	)		(7.9	)
Deferred acquisition costs		(151.8	)		(146.0	)
Property and equipment		(109.9	)		(105.4	)
Prepaid expenses		(16.1	)		(12.6	)
Deferred gain on extinguishment of debt		(5.8	)		(5.8	)
Other		(4.5	)		(3.8	)
Net deferred tax asset		196.0			178.2
Net income taxes recoverable (payable)		12.0			10.8
Income taxes	$	208.0		$	189.0

Although realization of the deferred tax asset is not assured, management believes that it is more likely than not that the deferred tax asset will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes and, therefore, no valuation allowance was needed at December 31, 2011.

We have been a participant in the Compliance Assurance Program (CAP) since 2007. Under CAP, the Internal Revenue Service (IRS) begins its examination process for the tax year before the tax return is filed, by examining significant transactions and events as they occur. The goal of the CAP program is to expedite the exam process and to reduce the level of uncertainty regarding a taxpayer’s tax filing positions.

All federal income tax years prior to 2007 are closed. The IRS exams for 2007-2010 have been completed. We consider 2007 to be effectively settled. For the 2008, 2009, and 2010 tax years, we have received partial acceptance letters. We agreed to extend the statute of limitations for the 2007 and 2008 tax years to September 30, 2012, at the request of IRS Appeals.

One issue remains open for the 2008, 2009, and 2010 tax years relating to partial worthlessness deductions on certain debt instruments; we have reached settlements with IRS Appeals on this issue for 2008 and 2009, but they are pending review by the Congressional Joint Committee on Taxation. For the 2010 tax year, there is one additional unresolved issue that relates to our 2010 debt Tender Offer (see Note 4 – Debt for further discussion) and the appropriate timing of when to recognize the tax on the gain that we recorded in net income that related to the previously unrealized gain on forecasted transactions. We expect all open issues to be resolved by the end of 2012 and believe that none of these issues will have a material effect on our financial condition, results of operations, or cash flows. In addition to these unresolved issues, we filed refund claims for the 2007-2009 tax years relating to the research and experimentation tax credit; these claims have been accepted by the IRS, but, as of December 31, 2011, were pending review by the Congressional Joint Committee on Taxation.

We recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. We have not recorded any unrecognized tax benefits, or any related interest and penalties, as of December 31, 2011 and 2010. For the years ended December 31, 2011, 2010, and 2009, only the 2009 tax provision includes an interest benefit (net of tax) of $0.3 million related to the settlement of the 2004-2007 IRS exams.

App.-A-27

6.  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

Activity in the loss and loss adjustment expense reserves is summarized as follows:

(millions)	2011			2010			2009
Balance at January 1	$	7,071.0		$	6,653.0		$	6,177.4
Less reinsurance recoverables on unpaid losses		704.1			529.4			244.5
Net balance at January 1		6,366.9			6,123.6			5,932.9
Incurred related to:
Current year		10,876.8			10,451.7			10,040.9
Prior years		(242.0	)		(320.4	)		(136.0	)
Total incurred		10,634.8			10,131.3			9,904.9
Paid related to:
Current year		7,289.3			6,841.0			6,542.2
Prior years		3,252.3			3,047.0			3,172.0
Total paid		10,541.6			9,888.0			9,714.2
Net balance at December 31		6,460.1			6,366.9			6,123.6
Plus reinsurance recoverables on unpaid losses		785.7			704.1			529.4
Balance at December 31	$	7,245.8		$	7,071.0		$	6,653.0

We experienced favorable reserve development in each of the last three years, which is reflected as “Incurred related to prior years” in the table above.

2011

• About half of the favorable reserve development was attributable to accident years 2008 and prior, while the balance was primarily due to claims from accident year 2010.

• Approximately 70% of the favorable reserve development was attributable to our Personal Lines business, with our Agency and Direct channels contributing 25% and 75%, respectively; the balance was primarily in our Commercial Auto business.

2010

• Approximately 70% of the favorable reserve development was attributable to accident year 2009, while the balance was mostly due to claims from accident years 2007 and 2006.

• About 70% of the favorable reserve development was in our Personal Lines business, with our Agency and Direct channels contributing almost equal amounts; the balance was in our Commercial Auto business.

2009

• About 60% of the favorable reserve development was due to favorable development for accident years 2006 and prior, while the balance was mostly due to claims from accident year 2008.

• Approximately 55% of the favorable reserve development was attributable to our Personal Lines business, with our Agency and Direct channels contributing 25% and 75%, respectively; the balance was primarily in our Commercial Auto business.

The favorable reserve development reflected the settlement of larger losses for amounts less than we originally reserved in our Personal Lines business (primarily in our personal auto product) for 2011 and 2010, and in our Commercial Auto business for each of the last three years. During the last three years, we also experienced lower than expected defense and cost containment costs, reflecting a combination of fewer claims being litigated, as well as the fact that a greater percentage of these cases are now being handled by our in-house counsel, which is a cost-effective alternative to using external law firms. In addition, for 2010, our incurred but not recorded (IBNR) reserves developed favorably due to lower severity and frequency of late emerging claims. However, in 2011, the number of late emerging claims increased over 2010 and was greater than anticipated by our carried IBNR, thus we recognized unfavorable development on our total IBNR reserves.

Because we are primarily an insurer of motor vehicles, we have limited exposure to environmental, asbestos, and general liability claims. We have established reserves for such exposures, in amounts that we believe to be adequate based on information currently known. These claims are not expected to have a material effect on our liquidity, financial condition, cash flows, or results of operations.

App.-A-28

We write personal and commercial auto insurance throughout the United States and could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, we believe that, based on historical experience, such an event would not be so material as to disrupt the overall normal operations of Progressive. We are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

7.  REINSURANCE

The effect of reinsurance on premiums written and earned for the years ended December 31, was as follows:

	2011						2010						2009
(millions)	Written			Earned			Written			Earned			Written			Earned
Direct premiums	$	15,333.1		$	15,107.5		$	14,700.0		$	14,519.2		$	14,196.3		$	14,199.4
Ceded		(186.5	)		(204.7	)		(223.2	)		(204.4	)		(193.4	)		(186.6	)
Net premiums	$	15,146.6		$	14,902.8		$	14,476.8		$	14,314.8		$	14,002.9		$	14,012.8

About 95% of our ceded premiums are ceded to state-provided reinsurance facilities, including the Michigan Catastrophic Claims Association (“MCCA”) and the North Carolina Reinsurance Facility (“NCRF”), and state-mandated involuntary Commercial Auto Insurance Procedures/Plans (“CAIP”) (collectively referred to as “State Plans”); MCCA and NCRF each comprise about 40% of the ceded premiums. The remaining 5% represents premiums ceded related to our non-auto programs.

Losses and loss adjustment expenses (LAE) were net of reinsurance ceded of $219.7 million in 2011, $312.7 million in 2010, and $417.6 million in 2009. During 2009, we changed our loss reserving process regarding lifetime estimates for medical benefits related to personal injury protection claims ceded to the MCCA, which increased both the amount of loss reserves and the corresponding reinsurance recoverables on unpaid losses and, therefore, had no impact on our results of operations. During 2010, further reviews of the MCCA program claim files resulted in additional ceded reserves to reflect lifetime estimates, as well as an increase in claims volume.

Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:

	Prepaid Reinsurance Premiums										Reinsurance Recoverables
	2011					2010					2011					2010
(millions)	$		%			$		%			$		%			$		%
MCCA	$	21.4		31	%	$	20.0		23	%	$	650.4		80	%	$	578.7		78	%
NCRF		19.0		27			20.7		23			51.4		6			45.3		6
CAIP		12.7		18			11.9		14			58.4		7			65.9		9
State Plans		53.1		76			52.6		60			760.2		93			689.9		93
Non-auto		16.7		24			35.5		40			57.8		7			51.6		7
Total	$	69.8		100	%	$	88.1		100	%	$	818.0		100	%	$	741.5		100	%

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to Progressive. Since the majority of our reinsurance is through State Plans, our exposure to losses from their failure is minimal, since the plans are funded by mechanisms supported by the insurance companies in the state. We evaluate the financial condition of our other reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies. The majority of the reinsurance on our non-auto programs relates to our professional liability insurance business, which was sold during 2010 and is currently in run-off.

8.  STATUTORY FINANCIAL INFORMATION

Consolidated statutory surplus was $5,269.2 million and $5,073.0 million at December 31, 2011 and 2010, respectively. Statutory net income was $1,001.7 million, $1,049.1 million, and $1,300.8 million for the years ended December 31, 2011, 2010, and 2009, respectively.

At December 31, 2011, $472.6 million of consolidated statutory surplus represented net admitted assets of our insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of

App.-A-29

domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum statutory surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the companies are licensed.

During 2011, the insurance subsidiaries paid aggregate cash dividends of $874.9 million to the parent company. Based on the dividend laws currently in effect, the insurance subsidiaries could pay aggregate dividends of $1,195.8 million in 2012 without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of previous dividends paid by the applicable subsidiary.

9.  EMPLOYEE BENEFIT PLANS

Retirement Plans  Progressive has a defined contribution pension plan (“401(k) Plan”) that covers all United States employees who are 18 years of age or older and have been employed with the company for at least 30 days. Under this plan, Progressive matches up to a maximum of 6% of an employee’s eligible compensation contributed to the plan. Employee and company matching contributions are invested, at the direction of the employee, in a number of investment options available under the plan, including various mutual funds and a Progressive common stock fund. As of December 3, 2010, the Progressive common stock fund was converted to an employee stock ownership program (“ESOP”) within the 401(k) Plan. At December 31, 2011, the ESOP held 26.9 million of our common shares, all of which are included in shares outstanding. Dividends on these shares are reinvested in common shares or paid out in cash at the election of the participant and the related tax benefit is recorded as part of our tax provision.

Matching contributions made by the company for the 401(k) Plan were $64.1 million, $61.3 million, and $60.7 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Postemployment Benefits  Progressive provides various postemployment benefits to former or inactive employees who meet eligibility requirements, and to their beneficiaries and covered dependents. Postemployment benefits include salary continuation and disability-related benefits, including workers’ compensation and, if elected, continuation of health-care benefits for specified limited periods. The liability for these benefits was $20.8 million at both December 31, 2011 and 2010.

Postretirement Benefits  We provide postretirement health and life insurance benefits to all employees who met requirements as to age and length of service at December 31, 1988. There are approximately 130 people who are eligible for these postretirement benefits. Our funding policy for these benefits is to contribute annually, to a 501(c)(9) trust, the maximum amount that can be deducted for federal income tax purposes.

Incentive Compensation Plans – Employees  Our incentive compensation includes both non-equity incentive plans (cash) and equity incentive plans. Cash incentive compensation includes a cash bonus program for a limited number of senior executives and our Gainsharing program for other employees; the bases of these programs are similar in nature. Equity incentive compensation plans provide for the granting of restricted stock awards and restricted stock unit awards (collectively, “restricted equity awards”) to key members of management. Prior to 2003, we granted non-qualified stock options (NQSOs) as equity-based incentive compensation (see below). The amounts charged to income for the incentive compensation plans for the years ended December 31, were:

	2011				2010				2009
(millions)	Pretax		After Tax		Pretax		After Tax		Pretax		After Tax
Cash	$	196.1	$	127.5	$	257.3	$	167.2	$	120.4	$	78.3
Equity		50.5		32.8		45.9		29.8		40.3		26.2

Our 2003 Incentive Plan, which provides for the granting of equity-based awards to key members of management, has 18.7 million shares currently authorized, net of restricted equity awards cancelled; 2.5 million shares remain available for future awards. In addition, our 2010 Equity Incentive Plan, approved by shareholders in April 2010, had 18.0 million shares authorized as of December 31, 2011, and 15.6 million shares remain available for future awards.

In 2003, we began issuing restricted equity awards in lieu of NQSOs. In March 2010, we began issuing restricted stock units in lieu of restricted stock as the basis for our equity awards. The restricted equity awards were issued as either time-based or performance-based awards. The time-based awards vest in equal installments upon the lapse of specified periods of

App.-A-30

time, typically three, four, and five years. All restricted stock unit conversions at vesting and option exercises are settled in Progressive common shares from existing treasury shares on a one-to-one basis.

The performance-based awards were granted to our Chief Executive Officer as his sole equity award for 2011, and to approximately 40 executives and senior managers in addition to their time-based awards (including the CEO for 2010 and prior), to provide additional incentive to achieve pre-established profitability and growth targets. Vesting for all awards is based upon the achievement of predetermined performance goals within specified time periods. The targets for the performance-based awards, as well as the ultimate number of shares or units that may vest, vary by grant. The performance-based awards granted in 2010 and 2011 may vest from 0% to 200% of the award amount, and have a target value of 100%. Performance awards made in March 2009, may vest from 0% to 100% of the award amount and have a target value of 100%. Performance-based awards made prior to March 2009 would either vest or be forfeited in full (i.e., no partial vesting).

Generally, time-based and performance-based equity awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant. Performance-based equity awards that contain variable vesting criteria are expensed based on management’s expected vesting percentage. These estimates can change periodically throughout the measurement period. However, the restricted stock awards granted in 2004 that were deferred pursuant to our deferred compensation plan are accounted for as liability awards, since distributions from the deferred compensation plan for these awards will be made in cash; accordingly, we record expense on a pro rata basis based on the current market value of our common shares at the end of each reporting period. Only performance-based awards remain unvested from this grant.

A summary of all employee restricted equity award activity during the years ended December 31, follows:

	2011					2010					2009
Restricted Equity Awards	Number of Shares1			Weighted Average Grant Date Fair Value		Number of Shares1			Weighted Average Grant Date Fair Value		Number of Shares1			Weighted Average Grant Date Fair Value
Beginning of year		11,681,826		$	16.55		10,614,016		$	17.04		8,260,696		$	20.39
Add (deduct):
Granted2		2,483,461			20.03		2,841,400			17.50		4,072,152			12.08
Vested		(1,571,237	)		19.88		(1,337,647	)		22.72		(1,239,281	)		23.14
Forfeited		(297,203	)		15.41		(435,943	)		15.58		(479,551	)		16.98
End of year3,4		12,296,847		$	16.86		11,681,826		$	16.55		10,614,016		$	17.04
Available, end of year		18,141,922					20,328,180					4,753,038

¹  Includes both restricted stock units and restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares. All performance-based awards are included at their target amounts.

²  In 2010, we began reinvesting dividend equivalents on restricted stock units. For 2011 and 2010, the number granted includes 55,288 and 134,644 units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

³  At December 31, 2011, the number of shares included 3,667,204 performance-based awards at their target amounts. We expect 3,791,224 performance-based awards to vest, based upon our current estimate of the achievement of pre-determined performance goals.

⁴  At December 31, 2011, the total unrecognized compensation cost related to unvested equity awards was $82.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.44 years.

The aggregate fair value of the restricted equity awards that vested during the years ended December 31, 2011, 2010, and 2009, was $31.3 million, $24.3 million, and $16.8 million, respectively, based on the actual stock price on the vesting date. In 2009, we also had 91,856 deferred liability awards vest with no intrinsic value since, as previously discussed, these awards were expensed based on the current market value at the end of each reporting period.

Prior to 2003, we granted NQSOs. These options became exercisable at various dates not earlier than six months after the date of grant, and remained exercisable for up to ten years from the date of the award. All NQSOs vested on or before

App.-A-31

January 1, 2007 and expired on December 31, 2011. All options granted had an exercise price equal to the market value of the common shares on the date of grant.

Following is a summary of all employee stock option activity during the years ended December 31:

	2011					2010					2009
Options Outstanding	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Beginning of year		1,916,416		$	11.31		5,102,888		$	9.31		8,503,273		$	7.71
Add:
Antidilution adjustment1		NA			NA		97,387			NA		NA			NA
Deduct:
Exercised		(1,913,552	)		11.31		(3,283,859	)		7.87		(3,394,633	)		5.31
Forfeited		(2,864	)		11.28		0			0		(5,752	)		5.69
End of year		0		$	0		1,916,416		$	11.31		5,102,888		$	9.31
Exercisable, end of year		0		$	0		1,916,416		$	11.31		5,102,888		$	9.31

NA = Not Applicable

¹ During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

The total pretax intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009, were $15.2 million, $40.8 million, and $36.1 million, respectively, based on the actual stock price at the time of exercise.

Incentive Compensation Plans – Directors  Our 2003 Directors Equity Incentive Plan, which provides for the granting of equity-based awards, including restricted stock awards, to non-employee directors of Progressive, had 1.4 million shares authorized as of December 31, 2011, net of restricted stock awards cancelled; 0.7 million shares remain available for future restricted stock grants. Our 1998 Directors’ Stock Option Plan has expired; however, stock option awards made under this plan prior to its expiration are still in effect.

In 2003, we began issuing restricted stock awards to non-employee directors as the equity component of their compensation. We plan to continue to grant restricted stock to our non-employee directors and not to change to restricted stock units as we have with our employees. The restricted stock awards are issued as time-based awards. The vesting period (i.e., requisite service period) must be a minimum of six months and one day. The time-based awards granted to date have typically included vesting periods of 11 or 12 months from the date of each grant. To the extent a director is newly appointed during the year, or his or her committee assignments change, the vesting period may be shorter but always greater than six months and one day per the plan’s specifications. The restricted stock awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant.

Restricted stock awards are granted to non-employee directors as their sole compensation for serving as members of the Board of Directors.

App.-A-32

A summary of all directors’ restricted stock activity during the years ended December 31, follows:

	2011					2010					2009
Restricted Stock	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Beginning of year		109,545		$	20.86		118,984		$	15.79		105,420		$	17.96
Add (deduct):
Granted		94,106			21.80		112,670			20.75		129,467			15.78
Vested		(109,545	)		20.86		(122,109	)		15.82		(105,420	)		17.96
Forfeited		0			0		0			0		(10,483	)		15.74
End of year		94,106		$	21.80		109,545		$	20.86		118,984		$	15.79
Available, end of year1		663,095					757,201					869,871

¹ Represents shares available under the 2003 Directors Equity Incentive Plan.

Prior to 2003, we granted nonqualified stock options as the equity component of the directors’ compensation. These options became exercisable at various dates not earlier than six months, and remain exercisable for up to ten years from the date of grant. All options granted had an exercise price equal to the market value of the common shares on the date of grant and, under the then applicable accounting guidance, no compensation expense was recorded. All option exercises are settled in Progressive common shares from existing treasury shares.

A summary of all stock option activity for both current and former directors during the years ended December 31, follows:

	2011					2010					2009
Options Outstanding	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Beginning of year		120,125		$	10.34		312,545		$	8.46		401,357		$	8.60
Add:
Antidilution adjustment1		NA			NA		5,787			NA		NA			NA
Deduct:
Exercised		(83,888	)		9.41		(198,207	)		7.07		(88,812	)		9.10
End of year		36,237		$	12.51		120,125		$	10.34		312,545		$	8.46
Exercisable, end of year2		36,237		$	12.51		120,125		$	10.34		312,545		$	8.46

NA = Not Applicable

¹  During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

² The 1998 Directors’ Stock Option Plan has expired.

The total pretax intrinsic value of options exercised, and the fair value of the restricted stock vested, during the years ended December 31, 2011, 2010, and 2009, was $3.3 million, $5.1 million, and $1.9 million, respectively, based on the actual stock price at time of exercise/vesting.

The following director stock options were outstanding and exercisable as of December 31, 2011:

Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Closing Stock Price
36,237	$	12.51	$	0.3 million		0.3 years	$	19.51

App.-A-33

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the difference between our closing stock price and the exercise price of the options, which is the amount that would have been received by the option holders, before taxes, had all option holders exercised their options as of that date. All of the exercisable options at December 31, 2011, were “in-the-money.”

Deferred Compensation  We maintain The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) that permits eligible executives to defer receipt of some or all of their annual bonuses and all of their annual equity awards. Deferred cash compensation is deemed invested in one or more investment funds, including common shares of Progressive, offered under the Deferral Plan and elected by the participant. All Deferral Plan distributions attributable to deferred cash compensation will be paid in cash.

For all equity awards granted on or after March 17, 2005, and deferred pursuant to the Deferral Plan, the deferred amounts are deemed invested in common shares and are ineligible for transfer to other investment funds in the Deferral Plan; distributions of these deferred awards will be made in common shares. For all restricted stock awards granted prior to that date, the deferred amounts are eligible to be transferred to any of the investment funds in the Deferral Plan; distributions of these deferred awards will be made in cash.

We reserved 3.6 million common shares for issuance under the Deferral Plan. An irrevocable grantor trust has been established to provide a source of funds to assist us in meeting our liabilities under the Deferral Plan.

The Deferral Plan Irrevocable Grantor Trust account held the following assets at December 31:

(millions)	2011		2010
Progressive common shares1	$	35.2	$	31.1
Other investment funds		66.2		67.3
Total	$	101.4	$	98.4

¹ Includes 0.7 million and 0.5 million common shares as of December 31, 2011 and 2010, respectively, to be distributed in common shares.

10.  SEGMENT INFORMATION

We write personal auto and other specialty property-casualty insurance and provide related services throughout the United States. Our Personal Lines segment writes insurance for personal autos and recreational vehicles. The Personal Lines segment is comprised of both the Agency and Direct businesses. The Agency business includes business written by our network of more than 35,000 independent insurance agencies, including brokerages in New York and California, and strategic alliance business relationships (other insurance companies, financial institutions, and national agencies). The Direct business includes business written directly by us online and by phone.

Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses in the business auto, contractor, tow, for-hire specialty, and for-hire transportation markets. This segment is distributed through both the independent agency and direct channels.

Our other indemnity businesses manage our run-off businesses, including the run-off of our professional liability insurance for community banks, which was sold in 2010.

Our service businesses provide insurance-related services, including processing CAIP business and serving as an agent for homeowners, general liability, and workers’ compensation insurance through our programs with unaffiliated insurance companies.

All segment revenues are generated from external customers and we do not have a reliance on any major customer.

We evaluate profitability based on pretax underwriting profit (loss) for the Personal Lines and Commercial Auto segments and for the other indemnity businesses. Pretax underwriting profit (loss) is calculated as net premiums earned less each of (i) losses and loss adjustment expenses, (ii) policy acquisition costs, and (iii) other underwriting expenses. Service business pretax profit (loss) is the difference between service business revenues and service business expenses.

App.-A-34

Expense allocations are based on certain assumptions and estimates primarily related to revenue and volume; stated segment operating results would change if different methods were applied. We do not allocate assets or income taxes to operating segments. In addition, we do not separately identify depreciation and amortization expense by segment, and such allocation would be impractical. Companywide depreciation expense was $88.5 million in 2011, $83.1 million in 2010, and $87.3 million in 2009. The accounting policies of the operating segments are the same as those described in Note 1 – Reporting and Accounting Policies.

Following are the operating results for the years ended December 31:

	2011						2010					2009
(millions)	Revenues			Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)
Personal Lines
Agency	$	7,627.4		$	564.9		$	7,419.7	$	601.0		$	7,414.8	$	579.2
Direct		5,803.7			354.4			5,407.2		291.1			4,951.1		357.9
Total Personal Lines1		13,431.1			919.3			12,826.9		892.1			12,365.9		937.1
Commercial Auto		1,467.1			133.5			1,474.2		185.0			1,623.3		229.8
Other indemnity		4.6			(5.5	)		13.7		6.4			23.6		8.7
Total underwriting operations		14,902.8			1,047.3			14,314.8		1,083.5			14,012.8		1,175.6
Service businesses		22.8			3.4			25.9		4.5			16.7		(2.7	)
Investments2		582.6			569.1			616.2		604.3			534.1		523.0
Net gains (losses) on extinguishment of debt		(.1	)		(.1	)		6.4		6.4			0		0
Interest expense		NA			(132.7	)		NA		(133.5	)		NA		(139.0	)
Consolidated total	$	15,508.1		$	1,487.0		$	14,963.3	$	1,565.2		$	14,563.6	$	1,556.9

¹  Personal auto insurance accounted for 91% of the total Personal Lines segment net premiums earned in 2011, and 90% in both 2010 and 2009; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

² Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

NA = Not Applicable

Progressive’s management uses underwriting margin and combined ratio as primary measures of underwriting profitability. The underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from insurance operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for our underwriting operations for the years ended December 31:

	2011					2010					2009
	Underwriting Margin			Combined Ratio		Underwriting Margin			Combined Ratio		Underwriting Margin			Combined Ratio
Personal Lines
Agency		7.4	%		92.6		8.1	%		91.9		7.8	%		92.2
Direct		6.1			93.9		5.4			94.6		7.2			92.8
Total Personal Lines		6.8			93.2		7.0			93.0		7.6			92.4
Commercial Auto		9.1			90.9		12.5			87.5		14.2			85.8
Other indemnity1		NM			NM		NM			NM		NM			NM
Total underwriting operations		7.0			93.0		7.6			92.4		8.4			91.6

¹ Underwriting margins/combined ratios are not meaningful (NM) for our other indemnity businesses due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

App.-A-35

11.  OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the years ended December 31, were as follows:

	2011									2010									2009
(millions)	Pretax			Tax (Provision) Benefit			After Tax			Pretax			Tax (Provision) Benefit			After Tax			Pretax			Tax (Provision) Benefit			After Tax
Net unrealized gains (losses) on securities:
Arising during period:
Fixed maturities	$	132.9		$	(46.5	)	$	86.4		$	302.9		$	(106.0	)	$	196.9		$	519.4		$	(181.8	)	$	337.6
Equity securities		(57.5	)		20.1			(37.4	)		241.7			(84.6	)		157.1			671.7			(235.1	)		436.6
Net non-credit related OTTI losses, adjusted for valuation changes		(5.5	)		1.9			(3.6	)		21.4			(7.5	)		13.9			(24.1	)		8.4			(15.7	)
Reclassification adjustment for (gains) losses realized in net income:
Fixed maturities		(47.4	)		16.6			(30.8	)		46.3			(16.2	)		30.1			(8.5	)		3.0			(5.5	)
Equity securities		(152.5	)		53.4			(99.1	)		(93.7	)		32.8			(60.9	)		(86.7	)		30.3			(56.4	)
Change in net unrealized gains (losses) on securities1		(130.0	)		45.5			(84.5	)		518.6			(181.5	)		337.1			1,071.8			(375.2	)		696.6
Net unrealized gains (losses) on forecasted transactions:2
Arising during period		(5.1	)		1.8			(3.3	)		0			0			0			0			0			0
Reclassification adjustment for amounts realized in net income3		(5.3	)		1.8			(3.5	)		(10.6	)		3.7			(6.9	)		(5.1	)		1.8			(3.3	)
Change in net unrealized gains on forecasted transactions		(10.4	)		3.6			(6.8	)		(10.6	)		3.7			(6.9	)		(5.1	)		1.8			(3.3	)
Foreign currency translation adjustment		.2			(.1	)		.1			1.2			(.9	)		.3			1.4			0			1.4
Other comprehensive income (loss)	$	(140.2	)	$	49.0		$	(91.2	)	$	509.2		$	(178.7	)	$	330.5		$	1,068.1		$	(373.4	)	$	694.7

¹  December 31, 2009 excludes the $189.6 million ($291.8 million pretax) cumulative effect of change in accounting principle we recorded in June 2009 in accordance with the new accounting guidance for other-than-temporary impairments we adopted during the second quarter 2009.

²  Entered into for the purpose of managing interest rate risk associated with our debt issuances, and managing foreign currency risk associated with our forecasted foreign currency transaction, which was closed in 2009.

³  We expect to reclassify $2.3 million (pretax) into income during the next 12 months. During 2011 and 2010, we reclassified $0.3 million and $5.8 million, respectively, on a pretax basis, from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of the 6.70% Debentures repurchased during the periods (see Note 4 – Debt for further discussion).

12.  LITIGATION

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies in the ordinary course of our business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, The Progressive Corporation and/or its insurance subsidiaries are named as defendants in a number of class action or individual lawsuits arising out of the operations of the insurance subsidiaries. Other insurance companies face many of these same issues. The lawsuits discussed below are in various stages of development. We plan to contest these suits vigorously, but may pursue settlement negotiations in some cases, if appropriate. The outcomes of these cases are uncertain at this time.

We establish accruals for lawsuits when it is probable that a loss has been incurred and we can reasonably estimate its potential exposure, which may include a range of loss (referred to as a loss that is both “probable and estimable” in the discussion below). As to lawsuits in which the loss is not considered both probable and estimable, we have not established a liability at this time. It is generally not possible to determine the exposure associated with our lawsuits for a number of reasons, including, without limitation, one or more of the following: liability appears to be remote; putative class action lawsuits generally pose immaterial exposure until a class is actually certified, which, historically, has not been granted by

App.-A-36

the courts in the vast majority of our cases in which certification has been sought; class definitions are often indefinite and preclude detailed exposure analysis; and, complaints rarely state an amount sought as relief, and when such amount is stated, it is often a function of pleading requirements and may be unrelated to the potential exposure.

The following is a discussion of potentially significant pending class action cases at December 31, 2011, and certain cases resolved during the three-year period then ended. For cases that have settled, but for which settlement is not complete, an accrual has been established at our best estimate of the exposure. Settlements that are complete are fully reflected in our financial statements. The amounts accrued or paid for these settlements were not material to our consolidated financial condition, cash flows, or results of operations.

As to the pending cases, although their outcomes are uncertain, in each case we do not believe that the outcome will have a material impact on our consolidated financial condition, cash flows, or results of operations. In addition, we do not consider the losses from the pending cases to be both probable and estimable, and we are unable to estimate a range of loss, if any, at this time, due to the factors discussed above. In the event that any one or more of these cases results in a substantial judgment against, or settlement by, Progressive, the resulting liability could have a material effect on our consolidated financial condition, cash flows, and/or results of operations.

Pending cases at December 31, 2011, include:

• One certified class action lawsuit seeking interest on personal injury protection (PIP) payments that allegedly were late.

• Two putative class action lawsuits alleging that we violate the “make-whole” and “common-fund” doctrines. Specifically, it is alleged that we may obtain reimbursement of medical payments made on behalf of an insured only when the insured has been made whole by the person who caused the insured’s injuries and that we further must deduct from the reimbursement amount a proportionate share of the insured’s legal fees for pursuing the person who caused the insured’s injuries.

• Two putative class action lawsuits challenging the labor rates our insurance subsidiaries pay to auto body repair shops.

• Four putative class action lawsuits challenging Progressive’s insurance subsidiaries’ practice in Florida of adjusting PIP and first-party medical payments.

• One certified and one putative class action lawsuit, each that challenges our insurance subsidiaries’ use of certain automated database vendors or software to assist in the adjustment of bodily injury claims where the plaintiffs allege that these databases or software systematically undervalue the claims.

• One putative class action lawsuit challenging our policy form with regard to rejecting uninsured motorist coverage.

• One putative class action lawsuit challenging Progressive’s evaluation of physical damage claims regarding diminution of value.

• Two putative class action lawsuits challenging the manner in which Progressive grants a discount for anti-theft devices.

• One putative class action lawsuit alleging that Progressive charged insureds for illusory uninsured motorist/underinsured motorist coverage on multiple vehicle policies.

• One putative class action lawsuit alleging that Progressive improperly applies a preferred provider discount to medical payment claims.

• One putative class action lawsuit alleging that Progressive undervalues total loss claims through the use of certain valuation tools.

• One putative class action lawsuit challenging the manner in which Progressive charges premium and assesses total loss claims for commercial vehicle stated amount policies.

Cases settled during 2011, include:

• One putative class action lawsuit that challenged the labor rates our insurance subsidiaries pay to auto body repair shops; settlement was completed in 2011.

• One class action lawsuit certified for settlement that alleged Progressive charged insureds for illusory uninsured motorist/underinsured motorist coverage on multiple vehicle policies; an accrual has been established.

App.-A-37

Cases settled during 2010, include:

• One putative class action lawsuit challenging our notice of cancellation form for nonpayment of premium and subsequent denial of automobile coverage; an accrual has been established.

Cases settled during 2009, include:

• One certified class action lawsuit that challenged our insurance subsidiaries’ use of certain automated database vendors or software to assist in the adjustment of bodily injury claims; settlement was completed in 2010.

• Eight class action lawsuits, which were consolidated in one settlement agreement, and six individual lawsuits, which challenged certain aspects of our insurance subsidiaries use of credit information and compliance with notice requirements under the federal Fair Credit Reporting Act; payments were made during 2009 and the administration of this class action settlement was completed in 2010.

• One certified nationwide class action lawsuit challenging our insurance subsidiaries’ practice of taking betterment on boat repairs; settlement was completed in 2009.

• One putative class action lawsuit alleging that Progressive’s insurance subsidiaries used non-conforming underinsured motorist rejection forms; settlement was completed in 2009.

• One certified class action lawsuit alleging that Progressive’s insurance subsidiaries failed to offer certain enhanced PIP benefits; an accrual has been established.

• Three state class action lawsuits related to over-charging municipal tax to policyholders; an accrual has been established.

13.  COMMITMENTS AND CONTINGENCIES

We have certain noncancelable operating lease commitments with lease terms greater than one year for property and computer equipment. The minimum commitments under these agreements at December 31, 2011, were as follows:

(millions) Year	Commitments
2012	$	53.0
2013		42.1
2014		26.0
2015		15.3
2016		7.8
Thereafter		13.8
Total	$	158.0

Some of the leases have options to renew at the end of the lease periods. The expense we incurred for the leases disclosed above, as well as other operating leases that may be cancelable or have terms less than one year, was:

(millions) Year	Expense
2011	$	80.8
2010		96.7
2009		109.0

We also have certain noncancelable purchase obligations. The minimum commitment under these agreements at December 31, 2011, was $174.3 million.

As of December 31, 2011, we had no open investment funding commitments; we had no uncollateralized lines or letters of credit as of December 31, 2011 or 2010.

App.-A-38

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of The Progressive Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of The Progressive Corporation and its subsidiaries at December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio

February 28, 2012

App.-A-39

Management’s Report on Internal Control over Financial Reporting

Progressive’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control structure was designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in Internal Control – Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2011.

During the fourth quarter 2011, there were no changes in our internal control over financial reporting identified in the internal control review process that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PricewaterhouseCoopers LLP, an independent registered public accounting firm that audited the financial statements included in this Annual Report, has audited, and issued an attestation report on the effectiveness of, our internal control over financial reporting as of December 31, 2011; such report appears herein.

CEO and CFO Certifications

Glenn M. Renwick, President and Chief Executive Officer of The Progressive Corporation, and Brian C. Domeck, Vice President and Chief Financial Officer of The Progressive Corporation, have issued the certifications required by Sections 302 and 906 of The Sarbanes-Oxley Act of 2002 and applicable SEC regulations with respect to Progressive’s 2011 Annual Report on Form 10-K, including the financial statements provided in this Report. Among other matters required to be included in those certifications, Mr. Renwick and Mr. Domeck have each certified that, to the best of his knowledge, the financial statements, and other financial information included in the Annual Report on Form 10-K, fairly present in all material respects the financial condition, results of operations, and cash flows of Progressive as of, and for, the periods presented. See Exhibits 31 and 32 to Progressive’s Annual Report on Form 10-K for the complete Section 302 and 906 certifications, respectively.

App.-A-40

The Progressive Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our consolidated financial statements and the related notes, together with the supplemental information, should be read in conjunction with the following discussion and analysis of our consolidated financial condition and results of operations.

I.   OVERVIEW

The Progressive Corporation is a holding company that does not have any revenue producing operations, physical property, or employees of its own. The Progressive Group of Insurance Companies, together with our holding company and non-insurance subsidiaries, comprise what we refer to as Progressive. Since 1937, Progressive has been offering insurance to consumers and is estimated to be the country’s fourth largest private passenger auto insurer based on net premiums written during 2011. Our insurance companies offer personal and commercial automobile insurance and other specialty property-casualty insurance and related services throughout the United States, as well as personal auto insurance on an Internet-only basis in Australia. Our Personal Lines segment writes insurance for private passenger automobiles and recreational vehicles through more than 35,000 independent insurance agencies and directly to consumers online and over the phone. Our Commercial Auto segment offers insurance for cars and trucks owned by small businesses through both the independent agency and direct channels; this business is estimated to be in the top four in its industry. Our underwriting operations, combined with our service and investment operations, make up the consolidated group.

The Progressive Corporation receives cash through subsidiary dividends, security sales, borrowings, and other transactions, and uses these funds to contribute to its subsidiaries (e.g., to support growth), to make payments to shareholders and debt holders (e.g., dividends and interest, respectively), to repurchase its debt and common shares, and for other business purposes that might arise. The holding company’s funds are generally held in a non-insurance subsidiary, which at year-end 2011, had $2.0 billion of marketable securities available for use by the holding company. In 2011, The Progressive Corporation received $0.9 billion from its subsidiaries, net of capital contributions. In addition, during the third quarter 2011, we saw an opportunity to enhance the holding company’s capital position and, in light of low yields, issued $500 million of 3.75% Senior Notes due 2021.

With our strong capital position and consistent with our long-standing policy of returning underleveraged capital to our investors, we took several actions during 2011, returning $1.3 billion to our shareholders and investors. We accelerated our common stock repurchases in light of the existing market conditions and our view of the value of our stock. During the year, we repurchased a total of 51.3 million of our common shares at a total cost of $997.8 million. We also saw an opportunity to repurchase some of our outstanding debt in the open market. During the year, we retired $15.0 million of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 at or near par. Lastly, in December 2011, we declared our annual variable dividend, based on 2011 underwriting results. Using our variable dividend formula, which included a Gainshare factor of 1.10, after-tax underwriting income of $680.7 million, and the 33 1/3% target factor established by the Board of Directors, the Board declared a dividend of $.4072 per share, or $249.4 million in the aggregate; the dividend was paid to shareholders in February 2012.

We ended 2011 with $8.2 billion of total capital (debt and equity), $0.2 billion more than at the start of the year, inclusive of the actions discussed above. We continue to manage our investing and financing activities in order to maintain sufficient capital to support all the insurance we can profitably underwrite and service, while returning underleveraged capital to shareholders.

During 2011, we hit a milestone by generating over $15 billion of net premiums written, an increase of 5% from last year. Policies in force also increased 5% on a companywide basis, which represented almost 580,000 new policies, or about a million new customers. The national rollout of Snapshot^®, our usage-based insurance product, along with other product initiatives discussed below, helped contribute to this increase. Our Commercial Auto business, which has been affected by the downturn of the economy over the last few years, saw premiums increase during 2011, reflecting both price increases and an increase in new applications in the second half of the year. Although new policies are necessary to maintain a growing book of business, we continue to focus on the retention of current customers as a critical component of our ongoing growth. During the year, policy life expectancy, our measure for retention, increased about 2% in personal auto and remained flat in Commercial Auto.

We reported net income of $1.0 billion, or $1.59 per share, for 2011, driven by strong underwriting profitability and modest investment returns. Our insurance operations produced a 7.0% underwriting profit margin, despite 2011 having been an active year for catastrophes. Our investment portfolio generated investment income of $480.0 million, plus net realized gains of $102.6 million.

App.-A-41

A. Operations

In 2011, our insurance subsidiaries generated underwriting profitability of 7.0%, which exceeded our targeted profitability objective of 4%. Both our Personal Lines and Commercial Auto businesses contributed to our strong profitability. In our Personal Lines business, 39 states plus the District of Columbia met or exceeded their profitability target, including 8 out of our top 10 volume states; only three states generated an underwriting loss for 2011. In our Commercial Auto business, 35 states generated an underwriting profit during the year.

During the year, we realized $242.0 million, or 1.6 combined ratio points, of favorable prior accident year reserve development. About 70% of the favorable development was in our Personal Lines business, with the remainder in our Commercial Auto business. We also recognized about 1.4 points of catastrophe losses, primarily relating to hurricane Irene and the active spring storm season. For the year, our overall incurred auto accident frequency decreased about 2% and severity was up about 0.5%, compared to the prior year. The decline in auto frequency was experienced in each of our insurance coverages, while the slight increase in total severity was primarily due to higher severity in our bodily injury and property coverages.

On a year-over-year basis, net premiums written and earned increased 5% and 4%, respectively. Changes in net premiums written are a function of new business applications (i.e., issued policies), premium per policy, and retention.

During 2011, new auto applications decreased 2% on a year-over-year basis, reflecting a 2% decrease in both our Agency and Direct businesses. New auto applications increased during the fourth quarter, following three quarters of year-over-year declines. On a state-by-state basis, we experienced year-over-year growth in 13 states in our Agency auto business and in 17 states in our Direct auto business. Florida was a significant contributor to new application growth in both channels, reflecting our efforts to make our rates more competitive. Our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) generated an increase in new applications of about 5%. New applications in our Commercial Auto business declined about 2% for the year, despite new applications beginning to increase mid-year.

Our efforts remain focused on several initiatives we have put in place that are designed to help stimulate growth and provide consumers with distinctive new insurance options. These initiatives include:

• the national advertising and continued expansion of Snapshot^®, our usage-based insurance product

• new product models in both our Personal Lines and Commercial Auto businesses, which are designed to improve competitiveness with advanced segmentation and product features

• efforts to further penetrate customer households through cross-selling products, and

• additional functionality in the mobile device space, including:

• a feature that enables customers in certain states to purchase insurance directly from their mobile devices after receiving a quote

• the nationwide rollout of a mobile quoting application for our Commercial Auto business, and

• a prototype application with the ability to use the camera in a mobile device to send a photo of a driver’s license and insurance card, along with some additional information, to get an instantaneous quote.

In addition, Name Your Price^® remains a key initiative. This program is available countrywide and provides our Direct auto customers a tool that allows them to name or select the price they would like to pay for auto insurance and match it to a range of coverage combinations.

During 2011, on a year-over-year basis, our written premium per policy for our Agency auto business remained flat, while our Direct auto business was 1% lower than the prior year. Commercial Auto experienced a 5% increase in written premium per policy, compared to decreases the last few years, primarily reflecting rate increases taken during the year and shifts in our mix of business to higher average premium policies. The special lines products written premium per policy declined 4% year-over-year, driven largely by older average model years of motorcycles insured.

Companywide policies in force increased 5% on a year-over-year basis since December 31, 2010. This increase reflects about 581,000 additional Personal Lines policies, partially offset by a decrease of about 1,000 Commercial Auto policies. The biggest contributor to the Personal Lines growth was our Direct auto business where policies in force grew 6%, or 234,000 policies. In our Agency auto business, policies in force reached an all-time high during the year and ended 2011 with 4.6 million policies, an increase of 168,000 policies, or 4%; our previous high-water mark was in April 2006. Our special lines products increased about 179,000 policies, or 5%.

App.-A-42

To further grow policies in force, it is critical that we retain our customers for longer periods, which is why increasing retention remains one of our most important priorities and why we have stepped up our efforts to increase the number of multi-product households. In 2011, we continued to increase customer retention, as measured by policy life expectancy. Total personal auto policy life expectancy increased 2% on a year-over-year basis, with our Agency auto business increasing 6%, while our Direct auto business decreased 3%. Our policy life expectancy is now similar in both channels. Actions taken during 2011, including our efforts to stabilize rates at renewal and the greater penetration of the multi-product offerings, contributed to the policy life expectancy lengthening and allowed our Agency business to reach another all-time high in retention. The policy life expectancy for our Commercial Auto business remained relatively unchanged, while we saw a slight decrease for our special lines products from the prior year. We realize the importance that retention has on our ability to continue to grow profitably and will maintain our focus on providing customers with other insurance-related products and services they may need over time in our ongoing efforts to increase retention.

B. Investments and Capital Management

The fair value of our investment portfolio was $16.0 billion at December 31, 2011. During 2011, we continued diligently to manage our credit exposure and added to our common equity position. Our asset allocation strategy is to maintain 0-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in Group II securities. We define Group I securities to include:

• common equities

• nonredeemable preferred stocks

• redeemable preferred stocks, except for 50% of investment-grade redeemable preferred stocks with cumulative dividends, and

• all other non-investment-grade fixed-maturity securities.

Group II securities include:

• short-term securities

• all other fixed-maturity securities.

At December 31, 2011, 21% of our portfolio was allocated to Group I and 79% to Group II securities. We use the credit ratings from models provided by the National Association of Insurance Commissioners (NAIC) for classifying our residential and commercial mortgage-backed securities, while all other debt securities derive their credit ratings from external vendors in determining whether securities should be classified as Group I or II.

At December 31, 2011, we held $10.0 million in Australian Treasury Bills to support our Australian operations; we held no other foreign sovereign debt. At year-end 2011, we held $622.7 million of U.S. dollar-denominated corporate bonds issued by companies that are domiciled, or whose parent companies are domiciled, in foreign countries. Of these securities, $385.9 million are from U.K. and other European companies in the consumer, industrial, energy, and communications industries. In addition, at year-end 2011, we held $6.0 million of foreign-domiciled other asset-backed securities and $131.9 million of foreign-domiciled preferred stocks (redeemable and nonredeemable). Included in the preferred stocks were $70.3 million issued by U.K.-based financial institutions and $26.5 million issued by a European bank. We also held $0.7 million ($25 million notional value) of credit protection on the one European financial institution at December 31, 2011. In total, these securities represent approximately 5% of our portfolio at year-end 2011.

Our investment portfolio produced a fully taxable equivalent (FTE) total return of 3.2% for 2011. Our common stock and fixed-income portfolios contributed to this positive total return with FTE returns of 2.5% and 3.4%, respectively. We continue to maintain our fixed-income portfolio strategy of investing in high-quality securities and maintaining our duration near the low end of our range. At December 31, 2011, the fixed-income portfolio had a weighted average credit quality of AA-. Our fixed-income portfolio’s duration at December 31, 2011 was 1.9 years, a measure which reflects the portfolio’s exposure to changes in interest rates. We positioned our portfolio duration at the lower end of our duration guidelines with the view that, with interest rates extraordinarily low, the risk of higher rates exceeded the gain potential from a decrease in rates. Our preference is for credit and reinvestment risk over interest rate risk at this time.

App.-A-43

At December 31, 2011, our total capital (debt plus equity) was $8.2 billion, up from $8.0 billion held at December 31, 2010. Our debt-to-total capital ratio was 29.6% at year-end 2011, although this ratio was reduced to 25.9% in January 2012 when our $350 million 6.375% Senior Notes were retired at maturity. We continue to manage our investing and financing activities in order to maintain sufficient capital to support all of the insurance we can profitably underwrite and service.

II.   FINANCIAL CONDITION

A. Holding Company

In 2011, The Progressive Corporation, the holding company, received $0.9 billion of dividends, net of capital contributions, from its subsidiaries. For the three-year period ended December 31, 2011, The Progressive Corporation received $3.2 billion of dividends from its subsidiaries, net of capital contributions. Regulatory restrictions on subsidiary dividends are described in Note 8 – Statutory Financial Information.

Progressive’s debt-to-total capital (debt plus equity) ratios at December 31, 2011, 2010, and 2009 were 29.6%, 24.5%, and 27.5%, respectively. In August 2011, we issued $500 million of our 3.75% Senior Notes due 2021 (the “3.75% Senior Notes”); no debt was issued in 2010 or 2009. During the last three years, we repurchased $237.9 million, in aggregate principal amount, of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “6.70% Debentures”), including $15.0 million in 2011 and $222.9 million pursuant to a Tender Offer in 2010. See Note 4 – Debt and the Liquidity and Capital Resources section below for a further discussion of our debt activity. In January 2012, we retired all $350 million of our 6.375% Senior Notes at maturity.

We repurchased 51.3 million of our common shares in 2011. The total cost to repurchase these shares was $997.8 million, with an average cost of $19.45 per share. After we issued the debt in August 2011, we accelerated our repurchases, reflecting our strong capital position, well-structured portfolio, solid operations, and our view of the value of our stock. During the three-year period ended December 31, 2011, we repurchased 75.7 million of our common shares at a total cost of $1.4 billion (average cost of $18.99 per share).

Progressive maintains a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of the year. The annual variable dividend is based on a target percentage of after-tax underwriting income multiplied by a companywide performance factor (“Gainshare factor”), subject to the limitations discussed below. The target percentage is determined by our Board of Directors on an annual basis and announced to shareholders and the public. The Board determined the target percentage to be 33 1/3% for 2011, 25% for 2010, and 20% for 2009, of annual after-tax underwriting income. For 2012, the Board has maintained the target percentage at 33 1/3% of annual after-tax underwriting income.

The Gainshare factor can range from zero to two and is determined by comparing our operating performance for the year to certain predetermined profitability and growth objectives approved by the Compensation Committee of the Board. This Gainshare factor is also used in the variable cash incentive program currently in place for our employees (referred to as our “Gainsharing program”). Although recalibrated every year, the structure of the Gainsharing program generally remains the same. For 2011, the Gainshare factor was 1.10, compared to 1.50 in 2010 and 0.71 in 2009.

Our annual variable dividend program is subject to certain limitations. If the Gainshare factor is zero or if our after-tax comprehensive income (net income plus the after-tax change in net unrealized gains (losses) on securities, among other factors) is less than after-tax underwriting income, no dividend will be paid. Nevertheless, the declaration and amount of the dividend remains within the Board’s discretion.

Following is a summary of our shareholder dividends that were either declared or paid in the last three years:

(millions, except per share amounts)				Amount
Year	Dividend Type	Declared	Paid	Per Share		Total1
2011	Annual	December 2011	February 2012	$	.4072	$	249.4
2010	Annual	December 2010	February 2011		.3987		263.8
2010	Extraordinary	October 2010	December 2010		1.0000		663.2
2009	Annual	December 2009	February 2010		.1613		108.4
20082	Annual	—	—		—		—

¹Based on shares outstanding as of the record date.

²No annual variable dividend was declared based on 2008 results, reflecting the fact that we had an after-tax comprehensive loss of $614.7 million, despite reporting $477.7 million of after-tax underwriting income for the same period.

App.-A-44

B. Liquidity and Capital Resources

Progressive’s insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance of paying claims. As an auto insurer, our claims liabilities are generally short in duration. Generally, at any point in time, approximately 50% of our outstanding reserves are paid within the following twelve months and less than 15% are still outstanding after three years. See Claims Payment Patterns, a supplemental disclosure provided in this Annual Report, for further discussion of the timing of claims payments.

As of December 31, 2011, our consolidated statutory surplus was $5.3 billion, compared to $5.1 billion at December 31, 2010. Our net premiums written-to-surplus ratio was 2.9 to 1 both at year-end 2011 and 2010, compared to 2.8 at year-end 2009. We also have access to $2.0 billion in a non-insurance subsidiary, portions of which could be contributed to the capital of our insurance subsidiaries to support growth as needed. In addition, our risk-based capital ratios, which are a series of dynamic surplus-related formulas that contain a variety of factors that are applied to financial balances based on the degree of certain risks (e.g., asset, credit, and underwriting), are well in excess of minimum regulatory requirements. Nonetheless, the payment of dividends by our subsidiaries may be subject to certain limitations. See Note 8 – Statutory Financial Information for additional information on subsidiary dividends.

For the three years ended December 31, 2011, operations generated positive cash flows of $4.7 billion, and cash flows are expected to remain positive in both the short-term and reasonably foreseeable future. In 2011, our operating cash flows decreased $181 million, compared to 2010, primarily due to higher advertising expenditures, commissions paid, salaries paid, and timing differences of cash payments.

As of December 31, 2011, 79% of our portfolio was invested in Group II securities, as defined above. In addition, our fixed-income portfolio duration was 1.9 years, with a weighted average credit quality of AA-. At year end, we held $4.5 billion in short-term investments and U.S. Treasury securities. Based on our portfolio allocation and investment strategies, we believe that we have sufficient readily available marketable securities to cover our claims payments without having a negative effect on our cash flows from operations. See Item 1A, “Risk Factors,” in our Form 10-K filed with the SEC for a discussion of certain matters that may affect our portfolio and capital position.

As noted above, during the year we issued $500 million of our 3.75% Senior Notes. We received proceeds of $497 million, after deducting underwriting discounts and commissions, and incurred an additional $1.0 million of expenses related to the issuance. In addition, upon issuance of the 3.75% Senior Notes, we closed a forecasted debt issuance hedge, which was entered into to hedge against a possible rise in interest rates, and recognized a $5.1 million pretax loss as part of accumulated other comprehensive income (loss); the loss will be recognized as an increase to interest expense and amortized over the life of the 3.75% Senior Notes. In addition to this debt issuance, in January 2012, we retired all $350 million of our 6.375% Senior Notes at maturity. Our next scheduled debt maturity will be in October 2013 of $150 million of our 7% Senior Notes.

In September 2011, we entered into an agreement with The Bank of New York Mellon Trust Company, N.A., as trustee, modifying the terms of our 6.70% Debentures. Pursuant to that agreement, we surrendered our right to temporarily defer the payment of interest on the Debentures, which had been an unexercised feature of the 6.70% Debentures since they were issued in 2007. By surrendering that right, we were able to terminate the related obligation to set aside 250 million of our unissued common shares by June 2012; we were required to reserve these shares as a source of potential funding to pay deferred interest in the event we were ever to exercise our right to defer temporarily the payment of interest under the 6.70% Debentures. As a result of this agreement, we surrendered a right that we had no intention to use and preserved flexibility over a significant amount of our unissued shares, which we determined to be in the best interests of the company and its shareholders. These changes were effective immediately upon execution of the agreement.

Based upon our capital planning and forecasting efforts, we believe that we have sufficient capital resources, cash flows from operations, and borrowing capacity to support our current and anticipated business, scheduled principal and interest payments on our debt, and expected capital requirements. The covenants on our existing debt securities do not include any rating or credit triggers that would require an adjustment of the interest rate or an acceleration of principal payments in the event our securities are downgraded by a rating agency.

App.-A-45

We seek to deploy and use capital in a prudent manner and use multiple data sources and modeling tools to estimate the frequency, severity, and correlation of identified exposures, including, but not limited to, catastrophic losses, natural disasters, and other significant business interruptions, to estimate our potential capital needs.

Management views our capital position as consisting of the following three layers, each with a specific size and purpose:

• The first layer of capital, which we refer to as “regulatory capital,” is the amount of capital we need to satisfy state insurance regulatory requirements and support our objective of writing all the business we can write and service, consistent with our underwriting discipline of achieving a 96 combined ratio. This capital is held by our various insurance entities.

• The second layer of capital we call “extreme contingency.” While our regulatory capital is, by definition, a cushion for absorbing financial consequences of adverse events, such as loss reserve development, litigation, weather catastrophes, or investment market corrections, we view that as a base and hold additional capital for even more extreme conditions. The modeling used to quantify capital needs for these conditions is quite extensive, including tens of thousands of simulations, representing our best estimates of such contingencies based on historical experience. This capital is held either at a non-insurance subsidiary of the holding company or in our insurance entities, where it is potentially eligible for a dividend up to the holding company.

• The third layer of capital is capital in excess of the sum of the first two layers and provides maximum flexibility to repurchase stock or other securities, consider acquisitions, and pay dividends to shareholders, among other purposes. This capital is largely held at a non-insurance subsidiary of the holding company.

At all times during the last two years, our total capital exceeded the sum of our regulatory capital layer plus our self-constructed extreme contingency load. At December 31, 2011, we held total capital (debt plus equity) of $8.2 billion at book value, compared to $8.0 billion at book value at December 31, 2010.

The combination of strong operating and modest investment results increased the amount of capital in our third layer to a level that allowed our Board of Directors to take several actions to return underleveraged capital to our investors during the last three years, including:

• Repurchases of our outstanding debt securities. From time to time, we may elect to repurchase our outstanding debt securities in the open market or in privately negotiated transactions, when management believes that such securities are attractively priced and capital is available for such a purpose.

• During 2011, we repurchased $15.0 million in aggregate principal amount of our 6.70% Debentures at or near par in the open market, resulting in a net loss on these debt extinguishments of $0.1 million.

• In June 2010, we commenced an offer to purchase for cash (the “Tender Offer”) up to $350 million in aggregate principal amount of our 6.70% Debentures. The Tender Offer expired in July 2010. We received valid tenders from holders of the 6.70% Debentures in the aggregate principal amount of $222.9 million. All of the tendering holders validly tendered by the early tender date and received consideration of $950 per $1,000 principal amount of the 6.70% Debentures accepted for purchase, which included an early tender payment of $50 per $1,000 principal amount of 6.70% Debentures accepted. The total cost of the Tender Offer, including the related Consent Solicitation and all associated fees, was $214.3 million, resulting in a net gain of $6.4 million on the debt extinguishment. See Note 4 – Debt for additional information, including details of the Consent Solicitation to holders of our 6.25% Senior Notes due 2032, which allowed us to terminate the Replacement Capital Covenant and proceed with the Tender Offer.

App.-A-46

• Repurchases of our common shares. We continued our practice of repurchasing our common shares when we deem it appropriate. During 2011, we repurchased 51.3 million shares at a total cost of $997.8 million. In June 2011, the Board of Directors approved a new authorization to repurchase up to 75 million common shares, to be used in addition to, and after completion of, the remaining repurchases available under the June 2009 authorization; repurchases of the remaining shares under the 2009 authorization were completed during the third quarter 2011. As of December 31, 2011, we had 50.7 million shares remaining under our 2011 authorization. During 2010 and 2009, we repurchased 13.3 million shares and 11.1 million shares, respectively, at a total cost of $258.6 million and $180.6 million, respectively.

• Declaration of dividends. As part of our capital strategy, in December 2011, 2010, and 2009, we declared our annual variable dividends of $.4072 per share, $.3987 per share, and $.1613 per share, respectively. In addition, in October 2010, we declared a $1.00 per share extraordinary dividend, reflecting our additional action to return underleveraged capital to shareholders.

Short-Term Borrowings

During the last three years, we did not engage in short-term borrowings to fund our operations. As discussed above, our insurance operations create liquidity by collecting and investing insurance premiums in advance of paying claims. Information concerning our insurance operations can be found below under Results of Operations – Underwriting, and details about our investment portfolio can be found below under Results of Operations – Investments.

In order to provide liquidity in the event of disruptions in our cash management operations, such as disruptions in the financial markets or related facilities, that could affect our ability to transfer or receive funds, we currently have a 364-Day Secured Liquidity Credit Facility Agreement with PNC Bank, National Association (PNC). Under this agreement, we may borrow up to $125 million, which may be increased to $150 million at our request but subject to PNC’s discretion. Any borrowings under this agreement would be secured by a lien on certain marketable securities held in our investment portfolio. We had no borrowings under this arrangement in 2011 or 2010. See Note 4 – Debt for further discussion of our credit facility.

C. Commitments and Contingencies

Contractual Obligations

A summary of our noncancelable contractual obligations as of December 31, 2011, follows:

	Payments due by period
(millions)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt1	$	2,462.1	$	350.0	$	150.0	$	0	$	1,962.1
Interest payments on debt2		1,371.0		136.3		239.9		229.4		765.4
Operating leases		158.0		53.0		68.1		23.1		13.8
Purchase obligations		174.3		97.7		67.0		9.6		0
Loss and loss adjustment expense reserves		7,245.8		3,721.6		2,550.5		580.1		393.6
Total	$	11,411.2	$	4,358.6	$	3,075.5	$	842.2	$	3,134.9

¹In January 2012, we retired $350 million of our 6.375% Senior Notes at maturity.

²Includes interest on the 6.70% Debentures at the fixed annual rate through, but excluding, June 15, 2017. See Note 4 – Debt for further discussion on the interest rate and maturity dates for these Debentures.

Purchase obligations represent our noncancelable commitments for goods and services (e.g., software licenses and maintenance on information technology equipment). Unlike many other forms of contractual obligations, loss and loss adjustment expense (LAE) reserves do not have definitive due dates and the ultimate payment dates are subject to a number of variables and uncertainties. As a result, the total loss and LAE reserve payments to be made by period, as shown above, are estimates based on our recent payment patterns. To further understand our claims payments, see Claims Payment Patterns, a supplemental disclosure provided in this Annual Report. In addition, we annually publish a comprehensive Report on Loss Reserving Practices, which was most recently filed with the SEC on a Form 8-K on June 30, 2011, that further discusses our claims payment development patterns.

App.-A-47

In 2011, we issued $500 million of 3.75% Senior Notes. We did not enter into any other significant new contractual commitments outside the ordinary course of business during 2011 or 2010.

As discussed in the Liquidity and Capital Resources section above, we believe that we have sufficient borrowing capacity, cash flows, and other capital resources to satisfy these contractual obligations.

Off-Balance-Sheet Arrangements

Our off-balance-sheet leverage includes derivative positions (as disclosed in Note 2 – Investments and the Derivative Instruments section of this Management’s Discussion and Analysis), operating leases, and purchase obligations (disclosed in the table above).

Other

We currently have no significant construction underway.

We maintain insurance on our real property and other physical assets, including coverage for losses due to business interruptions caused by covered property damage. However, the insurance will not compensate us for losses that may occur due to disruptions in service as a result of a computer, data processing, or telecommunications systems failure, cyber attack, or other event that is unrelated to covered property damage, nor will the insurance necessarily compensate us for all losses resulting from covered events. To help maintain functionality and reduce the risk of significant interruptions of our operations, we maintain back-up systems or facilities for certain of our principal systems and services. We still may be exposed, however, should these measures prove to be unsuccessful or inadequate to protect against severe, multiple, or prolonged service interruptions or against interruptions of systems where no back-up currently exists. We have established emergency management teams, which are responsible for responding to business disruptions and other risk events. The teams’ ability to respond successfully may be limited depending on the nature of the event, the completeness and effectiveness of our plans to maintain business continuity upon the occurrence of such an event, and other factors beyond our control.

App.-A-48

III.   RESULTS OF OPERATIONS —UNDERWRITING

A. Growth

(millions)	2011			2010			2009
NET PREMIUMS WRITTEN
Personal Lines
Agency	$	7,705.8		$	7,490.2		$	7,391.2
Direct		5,906.4			5,534.2			5,061.9
Total Personal Lines		13,612.2			13,024.4			12,453.1
Commercial Auto		1,534.3			1,449.5			1,533.9
Other indemnity		.1			2.9			15.9
Total underwriting operations	$	15,146.6		$	14,476.8		$	14,002.9
Growth over prior year		5	%		3	%		3	%
NET PREMIUMS EARNED
Personal Lines
Agency	$	7,627.4		$	7,419.7		$	7,414.8
Direct		5,803.7			5,407.2			4,951.1
Total Personal Lines		13,431.1			12,826.9			12,365.9
Commercial Auto		1,467.1			1,474.2			1,623.3
Other indemnity		4.6			13.7			23.6
Total underwriting operations	$	14,902.8		$	14,314.8		$	14,012.8
Growth over prior year		4	%		2	%		3	%

Net premiums written represent the premiums generated from policies written during the period less any premiums ceded to reinsurers. Net premiums earned, which are a function of the premiums written in the current and prior periods, are earned as revenue over the life of the policy using a daily earnings convention.

We generated an increase in total written and earned premiums during each of the last three years. The increase in premiums reflects our efforts to increase retention, as well as continued work on several initiatives aimed at providing consumers with distinctive new insurance options (discussed below). The Commercial Auto business generated an increase in written premium for 2011, reflecting both rate increases taken during the year and an increase in new applications in the second half of the year, compared to declines in both written and earned premium during 2010 and 2009.

Policies in force, our preferred measure of growth, represents all policies under which coverage was in effect as of the end of the period specified. As of December 31, our policies in force were:

(thousands)	2011			2010			2009
POLICIES IN FORCE
Personal Lines
Agency auto		4,648.5			4,480.1			4,299.2
Direct auto		3,844.5			3,610.4			3,201.1
Total auto		8,493.0			8,090.5			7,500.3
Special lines1		3,790.8			3,612.2			3,440.3
Total Personal Lines		12,283.8			11,702.7			10,940.6
Growth over prior year		5	%		7	%		5	%
POLICIES IN FORCE
Commercial Auto		509.1			510.4			512.8
Growth over prior year		0	%		0	%		(5	)%

¹  Includes insurance for motorcycles, ATVs, RVs, mobile homes, watercraft, snowmobiles, and similar items, as well as a personal umbrella product.

App.-A-49

To analyze growth, we review new policies, rate levels, and the retention characteristics of our books of business. The following table shows our year-over-year changes in new and renewal applications (i.e., issued policies):

	Growth Over Prior Year
	2011			2010			2009
APPLICATIONS
Personal Lines
New		(1	)%		7	%		6	%
Renewal		7	%		5	%		6	%
Commercial Auto
New		(2	)%		(1	)%		(9	)%
Renewal		(1	)%		(4	)%		2	%

Our Personal Lines business had a slight decline in new applications in 2011, compared to last year, in both our Agency and Direct auto businesses. We generated an increase in new applications for both our Agency and Direct auto businesses in the fourth quarter of 2011, primarily due to significant growth in several large states (see further discussion in the Agency and Direct business sections below). Our Commercial Auto business continued to experience a decline in new and renewal business applications, although we are beginning to see some positive signs in this business with new application growth returning in the second half of 2011.

We pursue initiatives aimed at providing consumers with distinctive new auto insurance options. During 2011, we continued the rollout of new personal auto product models, which further refine our segmentation and incorporate the best design elements of the Agency and Direct auto products. We introduced these models to 21 jurisdictions during 2011, bringing the total number of markets to 40 at the end of the year. We plan to extend the rollout to about 5 to 7 additional states in 2012, which will substantially complete the rollout of these products.

During 2011, we launched the national advertising of Snapshot^®, our usage-based insurance product. Snapshot was made available in 12 additional states and the District of Columbia in 2011, bringing the total number of Direct markets to 40. Agency auto customers have access to Snapshot in 33 of those 40 jurisdictions. We plan to expand Snapshot into about 3 to 4 additional states, depending on regulatory approval and business results, during 2012. We currently have four patents, and additional patent applications pending, with respect to usage-based insurance.

We are also continuing with our efforts to further penetrate customer households through cross-selling products. Progressive Home Advantage^®, the program in which we “bundle” our auto product with property insurance provided by one of three unaffiliated insurance carriers, is becoming an integral part of our consumer offerings. The program is currently available to Agency customers in 44 states, Direct customers in 48 states, and is available to both Agency and Direct customers in the District of Columbia. Progressive Home Advantage is not available to customers in Florida and Alaska. These multi-product customers are an important part of our strategic agenda, since they tend to stay with us longer, have better loss experience, and represent a sizable segment of the market. In addition, we continue to focus on selling auto policies to our special lines customers and vice versa.

In 2011, we worked on improving our offerings in the mobile space. Customers now have the ability to obtain a quote and buy an auto insurance policy on our mobile website in 41 states and the District of Columbia. In addition, policyholders are able to make payments and certain endorsements from their mobile device, as well as receive identification cards and severe weather text alerts. We also recently expanded our mobile offerings for agents by making our agency-dedicated website accessible from an application designed for a tablet computer, and have developed a prototype application that allows consumers to use the camera from their mobile device to send a picture of their driver’s license and current insurance card to get an instantaneous quote. We will continue to add new functionality to our mobile site and mobile applications, such as quoting for multi-vehicle households, additional policy servicing capabilities, and other agent-facing solutions during 2012.

We also began the national rollout of a new product model in our Commercial Auto business during 2011. This new model, which expands our coverage offerings, simplifies the quoting and claims experience, and provides incentives for customers to stay with us longer, is available in 14 states. We plan to continue the rollout to our remaining 35 Commercial Auto business states during 2012. We also offer our Commercial Auto customers general liability coverage in 19 states and workers’ compensation coverage in 14 states through our Progressive Commercial Advantage^SM program; these products are underwritten by three unaffiliated insurance companies.

App.-A-50

We experienced the following changes in written premium per policy:

	Change Over Prior Year
	2011			2010			2009
WRITTEN PREMIUM PER POLICY
Personal Lines — auto		(1	)%		(1	)%		(2	)%
Commercial Auto		5	%		(6	)%		(7	)%

In each of the last three years, our personal auto business experienced a decline in written premium per policy, primarily the result of shifts in our mix of business. Our Commercial Auto business experienced an increase in written premium per policy in 2011, compared to decreases in the last two years, primarily reflecting rate increases taken during the year, as well as a shift in the mix of our business. Adjusting rates is a continuous process and we will continue to evaluate future rate needs and react quickly as we recognize changing trends. See below for additional discussion on written premium per policy for our Agency and Direct auto channels and our Commercial Auto business.

Another important element affecting growth is customer retention. One measure of retention is policy life expectancy, which is our actuarial estimate of the average length of time that a policy (including any renewals) will remain in force before cancellation or lapse in coverage. The following table shows our year-over-year changes in policy life expectancy:

	Change Over Prior Year
	2011			2010			2009
POLICY LIFE EXPECTANCY
Personal Lines:
Auto		2	%		5	%		3	%
Special lines		(1	)%		(1	)%		(3	)%
Commercial Auto		0	%		(1	)%		0	%

The lengthening policy life expectancies in our personal auto business, in part reflects our efforts to stabilize rates at renewal and the greater penetration of multi-product offerings. Our special lines and Commercial Auto businesses have seen little change in policy life expectancy over the last several years. Realizing the importance that retention has on our ability to continue to grow profitably, we continue to emphasize competitive pricing, quality service, and other retention initiatives for our customers.

B. Profitability

Profitability for our underwriting operations is defined by pretax underwriting profit, which is calculated as net premiums earned less losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses. We also use underwriting profit margin, which is underwriting profit expressed as a percentage of net premiums earned, to analyze our results. For the three years ended December 31, our underwriting profitability results were as follows:

($ in millions)	2011						2010					2009
	Underwriting Profit (Loss)						Underwriting Profit (Loss)					Underwriting Profit (Loss)
	$			Margin			$		Margin			$		Margin
Personal Lines
Agency	$	564.9			7.4	%	$	601.0		8.1	%	$	579.2		7.8	%
Direct		354.4			6.1			291.1		5.4			357.9		7.2
Total Personal Lines		919.3			6.8			892.1		7.0			937.1		7.6
Commercial Auto		133.5			9.1			185.0		12.5			229.8		14.2
Other indemnity1		(5.5	)		NM			6.4		NM			8.7		NM
Total underwriting operations	$	1,047.3			7.0	%	$	1,083.5		7.6	%	$	1,175.6		8.4	%

¹ Underwriting margins for our other indemnity businesses are not meaningful (NM) due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

App.-A-51

Our underwriting margins for the last three years exceeded our long-term profitability target of 4%, but have decreased each year since 2009. Pricing and market conditions are always significant drivers of underwriting margins over any defined period. In addition, the lower underwriting margin in 2011 reflects higher catastrophe losses and less favorable loss reserve development than we experienced during 2010. The lower underwriting margin in 2010, compared to 2009, was due to increased advertising expenditures and higher payment for employees under our Gainshare program.

Further underwriting results for our Personal Lines business, including its channel components, the Commercial Auto business, and our underwriting operations in total, as defined in Note 10 – Segment Information, were as follows:

Underwriting Performance1	2011		2010		2009
Personal Lines – Agency
Loss & loss adjustment expense ratio		71.8		70.6		71.1
Underwriting expense ratio		20.8		21.3		21.1
Combined ratio		92.6		91.9		92.2
Personal Lines – Direct
Loss & loss adjustment expense ratio		71.4		72.6		72.3
Underwriting expense ratio		22.5		22.0		20.5
Combined ratio		93.9		94.6		92.8
Total Personal Lines
Loss & loss adjustment expense ratio		71.6		71.4		71.5
Underwriting expense ratio		21.6		21.6		20.9
Combined ratio		93.2		93.0		92.4
Commercial Auto
Loss & loss adjustment expense ratio		68.9		65.1		64.7
Underwriting expense ratio		22.0		22.4		21.1
Combined ratio		90.9		87.5		85.8
Total Underwriting Operations2
Loss & loss adjustment expense ratio		71.4		70.8		70.7
Underwriting expense ratio		21.6		21.6		20.9
Combined ratio		93.0		92.4		91.6
Accident year-Loss & loss adjustment expense ratio3		73.0		73.0		71.7

¹ Ratios are expressed as a percentage of net premiums earned.

² Combined ratios for the other indemnity businesses are not presented separately due to the low level of premiums earned by, and the variability of loss costs in, such businesses. For the years ended December 31, 2011, 2010, and 2009, these businesses generated an underwriting profit (loss) of $(5.5) million, $6.4 million, and $8.7 million, respectively.

³ The accident year ratios include only the losses that occurred during the period noted. As a result, accident period results will change over time, either favorably or unfavorably, as we revise our estimates of loss costs when payments are made or reserves for that accident period are reviewed.

Losses and Loss Adjustment Expenses (LAE)

(millions)	2011		2010		2009
Change in net loss and LAE reserves	$	93.2	$	243.3	$	190.7
Paid losses and LAE		10,541.6		9,888.0		9,714.2
Total incurred losses and LAE	$	10,634.8	$	10,131.3	$	9,904.9

Claims costs, our most significant expense, represent payments made, and estimated future payments to be made, to or on behalf of our policyholders, including expenses needed to adjust or settle claims. Claims costs are a function of loss severity and frequency and are influenced by inflation and driving patterns, among other factors. Accordingly, anticipated changes in these factors are taken into account when we establish premium rates and loss reserves. Our estimated needed reserves are adjusted as these underlying assumptions change. See Critical Accounting Policies for a discussion of the effect of changing estimates.

App.-A-52

Our total loss and loss adjustment expense ratio increased 0.6 points in 2011 and was relatively flat in 2010, compared to the prior year. Catastrophe losses contributed 1.4 points in 2011 to our loss and loss adjustment expense ratio, compared to 0.8 points in 2010 and 0.7 points in 2009. The large amount of catastrophe losses in 2011 primarily related to hurricane Irene and significant spring storms, including hail and tornadoes. We recognized favorable prior accident year development in 2011, 2010, and 2009, which decreased the calendar year loss and loss adjustment expense ratio by 1.6 points, 2.2 points, and 1.0 points, respectively. The combination of higher catastrophe losses and less favorable reserve development in 2011 was partially offset by a decrease in frequency for each of our auto coverages, excluding comprehensive. On an accident year basis, our 2009 loss and loss adjustment expense ratio was 1.3 points lower than both 2011 and 2010, primarily reflecting lower frequency in our Commercial Auto business in 2009, compared to the other two years.

The following discussion of our severity and frequency trends excludes comprehensive coverage because of its inherent volatility, as it is typically linked to catastrophic losses generally resulting from adverse weather. Comprehensive coverage insures against damage to a customer’s vehicle due to various causes (other than collision), such as windstorm, hail, theft, falling objects, and glass breakage.

Total personal auto incurred severity (i.e., average cost per claim, including both paid losses and the change in reserves) was up about 0.5% in 2011, down about 1.5% in 2010, and was relatively flat in 2009, over the prior-year periods.

• 2011 – Severity in our bodily injury and property coverages increased, while our personal injury protection (PIP) severity was down about 3%.

• 2010 – We experienced a decrease in severity for our bodily injury coverage and the property coverages, while PIP severity increased about 3%.

• 2009 – Severity in our property coverages decreased and PIP severity increased, while bodily injury severity remained relatively flat.

It is difficult to estimate future severity, especially for bodily injury and PIP claims, but we continue to monitor changes in the underlying costs, such as medical costs, health care reform, jury verdicts, auto parts, and used car prices, along with regulatory changes, which may affect severity. The severity we experience also will vary with changes in our mix of business by policy limits and coverages.

Our incurred frequency of auto accidents, on a calendar-year basis, was down about 2% in 2011 and was relatively flat in both 2010 and 2009, compared to the prior-year periods.

• 2011 – Each of our coverages experienced a decline in frequency, with bodily injury and PIP having slightly more of a decrease than the property coverages.

• 2010 – We experienced a slight increase in frequency in bodily injury and PIP coverages, while the frequency in the property coverages remained flat.

• 2009 – Increases in frequency for our bodily injury and PIP coverages were offset by decreases in the property coverages.

The degree or direction of frequency change that we will experience in the future is not something that we are able to predict with any certainty. We continue to analyze trends to distinguish changes in our experience from external factors, such as changes in the number of vehicles per household, miles driven, gasoline prices, greater vehicle safety, and unemployment rates, versus those resulting from shifts in the mix of our business, to allow us to reserve more accurately for our loss exposure.

App.-A-53

The table below presents the actuarial adjustments implemented and the loss reserve development experienced in the years ended December 31:

($ in millions)	2011		2010		2009
Actuarial Adjustments
Reserve decrease/(increase)
Prior accident years	$	151.7	$	124.6	$	3.9
Current accident year		91.7		71.0		(51.5	)
Calendar year actuarial adjustments	$	243.4	$	195.6	$	(47.6	)
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustments	$	151.7	$	124.6	$	3.9
All other development		90.3		195.8		132.1
Total development	$	242.0	$	320.4	$	136.0
(Increase) decrease to calendar year combined ratio		1.6 pts.		2.2 pts.		1.0 pts.

Total development consists both of actuarial adjustments and “all other development.” The actuarial adjustments represent the net changes made by our actuarial department to both current and prior accident year reserves based on regularly scheduled reviews. Through these reviews, the actuaries identify and measure variances in the projected frequency and severity trends, which allows them to adjust the reserves to reflect the current costs. We report these actuarial adjustments separately for the current and prior accident years to reflect these adjustments as part of the total prior accident years’ reserve development.

“All other development” represents claims settling for more or less than reserved, emergence of unrecorded claims at rates different than anticipated in our incurred but not recorded (IBNR) reserves, and changes in reserve estimates on specific claims. Although we believe that the development from both the actuarial adjustments and “all other development” generally results from the same factors, as discussed below, we are unable to quantify the portion of the reserve development that might be applicable to any one or more of those underlying factors.

Our objective is to establish case and IBNR reserves that are adequate to cover all loss costs, while sustaining minimal variation from the date that the reserves are initially established until losses are fully developed. As reflected in the table above, we experienced favorable reserve development in each of the last three years.

2011

• About half of the favorable reserve development was attributable to accident years 2008 and prior, while the balance was primarily due to claims from accident year 2010.

• Approximately 70% of the favorable reserve development was attributable to our Personal Lines business, with our Agency and Direct channels contributing 25% and 75%, respectively; the balance was primarily in our Commercial Auto business.

2010

• Approximately 70% of the favorable reserve development was attributable to accident year 2009, while the balance was mostly due to claims from accident years 2007 and 2006.

• About 70% of the favorable reserve development was in our Personal Lines business, with our Agency and Direct channels contributing almost equal amounts; the balance was in our Commercial Auto business.

2009

• About 60% of the favorable reserve development was due to favorable development for accident years 2006 and prior, while the balance was mostly due to claims from accident year 2008.

• Approximately 55% of the favorable reserve development was attributable to our Personal Lines business, with our Agency and Direct channels contributing 25% and 75%, respectively; the balance was primarily in our Commercial Auto business.

App.-A-54

The favorable reserve development reflected the settlement of larger losses for amounts less than we originally reserved in our Personal Lines business (primarily in our personal auto product) for 2011 and 2010, and in our Commercial Auto business for each of the last three years. During the last three years, we also experienced lower than expected defense and cost containment costs, reflecting a combination of fewer claims being litigated, as well as the fact that a greater percentage of these cases are now being handled by our in-house counsel, which is a cost-effective alternative to using external law firms. In addition, for 2010, our IBNR reserves developed favorably due to lower severity and frequency of late emerging claims. However, in 2011, the number of late emerging claims increased over 2010 and was greater than anticipated by our carried IBNR, thus we recognized unfavorable development on our total IBNR reserves.

We continue to focus on our loss reserve analysis, attempting to enhance accuracy and to further our understanding of our loss costs. A detailed discussion of our loss reserving practices can be found in our Report on Loss Reserving Practices, which was filed in a Form 8-K on June 30, 2011.

Because we are primarily an insurer of motor vehicles, our exposure as an insurer of environmental, asbestos, and general liability claims is limited. We have established reserves for these exposures in amounts that we believe to be adequate based on information currently known. These exposures do not have a material effect on our liquidity, financial condition, cash flows, or results of operations.

Underwriting Expenses

Progressive’s other underwriting expenses and policy acquisition costs as a percentage of premiums earned were relatively unchanged for 2011 and increased 0.7 points in 2010 over 2009. In 2011, increased advertising expenses and information technology costs were offset by lower Gainsharing expenses. The increase in 2010 primarily reflects higher advertising and Gainsharing expenditures, partially offset by a solid increase in productivity, reflected by an increase in companywide policies in force per full-time equivalent employee. In accordance with GAAP, policy acquisition costs are amortized over the policy period in which the related premiums are earned (see Note 1—Reporting and Accounting Policies). We do not defer any advertising costs.

C. Personal Lines

	Growth Over Prior Year
	2011			2010			2009
Net premiums written		5	%		5	%		5	%
Net premiums earned		5	%		4	%		4	%
Policies in force		5	%		7	%		5	%

Progressive’s Personal Lines business writes insurance for personal autos and recreational vehicles and represented 90% of our total net premiums written in both 2011 and 2010, compared to 89% for 2009. We currently write our Personal Lines products in all 50 states. We also offer our personal auto product (not special lines products) in the District of Columbia and on an Internet-only basis in Australia.

Personal auto represented slightly more than 90% of our total Personal Lines net premiums written in each of the last three years. These auto policies are primarily written for 6-month terms. The remaining Personal Lines business is comprised of special lines products (e.g., motorcycles, watercraft, and RVs), which are written for 12-month terms. Personal auto policies in force increased 5% for 2011, 8% for 2010, and 5% for 2009; policies in force for the special lines products increased 5% in both 2011 and 2010 and 3% in 2009. Net premiums written for personal auto increased 5% in each of the last three years; special lines net premiums written grew 1% in both 2011 and 2010 and 4% in 2009.

Our total Personal Lines business generated strong underwriting results in 2011, which were widely distributed by product and state. In 2011, 47 states and the District of Columbia were profitable, including 9 of our 10 largest states. The special lines products had a favorable effect on the total Personal Lines combined ratio of approximately 1.0 points in both 2011 and 2009, and 1.5 points in 2010.

Even though our Agency and Direct businesses are managed under one Personal Lines organization, we will continue to report our Agency and Direct business results separately as components of our Personal Lines segment to provide further understanding of our products by channel.

App.-A-55

The Agency Business

	Growth Over Prior Year
	2011			2010			2009
Net premiums written		3	%		1	%		1	%
Net premiums earned		3	%		0	%		1	%
Auto: policies in force		4	%		4	%		0	%
new applications		(2	)%		4	%		3	%
renewal applications		5	%		1	%		0	%
written premium per policy		0	%		0	%		0	%
policy life expectancy		6	%		8	%		2	%

The Agency business includes business written by more than 35,000 independent insurance agencies that represent Progressive, as well as brokerages in New York and California. In 2011, our Agency auto business experienced a decrease in new applications, compared to increases in the last two years. The decrease in 2011 reflects, in large part, the strong growth in new applications we experienced in the first half of 2010, and an apparent decline of consumers shopping for auto insurance, which began toward the end of 2010 and carried into 2011. Despite the decline in new applications for the year, our Agency auto business did see an increase in new applications in the fourth quarter 2011, compared to the same quarter in 2010. Significant increases in several large states, including Florida, New York, California, and New Jersey, reflecting previous actions to make our rates more competitive in those states, contributed to the fourth quarter growth. Over the last three years, written premium per policy on total Agency auto business has remained steady, but in 2011 written premium per policy was up modestly for new business. Retention in our Agency auto business (measured by policy life expectancy) has improved in each of the last three years.

On a year-over-year basis, Agency auto quotes were relatively flat, compared to increases in both 2010 and 2009. Quoting on third-party comparative rating systems continues to increase and our presentation on these systems continues to improve. We are continuing to identify opportunities to ensure our prices are available for our agents, including efforts to make agent quoting and servicing available on tablet computers. Our Agency auto rate of conversion (i.e., converting a quote to a sale) decreased in both 2011 and 2009 and was relatively flat in 2010.

The underwriting expense ratio in our Agency business was down 0.5 points in 2011 and was relatively unchanged the previous two years. Improved customer retention and cost saving efforts helped keep expenses in line during all three years.

The Direct Business

	Growth Over Prior Year
	2011			2010			2009
Net premiums written		7	%		9	%		11	%
Net premiums earned		7	%		9	%		10	%
Auto: policies in force		6	%		13	%		13	%
new applications		(2	)%		9	%		20	%
renewal applications		11	%		13	%		13	%
written premium per policy		(1	)%		(3	)%		(4	)%
policy life expectancy		(3	)%		2	%		3	%

The Direct business includes business written directly by Progressive online and over the phone. Similar to the Agency channel, we were unable to generate new business growth in our Direct channel for the full year 2011, but we did see a solid increase in new applications in the fourth quarter 2011, compared to last year; Florida and New Jersey had the largest year-over-year increases for both the year and the fourth quarter. Out of our top 10 Direct auto states, four states experienced an increase in new auto applications in 2011, compared to eight states in 2010 and nine states in 2009.

Written premium per policy for total Direct auto was down in each of the last three years, as compared to the prior year, although the rate of decline slowed in 2011. Written premium per policy on Direct auto new business increased slightly in 2011. The decreases in each year primarily reflect shifts in our mix of business (e.g., older age vehicles, state mix in our renewal business, and drivers with proof of prior insurance). We believe the decline in policy life expectancy for 2011 reflects rate increases taken in Florida and Massachusetts, as well as changes in bill plan presentation, which has led to more customers paying in installments and, historically, these customers tend to retain for shorter periods.

App.-A-56

On a year-over-year basis, the total number of quotes in the Direct business decreased in 2011, reflecting decreases in both Internet quotes and quotes generated via the phone, compared to increases in both 2010 and 2009. Significant quoting activity in the first half of 2010 and an apparent decline in the level of consumer shopping, which began towards the end of 2010 and carried into 2011, adversely affected the comparisons in 2011. The total Direct business conversion rate was relatively flat in 2011 and had solid increases in both 2010 and 2009, compared to the prior years.

We increased our total advertising expenditures on a year-over-year basis in each of the last three years. We continue to work toward achieving our key objective of having our efforts in marketing and other brand-building activities match our competency in other technical skills, such as pricing and claims handling. We remain focused on establishing a well-respected brand and added to our inventory of television commercials and Internet advertising. We continue to use “Flo” to provide fresh and engaging messages, and during 2011, we increased the use of a complementary campaign with the “Messenger.” In addition, during 2011, we have invested in the infrastructure of both our mobile capabilities and our usage-based insurance products.

D. Commercial Auto

	Growth Over Prior Year
	2011			2010			2009
Net premiums written		6	%		(6	)%		(10	)%
Net premiums earned		0	%		(9	)%		(8	)%
Policies in force		0	%		0	%		(5	)%
New applications		(2	)%		(1	)%		(9	)%
Renewal applications		(1	)%		(4	)%		2	%
Written premium per policy		5	%		(6	)%		(7	)%
Policy life expectancy		0	%		(1	)%		0	%

Progressive’s Commercial Auto business writes primary liability, physical damage, and other auto-related insurance for automobiles and trucks owned by small businesses, with the majority of our customers insuring three or fewer vehicles. Our Commercial Auto business represented 10% of our total net premiums written in both 2011 and 2010 and 11% in 2009. This business is primarily distributed through independent agents and operates in the following business market targets:

• Business auto – autos, vans, and pick-up trucks used by small businesses, such as retailing, farming, services, and private trucking

• Contractor – vans, pick-up trucks, and dump trucks used by small businesses, such as artisan contractors, heavy construction, and landscapers/snowplowers

• For-hire transportation – tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses and non-fleet long-haul operators

• For-hire specialty – dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses, and

• Tow – tow trucks and wreckers used in towing services and gas/service station businesses.

Business auto and contractor are the two largest business market targets, and together, account for approximately 60% of our total Commercial Auto premiums and approximately 75% of the vehicles we insure in this business. We currently write our Commercial Auto business in 49 states; we do not write Commercial Auto in Hawaii or the District of Columbia. The majority of our policies in this business are written for 12-month terms.

The economic downturn during the last three years has had a significant effect on our Commercial Auto business’s new application growth. Although our Commercial Auto business experienced an overall decrease in new applications in each of the last three years, both 2011 and 2010 had some quarters with positive growth in new applications, showing some sign of possible recovery. Policies in force remained relatively unchanged since the end of 2009.

App.-A-57

We have been increasing rates in our Commercial Auto business for the past three years, but 2011 was the first year we have seen those rate increases translate into a year-over-year increase in written premium per policy. In addition, during 2011, we experienced shifts in our mix of business toward business market targets with higher average written premium. The decline in written premium per policy in 2010 and 2009 was due to shifts in our mix of business (e.g., greater percentage of liability-only policies, changes in geographical mix, and more policies qualifying for discounts). The change in policy life expectancy for our Commercial Auto business was flat or slightly negative over the last three years.

Commercial Auto’s expense ratio decreased 0.4 points in 2011, and increased 1.3 points in 2010, over the prior year. The increase in 2010 was due to increased information technology costs and an increase in Gainsharing expense.

Although Commercial Auto differs from Personal Lines auto in its customer base and products written, both businesses require the same fundamental skills, including disciplined underwriting and pricing, as well as excellent claims service. Since the Commercial Auto policies have higher limits than Personal Lines auto, we analyze the large loss trends and reserving in more detail to allow us to react quickly to changes in this exposure.

E. Other Indemnity

Our other indemnity businesses represented less than 1% of our net premiums written in each of the last three years and consist of managing our run-off businesses, which include the run-off of our professional liability businesses that we sold in 2010. Pursuant to our agreement with the purchaser of this business, we will continue to write these policies, principally directors and officers liability insurance for community banks, for an agreed upon period after the closing of the sale. As of December 31, 2011, we continued to write business in only two states and will stop writing all business as of April 30, 2012. Beginning in July 2010, all such new and renewal business is 100% reinsured. From August 1, 2009 through June 30, 2010, the substantial majority of the business written for these policies was 100% reinsured. Prior to August 1, 2009, we reinsured the majority of the risk on these coverages with a small mutual reinsurer controlled by its bank customers and various other reinsurance entities. The sale of these businesses did not have a material effect on our financial condition, results of operations, or cash flows.

F. Service Businesses

Our service businesses, which represent less than 1% of our total revenues and do not have a material effect on our overall operations, primarily include:

• Commercial Auto Insurance Procedures/Plans (CAIP) – We are the only servicing carrier on a nationwide basis for CAIP, which are state-supervised plans servicing the involuntary market in 42 states and the District of Columbia. As a service provider, we provide policy issuance and claims adjusting services and collect fee revenue that is earned on a pro rata basis over the terms of the related policies. In 2010, we reached an agreement with AIPSO (the national organization responsible for administering the involuntary insurance market) under which we will receive a supplemental fee, when necessary, to satisfy a minimum servicing fee requirement; this agreement is scheduled to expire on August 31, 2013. We cede 100% of the premiums and losses to the plans. Reimbursements to us from the CAIP plans are required by state laws and regulations. Material violations of contractual service standards can result in ceding restrictions for the affected business. We have maintained, and plan to continue to maintain, compliance with these standards. Any changes in our participation as a CAIP service provider would not materially affect our financial condition, results of operations, or cash flows.

• Progressive Home Advantage^® – Through Progressive Home Advantage, we offer, either directly or through our network of independent agents, new and existing Agency and Direct customers home, condominium, and renters insurance underwritten by unaffiliated homeowner’s insurance companies. Progressive Home Advantage is not available to customers in Florida and Alaska. For the policies written under this program in our Direct business, we receive commissions, which are used to mitigate the expenses associated with maintaining this program.

• Progressive Commercial Advantage^SM – We currently offer our Commercial Auto customers the ability to package their auto coverage with other commercial coverages that are underwritten by three unaffiliated insurance companies. This program offers general liability coverage in 19 states and workers’ compensation coverage in 14 states as of December 31, 2011. We receive commissions for the policies written under this program, which are used to mitigate the expenses associated with maintaining this program.

App.-A-58

Our service businesses generated an operating profit in both 2011 and 2010, reflecting the recognition of the minimum servicing fee for CAIP discussed above, compared to an operating loss in 2009, which resulted from the downturn in the involuntary commercial auto market.

G. Litigation

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies in the ordinary course of business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, various Progressive entities are named as defendants in a number of class action or individual lawsuits arising out of the operations of the insurance subsidiaries. These cases include those alleging damages as a result of our practices in evaluating or paying medical or injury claims or benefits, including, but not limited to, personal injury protection, medical payments, uninsured motorist/underinsured motorist (UM/UIM), and bodily injury benefits; rating practices at policy renewal; the utilization, content, or appearance of UM/UIM rejection forms; labor rates paid to auto body repair shops; and cases challenging other aspects of our claims or marketing practices or other business operations. Other insurance companies face many of these same issues. During the last three years, we have settled several class action lawsuits. These settlements did not have a material effect on our financial condition, cash flows, or results of operations. See Note 12 – Litigation for a more detailed discussion.

H. Income Taxes

As reported in the balance sheets, income taxes are comprised of net current income taxes payable/recoverable and net deferred tax assets and liabilities. A deferred tax asset/liability is a tax benefit/expense that is expected to be realized in a future tax return. At both December 31, 2011 and 2010, our income taxes were in a net asset position.

Our net deferred tax asset was $196.0 million at December 31, 2011, compared to $178.2 million at December 31, 2010. The increase in our net deferred tax asset since December 31, 2010, is primarily due to the net unrealized losses that occurred in our investment portfolio and increases in both the unearned premium reserve and accruals that are not deductible for income tax purposes. This increase is partially offset by the recognition of tax losses on sales of securities for which we had previously recorded other-than-temporary impairments. At both December 31, 2011 and 2010, we determined that we did not need a valuation allowance on our deferred tax asset. Although realization of the deferred tax asset is not assured, management believes it is more likely than not that the gross deferred tax asset will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes.

There were no material changes in our uncertain tax positions during 2011.

See Note 5 – Income Taxes for further information.

App.-A-59

IV.  RESULTS OF OPERATIONS—INVESTMENTS

A. Portfolio Allocation

At year-end 2011, the fair value of our investment portfolio was $16.0 billion, 3% greater than at year-end 2010. The combination of our debt issuance and operating and investment returns more than offset our capital transactions during the year, such as share repurchases and shareholder dividends. Our investment income (interest and dividends) decreased 8% in 2011, as compared to 2010, reflecting lower yields in the portfolio, and increased 3% in 2010, as compared to 2009, reflecting an increase in average assets, partially offset by lower yields in the portfolio.

In 2011, we recognized $102.6 million in net realized gains, compared to $96.1 million and $27.1 million in 2010 and 2009, respectively. The net realized gains for all three periods were primarily the result of security sales, partially offset by changes in valuation of our derivative positions and write-downs of securities determined to have had other-than-temporary declines in fair value. The composition of the investment portfolio at December 31, was:

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Portfolio		Duration (years)		Rating2
2011
Fixed maturities	$	11,455.7	$	370.2	$	(73.2	)	$	6.6		$	11,759.3		73.6%		2.1		AA-
Nonredeemable preferred stocks		473.7		342.6		(3.7	)		(6.3	)		806.3		5.1		1.1		BBB-
Short-term investments – other		1,551.8		0		0			0			1,551.8		9.7		<1		AA+
Total fixed-income securities		13,481.2		712.8		(76.9	)		.3			14,117.4		88.4		1.9		AA-
Common equities		1,431.0		440.0		(25.4	)		0			1,845.6		11.6		na		na
Total portfolio3,4	$	14,912.2	$	1,152.8	$	(102.3	)	$	.3		$	15,963.0		100.0%		1.9		AA-
2010
Fixed maturities	$	11,630.8	$	304.1	$	(87.1	)	$	2.2		$	11,850.0		76.3%		2.3		AA
Nonredeemable preferred stocks		601.3		560.2		0			(3.9	)		1,157.6		7.5		1.2		BBB-
Short-term investments – other		1,090.8		0		0			0			1,090.8		7.0		<1		AAA-
Total fixed-income securities		13,322.9		864.3		(87.1	)		(1.7	)		14,098.4		90.8		2.0		AA-
Common equities		1,021.7		406.5		(3.2	)		0			1,425.0		9.2		na		na
Total portfolio3,4	$	14,344.6	$	1,270.8	$	(90.3	)	$	(1.7	)	$	15,523.4		100.0%		2.0		AA-

na = not applicable

¹  Represents net holding period gains (losses) on certain hybrid securities.

²  Represents ratings at December 31, 2011 and 2010. Credit quality ratings are assigned by nationally recognized securities rating organizations. To calculate the weighted average credit quality ratings, we weight individual securities based on fair value and assign a numeric score of 0-5, with non-investment-grade and non-rated securities assigned a score of 0-1. To the extent the weighted average of the ratings falls between AAA and AA+, we assign an internal rating of AAA-.

³ Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

⁴ The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities in the portfolio of a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

App.-A-60

Our asset allocation strategy is to maintain 0-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in Group II securities, as defined in the Overview – Investments and Capital Management section and as reflected in the following table. We believe this asset allocation strategy allows us to more accurately assess the risks associated with these securities for capital purposes and is in line with our primary regulator’s treatment.

The following tables show the composition of our Group I and Group II securities at December 31, 2011 and December 31, 2010:

($ in millions)	Fair Value		% of Total Portfolio
2011
Group I securities:
Non-investment-grade fixed maturities	$	384.4		2.4%
Redeemable preferred stocks1		287.8		1.8
Non-redeemable preferred stocks		806.3		5.1
Common equities		1,845.6		11.6
Total Group I securities		3,324.1		20.9
Group II securities:
Other fixed maturities2		11,087.1		69.4
Short-term investments – other		1,551.8		9.7
Total Group II securities		12,638.9		79.1
Total portfolio	$	15,963.0		100.0%
2010
Group I securities:
Non-investment-grade fixed maturities	$	421.1		2.7%
Redeemable preferred stocks1		367.9		2.3
Non-redeemable preferred stocks		1,157.6		7.5
Common equities		1,425.0		9.2
Total Group I securities		3,371.6		21.7
Group II securities:
Other fixed maturities2		11,061.0		71.3
Short-term investments – other		1,090.8		7.0
Total Group II securities		12,151.8		78.3
Total portfolio	$	15,523.4		100.0%

¹  Includes non-investment-grade redeemable preferred stocks of $201.7 million at December 31, 2011 and $233.3 million at December 31, 2010.

²  Includes investment-grade redeemable preferred stocks, with cumulative dividends, of $86.1 million at December 31, 2011 and $134.6 million at December 31, 2010.

Unrealized Gains and Losses

As of December 31, 2011, our portfolio had pretax net unrealized gains, recorded as part of accumulated other comprehensive income, of $1,050.5 million, compared to $1,180.5 million at December 31, 2010. During the year, our fixed-income portfolio’s valuation decreased $141.3 million, primarily due to spread widening (i.e., the risk premium paid above the comparable Treasury rate) in some fixed-income sectors. The net unrealized gains in our common equity portfolio increased $11.3 million over the same time period, reflecting positive returns in the broad equity market.

See Note 2 – Investments for a further break-out of our gross unrealized gains and losses.

App.-A-61

Fixed-Income Securities

The fixed-income portfolio is managed internally and includes fixed-maturity securities, short-term investments, and nonredeemable preferred stocks. The fixed-maturity securities and short-term investments, as reported on the balance sheets at December 31, were comprised of the following:

($ in millions)	2011				2010
Investment-grade fixed maturities:1
Short/intermediate term	$	12,539.3	94.2	%	$	12,037.2	93.0%
Long term		55.7	.4			38.4	.3
Non-investment-grade fixed maturities2		716.1	5.4			865.2	6.7
Total	$	13,311.1	100.0	%	$	12,940.8	100.0%

¹ Long term includes securities with expected liquidation dates of 10 years or greater. Asset-backed securities are reported at their weighted average maturity based upon their projected cash flows. All other securities that do not have a single expected maturity date are reported at average maturity.

² Non-investment-grade fixed-maturity securities are non-rated or have a quality rating of an equivalent BB+ or lower, classified by the lowest rating from a nationally recognized rating agency.

The year-over-year decrease in dollar amount of our non-investment-grade fixed maturities primarily resulted from maturities, calls, paydowns, and sales.

A primary exposure for the fixed-income portfolio is interest rate risk, which is managed by maintaining the portfolio’s duration between 1.5 and 5 years. Interest rate risk includes the change in value resulting from movements in the underlying market rates of debt securities held. The fixed-income portfolio had a duration of 1.9 years at December 31, 2011, compared to 2.0 years at December 31, 2010. The distribution of duration and convexity (i.e., a measure of the speed at which the duration of a security is expected to change based on a rise or fall in interest rates) are monitored on a regular basis.

The duration distribution of our fixed-income portfolio, represented by the interest rate sensitivity of the comparable benchmark U.S. Treasury Notes, was:

Duration Distribution	2011			2010
1 year		22.6	%		34.6%
2 years		22.3			15.5
3 years		31.5			23.4
5 years		20.8			22.6
10 years		2.8			3.9
Total fixed-income portfolio		100.0	%		100.0%

The shift in duration distribution reflects our decision to further reduce our exposure to longer-duration bonds, while maintaining our overall portfolio duration at a similar level.

Another primary exposure related to the fixed-income portfolio is credit risk. This risk is managed by maintaining an A+ minimum average portfolio credit quality rating, as defined by nationally recognized rating agencies.

The credit quality distribution of the fixed-income portfolio was:

Rating	2011		2010
AAA		53.6%		54.8%
AA		13.4		11.6
A		5.1		6.8
BBB		21.3		18.2
Non-rated/other		6.6		8.6
Total fixed-income portfolio		100.0%		100.0%

App.-A-62

Our portfolio is also exposed to concentration and credit risk. Our investment constraints limit investment in a single issuer, other than U.S. Treasury Notes or a state’s general obligation bonds, to 2.5% of shareholders’ equity, while the single issuer limitation on preferred stocks and/or non-investment-grade debt is 1.25% of shareholders’ equity. Additionally, the guideline applicable to any state’s general obligation bonds is 6% of shareholders’ equity. Our credit risk guidelines limit single issuer exposure; however, we also consider sector concentration a risk, and we frequently evaluate the portfolio’s sector allocation with regard to internal requirements and external market factors. Additionally, we consider concentration risk in the context of asset classes, including but not limited to common equities, residential and commercial mortgage securities, municipal bonds, and high-yield bonds.

We also monitor prepayment and extension risk, especially in our structured product and preferred stock portfolios. Prepayment risk includes the risk of early redemption of security principal that may need to be reinvested at less attractive rates. Extension risk includes the risk that a security will not be redeemed when anticipated, and that the security that is extended has a lower yield than a security we might be able to obtain by reinvesting the expected redemption principal. The different types of structured debt and preferred securities, which are discussed in more detail below, help minimize this risk. During 2011, we did not experience significant prepayment or extension of principal relative to our cash flow expectations in the portfolio.

The pricing on the majority of our preferred stocks continues to reflect expectations that many issuers will not call such securities on the first call date, and hence reflects an assumption that the securities will remain outstanding for a period of time beyond such initial call date (extension risk). Of the seven preferred stocks that had their first call date during 2011, only one of these securities was called. Extension risk on holding these securities is limited because they either convert from a fixed-rate coupon instrument to a variable rate coupon after the call date, or were variable rate coupon securities prior to the call date. Reinvestment risk is limited to the difference in the credit spread received above the benchmark rate (e.g., LIBOR) and the current market credit spread for that issuer.

We also face the risk that our preferred stock dividend payments could be deferred for one or more periods. As of December 31, 2011, all of our preferred securities continued to pay their dividends in full and on time.

Liquidity risk is another risk factor we monitor. Our overall portfolio remains very liquid and sufficient to meet expected liquidity requirements. As of December 31, 2011, we held $4.5 billion of U.S. Treasury and short-term securities, compared to $4.3 billion at December 31, 2010. The short-to-intermediate duration of our portfolio provides an additional source of liquidity, as we expect approximately $1.4 billion, or 16%, of our fixed-income portfolio, excluding U.S. Treasury and short-term securities, to repay principal during 2012. Cash from interest and dividend payments provide an additional source of recurring liquidity.

Included in the fixed-income portfolio are U.S. government obligations, which include U.S. Treasury Notes and interest rate swaps. Although the interest rate swaps are not obligations of the U.S. government, they are recorded in this portfolio as the change in fair value is correlated to movements in the U.S. Treasury market. The duration of these securities was comprised of the following at December 31, 2011:

($ in millions)	Fair Value		Duration (years)
U.S. Treasury Notes
Less than two years	$	334.0		1.4
Two to five years		2,629.0		3.3
Total U.S. Treasury Notes		2,963.0		3.1
Interest Rate Swaps
Two to five years ($900 notional value)		0		(4.5	)
Five to nine years ($363 notional value)		0		(6.5	)
Total interest rate swaps ($1,263 notional value)		0		(5.0	)
Total U.S. government obligations	$	2,963.0		1.1

App.-A-63

The interest rate swap shows a fair value of zero as it is in an overall liability position, and the fair value is reported in the “other liabilities” section of the Consolidated Balance Sheets. The negative duration of the interest rate swap is due to the position being short interest-rate exposure (i.e., receiving a variable-rate coupon). In determining duration, we add the interest rate sensitivity of our interest rate swap positions to that of our Treasury holdings, but do not add the notional value of the swaps to our Treasury holdings in order to calculate an unlevered duration for the portfolio.

ASSET-BACKED SECURITIES

Included in the fixed-income portfolio are asset-backed securities, which were comprised of the following at December 31:

($ in millions)	Fair Value		Net Unrealized Gains (Losses)			% of Asset- Backed Securities		Duration (years)		Rating (at period end)
2011
Prime collateralized mortgage obligations	$	228.6	$	(9.6	)		6.5%		1.2		A
Alt-A collateralized mortgage obligations		43.2		.9			1.2		2.1		A-
Collateralized mortgage obligations		271.8		(8.7	)		7.7		1.3		A-
Commercial mortgage-backed obligations		1,595.7		39.8			45.3		2.4		AA+
Commercial mortgage-backed obligations: interest only		280.9		7.0			8.0		1.6		AAA-
Commercial mortgage-backed obligations		1,876.6		46.8			53.3		2.2		AA+
Other asset-backed securities:
Automobile		682.6		5.1			19.4		1.3		AAA
Credit card		157.2		4.0			4.4		1.4		AAA
Home equity (sub-prime bonds)		155.1		(17.3	)		4.4		<.1		A-
Other1		380.8		.9			10.8		1.1		AAA-
Other asset-backed securities		1,375.7		(7.3	)		39.0		1.1		AAA-
Total asset-backed securities	$	3,524.1	$	30.8			100.0%		1.7		AA+
2010
Prime collateralized mortgage obligations	$	344.7	$	(3.1	)		9.9%		1.7		A
Alt-A collateralized mortgage obligations		44.7		2.2			1.3		2.5		A-
Collateralized mortgage obligations		389.4		(.9	)		11.2		1.8		A
Commercial mortgage-backed obligations		1,440.3		46.0			41.5		2.1		AA+
Commercial mortgage-backed obligations: interest only		391.8		14.0			11.3		1.2		AAA-
Commercial mortgage-backed obligations		1,832.1		60.0			52.8		1.9		AA+
Other asset-backed securities:
Automobile		636.9		7.9			18.4		1.3		AAA
Credit card		185.7		2.4			5.4		1.6		AAA-
Home equity (sub-prime bonds)		174.2		(2.6	)		5.0		.3		A-
Other1		251.4		(.1	)		7.2		.9		AAA-
Other asset-backed securities		1,248.2		7.6			36.0		1.1		AA+
Total asset-backed securities	$	3,469.7	$	66.7			100.0%		1.6		AA+

¹ Includes equipment leases, manufactured housing, and other types of structured debt.

At December 31, 2011 and 2010, our asset-backed securities had net unrealized gains of $30.8 million and $66.7 million, respectively. Substantially all of the asset-backed securities have widely available market quotes. As of December 31, 2011, approximately 6% of our asset-backed securities were exposed to non-prime mortgage loans (home equity and Alt-A). Consistent with our plan to add high-quality, short-maturity, fixed-income securities, during 2011, we continued to purchase investment-grade structured securities, primarily in the commercial mortgage-backed and consumer asset-backed markets. These investments typically have a maturity profile of five years or less, and have substantial structural credit support (i.e., the amount of underlying principal balance that is available to absorb losses before our position begins to recognize losses due to further defaults). We reviewed all of our asset-backed securities for other-than-temporary impairment and yield or

App.-A-64

asset valuation adjustments under current accounting guidance, and we realized $3.9 million, $13.0 million, and $33.6 million in write-downs on these securities during the years ended December 31, 2011, 2010, and 2009, respectively. These write-downs occurred primarily in the residential mortgage sectors of our asset-backed portfolio as detailed below.

Collateralized Mortgage Obligations At December 31, 2011, 7.7% of our asset-backed securities were collateralized mortgage obligations (CMO), which are a component of our residential mortgage-backed securities. During the year ended December 31, 2011, we recorded $3.1 million in credit loss write-downs on our CMO portfolio due to estimated principal losses in the security’s most recent cash flow projections. We did not have any write-downs on Alt-A securities during 2011. During the years ended December 31, 2010 and 2009, we recorded $1.7 million and $8.3 million in write-downs on our CMO portfolio, respectively, including $0.4 million and $4.0 million on Alt-A securities. The following table details the credit quality rating and fair value of our collateralized mortgage obligations, along with the loan classification and a comparison of the fair value at December 31, 2011, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Collateralized Mortgage Obligations (at December 31, 2011)
($ in millions) Category	AAA			AA			A			BBB			Non-Investment Grade			Total			% of Total
Non-agency prime1	$	80.2		$	9.9		$	15.1		$	23.7		$	78.0		$	206.9			76.1	%
Alt-A		.8			24.3			0			0			18.1			43.2			15.9
Government/GSE2		9.7			2.2			6.7			0			3.1			21.7			8.0
Total fair value	$	90.7		$	36.4		$	21.8		$	23.7		$	99.2		$	271.8			100.0	%
Increase (decrease) in value		.6	%		(2.3	)%		(4.1	)%		(7.0	)%		(5.4	)%		(3.1	)%

¹ Includes $9.2 million of securities with mandatory redemption dates.

² The securities in this category are insured by a Government Sponsored Entity (GSE) and/or collateralized by mortgage loans insured by the Federal Housing Administration (FHA) or the U.S. Department of Veteran Affairs (VA).

Commercial Mortgage-Backed Securities At December 31, 2011, 45.3% of our asset-backed securities were commercial mortgage-backed securities (CMBS) and 8.0% were CMBS interest only securities (IO). We recorded $0.6 million, $1.9 million, and $0.9 million in write-downs on our IO portfolio during the years ended December 31, 2011, 2010, and 2009, respectively. No write-downs were recorded on our CMBS portfolio during the same periods. The following table details the credit quality rating and fair value of our CMBS and IO portfolios:

Commercial Mortgage-Backed Securities (at December 31, 2011)
($ in millions) Category	AAA			AA			A			BBB			Non-Investment Grade			Total			% of Total
CMBS	$	1,246.0		$	84.0		$	100.0		$	137.7		$	28.0		$	1,595.7			85.0	%
IO		277.1			0			0			1.8			2.0			280.9			15.0
Total fair value	$	1,523.1		$	84.0		$	100.0		$	139.5		$	30.0		$	1,876.6			100.0	%
% of Total fair value		81.2	%		4.5	%		5.3	%		7.4	%		1.6	%		100.0	%

The CMBS portfolio contained 10.4% of securities that are rated BBB or lower, with a net unrealized gain of $6.4 million at December 31, 2011, and an average duration of 1.9 years, compared to 2.4 years for the entire CMBS portfolio. Approximately 26% of our CMBS portfolio was originated from 2005 to 2007, a period in which the CMBS market saw more aggressive underwriting. The BBB and non-investment-grade exposure includes $80.3 million of cell tower securitizations. All of these bonds have a single borrower, are backed by a cross-collateralized pool of cell towers throughout the United States, and have significant net cash flow relative to their interest payments.

Planned amortization class IOs comprised 62% of our IO portfolio. This is a class that is structured to provide bondholders with greater protection against loan prepayment, default, or extension risk. The bonds are at the top of the payment order for interest distributions and benefit from increased structural support over time as they repay. We have no 2007 to 2009 origination vintage exposure; securities issued in that time frame are viewed as having a higher risk profile due to underwriting criteria in place at that time.

App.-A-65

Home-Equity Securities At December 31, 2011, 4.4% of our asset-backed securities were home-equity securities, which are a component of our residential mortgage-backed securities. We recorded $0.2 million, $9.4 million, and $23.7 million in write-downs for the years ended December 31, 2011, 2010, and 2009, respectively. The following table shows the credit quality rating of our home-equity securities, by deal origination year, along with a comparison of the fair value at December 31, 2011, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Home-Equity Securities (at December 31, 2011)
($ in millions)	Deal Origination Year												Total			% of Total
Rating (date acquired)	2007			2006			2005			2004
AAA (January 2008-February 2011)	$	0		$	0		$	41.2		$	0		$	41.2			26.6	%
AA (February 2008-April 2010)		0			0			9.9			3.9			13.8			8.9
A (March 2008-December 2011)		0			10.3			20.5			0			30.8			19.8
BBB (April 2008)		0			0			3.2			0			3.2			2.1
Non-investment grade (March 2007-May 2008)		.3			21.0			35.1			9.7			66.1			42.6
Total	$	.3		$	31.3		$	109.9		$	13.6		$	155.1			100.0	%
Increase (decrease) in value		(22.9	)%		(2.4	)%		(13.1	)%		.5	%		(10.0	)%

MUNICIPAL SECURITIES

Included in the fixed-income portfolio at December 31, 2011 and 2010, were $2,002.1 million and $1,989.1 million, respectively, of state and local government obligations. These securities had a duration of 2.6 years and 2.3 years, at December 31, 2011 and 2010, respectively, with an overall credit quality of AA+ (excluding the benefit of credit support from bond insurance) for both years. These securities had net unrealized gains of $63.5 million and $33.6 million at December 31, 2011 and 2010, respectively. During the years ended December 31, 2011, 2010, and 2009, we did not record any write-downs on our municipal portfolio. The following table details the credit quality rating of our municipal securities at December 31, 2011, without the benefit of credit or bond insurance:

Municipal Securities (at December 31, 2011)
(millions) Rating	General Obligations		Revenue Bonds		Total
AAA	$	316.9	$	444.8	$	761.7
AA		500.8		660.5		1,161.3
A		19.4		44.3		63.7
BBB		1.5		6.7		8.2
Other1		0		7.2		7.2
Total	$	838.6	$	1,163.5	$	2,002.1

¹ Includes non-investment-grade and non-rated securities.

Included in revenue bonds were $885.1 million of single family housing revenue bonds issued by state housing finance agencies, of which $371.7 million were supported by individual mortgages held by the state housing finance agencies and $513.4 million were supported by mortgage-backed securities. Of the programs supported by mortgage-backed securities, approximately 30% were collateralized by Fannie Mae and Freddie Mac mortgages; the remaining 70% were collateralized by Ginnie Mae loans, which are fully guaranteed by the U.S. government. Of the programs supported by individual mortgages held by the state housing finance agencies, the overall credit quality rating was AA. Most of these mortgages were supported by FHA, VA, or private mortgage insurance providers.

Approximately 11%, or $223.3 million, of our total municipal securities were insured general obligation ($154.4 million) or revenue ($68.9 million) bonds with an overall credit quality rating of AA- at December 31, 2011, excluding the benefit of credit insurance provided by monoline insurers. These securities had a net unrealized gain of $9.2 million at December 31, 2011, compared to $10.9 million at December 31, 2010. We buy and hold these securities based on our evaluation of the underlying credit without reliance on the monoline insurance. Our investment policy does not require us to liquidate securities should the insurance provided by the monoline insurers cease to exist.

App.-A-66

CORPORATE SECURITIES

Included in our fixed-income securities at December 31, 2011 and 2010, were $2,896.2 million and $2,646.1 million, respectively, of fixed-rate corporate securities. These securities had a duration of 3.2 years at December 31, 2011, compared to 3.3 years at December 31, 2010, with an overall credit quality rating of BBB for both years. These securities had net unrealized gains of $87.8 million and $64.8 million at December 31, 2011 and 2010, respectively. During the years ended December 31, 2011, 2010, and 2009, we did not record any write-downs on our corporate debt portfolio. The table below shows the exposure break-down by sector and rating, reflecting any changes in ratings since acquisition:

Corporate Securities (at December 31, 2011)
Sector	AAA			AA			A			BBB			Non-Investment Grade			% of Portfolio
Consumer		0	%		0	%		4.4	%		19.0	%		3.8	%		27.2	%
Industrial		0			1.5			1.9			19.4			3.6			26.4
Communications		0			0			4.1			13.7			.3			18.1
Financial Services		0			3.5			3.4			3.8			3.3			14.0
Technology		0			0			0			2.7			0			2.7
Basic Materials		0			0			0			4.8			0			4.8
Energy		1.4			0			1.8			3.4			0			6.6
Other		0			0			0			.2			0			.2
Total		1.4	%		5.0	%		15.6	%		67.0	%		11.0	%		100.0	%

PREFERRED STOCKS – REDEEMABLE AND NONREDEEMABLE

We hold both redeemable (i.e., mandatory redemption dates) and nonredeemable (i.e., perpetual with call dates) preferred stocks. At December 31, 2011, we held $373.9 million in redeemable preferred stocks and $806.3 million in nonredeemable preferred stocks, compared to $502.5 million and $1,157.6 million, respectively, at December 31, 2010.

Our preferred stock portfolio had net unrealized gains of $333.5 million and $572.7 million at December 31, 2011 and 2010, respectively. We did not record any write-downs on our preferred stock portfolio during the years ended December 31, 2011 or 2010, compared to $213.2 million in write-downs during the year ended December 31, 2009.

Our preferred stock portfolio had a duration of 1.6 years, which reflects the portfolio’s exposure to changes in interest rates, at December 31, 2011, compared to 1.8 years at December 31, 2010. The overall credit quality rating was BBB- at December 31, 2011 and 2010. Approximately 45% of our preferred stock securities are fixed-rate securities, and 55% are floating-rate securities. All of our preferred securities have call or mandatory redemption features. Most of the securities are structured to provide some protection against extension risk in the event the issuer elects not to call such securities at their initial call date, by either paying a higher dividend amount or by paying floating-rate coupons. Of our fixed-rate securities, approximately 90% will convert to floating-rate dividend payments if not called at their initial call date. The interest rate duration of our preferred securities is calculated to reflect both the call and floating rate features. Although a preferred security may remain outstanding if not called, its interest rate duration will reflect the variable nature of the dividend. The table below shows the exposure break-down by sector and rating, reflecting any changes in ratings since acquisition:

Preferred Stocks (at December 31, 2011)
Sector	A			BBB			Non-Investment Grade			% of Preferred Stock Portfolio
Financial Services
U.S. banks		4.7	%		37.3	%		12.6	%		54.6	%
Foreign banks		0			2.2			1.2			3.4
Insurance		0			8.0			7.1			15.1
Other		0			0			2.0			2.0
Total financial services		4.7			47.5			22.9			75.1
Industrials		0			3.0			11.8			14.8
Utilities		0			10.1			0			10.1
Total		4.7	%		60.6	%		34.7	%		100.0	%

Approximately 55% of our preferred stock securities pay dividends that have tax preferential characteristics, while the balance pay dividends that are fully taxable. In addition, all of our non-investment-grade preferred stocks were with issuers that maintain investment-grade senior debt ratings.

App.-A-67

Common Equities

Common equities, as reported on the balance sheets at December 31, were comprised of the following:

($ in millions)	2011				2010
Common stocks	$	1,834.1	99.4	%	$	1,413.2	99.2	%
Other equity-like investments		11.5	.6			11.8	.8
Total common equities	$	1,845.6	100.0	%	$	1,425.0	100.0	%

At December 31, 2011, 11.6% of the portfolio was in common equities, compared to 9.2% at the same time last year. Our indexed common stock portfolio, which makes up 97% of our December 31, 2011 common stock holdings, is managed externally to track the Russell 1000 Index with an anticipated annual tracking error of +/- 50 basis points. Our individual holdings are selected based on their contribution to the correlation with the index. For 2011 and 2010, the GAAP basis total return was within the desired tracking error when compared to the Russell 1000 Index. We held 748 out of 981, or 76%, of the common stocks comprising the Russell 1000 Index at December 31, 2011, which made up 93% of the total market capitalization of the index.

The remaining 3% reflects our decision to invest in common stocks outside of the index. During the fourth quarter 2011, we selected an external investment manager to invest up to $150 million in such common stocks; at year-end 2011, $59.0 million was invested in such securities.

The year-over-year increase in our common stock portfolio reflects our efforts to increase our exposure during the year. During 2011, we recorded $1.6 million in write-downs on our common equities, compared to $0.9 million and $17.4 million for the years ended December 31, 2010 and 2009, respectively.

The following is a summary of our indexed common stock portfolio holdings by sector compared to the Russell 1000 Index composition:

Sector	Equity Portfolio Allocation at December 31, 2011			Russell 1000 Allocation at December 31, 2011			Russell 1000 Sector Return in 2011
Consumer discretionary		13.6	%		14.1	%		5.5	%
Consumer staple		8.9			9.1			14.5
Financial service		14.9			15.5			(12.9	)
Health care		11.5			11.2			11.8
Materials and processing		4.6			4.5			(6.9	)
Other energy		11.5			11.5			3.5
Producer durable		10.2			11.0			(1.9	)
Technology		16.6			16.5			.3
Utility		6.6			6.6			12.6
Other equity		1.6			NA			NA
Total common stocks		100.0	%		100.0	%		1.5	%

NA = Not Applicable

Trading Securities

At December 31, 2011 and 2010, we did not hold any trading securities and we did not have any net realized gains (losses) on trading securities for the years ended December 31, 2011, 2010, and 2009.

App.-A-68

Derivative Instruments

We have invested in the following derivative exposures at various times: interest rate swaps, asset-backed credit default swaps, U.S. corporate debt credit default swaps, cash flow hedges, and equity options. See Note 2—Investments for further discussion of our derivative positions.

For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as a component of the available-for-sale portfolio, the inception-to-date realized gain on the derivative position at period end would have to exceed any upfront cash received (net derivative asset). On the other hand, a net derivative liability would include any inception-to-date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to their immaterial effect on our financial condition, cash flows, and results of operations.

INTEREST RATE SWAPS

We invest in interest rate swaps primarily to manage the fixed-income portfolio duration. The following table summarizes our interest rate swap activity classified by the status (open vs. closed) of the swap position as of December 31, 2011:

										Net Realized Gains (Losses)
(millions)	Date			Notional Value						Years ended December 31,
Term	Effective	Maturity	Coupon	2011		2010		2009		2011			2010			2009
Open:
5-year	05/2011	05/2016	Receive variable	$	400	$	0	$	0	$	(20.0	)	$	0		$	0
5-year	08/2011	08/2016	Receive variable		500		0		0		(9.2	)		0			0
9-year	12/2009	01/2019	Receive variable		363		363		363		(44.8	)		(33.9	)		.1
Total open positions				$	1,263	$	363	$	363	$	(74.0	)	$	(33.9	)	$	.1
Closed:
2-year	NA	NA	Receive fixed	$	0	$	0	$	2,300	$	0		$	0		$	3.8
3-year	NA	NA	Receive fixed		0		0		880		0			0			8.3
5-year	NA	NA	Receive fixed		0		0		1,006		0			0			(1.7	)
9-year	NA	NA	Receive variable		350		350		350		(25.5	)		(32.7	)		0
Total closed positions				$	350	$	350	$	4,536	$	(25.5	)	$	(32.7	)	$	10.4
Total interest rate swaps										$	(99.5	)	$	(66.6	)	$	10.5

NA = Not Applicable

CORPORATE CREDIT DEFAULT SWAPS

We invest in corporate credit default swaps primarily to manage the fixed-income portfolio credit risk. The following table summarizes our corporate credit default swap activity classified by the status of the swap position as of December 31, 2011:

(millions)	Date		Bought or Sold Protection	Notional Value						Net Realized Gains (Losses)
										Years ended December 31,
Term	Effective	Maturity		2011		2010		2009		2011			2010			2009
Open:
5-year	09/2008	09/2013	Bought	$	25	$	25	$	25	$	(.2	)	$	.9		$	(.6	)
Closed:
2-year	NA	NA	Bought	$	0	$	10	$	7	$	0		$	0		$	(.4	)
4-year	NA	NA	Bought		0		15		0		0			(.2	)		0
Corporate swap	NA	NA	Sold		10		10		0		.2			1.2			0
Treasury Note1	NA	NA	Sold		10		10		0		.3			.4			0
Total closed positions										$	.5		$	1.4		$	(.4	)
Total corporate swaps										$	.3		$	2.3		$	(1.0	)

¹ Used to replicate a long corporate bond position.

NA = Not Applicable

App.-A-69

CASH FLOW HEDGES

During 2011, we issued $500 million of 3.75% Senior Notes and entered into a forecasted debt issuance hedge (cash flow hedge) against a possible rise in interest rates (see Note 4 – Debt for further discussion). Upon issuance of the 3.75% Senior Notes, the hedge was closed and we recognized, as part of accumulated other comprehensive income, a pretax unrealized loss of $5.1 million. The $5.1 million loss was deferred and is being recognized as an increase to interest expense over the life of the 3.75% Senior Notes.

We repurchased $15.0 million and $222.9 million principal amount of our 6.70% Debentures at or near par in the open market at December 31, 2011 and 2010, respectively (see Note 4 – Debt for further discussion). We reclassified $0.3 million and $5.8 million (pretax) from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the repurchased 6.70% Debentures.

During 2011, 2010, and 2009, we recognized $2.6 million, $2.7 million, and $2.8 million, respectively, as a net decrease to interest expense on our closed debt issuance cash flow hedges.

In 2009, we realized a foreign currency trade gain of $0.9 million, reflecting the previously deferred gain on our foreign currency cash flow hedge, which was opened during 2008 and closed in 2009.

B. Investment Results

Investment income (interest and dividends, before investment and interest expenses) decreased 8% for 2011, compared to an increase of 3% for 2010 and a decrease of 20% for 2009. The reduction in 2011 was primarily the result of a decrease in investment yields during the period. The increase in 2010 was the result of an increase in average invested assets, partially offset by a reduction in the portfolio yield. The reduction in 2009 was primarily the result of investing new cash and proceeds from security sales, redemptions, and maturities into lower-yielding U.S. Treasury Notes and short-term investments as a means to protect the portfolio from additional valuation declines and the historically low rate environment.

We report total return to reflect more accurately the management philosophy governing the portfolio and our evaluation of investment results. The fully taxable equivalent (FTE) total return includes investment income, net realized gains (losses) on securities, and changes in unrealized gains (losses) on investments.

The following summarizes investment results for the years ended December 31:

	2011			2010			2009
Pretax investment book yield		3.2	%		3.5	%		3.7	%
Weighted average FTE book yield		3.6	%		3.9	%		4.2	%
FTE total return:
Fixed-income securities		3.4	%		6.9	%		12.2	%
Common stocks		2.5	%		17.0	%		29.5	%
Total portfolio		3.2	%		7.8	%		12.5	%

App.-A-70

A further break-down of our total returns for our fixed-income securities, including the net gains (losses) on our derivative positions, for the years ended December 31, follows:

	2011			2010			2009
Fixed-income securities:
U.S. Treasury Notes		3.0	%		4.7	%		(1.7	)%
Municipal bonds		6.9	%		5.4	%		10.7	%
Corporate bonds		5.6	%		8.4	%		23.6	%
Commercial mortgage-backed securities		3.8	%		8.2	%		26.0	%
Collateralized mortgage obligations		.7	%		10.7	%		26.2	%
Asset-backed securities		1.3	%		7.0	%		.7	%
Preferred stocks		0	%		15.2	%		60.1	%

Investment expenses were $13.5 million in 2011, compared to $11.9 million in 2010 and $11.1 million in 2009. The increase in 2011 was the result of $1.0 million in expenses related to the issuance of our 3.75% Senior Notes during the year (see Note 4 – Debt for further discussion).

Interest expense in 2011 was $132.7 million, compared to $133.5 million in 2010 and $139.0 million in 2009. The decrease in 2011 and 2010 reflects the 2010 repurchase of $222.9 million of our 6.70% Debentures; in 2011, the decrease was partially offset by the issuance of our 3.75% Senior Notes (see Note 4 – Debt for further discussion).

Other-Than-Temporary Impairment (OTTI)

Realized losses may include write-downs of securities determined to have had an other-than-temporary decline in fair value. The write-down activity recorded in the comprehensive income statements for the years ended December 31, was as follows:

(millions)	Total Write-downs		Write-downs on Securities Sold			Write-downs on Securities Held at Period End
2011
Residential mortgage-backed securities	$	3.3	$	0		$	3.3
Commercial mortgage-backed securities		.6		0			.6
Total fixed income		3.9		0			3.9
Common equities		1.6		(1.4	)		.2
Total portfolio	$	5.5	$	(1.4	)	$	4.1
2010
Residential mortgage-backed securities	$	11.1	$	0		$	11.1
Commercial mortgage-backed securities		1.9		0			1.9
Total fixed income		13.0		0			13.0
Common equities		.9		(.4	)		.5
Total portfolio	$	13.9	$	(.4	)	$	13.5
2009
Residential mortgage-backed securities	$	32.0	$	0		$	32.0
Commercial mortgage-backed securities		.9		0			.9
Other asset-backed securities		.7		(.7	)		0
Preferred stocks		213.2		(48.3	)		164.9
Total fixed income		246.8		(49.0	)		197.8
Common equities		17.4		(7.1	)		10.3
Total portfolio	$	264.2	$	(56.1	)	$	208.1

See Critical Accounting Policies, Other-Than-Temporary Impairment for a complete discussion on our analysis regarding our treatment of OTTI.

App.-A-71

C. Repurchase Transactions

From time to time, we enter into reverse repurchase commitment transactions. In these transactions, we loan cash to internally approved counterparties and receive U.S. Treasury Notes pledged as collateral against the cash borrowed. We choose to enter into these transactions as rates and credit quality are more attractive than other short-term rates available in the market. Our exposure to credit risk is limited due to the characteristics of the collateral (i.e., U.S. Treasury Notes) received. The income generated on these transactions is calculated at the then applicable general collateral rates on the value of U.S. Treasury securities received. We have counterparty exposure on reverse repurchase agreements in the event of a counterparty default to the extent the general collateral security’s value is below the cash we delivered to acquire the collateral. The short-term duration of the transactions (primarily overnight investing) reduces that default exposure.

We earned income of $0.4 million, $1.2 million, and $0.9 million on reverse repurchase agreements for the years ended December 31, 2011, 2010, and 2009, respectively. We had $384.2 million of open reverse repurchase commitments with two counterparties at December 31, 2011, compared to $705.8 million open with two counterparties at December 31, 2010. During 2011, our largest single outstanding balance of reverse repurchase commitments was $975.0 million, which was open for four days; the average daily balance of reverse repurchase commitments was $618.7 million. During 2010, our largest single outstanding balance of reverse repurchase commitments was $1,131.3 million, which was open for one day; the average daily balance of reverse repurchase commitments was $744.9 million.

Additionally, during the second quarter 2011, we entered into repurchase commitment transactions during a period of ten days. In these transactions, we loaned U.S. Treasury securities to internally approved counterparties in exchange for cash equal to the fair value of the securities. The cash proceeds were invested in unsecured commercial paper issued by large, high-quality institutions. These transactions were entered into as overnight arrangements, and we had no open repurchase commitments at December 31, 2011. During the period we invested in repurchase transactions, the largest single outstanding balance was $43.6 million, which was open for one day; the average daily balance of repurchase commitments was $43.5 million. We earned income of less than $0.1 million during the period these transactions were open; we did not enter into any repurchase commitment transactions during 2010.

App.-A-72

V. CRITICAL ACCOUNTING POLICIES

Progressive is required to make certain estimates and assumptions when preparing its financial statements and accompanying notes in conformity with GAAP. Actual results could differ from those estimates in a variety of areas. The two areas that we view as most critical with respect to the application of estimates and assumptions are the establishment of our loss reserves and the method of determining impairments in our investment portfolio.

A. Loss and LAE Reserves

Loss and loss adjustment expense (LAE) reserves represent our best estimate of our ultimate liability for losses and LAE relating to events that occurred prior to the end of any given accounting period but have not yet been paid. At December 31, 2011, we had $6.5 billion of net loss and LAE reserves, which included $5.1 billion of case reserves and $1.4 billion of incurred but not recorded (IBNR) reserves.

Progressive’s actuarial staff reviews over 400 subsets of business data, which are at a combined state, product, and line coverage level (the “products”), to calculate the needed loss and LAE reserves. We begin our review of a set of data by producing multiple estimates of needed reserves, using both paid and incurred data, to determine if a reserve change is required. In the event of a wide variation among results generated by the different projections, our actuarial group will further analyze the data using additional techniques. Each review develops a point estimate for a relatively small subset of the business, which allows us to establish meaningful reserve levels for that subset. In addition, the actuarial staff completes separate projections of needed case and IBNR reserves.

We review a large majority of our reserves by product/state combination on a quarterly time frame, with the remaining reserves generally reviewed on a semiannual basis. A change in our scheduled reviews of a particular subset of the business depends on the size of the subset or emerging issues relating to the product or state. By reviewing the reserves at such a detailed level, we have the ability to identify and measure variances in the trends by state, product, and line coverage that otherwise would not be seen on a consolidated basis. Our intricate process of reviewing the aforementioned subsets makes compiling a companywide roll up to generate a range of needed loss reserves not meaningful. We do not review loss reserves on a macro level and, therefore, do not derive a companywide range of reserves to compare to a standard deviation.

In analyzing the ultimate accident year loss experience, our actuarial staff reviews in detail, at the subset level, frequency (number of losses per earned car year), severity (dollars of loss per each claim), and average premium (dollars of premium per earned car year). The loss ratio, a primary measure of loss experience, is equal to the product of frequency times severity divided by the average premium. The average premium for personal and commercial auto businesses is not estimated. The actual frequency experienced will vary depending on the change in mix of class of drivers insured by Progressive, but the frequency projections for these lines of business is generally stable in the short term, because a large majority of the parties involved in an accident report their claims within a short time period after the occurrence. The severity experienced by Progressive is much more difficult to estimate, especially for injury claims, since severity is affected by changes in underlying costs, such as medical costs, jury verdicts, and regulatory changes. In addition, severity will vary relative to the change in our mix of business by limit.

Assumptions regarding needed reserve levels made by the actuarial staff take into consideration influences on available historical data that reduce the predictiveness of our projected future loss costs. Internal considerations that are process-related, which generally result from changes in our claims organization’s activities, include claim closure rates, the number of claims that are closed without payment, and the level of the claims representatives’ estimates of the needed case reserve for each claim. These changes and their effect on the historical data are studied at the state level versus on a larger, less indicative, countrywide basis.

External items considered include the litigation atmosphere, state-by-state changes in medical costs, and the availability of services to resolve claims. These also are better understood at the state level versus at a more macro, countrywide level.

The manner in which we consider and analyze the multitude of influences on the historical data, as well as how loss reserves affect our financial results, is discussed in more detail in our Report on Loss Reserving Practices, which was filed on June 30, 2011 via Form 8-K.

App.-A-73

At December 31, 2011, Progressive had $7.2 billion of carried gross reserves and $6.5 billion of net reserves (net of reinsurance recoverables on unpaid losses). Our net reserve balance implicitly assumes that the loss and LAE severity for accident year 2011 over accident year 2010 will decrease by 0.2% for personal auto liability and increase 8.4% for commercial auto liability. Personal auto liability and commercial auto liability reserves represent approximately 98% of our total carried net reserves. As discussed above, the severity estimates are influenced by many variables that are difficult to precisely quantify and which influence the final amount of claims settlement. That, coupled with changes in internal claims practices, the legal environment, and state regulatory requirements, requires significant judgment in the estimate of the needed reserves to be carried.

The following table highlights what the effect would be to our carried loss and LAE reserves, on a net basis, as of December 31, 2011, if during 2012 we were to experience the indicated change in our estimate of severity for the 2011 accident year (i.e., claims that occurred in 2011):

	Estimated Changes in Severity for Accident Year 2011
(millions)	-4%		-2%		As Reported		+2%		+4%
Personal auto liability	$	4,872.1	$	4,993.3	$	5,114.5	$	5,235.7	$	5,356.9
Commercial auto liability		1,173.6		1,190.2		1,206.8		1,223.4		1,240.0
Other1		138.8		138.8		138.8		138.8		138.8
Total	$	6,184.5	$	6,322.3	$	6,460.1	$	6,597.9	$	6,735.7

¹ Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is presented due to the immaterial level of these reserves.

Note: Every percentage point change in our estimate of severity for the 2011 accident years would affect our personal auto liability reserves by $60.6 million and our commercial auto reserves by $8.3 million.

Our 2011 year-end loss and LAE reserve balance also includes claims from prior years. Claims that occurred in 2011, 2010, and 2009, in the aggregate, accounted for approximately 92% of our reserve balance. If during 2012 we were to experience the indicated change in our estimate of severity for the total of the prior three accident years (i.e., 2011, 2010, and 2009), the effect to our year-end 2011 reserve balances would be as follows:

	Estimated Changes in Severity for Accident Years 2011, 2010, and  2009
(millions)	-4%		-2%		As Reported		+2%		+4%
Personal auto liability	$	4,413.7	$	4,764.1	$	5,114.5	$	5,464.9	$	5,815.3
Commercial auto liability		1,111.6		1,159.2		1,206.8		1,254.4		1,302.0
Other1		138.8		138.8		138.8		138.8		138.8
Total	$	5,664.1	$	6,062.1	$	6,460.1	$	6,858.1	$	7,256.1

¹ Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is presented due to the immaterial level of these reserves.

Note: Every percentage point change in our estimate of severity for the 2011, 2010, and 2009 accident years would affect our personal auto liability reserves by $175.2 million and our commercial auto reserves by $23.8 million.

App.-A-74

Our best estimate of the appropriate amount for our reserves as of year-end 2011 is included in our financial statements for the year. Our goal is to ensure that total reserves are adequate to cover all loss costs, while sustaining minimal variation from the time reserves are initially established until losses are fully developed. At the point in time when reserves are set, we have no way of knowing whether our reserve estimates will prove to be high or low, or whether one of the alternative scenarios discussed above is “reasonably likely” to occur. The above tables show the possible favorable or unfavorable development we will realize if our estimates miss by 2% or 4%. During 2011, our estimate of the needed reserves at the end of 2010 decreased 3.8%. The following table shows how we have performed against this goal over the last ten years:

($ in millions) For the years ended December 31,	2001		2002		2003		2004		2005		2006		2007		2008		2009		2010		2011
Loss and LAE Reserves - net1	$	3,069.7	$	3,632.1	$	4,346.4	$	4,948.5	$	5,313.1	$	5,363.6	$	5,655.2	$	5,932.9	$	6,123.6	$	6,366.9	$	6,460.1
Re-estimated reserves as of:
One year later		3,073.2		3,576.0		4,237.3		4,592.6		5,066.2		5,443.9		5,688.4		5,796.9		5,803.2		6,124.9
Two years later		3,024.2		3,520.7		4,103.3		4,485.2		5,130.5		5,469.8		5,593.8		5,702.1		5,647.7		—
Three years later		2,988.7		3,459.2		4,048.0		4,501.6		5,093.6		5,381.9		5,508.0		5,573.8		—		—
Four years later		2,982.7		3,457.8		4,070.0		4,471.0		5,046.7		5,336.5		5,442.1		—		—		—
Five years later		2,993.7		3,475.4		4,073.7		4,475.5		5,054.6		5,342.8		—		—		—		—
Six years later		3,002.5		3,472.5		4,072.4		4,486.4		5,060.8		—		—		—		—		—
Seven years later		3,000.6		3,470.1		4,080.5		4,486.3		—		—		—		—		—		—
Eight years later		2,995.8		3,477.3		4,077.8		—		—		—		—		—		—		—
Nine years later		3,000.9		3,475.9		—		—		—		—		—		—		—		—
Ten years later		3,000.0		—		—		—		—		—		—		—		—		—
Cumulative Development:
Favorable(Unfavorable)	$	69.7	$	156.2	$	268.6	$	462.2	$	252.3	$	20.8	$	213.1	$	359.1	$	475.9	$	242.0
Percentage2		2.3		4.3		6.2		9.3		4.7		0.4		3.8		6.1		7.8		3.8

¹ Represents loss and LAE reserves net of reinsurance recoverables on net unpaid losses at the balance sheet date.

² Cumulative development ÷ loss and LAE reserves.

Note: The chart above represents the development of the property casualty loss and LAE reserves for 2001 through 2010. The last line in the triangle for each year represents the following:

Re-estimated reserves = Total amount paid to-date + Re-estimated liability for unpaid losses and LAE-net

Changes in the estimated severity and the actual number of late reported claims are the cause of the change in our re-estimated reserves from year to year. The cumulative development represents the aggregate change in our estimates over all years.

For 2001, while we experienced an increase in bodily injury severity, our developed reserves were within 2.5% of our original estimates. Our bodily injury severity change was much lower than we expected between 2002 and 2005; thus, the reserve run-off for these years was very favorable following the end of each year, or about 4% to 9% of our original carried amounts. The reserve development for 2006 and 2007 was less than 4% of our original carried reserves. For both 2008 and 2009, we experienced favorable reserve development of more than 6% of our original estimates, which reflects the decreases in severity we experienced in both our personal auto (about 3.5%) and Commercial Auto (about 5%) businesses through 2011. The favorable development of approximately 4% for 2010 also reflects lower severity estimates for both personal auto and Commercial Auto, but to a lesser extent than the previous two years.

Because Progressive is primarily an insurer of motor vehicles, we have minimal exposure as an insurer of environmental, asbestos, and general liability claims.

App.-A-75

B. Other-Than-Temporary Impairment (OTTI)

Realized losses may include write-downs of securities determined to have had an other-than-temporary decline in fair value. We routinely monitor our portfolio for pricing changes that might indicate potential impairments and perform detailed reviews of securities with unrealized losses based on predetermined guidelines. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial conditions, business prospects, or other factors, (ii) market-related factors, such as interest rates or equity market declines (e.g., negative return at either a sector index level or at the broader market level), or (iii) credit-related losses, where the present value of cash flows expected to be collected is lower than the amortized cost basis of the security.

Fixed-income securities and common equities with declines attributable to issuer-specific fundamentals are reviewed to identify all available evidence, circumstances, and influences to estimate the potential for, and timing of, recovery of the investment’s impairment. An other-than-temporary impairment loss is deemed to have occurred when the potential for recovery does not satisfy the criteria set forth in the current accounting guidance.

For fixed-income investments with unrealized losses due to market- or sector-related declines, the losses are not deemed to qualify as other-than-temporary if we do not have the intent to sell the investments, and it is more likely than not that we will not be required to sell the investments, prior to the period of time that we anticipate to be necessary for the investments to recover their cost bases. In general, our policy for common equity securities with market- or sector-related declines is to recognize impairment losses on individual securities with losses we cannot reasonably conclude will recover in the near term under historical conditions by the earlier of (i) when we are able to objectively determine that the loss is other-than-temporary, or (ii) when the security has been in such a loss position for three consecutive quarters.

When a security in our fixed-maturity portfolio has an unrealized loss and we intend to sell the security, or it is more likely than not that we will be required to sell the security, we write-down the security to its current fair value and recognize the entire unrealized loss through the comprehensive income statement as a realized loss. If a fixed-maturity security has an unrealized loss and it is more likely than not that we will hold the debt security until recovery (which could be maturity), then we determine if any of the decline in value is due to a credit loss (i.e., where the present value of cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we will recognize that portion of the impairment in the comprehensive income statement as a realized loss; any remaining unrealized loss on the security is considered to be due to other factors (e.g., interest rate and credit spread movements) and is reflected in shareholders’ equity, along with unrealized gains or losses on securities that are not deemed to be other-than-temporarily impaired.

The following table stratifies the gross unrealized losses in our fixed-income and common equity portfolios at December 31, 2011, by the duration in a loss position and magnitude of the loss as a percentage of the cost of the security:

(millions)	Fair Value		Total Gross Unrealized Losses		Decline of Investment Value
					>15%		>25%		>35%		>45%
Fixed Income:
Unrealized loss for less than 12 months	$	735.3	$	16.8	$	3.9	$	0	$	0	$	0
Unrealized loss for 12 months or greater		628.5		60.1		29.2		24.3		13.2		4.2
Total	$	1,363.8	$	76.9	$	33.1	$	24.3	$	13.2	$	4.2
Common Equity:
Unrealized loss for less than 12 months	$	196.7	$	23.1	$	14.7	$	5.1	$	0	$	0
Unrealized loss for 12 months or greater		17.9		2.3		.5		0		0		0
Total	$	214.6	$	25.4	$	15.2	$	5.1	$	0	$	0

We completed a thorough review of the existing securities in these loss categories and determined that, applying the procedures and criteria discussed above, these securities were not other-than-temporarily impaired. We do not intend to sell these securities. We also determined that it is more likely than not that we will not be required to sell these securities, for the periods of time necessary to recover the cost bases of these securities, and that there is no additional credit-related impairment on our debt securities.

Since total unrealized losses are already a component of our shareholders’ equity in the comprehensive income statement, any recognition of these losses as additional OTTI losses would have no effect on our total comprehensive income, book value, or reported investment total return.

App.-A-76

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Statements in this report that are not historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to estimates, assumptions, and projections generally; inflation and changes in economic conditions (including changes in interest rates and financial markets); the possible failure of one or more governmental entities to make scheduled debt payments or satisfy other obligations; the potential or actual downgrading of governmental, corporate, or other securities by a rating agency; the financial condition of, and other issues relating to the strength of and liquidity available to, issuers of securities held in our investment portfolios and other companies with which we have ongoing business relationships, including counterparties to certain financial transactions; the accuracy and adequacy of our pricing and loss reserving methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to retain more customers; initiatives by competitors and the effectiveness of our response; our ability to obtain regulatory approval for requested rate changes and the timing thereof; the effectiveness of our brand strategy and advertising campaigns relative to those of competitors; legislative and regulatory developments, including, but not limited to, health care reform and tax law changes; disputes relating to intellectual property rights; the outcome of litigation pending or that may be filed against us; weather conditions (including the severity and frequency of storms, hurricanes, snowfalls, hail, and winter conditions); changes in driving patterns and loss trends; acts of war and terrorist activities; our ability to maintain the uninterrupted operation of our facilities, systems (including information technology systems), and business functions; court decisions and trends in litigation and health care and auto repair costs; and other matters described from time to time in our releases and publications, and in our periodic reports and other documents filed with the United States Securities and Exchange Commission. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.

App.-A-77

The Progressive Corporation and Subsidiaries

Ten Year Summary – Selected Financial Information

(unaudited)

(millions - except ratios, policies in force, per share amounts, and number of people employed)	2011			2010			2009			2008			2007
Net premiums written	$	15,146.6		$	14,476.8		$	14,002.9		$	13,604.3		$	13,772.5
Growth		5	%		3	%		3	%		(1	)%		(3	)%
Net premiums earned	$	14,902.8		$	14,314.8		$	14,012.8		$	13,631.4		$	13,877.4
Growth		4	%		2	%		3	%		(2	)%		(2	)%
Policies in force (thousands):
Personal Lines		12,283.8			11,702.7			10,940.6			10,464.9			10,115.6
Growth		5	%		7	%		5	%		3	%		4	%
Commercial Auto		509.1			510.4			512.8			539.4			539.2
Growth		0	%		0	%		(5	)%		0	%		7	%
Total revenues	$	15,508.1		$	14,963.3		$	14,563.6		$	12,840.1		$	14,686.8
Underwriting margins:1
Personal Lines		6.8	%		7.0	%		7.6	%		5.4	%		7.0	%
Commercial Auto		9.1	%		12.5	%		14.2	%		5.3	%		10.1	%
Total underwriting operations		7.0	%		7.6	%		8.4	%		5.4	%		7.4	%
Net income (loss)	$	1,015.5		$	1,068.3		$	1,057.5		$	(70.0	)	$	1,182.5
Per share2		1.59			1.61			1.57			(.10	)		1.65
Average equivalent shares2		636.9			663.3			672.2			668.0			718.5
Comprehensive income (loss)	$	924.3		$	1,398.8		$	1,752.2		$	(614.7	)	$	1,071.0
Total assets	$	21,844.8		$	21,150.3		$	20,049.3		$	18,250.5		$	18,843.1
Debt outstanding		2,442.1			1,958.2			2,177.2			2,175.5			2,173.9
Total shareholders’ equity		5,806.7			6,048.9			5,748.6			4,215.3			4,935.5
Statutory surplus		5,269.2			5,073.0			4,953.6			4,470.6			4,587.3
Common shares outstanding		613.0			662.4			672.6			676.5			680.2
Common share price:
High	$	22.08		$	22.13		$	18.10		$	21.31		$	25.16
Low		16.88			16.18			9.76			10.29			17.26
Close (at December 31)		19.51			19.87			17.99			14.81			19.16
Market capitalization	$	11,959.6		$	13,161.9		$	12,100.1		$	10,019.0		$	13,032.6
Book value per common share		9.47			9.13			8.55			6.23			7.26
Ratios:
Return on average shareholders’ equity
Net income		16.5	%		17.1	%		21.4	%		(1.5	)%		19.5	%
Comprehensive income		15.0	%		22.3	%		35.5	%		(13.3	)%		17.7	%
Debt to total capital		29.6	%		24.5	%		27.5	%		34.0	%		30.6	%
Price to earnings3		12.3			12.3			11.5			NA			11.6
Price to book		2.1			2.2			2.1			2.4			2.6
Earnings to fixed charges3		11.6	x		11.9	x		11.3	x		NA			13.5	x
Net premiums written to statutory surplus		2.9			2.9			2.8			3.0			3.0
Statutory combined ratio		92.9			92.5			91.6			94.6			92.7
Dividends declared per share4	$	.4072		$	1.3987		$	.1613		$	0		$	2.1450
Number of people employed		25,007			24,638			24,661			25,929			26,851

All share and per share amounts were adjusted for the May 18, 2006, 4-for-1 stock split.

¹  Underwriting margins are calculated as pretax underwriting profit (loss), as defined in Note 10 — Segment Information, as a percentage of net premiums earned.

²  Amounts reflect basic net income per share and basic average equivalent shares for 2008 since we reported a net loss; all other periods are presented on a diluted basis.

App.-A-78

(millions – except ratios, policies in force, per share amounts, and number of people employed)	2006			2005			2004			2003			2002
Net premiums written	$	14,132.0		$	14,007.6		$	13,378.1		$	11,913.4		$	9,452.0
Growth		1	%		5	%		12	%		26	%		30	%
Net premiums earned	$	14,117.9		$	13,764.4		$	13,169.9		$	11,341.0		$	8,883.5
Growth		3	%		5	%		16	%		28	%		24	%
Policies in force (thousands):
Personal Lines		9,741.1			9,494.0			8,680.3			7,807.9			6,569.1
Growth		3	%		9	%		11	%		19	%		22	%
Commercial Auto		503.2			468.2			420.2			365.1			288.9
Growth		7	%		11	%		15	%		26	%		38	%
Total revenues	$	14,786.4		$	14,303.4		$	13,782.1		$	11,892.0		$	9,294.4
Underwriting margins:1
Personal Lines		12.3	%		11.0	%		14.1	%		12.1	%		7.5	%
Commercial Auto		19.8	%		17.9	%		21.1	%		17.5	%		9.1	%
Total underwriting operations		13.3	%		11.9	%		14.9	%		12.7	%		7.6	%
Net income (loss)	$	1,647.5		$	1,393.9		$	1,648.7		$	1,255.4		$	667.3
Per share2		2.10			1.74			1.91			1.42			.75
Average equivalent shares2		783.8			799.3			864.8			882.1			892.8
Comprehensive income (loss)	$	1,853.1		$	1,347.8		$	1,668.5		$	1,511.1		$	710.7
Total assets	$	19,482.1		$	18,898.6		$	17,184.3		$	16,281.5		$	13,564.4
Debt outstanding		1,185.5			1,284.9			1,284.3			1,489.8			1,489.0
Total shareholders’ equity		6,846.6			6,107.5			5,155.4			5,030.6			3,768.0
Statutory surplus		4,963.7			4,674.1			4,671.0			4,538.3			3,370.2
Common shares outstanding		748.0			789.3			801.6			865.8			871.8
Common share price:
High	$	30.09		$	31.23		$	24.32		$	21.17		$	15.12
Low		22.18			20.35			18.28			11.56			11.19
Close (at December 31)		24.22			29.20			21.21			20.90			12.41
Market capitalization	$	18,116.6		$	23,040.7		$	17,001.9		$	18,088.9		$	10,819.3
Book value per common share		9.15			7.74			6.43			5.81			4.32
Ratios:
Return on average shareholders’ equity
Net income		25.3	%		25.0	%		30.0	%		29.1	%		19.3	%
Comprehensive income		28.4	%		24.1	%		30.4	%		35.0	%		20.5	%
Debt to total capital		14.8	%		17.4	%		19.9	%		22.8	%		28.3	%
Price to earnings3		11.5			16.7			11.1			14.7			16.6
Price to book		2.6			3.8			3.3			3.6			2.9
Earnings to fixed charges3		24.7	x		21.3	x		27.1	x		18.8	x		13.2	x
Net premiums written to statutory surplus		2.8			3.0			2.9			2.6			2.8
Statutory combined ratio		86.5			87.4			84.6			86.2			91.3
Dividends declared per share4	$	.0325		$	.0300		$	.0275		$	.0250		$	.0240
Number of people employed		27,778			28,336			27,085			25,834			22,974

³  Ratios are not applicable (NA) for 2008 since we reported a net loss for the year.

⁴  Progressive transitioned to an annual variable dividend policy beginning in 2007. In accordance with this policy, no dividend was declared in 2008 since our comprehensive income was less than after-tax underwriting income. In addition to the annual variable dividend, Progressive’s Board declared extraordinary cash dividends of $1.00 per common share in 2010 and $2.00 per common share in 2007. Progressive paid quarterly dividends prior to 2007.

App.-A-79

The Progressive Corporation and Subsidiaries

Quarterly Financial and Common Share Data

(unaudited)

(millions – except per share amounts)
			Net Income				Stock Price1
Quarter	Total Revenues		Total		Per Share2		High		Low		Close		Rate of Return3			Dividends Declared Per Share4
2011
1	$	3,893.5	$	362.9	$	.55	$	21.24	$	19.12	$	21.13				$	0
2		3,872.7		245.2		.38		22.08		19.79		21.38					0
3		3,811.0		150.7		.24		21.66		16.88		17.76					0
4		3,930.9		256.7		.42		19.74		16.97		19.51					.4072
	$	15,508.1	$	1,015.5	$	1.59	$	22.08	$	16.88	$	19.51		.2	%	$	.4072
2010
1	$	3,665.9	$	295.6	$	.44	$	19.69	$	16.18	$	19.09				$	0
2		3,686.3		211.9		.32		20.94		18.67		18.72					0
3		3,769.5		261.6		.40		21.59		18.41		20.87					0
4		3,841.6		299.2		.45		22.13		19.54		19.87					1.3987
	$	14,963.3	$	1,068.3	$	1.61	$	22.13	$	16.18	$	19.87		16.9	%	$	1.3987
2009
1	$	3,468.2	$	232.5	$	.35	$	15.24	$	9.76	$	13.44				$	0
2		3,583.5		250.1		.37		17.00		13.00		15.11					0
3		3,611.3		269.9		.40		17.50		14.12		16.58					0
4		3,900.6		305.0		.46		18.10		15.90		17.99					.1613
	$	14,563.6	$	1,057.5	$	1.57	$	18.10	$	9.76	$	17.99		21.5	%	$	.1613

¹ Prices are as reported on the consolidated transaction reporting system. Progressive’s common shares are listed on the New York Stock Exchange under the symbol PGR.

² The sum may not equal the total because the average equivalent shares differ in the quarterly and annual periods.

³ Represents annual rate of return, assuming dividend reinvestment.

⁴ Progressive maintains an annual variable dividend policy which is typically declared each December and paid early the following year. In addition to the annual variable dividend, in October 2010, Progressive’s Board declared an extraordinary cash dividend of $1.00 per common share that was paid in December 2010.

App.-A-80

The Progressive Corporation and Subsidiaries

Performance Graph

(unaudited)

The following performance graph compares the performance of Progressive’s Common Shares (“PGR”) to the Standard & Poor’s Index (“S&P Index”) and the Value Line Property/Casualty Industry Group (“P/C Group”) for the last five years.

Cumulative Five-Year Total Return*

PGR, S&P Index, P/C Group (Performance Results through 12/31/11)

(Assumes $100 was invested at the close of trading on December 31, 2006)
	2007		2008		2009		2010		2011
PGR	$	87.37	$	68.24	$	82.90	$	96.91	$	97.06
S&P Index		105.49		67.02		84.75		97.51		99.57
P/C Group		121.77		86.79		106.88		129.03		138.42

^*  Assumes reinvestment of dividends

Source: Value Line Publishing LLC

App.-A-81

The Progressive Corporation and Subsidiaries

Claims Payment Patterns

(unaudited)

The Progressive Group of Insurance Companies is primarily an insurer of automobiles and recreational vehicles owned by individuals, and cars and trucks owned by small businesses. As such, our claims liabilities are generally short in duration. Since our incurred losses consist of both payments and changes in the reserve estimates, it is important to understand our paid development patterns. The charts below show our claims payment patterns, reflecting both dollars and claims counts paid, for personal auto physical damage and bodily injury claims, as well as on a total personal auto basis, in each case calculated from the date of loss. Since physical damage claims pay out so quickly, the chart is calibrated on a monthly basis, as compared to a quarterly basis for the bodily injury and total auto payments.

App.-A-82

Note: The above graphs are presented for our personal auto products on an accident period basis and are based on three years of actual experience for physical damage and nine years for bodily injury and total personal auto.

App.-A-83

The Progressive Corporation and Subsidiaries

Quantitative Market Risk Disclosures

(unaudited)

Quantitative market risk disclosures are only presented for market risk categories when risk is considered material. Materiality is determined based on the fair value of the financial instruments at December 31, 2011, and the potential for near-term losses from reasonably possible near-term changes in market rates or prices. We had no trading financial instruments at December 31, 2011. See Management’s Discussion and Analysis of Financial Condition and Results of Operations for our discussion of the qualitative information about market risk.

OTHER-THAN-TRADING FINANCIAL INSTRUMENTS

Financial instruments subject to interest rate risk were:

	Fair Value
(millions)	-200 bps Change1		-100 bps Change1		Actual		+100 bps Change		+200 bps Change
U.S. government obligations2	$	2,943.2	$	2,964.2	$	2,963.0	$	2,930.4	$	2,902.0
State and local government obligations		2,057.6		2,040.4		2,002.1		1,951.3		1,904.2
Asset-backed securities		3,557.3		3,551.7		3,524.1		3,465.0		3,409.2
Corporate securities		2,973.8		2,955.0		2,896.2		2,805.6		2,719.6
Nonredeemable preferred stocks		813.7		813.1		806.3		793.6		781.0
Redeemable preferred stocks		377.3		377.0		373.9		368.0		362.2
Short-term investments		1,551.8		1,551.8		1,551.8		1,551.8		1,551.8
Balance as of December 31, 2011	$	14,274.7	$	14,253.2	$	14,117.4	$	13,865.7	$	13,630.0
Balance as of December 31, 2010	$	14,539.6	$	14,416.6	$	14,098.4	$	13,799.3	$	13,516.3

¹ The amounts reflect an interest rate of 1 basis point when the hypothetical decline in interest rates would have pushed yields to a negative level.

² Due to the low interest rate environment and our portfolio containing no U.S. Treasury Notes at the longer end of the yield curve, the loss in value associated with the interest rate swap derivative positions with a short exposure (i.e., paying fixed, receiving variable) to interest rates would exceed the increase in value of our long U.S. Treasury Notes, resulting in an overall decline in value of these securities at the -200 bps movement.

Exposure to risk is represented in terms of changes in fair value due to selected hypothetical movements in market rates. Bonds and preferred stocks are individually priced to yield to the worst case scenario, which includes any issuer-specific features, such as a call option. Asset-backed securities, including state and local government housing securities, are priced assuming deal specific prepayment scenarios, considering the deal structure, prepayment penalties, yield maintenance agreements, and the underlying collateral.

Financial instruments subject to equity market risk were:

	Fair Value
(millions)	-10%		Actual		+10%
Common equities as of December 31, 2011	$	1,659.2	$	1,845.6	$	2,032.0
Common equities as of December 31, 2010	$	1,271.1	$	1,425.0	$	1,578.9

The model represents the estimated value of our common equity portfolio given a +/-10% change in the market, based on the common stock portfolio’s weighted average beta of 1.01 for 2011 and 1.08 for 2010. The beta is derived from recent historical experience, using the S&P 500 as the market surrogate. The historical relationship of the common stock portfolio’s beta to the S&P 500 is not necessarily indicative of future correlation, as individual company or industry factors may affect price movement. Betas are not available for all securities. In such cases, the change in fair value reflects a direct +/-10% change; the portion of securities without betas is approximately 2%.

App.-A-84

The Progressive Corporation and Subsidiaries

Net Premiums Written by State

(unaudited)

($ in millions)	2011				2010				2009				2008				2007
Florida	$	1,683.1	11.1	%	$	1,603.2	11.1	%	$	1,667.0	11.9	%	$	1,631.0	12.0	%	$	1,656.9	12.0	%
Texas		1,403.8	9.3			1,321.4	9.1			1,228.9	8.8			1,151.3	8.5			1,072.0	7.8
California		935.8	6.2			914.1	6.3			951.9	6.8			1,016.3	7.5			1,106.4	8.0
Georgia		738.2	4.9			714.6	4.9			682.9	4.9			699.7	5.1			748.9	5.4
New York		713.4	4.7			685.3	4.7			704.1	5.0			738.8	5.4			847.9	6.2
Ohio		689.0	4.5			652.5	4.5			623.9	4.5			632.4	4.7			655.9	4.8
Pennsylvania		623.1	4.1			608.5	4.2			580.7	4.1			563.7	4.1			610.5	4.4
New Jersey		496.3	3.3			440.6	3.1			405.9	2.9			341.0	2.5			279.1	2.0
Louisiana		496.1	3.3			465.9	3.2			414.5	3.0			373.7	2.7			359.4	2.6
Michigan		471.7	3.1			448.4	3.1			455.3	3.2			461.8	3.4			443.5	3.2
All other		6,896.1	45.5			6,622.3	45.8			6,287.8	44.9			5,994.6	44.1			5,992.0	43.6
Total	$	15,146.6	100.0	%	$	14,476.8	100.0	%	$	14,002.9	100.0	%	$	13,604.3	100.0	%	$	13,772.5	100.0	%

App.-A-85

Principal Office

The Progressive Corporation

6300 Wilson Mills Road

Mayfield Village, Ohio 44143

440-461-5000

progressive.com

24-Hour Insurance Quotes, Claims Reporting, and Customer Service

	Personal autos, motorcycles, and recreational vehicles	Commercial autos/trucks
To receive a quote	1-800-PROGRESSIVE (1-800-776-4737) progressive.com	1-888-806-9598 progressivecommercial.com
To report a claim	1-800-274-4499 progressive.com1	1-800-274-4499
For customer service:
If you bought your policy through an independent agent or broker	1-800-925-2886 (1-800-300-3693 in California) progressiveagent.com	1-800-444-4487 progressivecommercial.com
If you bought your policy directly through Progressive online or by phone	1-800-PROGRESSIVE (1-800-776-4737) progressive.com	1-800-444-4487 progressivecommercial.com
If you have a complaint or concern regarding any claim handling or other claims-related issue2	1-800-274-4641 email: claims@email.progressive.com	1-800-274-4641 email: claims@email.progressive.com

¹  Claims reporting via the website is currently only available for personal auto policies.

²  Any policyholder, claimant, or other interested party who has any complaint or concern regarding any claim handling or other claims-related issue may report such claim using the contact information above. The complaint or concern will be promptly forwarded to the appropriate management personnel in our claims organization for review and response.

Annual Meeting  The Annual Meeting of Shareholders will be held at the offices of The Progressive Corporation, 6671 Beta Drive, Mayfield Village, Ohio 44143 on April 20, 2012, at 10 a.m. eastern time. There were 3,273 shareholders of record on December 31, 2011.

Common Shares and Dividends  The Progressive Corporation’s common shares are traded on the New York Stock Exchange (symbol PGR). Progressive currently has an annual variable dividend policy. We expect the Board to declare the next annual variable dividend, subject to policy limitations, in December 2012, with a record date in January 2013 and payment shortly thereafter. A complete description of our annual variable dividend policy can be found at:

progressive.com/dividend.

Shareholder/Investor Relations  Progressive does not maintain a mailing list for distribution of shareholders’ reports. To view Progressive’s publicly filed documents, shareholders can access our website: progressive.com/sec. To view our earnings and other releases, access progressive.com/investors.

For financial-related information or to request copies of Progressive’s publicly filed documents free of charge, write to: The Progressive Corporation, Investor Relations, 6300 Wilson Mills Road, Box W33, Mayfield Village, Ohio 44143, email: investor_relations@progressive.com or call: 440-395-2222.

For all other company information, call: 440-461-5000 or access our website at progressive.com/contactus.

Transfer Agent and Registrar

Registered Shareholders:  If you have questions or changes to your account and your Progressive shares are registered in your name, write to: American Stock Transfer & Trust Company, Attn: Operations Center, 6201 15th Avenue, Brooklyn, NY 11219; phone: 1-866-709-7695; email: info@amstock.com; or visit their website at: www.amstock.com.

Beneficial Shareholders:  If your Progressive shares are held in a brokerage or other financial institution account, contact your broker or financial institution directly regarding questions or changes to your account.

App.-A-86

Contact Non-Management Directors Interested parties have the ability to contact the non-management directors as a group by sending a written communication clearly addressed to the non-management directors to either of the following:

Peter B. Lewis, Chairman of the Board, The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 or email: peter_lewis@progressive.com.

Charles E. Jarrett, Secretary, The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 or email: chuck_jarrett@progressive.com.

The recipient will forward communications so received to the non-management directors.

Accounting Complaint Procedure  Any employee or other interested party with a complaint or concern regarding accounting, internal accounting controls, or auditing matters relating to Progressive may report such complaint or concern directly to the Chairman of the Audit Committee, as follows: Patrick H. Nettles, Ph.D., Chairman of the Audit Committee, patrick_nettles@progressive.com.

Any such complaint or concern also may be reported anonymously over the following toll-free Alert Line: 1-800-683-3604 or online at www.progressivealertline.com. Progressive will not retaliate against any individual by reason of his or her having made such a complaint or reported such a concern in good faith. View the complete procedures at:

progressive.com/governance.

Whistleblower Protections  Progressive will not retaliate against any officer or employee of Progressive because of any lawful act done by the employee to provide information or otherwise assist in investigations regarding conduct that the employee reasonably believes to be a violation of federal securities laws or of any rule or regulation of the Securities and Exchange Commission or federal securities laws relating to fraud against shareholders. View the complete Whistleblower Protections at progressive.com/governance.

Corporate Governance  Progressive’s Corporate Governance Guidelines and Board Committee Charters are available at: progressive.com/governance.

Counsel  Baker & Hostetler LLP, Cleveland, Ohio

Charitable Contributions  Progressive contributes annually to The Progressive Insurance Foundation, which provides: (i) financial support to the Insurance Institute for Highway Safety to further its work in reducing the human trauma and economic costs of auto accidents; and (ii) matching funds to eligible 501(c)(3) charitable organizations to which Progressive employees contribute.

Social Responsibility  Progressive uses an interactive online format to communicate our social responsibility efforts. This report can be found at: progressive.com/socialresponsibility.

Online Annual Report and Proxy Statement  Our 2011 Annual Report to Shareholders can be found at:

progressive.com/annualreport.

We have also posted copies of our 2012 Proxy Statement and 2011 Annual Report to Shareholders, in a “PDF” format, at: progressiveproxy.com.

^©2012 The Progressive Corporation

App.-A-87

Directors
Stuart B. Burgdoerfer1,6	* Norman S. Matthews3,5,6	1 Audit Committee Member
Executive Vice President and	Consultant,	2 Executive Committee Member
Chief Financial Officer,	Former President,	3 Compensation Committee Member
Limited Brands, Inc.	Federated Department Stores, Inc.	4 Investment and Capital Committee
(retailing)	(retailing)	Member
		5 Nominating and Governance
Charles A. Davis4,5,6	Heidi G. Miller, Ph.D.1,6	Committee Member
Chief Executive Officer,	Retired President of International,	6 Independent Director
Stone Point Capital LLC	JPMorgan Chase & Co.
(private equity investing)	(financial services)
Roger N. Farah3,6	Patrick H. Nettles, Ph.D.1,6
President and Chief Operating Officer,	Executive Chairman,	* In April 2012, Norman S. Matthews will retire after 31 years of service on our Board. Progressive would like to thank Mr. Matthews for his dedicated service and the many contributions he made during his tenure on the Board.
Ralph Lauren Corporation	Ciena Corporation
(lifestyle products)	(telecommunications)
Lawton W. Fitt4,6	Glenn M. Renwick2
Retired Partner,	President and Chief Executive Officer,
Goldman Sachs Group	The Progressive Corporation
(financial services)
Stephen R. Hardis2,4,5,6	Bradley T. Sheares, Ph.D.3,6
Retired Chairman of the Board and	Former Chief Executive Officer,
Chief Executive Officer,	Reliant Pharmaceuticals, Inc.
Eaton Corporation	(pharmaceuticals)
(manufacturing)
Peter B. Lewis2,4,6
Chairman of the Board,
The Progressive Corporation
(non-executive)
Corporate Officers	Other Executive Officers
Glenn M. Renwick	John A. Barbagallo
President and Chief Executive Officer	Commercial Lines Group President
Brian C. Domeck	M. Jeffrey Charney
Vice President and Chief Financial Officer	Chief Marketing Officer
Charles E. Jarrett	William M. Cody
Vice President, Secretary,	Chief Investment Officer
and Chief Legal Officer
	Susan Patricia Griffith
Thomas A. King	Claims Group President
Vice President and Treasurer
	Valerie Krasowski
Jeffrey W. Basch	Chief Human Resource Officer
Vice President and
Chief Accounting Officer	John P. Sauerland
	Personal Lines Group President
Mariann Wojtkun Marshall
Assistant Secretary	Raymond M. Voelker
	Chief Information Officer
Peter B. Lewis
Chairman of the Board
(non-executive)

App.-A-88

EX-21

Exhibit 21

SUBSIDIARIES OF THE PROGRESSIVE CORPORATION

	Jurisdiction
Name of Subsidiary	of Incorporation
Drive Insurance Holdings, Inc.	Delaware
Drive New Jersey Insurance Company	New Jersey
Progressive American Insurance Company	Ohio
Progressive Bayside Insurance Company	Ohio
Progressive Casualty Insurance Company	Ohio
PC Investment Company	Delaware
Progressive Gulf Insurance Company	Ohio
Progressive Specialty Insurance Company	Ohio
Trussville/Cahaba, AL, LLC	Ohio
Progressive Classic Insurance Company	Wisconsin
Progressive Commercial Advantage Agency, Inc.	Ohio
Progressive DLP Corp.	Ohio
Progressive Hawaii Insurance Corp.	Ohio
Progressive Michigan Insurance Company	Michigan
Progressive Mountain Insurance Company	Ohio
Progressive Northern Insurance Company	Wisconsin
Progressive Northwestern Insurance Company	Ohio
Progressive Preferred Insurance Company	Ohio
Progressive Security Insurance Company	Louisiana
Progressive Southeastern Insurance Company	Indiana
Progressive West Insurance Company	Ohio
Garden Sun Insurance Services, Inc.	Hawaii
Pacific Motor Club	California
Progny Agency, Inc.	New York
Progressive Adjusting Company, Inc.	Ohio
Progressive Capital Management Corp.	New York
Progressive Commercial Holdings, Inc.	Delaware
Artisan and Truckers Casualty Company	Wisconsin
National Continental Insurance Company	New York
Progressive Commercial Casualty Company	Ohio
Progressive Express Insurance Company	Ohio
United Financial Casualty Company	Ohio

	Jurisdiction
Name of Subsidiary (con’t)	of Incorporation
Progressive Direct Holdings, Inc.	Delaware
Mountain Laurel Assurance Company	Ohio
Progressive Advanced Insurance Company	Ohio
Progressive Auto Pro Insurance Agency, Inc.	Florida
Progressive Choice Insurance Company	Ohio
Progressive Direct Insurance Company	Ohio
Gadsden, AL, LLC	Ohio
Progressive Freedom Insurance Company	New Jersey
Progressive Garden State Insurance Company	New Jersey
Progressive Marathon Insurance Company	Michigan
Progressive Max Insurance Company	Ohio
Progressive Paloverde Insurance Company	Indiana
Progressive Premier Insurance Company of Illinois	Ohio
Progressive Select Insurance Company	Ohio
Progressive Specialty Insurance Agency, Inc.	Ohio
Progressive Universal Insurance Company	Wisconsin
Progressive Investment Company, Inc.	Delaware
Progressive Premium Budget, Inc.	Ohio
Progressive RSC, Inc.	Ohio
Progressive Vehicle Service Company	Ohio
Village Transport Corp.	Delaware
Wilson Mills Land Co.	Ohio
Each subsidiary is wholly owned by its parent.

EX-24

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 10th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Peter B. Lewis	Director and Chairman of the Board
Peter B. Lewis

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Glenn M. Renwick	Director, President and
Glenn M. Renwick	Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 13th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Brian C. Domeck	Vice President and
Brian C. Domeck	Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 9th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Jeffrey W. Basch	Vice President and
Jeffrey W. Basch	Chief Accounting Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 13th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Stuart B. Burgdoerfer
Stuart B. Burgdoerfer	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 10th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Charles A. Davis
Charles A. Davis	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 13th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Roger N. Farah
Roger N. Farah	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 12th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Lawton W. Fitt
Lawton W. Fitt	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 11th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Stephen R. Hardis
Stephen R. Hardis	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 13th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Norman S. Matthews
Norman S. Matthews	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 10th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Heidi G. Miller, Ph.D.
Heidi G. Miller, Ph.D.	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 13th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Patrick H. Nettles, Ph.D.
Patrick H. Nettles, Ph.D.	Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey, and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name, place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of The Progressive Corporation for the year 2011, and any and all amendments relating thereto and other documents in connection therewith, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 15th day of February, 2012.

	Position(s) with
Signature	The Progressive Corporation
/s/ Bradley T. Sheares, Ph.D.
Bradley T. Sheares, Ph.D.	Director

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Glenn M. Renwick, certify that:

1. I have reviewed this annual report on Form 10-K of The Progressive Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2012	/s/ Glenn M. Renwick
	Glenn M. Renwick
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Brian C. Domeck, certify that:

1. I have reviewed this annual report on Form 10-K of The Progressive Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2012	/s/ Brian C. Domeck
	Brian C. Domeck
	Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

I, Glenn M. Renwick, President and Chief Executive Officer of The Progressive Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2011 (the “Report”), which this certification accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Glenn M. Renwick

Glenn M. Renwick

President and Chief Executive Officer

February 28, 2012

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

I, Brian C. Domeck, Vice President and Chief Financial Officer of The Progressive Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2011 (the “Report”), which this certification accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Brian C. Domeck

Brian C. Domeck

Vice President and Chief Financial Officer

February 28, 2012

EX-99

Exhibit 99

Letter to Shareholders

It’s not always apparent when meaningful business history is being made and in auto insurance that’s not very often, but in 2011, Progressive’s introduction of Snapshot^® just might qualify.

“I’m a good driver why don’t I get credit for that?” “What does my age or occupation tell you about my driving?” … and the list goes on as consumers struggle with group statistics of correlation versus their sense of controllable causes. Snapshot, and what is sure to follow in its evolution, is a meaningful start toward personalized insurance pricing based on real-time measurement of your driving behavior – the statistics of one.

The power of participation and personalization has strong appeal, no better demonstrated than when we asked customers, employees, shareholders, and directors to contribute artwork for this Annual Report. A simple request to draw online a car facing to the right resulted in tens of thousands of responses – no two the same. Objective curation of the responses has selected a sample to highlight this report – sadly mine is absent, but the point is not diminished. The numerosity of responses provides a visual clue as to the expansive power that personalization provides to segmentation in insurance pricing.

As exciting as Snapshot is, and I’ll discuss it in more detail later, there is much more to reflect on for Progressive in 2011.

For the first time in Progressive’s history net premiums written topped $15 billion, surpassing that mark in the closing days of the year. Earned premiums, recognized on a lag to written, finished around $14.9 billion.

Our combined ratio of 93 was an equally satisfying result, and while three points better than the objective we communicate to shareholders, it benefited from what I would classify as generally higher-than-expected favorable development from prior year loss reserves, as those estimates were refined based on actual payment patterns. However, net of any favorable development, we outperformed our target 96 combined ratio and comfortably handled an active catastrophe year.

Net premiums written growth for the year was 5%, or alternatively about $670 million, not yet numbers that come close to taxing our ability or desire to manage growth, but a strong growth quarter to end the year was encouraging. Reporting last year I commented that, “The closing years of the decade appear to be the approximate time frame during which industrywide profitability will once again be moderated and sustained industry premium declines will turn positive.” This appears to have some continued veracity and for Progressive the combination of growth and margin in the last few years supports our turn.

Industrywide
	Premium Growth			Combined Ratio
2006		0.4	%		94.2
2007		(0.7	)%		97.7
2008		(0.7	)%		99.8
2009		(0.9	)%		100.8
2010		1.5	%		100.4
Note: Represents A.M. Best Private Passenger Auto Data.

I favor unit counts in analyzing the health of the business and for 2011 we increased our number of policies in force by about 580,000 and by extension approximately a million new customers. Combined with our internal mandate to serve all of our nearly 13 million policies over an ever increasing life expectancy, we would assess 2011 to be a healthy year – notwithstanding considerable room for improvement.

Our net income of just over $1 billion and the per-share equivalent of $1.59, aided by share repurchases, are reasonably comparable to the equivalent results from the prior two years. Thankfully nothing compares well to 2008. Our objective however, is not annual comparability but superiority. So what’s in this year’s results that a closer diagnostic might highlight and support the optimism I feel for the year ahead?

Closing Speed – Our fourth quarter production, a composite of rate, new policies, and renewal acceptances, across all products was, at 8% written premium growth, stronger than any prior quarter for the year and, in fact, for the last 26 quarters. It’s always nice to be carrying momentum as the year closes, but any projections of what this may or may not mean holds considerably less value than our ongoing monthly reporting of attained results.

Our Agency business had and continues to maintain very steady production since regaining positive policy growth in late 2009. Meaningful trends in production in this channel are subject to many factors, perhaps the most significant of which is rate presentation and competitive positioning. We’ve worked diligently to ensure that, regardless of the means an agent uses to get our rates, our best product options are always presented. Our unwavering philosophy of continuous rate review by state and distribution channel often means we are taking rate ahead of competitors, but it also means that significant rate action by others may not need to be directly matched by us. While in many states 2011 rate changes were moderate, we were still advantaged by our philosophy, as several competitors in several states took needed rate actions. Our expectation that our agent-produced policies would reach an all-time high early in the year in-fact happened, and we ended the year even higher, fully correcting a negative trend in this key measure which began in 2006.

Our Direct business received a welcome lift from a very healthy shopping trend in the early part of 2010, but momentum was noticeably slowing by year-end and, as expected, carried into 2011. While attracting a healthy number of new customers in 2011, we did not match the new business application counts achieved in 2010 for much of the year. However, by the fourth quarter, we were once again posting positive new application growth. New policies are essential to maintaining a vibrant and growing book, but the flow through to renewal status is even more critical. For the year, we grew our renewal applications about 11%. The overall policies in force growth for Direct auto was an acceptable 6%, but somewhat slower than we hope many of our new product offerings would allow us to achieve.

Our market-leading special lines business, insuring motorcycles, recreational vehicles, boats, watercraft, and snowmobiles, finished another very successful year. We exceeded $1.2 billion in written premiums with underwriting margins considerably better than our targets. We look forward to an economy where new sales of these vehicles return to prior levels. Our special lines offerings, along with our continued growth in our Progressive Home Advantage^® program, continued to drive our important multi-product household measures to new highs for the year.

After several years of really tough sledding, reflecting the economy at-large, our Commercial Auto product found new energy as the year progressed. Declining trends in premium and policies were arrested and reversed during the year, and Commercial Auto finished out the year with close to 6% written premium growth, mostly driven by double-digit growth in the 3^rd and 4^th quarters. This growth reflects our implementation of needed pricing increases, often before our competitors, returning unit growth through new applications, and some expansion of product offerings. With significant growth comes the added concern of balanced profitability; for now, we are very satisfied that we’re finding a balance that meets our objectives, but remain vigilant.

Investment Headwinds – We target no specific mix of income from underwriting and investments. It’s fair to suggest, however, that while underwriting income is very much in-line with long-held performance objectives, total return from our investments, a hugely important contribution to our economic model, has been both highly variable and at times, including this year, below the contribution we might desire in our more global outlook for shareholder return. With that clear recognition, and the appreciation that managing our portfolio to a very short duration for some time has left opportunity on the table, I continue to feel strongly, given the climate and uncertainty, that we have taken and will continue to take a position that will not inhibit our ability to underwrite all the business we can at an appropriately aggressive premiums-to-surplus ratio. Our fully taxable equivalent total return for the year was 3.2%, less than half the equivalent number for 2010 and the reduction was apportioned across both the fixed-income and common stock portions of the portfolio. Our preference is to avoid the price volatility of longer-duration assets at the prevailing low yields, favoring shorter duration bonds at unquestionably very low yields, but with the opportunity for faster future reinvestment. With perfect prospective information, we would all make the right choice. Without it we are guided by ensuring our underwriting franchise is a protected asset with no constraints to do what it does best.

While low yields and highly volatile equity markets made for challenging times for investment income, it provided an attractive opportunity to reassess the composition of our capital structure. We issued $500 million of 10-year senior debt to strong market acceptance and a coupon interest rate of 3.75%. With a strong capital position, well-structured portfolio, solid operations, and what to us appeared to be depressed equity valuations, including ours, we repurchased our stock after the capital raise at an accelerated rate. Consistent with our long-standing policy to repurchase shares when our capital balance, view of the future, and the company’s stock price make it attractive to do so, we repurchased 51.3 million shares, for close to $1 billion, or about 7.7% of our outstanding shares at year end 2010. With those transactions, our debt-to-total capital ended the year at 29.6%, inside our 30% guidance, but was further reduced upon retirement at maturity of a $350 million tranche of our outstanding debt in early 2012.

Our best net expression of underwriting performance against our goals for the year is our Gainshare score. For 2011 the score was 1.1, mid-range on the 0 to 2 scale. Combining the Gainshare score with after-tax underwriting income and the board-established dividend target factor of 33 1/3%, our variable dividend payment for 2011 was approximately $250 million or just short of 41 cents per share.

We spend significant time and effort modeling our capital requirements and sizing what we call “layers of capital” to satisfy regulatory requirements and any manner of contingencies we could envision for our business. Capital in excess of these two layers is available for share repurchases, acquisitions, and shareholder dividends. Our variable dividend has become an effective, appropriate, and now reasonably meaningful part of our capital management practices. The board has determined the parameters for 2012 will remain the same as in 2011.

With a strong and well-structured investment portfolio and capital position, we enter 2012 certainly hopeful for an improved investment environment and returns that more comfortably match the underwriting contribution, but not dependent on it.

Product Potential-Product design differences between auto insurance offerings are understandably obscure and certainly less obvious than those of many consumer products. While subtle for some, their importance and contribution are the very essence of success in our business. Progressive, with some justification, is well recognized in our industry as a leader in product design and price segmentation. In large part, this is the statistical matching of auto accident related costs incurred by an individual to the premium to be paid. But product design is much more than just price segmentation and for us involves the consumer and agent presentation and, increasingly so, their ability to interact with the product by selecting and packaging combinations of coverage that best meet their needs.

I doubt any year in Progressive’s history has broadened the horizons of just what might be possible with future product design more than 2011. The vast majority of the statistical matching in use today is based on observable and verifiable characteristics of the driver and vehicle. While admittedly, it’s the science of correlation and grouping, it has extraordinary power and marginal improvements with disproportionate gains are available to those truly committed to product research and development. As good as the base science is, it lacked a meaningful direct relationship to actual driving behavior. Our work with measuring driver behavior, over now many years, provided its share of challenges, but from the earliest days suggested that, if possible and practical, the data set would expand the known universe of rating segmentation. 2011 was the year that possible and practical fully merged in our product offering of “Snapshot.”

Snapshot, available in both our Agency and Direct channels, has been met with significant consumer appeal. We’ve seen an increasing number of Direct customers choosing to improve their initial price estimate by installing our measurement device and reporting their driving behavior. We provide the policyholder a portal view into their trip management - when, how many, how far, and selected variables of interest, which for us are a proxy for defensive driving. After 30 days, we are able to make an initial estimate of a discount that reflects the individual’s driving characteristics and apply that for immediate use. A final estimate is applied to the subsequent renewal and the measurement device is returned and available for reuse, although we maintain a right for future calibration. Discounts range between 0% and 30% and the full range is effectively used. Perhaps more importantly, and you’ll excuse me that certain specifics are best closely held, the expectation of getting a discount is far better than 50/50, suggesting, as I think we all intuitively know, that a smaller percentage of drivers are responsible for a disproportionate share of the costs. Identifying just who they are is the challenge we’re exploring. Acceptance by agents on behalf of their customers is somewhat slower, and in many ways understandably so, but as the product feature matures, I fully expect increased consideration and use.

Snapshot is built on top of our existing product and, as such, it is an additional level of segmentation rather than a product in and of itself. The segmentation provided, however, is able to be isolated and fully analyzed and tuned. Historically, data quantity, management, and mining have been the keys to effective segmentation and real-time usage data will be no different, but the amplification of each is not for the faint of heart. The data sets are huge, requiring storage, access, and mining techniques that challenge those that only months ago seemed state-of-the-art. Without data, only dangerous inferences can be drawn. Our commitment to building an initial data set has been a disciplined undertaking over several years and now, with a viable product in-market, our reward of ever expanding data is tremendous. We now measure data in miles of behavioral observation and at last count we have the equivalent of multiple round trips to Mars.

Snapshot and usage-based data in auto insurance rating has been well accepted by regulators who have allowed us to protect our proprietary algorithm in 39 states and the District of Columbia, for which we are very appreciative. The U.S. patent office has equally affirmed our existing intellectual property, and has now approved one additional patent. Consumers and those who speak for them have, with few exceptions, been enthusiastic about the product, and privacy concerns, so very prominent in the early years, have been mitigated by the design and discrete monitoring periods.

Much remains to be done before the full power of usage-based segmentation will be tapped. I sense that as good as we feel today we will look back with some humility, in future years, when we realize just what has been possible.

Product features and packaging, like Name Your Price^®, provide consumers wishing to shop online a very real opportunity to leverage technology to their advantage and explore a range of options available to them. Agents have always provided the ability for customers to reach smart decisions on price and coverage. Now Name Your Price in combination with Snapshot provides for a powerful and compelling quote process quite unlike our competitors.

Ever increasing product complexity must be presented to consumers and agents with great, easy-to-use technology interfaces. We’re fanatics about the presentation layer of our products. We receive consistent recognition in agent surveys as their leading company and equally consistent recognition as the leading insurance website by Keynote. However, the range of presentation formats has expanded greatly with tablets and smart phones and that has our full attention. More than 15% of search activity for

Progressive, or other auto insurance terms, is now mobile-device based and quoting and sales attributed to mobile devices have grown at rates that make days and weeks approximate early Internet months.

As noted last year, the potential for devices that are on your person often with a camera and location software, is a new and really exciting dimension for all aspects of our business and I suggested to expect more in 2011. I had the pleasure of being directly involved with the team leading our mobile strategy and their progress in 2011 has been nothing short of impressive. We talk in terms of “mobilize” not “miniaturize,” which simply means using the capabilities versus adapting the old product and presentation to new devices and formats.

Selecting just one initiative to build on the concept of product design and presentation is our prototype application that allows a consumer to use the camera in their device to send a photo of a driver’s license and similarly their current insurance card with vehicle identification number, and in return get an insurance quote returned instantaneously. A quote that then may well be further personalized by Name Your Price and Snapshot. Expect more - I think that’s more . . . and better.

Old industries do reinvent themselves and this feels like it’s going to be quite a ride.

Brand and Distribution Momentum - An open question existed over the last decade or so - could we market and retail our product with the same success we enjoyed, more as a wholesaler, with our agents representing our consumer face? Perhaps an even more interesting question, and for me the correct one, “Could we do so while enhancing both our Agent and Direct distribution options?” - our very clear and consistently stated objective.

Today, I believe we have an answer. Progressive is a business generating brand. One that is more important than any means of distribution or product feature but in fact a clear consumer mindset about who we are as a company and what they should expect as a customer. Our Personal Lines business today is a very balanced book, between distribution options, with agent-produced auto business slightly larger at 55% of policies. Our single brand multi-distribution company is a unique and valuable positioning in our space. The road was not always straight, but the result is extremely rewarding and powerful.

Research on consumer’s reactions to brands, preferences, and advertising is extensive and often constructive, but rarely definitive. We are, however, encouraged that consumer awareness of our brand is both positive and closely associated with key characteristics such as ease of doing business, distinctive product features, and exceptional service, all consistent with our intentions.

Ensuring congruity between internal and external brands with actions matching expectations has been central to our global brand development. The brand ambassador status bestowed on “Flo,” our most visible employee image, is no accident and serves as a clear behavioral model for all - the substance perhaps not the humor. The importance of getting this right was highlighted in 2011 as “Flo” was voted America’s #1 advertising icon (as named by Entertainment Weekly). I’m sure her over 3.3 million Facebook fans had something to do with that, but the point is the same.

For 2011 we had clear objectives to advance our marketing and advertising efforts.

We wanted the character of “Flo” to endure and, to do so, sought to make the character richer and extend her range of interactions and messages. The results are always subject to opinion, but for me the creative developed in 2011, for use in 2011 and 2012, was some of the best in this now long running campaign. Results trump opinion, but I think consumers might agree.

We had some clear ideas about a new campaign, its target audience, and message, and tested our “Messenger” campaign late in 2010. However, we found by observing the “Messenger’s” natural interaction style with all ranges of people that we had an opportunity to improve on the concept. By mid-year, we were reworking the campaign structure. The “Messenger” is now carrying his message of Progressive’s savings and convenience, by interacting with prospective customers in real and unscripted settings. Choosing settings like a gas station or baggage claim at the airport, the “Messenger” can empathize with the pain points of gas prices or baggage fees and, while not able to solve them, is willing to share his savings on auto insurance to help with the burden. These true slice-of-life scenarios, where the “Messenger” can perform what we call random acts of savings, provide reactions and responses that simply could not be scripted. We’re encouraged by early results and the developing acceptance of the character from “Not quite sure,” to a guy who understands life and helps when he can by “saving it forward.”

No campaign it would seem appeals to all and we are delighted to have additional assets for use across the range of audiences we wish to address and the media options available to us. The most enduring of our objectives is to ensure all our customer communication and messaging is integrated and presents a consistent Progressive brand, be it in print, social media, digital, or television.

The media and advertising world is dynamic and expensive and we must be judicious in all we do. 2011 was a good year in which we took encouraging steps to ensure we have what’s necessary to continue the momentum we’ve been building in our brand and consumer appeal.

The Progressive Journey

Progressive will celebrate 75 years in business this year and, while I only have visibility into the last third, it is a business story of some considerable note. However, in so many ways, it feels like the story is just beginning as we adapt to the ever changing needs of the consumer, technology, and available data.

Our efforts to retain customers must reach the competence we exhibit in acquiring new ones, something we estimate we now lead.

More than just words, this guides our actions in every area of the company. Isolating and highlighting any such action severely understates the efforts of so many, but accepting that risk, it seems appropriate to comment on the extraordinary response of our Claims organization to the multiple catastrophes of 2011. Perhaps a strange compliment, but they made it look almost too easy. The deployment logistics and the commitment of our people to leave their regular routine and go where our customers needed them most, continues to impress me no matter how familiar I am with the planning, preparation, and expectations that are in place for such occasions. Customers know and appreciate good service and our efforts are rewarded with their increased Net Promoter^® scores and renewal behavior following a satisfying claims response.

Our future won’t be without challenges, but the metaphorical mountains we have climbed are meaningful; there are bigger ones yet to climb, but, as I said at our 2011 investor conference, “not many get the view from here.” I hope this review of the year leaves you as optimistic as it does me.

Our People and Culture

We are Progressive and we are progressive - yes, a pithy and perhaps simple statement, but for us it’s so much more. It’s the crystallization of our culture and what we aspire to contribute to our industry and consumers. It’s an enduring impetus to continuously refine our work environment to one where we’re all motivated to do our best work, where we can grow constantly, and that others will want to join. The blend of both practical and emotional energy in the statement, effectively communicates the responsibility and self-imposed aspirations that come from our quest to be “Consumers’ #1 choice for Auto Insurance.” Our people, culture, and aspirations are what continue to make us special.

Nothing we have achieved has been without the efforts of so many, and I thank the people of Progressive, our agents and brokers, customers, and shareholders for their support in making this all possible.

To all the people who make Progressive, progressive – Thank You.

Glenn M. Renwick

President and Chief Executive Officer

Net Promoter^® is a registered trademark of Satmetrix Systems, Inc.

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SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	$ 14,912.2
Fair Value	15,963.0
Amount At Which Shown In The Balance Sheet	15,963.0
Short-term investments
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,551.8	[1]
Fair Value	1,551.8	[1]
Amount At Which Shown In The Balance Sheet	1,551.8	[1]
Short-term investments | Foreign Government Debt
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	10.0
Fair Value	10.0
Amount At Which Shown In The Balance Sheet	$ 10.0

[1] Includes $10.0 million in treasury bills issued by the Australian government.

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Investment Portfolio by Major Security Type (Parenthetical) (Detail) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Schedule of Available-for-sale Securities [Line Items]
Net unsettled security transactions offset in other assets	$ 46,900,000	$ 46,300,000
Securities in the portfolio of a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions	$ 2,000,000,000	$ 2,200,000,000

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SUPPLEMENTAL INFORMATION CONCERNING PROPERTY - CASUALTY INSURANCE OPERATIONS (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Supplemental Information for Property, Casualty Insurance Underwriters [Line Items]
Losses and Loss Adjustment Expenses Incurred Related to Current Year	$ 10,876.8	$ 10,451.7	$ 10,040.9
Losses and Loss Adjustment Expenses Incurred Related to Prior Years	(242.0)	(320.4)	(136.0)
Paid Losses and Loss Adjustment Expenses	$ 10,541.6	$ 9,888.0	$ 9,714.2

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Summary of Changes in Fair Value Associated With Level 3 Assets (Parenthetical) (Detail) (Fixed maturities, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2010 Asset-backed Securities	Dec. 31, 2011 Residential mortgage-backed securities Asset-backed Securities	Dec. 31, 2010 Industrials Redeemable preferred stocks
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Transferred out of Level 2 into Level 3	$ 14.6	$ 12.1
Transferred out of Level 3 into Level 2	$ (41.5)	$ (15.1)	$ (15.4)	$ (53.1)

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INVESTMENTS - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended													12 Months Ended								12 Months Ended				12 Months Ended														12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2011 Categories of Investments, Marketable Securities, Trading Securities	Dec. 31, 2010 Categories of Investments, Marketable Securities, Trading Securities	Dec. 31, 2009 Categories of Investments, Marketable Securities, Trading Securities	Dec. 31, 2011 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067	Dec. 31, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067	Dec. 31, 2007 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067	Dec. 31, 2011 3.75% Senior Notes due 2021	Dec. 31, 2010 3.75% Senior Notes due 2021	Dec. 31, 2011 Fixed maturities	Dec. 31, 2010 Fixed maturities	Dec. 31, 2011 Fixed maturities Corporate debt securities	Dec. 31, 2010 Fixed maturities Corporate debt securities	Dec. 31, 2011 Non-Income Producing Investments	Dec. 31, 2011 Fixed Income Securities	Dec. 31, 2011 Equity securities	Dec. 31, 2010 Equity securities	Dec. 31, 2011 Equity securities Common equities	Dec. 31, 2010 Equity securities Common equities	Dec. 31, 2011 Equity securities Russell One Thousand Common equities	Dec. 31, 2011 Equity securities Managed Equity Strategy Common equities	Dec. 31, 2011 Foreign Government Debt	Dec. 31, 2010 Foreign Government Debt	Dec. 31, 2011 Interest Rate Swaps	Dec. 31, 2010 Interest Rate Swaps	Dec. 31, 2009 Interest Rate Swaps	Dec. 31, 2011 Interest Rate Swaps Opened in 2009 Contract	Dec. 31, 2009 Interest Rate Swaps Opened in 2009 Contract	Dec. 31, 2011 Interest Rate Swaps Opened in 2009 Nine Year Time Horizon	Dec. 31, 2009 Interest Rate Swaps Opened in 2009 Nine Year Time Horizon	Dec. 31, 2011 Interest Rate Swaps Opened in 2011 Contract	Dec. 31, 2011 Interest Rate Swaps Opened in 2011 Five Year Time Horizon	Dec. 31, 2011 Corporate Credit Default Swaps Financial Services Sector	Dec. 31, 2010 Corporate Credit Default Swaps Financial Services Sector	Dec. 31, 2009 Corporate Credit Default Swaps Financial Services Sector	Dec. 31, 2011 Corporate Credit Default Swaps Automotive Sector	Dec. 31, 2010 Corporate Credit Default Swaps Automotive Sector	Dec. 31, 2010 Corporate Credit Default Swaps Technology Sector Contract	Dec. 31, 2009 Corporate Credit Default Swaps Technology Sector Contract	Dec. 31, 2010 Corporate Credit Default Swaps 2-year Time Horizon Technology Sector	Dec. 31, 2009 Corporate Credit Default Swaps 2-year Time Horizon Technology Sector	Dec. 31, 2010 Corporate Credit Default Swaps 4-year Time Horizon Technology Sector
Schedule of Investments [Line Items]
Treasury Bills issued by the Australian government																								$ 10.0	$ 0
Percentage which the issuer receives the security back at once the change of control is triggered														1.00%
Realized Investment Losses														17.4
Principal amount of bonds and certificates of deposit on deposit to meet state insurance regulatory and/or rating agency requirements	150.7
Fair value of fixed-maturity securities that were non-income producing during the preceding 12 months																0
Gross unrealized losses	102.3	90.3										73.2	87.1	6.5	13.3		76.9	29.1	3.2	25.4	3.2
Percentage of Common stock portfolio																						97.00%	3.00%
Net realized gains (losses) on securities	108.1	110.0	67.9	0	0	0
Repurchase of debt, face amount							15.0	222.9
Cash flow hedge gain reclassification from accumulated other comprehensive income to net realized gains/losses on securities	0.3	5.8					0.3	5.8
Debt instrument, face amount							1,000	1,000		500	500
Hedge gain (loss) included in accumulated other comprehensive income							34.4		34.4	(5.1)
Debt instrument fixed interest rate terms									10 years
Cash flow hedge gain recognized as an adjustment to interest expense	2.6	2.7	2.8
Realized gain on foreign currency cash flow hedge			0.9
Exposure position terms																										During the year ended December 31, 2011, we held a 9-year interest rate swap position and two 5-year interest rate swap positions where we are paying a fixed rate and receiving a variable rate.
Derivative maturity, term																															9 years	9 years		5 years	5 years	5 years	5 years	5 years	5 years			2 years	2 years	4 years
Cash collateral received from counterparty																																			0.7	0.5			1.1
Cash collateral delivered to the counterparties																										81.7	52.2	0									0.6
Number of Interest rate swap position held																													1	1			2
Number of derivative positions opened																																								2	1
Number of derivative positions closed																																								2	1
Upfront cash payment made when entering exposure position																																								$ 0.2	$ 0.6

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Components of Net Deferred Tax Assets (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Deferred tax assets:
Unearned premiums reserve	$ 319.1	$ 302.3
Investment basis differences	246.1	286.3
Non-deductible accruals	172.1	158.9
Loss and loss adjustment expense reserves	113.6	120.4
Other	5.2	5.0
Deferred tax liabilities:
Net unrealized gains on securities	(367.7)	(413.2)
Hedges on forecasted transactions	(4.3)	(7.9)
Deferred acquisition costs	(151.8)	(146.0)
Property and equipment	(109.9)	(105.4)
Prepaid expenses	(16.1)	(12.6)
Deferred gain on extinguishment of debt	(5.8)	(5.8)
Other	(4.5)	(3.8)
Net deferred tax asset	196.0	178.2
Net income taxes recoverable (payable)	12.0	10.8
Income taxes	$ 208.0	$ 189.0

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Minimum Commitments under Noncancelable Operating Lease Agreements (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Commitments and Contingencies Disclosure [Line Items]
2012	$ 53.0
2013	42.1
2014	26.0
2015	15.3
2016	7.8
Thereafter	13.8
Total	$ 158.0

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SUPPLEMENTARY INSURANCE INFORMATION (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Supplementary Insurance Information, by Segment [Line Items]
Deferred policy acquisition costs	$ 433.6	[1]	$ 417.2	[1]	$ 402.2	[1]
Future policy benefits, losses, claims, and loss expenses	7,245.8	[1]	7,071.0	[1]	6,653.0	[1]
Unearned premiums	4,579.4	[1]	4,353.8	[1]	4,172.9	[1]
Other policy claims and benefits payable	0	[1]	0	[1]	0	[1]
Premium revenue	14,902.8		14,314.8		14,012.8
Net investment income	466.5	[1],[2]	508.2	[1],[2]	495.9	[1],[2]
Benefits, claims, losses, and settlement expenses	10,634.8		10,131.3		9,904.9
Amortization of deferred policy acquisition costs	1,399.2		1,359.9		1,364.6
Other operating expenses	1,821.5		1,740.1		1,567.7
Net premiums written	15,146.6		14,476.8		14,002.9
Personal Lines
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue	13,431.1		12,826.9		12,365.9
Benefits, claims, losses, and settlement expenses	9,615.2		9,159.6		8,847.0
Amortization of deferred policy acquisition costs	1,231.9		1,188.1		1,171.6
Other operating expenses	1,664.7		1,587.1		1,410.2
Net premiums written	13,612.2		13,024.4		12,453.1
Commercial Auto
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue	1,467.1		1,474.2		1,623.3
Benefits, claims, losses, and settlement expenses	1,010.7		958.6		1,050.7
Amortization of deferred policy acquisition costs	166.6		167.9		187.0
Other operating expenses	156.3		162.7		155.8
Net premiums written	1,534.3		1,449.5		1,533.9
Other Indemnity
Supplementary Insurance Information, by Segment [Line Items]
Premium revenue	4.6		13.7	[3]	23.6
Benefits, claims, losses, and settlement expenses	8.9		13.1	[3]	7.2
Amortization of deferred policy acquisition costs	0.7		3.9	[3]	6.0
Other operating expenses	0.5		(9.7)	[3]	1.7
Net premiums written	$ 0.1		$ 2.9	[3]	$ 15.9

[1] Progressive does not allocate assets, liabilities, or investment income to operating segments.

[2] Excludes total net realized gains (losses) on securities.

[3] We sold our professional liability insurance businesses in the first quarter 2010. The gain on the sale is reflected in other operating expenses.

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REINSURANCE (Tables)

12 Months Ended

Dec. 31, 2011

Effect of Reinsurance on Premiums Written and Earned

The effect of reinsurance on premiums written and earned for the years ended December 31, was as follows:

	2011						2010						2009
(millions)	Written			Earned			Written			Earned			Written			Earned
Direct premiums	$	15,333.1		$	15,107.5		$	14,700.0		$	14,519.2		$	14,196.3		$	14,199.4
Ceded		(186.5	)		(204.7	)		(223.2	)		(204.4	)		(193.4	)		(186.6	)
Net premiums	$	15,146.6		$	14,902.8		$	14,476.8		$	14,314.8		$	14,002.9		$	14,012.8

Prepaid Reinsurance Premiums and Reinsurance Recoverables

Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:

	Prepaid Reinsurance Premiums										Reinsurance Recoverables
	2011					2010					2011					2010
(millions)	$		%			$		%			$		%			$		%
MCCA	$	21.4		31	%	$	20.0		23	%	$	650.4		80	%	$	578.7		78	%
NCRF		19.0		27			20.7		23			51.4		6			45.3		6
CAIP		12.7		18			11.9		14			58.4		7			65.9		9
State Plans		53.1		76			52.6		60			760.2		93			689.9		93
Non-auto		16.7		24			35.5		40			57.8		7			51.6		7
Total	$	69.8		100	%	$	88.1		100	%	$	818.0		100	%	$	741.5		100	%

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INCOME TAXES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2009
Income Taxes [Line Items]
Interest benefit (net of tax) related to the settlement of IRS exams, net of tax	$ 0.3

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DEBT - Additional Information (Detail) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended	12 Months Ended				12 Months Ended								1 Months Ended
	Sep. 30, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2011 Upper Limit	Dec. 31, 2011 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067	Dec. 31, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067	Jun. 30, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067	Dec. 31, 2011 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 Three Month LIBOR	Jun. 30, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 Tendered by June 23, 2010	Jun. 23, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 Tendered by June 23, 2010	Jun. 30, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 Tendered by June 23, 2010 Upper Limit	Jun. 30, 2010 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 Early Tender Premium	Jun. 30, 2010 6.25% Senior Notes due 2032	Jan. 31, 2012 6.375% Senior Notes due 2012 Repayment of Debt	Dec. 31, 2011 Euro Dollar Rate	Dec. 31, 2011 Base Rate Loans One Month LIBOR	Dec. 31, 2011 Base Rate Loans Federal Funds Rate
Debt Instrument [Line Items]
Debt interest payments		Interest on all debt is payable semiannually at the stated rates. However, the 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the "6.70% Debentures") will only bear interest at this fixed annual rate through, but excluding, June 15, 2017. Thereafter, the 6.70% Debentures will bear interest at an annual rate equal to the three-month LIBOR plus 2.0175%, and the interest will be payable quarterly. In addition, prior to September 2011 and subject to certain conditions, we had the right to defer the payment of interest on the 6.70% Debentures for one or more periods not exceeding ten consecutive years each.
Interest payment frequency		Payable semiannually
Cash flow hedge gain reclassification from accumulated other comprehensive income to net realized gains/losses on securities		$ 300,000	$ 5,800,000			$ 300,000	$ 5,800,000
364-Day Secured Liquidity Credit Facility Agreement with PNC Bank, National Association (PNC), interest rate terms		Base Rate Loans will bear daily interest at the greater of (a) PNC's prime rate for such day, (b) the federal funds effective rate for such day plus 1/2% per annum, or (c) one-month LIBOR plus 2% per annum.
Consideration paid for revolving agreement		25,000	62,500
Basis points									2.0175%							0.50%	2.00%	0.50%
Unissued common shares reserve					250
Fixed interest rate term						10 years
Repurchase of debt, face amount						15,000,000	222,900,000
Net gain (loss) on extinguishment of debt	6,400,000	(100,000)	6,400,000	0		(100,000)
Tender offer, aggregate principal amount												350,000,000
Tender Offer Aggregate Principal Amount Tendered											222,900,000
Tendered payment amount per $1000 principal amount of the Debentures										950			50
Description of Consent Solicitation and Replacement Capital Covenant														As a condition of the Tender Offer, we solicited consents (the "Consent Solicitation") from the holders of our 6.25% Senior Notes to terminate the Replacement Capital Covenant (the "RCC") relating to the 6.25% Senior Notes. The RCC was originally entered into by Progressive in June 2007 for the benefit of the holders of the 6.25% Senior Notes in connection with the issuance of the 6.70% Debentures. Under the RCC, we agreed that we would not repay, redeem, defease, or purchase all or any part of the 6.70% Debentures before June 15, 2047, unless Progressive was to obtain a specified portion of the funds used in the transaction through the sale of its common shares or certain other equity or equity-like securities. The RCC was terminated on June 23, 2010, the expiration date of the Consent Solicitation, at which time we had received the consent of holders of a majority of the outstanding aggregate principal amount of the 6.25% Senior Notes. Those holders who validly delivered their consent by the expiration date received a consent fee of $5.00 for each $1,000 principal amount of their 6.25% Senior Notes.
Consent fee for each $1,000 principal amount of Notes														5.00
Principal amount of Debentures								1,000						1,000
364-Day Secured Liquidity Credit Facility Agreement with PNC Bank, National Association (PNC), initial borrowing capacity		125,000,000
364-Day Secured Liquidity Credit Facility Agreement with PNC Bank, National Association (PNC), Maximum borrowing capacity		150,000,000
Amount on deposit with PNC																		125,000,000
Repayment of Senior Notes															$ 350,000,000

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Summary of All Employee Restricted Equity Award Activity (Parenthetical) (Detail) (Employee Restricted Equity Awards, USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 Year		Dec. 31, 2010		Dec. 31, 2009
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number granted units	2,483,461	[1],[2]	2,841,400	[1],[2]	4,072,152	[1],[2]
Weighted average grant date fair value	$ 20.03	[2]	$ 17.50	[2]	$ 12.08	[2]
Unrecognized compensation cost related to unvested equity awards	$ 82.1
Period of recognition of compensation expense related to unvested equity awards (years)	2.44
Dividend Equivalent Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number granted units	55,288		134,644
Weighted average grant date fair value	$ 0		$ 0
Performance Based Restricted Equity Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity awards target amount	3,667,204
Equity awards to vest	3,791,224

[1] Includes both restricted stock units and restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares. All performance-based awards are included at their target amounts.

[2] In 2010, we began reinvesting dividend equivalents on restricted stock units. For 2011 and 2010, the number granted includes 55,288 and 134,644 units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

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Composition of Fixed Maturities by Maturity (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Available for sale, cost
Less than one year	$ 1,399.0
One to five years	8,582.6
Five to ten years	1,380.9
Ten years or greater	92.5
Total	11,455.0	[1]
Available for sale, Fair value
Less than one year	1,418.8
One to five years	8,850.9
Five to ten years	1,398.0
Ten years or greater	90.9
Total	$ 11,758.6	[1]

[1] Excludes $0.7 million of gains on the open credit default swap positions.

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Components of Income Tax Provision (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Income Taxes [Line Items]
Current tax provision	$ 440.2	$ 433.9	$ 491.0
Deferred tax expense	31.3	63.0	8.4
Total income tax provision	$ 471.5	$ 496.9	$ 499.4

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EMPLOYEE BENEFIT PLANS - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified			12 Months Ended																			12 Months Ended	1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011 Employee Restricted Equity Awards		Dec. 31, 2010 Employee Restricted Equity Awards		Dec. 31, 2009 Employee Restricted Equity Awards		Dec. 31, 2011 Employee Stock Option	Dec. 31, 2010 Employee Stock Option	Dec. 31, 2009 Employee Stock Option	Dec. 31, 2011 Non Employee Director Restricted Equity Awards		Dec. 31, 2010 Non Employee Director Restricted Equity Awards		Dec. 31, 2009 Non Employee Director Restricted Equity Awards		Dec. 31, 2011 Executive Deferred Compensation Plan	Dec. 31, 2011 2003 Incentive Plan Employee Restricted Equity Awards	Dec. 31, 2011 2010 Equity Incentive Plan Employee Restricted Equity Awards	Dec. 31, 2011 2003 Directors Equity Incentive Plan Non Employee Director Restricted Equity Awards	Dec. 31, 2011 Other Postretirement Benefit Plans, Defined Benefit Person	Feb. 28, 2009 Performance Based Restricted Equity Awards	Dec. 31, 2011 Performance Based Restricted Equity Awards Person	Dec. 31, 2010 Performance Based Restricted Equity Awards	Mar. 31, 2009 Performance Based Restricted Equity Awards Upper Limit	Dec. 31, 2011 Performance Based Restricted Equity Awards Upper Limit	Dec. 31, 2010 Performance Based Restricted Equity Awards Upper Limit	Mar. 31, 2009 Performance Based Restricted Equity Awards Minimum	Dec. 31, 2011 Performance Based Restricted Equity Awards Minimum	Dec. 31, 2010 Performance Based Restricted Equity Awards Minimum	Dec. 31, 2011 Defined Contribution Pension Plan 401k	Dec. 31, 2010 Defined Contribution Pension Plan 401k	Dec. 31, 2009 Defined Contribution Pension Plan 401k	Dec. 31, 2011 Defined Contribution Pension Plan 401k Upper Limit
Employee Benefits Disclosure [Line Items]
Matching contribution to defined contribution pension plan																																			6.00%
Employee Stock Ownership Plan Shares held	26,900,000
Matching contributions																																$ 64.1	$ 61.3	$ 60.7
Postemployment benefits liability	20.8	20.8
Number of employees, approximately																						130		40
Performance-based awards vesting range																							Either vest or be forfeited in full (i.e., no partial vesting).
Shares authorized																			18,700,000	18,000,000	1,400,000
Shares available for future awards			18,141,922	[1]	20,328,180	[1]	4,753,038	[1]				663,095	[2]	757,201	[2]	869,871	[2]		2,500,000	15,600,000	700,000
Performance-based awards granted vesting percentage of the award amount																										100.00%	200.00%	200.00%	0.00%	0.00%	0.00%
Performance-based awards granted vesting target percentage																								100.00%	100.00%
Aggregate fair value of the restricted equity awards that vested during the period			31.3		24.3		16.8
Deferred Liability Awards Vested							91,856
Description of plan									Prior to 2003, we granted NQSOs. These options became exercisable at various dates not earlier than six months after the date of grant, and remained exercisable for up to ten years from the date of the award.
Vested and expiring									All NQSOs vested on or before January 1, 2007 and expired on December 31, 2011.
Total pretax intrinsic value of options exercised									$ 15.2	$ 40.8	$ 36.1	$ 3.3		$ 5.1		$ 1.9
Requisite service period, minimum												Six months and one day
Vesting period of grants to date												11 or 12 months
Common shares reserved for issuance under executive deferred compensation plan																		3,600,000

[1] Includes both restricted stock units and restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares. All performance-based awards are included at their target amounts.

[2] Represents shares available under the 2003 Directors Equity Incentive Plan.

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LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Personal Lines
Favorable development in loss and loss adjustment expense reserves	70.00%	70.00%	55.00%
Personal Lines | Agency Channel
Favorable development in loss and loss adjustment expense reserves	25.00%		25.00%
Personal Lines | Direct Channel
Favorable development in loss and loss adjustment expense reserves	75.00%		75.00%
Accident Year 2009
Favorable development in loss and loss adjustment expense reserves		70.00%
Accident Years 2006 and prior
Favorable development in loss and loss adjustment expense reserves			60.00%

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Amounts Charged to Income for Employees Incentive Compensation Plans (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Incentive Compensation Cash Award
Incentive Compensation Plans Expense [Line Items]
Pretax	$ 196.1	$ 257.3	$ 120.4
After Tax	127.5	167.2	78.3
Stock Compensation Plan
Incentive Compensation Plans Expense [Line Items]
Pretax	50.5	45.9	40.3
After Tax	$ 32.8	$ 29.8	$ 26.2

XML

Reconciliation of Provision (Benefit) for Income Taxes Reported in the Consolidated Statements Of Income with Tax at the Statutory Rate (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Income Taxes [Line Items]
Income before income taxes	$ 1,487.0	$ 1,565.2	$ 1,556.9
Tax at statutory rate	520.5	547.8	544.9
Exempt interest income	(17.5)	(19.4)	(26.7)
Dividends received deduction	(18.2)	(17.2)	(17.9)
Tax credits	(9.1)	0	0
Tax-deductible dividends	(3.8)	(13.0)	0
Other items, net	(0.4)	(1.3)	(0.9)
Total income tax provision	$ 471.5	$ 496.9	$ 499.4
Tax at statutory rate	35.00%	35.00%	35.00%
Exempt interest income	(1.00%)	(1.00%)	(2.00%)
Dividends received deduction	(1.00%)	(1.00%)	(1.00%)
Tax credits	(1.00%)	0.00%	0.00%
Tax-deductible dividends	0.00%	(1.00%)	0.00%
Other items, net	0.00%	0.00%	0.00%
Total income tax provision	32.00%	32.00%	32.00%

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Debt (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Debt Instrument [Line Items]
Carrying Value	$ 2,442.1	[1]	$ 1,958.2	[1]
Fair Value	2,664.7		2,105.7
6.375% Senior Notes due 2012
Debt Instrument [Line Items]
Carrying Value	350.0		349.6
Fair Value	350.5		369.3
7% Notes due 2013
Debt Instrument [Line Items]
Carrying Value	149.7		149.6
Fair Value	162.4		165.0
3.75% Senior Notes due 2021
Debt Instrument [Line Items]
Carrying Value	497.0		0
Fair Value	525.3		0
6 5/8% Senior Notes due 2029
Debt Instrument [Line Items]
Carrying Value	295.0		294.8
Fair Value	364.4		329.9
6.25% Senior Notes due 2032
Debt Instrument [Line Items]
Carrying Value	394.4		394.2
Fair Value	492.4		433.3
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Carrying Value	756.0		770.0
Fair Value	$ 769.7		$ 808.2

[1] Consists of both short- and long-term debt. See Note 4 - Debt for further discussion.

XML

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

COMMITMENTS AND CONTINGENCIES

13.  COMMITMENTS AND CONTINGENCIES

We have certain noncancelable operating lease commitments with lease terms greater than one year for property and computer equipment. The minimum commitments under these agreements at December 31, 2011, were as follows:

(millions) Year	Commitments
2012	$	53.0
2013		42.1
2014		26.0
2015		15.3
2016		7.8
Thereafter		13.8
Total	$	158.0

Some of the leases have options to renew at the end of the lease periods. The expense we incurred for the leases disclosed above, as well as other operating leases that may be cancelable or have terms less than one year, was:

(millions) Year	Expense
2011	$	80.8
2010		96.7
2009		109.0

We also have certain noncancelable purchase obligations. The minimum commitment under these agreements at December 31, 2011, was $174.3 million.

As of December 31, 2011, we had no open investment funding commitments; we had no uncollateralized lines or letters of credit as of December 31, 2011 or 2010.

XML

Interest Capitalized (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Capitalized Interest [Line Items]
Capitalized Interest	$ 0.4	$ 1.1	$ 2.6

XML

CONDENSED BALANCE SHEETS (PARENT COMPANY) (Parenthetical) (Detail) (USD $) In Millions, except Per Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Condensed Financial Statements, Captions [Line Items]
Common Shares, par value	$ 1.00	$ 1.00
Common Shares, authorized	900.0	900.0
Common Shares, issued	797.7	797.7
Common Shares, treasury shares	184.7	135.3
Parent Company
Condensed Financial Statements, Captions [Line Items]
Common Shares, par value	$ 1.00	$ 1.00
Common Shares, authorized	900.0	900.0
Common Shares, issued	797.7	797.7
Common Shares, treasury shares	184.7	135.3

XML

Aggregate Principal Payments On Debt Outstanding (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Debt Outstanding [Line Items]
2012	$ 350.0
2013	150.0
2014	0
2015	0
2016	0
Thereafter	1,962.1
Total	$ 2,462.1

XML

Assets Held in Deferral Plan Irrevocable Grantor Trust Account (Parenthetical) (Detail) (Progressive common shares) In Millions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Progressive common shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares held in Deferral Plan Irrevocable Grantor Trust account to be distributed in-kind	0.7	0.5

XML

COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2011

Minimum Commitments under Noncancelable Operating Lease Agreements

The minimum commitments under these agreements at December 31, 2011, were as follows:

(millions) Year	Commitments
2012	$	53.0
2013		42.1
2014		26.0
2015		15.3
2016		7.8
Thereafter		13.8
Total	$	158.0

Expense Incurred for Leases

The expense we incurred for the leases disclosed above, as well as other operating leases that may be cancelable or have terms less than one year, was:

(millions) Year	Expense
2011	$	80.8
2010		96.7
2009		109.0

XML

Supplemental Cash Flow Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Schedule of Cash Flow, Supplemental [Line Items]
Income taxes, net of refunds	$ 435.0	$ 434.0	$ 461.7
Interest	$ 129.5	$ 138.4	$ 144.7

XML

Composition of the Investment Portfolio by Major Security Type (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Portfolio	$ 15,963.0	[1],[2]	$ 15,523.4	[1],[2]
Debt	2,664.7	[3]	2,105.7	[3]
Fixed maturities
Portfolio	11,759.3		11,850.0
Fixed maturities | Redeemable preferred stocks
Portfolio	373.9		502.5
Fixed maturities | Redeemable preferred stocks | Financials
Portfolio	131.3		195.8
Fixed maturities | Redeemable preferred stocks | Utilities
Portfolio	68.1		71.4
Fixed maturities | Redeemable preferred stocks | Industrials
Portfolio	174.5		235.3
Fixed maturities | Debt Securities
Portfolio	7,861.3		7,877.8
Fixed maturities | Debt Securities | U.S. government obligations
Portfolio	2,963.0		3,242.6
Fixed maturities | Debt Securities | State and local government obligations
Portfolio	2,002.1		1,989.1
Fixed maturities | Debt Securities | Corporate debt securities
Portfolio	2,896.2		2,646.1
Fixed maturities | Asset-backed Securities
Portfolio	3,524.1		3,469.7
Fixed maturities | Asset-backed Securities | Residential mortgage-backed securities
Portfolio	426.9		563.6
Fixed maturities | Asset-backed Securities | Commercial mortgage-backed securities
Portfolio	1,876.6		1,832.1
Fixed maturities | Asset-backed Securities | Other asset-backed securities
Portfolio	1,220.6		1,074.0
Equity securities | Nonredeemable preferred stocks
Portfolio	806.3		1,157.6
Equity securities | Nonredeemable preferred stocks | Financials
Portfolio	753.3		1,055.3
Equity securities | Nonredeemable preferred stocks | Utilities
Portfolio	53.0		67.9
Equity securities | Nonredeemable preferred stocks | Industrials
Portfolio	0		34.4
Equity securities | Common equities
Portfolio	1,845.6		1,425.0
Equity securities | Common equities | Common Stocks
Portfolio	1,834.1		1,413.2
Equity securities | Common equities | Other Equity-like Investments
Portfolio	11.5		11.8
Total Fixed Maturities and Equity Securities
Portfolio	14,411.2		14,432.6
Short-term investments
Portfolio	1,551.8	[4]	1,090.8	[4]
Fair Value, Inputs, Level 1 | Fixed maturities
Portfolio	2,987.1		3,266.0
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks
Portfolio	24.1		23.4
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks | Financials
Portfolio	24.1		23.4
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks | Utilities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Redeemable preferred stocks | Industrials
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Debt Securities
Portfolio	2,963.0		3,242.6
Fair Value, Inputs, Level 1 | Fixed maturities | Debt Securities | U.S. government obligations
Portfolio	2,963.0		3,242.6
Fair Value, Inputs, Level 1 | Fixed maturities | Debt Securities | State and local government obligations
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Debt Securities | Corporate debt securities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Asset-backed Securities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Asset-backed Securities | Residential mortgage-backed securities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Asset-backed Securities | Commercial mortgage-backed securities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Fixed maturities | Asset-backed Securities | Other asset-backed securities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks
Portfolio	227.9		490.2
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks | Financials
Portfolio	227.9		490.2
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks | Utilities
Portfolio	0		0
Fair Value, Inputs, Level 1 | Equity securities | Nonredeemable preferred stocks | Industrials
Portfolio	0		0
Fair Value, Inputs, Level 1 | Equity securities | Common equities
Portfolio	1,834.1		1,413.2
Fair Value, Inputs, Level 1 | Equity securities | Common equities | Common Stocks
Portfolio	1,834.1		1,413.2
Fair Value, Inputs, Level 1 | Equity securities | Common equities | Other Equity-like Investments
Portfolio	0		0
Fair Value, Inputs, Level 1 | Total Fixed Maturities and Equity Securities
Portfolio	5,049.1		5,169.4
Fair Value, Inputs, Level 2 | Fixed maturities
Portfolio	8,686.0		8,425.3
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks
Portfolio	349.8		479.1
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks | Financials
Portfolio	107.2		172.4
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks | Utilities
Portfolio	68.1		71.4
Fair Value, Inputs, Level 2 | Fixed maturities | Redeemable preferred stocks | Industrials
Portfolio	174.5		235.3
Fair Value, Inputs, Level 2 | Fixed maturities | Debt Securities
Portfolio	4,898.3		4,605.7
Fair Value, Inputs, Level 2 | Fixed maturities | Debt Securities | U.S. government obligations
Portfolio	0		0
Fair Value, Inputs, Level 2 | Fixed maturities | Debt Securities | State and local government obligations
Portfolio	2,002.1		1,989.1
Fair Value, Inputs, Level 2 | Fixed maturities | Debt Securities | Corporate debt securities
Portfolio	2,896.2		2,616.6
Fair Value, Inputs, Level 2 | Fixed maturities | Asset-backed Securities
Portfolio	3,437.9		3,340.5
Fair Value, Inputs, Level 2 | Fixed maturities | Asset-backed Securities | Residential mortgage-backed securities
Portfolio	364.6		466.9
Fair Value, Inputs, Level 2 | Fixed maturities | Asset-backed Securities | Commercial mortgage-backed securities
Portfolio	1,855.3		1,804.6
Fair Value, Inputs, Level 2 | Fixed maturities | Asset-backed Securities | Other asset-backed securities
Portfolio	1,218.0		1,069.0
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks
Portfolio	578.4		667.4
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks | Financials
Portfolio	525.4		565.1
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks | Utilities
Portfolio	53.0		67.9
Fair Value, Inputs, Level 2 | Equity securities | Nonredeemable preferred stocks | Industrials
Portfolio	0		34.4
Fair Value, Inputs, Level 2 | Equity securities | Common equities
Portfolio	0		0
Fair Value, Inputs, Level 2 | Equity securities | Common equities | Common Stocks
Portfolio	0		0
Fair Value, Inputs, Level 2 | Equity securities | Common equities | Other Equity-like Investments
Portfolio	0		0
Fair Value, Inputs, Level 2 | Total Fixed Maturities and Equity Securities
Portfolio	9,264.4		9,092.7
Fair Value, Inputs, Level 3 | Fixed maturities
Portfolio	86.2		158.7
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks
Portfolio	0		0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks | Financials
Portfolio	0		0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks | Utilities
Portfolio	0		0
Fair Value, Inputs, Level 3 | Fixed maturities | Redeemable preferred stocks | Industrials
Portfolio	0		0
Fair Value, Inputs, Level 3 | Fixed maturities | Debt Securities
Portfolio	0		29.5
Fair Value, Inputs, Level 3 | Fixed maturities | Debt Securities | U.S. government obligations
Portfolio	0		0
Fair Value, Inputs, Level 3 | Fixed maturities | Debt Securities | State and local government obligations
Portfolio	0		0
Fair Value, Inputs, Level 3 | Fixed maturities | Debt Securities | Corporate debt securities
Portfolio	0		29.5
Fair Value, Inputs, Level 3 | Fixed maturities | Asset-backed Securities
Portfolio	86.2		129.2
Fair Value, Inputs, Level 3 | Fixed maturities | Asset-backed Securities | Residential mortgage-backed securities
Portfolio	62.3		96.7
Fair Value, Inputs, Level 3 | Fixed maturities | Asset-backed Securities | Commercial mortgage-backed securities
Portfolio	21.3		27.5
Fair Value, Inputs, Level 3 | Fixed maturities | Asset-backed Securities | Other asset-backed securities
Portfolio	2.6		5.0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks
Portfolio	0		0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks | Financials
Portfolio	0		0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks | Utilities
Portfolio	0		0
Fair Value, Inputs, Level 3 | Equity securities | Nonredeemable preferred stocks | Industrials
Portfolio	0		0
Fair Value, Inputs, Level 3 | Equity securities | Common equities
Portfolio	11.5		11.8
Fair Value, Inputs, Level 3 | Equity securities | Common equities | Common Stocks
Portfolio	0		0
Fair Value, Inputs, Level 3 | Equity securities | Common equities | Other Equity-like Investments
Portfolio	11.5		11.8
Fair Value, Inputs, Level 3 | Total Fixed Maturities and Equity Securities
Portfolio	97.7		170.5
Carrying (Reported) Amount, Fair Value Disclosure
Portfolio	14,912.2		14,344.6
Debt	2,442.1	[3]	1,958.2	[3]
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities
Portfolio	11,455.7		11,630.8
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks
Portfolio	379.3		490.0
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks | Financials
Portfolio	124.3		183.8
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks | Utilities
Portfolio	70.8		70.2
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Redeemable preferred stocks | Industrials
Portfolio	184.2		236.0
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Debt Securities
Portfolio	7,582.8		7,737.7
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Debt Securities | U.S. government obligations
Portfolio	2,842.7		3,203.2
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Debt Securities | State and local government obligations
Portfolio	1,938.6		1,955.5
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Debt Securities | Corporate debt securities
Portfolio	2,801.5		2,579.0
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Asset-backed Securities
Portfolio	3,493.6		3,403.1
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Asset-backed Securities | Residential mortgage-backed securities
Portfolio	452.9		567.1
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Asset-backed Securities | Commercial mortgage-backed securities
Portfolio	1,829.8		1,772.1
Carrying (Reported) Amount, Fair Value Disclosure | Fixed maturities | Asset-backed Securities | Other asset-backed securities
Portfolio	1,210.9		1,063.9
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks
Portfolio	473.7		601.3
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks | Financials
Portfolio	433.7		514.3
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks | Utilities
Portfolio	40.0		50.8
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Nonredeemable preferred stocks | Industrials
Portfolio	0		36.2
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Common equities
Portfolio	1,431.0		1,021.7
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Common equities | Common Stocks
Portfolio	1,427.3		1,017.6
Carrying (Reported) Amount, Fair Value Disclosure | Equity securities | Common equities | Other Equity-like Investments
Portfolio	3.7		4.1
Carrying (Reported) Amount, Fair Value Disclosure | Total Fixed Maturities and Equity Securities
Portfolio	13,360.4		13,253.8
Carrying (Reported) Amount, Fair Value Disclosure | Short-term investments
Portfolio	$ 1,551.8	[4]	$ 1,090.8	[4]

[1] Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

[2] The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

[3] Debt is not subject to measurement at fair value in the Consolidated Balance Sheets. Therefore, it is not broken out by hierarchy level; fair values are obtained from external sources.

[4] Due to the underlying nature of these securities, cost approximates fair value.

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OTTI Credit Losses Recognized in Earnings (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010
Beginning balance	$ 39.8		$ 48.5
Credit losses for which an OTTI was previously recognized	1.4		3.3
Credit losses for which an OTTI was not previously recognized	1.5		3.4
Change in recoveries of future cash flows expected to be collected	(5.4)	[1],[2]	(5.7)	[1]
Reductions for previously recognized credit impairments written down to fair value	(1.5)	[3]	(9.7)	[3]
Ending balance	35.8		39.8
Residential mortgage-backed securities
Beginning balance	32.3		41.1
Credit losses for which an OTTI was previously recognized	1.4		3.0
Credit losses for which an OTTI was not previously recognized	1.1		2.4
Change in recoveries of future cash flows expected to be collected	0.8	[1],[2]	(5.3)	[1]
Reductions for previously recognized credit impairments written down to fair value	(1.1)	[3]	(8.9)	[3]
Ending balance	34.5		32.3
Commercial mortgage-backed securities
Beginning balance	1.0		0.9
Credit losses for which an OTTI was previously recognized	0		0.3
Credit losses for which an OTTI was not previously recognized	0.4		1.0
Change in recoveries of future cash flows expected to be collected	0.3	[1],[2]	(0.4)	[1]
Reductions for previously recognized credit impairments written down to fair value	(0.4)	[3]	(0.8)	[3]
Ending balance	1.3		1.0
Corporate debt securities
Beginning balance	6.5		6.5
Credit losses for which an OTTI was previously recognized	0		0
Credit losses for which an OTTI was not previously recognized	0		0
Change in recoveries of future cash flows expected to be collected	(6.5)	[1],[2]	0	[1]
Reductions for previously recognized credit impairments written down to fair value	0	[3]	0	[3]
Ending balance	$ 0		$ 6.5

[1] Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

[2] Includes $2.0 million received on a residential mortgage-backed security in excess of the cash flows expected to be collected at the time of the write-down.

[3] Reflects reductions of prior credit impairments where the current credit impairment requires writing securities down to fair value (i.e., no remaining non-credit loss).

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REINSURANCE (Detail) (Property, Liability and Casualty Insurance Segment, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Property, Liability and Casualty Insurance Segment
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Gross Amount	$ 15,107.5	$ 14,519.2	$ 14,199.4
Ceded to Other Companies	204.7	204.4	186.6
Assumed From Other Companies	0	0	0
Net Amount	$ 14,902.8	$ 14,314.8	$ 14,012.8
Percentage of Amount Assumed to Net	0.00%	0.00%	0.00%

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SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

12 Months Ended

Dec. 31, 2011

SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2011			2010			2009
Revenues
Dividends from subsidiaries	$	875.3		$	1,216.2		$	1,230.6
Undistributed income from subsidiaries		225.7			(73.5	)		(78.7	)
Equity in net income of subsidiaries*		1,101.0			1,142.7			1,151.9
Intercompany investment income*		5.6			6.6			8.5
Net gains (losses) on extinguishment of debt		(.1	)		6.4			0
Total revenues		1,106.5			1,155.7			1,160.4
Expenses
Interest expense		138.0			139.5			146.4
Deferred compensation1		.4			4.3			4.8
Other operating costs and expenses		4.7			3.9			3.3
Total expenses		143.1			147.7			154.5
Income before income taxes		963.4			1,008.0			1,005.9
Provision (benefit) for income taxes		(52.1	)		(60.3	)		(51.6	)
Net income	$	1,015.5		$	1,068.3		$	1,057.5
Other comprehensive income (loss)		(91.2	)		330.5			694.7
Comprehensive income	$	924.3		$	1,398.8		$	1,752.2

* Eliminated in consolidation.

¹  See Note 4 – Employee Benefit Plans in these condensed financial statements.

See notes to condensed financial statements.

CONDENSED BALANCE SHEETS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	December 31,
	2011		2010
Assets
Investment in affiliate	$	1.0	$	1.0
Investment in subsidiaries*		6,179.5		5,984.8
Receivable from investment subsidiary*		2,096.6		2,120.2
Intercompany receivable*		237.6		179.1
Income taxes		52.1		48.7
Other assets		69.0		70.2
Total Assets	$	8,635.8	$	8,404.0
Liabilities and Shareholders’ Equity
Accounts payable, accrued expenses, and other liabilities	$	137.4	$	132.8
Dividend payable		249.6		264.1
Debt		2,442.1		1,958.2
Total liabilities		2,829.1		2,355.1
Common Shares, $1.00 par value (authorized 900.0; issued 797.7, including treasury shares of 184.7 and 135.3)		613.0		662.4
Paid-in capital		1,006.2		1,007.1
Retained earnings		3,495.0		3,595.7
Total accumulated other comprehensive income		692.5		783.7
Total shareholders’ equity		5,806.7		6,048.9
Total Liabilities and Shareholders’ Equity	$	8,635.8	$	8,404.0

* Eliminated in consolidation.

See notes to condensed financial statements.

CONDENSED STATEMENTS OF CASH FLOWS

THE PROGRESSIVE CORPORATION (PARENT COMPANY)

(millions)

	Years Ended December 31,
	2011			2010			2009
Cash Flows From Operating Activities:
Net income	$	1,015.5		$	1,068.3		$	1,057.5
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed income from subsidiaries		(225.7	)		73.5			78.7
Amortization of stock-based compensation		2.1			2.4			1.8
Net (gains) losses on extinguishment of debt		.1			(6.4	)		0
Changes in:
Intercompany receivable		(58.5	)		(54.1	)		(22.0	)
Accounts payable, accrued expenses, and other liabilities		4.5			7.3			12.5
Income taxes		(3.4	)		(12.2	)		31.1
Other, net		4.2			(1.9	)		(5.6	)
Net cash provided by operating activities		738.8			1,076.9			1,154.0
Cash Flows From Investing Activities:
Additional investments in equity securities of consolidated subsidiaries		(11.8	)		(3.5	)		(152.4	)
Received from (paid to) investment subsidiary		23.6			122.0			(849.5	)
Net cash provided by (used in) investing activities		11.8			118.5			(1,001.9	)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options		22.4			27.2			18.8
Tax benefit from exercise/vesting of stock-based compensation		6.4			14.0			9.7
Proceeds from debt issuance		497.0			0			0
Reacquisition of debt		(15.0	)		(214.3	)		0
Dividends paid to shareholders		(263.6	)		(763.7	)		0
Acquisition of treasury shares		(997.8	)		(258.6	)		(180.6	)
Net cash used in financing activities		(750.6	)		(1,195.4	)		(152.1	)
Change in cash		0			0			0
Cash, beginning of year		0			0			0
Cash, end of year	$	0		$	0		$	0

See notes to condensed financial statements.

NOTES TO CONDENSED FINANCIAL STATEMENTS

The accompanying condensed financial statements of The Progressive Corporation (parent company) should be read in conjunction with the consolidated financial statements and notes thereto of The Progressive Corporation and subsidiaries’ Annual Report to Shareholders, which is included as Exhibit 13 to this Form 10-K.

Note 1. Statements of Cash Flows — For the purpose of the Statements of Cash Flows, cash includes only bank demand deposits. The Progressive Corporation does not hold any cash but has unrestricted access to funds maintained in a non-insurance, investment subsidiary to meet its holding company obligations; at year-end 2011 and 2010, $2.0 billion and $2.2 billion, respectively, of marketable securities were available in this company. Non-cash activity includes declared but unpaid dividends. For the years ended December 31, we paid the following:

(millions)	2011		2010		2009
Income taxes, net of refunds	$	435.0	$	434.0	$	461.7
Interest		129.5		138.4		144.7

Note 2. Income Taxes — The Progressive Corporation files a consolidated federal income tax return with all subsidiaries and acts as an agent for the consolidated tax group when making payments to the Internal Revenue Service. Income taxes in the accompanying Condensed Balance Sheets are comprised of the parent company’s net deferred tax assets and the consolidated group’s net income taxes payable/recoverable. The Progressive Corporation and its subsidiaries have adopted, pursuant to a written agreement, a method of allocating consolidated federal income taxes. Amounts allocated to the subsidiaries under the written agreement are included in “Intercompany Receivable” in the accompanying Condensed Balance Sheets.

Note 3. Debt — The information relating to debt is incorporated by reference from Note 4 – Debt in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

Note 4. Employee Benefit Plans — The information relating to incentive compensation plans and deferred compensation is incorporated by reference from Note 9 – Employee Benefit Plans in our Annual Report, which is included as Exhibit 13 to this Form 10-K.

Note 5. Other Comprehensive Income — On the condensed Statements of Comprehensive Income, other comprehensive income (loss) represents activity of the subsidiaries of The Progressive Corporation and includes net unrealized gains (losses) on securities, net unrealized gains on forecasted transactions, and foreign currency translation adjustments.

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OTTI Credit Losses Recognized in Earnings (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010
Change in recoveries of future cash flows expected to be collected	$ (5.4)	[1],[2]	$ (5.7)	[1]
Residential mortgage-backed securities
Change in recoveries of future cash flows expected to be collected	0.8	[1],[2]	(5.3)	[1]
Residential mortgage-backed securities | Actual Cash Flow Recovery
Change in recoveries of future cash flows expected to be collected	$ 2.0

[1] Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

[2] Includes $2.0 million received on a residential mortgage-backed security in excess of the cash flows expected to be collected at the time of the write-down.

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CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash Flows From Operating Activities:
Net income	$ 1,015.5	$ 1,068.3	$ 1,057.5
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of stock-based compensation	50.5	45.9	40.3
Net (gains) losses on extinguishment of debt	0.1	(6.4)	0
Changes in:
Accounts payable, accrued expenses, and other liabilities	35.5	210.2	(71.8)
Income taxes	28.4	48.1	29.7
Other, net	5.9	(10.0)	(28.2)
Net cash provided by operating activities	1,497.9	1,679.3	1,486.8
Cash Flows From Investing Activities:
Net cash provided by (used in) investing activities	(744.9)	(486.5)	(1,178.6)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options	22.4	27.2	18.8
Tax benefit from exercise/vesting of stock-based compensation	6.4	14.0	9.7
Proceeds from debt issuance	491.9	0	0
Reacquisition of debt	(15.0)	(214.3)	0
Dividends paid to shareholders	(263.6)	(763.7)	0
Acquisition of treasury shares	(997.8)	(258.6)	(180.6)
Net cash used in financing activities	(755.7)	(1,195.4)	(152.1)
Increase (decrease) in cash	(3.2)	(1.8)	157.8
Cash, beginning of year	158.9	160.7	2.9
Cash, End of year	155.7	158.9	160.7
Parent Company
Cash Flows From Operating Activities:
Net income	1,015.5	1,068.3	1,057.5
Adjustments to reconcile net income to net cash provided by operating activities:
Undistributed income from subsidiaries	(225.7)	73.5	78.7
Amortization of stock-based compensation	2.1	2.4	1.8
Net (gains) losses on extinguishment of debt	0.1	(6.4)	0
Changes in:
Intercompany receivable	(58.5)	(54.1)	(22.0)
Accounts payable, accrued expenses, and other liabilities	4.5	7.3	12.5
Income taxes	(3.4)	(12.2)	31.1
Other, net	4.2	(1.9)	(5.6)
Net cash provided by operating activities	738.8	1,076.9	1,154.0
Cash Flows From Investing Activities:
Additional investments in equity securities of consolidated subsidiaries	(11.8)	(3.5)	(152.4)
Received from (paid to) investment subsidiary	23.6	122.0	(849.5)
Net cash provided by (used in) investing activities	11.8	118.5	(1,001.9)
Cash Flows From Financing Activities:
Proceeds from exercise of stock options	22.4	27.2	18.8
Tax benefit from exercise/vesting of stock-based compensation	6.4	14.0	9.7
Proceeds from debt issuance	497.0	0	0
Reacquisition of debt	(15.0)	(214.3)	0
Dividends paid to shareholders	(263.6)	(763.7)	0
Acquisition of treasury shares	(997.8)	(258.6)	(180.6)
Net cash used in financing activities	(750.6)	(1,195.4)	(152.1)
Increase (decrease) in cash	0	0	0
Cash, beginning of year	0	0	0
Cash, End of year	$ 0	$ 0	$ 0

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FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2011

Composition of the Investment Portfolio by Major Security Type

The composition of the investment portfolio by major security type was:

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2011
Fixed maturities:
U.S. government obligations	$	2,963.0	$	0	$	0	$	2,963.0	$	2,842.7
State and local government obligations		0		2,002.1		0		2,002.1		1,938.6
Corporate debt securities		0		2,896.2		0		2,896.2		2,801.5
Subtotal		2,963.0		4,898.3		0		7,861.3		7,582.8
Asset-backed securities:
Residential mortgage-backed		0		364.6		62.3		426.9		452.9
Commercial mortgage-backed		0		1,855.3		21.3		1,876.6		1,829.8
Other asset-backed		0		1,218.0		2.6		1,220.6		1,210.9
Subtotal asset-backed securities		0		3,437.9		86.2		3,524.1		3,493.6
Redeemable preferred stocks:
Financials		24.1		107.2		0		131.3		124.3
Utilities		0		68.1		0		68.1		70.8
Industrials		0		174.5		0		174.5		184.2
Subtotal redeemable preferred stocks		24.1		349.8		0		373.9		379.3
Total fixed maturities		2,987.1		8,686.0		86.2		11,759.3		11,455.7
Equity securities:
Nonredeemable preferred stocks:
Financials		227.9		525.4		0		753.3		433.7
Utilities		0		53.0		0		53.0		40.0
Industrials		0		0		0		0		0
Subtotal nonredeemable preferred stocks		227.9		578.4		0		806.3		473.7
Common equities:
Common stocks		1,834.1		0		0		1,834.1		1,427.3
Other equity-like investments		0		0		11.5		11.5		3.7
Subtotal common equities		1,834.1		0		11.5		1,845.6		1,431.0
Total fixed maturities and equity securities	$	5,049.1	$	9,264.4	$	97.7		14,411.2		13,360.4
Short-term investments:
Other short-term investments1								1,551.8		1,551.8
Total portfolio							$	15,963.0	$	14,912.2
Debt2							$	2,664.7	$	2,442.1

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2010
Fixed maturities:
U.S. government obligations	$	3,242.6	$	0	$	0	$	3,242.6	$	3,203.2
State and local government obligations		0		1,989.1		0		1,989.1		1,955.5
Corporate debt securities		0		2,616.6		29.5		2,646.1		2,579.0
Subtotal		3,242.6		4,605.7		29.5		7,877.8		7,737.7
Asset-backed securities:
Residential mortgage-backed		0		466.9		96.7		563.6		567.1
Commercial mortgage-backed		0		1,804.6		27.5		1,832.1		1,772.1
Other asset-backed		0		1,069.0		5.0		1,074.0		1,063.9
Subtotal asset-backed securities		0		3,340.5		129.2		3,469.7		3,403.1
Redeemable preferred stocks:
Financials		23.4		172.4		0		195.8		183.8
Utilities		0		71.4		0		71.4		70.2
Industrials		0		235.3		0		235.3		236.0
Subtotal redeemable preferred stocks		23.4		479.1		0		502.5		490.0
Total fixed maturities		3,266.0		8,425.3		158.7		11,850.0		11,630.8
Equity securities:
Nonredeemable preferred stocks:
Financials		490.2		565.1		0		1,055.3		514.3
Utilities		0		67.9		0		67.9		50.8
Industrials		0		34.4		0		34.4		36.2
Subtotal nonredeemable preferred stocks		490.2		667.4		0		1,157.6		601.3
Common equities:
Common stocks		1,413.2		0		0		1,413.2		1,017.6
Other equity-like investments		0		0		11.8		11.8		4.1
Subtotal common equities		1,413.2		0		11.8		1,425.0		1,021.7
Total fixed maturities and equity securities	$	5,169.4	$	9,092.7	$	170.5		14,432.6		13,253.8
Short-term investments:
Other short-term investments1								1,090.8		1,090.8
Total portfolio							$	15,523.4	$	14,344.6
Debt2							$	2,105.7	$	1,958.2

¹  Due to the underlying nature of these securities, cost approximates fair value.

² Debt is not subject to measurement at fair value in the Consolidated Balance Sheets. Therefore, it is not broken out by hierarchy level; fair values are obtained from external sources.

Summary of Changes in Fair Value Associated With Level 3 Assets

The following tables provide a summary of changes in fair value associated with Level 3 assets for the years ended December 31, 2011 and 2010:

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2010		Calls/ Maturities/ Paydowns			Purchases		Sales			Net Realized (Gain)/Loss			Change in Valuation			Net Transfers In (Out)1			Fair value at Dec. 31, 2011
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	96.7	$	(19.5	)	$	0	$	0		$	0		$	.5		$	(15.4	)	$	62.3
Commercial mortgage-backed		27.5		(.3	)		0		0			0			(5.9	)		0			21.3
Other asset-backed		5.0		(2.6	)		0		0			0			.2			0			2.6
Total asset-backed securities		129.2		(22.4	)		0		0			0			(5.2	)		(15.4	)		86.2
Corporate debt securities		29.5		0			0		(27.9	)		(.6	)		(1.0	)		0			0
Other debt obligations		0		0			0		0			0			0			0			0
Redeemable preferred stocks:
Industrials		0		0			0		0			0			0			0			0
Total fixed maturities		158.7		(22.4	)		0		(27.9	)		(.6	)		(6.2	)		(15.4	)		86.2
Equity securities:
Common equities:
Other equity-like investments		11.8		0			0		0			0			(.3	)		0			11.5
Total Level 3 securities	$	170.5	$	(22.4	)	$	0	$	(27.9	)	$	(.6	)	$	(6.5	)	$	(15.4	)	$	97.7

¹ The $(15.4) million was transferred out of Level 3 into Level 2 due to the availability of vendor pricing on a residential mortgage-backed security.

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2009		Calls/ Maturities/ Paydowns			Purchases		Sales			Net Realized (Gain)/Loss		Change in Valuation			Net Transfers In (Out)1			Fair value at Dec. 31, 2010
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	46.1	$	(20.9	)	$	55.6	$	0		$	0	$	4.8		$	11.1		$	96.7
Commercial mortgage-backed		21.6		0			0		0			0		5.4			.5			27.5
Other asset-backed		7.8		(2.6	)		0		0			0		(.2	)		0			5.0
Total asset-backed securities		75.5		(23.5	)		55.6		0			0		10.0			11.6			129.2
Corporate debt securities		28.2		0			0		0			0		1.3			0			29.5
Other debt obligations		1.1		0			0		0			0		(1.1	)		0			0
Redeemable preferred stocks:
Industrials		53.1		0			0		0			0		0			(53.1	)		0
Total fixed maturities		157.9		(23.5	)		55.6		0			0		10.2			(41.5	)		158.7
Equity securities:
Common equities:
Other equity-like investments		12.9		(2.1	)		0		(.3	)		.3		1.0			0			11.8
Total Level 3 securities	$	170.8	$	(25.6	)	$	55.6	$	(.3	)	$	.3	$	11.2		$	(41.5	)	$	170.5

¹ The net $(41.5) million of transfers out of Level 3 included: a $12.1 million transfer into Level 3 and subsequent transfer out of Level 3 at $(15.1) million due to sufficient trade volume, a $(53.1) million transfer out of Level 3 due to the availability of vendor pricing on a redeemable preferred stock, and $14.6 million of transfers into Level 3 due to the lack of trade volume.

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INVESTMENTS (Tables)

12 Months Ended

Dec. 31, 2011

Investment Portfolio by Major Security Type

The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio:

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Fair Value
December 31, 2011
Fixed maturities:
U.S. government obligations	$	2,842.7	$	120.3	$	0		$	0		$	2,963.0		18.6	%
State and local government obligations		1,938.6		64.1		(.6	)		0			2,002.1		12.5
Corporate debt securities		2,801.5		94.3		(6.5	)		6.9			2,896.2		18.1
Residential mortgage-backed securities		452.9		9.3		(35.3	)		0			426.9		2.7
Commercial mortgage-backed securities		1,829.8		52.3		(5.5	)		0			1,876.6		11.8
Other asset-backed securities		1,210.9		11.3		(1.3	)		(.3	)		1,220.6		7.6
Redeemable preferred stocks		379.3		18.6		(24.0	)		0			373.9		2.3
Total fixed maturities		11,455.7		370.2		(73.2	)		6.6			11,759.3		73.6
Equity securities:
Nonredeemable preferred stocks		473.7		342.6		(3.7	)		(6.3	)		806.3		5.1
Common equities		1,431.0		440.0		(25.4	)		0			1,845.6		11.6
Short-term investments:
Other short-term investments		1,551.8		0		0			0			1,551.8		9.7
Total portfolio2,3	$	14,912.2	$	1,152.8	$	(102.3	)	$	.3		$	15,963.0		100.0	%
($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Fair Value
December 31, 2010
Fixed maturities:
U.S. government obligations	$	3,203.2	$	56.3	$	(16.9	)	$	0		$	3,242.6		20.9	%
State and local government obligations		1,955.5		43.0		(9.4	)		0			1,989.1		12.8
Corporate debt securities		2,579.0		78.1		(13.3	)		2.3			2,646.1		17.0
Residential mortgage-backed securities		567.1		17.8		(21.3	)		0			563.6		3.6
Commercial mortgage-backed securities		1,772.1		66.9		(6.9	)		0			1,832.1		11.8
Other asset-backed securities		1,063.9		12.4		(2.2	)		(.1	)		1,074.0		6.9
Redeemable preferred stocks		490.0		29.6		(17.1	)		0			502.5		3.3
Total fixed maturities		11,630.8		304.1		(87.1	)		2.2			11,850.0		76.3
Equity securities:
Nonredeemable preferred stocks		601.3		560.2		0			(3.9	)		1,157.6		7.5
Common equities		1,021.7		406.5		(3.2	)		0			1,425.0		9.2
Short-term investments:
Other short-term investments		1,090.8		0		0			0			1,090.8		7.0
Total portfolio2,3	$	14,344.6	$	1,270.8	$	(90.3	)	$	(1.7	)	$	15,523.4		100.0	%

¹ Represents net holding period gains (losses) on certain hybrid securities (discussed below).

² Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

³ The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

Hybrid Securities

Included in our fixed-maturity and equity securities are hybrid securities, which are reported at fair value at December 31:

(millions)	2011		2010
Fixed maturities:
Corporate debt securities	$	234.9	$	176.4
Other asset-backed securities		15.5		14.9
Total fixed maturities		250.4		191.3
Equity securities:
Nonredeemable preferred stocks		14.2		52.8
Total hybrid securities	$	264.6	$	244.1

Composition of Fixed Matuities by Maturity

The composition of fixed maturities by maturity at December 31, 2011, was:

(millions)	Cost		Fair Value
Less than one year	$	1,399.0	$	1,418.8
One to five years		8,582.6		8,850.9
Five to ten years		1,380.9		1,398.0
Ten years or greater		92.5		90.9
Total1	$	11,455.0	$	11,758.6

¹ Excludes $0.7 million of gains on the open credit default swap positions.

Gross Unrealized losses by Major Security

The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total Fair Value		Gross Unrealized Losses			Less than 12 Months					12 Months or Greater
(millions)						Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2011
Fixed maturities:
U.S. government obligations	$	0	$	0		$	0	$	0		$	0	$	0
State and local government obligations		93.6		(.6	)		79.5		(.5	)		14.1		(.1	)
Corporate debt securities		262.7		(6.5	)		137.3		(4.6	)		125.4		(1.9	)
Residential mortgage-backed securities		308.7		(35.3	)		34.4		(2.0	)		274.3		(33.3	)
Commercial mortgage-backed securities		203.7		(5.5	)		161.4		(3.5	)		42.3		(2.0	)
Other asset-backed securities		284.2		(1.3	)		259.7		(1.0	)		24.5		(.3	)
Redeemable preferred stocks		191.4		(24.0	)		43.5		(1.5	)		147.9		(22.5	)
Total fixed maturities		1,344.3		(73.2	)		715.8		(13.1	)		628.5		(60.1	)
Equity securities:
Nonredeemable preferred stocks		19.5		(3.7	)		19.5		(3.7	)		0		0
Common equities		214.6		(25.4	)		196.7		(23.1	)		17.9		(2.3	)
Total equity securities		234.1		(29.1	)		216.2		(26.8	)		17.9		(2.3	)
Total portfolio	$	1,578.4	$	(102.3	)	$	932.0	$	(39.9	)	$	646.4	$	(62.4	)
	Total Fair Value		Gross Unrealized Losses			Less than 12 Months					12 Months or Greater
(millions)						Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2010
Fixed maturities:
U.S. government obligations	$	495.3	$	(16.9	)	$	495.3	$	(16.9	)	$	0	$	0
State and local government obligations		461.9		(9.4	)		454.0		(8.7	)		7.9		(.7	)
Corporate debt securities		589.3		(13.3	)		541.3		(11.6	)		48.0		(1.7	)
Residential mortgage-backed securities		314.1		(21.3	)		74.0		(1.0	)		240.1		(20.3	)
Commercial mortgage-backed securities		332.0		(6.9	)		269.7		(3.1	)		62.3		(3.8	)
Other asset-backed securities		214.8		(2.2	)		209.8		(1.1	)		5.0		(1.1	)
Redeemable preferred stocks		216.7		(17.1	)		0		0			216.7		(17.1	)
Total fixed maturities		2,624.1		(87.1	)		2,044.1		(42.4	)		580.0		(44.7	)
Equity securities:
Nonredeemable preferred stocks		0		0			0		0			0		0
Common equities		60.5		(3.2	)		57.3		(3.1	)		3.2		(.1	)
Total equity securities		60.5		(3.2	)		57.3		(3.1	)		3.2		(.1	)
Total portfolio	$	2,684.6	$	(90.3	)	$	2,101.4	$	(45.5	)	$	583.2	$	(44.8	)

Total Non-Credit Portion of Other-Than-Temporary Impairment (OTTI) Recorded in Accumulated Other Comprehensive Income (AOCI), Reflecting Orginal Non-Credit Loss at the Time Credit Impairment

The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined:

	December 31,
(millions)	2011			2010
Fixed maturities:
Residential mortgage-backed securities	$	(44.8	)	$	(44.3	)
Commercial mortgage-backed securities		(1.0	)		(1.0	)
Total fixed maturities	$	(45.8	)	$	(45.3	)

OTTI Credit Losses Recognized in Earnings

The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2011 and 2010, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Corporate Debt			Total
Beginning balance at January 1, 2011	$	32.3		$	1.0		$	6.5		$	39.8
Credit losses for which an OTTI was previously recognized		1.4			0			0			1.4
Credit losses for which an OTTI was not previously recognized		1.1			.4			0			1.5
Change in recoveries of future cash flows expected to be collected1,2		.8			.3			(6.5	)		(5.4	)
Reductions for previously recognized credit impairments written down to fair value3		(1.1	)		(.4	)		0			(1.5	)
Ending balance at December 31, 2011	$	34.5		$	1.3		$	0		$	35.8

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Corporate Debt		Total
Beginning balance at January 1, 2010	$	41.1		$	.9		$	6.5	$	48.5
Credit losses for which an OTTI was previously recognized		3.0			.3			0		3.3
Credit losses for which an OTTI was not previously recognized		2.4			1.0			0		3.4
Change in recoveries of future cash flows expected to be collected1		(5.3	)		(.4	)		0		(5.7	)
Reductions for previously recognized credit impairments written down to fair value3		(8.9	)		(.8	)		0		(9.7	)
Ending balance at December 31, 2010	$	32.3		$	1.0		$	6.5	$	39.8

¹  Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

²  Includes $2.0 million received on a residential mortgage-backed security in excess of the cash flows expected to be collected at the time of the write-down.

³  Reflects reductions of prior credit impairments where the current credit impairment requires writing securities down to fair value (i.e., no remaining non-credit loss).

Components of Net Realized Gains (Losses)

The components of net realized gains (losses) for the years ended December 31, were:

(millions)	2011			2010			2009
Gross realized gains on security sales
Fixed maturities:
U.S. government obligations	$	59.1		$	39.8		$	103.1
State and local government obligations		3.5			10.0			35.2
Corporate and other debt securities		23.0			30.9			20.5
Residential mortgage-backed securities		2.0			0			0
Commercial mortgage-backed securities		.3			1.0			.8
Other asset-backed securities		2.1			.8			0
Redeemable preferred stocks		4.6			8.5			0
Total fixed maturities		94.6			91.0			159.6
Equity securities:
Nonredeemable preferred stocks		148.9			83.6			32.6
Common equities		11.9			13.8			148.5
Subtotal gross realized gains on security sales		255.4			188.4			340.7
Gross realized losses on security sales
Fixed maturities:
U.S. government obligations		(9.3	)		(12.9	)		(2.1	)
State and local government obligations		0			0			(7.6	)
Corporate and other debt securities		(3.5	)		(.5	)		(.5	)
Residential mortgage-backed securities		0			0			(3.2	)
Commercial mortgage-backed securities		0			0			(9.9	)
Other asset-backed securities		0			0			(.7	)
Redeemable preferred stocks		(2.2	)		(5.2	)		0
Total fixed maturities		(15.0	)		(18.6	)		(24.0	)
Equity securities:
Nonredeemable preferred stocks		0			0			(57.3	)
Common equities		(36.5	)		(7.2	)		(40.0	)
Subtotal gross realized losses on security sales		(51.5	)		(25.8	)		(121.3	)
Net realized gains (losses) on security sales
Fixed maturities:
U.S. government obligations		49.8			26.9			101.0
State and local government obligations		3.5			10.0			27.6
Corporate and other debt securities		19.5			30.4			20.0
Residential mortgage-backed securities		2.0			0			(3.2	)
Commercial mortgage-backed securities		.3			1.0			(9.1	)
Other asset-backed securities		2.1			.8			(.7	)
Redeemable preferred stocks		2.4			3.3			0
Total fixed maturities		79.6			72.4			135.6
Equity securities:
Nonredeemable preferred stocks		148.9			83.6			(24.7	)
Common equities		(24.6	)		6.6			108.5
Subtotal net realized gains (losses) on security sales		203.9			162.6			219.4
Other-than-temporary impairment losses
Fixed maturities:
Residential mortgage-backed securities		(3.3	)		(11.1	)		(32.0	)
Commercial mortgage-backed securities		(.6	)		(1.9	)		(.9	)
Redeemable preferred stocks		0			0			(6.1	)
Total fixed maturities		(3.9	)		(13.0	)		(39.0	)
Equity securities:
Nonredeemable preferred stocks		0			0			(158.8	)
Common equities		(.2	)		(.5	)		(10.3	)
Subtotal other-than-temporary impairment losses		(4.1	)		(13.5	)		(208.1	)
Net holding period gains (losses)
Hybrid securities		1.7			5.5			14.5
Derivative instruments		(98.9	)		(58.5	)		1.3
Subtotal net holding period gains (losses)		(97.2	)		(53.0	)		15.8
Total net realized gains (losses) on securities	$	102.6		$	96.1		$	27.1

Components of Net Investment Income

The components of net investment income for the years ended December 31, were:

(millions)	2011			2010			2009
Fixed maturities:
U.S. government obligations	$	58.0		$	80.8		$	79.6
State and local government obligations		60.0			65.4			91.9
Corporate debt securities		106.7			84.3			48.2
Residential mortgage-backed securities		18.6			21.7			33.4
Commercial mortgage-backed securities		83.4			99.1			90.7
Other asset-backed securities		24.5			21.8			9.7
Redeemable preferred stocks		33.0			45.5			47.5
Other debt obligations		0			0			.3
Total fixed maturities		384.2			418.6			401.3
Equity securities:
Nonredeemable preferred stocks		57.7			70.6			89.7
Common equities		35.7			27.3			13.3
Short-term investments:
Other short-term investments		2.4			3.6			2.7
Investment income		480.0			520.1			507.0
Investment expenses		(13.5	)		(11.9	)		(11.1	)
Net investment income	$	466.5		$	508.2		$	495.9

Derivative Instruments

The following table shows the status of our derivative instruments at December 31, 2011 and 2010, and for the years ended December 31, 2011, 2010, and 2009; amounts are on a pretax basis:

(millions)								Balance Sheet							Income Statement
	Notional Value1								Assets (Liabilities) Fair Value						Net Realized Gains (Losses) on Securities
	December 31,								December 31,						Years ended December 31,
Derivatives designated as:	2011		2010		2009		Purpose	Classification	2011			2010			2011			2010			2009
Hedging instruments
Closed:
Foreign currency cash flow hedge	$	0	$	0	$	8	Forecasted transaction	Accumulated other comprehensive income	$	0		$	0		$	0		$	0		$	0
Ineffective cash flow hedge		15		223		0	Manage interest rate risk	NA		0			0			.3			5.8			0
Non-hedging instruments
Assets:
Interest rate swaps		0		0		713	Manage portfolio duration	Investments - fixed maturities		0			0			0			0			.1
Corporate credit default swaps		25		35		0	Manage credit risk	Investments - fixed maturities		.7			1.3			(.2)			2.5			0
Liabilities:
Interest rate swaps		1,263		713		0	Manage portfolio duration	Other liabilities		(76.1	)		(41.7	)		(74.0	)		(66.6	)		0
Corporate credit default swaps		0		0		25	Manage credit risk	Other liabilities		0			0			0			0			(.6	)
Closed:
Interest rate swaps		350		0		4,186	Manage portfolio duration	NA		0			0			(25.5	)		0			10.4
Corporate credit default swaps		10		25		7	Manage credit risk	NA		0			0			.5			(.2	)		(.4	)
Equity options2 (177,190 contracts)		NA		NA		NA	Manage price risk	NA		0			0			0			0			(9.1	)
Foreign currency trade		0		0		8	Manage currency risk	NA		0			0			0			0			.9
Total		NA		NA		NA			$	(75.4	)	$	(40.4	)	$	(98.9	)	$	(58.5	)	$	1.3

¹The amounts represent the value held at year-end for open positions and the maximum amount held during the year for closed positions.

²Each contract is equivalent to 100 shares of common stock of the issuer; we had no option activity in 2011 or 2010.

NA = Not Applicable

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Operating Results (Parenthetical) (Detail) (Underwriting Operations Segment, Personal Lines, Personal Auto)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Underwriting Operations Segment | Personal Lines | Personal Auto
Segment Reporting Information [Line Items]
Personal auto insurance percentage of the total personal lines segment net premiums earned	91.00%	90.00%	90.00%

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Hybrid Securities (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Hybrid Securities [Line Items]
Hybrid securities	$ 264.6	$ 244.1
Fixed maturities
Hybrid Securities [Line Items]
Hybrid securities	250.4	191.3
Fixed maturities | Corporate debt securities
Hybrid Securities [Line Items]
Hybrid securities	234.9	176.4
Fixed maturities | Other asset-backed securities
Hybrid Securities [Line Items]
Hybrid securities	15.5	14.9
Equity securities | Nonredeemable preferred stocks
Hybrid Securities [Line Items]
Hybrid securities	$ 14.2	$ 52.8

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CONDENSED FINANCIAL INFORMATION OF REGISTRANT - Additional Information (Detail) (USD $) In Billions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Securities Held in Consolidated Non-Insurance Subsidiary	$ 2.0	$ 2.2

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DEBT (Tables)

12 Months Ended

Dec. 31, 2011

Debt Table

Debt at December 31 consisted of:

	2011				2010
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
6.375% Senior Notes due 2012 (issued: $350.0, December 2001)	$	350.0	$	350.5	$	349.6	$	369.3
7% Notes due 2013 (issued: $150.0, October 1993)		149.7		162.4		149.6		165.0
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)		497.0		525.3		0		0
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)		295.0		364.4		294.8		329.9
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)		394.4		492.4		394.2		433.3
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued: $1,000.0, June 2007; outstanding: $762.1 and $777.1)		756.0		769.7		770.0		808.2
Total	$	2,442.1	$	2,664.7	$	1,958.2	$	2,105.7

Aggregate Principal Payments On Debt Outstanding

Aggregate principal payments on debt outstanding at December 31, 2011, is as follows:

(millions) Year	Payments
2012	$	350.0
2013		150.0
2014		0
2015		0
2016		0
Thereafter		1,962.1
Total	$	2,462.1

Cash Flow Hedging

Unrealized Gain (Loss) on Interest Rate Cash Flow Hedges Included in Accumulated Other Comprehensive Income

The original unrealized gain (loss) and the unamortized balance at December 31, 2011, on a pretax basis, of these hedges, were as follows:

(millions)	Original Unrealized Gain (Loss)			Unamortized Balance at December 31, 2011
6.375% Senior Notes	$	18.4		$	.2
3.75% Senior Notes		(5.1	)		(5.0	)
6 5/8% Senior Notes		(4.2	)		(3.5	)
6.25% Senior Notes		5.1			4.4
6.70% Debentures		34.4			16.1

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2011

Components of Income Tax Provision

The components of our income tax provision were as follows:

(millions)	2011		2010		2009
Current tax provision	$	440.2	$	433.9	$	491.0
Deferred tax expense		31.3		63.0		8.4
Total income tax provision	$	471.5	$	496.9	$	499.4

Reconciliation of Provision (Benefit) for Income Taxes Reported in the Consolidated Statements Of Income with Tax at the Statutory Rate

The provision for income taxes in the accompanying consolidated statements of comprehensive income differed from the statutory rate as follows:

($ in millions)	2011					2010					2009
Income before income taxes	$	1,487.0				$	1,565.2				$	1,556.9
Tax at statutory rate	$	520.5		35	%	$	547.8		35	%	$	544.9		35	%
Tax effect of:
Exempt interest income		(17.5	)	(1	)		(19.4	)	(1	)		(26.7	)	(2	)
Dividends received deduction		(18.2	)	(1	)		(17.2	)	(1	)		(17.9	)	(1	)
Tax credits		(9.1	)	(1	)		0		0			0		0
Tax-deductible dividends		(3.8	)	0			(13.0	)	(1	)		0		0
Other items, net		(.4	)	0			(1.3	)	0			(.9	)	0
Total income tax provision	$	471.5		32	%	$	496.9		32	%	$	499.4		32	%

Components of Net Deferred Tax Assets

At December 31, 2011 and 2010, the components of the net deferred tax asset were as follows:

(millions)	2011			2010
Deferred tax assets:
Unearned premiums reserve	$	319.1		$	302.3
Investment basis differences		246.1			286.3
Non-deductible accruals		172.1			158.9
Loss and loss adjustment expense reserves		113.6			120.4
Other		5.2			5.0
Deferred tax liabilities:
Net unrealized gains on securities		(367.7	)		(413.2	)
Hedges on forecasted transactions		(4.3	)		(7.9	)
Deferred acquisition costs		(151.8	)		(146.0	)
Property and equipment		(109.9	)		(105.4	)
Prepaid expenses		(16.1	)		(12.6	)
Deferred gain on extinguishment of debt		(5.8	)		(5.8	)
Other		(4.5	)		(3.8	)
Net deferred tax asset		196.0			178.2
Net income taxes recoverable (payable)		12.0			10.8
Income taxes	$	208.0		$	189.0

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SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

12 Months Ended

Dec. 31, 2011

SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES

SCHEDULE I — SUMMARY OF INVESTMENTS — OTHER THAN INVESTMENTS IN RELATED PARTIES

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

	December 31, 2011
Type of Investment	Cost		Fair Value		Amount At Which Shown In The Balance Sheet
Available-for-sale
Fixed maturities:
Bonds:
United States Government and government agencies and authorities	$	2,842.7	$	2,963.0	$	2,963.0
States, municipalities, and political subdivisions		1,938.6		2,002.1		2,002.1
Public utilities		97.8		97.5		97.5
Corporate and other debt securities		2,703.7		2,798.7		2,798.7
Asset-backed securities		3,493.6		3,524.1		3,524.1
Redeemable preferred stocks		379.3		373.9		373.9
Total fixed maturities		11,455.7		11,759.3		11,759.3
Equity securities:
Common stocks:
Public utilities		113.7		147.4		147.4
Banks, trusts, and insurance companies		203.0		224.7		224.7
Industrial, miscellaneous, and all other		1,114.3		1,473.5		1,473.5
Nonredeemable preferred stocks		473.7		806.3		806.3
Total equity securities		1,904.7		2,651.9		2,651.9
Short-term investments1		1,551.8		1,551.8		1,551.8
Total investments	$	14,912.2	$	15,963.0	$	15,963.0

¹ Includes $10.0 million in treasury bills issued by the Australian government.

Progressive did not have any securities of any one issuer with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2011.

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LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES (Tables)

12 Months Ended

Dec. 31, 2011

Activity in the Loss and Loss Adjustment Expense Reserves

Activity in the loss and loss adjustment expense reserves is summarized as follows:

(millions)	2011			2010			2009
Balance at January 1	$	7,071.0		$	6,653.0		$	6,177.4
Less reinsurance recoverables on unpaid losses		704.1			529.4			244.5
Net balance at January 1		6,366.9			6,123.6			5,932.9
Incurred related to:
Current year		10,876.8			10,451.7			10,040.9
Prior years		(242.0	)		(320.4	)		(136.0	)
Total incurred		10,634.8			10,131.3			9,904.9
Paid related to:
Current year		7,289.3			6,841.0			6,542.2
Prior years		3,252.3			3,047.0			3,172.0
Total paid		10,541.6			9,888.0			9,714.2
Net balance at December 31		6,460.1			6,366.9			6,123.6
Plus reinsurance recoverables on unpaid losses		785.7			704.1			529.4
Balance at December 31	$	7,245.8		$	7,071.0		$	6,653.0

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REINSURANCE - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Reinsurance ceded	$ 219.7	$ 312.7	$ 417.6
Non-Auto Reinsurance Programs
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Percentage of Ceded Premiums	5.00%
State Reinsurance Plan
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Percentage of Ceded Premiums	95.00%
State Reinsurance Plan | Michigan Catastrophic Claims Association
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Percentage of Ceded Premiums	40.00%
State Reinsurance Plan | North Carolina Reinsurance Facility
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Percentage of Ceded Premiums	40.00%

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CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (PARENT COMPANY) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	12 Months Ended
	Sep. 30, 2010	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Revenues
Net gains (losses) on extinguishment of debt	$ 6.4	$ (0.1)		$ 6.4		$ 0
Total revenues		15,508.1		14,963.3		14,563.6
Expenses
Interest expense		132.7		133.5		139.0
Total expenses		14,021.1		13,398.1		13,006.7
Income before income taxes		1,487.0		1,565.2		1,556.9
Provision (benefit) for income taxes		(471.5)		(496.9)		(499.4)
Net income		1,015.5		1,068.3		1,057.5
Other comprehensive income (loss)		(91.2)		330.5		694.7
Comprehensive income		924.3		1,398.8		1,752.2
Parent Company
Revenues
Dividends from subsidiaries		875.3		1,216.2		1,230.6
Undistributed income from subsidiaries		225.7		(73.5)		(78.7)
Equity in net income of subsidiaries		1,101.0	[1]	1,142.7	[1]	1,151.9	[1]
Intercompany investment income		5.6	[1]	6.6	[1]	8.5	[1]
Net gains (losses) on extinguishment of debt		(0.1)		6.4		0
Total revenues		1,106.5		1,155.7		1,160.4
Expenses
Interest expense		138.0		139.5		146.4
Deferred compensation		0.4	[2]	4.3	[2]	4.8	[2]
Other operating costs and expenses		4.7		3.9		3.3
Total expenses		143.1		147.7		154.5
Income before income taxes		963.4		1,008.0		1,005.9
Provision (benefit) for income taxes		(52.1)		(60.3)		(51.6)
Net income		1,015.5		1,068.3		1,057.5
Other comprehensive income (loss)		(91.2)		330.5		694.7
Comprehensive income		$ 924.3		$ 1,398.8		$ 1,752.2

[1] Eliminated in consolidation.

[2] See Note 4 - Employee Benefit Plans in these condensed financial statements.

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Investment Portfolio by Major Security Type (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Schedule of Available-for-sale Securities [Line Items]
Cost	$ 14,912.2	[1],[2]	$ 14,344.6	[1],[2]
Gross Unrealized Gains	1,152.8	[1],[2]	1,270.8	[1],[2]
Gross Unrealized Losses	(102.3)	[1],[2]	(90.3)	[1],[2]
Net Realized Gains (Losses)	0.3	[1],[2],[3]	(1.7)	[1],[2],[3]
Total investments at fair value	15,963.0	[1],[2]	15,523.4	[1],[2]
% of Total Fair Value	100.00%	[1],[2]	100.00%	[1],[2]
Fixed maturities
Schedule of Available-for-sale Securities [Line Items]
Cost	11,455.7		11,630.8
Gross Unrealized Gains	370.2		304.1
Gross Unrealized Losses	(73.2)		(87.1)
Net Realized Gains (Losses)	6.6	[3]	2.2	[3]
Total investments at fair value	11,759.3		11,850.0
% of Total Fair Value	73.60%		76.30%
Fixed maturities | U.S. government obligations
Schedule of Available-for-sale Securities [Line Items]
Cost	2,842.7		3,203.2
Gross Unrealized Gains	120.3		56.3
Gross Unrealized Losses	0		(16.9)
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	2,963.0		3,242.6
% of Total Fair Value	18.60%		20.90%
Fixed maturities | State and local government obligations
Schedule of Available-for-sale Securities [Line Items]
Cost	1,938.6		1,955.5
Gross Unrealized Gains	64.1		43.0
Gross Unrealized Losses	(0.6)		(9.4)
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	2,002.1		1,989.1
% of Total Fair Value	12.50%		12.80%
Fixed maturities | Corporate debt securities
Schedule of Available-for-sale Securities [Line Items]
Cost	2,801.5		2,579.0
Gross Unrealized Gains	94.3		78.1
Gross Unrealized Losses	(6.5)		(13.3)
Net Realized Gains (Losses)	6.9	[3]	2.3	[3]
Total investments at fair value	2,896.2		2,646.1
% of Total Fair Value	18.10%		17.00%
Fixed maturities | Residential mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Cost	452.9		567.1
Gross Unrealized Gains	9.3		17.8
Gross Unrealized Losses	(35.3)		(21.3)
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	426.9		563.6
% of Total Fair Value	2.70%		3.60%
Fixed maturities | Commercial mortgage-backed securities
Schedule of Available-for-sale Securities [Line Items]
Cost	1,829.8		1,772.1
Gross Unrealized Gains	52.3		66.9
Gross Unrealized Losses	(5.5)		(6.9)
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	1,876.6		1,832.1
% of Total Fair Value	11.80%		11.80%
Fixed maturities | Other asset-backed securities
Schedule of Available-for-sale Securities [Line Items]
Cost	1,210.9		1,063.9
Gross Unrealized Gains	11.3		12.4
Gross Unrealized Losses	(1.3)		(2.2)
Net Realized Gains (Losses)	(0.3)	[3]	(0.1)	[3]
Total investments at fair value	1,220.6		1,074.0
% of Total Fair Value	7.60%		6.90%
Fixed maturities | Redeemable preferred stocks
Schedule of Available-for-sale Securities [Line Items]
Cost	379.3		490.0
Gross Unrealized Gains	18.6		29.6
Gross Unrealized Losses	(24.0)		(17.1)
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	373.9		502.5
% of Total Fair Value	2.30%		3.30%
Equity securities | Nonredeemable preferred stocks
Schedule of Available-for-sale Securities [Line Items]
Cost	473.7		601.3
Gross Unrealized Gains	342.6		560.2
Gross Unrealized Losses	(3.7)		0
Net Realized Gains (Losses)	(6.3)	[3]	(3.9)	[3]
Total investments at fair value	806.3		1,157.6
% of Total Fair Value	5.10%		7.50%
Equity securities | Common equities
Schedule of Available-for-sale Securities [Line Items]
Cost	1,431.0		1,021.7
Gross Unrealized Gains	440.0		406.5
Gross Unrealized Losses	(25.4)		(3.2)
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	1,845.6		1,425.0
% of Total Fair Value	11.60%		9.20%
Short-term investments | Other Short-term investments
Schedule of Available-for-sale Securities [Line Items]
Cost	1,551.8		1,090.8
Gross Unrealized Gains	0		0
Gross Unrealized Losses	0		0
Net Realized Gains (Losses)	0	[3]	0	[3]
Total investments at fair value	$ 1,551.8		$ 1,090.8
% of Total Fair Value	9.70%		7.00%

[1] Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

[2] The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

[3] Represents net holding period gains (losses) on certain hybrid securities (discussed below).

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Debt (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Debt Instrument [Line Items]
Debt instrument, outstanding	$ 2,462.1
6.375% Senior Notes due 2012
Debt Instrument [Line Items]
Debt instrument, face amount	350	350
7% Notes due 2013
Debt Instrument [Line Items]
Debt instrument, face amount	150	150
3.75% Senior Notes due 2021
Debt Instrument [Line Items]
Debt instrument, face amount	500	500
6 5/8% Senior Notes due 2029
Debt Instrument [Line Items]
Debt instrument, face amount	300	300
6.25% Senior Notes due 2032
Debt Instrument [Line Items]
Debt instrument, face amount	400	400
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Debt instrument, face amount	1,000	1,000
Debt instrument, outstanding	$ 762.1	$ 777.1

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Consolidated Statements of Comprehensive Income (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Revenues
Net premiums earned	$ 14,902.8		$ 14,314.8		$ 14,012.8
Investment income	480.0		520.1		507.0
Other-than-temporary impairment (OTTI) losses:
Total OTTI losses	(6.0)		(19.1)		(80.9)
Non-credit losses, net of credit losses recognized on previously recorded non-credit OTTI losses	0.5		5.2		40.1
Net impairment losses recognized in earnings	(5.5)		(13.9)		(40.8)
Net realized gains (losses) on securities	108.1		110.0		67.9
Total net realized gains (losses) on securities	102.6		96.1		27.1
Service revenues	22.8		25.9		16.7
Net gains (losses) on extinguishment of debt	(0.1)		6.4		0
Total revenues	15,508.1		14,963.3		14,563.6
Expenses
Losses and loss adjustment expenses	10,634.8		10,131.3		9,904.9
Policy acquisition costs	1,399.2		1,359.9		1,364.6
Other underwriting expenses	1,821.5		1,740.1		1,567.7
Investment expenses	13.5		11.9		11.1
Service expenses	19.4		21.4		19.4
Interest expense	132.7		133.5		139.0
Total expenses	14,021.1		13,398.1		13,006.7
Net Income
Income before income taxes	1,487.0		1,565.2		1,556.9
Provision for income taxes	471.5		496.9		499.4
Net income	1,015.5		1,068.3		1,057.5
Net unrealized gains (losses) on securities:
Net non-credit related OTTI losses, adjusted for valuation changes, after tax	(3.6)		13.9		(15.7)
Other net unrealized gains (losses) on securities, after tax	(80.9)		323.2		712.3
Change in net unrealized gains (losses) on securities, after tax	(84.5)	[1]	337.1	[1]	696.6	[1]
Change in net unrealized gains on forecasted transactions, after tax	(6.8)		(6.9)		(3.3)
Foreign currency translation adjustment, after tax	0.1		0.3		1.4
Other comprehensive income (loss), after tax	(91.2)		330.5		694.7
Comprehensive income	$ 924.3		$ 1,398.8		$ 1,752.2
Computation of Net Income Per Share
Average shares outstanding - Basic	632.3		657.9		666.8
Net effect of dilutive stock-based compensation	4.6		5.4		5.4
Total equivalent shares - Diluted	636.9		663.3		672.2
Basic: Net income per share	$ 1.61		$ 1.62		$ 1.59
Diluted: Net income per share	$ 1.59		$ 1.61		$ 1.57

[1] December 31, 2009 excludes the $189.6 million ($291.8 million pretax) cumulative effect of change in accounting principle we recorded in June 2009 in accordance with the new accounting guidance for other-than-temporary impairments we adopted during the second quarter 2009.

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The Progressive Corporation Cash Paid (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Schedule of Cash Flow, Supplemental [Line Items]
Income taxes, net of refunds	$ 435.0	$ 434.0	$ 461.7
Interest	$ 129.5	$ 138.4	$ 144.7

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Assets Held in Deferral Plan Irrevocable Grantor Trust Account (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Assets held in Deferral Plan Irrevocable Grantor Trust account	$ 101.4		$ 98.4
Progressive common shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Assets held in Deferral Plan Irrevocable Grantor Trust account	35.2	[1]	31.1	[1]
Other Investment Funds
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Assets held in Deferral Plan Irrevocable Grantor Trust account	$ 66.2		$ 67.3

[1] Includes 0.7 million and 0.5 million common shares as of December 31, 2011 and 2010, respectively, to be distributed in common shares.

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Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Retained Earnings
Cash dividends declared on common shares, per share	$ 0.4072	$ 1.3987	$ 0.1613
Serial Preferred Stock
Preference Shares authorized	20.0
Preference Shares issued	0
Preferred Shares outstanding	0
Voting Preferred Stock
Preference Shares authorized	5.0
Preference Shares issued	0

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Summary of all Stock Option Activity for both Current and Former Directors (Parenthetical) (Detail) (Non Employee Director Stock Option, USD $)	12 Months Ended
	Dec. 31, 2010
Non Employee Director Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Extraordinary cash dividends declared Per common share	$ 1

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Gross Unrealized losses by Major Security (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	$ 1,578.4	$ 2,684.6
Gross Unrealized Losses	(102.3)	(90.3)
Less than 12 Months Fair Value	932.0	2,101.4
Less than 12 Months Unrealized Losses	(39.9)	(45.5)
12 Months or Greater Fair Value	646.4	583.2
12 Months or Greater Unrealized Losses	(62.4)	(44.8)
Fixed maturities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	1,344.3	2,624.1
Gross Unrealized Losses	(73.2)	(87.1)
Less than 12 Months Fair Value	715.8	2,044.1
Less than 12 Months Unrealized Losses	(13.1)	(42.4)
12 Months or Greater Fair Value	628.5	580.0
12 Months or Greater Unrealized Losses	(60.1)	(44.7)
Fixed maturities | U.S. government obligations
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	0	495.3
Gross Unrealized Losses	0	(16.9)
Less than 12 Months Fair Value	0	495.3
Less than 12 Months Unrealized Losses	0	(16.9)
12 Months or Greater Fair Value	0	0
12 Months or Greater Unrealized Losses	0	0
Fixed maturities | State and local government obligations
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	93.6	461.9
Gross Unrealized Losses	(0.6)	(9.4)
Less than 12 Months Fair Value	79.5	454.0
Less than 12 Months Unrealized Losses	(0.5)	(8.7)
12 Months or Greater Fair Value	14.1	7.9
12 Months or Greater Unrealized Losses	(0.1)	(0.7)
Fixed maturities | Corporate debt securities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	262.7	589.3
Gross Unrealized Losses	(6.5)	(13.3)
Less than 12 Months Fair Value	137.3	541.3
Less than 12 Months Unrealized Losses	(4.6)	(11.6)
12 Months or Greater Fair Value	125.4	48.0
12 Months or Greater Unrealized Losses	(1.9)	(1.7)
Fixed maturities | Residential mortgage-backed securities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	308.7	314.1
Gross Unrealized Losses	(35.3)	(21.3)
Less than 12 Months Fair Value	34.4	74.0
Less than 12 Months Unrealized Losses	(2.0)	(1.0)
12 Months or Greater Fair Value	274.3	240.1
12 Months or Greater Unrealized Losses	(33.3)	(20.3)
Fixed maturities | Commercial mortgage-backed securities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	203.7	332.0
Gross Unrealized Losses	(5.5)	(6.9)
Less than 12 Months Fair Value	161.4	269.7
Less than 12 Months Unrealized Losses	(3.5)	(3.1)
12 Months or Greater Fair Value	42.3	62.3
12 Months or Greater Unrealized Losses	(2.0)	(3.8)
Fixed maturities | Other asset-backed securities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	284.2	214.8
Gross Unrealized Losses	(1.3)	(2.2)
Less than 12 Months Fair Value	259.7	209.8
Less than 12 Months Unrealized Losses	(1.0)	(1.1)
12 Months or Greater Fair Value	24.5	5.0
12 Months or Greater Unrealized Losses	(0.3)	(1.1)
Fixed maturities | Redeemable preferred stocks
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	191.4	216.7
Gross Unrealized Losses	(24.0)	(17.1)
Less than 12 Months Fair Value	43.5	0
Less than 12 Months Unrealized Losses	(1.5)	0
12 Months or Greater Fair Value	147.9	216.7
12 Months or Greater Unrealized Losses	(22.5)	(17.1)
Equity securities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	234.1	60.5
Gross Unrealized Losses	(29.1)	(3.2)
Less than 12 Months Fair Value	216.2	57.3
Less than 12 Months Unrealized Losses	(26.8)	(3.1)
12 Months or Greater Fair Value	17.9	3.2
12 Months or Greater Unrealized Losses	(2.3)	(0.1)
Equity securities | Nonredeemable preferred stocks
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	19.5	0
Gross Unrealized Losses	(3.7)	0
Less than 12 Months Fair Value	19.5	0
Less than 12 Months Unrealized Losses	(3.7)	0
12 Months or Greater Fair Value	0	0
12 Months or Greater Unrealized Losses	0	0
Equity securities | Common equities
Investments, Unrealized Loss Position [Line Items]
Total Fair Value	214.6	60.5
Gross Unrealized Losses	(25.4)	(3.2)
Less than 12 Months Fair Value	196.7	57.3
Less than 12 Months Unrealized Losses	(23.1)	(3.1)
12 Months or Greater Fair Value	17.9	3.2
12 Months or Greater Unrealized Losses	$ (2.3)	$ (0.1)

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Operating Results (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Segment Reporting Information [Line Items]
Revenues	$ 15,508.1		$ 14,963.3		$ 14,563.6
Pretax Profit (Loss)	1,487.0		1,565.2		1,556.9
Underwriting Operations Segment
Segment Reporting Information [Line Items]
Revenues	14,902.8		14,314.8		14,012.8
Pretax Profit (Loss)	1,047.3		1,083.5		1,175.6
Underwriting Operations Segment | Personal Lines
Segment Reporting Information [Line Items]
Revenues	13,431.1	[1]	12,826.9	[1]	12,365.9	[1]
Pretax Profit (Loss)	919.3	[1]	892.1	[1]	937.1	[1]
Underwriting Operations Segment | Personal Lines | Agency Channel
Segment Reporting Information [Line Items]
Revenues	7,627.4		7,419.7		7,414.8
Pretax Profit (Loss)	564.9		601.0		579.2
Underwriting Operations Segment | Personal Lines | Direct Channel
Segment Reporting Information [Line Items]
Revenues	5,803.7		5,407.2		4,951.1
Pretax Profit (Loss)	354.4		291.1		357.9
Underwriting Operations Segment | Commercial Auto
Segment Reporting Information [Line Items]
Revenues	1,467.1		1,474.2		1,623.3
Pretax Profit (Loss)	133.5		185.0		229.8
Underwriting Operations Segment | Other Indemnity
Segment Reporting Information [Line Items]
Revenues	4.6		13.7		23.6
Pretax Profit (Loss)	(5.5)		6.4		8.7
Service Businesses
Segment Reporting Information [Line Items]
Revenues	22.8		25.9		16.7
Pretax Profit (Loss)	3.4		4.5		(2.7)
Investments
Segment Reporting Information [Line Items]
Revenues	582.6	[2]	616.2	[2]	534.1	[2]
Pretax Profit (Loss)	569.1	[2]	604.3	[2]	523.0	[2]
Net gain (loss) on extinguishment of debt
Segment Reporting Information [Line Items]
Revenues	(0.1)		6.4		0
Pretax Profit (Loss)	(0.1)		6.4		0
Interest Expense
Segment Reporting Information [Line Items]
Pretax Profit (Loss)	$ (132.7)		$ (133.5)		$ (139.0)

[1] Personal auto insurance accounted for 91% of the total Personal Lines segment net premiums earned in 2011, and 90% in both 2010 and 2009; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

[2] Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

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SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2011

Reconciliation of Revenue and Operating Income from Segments to Consolidated

Following are the operating results for the years ended December 31:

	2011						2010					2009
(millions)	Revenues			Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)
Personal Lines
Agency	$	7,627.4		$	564.9		$	7,419.7	$	601.0		$	7,414.8	$	579.2
Direct		5,803.7			354.4			5,407.2		291.1			4,951.1		357.9
Total Personal Lines1		13,431.1			919.3			12,826.9		892.1			12,365.9		937.1
Commercial Auto		1,467.1			133.5			1,474.2		185.0			1,623.3		229.8
Other indemnity		4.6			(5.5	)		13.7		6.4			23.6		8.7
Total underwriting operations		14,902.8			1,047.3			14,314.8		1,083.5			14,012.8		1,175.6
Service businesses		22.8			3.4			25.9		4.5			16.7		(2.7	)
Investments2		582.6			569.1			616.2		604.3			534.1		523.0
Net gains (losses) on extinguishment of debt		(.1	)		(.1	)		6.4		6.4			0		0
Interest expense		NA			(132.7	)		NA		(133.5	)		NA		(139.0	)
Consolidated total	$	15,508.1		$	1,487.0		$	14,963.3	$	1,565.2		$	14,563.6	$	1,556.9

¹  Personal auto insurance accounted for 91% of the total Personal Lines segment net premiums earned in 2011, and 90% in both 2010 and 2009; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

² Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

NA = Not Applicable

Underwriting Margins and Combined Ratios for our Underwriting Operations

Following are the underwriting margins/combined ratios for our underwriting operations for the years ended December 31:

	2011					2010					2009
	Underwriting Margin			Combined Ratio		Underwriting Margin			Combined Ratio		Underwriting Margin			Combined Ratio
Personal Lines
Agency		7.4	%		92.6		8.1	%		91.9		7.8	%		92.2
Direct		6.1			93.9		5.4			94.6		7.2			92.8
Total Personal Lines		6.8			93.2		7.0			93.0		7.6			92.4
Commercial Auto		9.1			90.9		12.5			87.5		14.2			85.8
Other indemnity1		NM			NM		NM			NM		NM			NM
Total underwriting operations		7.0			93.0		7.6			92.4		8.4			91.6

¹ Underwriting margins/combined ratios are not meaningful (NM) for our other indemnity businesses due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

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Derivative Instruments (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Derivative [Line Items]
Balance Sheet - Fair Value	$ (75.4)		$ (40.4)
Income Statement - Net Realized Gain (Loss) on Securities	(98.9)		(58.5)		1.3
Designated as Hedging Instruments | Closed Positions | Foreign Exchange Contract | Accumulated Other Comprehensive Income
Derivative [Line Items]
Notional Value	0	[1]	0	[1]	8	[1]
Purpose	Forecasted transaction
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	0		0		0
Designated as Hedging Instruments | Closed Positions | Ineffective Cash Flow Hedge
Derivative [Line Items]
Notional Value	15	[1]	223	[1]	0	[1]
Purpose	Manage interest rate risk
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	0.3		5.8		0
Non-hedging Instruments | Closed Positions | Foreign Exchange Contract
Derivative [Line Items]
Notional Value	0	[1]	0	[1]	8	[1]
Purpose	Manage currency risk
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	0		0		0.9
Non-hedging Instruments | Closed Positions | Interest Rate Swaps
Derivative [Line Items]
Notional Value	350	[1]	0	[1]	4,186	[1]
Purpose	Manage portfolio duration
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	(25.5)		0		10.4
Non-hedging Instruments | Closed Positions | Corporate Credit Default Swaps
Derivative [Line Items]
Notional Value	10	[1]	25	[1]	7	[1]
Purpose	Manage credit risk
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	0.5		(0.2)		(0.4)
Non-hedging Instruments | Closed Positions | Equity Contract
Derivative [Line Items]
Purpose	Manage price risk	[2]
Balance Sheet - Fair Value	0	[2]	0	[2]
Income Statement - Net Realized Gain (Loss) on Securities	0	[2]	0	[2]	(9.1)	[2]
Non-hedging Instruments | Assets | Interest Rate Swaps | Fixed maturities
Derivative [Line Items]
Notional Value	0	[1]	0	[1]	713	[1]
Purpose	Manage portfolio duration
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	0		0		0.1
Non-hedging Instruments | Assets | Corporate Credit Default Swaps | Fixed maturities
Derivative [Line Items]
Notional Value	25	[1]	35	[1]	0	[1]
Purpose	Manage credit risk
Balance Sheet - Fair Value	0.7		1.3
Income Statement - Net Realized Gain (Loss) on Securities	(0.2)		2.5		0
Non-hedging Instruments | Liabilities | Interest Rate Swaps | Other Liabilities
Derivative [Line Items]
Notional Value	1,263	[1]	713	[1]	0	[1]
Purpose	Manage portfolio duration
Balance Sheet - Fair Value	(76.1)		(41.7)
Income Statement - Net Realized Gain (Loss) on Securities	(74.0)		(66.6)		0
Non-hedging Instruments | Liabilities | Corporate Credit Default Swaps | Other Liabilities
Derivative [Line Items]
Notional Value	0	[1]	0	[1]	25	[1]
Purpose	Manage credit risk
Balance Sheet - Fair Value	0		0
Income Statement - Net Realized Gain (Loss) on Securities	$ 0		$ 0		$ (0.6)

[1] The amounts represent the value held at year-end for open positions and the maximum amount held during the year for closed positions.

[2] Each contract is equivalent to 100 shares of common stock of the issuer; we had no option activity in 2011 or 2010.

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SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2011

SEGMENT INFORMATION

10.  SEGMENT INFORMATION

We write personal auto and other specialty property-casualty insurance and provide related services throughout the United States. Our Personal Lines segment writes insurance for personal autos and recreational vehicles. The Personal Lines segment is comprised of both the Agency and Direct businesses. The Agency business includes business written by our network of more than 35,000 independent insurance agencies, including brokerages in New York and California, and strategic alliance business relationships (other insurance companies, financial institutions, and national agencies). The Direct business includes business written directly by us online and by phone.

Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses in the business auto, contractor, tow, for-hire specialty, and for-hire transportation markets. This segment is distributed through both the independent agency and direct channels.

Our other indemnity businesses manage our run-off businesses, including the run-off of our professional liability insurance for community banks, which was sold in 2010.

Our service businesses provide insurance-related services, including processing CAIP business and serving as an agent for homeowners, general liability, and workers’ compensation insurance through our programs with unaffiliated insurance companies.

All segment revenues are generated from external customers and we do not have a reliance on any major customer.

We evaluate profitability based on pretax underwriting profit (loss) for the Personal Lines and Commercial Auto segments and for the other indemnity businesses. Pretax underwriting profit (loss) is calculated as net premiums earned less each of (i) losses and loss adjustment expenses, (ii) policy acquisition costs, and (iii) other underwriting expenses. Service business pretax profit (loss) is the difference between service business revenues and service business expenses.

Expense allocations are based on certain assumptions and estimates primarily related to revenue and volume; stated segment operating results would change if different methods were applied. We do not allocate assets or income taxes to operating segments. In addition, we do not separately identify depreciation and amortization expense by segment, and such allocation would be impractical. Companywide depreciation expense was $88.5 million in 2011, $83.1 million in 2010, and $87.3 million in 2009. The accounting policies of the operating segments are the same as those described in Note 1 – Reporting and Accounting Policies.

Following are the operating results for the years ended December 31:

	2011						2010					2009
(millions)	Revenues			Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)			Revenues		Pretax Profit (Loss)
Personal Lines
Agency	$	7,627.4		$	564.9		$	7,419.7	$	601.0		$	7,414.8	$	579.2
Direct		5,803.7			354.4			5,407.2		291.1			4,951.1		357.9
Total Personal Lines1		13,431.1			919.3			12,826.9		892.1			12,365.9		937.1
Commercial Auto		1,467.1			133.5			1,474.2		185.0			1,623.3		229.8
Other indemnity		4.6			(5.5	)		13.7		6.4			23.6		8.7
Total underwriting operations		14,902.8			1,047.3			14,314.8		1,083.5			14,012.8		1,175.6
Service businesses		22.8			3.4			25.9		4.5			16.7		(2.7	)
Investments2		582.6			569.1			616.2		604.3			534.1		523.0
Net gains (losses) on extinguishment of debt		(.1	)		(.1	)		6.4		6.4			0		0
Interest expense		NA			(132.7	)		NA		(133.5	)		NA		(139.0	)
Consolidated total	$	15,508.1		$	1,487.0		$	14,963.3	$	1,565.2		$	14,563.6	$	1,556.9

¹  Personal auto insurance accounted for 91% of the total Personal Lines segment net premiums earned in 2011, and 90% in both 2010 and 2009; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

² Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expenses.

NA = Not Applicable

Progressive’s management uses underwriting margin and combined ratio as primary measures of underwriting profitability. The underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from insurance operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting margins/combined ratios for our underwriting operations for the years ended December 31:

	2011					2010					2009
	Underwriting Margin			Combined Ratio		Underwriting Margin			Combined Ratio		Underwriting Margin			Combined Ratio
Personal Lines
Agency		7.4	%		92.6		8.1	%		91.9		7.8	%		92.2
Direct		6.1			93.9		5.4			94.6		7.2			92.8
Total Personal Lines		6.8			93.2		7.0			93.0		7.6			92.4
Commercial Auto		9.1			90.9		12.5			87.5		14.2			85.8
Other indemnity1		NM			NM		NM			NM		NM			NM
Total underwriting operations		7.0			93.0		7.6			92.4		8.4			91.6

¹ Underwriting margins/combined ratios are not meaningful (NM) for our other indemnity businesses due to the low level of premiums earned by, and the variability of loss costs in, such businesses.

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OTHER COMPREHENSIVE INCOME (LOSS) (Tables)

12 Months Ended

Dec. 31, 2011

Components of Other Comprehensive Income (Loss)

The components of other comprehensive income (loss) for the years ended December 31, were as follows:

	2011									2010									2009
(millions)	Pretax			Tax (Provision) Benefit			After Tax			Pretax			Tax (Provision) Benefit			After Tax			Pretax			Tax (Provision) Benefit			After Tax
Net unrealized gains (losses) on securities:
Arising during period:
Fixed maturities	$	132.9		$	(46.5	)	$	86.4		$	302.9		$	(106.0	)	$	196.9		$	519.4		$	(181.8	)	$	337.6
Equity securities		(57.5	)		20.1			(37.4	)		241.7			(84.6	)		157.1			671.7			(235.1	)		436.6
Net non-credit related OTTI losses, adjusted for valuation changes		(5.5	)		1.9			(3.6	)		21.4			(7.5	)		13.9			(24.1	)		8.4			(15.7	)
Reclassification adjustment for (gains) losses realized in net income:
Fixed maturities		(47.4	)		16.6			(30.8	)		46.3			(16.2	)		30.1			(8.5	)		3.0			(5.5	)
Equity securities		(152.5	)		53.4			(99.1	)		(93.7	)		32.8			(60.9	)		(86.7	)		30.3			(56.4	)
Change in net unrealized gains (losses) on securities1		(130.0	)		45.5			(84.5	)		518.6			(181.5	)		337.1			1,071.8			(375.2	)		696.6
Net unrealized gains (losses) on forecasted transactions:2
Arising during period		(5.1	)		1.8			(3.3	)		0			0			0			0			0			0
Reclassification adjustment for amounts realized in net income3		(5.3	)		1.8			(3.5	)		(10.6	)		3.7			(6.9	)		(5.1	)		1.8			(3.3	)
Change in net unrealized gains on forecasted transactions		(10.4	)		3.6			(6.8	)		(10.6	)		3.7			(6.9	)		(5.1	)		1.8			(3.3	)
Foreign currency translation adjustment		.2			(.1	)		.1			1.2			(.9	)		.3			1.4			0			1.4
Other comprehensive income (loss)	$	(140.2	)	$	49.0		$	(91.2	)	$	509.2		$	(178.7	)	$	330.5		$	1,068.1		$	(373.4	)	$	694.7

¹  December 31, 2009 excludes the $189.6 million ($291.8 million pretax) cumulative effect of change in accounting principle we recorded in June 2009 in accordance with the new accounting guidance for other-than-temporary impairments we adopted during the second quarter 2009.

²  Entered into for the purpose of managing interest rate risk associated with our debt issuances, and managing foreign currency risk associated with our forecasted foreign currency transaction, which was closed in 2009.

³  We expect to reclassify $2.3 million (pretax) into income during the next 12 months. During 2011 and 2010, we reclassified $0.3 million and $5.8 million, respectively, on a pretax basis, from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of the 6.70% Debentures repurchased during the periods (see Note 4 – Debt for further discussion).

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SEGMENT INFORMATION - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Segment Reporting Information [Line Items]
Depreciation	$ 88.5	$ 83.1	$ 87.3
Underwriting Operations Segment | Personal Lines | Agency Channel | Minimum
Segment Reporting Information [Line Items]
Independent insurance agencies and brokerages	35,000

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LITIGATION

12 Months Ended

Dec. 31, 2011

LITIGATION

12.  LITIGATION

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies in the ordinary course of our business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, The Progressive Corporation and/or its insurance subsidiaries are named as defendants in a number of class action or individual lawsuits arising out of the operations of the insurance subsidiaries. Other insurance companies face many of these same issues. The lawsuits discussed below are in various stages of development. We plan to contest these suits vigorously, but may pursue settlement negotiations in some cases, if appropriate. The outcomes of these cases are uncertain at this time.

We establish accruals for lawsuits when it is probable that a loss has been incurred and we can reasonably estimate its potential exposure, which may include a range of loss (referred to as a loss that is both “probable and estimable” in the discussion below). As to lawsuits in which the loss is not considered both probable and estimable, we have not established a liability at this time. It is generally not possible to determine the exposure associated with our lawsuits for a number of reasons, including, without limitation, one or more of the following: liability appears to be remote; putative class action lawsuits generally pose immaterial exposure until a class is actually certified, which, historically, has not been granted by the courts in the vast majority of our cases in which certification has been sought; class definitions are often indefinite and preclude detailed exposure analysis; and, complaints rarely state an amount sought as relief, and when such amount is stated, it is often a function of pleading requirements and may be unrelated to the potential exposure.

The following is a discussion of potentially significant pending class action cases at December 31, 2011, and certain cases resolved during the three-year period then ended. For cases that have settled, but for which settlement is not complete, an accrual has been established at our best estimate of the exposure. Settlements that are complete are fully reflected in our financial statements. The amounts accrued or paid for these settlements were not material to our consolidated financial condition, cash flows, or results of operations.

As to the pending cases, although their outcomes are uncertain, in each case we do not believe that the outcome will have a material impact on our consolidated financial condition, cash flows, or results of operations. In addition, we do not consider the losses from the pending cases to be both probable and estimable, and we are unable to estimate a range of loss, if any, at this time, due to the factors discussed above. In the event that any one or more of these cases results in a substantial judgment against, or settlement by, Progressive, the resulting liability could have a material effect on our consolidated financial condition, cash flows, and/or results of operations.

Pending cases at December 31, 2011, include:

• One certified class action lawsuit seeking interest on personal injury protection (PIP) payments that allegedly were late.

• Two putative class action lawsuits alleging that we violate the “make-whole” and “common-fund” doctrines. Specifically, it is alleged that we may obtain reimbursement of medical payments made on behalf of an insured only when the insured has been made whole by the person who caused the insured’s injuries and that we further must deduct from the reimbursement amount a proportionate share of the insured’s legal fees for pursuing the person who caused the insured’s injuries.

• Two putative class action lawsuits challenging the labor rates our insurance subsidiaries pay to auto body repair shops.

• Four putative class action lawsuits challenging Progressive’s insurance subsidiaries’ practice in Florida of adjusting PIP and first-party medical payments.

• One certified and one putative class action lawsuit, each that challenges our insurance subsidiaries’ use of certain automated database vendors or software to assist in the adjustment of bodily injury claims where the plaintiffs allege that these databases or software systematically undervalue the claims.

• One putative class action lawsuit challenging our policy form with regard to rejecting uninsured motorist coverage.

• One putative class action lawsuit challenging Progressive’s evaluation of physical damage claims regarding diminution of value.

• Two putative class action lawsuits challenging the manner in which Progressive grants a discount for anti-theft devices.

• One putative class action lawsuit alleging that Progressive charged insureds for illusory uninsured motorist/underinsured motorist coverage on multiple vehicle policies.

• One putative class action lawsuit alleging that Progressive improperly applies a preferred provider discount to medical payment claims.

• One putative class action lawsuit alleging that Progressive undervalues total loss claims through the use of certain valuation tools.

• One putative class action lawsuit challenging the manner in which Progressive charges premium and assesses total loss claims for commercial vehicle stated amount policies.

Cases settled during 2011, include:

• One putative class action lawsuit that challenged the labor rates our insurance subsidiaries pay to auto body repair shops; settlement was completed in 2011.

• One class action lawsuit certified for settlement that alleged Progressive charged insureds for illusory uninsured motorist/underinsured motorist coverage on multiple vehicle policies; an accrual has been established.

Cases settled during 2010, include:

• One putative class action lawsuit challenging our notice of cancellation form for nonpayment of premium and subsequent denial of automobile coverage; an accrual has been established.

Cases settled during 2009, include:

• One certified class action lawsuit that challenged our insurance subsidiaries’ use of certain automated database vendors or software to assist in the adjustment of bodily injury claims; settlement was completed in 2010.

• Eight class action lawsuits, which were consolidated in one settlement agreement, and six individual lawsuits, which challenged certain aspects of our insurance subsidiaries use of credit information and compliance with notice requirements under the federal Fair Credit Reporting Act; payments were made during 2009 and the administration of this class action settlement was completed in 2010.

• One certified nationwide class action lawsuit challenging our insurance subsidiaries’ practice of taking betterment on boat repairs; settlement was completed in 2009.

• One putative class action lawsuit alleging that Progressive’s insurance subsidiaries used non-conforming underinsured motorist rejection forms; settlement was completed in 2009.

• One certified class action lawsuit alleging that Progressive’s insurance subsidiaries failed to offer certain enhanced PIP benefits; an accrual has been established.

• Three state class action lawsuits related to over-charging municipal tax to policyholders; an accrual has been established.

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Fair Value - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 Investment		Dec. 31, 2010 Investment
Fair Value Measurements [Line Items]
Quoted prices percentage of fair value assets	100.00%	[1],[2]	100.00%	[1],[2]
Portfolio	$ 15,963.0	[1],[2]	$ 15,523.4	[1],[2]
Nonredeemable preferred stocks | Equity securities
Fair Value Measurements [Line Items]
Transferred out of Level 1 into Level 2	44.2		0
Number of security transferred out of Level 1 into Level 2	1		0
Fair Value, Inputs, Level 1 | Vendor Quoted Pricing
Fair Value Measurements [Line Items]
Quoted prices percentage of fair value assets	59.00%		63.00%
Fair Value, Inputs, Level 2 | Vendor Quoted Pricing
Fair Value Measurements [Line Items]
Quoted prices percentage of fair value assets	96.00%		94.00%
Fair Value, Inputs, Level 2 | Dealer Quoted Pricing
Fair Value Measurements [Line Items]
Quoted prices percentage of fair value assets	4.00%		6.00%
Fair Value, Inputs, Level 3 | Common equities | Internal Pricing
Fair Value Measurements [Line Items]
Portfolio	10.2		10.2
Number of securities	1		1
Fair Value, Inputs, Level 3 | Fixed maturities | Internal Pricing
Fair Value Measurements [Line Items]
Portfolio	$ 0.5		$ 0.5
Number of securities	2		2

[1] Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

[2] The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

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Consolidated Statements of Cash Flows (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Cash Flows From Operating Activities
Net income	$ 1,015.5	$ 1,068.3	$ 1,057.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	88.5	83.1	87.3
Amortization of fixed-income securities	233.0	229.2	230.8
Amortization of stock-based compensation	50.5	45.9	40.3
Net realized (gains) losses on securities	(102.6)	(96.1)	(27.1)
Net (gains) losses on disposition of property and equipment	8.7	2.3	13.3
Net (gains) losses on extinguishment of debt	0.1	(6.4)	0
Changes in:
Premiums receivable	(191.4)	(283.6)	(46.2)
Reinsurance recoverables	(76.5)	(176.7)	(276.3)
Prepaid reinsurance premiums	18.3	(18.8)	(6.9)
Deferred acquisition costs	(16.4)	(15.0)	11.8
Income taxes	28.4	48.1	29.7
Unearned premiums	225.6	180.8	(3.0)
Loss and loss adjustment expense reserves	174.8	418.0	475.6
Accounts payable, accrued expenses, and other liabilities	35.5	210.2	(71.8)
Other, net	5.9	(10.0)	(28.2)
Net cash provided by operating activities	1,497.9	1,679.3	1,486.8
Purchases:
Fixed maturities	(6,032.4)	(4,491.7)	(10,046.3)
Equity securities	(582.0)	(511.4)	(624.2)
Sales:
Fixed maturities	4,442.6	3,055.8	7,950.0
Equity securities	423.5	241.9	919.4
Maturities, paydowns, calls, and other:
Fixed maturities	1,540.9	1,341.1	842.5
Equity securities	0	0	15.7
Net sales (purchases) of short-term investments - other	(461.0)	(11.5)	75.6
Net unsettled security transactions	(0.6)	(54.0)	(246.5)
Purchases of property and equipment	(78.9)	(64.7)	(66.6)
Sales of property and equipment	3.0	8.0	1.8
Net cash provided by (used in) investing activities	(744.9)	(486.5)	(1,178.6)
Cash Flows From Financing Activities
Proceeds from exercise of stock options	22.4	27.2	18.8
Tax benefit from exercise/vesting of stock-based compensation	6.4	14.0	9.7
Proceeds from debt issuance	491.9	0	0
Reacquisition of debt	(15.0)	(214.3)	0
Dividends paid to shareholders	(263.6)	(763.7)	0
Acquisition of treasury shares	(997.8)	(258.6)	(180.6)
Net cash used in financing activities	(755.7)	(1,195.4)	(152.1)
Effect of exchange rate changes on cash	(0.5)	0.8	1.7
Increase (decrease) in cash	(3.2)	(1.8)	157.8
Cash, beginning of year	158.9	160.7	2.9
Cash, End of year	$ 155.7	$ 158.9	$ 160.7

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Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010
Investments - Available-for-sale, at fair value:
Fixed maturities (amortized cost: $11,455.7 and $11,630.8)	$ 11,759.3		$ 11,850.0
Equity securities:
Nonredeemable preferred stocks (cost: $473.7 and $601.3)	806.3		1,157.6
Common equities (cost: $1,431.0 and $1,021.7)	1,845.6		1,425.0
Short-term investments (amortized cost: $1,551.8 and $1,090.8)	1,551.8		1,090.8
Total investments at fair value	15,963.0	[1],[2]	15,523.4	[1],[2]
Cash	155.7		158.9
Accrued investment income	105.7		109.3
Premiums receivable, net of allowance for doubtful accounts of $124.2 and $114.9	2,929.8		2,738.4
Reinsurance recoverables, including $32.3 and $37.4 on paid losses and loss adjustment expenses	818.0		741.5
Prepaid Reinsurance Premiums	69.8		88.1
Deferred acquisition costs	433.6		417.2
Income taxes	208.0		189.0
Property and equipment, net of accumulated depreciation of $573.8 and $564.3	911.3		932.6
Other assets	249.9		251.9
Total assets	21,844.8		21,150.3
Liabilities and Shareholders' Equity
Unearned premiums	4,579.4		4,353.8
Loss and loss adjustment expense reserves	7,245.8		7,071.0
Accounts payable, accrued expenses, and other liabilities	1,770.8	[3]	1,718.4	[3]
Debt	2,442.1	[4]	1,958.2	[4]
Total liabilities	16,038.1		15,101.4
Common Shares, $1.00 par value (authorized 900.0; issued 797.7, including treasury shares of 184.7 and 135.3)	613.0		662.4
Paid-in capital	1,006.2		1,007.1
Retained earnings	3,495.0		3,595.7
Accumulated other comprehensive income, net of tax:
Net non-credit related OTTI losses, adjusted for valuation changes	(5.4)		(1.8)
Other net unrealized gains (losses) on securities	688.2		769.1
Total net unrealized gains (losses) on securities	682.8		767.3
Net unrealized gains on forecasted transactions	7.9		14.7
Foreign currency translation adjustment	1.8		1.7
Total accumulated other comprehensive income	692.5		783.7
Total shareholders' equity	5,806.7		6,048.9
Total liabilities and shareholders' equity	$ 21,844.8		$ 21,150.3

[1] Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

[2] The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

[3] See Note 12 - Litigation and Note 13 - Commitments and Contingencies for further discussion.

[4] Consists of both short- and long-term debt. See Note 4 - Debt for further discussion.

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INCOME TAXES

12 Months Ended

Dec. 31, 2011

INCOME TAXES

5.   INCOME TAXES

The components of our income tax provision were as follows:

(millions)	2011		2010		2009
Current tax provision	$	440.2	$	433.9	$	491.0
Deferred tax expense		31.3		63.0		8.4
Total income tax provision	$	471.5	$	496.9	$	499.4

The provision for income taxes in the accompanying consolidated statements of comprehensive income differed from the statutory rate as follows:

($ in millions)	2011					2010					2009
Income before income taxes	$	1,487.0				$	1,565.2				$	1,556.9
Tax at statutory rate	$	520.5		35	%	$	547.8		35	%	$	544.9		35	%
Tax effect of:
Exempt interest income		(17.5	)	(1	)		(19.4	)	(1	)		(26.7	)	(2	)
Dividends received deduction		(18.2	)	(1	)		(17.2	)	(1	)		(17.9	)	(1	)
Tax credits		(9.1	)	(1	)		0		0			0		0
Tax-deductible dividends		(3.8	)	0			(13.0	)	(1	)		0		0
Other items, net		(.4	)	0			(1.3	)	0			(.9	)	0
Total income tax provision	$	471.5		32	%	$	496.9		32	%	$	499.4		32	%

Deferred income taxes reflect the effect for financial statement reporting purposes of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. At December 31, 2011 and 2010, the components of the net deferred tax asset were as follows:

(millions)	2011			2010
Deferred tax assets:
Unearned premiums reserve	$	319.1		$	302.3
Investment basis differences		246.1			286.3
Non-deductible accruals		172.1			158.9
Loss and loss adjustment expense reserves		113.6			120.4
Other		5.2			5.0
Deferred tax liabilities:
Net unrealized gains on securities		(367.7	)		(413.2	)
Hedges on forecasted transactions		(4.3	)		(7.9	)
Deferred acquisition costs		(151.8	)		(146.0	)
Property and equipment		(109.9	)		(105.4	)
Prepaid expenses		(16.1	)		(12.6	)
Deferred gain on extinguishment of debt		(5.8	)		(5.8	)
Other		(4.5	)		(3.8	)
Net deferred tax asset		196.0			178.2
Net income taxes recoverable (payable)		12.0			10.8
Income taxes	$	208.0		$	189.0

Although realization of the deferred tax asset is not assured, management believes that it is more likely than not that the deferred tax asset will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes and, therefore, no valuation allowance was needed at December 31, 2011.

We have been a participant in the Compliance Assurance Program (CAP) since 2007. Under CAP, the Internal Revenue Service (IRS) begins its examination process for the tax year before the tax return is filed, by examining significant transactions and events as they occur. The goal of the CAP program is to expedite the exam process and to reduce the level of uncertainty regarding a taxpayer’s tax filing positions.

All federal income tax years prior to 2007 are closed. The IRS exams for 2007-2010 have been completed. We consider 2007 to be effectively settled. For the 2008, 2009, and 2010 tax years, we have received partial acceptance letters. We agreed to extend the statute of limitations for the 2007 and 2008 tax years to September 30, 2012, at the request of IRS Appeals.

One issue remains open for the 2008, 2009, and 2010 tax years relating to partial worthlessness deductions on certain debt instruments; we have reached settlements with IRS Appeals on this issue for 2008 and 2009, but they are pending review by the Congressional Joint Committee on Taxation. For the 2010 tax year, there is one additional unresolved issue that relates to our 2010 debt Tender Offer (see Note 4 – Debt for further discussion) and the appropriate timing of when to recognize the tax on the gain that we recorded in net income that related to the previously unrealized gain on forecasted transactions. We expect all open issues to be resolved by the end of 2012 and believe that none of these issues will have a material effect on our financial condition, results of operations, or cash flows. In addition to these unresolved issues, we filed refund claims for the 2007-2009 tax years relating to the research and experimentation tax credit; these claims have been accepted by the IRS, but, as of December 31, 2011, were pending review by the Congressional Joint Committee on Taxation.

We recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. We have not recorded any unrecognized tax benefits, or any related interest and penalties, as of December 31, 2011 and 2010. For the years ended December 31, 2011, 2010, and 2009, only the 2009 tax provision includes an interest benefit (net of tax) of $0.3 million related to the settlement of the 2004-2007 IRS exams.

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Components of Other Comprehensive Income (Loss) (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Accumulated Other Comprehensive Income (Loss) [Line Items]
Change in unrealized gains (losses) from cumulative effect of change in accounting principle, net of tax			$ 189.6
Change in unrealized gains (losses) from cumulative effect of change in accounting principle, pretax			291.8
Net unrealized gains on forecasted transactions, related to the Debentures that were extinguished pursuant to the Tender Offer, reclassified from accumulated other comprehensive income to net realized gains/losses on securities, pretax	0.3	5.8
Net unrealized gains on forecasted transactions, expected to reclassify into income within the next 12 months	$ 2.3

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Summary of all Stock Option Activity for both Current and Former Directors (Detail) (Non Employee Director Stock Option, USD $)	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Non Employee Director Stock Option
Number of Shares
Beginning of year	120,125		312,545		401,357
Antidilution adjustment			5,787	[1]
Deduct:
Exercised	(83,888)		(198,207)		(88,812)
End of year	36,237		120,125		312,545
Exercisable, end of year	36,237	[2]	120,125	[2]	312,545	[2]
Weighted Average Exercise Price
Beginning of year	$ 10.34		$ 8.46		$ 8.60
Exercised	$ 9.41		$ 7.07		$ 9.10
End of year	$ 12.51		$ 10.34		$ 8.46
Exercisable, end of year	$ 12.51	[2]	$ 10.34	[2]	$ 8.46	[2]

[1] During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

[2] The 1998 Directors' Stock Option Plan has expired.

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Summary of All Employee Stock Option Activity (Parenthetical) (Detail) (Employee Stock Option, USD $)	12 Months Ended
	Dec. 31, 2010
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Extraordinary cash dividends declared Per common share	$ 1.00

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2011	Jan. 31, 2012	Jun. 30, 2011
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY
Trading Symbol	PGR
Entity Registrant Name	PROGRESSIVE CORP/OH/
Entity Central Index Key	0000080661
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		611,506,847
Entity Public Float			$ 12,567,057,592

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LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

12 Months Ended

Dec. 31, 2011

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

6.  LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

Activity in the loss and loss adjustment expense reserves is summarized as follows:

(millions)	2011			2010			2009
Balance at January 1	$	7,071.0		$	6,653.0		$	6,177.4
Less reinsurance recoverables on unpaid losses		704.1			529.4			244.5
Net balance at January 1		6,366.9			6,123.6			5,932.9
Incurred related to:
Current year		10,876.8			10,451.7			10,040.9
Prior years		(242.0	)		(320.4	)		(136.0	)
Total incurred		10,634.8			10,131.3			9,904.9
Paid related to:
Current year		7,289.3			6,841.0			6,542.2
Prior years		3,252.3			3,047.0			3,172.0
Total paid		10,541.6			9,888.0			9,714.2
Net balance at December 31		6,460.1			6,366.9			6,123.6
Plus reinsurance recoverables on unpaid losses		785.7			704.1			529.4
Balance at December 31	$	7,245.8		$	7,071.0		$	6,653.0

We experienced favorable reserve development in each of the last three years, which is reflected as “Incurred related to prior years” in the table above.

2011

• About half of the favorable reserve development was attributable to accident years 2008 and prior, while the balance was primarily due to claims from accident year 2010.

• Approximately 70% of the favorable reserve development was attributable to our Personal Lines business, with our Agency and Direct channels contributing 25% and 75%, respectively; the balance was primarily in our Commercial Auto business.

2010

• Approximately 70% of the favorable reserve development was attributable to accident year 2009, while the balance was mostly due to claims from accident years 2007 and 2006.

• About 70% of the favorable reserve development was in our Personal Lines business, with our Agency and Direct channels contributing almost equal amounts; the balance was in our Commercial Auto business.

2009

• About 60% of the favorable reserve development was due to favorable development for accident years 2006 and prior, while the balance was mostly due to claims from accident year 2008.

• Approximately 55% of the favorable reserve development was attributable to our Personal Lines business, with our Agency and Direct channels contributing 25% and 75%, respectively; the balance was primarily in our Commercial Auto business.

The favorable reserve development reflected the settlement of larger losses for amounts less than we originally reserved in our Personal Lines business (primarily in our personal auto product) for 2011 and 2010, and in our Commercial Auto business for each of the last three years. During the last three years, we also experienced lower than expected defense and cost containment costs, reflecting a combination of fewer claims being litigated, as well as the fact that a greater percentage of these cases are now being handled by our in-house counsel, which is a cost-effective alternative to using external law firms. In addition, for 2010, our incurred but not recorded (IBNR) reserves developed favorably due to lower severity and frequency of late emerging claims. However, in 2011, the number of late emerging claims increased over 2010 and was greater than anticipated by our carried IBNR, thus we recognized unfavorable development on our total IBNR reserves.

Because we are primarily an insurer of motor vehicles, we have limited exposure to environmental, asbestos, and general liability claims. We have established reserves for such exposures, in amounts that we believe to be adequate based on information currently known. These claims are not expected to have a material effect on our liquidity, financial condition, cash flows, or results of operations.

We write personal and commercial auto insurance throughout the United States and could be exposed to hurricanes or other natural catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, we believe that, based on historical experience, such an event would not be so material as to disrupt the overall normal operations of Progressive. We are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

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Activity in the Loss and Loss Adjustment Expense Reserves (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Causes of Increase (Decrease) in Liability for Unpaid Claims and Claims Adjustment Expense [Line Items]
Balance at beginning of period	$ 7,071.0	$ 6,653.0	$ 6,177.4
Less reinsurance recoverables on unpaid losses	704.1	529.4	244.5
Net balance at beginning of period	6,366.9	6,123.6	5,932.9
Incurred related to:
Current year	10,876.8	10,451.7	10,040.9
Prior years	(242.0)	(320.4)	(136.0)
Total incurred	10,634.8	10,131.3	9,904.9
Paid related to:
Current year	7,289.3	6,841.0	6,542.2
Prior years	3,252.3	3,047.0	3,172.0
Total paid	10,541.6	9,888.0	9,714.2
Net balance at ending of period	6,460.1	6,366.9	6,123.6
Plus reinsurance recoverables on unpaid losses	785.7	704.1	529.4
Balance at ending of period	$ 7,245.8	$ 7,071.0	$ 6,653.0

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Summary of All Employee Stock Option Activity (Detail) (Employee Stock Option, USD $)	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010		Dec. 31, 2009
Employee Stock Option
Number of Shares
Beginning of year	1,916,416	5,102,888		8,503,273
Antidilution adjustment		97,387	[1]
Deduct:
Exercised	(1,913,552)	(3,283,859)		(3,394,633)
Forfeited	(2,864)	0		(5,752)
End of year	0	1,916,416		5,102,888
Exercisable, end of year	0	1,916,416		5,102,888
Weighted Average Exercise Price
Beginning of year	$ 11.31	$ 9.31		$ 7.71
Exercised	$ 11.31	$ 7.87		$ 5.31
Forfeited	$ 11.28	$ 0.00		$ 5.69
End of year	$ 0.00	$ 11.31		$ 9.31
Exercisable, end of year	$ 0.00	$ 11.31		$ 9.31

[1] During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Fixed maturities, amortized cost	$ 11,455.7	$ 11,630.8
Nonredeemable preferred stocks, cost	473.7	601.3
Common equities, cost	1,431.0	1,021.7
Short-term investments, amortized cost	1,551.8	1,090.8
Premiums receivable, allowance for doubtful accounts	124.2	114.9
Reinsurance recoverables, paid losses and loss adjustment expenses	32.3	37.4
Property and equipment, accumulated depreciation	$ 573.8	$ 564.3
Common Shares, par value	$ 1.00	$ 1.00
Common Shares, authorized	900.0	900.0
Common Shares, issued	797.7	797.7
Common Shares, treasury shares	184.7	135.3

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SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY - CASUALTY INSURANCE OPERATIONS

12 Months Ended

Dec. 31, 2011

SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY - CASUALTY INSURANCE OPERATIONS

SCHEDULE VI — SUPPLEMENTAL INFORMATION CONCERNING PROPERTY - CASUALTY INSURANCE OPERATIONS

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

	Losses and Loss Adjustment
	Expenses Incurred Related to					Paid Losses and Loss Adjustment Expenses
Year Ended	Current Year		Prior Years
December 31, 2011	$	10,876.8	$	(242.0	)	$	10,541.6
December 31, 2010	$	10,451.7	$	(320.4	)	$	9,888.0
December 31, 2009	$	10,040.9	$	(136.0	)	$	9,714.2

Pursuant to Rule 12-18 of Regulation S-X. See Schedule III for the additional information required in Schedule VI.

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SCHEDULE IV - REINSURANCE

12 Months Ended

Dec. 31, 2011

SCHEDULE IV - REINSURANCE

SCHEDULE IV — REINSURANCE

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

					Assumed				Percentage
			Ceded to		From				of Amount
	Gross		Other		Other				Assumed
Year Ended:	Amount		Companies		Companies		Net Amount		to Net
December 31, 2011
Premiums earned:
Property and liability insurance	$	15,107.5	$	204.7	$	0	$	14,902.8		0
December 31, 2010
Premiums earned:
Property and liability insurance	$	14,519.2	$	204.4	$	0	$	14,314.8		0
December 31, 2009
Premiums earned:
Property and liability insurance	$	14,199.4	$	186.6	$	0	$	14,012.8		0

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OTHER COMPREHENSIVE INCOME (LOSS)

12 Months Ended

Dec. 31, 2011

OTHER COMPREHENSIVE INCOME (LOSS)

11.  OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the years ended December 31, were as follows:

	2011									2010									2009
(millions)	Pretax			Tax (Provision) Benefit			After Tax			Pretax			Tax (Provision) Benefit			After Tax			Pretax			Tax (Provision) Benefit			After Tax
Net unrealized gains (losses) on securities:
Arising during period:
Fixed maturities	$	132.9		$	(46.5	)	$	86.4		$	302.9		$	(106.0	)	$	196.9		$	519.4		$	(181.8	)	$	337.6
Equity securities		(57.5	)		20.1			(37.4	)		241.7			(84.6	)		157.1			671.7			(235.1	)		436.6
Net non-credit related OTTI losses, adjusted for valuation changes		(5.5	)		1.9			(3.6	)		21.4			(7.5	)		13.9			(24.1	)		8.4			(15.7	)
Reclassification adjustment for (gains) losses realized in net income:
Fixed maturities		(47.4	)		16.6			(30.8	)		46.3			(16.2	)		30.1			(8.5	)		3.0			(5.5	)
Equity securities		(152.5	)		53.4			(99.1	)		(93.7	)		32.8			(60.9	)		(86.7	)		30.3			(56.4	)
Change in net unrealized gains (losses) on securities1		(130.0	)		45.5			(84.5	)		518.6			(181.5	)		337.1			1,071.8			(375.2	)		696.6
Net unrealized gains (losses) on forecasted transactions:2
Arising during period		(5.1	)		1.8			(3.3	)		0			0			0			0			0			0
Reclassification adjustment for amounts realized in net income3		(5.3	)		1.8			(3.5	)		(10.6	)		3.7			(6.9	)		(5.1	)		1.8			(3.3	)
Change in net unrealized gains on forecasted transactions		(10.4	)		3.6			(6.8	)		(10.6	)		3.7			(6.9	)		(5.1	)		1.8			(3.3	)
Foreign currency translation adjustment		.2			(.1	)		.1			1.2			(.9	)		.3			1.4			0			1.4
Other comprehensive income (loss)	$	(140.2	)	$	49.0		$	(91.2	)	$	509.2		$	(178.7	)	$	330.5		$	1,068.1		$	(373.4	)	$	694.7

¹  December 31, 2009 excludes the $189.6 million ($291.8 million pretax) cumulative effect of change in accounting principle we recorded in June 2009 in accordance with the new accounting guidance for other-than-temporary impairments we adopted during the second quarter 2009.

²  Entered into for the purpose of managing interest rate risk associated with our debt issuances, and managing foreign currency risk associated with our forecasted foreign currency transaction, which was closed in 2009.

³  We expect to reclassify $2.3 million (pretax) into income during the next 12 months. During 2011 and 2010, we reclassified $0.3 million and $5.8 million, respectively, on a pretax basis, from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of the 6.70% Debentures repurchased during the periods (see Note 4 – Debt for further discussion).

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REINSURANCE

12 Months Ended

Dec. 31, 2011

REINSURANCE

7.  REINSURANCE

The effect of reinsurance on premiums written and earned for the years ended December 31, was as follows:

	2011						2010						2009
(millions)	Written			Earned			Written			Earned			Written			Earned
Direct premiums	$	15,333.1		$	15,107.5		$	14,700.0		$	14,519.2		$	14,196.3		$	14,199.4
Ceded		(186.5	)		(204.7	)		(223.2	)		(204.4	)		(193.4	)		(186.6	)
Net premiums	$	15,146.6		$	14,902.8		$	14,476.8		$	14,314.8		$	14,002.9		$	14,012.8

About 95% of our ceded premiums are ceded to state-provided reinsurance facilities, including the Michigan Catastrophic Claims Association (“MCCA”) and the North Carolina Reinsurance Facility (“NCRF”), and state-mandated involuntary Commercial Auto Insurance Procedures/Plans (“CAIP”) (collectively referred to as “State Plans”); MCCA and NCRF each comprise about 40% of the ceded premiums. The remaining 5% represents premiums ceded related to our non-auto programs.

Losses and loss adjustment expenses (LAE) were net of reinsurance ceded of $219.7 million in 2011, $312.7 million in 2010, and $417.6 million in 2009. During 2009, we changed our loss reserving process regarding lifetime estimates for medical benefits related to personal injury protection claims ceded to the MCCA, which increased both the amount of loss reserves and the corresponding reinsurance recoverables on unpaid losses and, therefore, had no impact on our results of operations. During 2010, further reviews of the MCCA program claim files resulted in additional ceded reserves to reflect lifetime estimates, as well as an increase in claims volume.

Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:

	Prepaid Reinsurance Premiums										Reinsurance Recoverables
	2011					2010					2011					2010
(millions)	$		%			$		%			$		%			$		%
MCCA	$	21.4		31	%	$	20.0		23	%	$	650.4		80	%	$	578.7		78	%
NCRF		19.0		27			20.7		23			51.4		6			45.3		6
CAIP		12.7		18			11.9		14			58.4		7			65.9		9
State Plans		53.1		76			52.6		60			760.2		93			689.9		93
Non-auto		16.7		24			35.5		40			57.8		7			51.6		7
Total	$	69.8		100	%	$	88.1		100	%	$	818.0		100	%	$	741.5		100	%

Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to Progressive. Since the majority of our reinsurance is through State Plans, our exposure to losses from their failure is minimal, since the plans are funded by mechanisms supported by the insurance companies in the state. We evaluate the financial condition of our other reinsurers and monitor concentrations of credit risk to minimize our exposure to significant losses from reinsurer insolvencies. The majority of the reinsurance on our non-auto programs relates to our professional liability insurance business, which was sold during 2010 and is currently in run-off.

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Prepaid Reinsurance Premiums and Reinsurance Recoverables (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011	Dec. 31, 2010
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid Reinsurance Premiums	$ 69.8	$ 88.1
Percentage of Prepaid Reinsurance Premiums	100.00%	100.00%
Reinsurance Recoverables	818.0	741.5
Percentage of Reinsurance Recoverables	100.00%	100.00%
Non-Auto Reinsurance Programs
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid Reinsurance Premiums	16.7	35.5
Percentage of Prepaid Reinsurance Premiums	24.00%	40.00%
Reinsurance Recoverables	57.8	51.6
Percentage of Reinsurance Recoverables	7.00%	7.00%
State Reinsurance Plan
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid Reinsurance Premiums	53.1	52.6
Percentage of Prepaid Reinsurance Premiums	76.00%	60.00%
Reinsurance Recoverables	760.2	689.9
Percentage of Reinsurance Recoverables	93.00%	93.00%
State Reinsurance Plan | Michigan Catastrophic Claims Association
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid Reinsurance Premiums	21.4	20.0
Percentage of Prepaid Reinsurance Premiums	31.00%	23.00%
Reinsurance Recoverables	650.4	578.7
Percentage of Reinsurance Recoverables	80.00%	78.00%
State Reinsurance Plan | North Carolina Reinsurance Facility
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid Reinsurance Premiums	19.0	20.7
Percentage of Prepaid Reinsurance Premiums	27.00%	23.00%
Reinsurance Recoverables	51.4	45.3
Percentage of Reinsurance Recoverables	6.00%	6.00%
State Reinsurance Plan | Commercial Auto Insurance Procedures Plans
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Prepaid Reinsurance Premiums	12.7	11.9
Percentage of Prepaid Reinsurance Premiums	18.00%	14.00%
Reinsurance Recoverables	$ 58.4	$ 65.9
Percentage of Reinsurance Recoverables	7.00%	9.00%

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FAIR VALUE

12 Months Ended

Dec. 31, 2011

FAIR VALUE

3.  FAIR VALUE

We have categorized our financial instruments, based on the degree of subjectivity inherent in the method by which they are valued, into a fair value hierarchy of three levels, as follows:

• Level 1:  Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. government obligations and active exchange-traded equity securities).

• Level 2:  Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i) quoted prices for similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active, (iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3:  Inputs that are unobservable. Unobservable inputs reflect our subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

Pursuant to generally accepted accounting principles, which require us to evaluate whether a market is distressed or inactive in determining the fair value for our portfolio, we review certain market level inputs to evaluate whether sufficient activity, volume, and new issuances existed to create an active market. Based on this evaluation, we concluded that there was sufficient activity related to the sectors and securities for which we obtained valuations.

The composition of the investment portfolio by major security type was:

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2011
Fixed maturities:
U.S. government obligations	$	2,963.0	$	0	$	0	$	2,963.0	$	2,842.7
State and local government obligations		0		2,002.1		0		2,002.1		1,938.6
Corporate debt securities		0		2,896.2		0		2,896.2		2,801.5
Subtotal		2,963.0		4,898.3		0		7,861.3		7,582.8
Asset-backed securities:
Residential mortgage-backed		0		364.6		62.3		426.9		452.9
Commercial mortgage-backed		0		1,855.3		21.3		1,876.6		1,829.8
Other asset-backed		0		1,218.0		2.6		1,220.6		1,210.9
Subtotal asset-backed securities		0		3,437.9		86.2		3,524.1		3,493.6
Redeemable preferred stocks:
Financials		24.1		107.2		0		131.3		124.3
Utilities		0		68.1		0		68.1		70.8
Industrials		0		174.5		0		174.5		184.2
Subtotal redeemable preferred stocks		24.1		349.8		0		373.9		379.3
Total fixed maturities		2,987.1		8,686.0		86.2		11,759.3		11,455.7
Equity securities:
Nonredeemable preferred stocks:
Financials		227.9		525.4		0		753.3		433.7
Utilities		0		53.0		0		53.0		40.0
Industrials		0		0		0		0		0
Subtotal nonredeemable preferred stocks		227.9		578.4		0		806.3		473.7
Common equities:
Common stocks		1,834.1		0		0		1,834.1		1,427.3
Other equity-like investments		0		0		11.5		11.5		3.7
Subtotal common equities		1,834.1		0		11.5		1,845.6		1,431.0
Total fixed maturities and equity securities	$	5,049.1	$	9,264.4	$	97.7		14,411.2		13,360.4
Short-term investments:
Other short-term investments1								1,551.8		1,551.8
Total portfolio							$	15,963.0	$	14,912.2
Debt2							$	2,664.7	$	2,442.1

	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2010
Fixed maturities:
U.S. government obligations	$	3,242.6	$	0	$	0	$	3,242.6	$	3,203.2
State and local government obligations		0		1,989.1		0		1,989.1		1,955.5
Corporate debt securities		0		2,616.6		29.5		2,646.1		2,579.0
Subtotal		3,242.6		4,605.7		29.5		7,877.8		7,737.7
Asset-backed securities:
Residential mortgage-backed		0		466.9		96.7		563.6		567.1
Commercial mortgage-backed		0		1,804.6		27.5		1,832.1		1,772.1
Other asset-backed		0		1,069.0		5.0		1,074.0		1,063.9
Subtotal asset-backed securities		0		3,340.5		129.2		3,469.7		3,403.1
Redeemable preferred stocks:
Financials		23.4		172.4		0		195.8		183.8
Utilities		0		71.4		0		71.4		70.2
Industrials		0		235.3		0		235.3		236.0
Subtotal redeemable preferred stocks		23.4		479.1		0		502.5		490.0
Total fixed maturities		3,266.0		8,425.3		158.7		11,850.0		11,630.8
Equity securities:
Nonredeemable preferred stocks:
Financials		490.2		565.1		0		1,055.3		514.3
Utilities		0		67.9		0		67.9		50.8
Industrials		0		34.4		0		34.4		36.2
Subtotal nonredeemable preferred stocks		490.2		667.4		0		1,157.6		601.3
Common equities:
Common stocks		1,413.2		0		0		1,413.2		1,017.6
Other equity-like investments		0		0		11.8		11.8		4.1
Subtotal common equities		1,413.2		0		11.8		1,425.0		1,021.7
Total fixed maturities and equity securities	$	5,169.4	$	9,092.7	$	170.5		14,432.6		13,253.8
Short-term investments:
Other short-term investments1								1,090.8		1,090.8
Total portfolio							$	15,523.4	$	14,344.6
Debt2							$	2,105.7	$	1,958.2

¹  Due to the underlying nature of these securities, cost approximates fair value.

² Debt is not subject to measurement at fair value in the Consolidated Balance Sheets. Therefore, it is not broken out by hierarchy level; fair values are obtained from external sources.

Our portfolio valuations classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources, including: pricing vendors, dealers/market makers, and exchange-quoted prices. During 2011, we had one nonredeemable preferred security with a value of $44.2 million that was transferred from Level 1 to Level 2 due to the lack of an exchange-quoted price at year-end. The exchange price was not available due to illiquidity in the market place that is expected to be temporary. A consistent exchange-quoted price was previously available for this security, and we will continue to monitor the security for future exchange trading volume. We recognize transfers between levels at the end of the reporting period. We did not have any transfers between Level 1 and Level 2 for the year ended December 31, 2010.

With limited exceptions, our Level 3 securities are also priced externally; however, due to several factors (e.g., nature of the securities, level of activity, and lack of similar securities trading to obtain observable market level inputs), these valuations are more subjective in nature. Certain private equity investments and fixed-income investments included in the Level 3 category are valued using external pricing supplemented by internal review and analysis.

At December 31, 2011, vendor-quoted prices represented 59% of our Level 1 classifications, compared to 63% at December 31, 2010. The securities quoted by vendors in Level 1 represent our holdings in U.S. Treasury Notes, which are frequently traded and the quotes are considered similar to exchange-traded quotes. The balance of our Level 1 pricing comes from quotes obtained directly from trades made on an active exchange.

At December 31, 2011, vendor-quoted prices comprised 96% of our Level 2 classifications, while dealer-quoted prices represented 4%, compared to 94% and 6%, respectively, at December 31, 2010. In our process for selecting a source (e.g., dealer, pricing service) to provide pricing for securities in our portfolio, we reviewed documentation from the sources that detailed the pricing techniques and methodologies used by these sources and determined if their policies adequately considered market activity, either based on specific transactions for the particular security type or based on modeling of securities with similar credit quality, duration, yield, and structure that were recently transacted. Once a source is chosen, we continue to monitor any changes or modifications to their processes by reviewing their documentation on internal controls for pricing and market reviews.

Our internal pricing policy is to consistently use a single source in order to maintain the integrity established when selecting the source initially. From time to time, we will obtain a quote from more than one source to help us further evaluate the market price of a security. Quotes obtained from the sources are not considered binding offers to transact a trade. Under our policy, when a review of the valuation received from our selected source appears outside what is considered market level activity (which is defined as trading at spreads or yields significantly different than comparable securities or outside the general sector level movement without a reasonable explanation), we may use an alternate source’s price. To the extent we determine that it is prudent to substitute one source’s price for another, we will contact the initial source to obtain an understanding of the factors that may be contributing to the significant price variance, which often leads the source to adjust their pricing input data for future pricing.

To allow us to determine if our initial source is providing a price that is outside of a reasonable range, we review our portfolio pricing on a weekly basis. We frequently challenge prices from our sources when a price provided does not match our expectations based on our evaluation of market trends/activity. Initially, we perform a global review of our portfolio by sector to identify securities whose prices appear outside of a reasonable range. We refine our review to analyze prices by specific criteria, such as whether the security is investment or non-investment-grade, prime or sub-prime, or a consumer product (e.g., auto, credit card). Through this review, we try to determine what contributed to the price variances among sources by analyzing spread movement, comparable security trades, if available, or industry or specific issuer fundamentals. We review quality control measures of our sources as they become available to determine if any significant changes have occurred from period to period that might indicate issues/concerns regarding their evaluation or market coverage. We also review data assumptions as supplied by our sources to determine if that data is relevant to current market conditions. In addition, we independently review each sector for transaction volumes, new issuances, and changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for our market valuations.

During each valuation period, we create internal estimations of portfolio valuation (performance returns), based on current market-related activity (i.e., interest rate and credit spread movements and other credit-related factors) within each major sector of our portfolio. We compare our internally generated portfolio results with those generated based on quotes we received externally and research material valuation differences. In addition, we compare our results to index returns for each major sector adjusting for duration and credit quality differences to better understand our portfolio’s results. Additionally, we review on a monthly basis our external sales transactions and compare the actual final market sales price to a previous market valuation price. This review provides us further validation that our pricing sources are providing market level prices, since we are able to explain significant price changes (i.e., greater than 2%) as known events occur in the market place and affect a particular security’s price at sale.

This analysis provides us additional comfort regarding the source’s process, the quality of their review, and their willingness to improve their analysis based on feedback from clients. We believe this collaborative effort helps ensure that we are reporting the most representative fair values of our securities.

After all the valuations are received and our review is complete, to the extent the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected security valuations to Level 3. At December 31, 2011 and 2010, securities in our fixed-maturity portfolio listed as Level 3 were comprised substantially of securities that were either: (i) private placement deals, (ii) thinly held and/or traded securities, or (iii) non-investment-grade securities with little liquidity. Based on these factors, it was difficult to independently verify observable market inputs that were used to generate the external valuations we received. At December 31, 2011 and 2010, we had one private common equity security with a value of $10.2 million that was priced internally. Additionally, at December 31, 2011 and 2010, we had two fixed-maturity securities with an aggregate value of $0.5 million that were priced internally. Despite the lack of sufficient observable market information, based on the valuations received in conjunction with our procedures for evaluating third-party prices, we believe the fair values reported in the financial statements accurately reflect market prices.

The following tables provide a summary of changes in fair value associated with Level 3 assets for the years ended December 31, 2011 and 2010:

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2010		Calls/ Maturities/ Paydowns			Purchases		Sales			Net Realized (Gain)/Loss			Change in Valuation			Net Transfers In (Out)1			Fair value at Dec. 31, 2011
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	96.7	$	(19.5	)	$	0	$	0		$	0		$	.5		$	(15.4	)	$	62.3
Commercial mortgage-backed		27.5		(.3	)		0		0			0			(5.9	)		0			21.3
Other asset-backed		5.0		(2.6	)		0		0			0			.2			0			2.6
Total asset-backed securities		129.2		(22.4	)		0		0			0			(5.2	)		(15.4	)		86.2
Corporate debt securities		29.5		0			0		(27.9	)		(.6	)		(1.0	)		0			0
Other debt obligations		0		0			0		0			0			0			0			0
Redeemable preferred stocks:
Industrials		0		0			0		0			0			0			0			0
Total fixed maturities		158.7		(22.4	)		0		(27.9	)		(.6	)		(6.2	)		(15.4	)		86.2
Equity securities:
Common equities:
Other equity-like investments		11.8		0			0		0			0			(.3	)		0			11.5
Total Level 3 securities	$	170.5	$	(22.4	)	$	0	$	(27.9	)	$	(.6	)	$	(6.5	)	$	(15.4	)	$	97.7

¹ The $(15.4) million was transferred out of Level 3 into Level 2 due to the availability of vendor pricing on a residential mortgage-backed security.

	Level 3 Fair Value
(millions)	Fair Value at Dec. 31, 2009		Calls/ Maturities/ Paydowns			Purchases		Sales			Net Realized (Gain)/Loss		Change in Valuation			Net Transfers In (Out)1			Fair value at Dec. 31, 2010
Fixed maturities:
Asset-backed securities:
Residential mortgage-backed	$	46.1	$	(20.9	)	$	55.6	$	0		$	0	$	4.8		$	11.1		$	96.7
Commercial mortgage-backed		21.6		0			0		0			0		5.4			.5			27.5
Other asset-backed		7.8		(2.6	)		0		0			0		(.2	)		0			5.0
Total asset-backed securities		75.5		(23.5	)		55.6		0			0		10.0			11.6			129.2
Corporate debt securities		28.2		0			0		0			0		1.3			0			29.5
Other debt obligations		1.1		0			0		0			0		(1.1	)		0			0
Redeemable preferred stocks:
Industrials		53.1		0			0		0			0		0			(53.1	)		0
Total fixed maturities		157.9		(23.5	)		55.6		0			0		10.2			(41.5	)		158.7
Equity securities:
Common equities:
Other equity-like investments		12.9		(2.1	)		0		(.3	)		.3		1.0			0			11.8
Total Level 3 securities	$	170.8	$	(25.6	)	$	55.6	$	(.3	)	$	.3	$	11.2		$	(41.5	)	$	170.5

¹ The net $(41.5) million of transfers out of Level 3 included: a $12.1 million transfer into Level 3 and subsequent transfer out of Level 3 at $(15.1) million due to sufficient trade volume, a $(53.1) million transfer out of Level 3 due to the availability of vendor pricing on a redeemable preferred stock, and $14.6 million of transfers into Level 3 due to the lack of trade volume.

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Total Non-Credit Portion of Other-Than-Temporary Impairment (OTTI) Recorded in Accumulated Other Comprehensive Income (AOCI), Reflecting Original Non-Credit Loss at the Time Credit Impairment (Detail) (Fixed maturities, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Non-credit portion of other-than-temporary impairments recognized in accumulated other comprehensive income	$ (45.8)	$ (45.3)
Residential mortgage-backed securities
Non-credit portion of other-than-temporary impairments recognized in accumulated other comprehensive income	(44.8)	(44.3)
Commercial mortgage-backed securities
Non-credit portion of other-than-temporary impairments recognized in accumulated other comprehensive income	$ (1.0)	$ (1.0)

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REPORTING AND ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2011

REPORTING AND ACCOUNTING POLICIES

1.  REPORTING AND ACCOUNTING POLICIES

Nature of Operations  The Progressive Corporation, an insurance holding company formed in 1965, owned 54 subsidiaries and had 1 mutual insurance company affiliate (collectively the “subsidiaries”) as of December 31, 2011. Our insurance subsidiaries provide personal and commercial automobile insurance and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles through both an independent insurance agency channel and a direct channel. Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses through both the independent agency and direct channels. We operate our businesses throughout the United States; we also sell personal auto physical damage insurance via the Internet in Australia.

Basis of Consolidation and Reporting  The accompanying consolidated financial statements include the accounts of The Progressive Corporation, its subsidiaries, which are wholly owned, and a mutual company affiliate, for which we have a controlling financial interest. All intercompany accounts and transactions are eliminated in consolidation.

Estimates  We are required to make estimates and assumptions when preparing our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact (e.g., losses are paid), results may, and will likely, differ from those estimates.

Investments  Progressive’s fixed-maturity securities, equity securities, and short-term investments are accounted for on an available-for-sale basis. See Note 2 – Investments for details regarding the composition of our investment portfolio.

Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes, reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.

Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are generally accounted for under the retrospective method. The retrospective method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception of the investment holding period, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The prospective method is used primarily for interest-only securities, non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure or where there is a greater risk of non-performance and where it is possible the initial investment may not be substantially recovered. The prospective method requires a calculation of future expected repayments and resets the yield to allow for future period adjustments; no current period impact to investment income or the security’s cost is made based on the cash flow update. Prepayment assumptions are based on market expectations and are updated quarterly.

Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments and are reported at quoted fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in the current period.

Short-term investments may include Eurodollar deposits, commercial paper, reverse repurchase transactions, and other securities expected to mature within one year. In addition, short-term investments can include auction rate securities (i.e., certain municipal bonds and preferred stocks). Due to the nature of auction rate securities, these securities are classified as short-term based upon their expected auction date (generally 7-49 days) rather than on their contractual maturity date (which is greater than one year at original issuance). In the event that an auction fails, the security may need to be reclassified from short-term. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income.

Trading securities are securities bought principally for the purpose of sale in the near term. To the extent we have trading securities, changes in fair value would be recognized in income in the current period. Derivative instruments, which may be used for trading purposes or classified as trading derivatives due to the characteristics of the transaction, are discussed below.

Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements, and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:

• Changes in fair value of an asset or liability (fair value hedge)

• Foreign currency of an investment in a foreign operation (foreign currency hedge), or

• Variable cash flows of a forecasted transaction (cash flow hedge).

To the extent we have derivatives held or issued for general investment purposes, these derivative instruments are recognized as either assets or liabilities and measured at fair value, with changes in fair value recognized in income as a component of net realized gains (losses) on securities during the period of change.

Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:

• Fair value hedge:  changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of change while the hedge is in effect.

• Foreign currency hedge:  changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.

• Cash flow hedge:  changes in fair value of the hedge would be reported as a component of accumulated other comprehensive income and subsequently amortized into earnings over the life of the hedged transaction.

If a hedge is deemed to become ineffective and discontinued, the following accounting treatment would be applied:

• Fair value hedge:  the derivative instrument would continue to be adjusted through income, while the adjustment in the change in value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive income.

• Foreign currency hedge:  changes in the value of the hedged item would continue to be reflected as a change in translation adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income for the current period.

• Cash flow hedge:  changes in fair value of the derivative instrument would be reported in income for the current period.

For all derivative positions, net cash requirements are limited to changes in fair values, which may vary based upon changes in interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same counterparty under a master netting arrangement.

Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio’s value in the near term. We regularly monitor our portfolio for price changes, which might indicate potential impairments, and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors, (ii) market-related factors, such as interest rates or equity market declines, or (iii) credit-related losses, where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security.

We analyze our debt securities to determine if we intend to sell, or if it is more likely than not that we will be required to sell, the security prior to recovery and, if so, we write down the security to its current fair value, with the entire amount of the write-down recorded to earnings. To the extent that it is more likely than not that we will hold the debt security until recovery (which could be maturity), we determine if any of the decline in value is due to a credit loss (i.e., where the present value of future cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we recognize that portion of the impairment in the comprehensive income statement, with the difference (i.e., non-credit related impairment) recognized as part of our net unrealized gains (losses) in accumulated other comprehensive income. When an equity security (common equity and nonredeemable preferred stock) in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the comprehensive income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in unrealized gains (losses) as part of accumulated other comprehensive income.

Realized gains (losses) on securities are computed based on the first-in first-out method and include write-downs on available-for-sale securities considered to have other-than-temporary declines in fair value (excluding non-credit related impairments), as well as holding period valuation changes on derivatives, trading securities, and hybrid instruments (securities with embedded call options, where the call option is a feature of the overall change in the value of the instrument).

Insurance Premiums and Receivables  Insurance premiums written are earned into income on a pro rata basis over the period of risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that is applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts and offer a variety of payment plans. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk. We perform a policy level evaluation to determine the extent to which the premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for doubtful accounts based on prior experience.

Deferred Acquisition Costs  Deferred acquisition costs include commissions, premium taxes, and other variable underwriting and direct sales costs incurred in connection with writing business. These costs are deferred and amortized over the policy period in which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these costs. Management believes that these costs will be fully recoverable in the near term. We do not defer any advertising costs.

Loss and Loss Adjustment Expense Reserves  Loss reserves represent the estimated liability on claims reported to us, plus reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are reflected in income currently. Such loss and loss adjustment expense reserves are susceptible to change in the near term.

Reinsurance  Our reinsurance transactions primarily include premiums ceded to state-provided reinsurance facilities (e.g., Michigan Catastrophic Claims Association and North Carolina Reinsurance Facility) and premiums written under state-mandated involuntary plans for commercial vehicles (Commercial Auto Insurance Procedures/Plans – “CAIP”) (collectively, “State Plans”) (see Note 7 – Reinsurance for further discussion). We cede 100% of the premiums written in our professional liability insurance businesses as we continue our exit of these markets. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written.

Income Taxes  The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. The principal items giving rise to such differences are investment securities (e.g., net unrealized gains (losses), write-downs, and derivative instruments), loss and loss adjustment expense reserves, unearned premiums reserves, deferred acquisition costs, property and equipment, and non-deductible accruals. We review our deferred tax assets regularly for recoverability. See Note 5 – Income Taxes for further discussion.

Property and Equipment  Property and equipment are recorded at cost, less accumulated depreciation, and includes capitalized software developed or acquired for internal use. Depreciation is recognized over the estimated useful lives of the assets using accelerated methods for most computer equipment and the straight-line method for certain computer equipment and all other fixed assets. The useful lives range from 2 to 4 years for computer equipment and laptop computers, 10 to 40 years for buildings and improvements, and 3 to 10 years for all other property and equipment. Land and buildings comprised 75% and 76% of total property and equipment at December 31, 2011 and 2010, respectively.

Total capitalized interest, which primarily relates to capitalized software projects, for the years ended December 31, was:

(millions)	Capitalized Interest
2011	$	.4
2010		1.1
2009		2.6

Guaranty Fund Assessments  We are subject to state guaranty fund assessments, which provide for the payment of covered claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal determination of insolvency has occurred, and we have written the premiums on which the assessments will be based.

Service Revenues and Expenses  Our service businesses provide insurance-related services. Service revenues generated from processing business for involuntary CAIP plans are earned on a pro rata basis over the term of the related policies. Service expenses related to these CAIP plans include acquisition expenses, which are deferred and amortized over the period in which the related revenues are earned. Other service business revenues and expenses are recorded in the period in which they are earned or incurred.

Stock-Based Compensation  We currently issue time-based and performance-based restricted stock unit awards to key members of management as our form of equity compensation, and time-based restricted stock awards to non-employee directors. Prior to 2010, we issued restricted stock awards, instead of restricted stock unit awards, to employees. Collectively, we refer to these awards as “restricted equity awards.” We currently do not issue stock options as a form of equity compensation. Compensation expense for time-based restricted equity awards with installment vesting is recognized over each respective vesting period. For performance-based restricted equity awards, compensation expense is recognized over the respective vesting periods.

We record an estimate for expected forfeitures of restricted equity awards based on our historical forfeiture rates. In addition, we shorten the vesting periods of certain restricted equity awards based on the “qualified retirement” provisions in our incentive compensation plans, under which (among other provisions) the vesting of 50% of outstanding time-based restricted equity awards will accelerate upon retirement if the participant is 55 years of age or older and satisfies certain years-of-service requirements.

The total compensation expense recognized for our stock-based compensation for the years ended December 31, was:

(millions)	2011		2010		2009
Pretax expense	$	50.5	$	45.9	$	40.3
Tax benefit		17.7		16.1		14.1

Net Income Per Share  Basic net income per share is computed using the weighted average number of common shares outstanding during the reporting period, excluding unvested time-based and performance-based restricted equity awards that are subject to forfeiture. Diluted net income per share includes common stock equivalents assumed outstanding during the period. Our common stock equivalents include the incremental shares assumed to be issued for:

• stock option exercises (all employee stock options expired December 31, 2011)

• time-based restricted equity awards, and

• certain performance-based restricted equity awards that satisfied contingency conditions during the period.

Supplemental Cash Flow Information  Cash includes only bank demand deposits. Non-cash activity includes declared but unpaid dividends. For the years ended December 31, we paid the following:

(millions)	2011		2010		2009
Income taxes, net of refunds	$	435.0	$	434.0	$	461.7
Interest		129.5		138.4		144.7

New Accounting Standards  During 2010, the Financial Accounting Standards Board (FASB) issued an accounting standard update related to the accounting for the deferral of costs associated with the successful acquisition or renewal of insurance contracts. This standard is intended to help reduce diversity in practice and is effective for fiscal years beginning after December 15, 2011 (January 2012 for calendar-year companies). Upon adoption, we will defer less acquisition costs under this new standard. At December 31, 2011, we had approximately $23 million of deferred acquisition costs that no longer met the criteria for deferral as of January 1, 2012. Pursuant to the guidance, we elected to adopt this standard on a prospective basis and, therefore, will recognize the effect of this accounting change into income primarily over the first six months of 2012, consistent with our insurance policy terms.

For the year ended December 31, 2011, we elected to early adopt the accounting standard update for the presentation of other comprehensive income that was issued by the FASB during 2011. This standard, which is effective for fiscal periods that begin after December 15, 2011 (January 2012 for calendar-year companies), requires entities to present items of net income and other comprehensive income in two separate, but consecutive, statements or, as we elected, together in one continuous statement, which we refer to as the Consolidated Statements of Comprehensive Income. There were no changes to the calculation of the components of net income or other comprehensive income as a result of this standard.

Reclassifications  Certain amounts in the Notes to Consolidated Financial Statements were reclassified for 2010 and 2009 in order to conform to current-year presentation requirements.

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INVESTMENTS

12 Months Ended

Dec. 31, 2011

INVESTMENTS

2. INVESTMENTS

The following tables present the composition of our investment portfolio by major security type, consistent with our internal classification of how we manage, monitor, and measure the portfolio:

($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Fair Value
December 31, 2011
Fixed maturities:
U.S. government obligations	$	2,842.7	$	120.3	$	0		$	0		$	2,963.0		18.6	%
State and local government obligations		1,938.6		64.1		(.6	)		0			2,002.1		12.5
Corporate debt securities		2,801.5		94.3		(6.5	)		6.9			2,896.2		18.1
Residential mortgage-backed securities		452.9		9.3		(35.3	)		0			426.9		2.7
Commercial mortgage-backed securities		1,829.8		52.3		(5.5	)		0			1,876.6		11.8
Other asset-backed securities		1,210.9		11.3		(1.3	)		(.3	)		1,220.6		7.6
Redeemable preferred stocks		379.3		18.6		(24.0	)		0			373.9		2.3
Total fixed maturities		11,455.7		370.2		(73.2	)		6.6			11,759.3		73.6
Equity securities:
Nonredeemable preferred stocks		473.7		342.6		(3.7	)		(6.3	)		806.3		5.1
Common equities		1,431.0		440.0		(25.4	)		0			1,845.6		11.6
Short-term investments:
Other short-term investments		1,551.8		0		0			0			1,551.8		9.7
Total portfolio2,3	$	14,912.2	$	1,152.8	$	(102.3	)	$	.3		$	15,963.0		100.0	%
($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Realized Gains (Losses)1			Fair Value		% of Total Fair Value
December 31, 2010
Fixed maturities:
U.S. government obligations	$	3,203.2	$	56.3	$	(16.9	)	$	0		$	3,242.6		20.9	%
State and local government obligations		1,955.5		43.0		(9.4	)		0			1,989.1		12.8
Corporate debt securities		2,579.0		78.1		(13.3	)		2.3			2,646.1		17.0
Residential mortgage-backed securities		567.1		17.8		(21.3	)		0			563.6		3.6
Commercial mortgage-backed securities		1,772.1		66.9		(6.9	)		0			1,832.1		11.8
Other asset-backed securities		1,063.9		12.4		(2.2	)		(.1	)		1,074.0		6.9
Redeemable preferred stocks		490.0		29.6		(17.1	)		0			502.5		3.3
Total fixed maturities		11,630.8		304.1		(87.1	)		2.2			11,850.0		76.3
Equity securities:
Nonredeemable preferred stocks		601.3		560.2		0			(3.9	)		1,157.6		7.5
Common equities		1,021.7		406.5		(3.2	)		0			1,425.0		9.2
Short-term investments:
Other short-term investments		1,090.8		0		0			0			1,090.8		7.0
Total portfolio2,3	$	14,344.6	$	1,270.8	$	(90.3	)	$	(1.7	)	$	15,523.4		100.0	%

¹ Represents net holding period gains (losses) on certain hybrid securities (discussed below).

² Excludes $46.9 million and $46.3 million at December 31, 2011 and 2010, respectively, of net unsettled security transactions included in other assets.

³ The total fair value of the portfolio includes $2.0 billion and $2.2 billion at December 31, 2011 and 2010, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions.

Our other short-term investments include Eurodollar deposits, commercial paper, reverse repurchase transactions, and other investments that are expected to mature within one year. At December 31, 2011 and 2010, we had $10.0 million and $0, respectively, in treasury bills issued by the Australian government, included in other short-term investments.

Included in our fixed-maturity and equity securities are hybrid securities, which are reported at fair value at December 31:

(millions)	2011		2010
Fixed maturities:
Corporate debt securities	$	234.9	$	176.4
Other asset-backed securities		15.5		14.9
Total fixed maturities		250.4		191.3
Equity securities:
Nonredeemable preferred stocks		14.2		52.8
Total hybrid securities	$	264.6	$	244.1

Certain corporate debt securities are accounted for as hybrid securities since they were acquired at a substantial premium and contain a change-in-control put option (derivative) that permits the investor, at its sole option once the change of control is triggered, to put the security back to the issuer at a 1% premium to par. Due to this change-in-control put option and the market premium paid to acquire these securities, there is the potential that the election to put, upon the change-in-control, could result in an acceleration of the remaining premium paid on these securities, which would result in a loss of $17.4 million as of December 31, 2011, if all of the bonds experienced a simultaneous change-in-control and we elected to exercise all of our put options. We are under no obligation to exercise the put option we hold if a change-in-control occurs. The put feature limits the potential loss in value that could be experienced in the event a corporate action occurs that results in a change-in-control which materially diminishes the credit quality of the issuer.

In our asset-backed portfolio, we hold one hybrid security that was acquired at a deep discount to par due to a failing auction, and contains a put option that allows the investor to put that security back to the auction at par. If the auction is restored, this embedded derivative has the potential to more than double our initial investment yield.

The hybrid securities in our nonredeemable preferred stock portfolio are perpetual preferred stocks that have call features with fixed-rate coupons, whereby the change in value of the call features is a component of the overall change in the value of the preferred stocks.

Our securities are reported at fair value, with the changes in fair value of these securities (other than hybrid securities and derivative instruments) reported as a component of accumulated other comprehensive income, net of deferred income taxes. The changes in fair value of the hybrid securities and derivative instruments are recorded as a component of net realized gains (losses) on securities.

At December 31, 2011, bonds and certificates of deposit in the principal amount of $150.7 million were on deposit to meet state insurance regulatory and/or rating agency requirements. We did not have any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at December 31, 2011 or 2010. At December 31, 2011, we did not have any debt securities that were non-income producing during the preceding 12 months.

Fixed Maturities The composition of fixed maturities by maturity at December 31, 2011, was:

(millions)	Cost		Fair Value
Less than one year	$	1,399.0	$	1,418.8
One to five years		8,582.6		8,850.9
Five to ten years		1,380.9		1,398.0
Ten years or greater		92.5		90.9
Total1	$	11,455.0	$	11,758.6

¹ Excludes $0.7 million of gains on the open credit default swap positions.

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities which do not have a single maturity date are reported at expected average maturity. Contractual maturities may differ from expected maturities because the issuers of the securities may have the right to call or prepay obligations.

Gross Unrealized Losses  As of December 31, 2011, we had $76.9 million of gross unrealized losses in our fixed-income securities and $25.4 million in our common equities. We currently do not intend to sell the fixed-income securities and determined that it is more likely than not that we will not be required to sell these securities for the period of time necessary to recover their cost bases. A review of our fixed-income securities indicated that the issuers were current with respect to their interest obligations and that there was no evidence of any deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity. In addition, 97% of our common stock portfolio was indexed to the Russell 1000, as such this portfolio may contain securities in a loss position for an extended period of time as long as there is no evidence of an issuer-specific impairment, and we may retain these securities as long as the portfolio and index correlation remain similar. The remaining 3% of our common stocks are part of a managed equity strategy, selected by an external investment advisor. If our strategy were to change and these securities were determined to be other-than-temporarily impaired, we would recognize a write-down in accordance with our stated policy.

The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

	Total Fair Value		Gross Unrealized Losses			Less than 12 Months					12 Months or Greater
(millions)						Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2011
Fixed maturities:
U.S. government obligations	$	0	$	0		$	0	$	0		$	0	$	0
State and local government obligations		93.6		(.6	)		79.5		(.5	)		14.1		(.1	)
Corporate debt securities		262.7		(6.5	)		137.3		(4.6	)		125.4		(1.9	)
Residential mortgage-backed securities		308.7		(35.3	)		34.4		(2.0	)		274.3		(33.3	)
Commercial mortgage-backed securities		203.7		(5.5	)		161.4		(3.5	)		42.3		(2.0	)
Other asset-backed securities		284.2		(1.3	)		259.7		(1.0	)		24.5		(.3	)
Redeemable preferred stocks		191.4		(24.0	)		43.5		(1.5	)		147.9		(22.5	)
Total fixed maturities		1,344.3		(73.2	)		715.8		(13.1	)		628.5		(60.1	)
Equity securities:
Nonredeemable preferred stocks		19.5		(3.7	)		19.5		(3.7	)		0		0
Common equities		214.6		(25.4	)		196.7		(23.1	)		17.9		(2.3	)
Total equity securities		234.1		(29.1	)		216.2		(26.8	)		17.9		(2.3	)
Total portfolio	$	1,578.4	$	(102.3	)	$	932.0	$	(39.9	)	$	646.4	$	(62.4	)
	Total Fair Value		Gross Unrealized Losses			Less than 12 Months					12 Months or Greater
(millions)						Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2010
Fixed maturities:
U.S. government obligations	$	495.3	$	(16.9	)	$	495.3	$	(16.9	)	$	0	$	0
State and local government obligations		461.9		(9.4	)		454.0		(8.7	)		7.9		(.7	)
Corporate debt securities		589.3		(13.3	)		541.3		(11.6	)		48.0		(1.7	)
Residential mortgage-backed securities		314.1		(21.3	)		74.0		(1.0	)		240.1		(20.3	)
Commercial mortgage-backed securities		332.0		(6.9	)		269.7		(3.1	)		62.3		(3.8	)
Other asset-backed securities		214.8		(2.2	)		209.8		(1.1	)		5.0		(1.1	)
Redeemable preferred stocks		216.7		(17.1	)		0		0			216.7		(17.1	)
Total fixed maturities		2,624.1		(87.1	)		2,044.1		(42.4	)		580.0		(44.7	)
Equity securities:
Nonredeemable preferred stocks		0		0			0		0			0		0
Common equities		60.5		(3.2	)		57.3		(3.1	)		3.2		(.1	)
Total equity securities		60.5		(3.2	)		57.3		(3.1	)		3.2		(.1	)
Total portfolio	$	2,684.6	$	(90.3	)	$	2,101.4	$	(45.5	)	$	583.2	$	(44.8	)

Other-Than-Temporary Impairment (OTTI)  The following table shows the total non-credit portion of the OTTI recorded in accumulated other comprehensive income, reflecting the original non-credit loss at the time the credit impairment was determined:

	December 31,
(millions)	2011			2010
Fixed maturities:
Residential mortgage-backed securities	$	(44.8	)	$	(44.3	)
Commercial mortgage-backed securities		(1.0	)		(1.0	)
Total fixed maturities	$	(45.8	)	$	(45.3	)

The following tables provide rollforwards of the amounts related to credit losses recognized in earnings for the periods ended December 31, 2011 and 2010, for which a portion of the OTTI losses were also recognized in accumulated other comprehensive income at the time the credit impairments were determined and recognized:

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Corporate Debt			Total
Beginning balance at January 1, 2011	$	32.3		$	1.0		$	6.5		$	39.8
Credit losses for which an OTTI was previously recognized		1.4			0			0			1.4
Credit losses for which an OTTI was not previously recognized		1.1			.4			0			1.5
Change in recoveries of future cash flows expected to be collected1,2		.8			.3			(6.5	)		(5.4	)
Reductions for previously recognized credit impairments written down to fair value3		(1.1	)		(.4	)		0			(1.5	)
Ending balance at December 31, 2011	$	34.5		$	1.3		$	0		$	35.8

(millions)	Residential Mortgage- Backed			Commercial Mortgage- Backed			Corporate Debt		Total
Beginning balance at January 1, 2010	$	41.1		$	.9		$	6.5	$	48.5
Credit losses for which an OTTI was previously recognized		3.0			.3			0		3.3
Credit losses for which an OTTI was not previously recognized		2.4			1.0			0		3.4
Change in recoveries of future cash flows expected to be collected1		(5.3	)		(.4	)		0		(5.7	)
Reductions for previously recognized credit impairments written down to fair value3		(8.9	)		(.8	)		0		(9.7	)
Ending balance at December 31, 2010	$	32.3		$	1.0		$	6.5	$	39.8

¹  Reflects expected recovery of prior period impairments that will be accreted into income over the remaining life of the security.

²  Includes $2.0 million received on a residential mortgage-backed security in excess of the cash flows expected to be collected at the time of the write-down.

³  Reflects reductions of prior credit impairments where the current credit impairment requires writing securities down to fair value (i.e., no remaining non-credit loss).

Since we determined that it is more likely than not that we will not be required to sell the securities prior to the recovery of their respective cost bases (which could be maturity), in order to measure the amount of credit losses on the securities that were determined to be other-than-temporarily impaired, we considered a number of factors and inputs related to the individual securities. The methodology and significant inputs used to measure the amount of credit losses in our portfolio included: current performance indicators on the underlying assets (e.g., delinquency rates, foreclosure rates, and default rates), credit support (via current levels of subordination), and historical credit ratings. Updated cash flow expectations were also generated by our portfolio managers based upon these performance indicators. In order to determine the amount of credit loss, if any, the net present value of the cash flows expected (i.e., expected recovery value) was calculated using the current book yield for each security, and was compared to its current amortized value. In the event that the net present value was below the amortized value, a credit loss was deemed to exist, and the security was written down.

Net Realized Gains (Losses) The components of net realized gains (losses) for the years ended December 31, were:

(millions)	2011			2010			2009
Gross realized gains on security sales
Fixed maturities:
U.S. government obligations	$	59.1		$	39.8		$	103.1
State and local government obligations		3.5			10.0			35.2
Corporate and other debt securities		23.0			30.9			20.5
Residential mortgage-backed securities		2.0			0			0
Commercial mortgage-backed securities		.3			1.0			.8
Other asset-backed securities		2.1			.8			0
Redeemable preferred stocks		4.6			8.5			0
Total fixed maturities		94.6			91.0			159.6
Equity securities:
Nonredeemable preferred stocks		148.9			83.6			32.6
Common equities		11.9			13.8			148.5
Subtotal gross realized gains on security sales		255.4			188.4			340.7
Gross realized losses on security sales
Fixed maturities:
U.S. government obligations		(9.3	)		(12.9	)		(2.1	)
State and local government obligations		0			0			(7.6	)
Corporate and other debt securities		(3.5	)		(.5	)		(.5	)
Residential mortgage-backed securities		0			0			(3.2	)
Commercial mortgage-backed securities		0			0			(9.9	)
Other asset-backed securities		0			0			(.7	)
Redeemable preferred stocks		(2.2	)		(5.2	)		0
Total fixed maturities		(15.0	)		(18.6	)		(24.0	)
Equity securities:
Nonredeemable preferred stocks		0			0			(57.3	)
Common equities		(36.5	)		(7.2	)		(40.0	)
Subtotal gross realized losses on security sales		(51.5	)		(25.8	)		(121.3	)
Net realized gains (losses) on security sales
Fixed maturities:
U.S. government obligations		49.8			26.9			101.0
State and local government obligations		3.5			10.0			27.6
Corporate and other debt securities		19.5			30.4			20.0
Residential mortgage-backed securities		2.0			0			(3.2	)
Commercial mortgage-backed securities		.3			1.0			(9.1	)
Other asset-backed securities		2.1			.8			(.7	)
Redeemable preferred stocks		2.4			3.3			0
Total fixed maturities		79.6			72.4			135.6
Equity securities:
Nonredeemable preferred stocks		148.9			83.6			(24.7	)
Common equities		(24.6	)		6.6			108.5
Subtotal net realized gains (losses) on security sales		203.9			162.6			219.4
Other-than-temporary impairment losses
Fixed maturities:
Residential mortgage-backed securities		(3.3	)		(11.1	)		(32.0	)
Commercial mortgage-backed securities		(.6	)		(1.9	)		(.9	)
Redeemable preferred stocks		0			0			(6.1	)
Total fixed maturities		(3.9	)		(13.0	)		(39.0	)
Equity securities:
Nonredeemable preferred stocks		0			0			(158.8	)
Common equities		(.2	)		(.5	)		(10.3	)
Subtotal other-than-temporary impairment losses		(4.1	)		(13.5	)		(208.1	)
Net holding period gains (losses)
Hybrid securities		1.7			5.5			14.5
Derivative instruments		(98.9	)		(58.5	)		1.3
Subtotal net holding period gains (losses)		(97.2	)		(53.0	)		15.8
Total net realized gains (losses) on securities	$	102.6		$	96.1		$	27.1

Gross realized gains and losses were the result of sales transactions in our fixed-income portfolio, affected by movements in credit spreads and interest rates, rebalancing of our equity-indexed portfolio, tax management, and holding period valuation changes on hybrids and derivatives. Also included are write-downs for securities determined to be other-than-temporarily impaired in our fixed-maturity and/or equity portfolios.

Net Investment Income  The components of net investment income for the years ended December 31, were:

(millions)	2011			2010			2009
Fixed maturities:
U.S. government obligations	$	58.0		$	80.8		$	79.6
State and local government obligations		60.0			65.4			91.9
Corporate debt securities		106.7			84.3			48.2
Residential mortgage-backed securities		18.6			21.7			33.4
Commercial mortgage-backed securities		83.4			99.1			90.7
Other asset-backed securities		24.5			21.8			9.7
Redeemable preferred stocks		33.0			45.5			47.5
Other debt obligations		0			0			.3
Total fixed maturities		384.2			418.6			401.3
Equity securities:
Nonredeemable preferred stocks		57.7			70.6			89.7
Common equities		35.7			27.3			13.3
Short-term investments:
Other short-term investments		2.4			3.6			2.7
Investment income		480.0			520.1			507.0
Investment expenses		(13.5	)		(11.9	)		(11.1	)
Net investment income	$	466.5		$	508.2		$	495.9

Trading Securities  At December 31, 2011 and 2010, we did not hold any trading securities and we did not have any net realized gains (losses) on trading securities for the years ended December 31, 2011, 2010, and 2009.

Derivative Instruments  We have invested in the following derivative exposures at various times: interest rate swaps, asset-backed credit default swaps, U.S. corporate debt credit default swaps, cash flow hedges, and equity options.

For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as an asset and a component of the available-for-sale portfolio, the inception-to-date realized gain on the derivative position at period end would have to exceed any upfront cash received (net derivative asset). On the other hand, a net derivative liability would include any inception-to-date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to their immaterial effect on our financial condition, cash flows, and results of operations.

The following table shows the status of our derivative instruments at December 31, 2011 and 2010, and for the years ended December 31, 2011, 2010, and 2009; amounts are on a pretax basis:

(millions)								Balance Sheet							Income Statement
	Notional Value1								Assets (Liabilities) Fair Value						Net Realized Gains (Losses) on Securities
	December 31,								December 31,						Years ended December 31,
Derivatives designated as:	2011		2010		2009		Purpose	Classification	2011			2010			2011			2010			2009
Hedging instruments
Closed:
Foreign currency cash flow hedge	$	0	$	0	$	8	Forecasted transaction	Accumulated other comprehensive income	$	0		$	0		$	0		$	0		$	0
Ineffective cash flow hedge		15		223		0	Manage interest rate risk	NA		0			0			.3			5.8			0
Non-hedging instruments
Assets:
Interest rate swaps		0		0		713	Manage portfolio duration	Investments - fixed maturities		0			0			0			0			.1
Corporate credit default swaps		25		35		0	Manage credit risk	Investments - fixed maturities		.7			1.3			(.2)			2.5			0
Liabilities:
Interest rate swaps		1,263		713		0	Manage portfolio duration	Other liabilities		(76.1	)		(41.7	)		(74.0	)		(66.6	)		0
Corporate credit default swaps		0		0		25	Manage credit risk	Other liabilities		0			0			0			0			(.6	)
Closed:
Interest rate swaps		350		0		4,186	Manage portfolio duration	NA		0			0			(25.5	)		0			10.4
Corporate credit default swaps		10		25		7	Manage credit risk	NA		0			0			.5			(.2	)		(.4	)
Equity options2 (177,190 contracts)		NA		NA		NA	Manage price risk	NA		0			0			0			0			(9.1	)
Foreign currency trade		0		0		8	Manage currency risk	NA		0			0			0			0			.9
Total		NA		NA		NA			$	(75.4	)	$	(40.4	)	$	(98.9	)	$	(58.5	)	$	1.3

¹The amounts represent the value held at year-end for open positions and the maximum amount held during the year for closed positions.

²Each contract is equivalent to 100 shares of common stock of the issuer; we had no option activity in 2011 or 2010.

NA = Not Applicable

CASH FLOW HEDGES

During the year ended December 31, 2011, we repurchased $15.0 million principal amount of our 6.70% Junior Subordinated Debentures due 2067 (the “6.70% Debentures”) at or near par in the open market (see Note 4 – Debt for further discussion). We reclassified $0.3 million (pretax) from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the repurchased 6.70% Debentures.

During 2010, we finalized our tender offer for, and repurchased $222.9 million principal amount of, the 6.70% Debentures. We reclassified $5.8 million (pretax) from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the 6.70% Debentures that were repurchased pursuant to the tender offer.

In anticipation of issuing the 6.70% Debentures in 2007, we entered into a forecasted debt issuance hedge (cash flow hedge) against a possible rise in interest rates. Upon issuance of the 6.70% Debentures, the hedge was closed, and we recognized a pretax gain of $34.4 million, which was recorded as part of accumulated other comprehensive income. The $34.4 million gain, less the $0.3 million and $5.8 million reclassifications mentioned above, was deferred and is being recognized as a decrease to interest expense over the 10-year fixed interest rate term of the 6.70% Debentures.

During 2011, we issued $500 million of 3.75% Senior Notes due 2021 (the “3.75% Senior Notes”) and entered into a forecasted debt issuance hedge (cash flow hedge) against a possible rise in interest rates (see Note 4 – Debt for further discussion). Upon issuance of the 3.75% Senior Notes in August 2011, the hedge was closed and we recognized, as part of accumulated other comprehensive income, a pretax unrealized loss of $5.1 million. The $5.1 million loss was deferred and is being recognized as an increase to interest expense over the life of the 3.75% Senior Notes.

During 2011, 2010, and 2009, we recognized $2.6 million, $2.7 million, and $2.8 million, respectively, as net decreases to interest expense on our closed debt issuance cash flow hedges.

In 2009, we realized a foreign currency trade gain of $0.9 million, reflecting the previously deferred gain on our foreign currency cash flow hedge, which was opened during 2008 and closed in 2009.

INTEREST RATE SWAPS

At December 31, 2011, 2010, and 2009, we invested in interest rate swap positions primarily to manage the fixed-income portfolio duration. During the year ended December 31, 2011, we held a 9-year interest rate swap position (opened in 2009) and two 5-year interest rate swap positions (opened in 2011); in each case, we are paying a fixed rate and receiving a variable rate, effectively shortening the duration of our fixed-income portfolio. We closed a portion of the 9-year position during 2011. The combined open positions have generated an aggregate realized loss, as interest rates have fallen since the inception of these positions. As of December 31, 2011, 2010, and 2009, we delivered $81.7 million, $52.2 million, and $0, respectively, in cash collateral to the applicable counterparty on these positions.

CORPORATE CREDIT DEFAULT SWAPS

Financial Services Sector – At December 31, 2011, 2010, and 2009, we held a position, which was opened during 2008, on one corporate issuer within the financial services sector where we bought credit default protection in the form of a credit default swap for a 5-year time horizon. We hold this protection to reduce some of our exposure to additional valuation declines on a preferred stock position of the same issuer. As of December 31, 2011 and 2010, we received $0.7 million and $0.5 million, respectively, in cash collateral from the counterparty on this corporate credit default swap position. As of December 31, 2009, we delivered $0.6 million in cash collateral to the counterparty on this corporate credit default swap position.

Automotive Sector – During 2011, we closed a position that was opened during 2010 where we sold credit protection in the form of a corporate credit default swap on one issuer in the automotive sector for a 5-year time horizon. We acquired an equal par value amount of U.S. Treasury Notes with a similar maturity to cover the credit default swap’s notional exposure. As of December 31, 2010, we received $1.1 million in cash collateral from the counterparty on this position.

Technology Sector – During 2010, we opened and closed two positions on one corporate issuer within the technology sector for which we bought credit default protection in the form of credit default swaps for 2-year and 4-year time horizons. We paid $0.2 million in upfront cash when we entered into the 4-year exposure position. We held this protection to reduce our exposure to additional valuation declines on a corporate position of the same issuer due to potential future credit impairment. We also opened and closed a position during 2009, for which we bought credit default protection in the form of credit default swaps for a 2-year time horizon on one corporate issuer within the technology sector. We paid $0.6 million in upfront cash when we entered this position.

EQUITY OPTIONS

We held no equity option positions during the years ended December 31, 2011 or 2010. During the year ended December 31, 2009, we opened and closed positions pursuant to which we simultaneously sold and purchased a substantially equivalent amount of call and put options, respectively, on Citigroup common stock, which related to our preferred stock holding. The purpose of this transaction was to effect a forward sale of a portion of the common stock we expected to receive from Citigroup resulting from the conversion of our preferred stock holding into common stock pursuant to Citigroup’s exchange that occurred during 2009. This was achieved through matching the strike price and term of the option contracts and was meant to offset the downside price risk of the common stock during the time period pending the exchange. All of the common stock we received from the preferred stock conversion was sold by the end of 2009.

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DEBT

12 Months Ended

Dec. 31, 2011

DEBT

4. DEBT

Debt at December 31 consisted of:

	2011				2010
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
6.375% Senior Notes due 2012 (issued: $350.0, December 2001)	$	350.0	$	350.5	$	349.6	$	369.3
7% Notes due 2013 (issued: $150.0, October 1993)		149.7		162.4		149.6		165.0
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)		497.0		525.3		0		0
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)		295.0		364.4		294.8		329.9
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)		394.4		492.4		394.2		433.3
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued: $1,000.0, June 2007; outstanding: $762.1 and $777.1)		756.0		769.7		770.0		808.2
Total	$	2,442.1	$	2,664.7	$	1,958.2	$	2,105.7

All of the outstanding debt was issued by The Progressive Corporation. Debt includes amounts we have borrowed and contributed to the capital of our insurance subsidiaries or used, or have available for use, for other business purposes. Fair values are obtained from external sources. There are no restrictive financial covenants or credit rating triggers on our debt.

Interest on all debt is payable semiannually at the stated rates. However, the 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “6.70% Debentures”) will only bear interest at this fixed annual rate through, but excluding, June 15, 2017. Thereafter, the 6.70% Debentures will bear interest at an annual rate equal to the three-month LIBOR plus 2.0175%, and the interest will be payable quarterly.

In September 2011, we entered into an agreement with The Bank of New York Mellon Trust Company, N.A., as trustee, modifying the terms of the 6.70% Debentures. Pursuant to that agreement, among other changes, we surrendered our right to temporarily defer the payment of interest on the 6.70% Debentures and terminated a related obligation to reserve 250 million of our unissued common shares as a source of potential funding to pay any such deferred interest. The changes were effective immediately upon execution of the agreement. Prior to this time, and subject to certain conditions, we had the right to defer the payment of interest on the 6.70% Debentures for one or more periods not exceeding ten consecutive years each.

Except for the 6.70% Debentures, all principal is due at the maturity stated in the table above. The 6.70% Debentures will become due on June 15, 2037, the scheduled maturity date, but only to the extent that we have received sufficient net proceeds from the sale of certain qualifying capital securities. We must use our commercially reasonable efforts, subject to certain market disruption events, to sell enough qualifying capital securities to permit repayment of the 6.70% Debentures in full on the scheduled maturity date or, if sufficient proceeds are not realized from the sale of such qualifying capital securities by such date, on each interest payment date thereafter. Any remaining outstanding principal will be due on June 15, 2067, the final maturity date.

The 7% Notes are noncallable. The 6.375% Senior Notes, the 3.75% Senior Notes, the 6 5/8% Senior Notes, and the 6.25% Senior Notes (collectively, “Senior Notes”) may be redeemed in whole or in part at any time, at our option, subject to a “make-whole” provision. The 6.70% Debentures may be redeemed, in whole or in part, at any time: (a) prior to June 15, 2017, at a redemption price equal to the greater of (i) 100% of the principal amount of the 6.70% Debentures being redeemed, or (ii) a “make-whole” amount, in each case plus any accrued and unpaid interest; or (b) on or after June 15, 2017, at a redemption price equal to 100% of the principal amount of the 6.70% Debentures being redeemed, plus any accrued and unpaid interest.

During 2011, we repurchased $15.0 million in aggregate principal amount of our 6.70% Debentures at or near par in the open market. As a result, our debt under these Debentures was extinguished and we incurred a net loss of $0.1 million.

In June 2010, we commenced an offer to purchase for cash (the “Tender Offer”) up to $350 million in aggregate principal amount of our 6.70% Debentures. The Tender Offer expired on July 8, 2010. We received valid tenders from holders of the 6.70% Debentures in the aggregate principal amount of $222.9 million. All of the tendering holders validly tendered by the early tender date of June 23, 2010, and received consideration of $950 per $1,000 principal amount of the 6.70% Debentures accepted for purchase, which included an early tender payment of $50 per $1,000 principal amount of 6.70% Debentures accepted. We recognized a net gain on this debt extinguishment of $6.4 million, after deducting expenses and fees associated with the Tender Offer and related Consent Solicitation discussed below.

As a condition of the Tender Offer, we solicited consents (the “Consent Solicitation”) from the holders of our 6.25% Senior Notes to terminate the Replacement Capital Covenant (the “RCC”) relating to the 6.25% Senior Notes. The RCC was originally entered into by Progressive in June 2007 for the benefit of the holders of the 6.25% Senior Notes in connection with the issuance of the 6.70% Debentures. Under the RCC, we agreed that we would not repay, redeem, defease, or purchase all or any part of the 6.70% Debentures before June 15, 2047, unless Progressive was to obtain a specified portion of the funds used in the transaction through the sale of its common shares or certain other equity or equity-like securities. The RCC was terminated on June 23, 2010, the expiration date of the Consent Solicitation, at which time we had received the consent of holders of a majority of the outstanding aggregate principal amount of the 6.25% Senior Notes. Those holders who validly delivered their consent by the expiration date received a consent fee of $5.00 for each $1,000 principal amount of their 6.25% Senior Notes.

Prior to issuance of the Senior Notes and 6.70% Debentures, we entered into forecasted debt issuance hedges against possible rises in interest rates. Upon issuance of the applicable debt securities, the hedges were closed and we recognized unrealized gains (losses) as part of accumulated other comprehensive income. The original unrealized gain (loss) and the unamortized balance at December 31, 2011, on a pretax basis, of these hedges, were as follows:

(millions)	Original Unrealized Gain (Loss)			Unamortized Balance at December 31, 2011
6.375% Senior Notes	$	18.4		$	.2
3.75% Senior Notes		(5.1	)		(5.0	)
6 5/8% Senior Notes		(4.2	)		(3.5	)
6.25% Senior Notes		5.1			4.4
6.70% Debentures		34.4			16.1

The gains (losses) on these hedges are deferred and are being amortized as adjustments to interest expense over the life of the related Senior Notes, and over the 10-year fixed interest rate term for the 6.70% Debentures. In addition to this amortization, during 2011 and 2010, we reclassified $0.3 million and $5.8 million, respectively, on a pretax basis, from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of the 6.70% Debentures repurchased during the periods.

On December 31, 2011, we entered into an amendment to the 364-Day Secured Liquidity Credit Facility Agreement (“Credit Facility Agreement”) with PNC Bank, National Association (PNC), which extended the expiration date of our outstanding credit facility agreement until December 31, 2012, unless earlier terminated pursuant to the terms of the agreement. Under this agreement, we may borrow up to $125 million, which may be increased to $150 million at our request but subject to PNC’s discretion. The purpose of the credit facility is to provide liquidity in the event of disruptions in our cash management operations, such as disruptions in the financial markets or related facilities that affect our ability to transfer or receive funds. Under this credit facility, we may borrow funds, on a revolving basis, either in the form of Eurodollar Loans or Base Rate Loans. Eurodollar Loans will bear interest at one-, two-, three-, or six-month LIBOR (as selected by us) plus 50 basis points for the selected period. Base Rate Loans will bear daily interest at the greater of (a) PNC’s prime rate for such day, (b) the federal funds effective rate for such day plus 1/2% per annum, or (c) one-month LIBOR plus 2% per annum. Any borrowings under this agreement will be secured by a lien on certain marketable securities held in our investment portfolio. Facility fees of $25,000 and $62,500 in 2011 and 2010, respectively, were paid as consideration for this revolving agreement. In addition, in 2011 and 2010, we had $125 million on deposit in an interest-bearing account at PNC, which was transferred to an FDIC-insured, non-interest bearing account in January 2012, to provide us with additional cash availability in the event of such disruption to our cash management operations. Our access to these funds is unrestricted. However, if we withdraw funds from this account for any reason other than in connection with a disruption in our cash management operations, the availability of borrowings under the PNC credit facility will be reduced on a dollar-for-dollar basis until such time as we replenish the funds to the deposit account. There are no rating triggers under the credit agreement. We had no borrowings under this arrangement in 2011 or 2010.

Aggregate principal payments on debt outstanding at December 31, 2011, is as follows:

(millions) Year	Payments
2012	$	350.0
2013		150.0
2014		0
2015		0
2016		0
Thereafter		1,962.1
Total	$	2,462.1

In January 2012, we retired the entire $350.0 million of our 6.375% Senior Notes at maturity.

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Components of Net Investment Income (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	$ 480.0	$ 520.1	$ 507.0
Investment expenses	(13.5)	(11.9)	(11.1)
Net investment income	466.5	508.2	495.9
Fixed maturities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	384.2	418.6	401.3
Fixed maturities | U.S. government obligations
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	58.0	80.8	79.6
Fixed maturities | State and local government obligations
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	60.0	65.4	91.9
Fixed maturities | Corporate debt securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	106.7	84.3	48.2
Fixed maturities | Residential mortgage-backed securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	18.6	21.7	33.4
Fixed maturities | Commercial mortgage-backed securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	83.4	99.1	90.7
Fixed maturities | Other asset-backed securities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	24.5	21.8	9.7
Fixed maturities | Redeemable preferred stocks
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	33.0	45.5	47.5
Fixed maturities | Other debt obligations
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	0	0	0.3
Equity securities | Nonredeemable preferred stocks
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	57.7	70.6	89.7
Equity securities | Common equities
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	35.7	27.3	13.3
Short-term investments | Other Short-term investments
Schedule of Investment Income, Reported Amounts, by Category [Line Items]
Investment income	$ 2.4	$ 3.6	$ 2.7

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STATUTORY FINANCIAL INFORMATION - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Statutory Accounting Practices [Line Items]
Consolidated statutory policyholders' surplus	$ 5,269.2	$ 5,073.0
Statutory net income	1,001.7	1,049.1	1,300.8
Consolidated statutory policyholders' surplus, net admitted assets of insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities' states of domicile	472.6
Aggregate cash dividends paid to the parent company by subsidiaries	874.9
Maximum aggregate dividend amount subsidiaries could pay without prior approval from regulatory authorities	$ 1,195.8

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Derivative Instruments (Parenthetical) (Detail) (Non-hedging Instruments, Closed Positions, Equity Contract)	Dec. 31, 2009
Non-hedging Instruments | Closed Positions | Equity Contract
Derivative [Line Items]
Open Option Contracts, Shares	100
Open Option Contracts, contracts	177,190

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Components of Other Comprehensive Income (Loss) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Net unrealized gains (losses) on securities, pretax:
Net non-credit related OTTI losses, adjusted for valuation changes, pretax	$ (5.5)		$ 21.4		$ (24.1)
Change in net unrealized gains (losses) on securities, pretax	(130.0)	[1]	518.6	[1]	1,071.8	[1]
Net unrealized gains (losses) on forecasted transactions, pretax:
Net unrealized gains (losses) on forecasted transactions arising during period, pretax	(5.1)	[2]	0	[2]	0	[2]
Reclassification adjustment for amounts realized in net income, pretax	(5.3)	[3]	(10.6)	[3]	(5.1)	[3]
Change in net unrealized gains on forecasted transactions, pretax	(10.4)		(10.6)		(5.1)
Foreign currency translation adjustment, pretax	0.2		1.2		1.4
Other comprehensive income (loss), pretax	(140.2)		509.2		1,068.1
Net unrealized gains (losses) on forecasted transactions, tax (provision) benefit:
Net unrealized gains (losses) on forecasted transactions arising during period, tax (provision) benefit	1.8	[2]	0	[2]	0	[2]
Reclassification adjustment for amounts realized in net income, tax (provision) benefit	1.8	[3]	3.7	[3]	1.8	[3]
Change in net unrealized gains on forecasted transactions, tax (provison) benefit	3.6		3.7		1.8
Foreign currency translation adjustment, tax (provision) benefit	(0.1)		(0.9)		0
Other comprehensive income (loss), tax (provision) benefit	49.0		(178.7)		(373.4)
Net unrealized gains (losses) on forecasted transactions, after tax:
Net unrealized gains (losses) on forecasted transactions arising during period, after tax	(3.3)	[2]	0	[2]	0	[2]
Reclassification adjustment for amounts realized in net income, after tax	(3.5)	[3]	(6.9)	[3]	(3.3)	[3]
Change in net unrealized gains on forecasted transactions, after tax	(6.8)		(6.9)		(3.3)
Foreign currency translation adjustment, after tax	0.1		0.3		1.4
Other comprehensive income (loss), after tax	(91.2)		330.5		694.7
Net unrealized gains (losses) securities, tax (provision) benefit
Net non-credit related OTTI losses, adjusted for valuation changes, tax (provision) benefit	1.9		(7.5)		8.4
Change in net unrealized gains (losses) on securities, tax (provision) benefit	45.5	[1]	(181.5)	[1]	(375.2)	[1]
Net unrealized gains (losses) on securities, after tax:
Net non-credit related OTTI losses, adjusted for valuation changes, after tax	(3.6)		13.9		(15.7)
Change in net unrealized gains (losses) on securities, after tax	(84.5)	[1]	337.1	[1]	696.6	[1]
Fixed maturities
Net unrealized gains (losses) on securities, pretax:
Net unrealized gains (losses) on securities arising during period, pretax	132.9		302.9		519.4
Reclassification adjustment for (gains) losses realized in net income, pretax	(47.4)		46.3		(8.5)
Net unrealized gains (losses) securities, tax (provision) benefit
Net unrealized gains (losses) on securities arising during period, tax (provision) benefit	(46.5)		(106.0)		(181.8)
Reclassification adjustment for (gains) losses realized in net income, tax (provision) benefit	16.6		(16.2)		3.0
Net unrealized gains (losses) on securities, after tax:
Net unrealized gains (losses) on securities arising during period, after tax	86.4		196.9		337.6
Reclassification adjustment for (gains) losses realized in net income, after tax	(30.8)		30.1		(5.5)
Equity securities
Net unrealized gains (losses) on securities, pretax:
Net unrealized gains (losses) on securities arising during period, pretax	(57.5)		241.7		671.7
Reclassification adjustment for (gains) losses realized in net income, pretax	(152.5)		(93.7)		(86.7)
Net unrealized gains (losses) securities, tax (provision) benefit
Net unrealized gains (losses) on securities arising during period, tax (provision) benefit	20.1		(84.6)		(235.1)
Reclassification adjustment for (gains) losses realized in net income, tax (provision) benefit	53.4		32.8		30.3
Net unrealized gains (losses) on securities, after tax:
Net unrealized gains (losses) on securities arising during period, after tax	(37.4)		157.1		436.6
Reclassification adjustment for (gains) losses realized in net income, after tax	$ (99.1)		$ (60.9)		$ (56.4)

[1] December 31, 2009 excludes the $189.6 million ($291.8 million pretax) cumulative effect of change in accounting principle we recorded in June 2009 in accordance with the new accounting guidance for other-than-temporary impairments we adopted during the second quarter 2009.

[2] Entered into for the purpose of managing interest rate risk associated with our debt issuances, and managing foreign currency risk associated with our forecasted foreign currency transaction, which was closed in 2009.

[3] We expect to reclassify $2.3 million (pretax) into income during the next 12 months. During 2011 and 2010, we reclassified $0.3 million and $5.8 million, respectively, on a pretax basis, from accumulated other comprehensive income on the balance sheet to net realized gains (losses) on securities on the comprehensive income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of the 6.70% Debentures repurchased during the periods (see Note 4 - Debt for further discussion).

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Components of Net Realized Gains (Losses) (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	$ 255.4	$ 188.4	$ 340.7
Gross realized losses on securities sales	(51.5)	(25.8)	(121.3)
Net realized gains (losses) on securities sales	203.9	162.6	219.4
Other-than-temporary impairment losses	(4.1)	(13.5)	(208.1)
Total net realized gains (losses) on securities	102.6	96.1	27.1
Fixed maturities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	94.6	91.0	159.6
Gross realized losses on securities sales	(15.0)	(18.6)	(24.0)
Net realized gains (losses) on securities sales	79.6	72.4	135.6
Other-than-temporary impairment losses	(3.9)	(13.0)	(39.0)
Fixed maturities | U.S. government obligations
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	59.1	39.8	103.1
Gross realized losses on securities sales	(9.3)	(12.9)	(2.1)
Net realized gains (losses) on securities sales	49.8	26.9	101.0
Fixed maturities | State and local government obligations
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	3.5	10.0	35.2
Gross realized losses on securities sales	0	0	(7.6)
Net realized gains (losses) on securities sales	3.5	10.0	27.6
Fixed maturities | Corporate And Other Debt Securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	23.0	30.9	20.5
Gross realized losses on securities sales	(3.5)	(0.5)	(0.5)
Net realized gains (losses) on securities sales	19.5	30.4	20.0
Fixed maturities | Residential mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	2.0	0	0
Gross realized losses on securities sales	0	0	(3.2)
Net realized gains (losses) on securities sales	2.0	0	(3.2)
Other-than-temporary impairment losses	(3.3)	(11.1)	(32.0)
Fixed maturities | Commercial mortgage-backed securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	0.3	1.0	0.8
Gross realized losses on securities sales	0	0	(9.9)
Net realized gains (losses) on securities sales	0.3	1.0	(9.1)
Other-than-temporary impairment losses	(0.6)	(1.9)	(0.9)
Fixed maturities | Other asset-backed securities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	2.1	0.8	0
Gross realized losses on securities sales	0	0	(0.7)
Net realized gains (losses) on securities sales	2.1	0.8	(0.7)
Fixed maturities | Redeemable preferred stocks
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	4.6	8.5	0
Gross realized losses on securities sales	(2.2)	(5.2)	0
Net realized gains (losses) on securities sales	2.4	3.3	0
Other-than-temporary impairment losses	0	0	(6.1)
Equity securities | Nonredeemable preferred stocks
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	148.9	83.6	32.6
Gross realized losses on securities sales	0	0	(57.3)
Net realized gains (losses) on securities sales	148.9	83.6	(24.7)
Other-than-temporary impairment losses	0	0	(158.8)
Equity securities | Common equities
Gain (Loss) on Investments [Line Items]
Gross realized gains on securities sales	11.9	13.8	148.5
Gross realized losses on securities sales	(36.5)	(7.2)	(40.0)
Net realized gains (losses) on securities sales	(24.6)	6.6	108.5
Other-than-temporary impairment losses	(0.2)	(0.5)	(10.3)
Hybrid and Derivative Instruments
Gain (Loss) on Investments [Line Items]
Net holding period gains (losses)	(97.2)	(53.0)	15.8
Hybrid and Derivative Instruments | Hybrid Preferred Stock
Gain (Loss) on Investments [Line Items]
Net holding period gains (losses)	1.7	5.5	14.5
Hybrid and Derivative Instruments | Derivative Instruments
Gain (Loss) on Investments [Line Items]
Net holding period gains (losses)	$ (98.9)	$ (58.5)	$ 1.3

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Summary of all Directors Restricted Stock Activity (Detail) (Non Employee Director Restricted Equity Awards, USD $)	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Non Employee Director Restricted Equity Awards
Number of Shares
Beginning of year	109,545		118,984		105,420
Add (deduct):
Granted	94,106		112,670		129,467
Vested	(109,545)		(122,109)		(105,420)
Forfeited	0		0		(10,483)
End of year	94,106		109,545		118,984
Available, end of year	663,095	[1]	757,201	[1]	869,871	[1]
Weighted Average Grant Date Fair Value
Beginning of year	$ 20.86		$ 15.79		$ 17.96
Granted	$ 21.80		$ 20.75		$ 15.78
Vested	$ 20.86		$ 15.82		$ 17.96
Forfeited	$ 0.00		$ 0.00		$ 15.74
End of year	$ 21.80		$ 20.86		$ 15.79

[1] Represents shares available under the 2003 Directors Equity Incentive Plan.

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EMPLOYEE BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2011

Amounts Charged to Income for Employees Incentive Compensation Plans

The amounts charged to income for the incentive compensation plans for the years ended December 31, were:

	2011				2010				2009
(millions)	Pretax		After Tax		Pretax		After Tax		Pretax		After Tax
Cash	$	196.1	$	127.5	$	257.3	$	167.2	$	120.4	$	78.3
Equity		50.5		32.8		45.9		29.8		40.3		26.2

Assets Held in Deferral Plan Irrevocable Grantor Trust Account

The Deferral Plan Irrevocable Grantor Trust account held the following assets at December 31:

(millions)	2011		2010
Progressive common shares1	$	35.2	$	31.1
Other investment funds		66.2		67.3
Total	$	101.4	$	98.4

¹ Includes 0.7 million and 0.5 million common shares as of December 31, 2011 and 2010, respectively, to be distributed in common shares.

Employee

Summary of Restricted Stock Activity

A summary of all employee restricted equity award activity during the years ended December 31, follows:

	2011					2010					2009
Restricted Equity Awards	Number of Shares1			Weighted Average Grant Date Fair Value		Number of Shares1			Weighted Average Grant Date Fair Value		Number of Shares1			Weighted Average Grant Date Fair Value
Beginning of year		11,681,826		$	16.55		10,614,016		$	17.04		8,260,696		$	20.39
Add (deduct):
Granted2		2,483,461			20.03		2,841,400			17.50		4,072,152			12.08
Vested		(1,571,237	)		19.88		(1,337,647	)		22.72		(1,239,281	)		23.14
Forfeited		(297,203	)		15.41		(435,943	)		15.58		(479,551	)		16.98
End of year3,4		12,296,847		$	16.86		11,681,826		$	16.55		10,614,016		$	17.04
Available, end of year		18,141,922					20,328,180					4,753,038

¹  Includes both restricted stock units and restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares. All performance-based awards are included at their target amounts.

²  In 2010, we began reinvesting dividend equivalents on restricted stock units. For 2011 and 2010, the number granted includes 55,288 and 134,644 units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

³  At December 31, 2011, the number of shares included 3,667,204 performance-based awards at their target amounts. We expect 3,791,224 performance-based awards to vest, based upon our current estimate of the achievement of pre-determined performance goals.

⁴  At December 31, 2011, the total unrecognized compensation cost related to unvested equity awards was $82.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.44 years.

Summary of Stock Option Activity

Following is a summary of all employee stock option activity during the years ended December 31:

	2011					2010					2009
Options Outstanding	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Beginning of year		1,916,416		$	11.31		5,102,888		$	9.31		8,503,273		$	7.71
Add:
Antidilution adjustment1		NA			NA		97,387			NA		NA			NA
Deduct:
Exercised		(1,913,552	)		11.31		(3,283,859	)		7.87		(3,394,633	)		5.31
Forfeited		(2,864	)		11.28		0			0		(5,752	)		5.69
End of year		0		$	0		1,916,416		$	11.31		5,102,888		$	9.31
Exercisable, end of year		0		$	0		1,916,416		$	11.31		5,102,888		$	9.31

NA = Not Applicable

¹ During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

Director

Summary of Restricted Stock Activity

A summary of all directors’ restricted stock activity during the years ended December 31, follows:

	2011					2010					2009
Restricted Stock	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Beginning of year		109,545		$	20.86		118,984		$	15.79		105,420		$	17.96
Add (deduct):
Granted		94,106			21.80		112,670			20.75		129,467			15.78
Vested		(109,545	)		20.86		(122,109	)		15.82		(105,420	)		17.96
Forfeited		0			0		0			0		(10,483	)		15.74
End of year		94,106		$	21.80		109,545		$	20.86		118,984		$	15.79
Available, end of year1		663,095					757,201					869,871

¹ Represents shares available under the 2003 Directors Equity Incentive Plan.

Summary of Stock Option Activity

A summary of all stock option activity for both current and former directors during the years ended December 31, follows:

	2011					2010					2009
Options Outstanding	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Beginning of year		120,125		$	10.34		312,545		$	8.46		401,357		$	8.60
Add:
Antidilution adjustment1		NA			NA		5,787			NA		NA			NA
Deduct:
Exercised		(83,888	)		9.41		(198,207	)		7.07		(88,812	)		9.10
End of year		36,237		$	12.51		120,125		$	10.34		312,545		$	8.46
Exercisable, end of year2		36,237		$	12.51		120,125		$	10.34		312,545		$	8.46

NA = Not Applicable

¹  During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

² The 1998 Directors’ Stock Option Plan has expired.

Director Stock Options Outstanding and Exercisable

The following director stock options were outstanding and exercisable as of December 31, 2011:

Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Closing Stock Price
36,237	$	12.51	$	0.3 million		0.3 years	$	19.51

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Stock-based Compensation (Detail) (Stock Compensation Plan, USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Stock Compensation Plan
Incentive Compensation Plans Expense [Line Items]
Pretax expense	$ 50.5	$ 45.9	$ 40.3
Tax benefit	$ 17.7	$ 16.1	$ 14.1

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EMPLOYEE BENEFIT PLANS

12 Months Ended

Dec. 31, 2011

EMPLOYEE BENEFIT PLANS

9.  EMPLOYEE BENEFIT PLANS

Retirement Plans  Progressive has a defined contribution pension plan (“401(k) Plan”) that covers all United States employees who are 18 years of age or older and have been employed with the company for at least 30 days. Under this plan, Progressive matches up to a maximum of 6% of an employee’s eligible compensation contributed to the plan. Employee and company matching contributions are invested, at the direction of the employee, in a number of investment options available under the plan, including various mutual funds and a Progressive common stock fund. As of December 3, 2010, the Progressive common stock fund was converted to an employee stock ownership program (“ESOP”) within the 401(k) Plan. At December 31, 2011, the ESOP held 26.9 million of our common shares, all of which are included in shares outstanding. Dividends on these shares are reinvested in common shares or paid out in cash at the election of the participant and the related tax benefit is recorded as part of our tax provision.

Matching contributions made by the company for the 401(k) Plan were $64.1 million, $61.3 million, and $60.7 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Postemployment Benefits  Progressive provides various postemployment benefits to former or inactive employees who meet eligibility requirements, and to their beneficiaries and covered dependents. Postemployment benefits include salary continuation and disability-related benefits, including workers’ compensation and, if elected, continuation of health-care benefits for specified limited periods. The liability for these benefits was $20.8 million at both December 31, 2011 and 2010.

Postretirement Benefits  We provide postretirement health and life insurance benefits to all employees who met requirements as to age and length of service at December 31, 1988. There are approximately 130 people who are eligible for these postretirement benefits. Our funding policy for these benefits is to contribute annually, to a 501(c)(9) trust, the maximum amount that can be deducted for federal income tax purposes.

Incentive Compensation Plans – Employees  Our incentive compensation includes both non-equity incentive plans (cash) and equity incentive plans. Cash incentive compensation includes a cash bonus program for a limited number of senior executives and our Gainsharing program for other employees; the bases of these programs are similar in nature. Equity incentive compensation plans provide for the granting of restricted stock awards and restricted stock unit awards (collectively, “restricted equity awards”) to key members of management. Prior to 2003, we granted non-qualified stock options (NQSOs) as equity-based incentive compensation (see below). The amounts charged to income for the incentive compensation plans for the years ended December 31, were:

	2011				2010				2009
(millions)	Pretax		After Tax		Pretax		After Tax		Pretax		After Tax
Cash	$	196.1	$	127.5	$	257.3	$	167.2	$	120.4	$	78.3
Equity		50.5		32.8		45.9		29.8		40.3		26.2

Our 2003 Incentive Plan, which provides for the granting of equity-based awards to key members of management, has 18.7 million shares currently authorized, net of restricted equity awards cancelled; 2.5 million shares remain available for future awards. In addition, our 2010 Equity Incentive Plan, approved by shareholders in April 2010, had 18.0 million shares authorized as of December 31, 2011, and 15.6 million shares remain available for future awards.

In 2003, we began issuing restricted equity awards in lieu of NQSOs. In March 2010, we began issuing restricted stock units in lieu of restricted stock as the basis for our equity awards. The restricted equity awards were issued as either time-based or performance-based awards. The time-based awards vest in equal installments upon the lapse of specified periods of time, typically three, four, and five years. All restricted stock unit conversions at vesting and option exercises are settled in Progressive common shares from existing treasury shares on a one-to-one basis.

The performance-based awards were granted to our Chief Executive Officer as his sole equity award for 2011, and to approximately 40 executives and senior managers in addition to their time-based awards (including the CEO for 2010 and prior), to provide additional incentive to achieve pre-established profitability and growth targets. Vesting for all awards is based upon the achievement of predetermined performance goals within specified time periods. The targets for the performance-based awards, as well as the ultimate number of shares or units that may vest, vary by grant. The performance-based awards granted in 2010 and 2011 may vest from 0% to 200% of the award amount, and have a target value of 100%. Performance awards made in March 2009, may vest from 0% to 100% of the award amount and have a target value of 100%. Performance-based awards made prior to March 2009 would either vest or be forfeited in full (i.e., no partial vesting).

Generally, time-based and performance-based equity awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant. Performance-based equity awards that contain variable vesting criteria are expensed based on management’s expected vesting percentage. These estimates can change periodically throughout the measurement period. However, the restricted stock awards granted in 2004 that were deferred pursuant to our deferred compensation plan are accounted for as liability awards, since distributions from the deferred compensation plan for these awards will be made in cash; accordingly, we record expense on a pro rata basis based on the current market value of our common shares at the end of each reporting period. Only performance-based awards remain unvested from this grant.

A summary of all employee restricted equity award activity during the years ended December 31, follows:

	2011					2010					2009
Restricted Equity Awards	Number of Shares1			Weighted Average Grant Date Fair Value		Number of Shares1			Weighted Average Grant Date Fair Value		Number of Shares1			Weighted Average Grant Date Fair Value
Beginning of year		11,681,826		$	16.55		10,614,016		$	17.04		8,260,696		$	20.39
Add (deduct):
Granted2		2,483,461			20.03		2,841,400			17.50		4,072,152			12.08
Vested		(1,571,237	)		19.88		(1,337,647	)		22.72		(1,239,281	)		23.14
Forfeited		(297,203	)		15.41		(435,943	)		15.58		(479,551	)		16.98
End of year3,4		12,296,847		$	16.86		11,681,826		$	16.55		10,614,016		$	17.04
Available, end of year		18,141,922					20,328,180					4,753,038

¹  Includes both restricted stock units and restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares. All performance-based awards are included at their target amounts.

²  In 2010, we began reinvesting dividend equivalents on restricted stock units. For 2011 and 2010, the number granted includes 55,288 and 134,644 units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

³  At December 31, 2011, the number of shares included 3,667,204 performance-based awards at their target amounts. We expect 3,791,224 performance-based awards to vest, based upon our current estimate of the achievement of pre-determined performance goals.

⁴  At December 31, 2011, the total unrecognized compensation cost related to unvested equity awards was $82.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.44 years.

The aggregate fair value of the restricted equity awards that vested during the years ended December 31, 2011, 2010, and 2009, was $31.3 million, $24.3 million, and $16.8 million, respectively, based on the actual stock price on the vesting date. In 2009, we also had 91,856 deferred liability awards vest with no intrinsic value since, as previously discussed, these awards were expensed based on the current market value at the end of each reporting period.

Prior to 2003, we granted NQSOs. These options became exercisable at various dates not earlier than six months after the date of grant, and remained exercisable for up to ten years from the date of the award. All NQSOs vested on or before January 1, 2007 and expired on December 31, 2011. All options granted had an exercise price equal to the market value of the common shares on the date of grant.

Following is a summary of all employee stock option activity during the years ended December 31:

	2011					2010					2009
Options Outstanding	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Beginning of year		1,916,416		$	11.31		5,102,888		$	9.31		8,503,273		$	7.71
Add:
Antidilution adjustment1		NA			NA		97,387			NA		NA			NA
Deduct:
Exercised		(1,913,552	)		11.31		(3,283,859	)		7.87		(3,394,633	)		5.31
Forfeited		(2,864	)		11.28		0			0		(5,752	)		5.69
End of year		0		$	0		1,916,416		$	11.31		5,102,888		$	9.31
Exercisable, end of year		0		$	0		1,916,416		$	11.31		5,102,888		$	9.31

NA = Not Applicable

¹ During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

The total pretax intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009, were $15.2 million, $40.8 million, and $36.1 million, respectively, based on the actual stock price at the time of exercise.

Incentive Compensation Plans – Directors  Our 2003 Directors Equity Incentive Plan, which provides for the granting of equity-based awards, including restricted stock awards, to non-employee directors of Progressive, had 1.4 million shares authorized as of December 31, 2011, net of restricted stock awards cancelled; 0.7 million shares remain available for future restricted stock grants. Our 1998 Directors’ Stock Option Plan has expired; however, stock option awards made under this plan prior to its expiration are still in effect.

In 2003, we began issuing restricted stock awards to non-employee directors as the equity component of their compensation. We plan to continue to grant restricted stock to our non-employee directors and not to change to restricted stock units as we have with our employees. The restricted stock awards are issued as time-based awards. The vesting period (i.e., requisite service period) must be a minimum of six months and one day. The time-based awards granted to date have typically included vesting periods of 11 or 12 months from the date of each grant. To the extent a director is newly appointed during the year, or his or her committee assignments change, the vesting period may be shorter but always greater than six months and one day per the plan’s specifications. The restricted stock awards are expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant.

Restricted stock awards are granted to non-employee directors as their sole compensation for serving as members of the Board of Directors.

A summary of all directors’ restricted stock activity during the years ended December 31, follows:

	2011					2010					2009
Restricted Stock	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Beginning of year		109,545		$	20.86		118,984		$	15.79		105,420		$	17.96
Add (deduct):
Granted		94,106			21.80		112,670			20.75		129,467			15.78
Vested		(109,545	)		20.86		(122,109	)		15.82		(105,420	)		17.96
Forfeited		0			0		0			0		(10,483	)		15.74
End of year		94,106		$	21.80		109,545		$	20.86		118,984		$	15.79
Available, end of year1		663,095					757,201					869,871

¹ Represents shares available under the 2003 Directors Equity Incentive Plan.

Prior to 2003, we granted nonqualified stock options as the equity component of the directors’ compensation. These options became exercisable at various dates not earlier than six months, and remain exercisable for up to ten years from the date of grant. All options granted had an exercise price equal to the market value of the common shares on the date of grant and, under the then applicable accounting guidance, no compensation expense was recorded. All option exercises are settled in Progressive common shares from existing treasury shares.

A summary of all stock option activity for both current and former directors during the years ended December 31, follows:

	2011					2010					2009
Options Outstanding	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Beginning of year		120,125		$	10.34		312,545		$	8.46		401,357		$	8.60
Add:
Antidilution adjustment1		NA			NA		5,787			NA		NA			NA
Deduct:
Exercised		(83,888	)		9.41		(198,207	)		7.07		(88,812	)		9.10
End of year		36,237		$	12.51		120,125		$	10.34		312,545		$	8.46
Exercisable, end of year2		36,237		$	12.51		120,125		$	10.34		312,545		$	8.46

NA = Not Applicable

¹  During the fourth quarter 2010, we declared a $1.00 per common share extraordinary cash dividend to shareholders of record at the close of business on December 20, 2010. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in accordance with the antidilution provisions of our incentive plans.

² The 1998 Directors’ Stock Option Plan has expired.

The total pretax intrinsic value of options exercised, and the fair value of the restricted stock vested, during the years ended December 31, 2011, 2010, and 2009, was $3.3 million, $5.1 million, and $1.9 million, respectively, based on the actual stock price at time of exercise/vesting.

The following director stock options were outstanding and exercisable as of December 31, 2011:

Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life		Closing Stock Price
36,237	$	12.51	$	0.3 million		0.3 years	$	19.51

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the difference between our closing stock price and the exercise price of the options, which is the amount that would have been received by the option holders, before taxes, had all option holders exercised their options as of that date. All of the exercisable options at December 31, 2011, were “in-the-money.”

Deferred Compensation  We maintain The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) that permits eligible executives to defer receipt of some or all of their annual bonuses and all of their annual equity awards. Deferred cash compensation is deemed invested in one or more investment funds, including common shares of Progressive, offered under the Deferral Plan and elected by the participant. All Deferral Plan distributions attributable to deferred cash compensation will be paid in cash.

For all equity awards granted on or after March 17, 2005, and deferred pursuant to the Deferral Plan, the deferred amounts are deemed invested in common shares and are ineligible for transfer to other investment funds in the Deferral Plan; distributions of these deferred awards will be made in common shares. For all restricted stock awards granted prior to that date, the deferred amounts are eligible to be transferred to any of the investment funds in the Deferral Plan; distributions of these deferred awards will be made in cash.

We reserved 3.6 million common shares for issuance under the Deferral Plan. An irrevocable grantor trust has been established to provide a source of funds to assist us in meeting our liabilities under the Deferral Plan.

The Deferral Plan Irrevocable Grantor Trust account held the following assets at December 31:

(millions)	2011		2010
Progressive common shares1	$	35.2	$	31.1
Other investment funds		66.2		67.3
Total	$	101.4	$	98.4

¹ Includes 0.7 million and 0.5 million common shares as of December 31, 2011 and 2010, respectively, to be distributed in common shares.

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REPORTING AND ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2011

Nature of Operations

Nature of Operations  The Progressive Corporation, an insurance holding company formed in 1965, owned 54 subsidiaries and had 1 mutual insurance company affiliate (collectively the “subsidiaries”) as of December 31, 2011. Our insurance subsidiaries provide personal and commercial automobile insurance and other specialty property-casualty insurance and related services. Our Personal Lines segment writes insurance for personal autos and recreational vehicles through both an independent insurance agency channel and a direct channel. Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses through both the independent agency and direct channels. We operate our businesses throughout the United States; we also sell personal auto physical damage insurance via the Internet in Australia.

Consolidation Policy

Basis of Consolidation and Reporting  The accompanying consolidated financial statements include the accounts of The Progressive Corporation, its subsidiaries, which are wholly owned, and a mutual company affiliate, for which we have a controlling financial interest. All intercompany accounts and transactions are eliminated in consolidation.

Estimates And Assumptions Policy

Estimates  We are required to make estimates and assumptions when preparing our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact (e.g., losses are paid), results may, and will likely, differ from those estimates.

Investment Policy

Investments  Progressive’s fixed-maturity securities, equity securities, and short-term investments are accounted for on an available-for-sale basis. See Note 2 – Investments for details regarding the composition of our investment portfolio.

Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes, reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.

Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are generally accounted for under the retrospective method. The retrospective method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception of the investment holding period, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The prospective method is used primarily for interest-only securities, non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure or where there is a greater risk of non-performance and where it is possible the initial investment may not be substantially recovered. The prospective method requires a calculation of future expected repayments and resets the yield to allow for future period adjustments; no current period impact to investment income or the security’s cost is made based on the cash flow update. Prepayment assumptions are based on market expectations and are updated quarterly.

Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments and are reported at quoted fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in the current period.

Short-term investments may include Eurodollar deposits, commercial paper, reverse repurchase transactions, and other securities expected to mature within one year. In addition, short-term investments can include auction rate securities (i.e., certain municipal bonds and preferred stocks). Due to the nature of auction rate securities, these securities are classified as short-term based upon their expected auction date (generally 7-49 days) rather than on their contractual maturity date (which is greater than one year at original issuance). In the event that an auction fails, the security may need to be reclassified from short-term. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income.

Trading securities are securities bought principally for the purpose of sale in the near term. To the extent we have trading securities, changes in fair value would be recognized in income in the current period. Derivative instruments, which may be used for trading purposes or classified as trading derivatives due to the characteristics of the transaction, are discussed below.

Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements, and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:

• Changes in fair value of an asset or liability (fair value hedge)

• Foreign currency of an investment in a foreign operation (foreign currency hedge), or

• Variable cash flows of a forecasted transaction (cash flow hedge).

To the extent we have derivatives held or issued for general investment purposes, these derivative instruments are recognized as either assets or liabilities and measured at fair value, with changes in fair value recognized in income as a component of net realized gains (losses) on securities during the period of change.

Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:

• Fair value hedge:  changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of change while the hedge is in effect.

• Foreign currency hedge:  changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.

• Cash flow hedge:  changes in fair value of the hedge would be reported as a component of accumulated other comprehensive income and subsequently amortized into earnings over the life of the hedged transaction.

If a hedge is deemed to become ineffective and discontinued, the following accounting treatment would be applied:

• Fair value hedge:  the derivative instrument would continue to be adjusted through income, while the adjustment in the change in value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive income.

• Foreign currency hedge:  changes in the value of the hedged item would continue to be reflected as a change in translation adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income for the current period.

• Cash flow hedge:  changes in fair value of the derivative instrument would be reported in income for the current period.

For all derivative positions, net cash requirements are limited to changes in fair values, which may vary based upon changes in interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same counterparty under a master netting arrangement.

Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio’s value in the near term. We regularly monitor our portfolio for price changes, which might indicate potential impairments, and perform detailed reviews of securities with unrealized losses. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors, (ii) market-related factors, such as interest rates or equity market declines, or (iii) credit-related losses, where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security.

We analyze our debt securities to determine if we intend to sell, or if it is more likely than not that we will be required to sell, the security prior to recovery and, if so, we write down the security to its current fair value, with the entire amount of the write-down recorded to earnings. To the extent that it is more likely than not that we will hold the debt security until recovery (which could be maturity), we determine if any of the decline in value is due to a credit loss (i.e., where the present value of future cash flows expected to be collected is lower than the amortized cost basis of the security) and, if so, we recognize that portion of the impairment in the comprehensive income statement, with the difference (i.e., non-credit related impairment) recognized as part of our net unrealized gains (losses) in accumulated other comprehensive income. When an equity security (common equity and nonredeemable preferred stock) in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the comprehensive income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in unrealized gains (losses) as part of accumulated other comprehensive income.

Realized gains (losses) on securities are computed based on the first-in first-out method and include write-downs on available-for-sale securities considered to have other-than-temporary declines in fair value (excluding non-credit related impairments), as well as holding period valuation changes on derivatives, trading securities, and hybrid instruments (securities with embedded call options, where the call option is a feature of the overall change in the value of the instrument).

Insurance Premiums and Receivables Policy

Insurance Premiums and Receivables  Insurance premiums written are earned into income on a pro rata basis over the period of risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that is applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts and offer a variety of payment plans. Generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk. We perform a policy level evaluation to determine the extent to which the premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for doubtful accounts based on prior experience.

Deferred Acquisition Costs Policy

Deferred Acquisition Costs  Deferred acquisition costs include commissions, premium taxes, and other variable underwriting and direct sales costs incurred in connection with writing business. These costs are deferred and amortized over the policy period in which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these costs. Management believes that these costs will be fully recoverable in the near term. We do not defer any advertising costs.

Reserve For Losses And Loss Adjustment Expenses

Loss and Loss Adjustment Expense Reserves  Loss reserves represent the estimated liability on claims reported to us, plus reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are reflected in income currently. Such loss and loss adjustment expense reserves are susceptible to change in the near term.

Reinsurance Policy

Reinsurance  Our reinsurance transactions primarily include premiums ceded to state-provided reinsurance facilities (e.g., Michigan Catastrophic Claims Association and North Carolina Reinsurance Facility) and premiums written under state-mandated involuntary plans for commercial vehicles (Commercial Auto Insurance Procedures/Plans – “CAIP”) (collectively, “State Plans”) (see Note 7 – Reinsurance for further discussion). We cede 100% of the premiums written in our professional liability insurance businesses as we continue our exit of these markets. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written.

Income Tax Policy

Income Taxes  The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. The principal items giving rise to such differences are investment securities (e.g., net unrealized gains (losses), write-downs, and derivative instruments), loss and loss adjustment expense reserves, unearned premiums reserves, deferred acquisition costs, property and equipment, and non-deductible accruals. We review our deferred tax assets regularly for recoverability. See Note 5 – Income Taxes for further discussion.

Property, Plant and Equipment Policy

Property and Equipment  Property and equipment are recorded at cost, less accumulated depreciation, and includes capitalized software developed or acquired for internal use. Depreciation is recognized over the estimated useful lives of the assets using accelerated methods for most computer equipment and the straight-line method for certain computer equipment and all other fixed assets. The useful lives range from 2 to 4 years for computer equipment and laptop computers, 10 to 40 years for buildings and improvements, and 3 to 10 years for all other property and equipment. Land and buildings comprised 75% and 76% of total property and equipment at December 31, 2011 and 2010, respectively.

Guaranty Fund Assessments Policy

Guaranty Fund Assessments  We are subject to state guaranty fund assessments, which provide for the payment of covered claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal determination of insolvency has occurred, and we have written the premiums on which the assessments will be based.

Non-Insurance Service Business

Service Revenues and Expenses  Our service businesses provide insurance-related services. Service revenues generated from processing business for involuntary CAIP plans are earned on a pro rata basis over the term of the related policies. Service expenses related to these CAIP plans include acquisition expenses, which are deferred and amortized over the period in which the related revenues are earned. Other service business revenues and expenses are recorded in the period in which they are earned or incurred.

Share based Compensation, Policy

Stock-Based Compensation  We currently issue time-based and performance-based restricted stock unit awards to key members of management as our form of equity compensation, and time-based restricted stock awards to non-employee directors. Prior to 2010, we issued restricted stock awards, instead of restricted stock unit awards, to employees. Collectively, we refer to these awards as “restricted equity awards.” We currently do not issue stock options as a form of equity compensation. Compensation expense for time-based restricted equity awards with installment vesting is recognized over each respective vesting period. For performance-based restricted equity awards, compensation expense is recognized over the respective vesting periods.

We record an estimate for expected forfeitures of restricted equity awards based on our historical forfeiture rates. In addition, we shorten the vesting periods of certain restricted equity awards based on the “qualified retirement” provisions in our incentive compensation plans, under which (among other provisions) the vesting of 50% of outstanding time-based restricted equity awards will accelerate upon retirement if the participant is 55 years of age or older and satisfies certain years-of-service requirements.

Net Income Per Share Policy

Income Per Share  Basic net income per share is computed using the weighted average number of common shares outstanding during the reporting period, excluding unvested time-based and performance-based restricted equity awards that are subject to forfeiture. Diluted net income per share includes common stock equivalents assumed outstanding during the period. Our common stock equivalents include the incremental shares assumed to be issued for:

• stock option exercises (all employee stock options expired December 31, 2011)

• time-based restricted equity awards, and

• certain performance-based restricted equity awards that satisfied contingency conditions during the period.

Cash Flow Supplemental Disclosure

Supplemental Cash Flow Information  Cash includes only bank demand deposits. Non-cash activity includes declared but unpaid dividends.

New Accounting Standards

New Accounting Standards  During 2010, the Financial Accounting Standards Board (FASB) issued an accounting standard update related to the accounting for the deferral of costs associated with the successful acquisition or renewal of insurance contracts. This standard is intended to help reduce diversity in practice and is effective for fiscal years beginning after December 15, 2011 (January 2012 for calendar-year companies). Upon adoption, we will defer less acquisition costs under this new standard. At December 31, 2011, we had approximately $23 million of deferred acquisition costs that no longer met the criteria for deferral as of January 1, 2012. Pursuant to the guidance, we elected to adopt this standard on a prospective basis and, therefore, will recognize the effect of this accounting change into income primarily over the first six months of 2012, consistent with our insurance policy terms.

For the year ended December 31, 2011, we elected to early adopt the accounting standard update for the presentation of other comprehensive income that was issued by the FASB during 2011. This standard, which is effective for fiscal periods that begin after December 15, 2011 (January 2012 for calendar-year companies), requires entities to present items of net income and other comprehensive income in two separate, but consecutive, statements or, as we elected, together in one continuous statement, which we refer to as the Consolidated Statements of Comprehensive Income. There were no changes to the calculation of the components of net income or other comprehensive income as a result of this standard.

Reclassifications

Reclassifications  Certain amounts in the Notes to Consolidated Financial Statements were reclassified for 2010 and 2009 in order to conform to current-year presentation requirements.

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Director Stock Options Outstanding and Exercisable (Detail) (Non Employee Director Stock Option, USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2011 Year		Dec. 31, 2010		Dec. 31, 2009
Non Employee Director Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares	36,237	[1]	120,125	[1]	312,545	[1]
Weighted Average Exercise Price	$ 12.51	[1]	$ 10.34	[1]	$ 8.46	[1]
Aggregate Intrinsic Value	$ 0.3
Weighted Average Remaining Contractual Life	0.3
Closing Stock Price	$ 19.51

[1] The 1998 Directors' Stock Option Plan has expired.

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REPORTING AND ACCOUNTING POLICIES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified				12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011 Adjustments for New Accounting Pronouncement	Dec. 31, 2011 computer equipment and laptop computers Year	Dec. 31, 2011 Building and Building Improvements Year	Dec. 31, 2011 Property, Plant and Equipment, Other Types Year	Dec. 31, 2011 Land and Building	Dec. 31, 2010 Land and Building
Significant Accounting Policies [Line Items]
Minimum useful life (years)				2	10	3
Maximum useful life (years)				4	40	10
Land and buildings as a percentage of total property and equipment							75.00%	76.00%
Deferred acquisition costs	$ 433.6	$ 417.2	$ 23.0

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Expense Incurred for Leases (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Commitments and Contingencies Disclosure [Line Items]
Expense	$ 80.8	$ 96.7	$ 109.0

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CONDENSED BALANCE SHEETS (PARENT COMPANY) (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Assets
Income taxes	$ 208.0		$ 189.0
Other assets	249.9		251.9
Total assets	21,844.8		21,150.3
Liabilities and Shareholders' Equity
Accounts payable, accrued expenses, and other liabilities	1,770.8	[1]	1,718.4	[1]
Debt	2,442.1	[2]	1,958.2	[2]
Total liabilities	16,038.1		15,101.4
Common Shares, $1.00 par value (authorized 900.0; issued 797.7, including treasury shares of 184.7 and 135.3)	613.0		662.4
Paid-in capital	1,006.2		1,007.1
Retained earnings	3,495.0		3,595.7
Total accumulated other comprehensive income	692.5		783.7
Total shareholders' equity	5,806.7		6,048.9		5,748.6
Total Liabilities and Shareholders' Equity	21,844.8		21,150.3
Parent Company
Assets
Investment in affiliate	1.0		1.0
Investment in subsidiaries	6,179.5	[3]	5,984.8	[3]
Receivable from investment subsidiary	2,096.6	[3]	2,120.2	[3]
Intercompany receivable	237.6	[3]	179.1	[3]
Income taxes	52.1		48.7
Other assets	69.0		70.2
Total assets	8,635.8		8,404.0
Liabilities and Shareholders' Equity
Accounts payable, accrued expenses, and other liabilities	137.4		132.8
Dividend payable	249.6		264.1
Debt	2,442.1		1,958.2
Total liabilities	2,829.1		2,355.1
Common Shares, $1.00 par value (authorized 900.0; issued 797.7, including treasury shares of 184.7 and 135.3)	613.0		662.4
Paid-in capital	1,006.2		1,007.1
Retained earnings	3,495.0		3,595.7
Total accumulated other comprehensive income	692.5		783.7
Total shareholders' equity	5,806.7		6,048.9
Total Liabilities and Shareholders' Equity	$ 8,635.8		$ 8,404.0

[1] See Note 12 - Litigation and Note 13 - Commitments and Contingencies for further discussion.

[2] Consists of both short- and long-term debt. See Note 4 - Debt for further discussion.

[3] Eliminated in consolidation.

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Consolidated Statements of Changes in Shareholders' Equity (USD $) In Millions	Total	Common Shares, $1.00 Par Value	Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income, Net of Tax
Balance, Beginning of year at Dec. 31, 2008		$ 676.5	$ 892.9	$ 2,697.8	$ (51.9)
Stock options exercised		3.5	15.3
Cumulative effect of change in accounting principle				189.6	(189.6)
Tax benefit from exercise/vesting of stock-based compensation			9.7
Net income	1,057.5			1,057.5
Other comprehensive income (loss)	694.7				694.7
Cash dividends declared on common shares ($.4072, $1.3987, and $.1613 per share)				(108.5)
Treasury shares purchased		(11.1)	(15.0)	(154.5)
Net restricted stock awards (issued) forfeited		3.7	(3.7)
Amortization of stock-based compensation			39.2
Other			1.3	1.2
Balance, End of year at Dec. 31, 2009	5,748.6	672.6	939.7	3,683.1	453.2
Stock options exercised		3.4	23.8
Cumulative effect of change in accounting principle				0	0
Tax benefit from exercise/vesting of stock-based compensation			14.0
Net income	1,068.3			1,068.3
Other comprehensive income (loss)	330.5				330.5
Cash dividends declared on common shares ($.4072, $1.3987, and $.1613 per share)				(924.8)
Treasury shares purchased		(13.3)	(19.3)	(226.0)
Net restricted stock awards (issued) forfeited		(0.3)	0.3
Amortization of stock-based compensation			44.8
Other			3.8	(4.9)
Balance, End of year at Dec. 31, 2010	6,048.9	662.4	1,007.1	3,595.7	783.7
Stock options exercised		2.0	20.4
Cumulative effect of change in accounting principle				0	0
Tax benefit from exercise/vesting of stock-based compensation			6.4
Net income	1,015.5			1,015.5
Other comprehensive income (loss)	(91.2)				(91.2)
Cash dividends declared on common shares ($.4072, $1.3987, and $.1613 per share)				(248.1)
Treasury shares purchased		(51.3)	(80.7)	(865.8)
Net restricted stock awards (issued) forfeited		(0.1)	0.1
Amortization of stock-based compensation			50.3
Other			2.6	(2.3)
Balance, End of year at Dec. 31, 2011	$ 5,806.7	$ 613.0	$ 1,006.2	$ 3,495.0	$ 692.5

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Summary of All Employee Restricted Equity Award Activity (Detail) (Employee Restricted Equity Awards, USD $)	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Employee Restricted Equity Awards
Number of Shares
Beginning of year	11,681,826	[1],[2],[3]	10,614,016	[1],[2],[3]	8,260,696	[1]
Add (deduct):
Granted	2,483,461	[1],[4]	2,841,400	[1],[4]	4,072,152	[1],[4]
Vested	(1,571,237)	[1]	(1,337,647)	[1]	(1,239,281)	[1]
Forfeited	(297,203)	[1]	(435,943)	[1]	(479,551)	[1]
End of year	12,296,847	[1],[2],[3]	11,681,826	[1],[2],[3]	10,614,016	[1],[2],[3]
Available, end of year	18,141,922	[1]	20,328,180	[1]	4,753,038	[1]
Weighted Average Grant Date Fair Value
Beginning of year	$ 16.55	[2],[3]	$ 17.04	[2],[3]	$ 20.39
Granted	$ 20.03	[4]	$ 17.50	[4]	$ 12.08	[4]
Vested	$ 19.88		$ 22.72		$ 23.14
Forfeited	$ 15.41		$ 15.58		$ 16.98
End of year	$ 16.86	[2],[3]	$ 16.55	[2],[3]	$ 17.04	[2],[3]

[1] Includes both restricted stock units and restricted stock. Upon vesting, all units will be converted on a one-for-one basis into Progressive common shares. All performance-based awards are included at their target amounts.

[2] At December 31, 2011, the number of shares included 3,667,204 performance-based awards at their target amounts. We expect 3,791,224 performance-based awards to vest, based upon our current estimate of the achievement of pre-determined performance goals.

[3] At December 31, 2011, the total unrecognized compensation cost related to unvested equity awards was $82.1 million, which includes performance-based awards at their currently estimated vesting value. This compensation expense will be recognized into the income statement over the weighted average vesting period of 2.44 years.

[4] In 2010, we began reinvesting dividend equivalents on restricted stock units. For 2011 and 2010, the number granted includes 55,288 and 134,644 units, respectively, at a weighted average grant date fair value of $0, since the dividends were factored into the grant date fair value of the original grant.

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SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

12 Months Ended

Dec. 31, 2011

SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES

(millions)

			Future
			policy
			benefits,				Other
			losses,				policy						Benefits,		Amortization
	Deferred		claims,				claims						claims,		of deferred
	policy		and				and				Net		losses, and		policy		Other			Net
	acquisition		loss		Unearned		benefits		Premium		investment		settlement		acquisition		operating			premiums
Segment	costs1		expenses1		premiums1		payable1		revenue		income1,2		expenses		costs		expenses			written
Year ended December 31, 2011:
Personal Lines									$	13,431.1			$	9,615.2	$	1,231.9	$	1,664.7		$	13,612.2
Commercial Auto										1,467.1				1,010.7		166.6		156.3			1,534.3
Other indemnity										4.6				8.9		.7		.5			.1
Total	$	433.6	$	7,245.8	$	4,579.4	$	0	$	14,902.8	$	466.5	$	10,634.8	$	1,399.2	$	1,821.5		$	15,146.6
Year ended December 31, 2010:
Personal Lines									$	12,826.9			$	9,159.6	$	1,188.1	$	1,587.1		$	13,024.4
Commercial Auto										1,474.2				958.6		167.9		162.7			1,449.5
Other indemnity3										13.7				13.1		3.9		(9.7	)		2.9
Total	$	417.2	$	7,071.0	$	4,353.8	$	0	$	14,314.8	$	508.2	$	10,131.3	$	1,359.9	$	1,740.1		$	14,476.8
Year ended December 31, 2009:
Personal Lines									$	12,365.9			$	8,847.0	$	1,171.6	$	1,410.2		$	12,453.1
Commercial Auto										1,623.3				1,050.7		187.0		155.8			1,533.9
Other indemnity										23.6				7.2		6.0		1.7			15.9
Total	$	402.2	$	6,653.0	$	4,172.9	$	0	$	14,012.8	$	495.9	$	9,904.9	$	1,364.6	$	1,567.7		$	14,002.9

¹  Progressive does not allocate assets, liabilities, or investment income to operating segments.

²  Excludes total net realized gains (losses) on securities.

³  We sold our professional liability insurance businesses in the first quarter 2010. The gain on the sale is reflected in other operating expenses.

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Composition of Fixed Maturities by Maturity (Parenthetical) (Detail) (Corporate Credit Default Swaps, USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Corporate Credit Default Swaps
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities debt maturities, gains on open credit default swap position	$ 0.7

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Effect of Reinsurance on Premiums Written and Earned (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items]
Direct premiums written	$ 15,333.1	$ 14,700.0	$ 14,196.3
Ceded	(186.5)	(223.2)	(193.4)
Net premiums written	15,146.6	14,476.8	14,002.9
Direct premiums earned	15,107.5	14,519.2	14,199.4
Ceded	(204.7)	(204.4)	(186.6)
Net premiums earned	$ 14,902.8	$ 14,314.8	$ 14,012.8

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COMMITMENTS AND CONTINGENCIES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Commitments and Contingencies Disclosure [Line Items]
Minimum commitment under noncancelable purchase obligations	$ 174.3

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Summary of Changes in Fair Value Associated With Level 3 Assets (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	$ 170.5		$ 170.8
Calls/ Maturities/ Paydowns	(22.4)		(25.6)
Purchases	0		55.6
Sales	(27.9)		(0.3)
Net Realized (Gain)/loss	(0.6)		0.3
Change in Valuation	(6.5)		11.2
Net Transfers in (out)	(15.4)	[1]	(41.5)	[2]
Ending Fair value	97.7		170.5
Fixed maturities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	158.7		157.9
Calls/ Maturities/ Paydowns	(22.4)		(23.5)
Purchases	0		55.6
Sales	(27.9)		0
Net Realized (Gain)/loss	(0.6)		0
Change in Valuation	(6.2)		10.2
Net Transfers in (out)	(15.4)	[1]	(41.5)	[2]
Ending Fair value	86.2		158.7
Fixed maturities | Corporate debt securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	29.5		28.2
Calls/ Maturities/ Paydowns	0		0
Purchases	0		0
Sales	(27.9)		0
Net Realized (Gain)/loss	(0.6)		0
Change in Valuation	(1.0)		1.3
Net Transfers in (out)	0	[1]	0	[2]
Ending Fair value	0		29.5
Fixed maturities | Other debt obligations
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	0		1.1
Calls/ Maturities/ Paydowns	0		0
Purchases	0		0
Sales	0		0
Net Realized (Gain)/loss	0		0
Change in Valuation	0		(1.1)
Net Transfers in (out)	0	[1]	0	[2]
Ending Fair value	0		0
Fixed maturities | Redeemable preferred stocks | Industrials
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	0		53.1
Calls/ Maturities/ Paydowns	0		0
Purchases	0		0
Sales	0		0
Net Realized (Gain)/loss	0		0
Change in Valuation	0		0
Net Transfers in (out)	0	[1]	(53.1)	[2]
Ending Fair value	0		0
Fixed maturities | Asset-backed Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	129.2		75.5
Calls/ Maturities/ Paydowns	(22.4)		(23.5)
Purchases	0		55.6
Sales	0		0
Net Realized (Gain)/loss	0		0
Change in Valuation	(5.2)		10.0
Net Transfers in (out)	(15.4)	[1]	11.6	[2]
Ending Fair value	86.2		129.2
Fixed maturities | Asset-backed Securities | Residential mortgage-backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	96.7		46.1
Calls/ Maturities/ Paydowns	(19.5)		(20.9)
Purchases	0		55.6
Sales	0		0
Net Realized (Gain)/loss	0		0
Change in Valuation	0.5		4.8
Net Transfers in (out)	(15.4)	[1]	11.1	[2]
Ending Fair value	62.3		96.7
Fixed maturities | Asset-backed Securities | Commercial mortgage-backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	27.5		21.6
Calls/ Maturities/ Paydowns	(0.3)		0
Purchases	0		0
Sales	0		0
Net Realized (Gain)/loss	0		0
Change in Valuation	(5.9)		5.4
Net Transfers in (out)	0	[1]	0.5	[2]
Ending Fair value	21.3		27.5
Fixed maturities | Asset-backed Securities | Other asset-backed securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	5.0		7.8
Calls/ Maturities/ Paydowns	(2.6)		(2.6)
Purchases	0		0
Sales	0		0
Net Realized (Gain)/loss	0		0
Change in Valuation	0.2		(0.2)
Net Transfers in (out)	0	[1]	0	[2]
Ending Fair value	2.6		5.0
Equity securities | Common equities | Other Equity-like Investments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Fair Value	11.8		12.9
Calls/ Maturities/ Paydowns	0		(2.1)
Purchases	0		0
Sales	0		(0.3)
Net Realized (Gain)/loss	0		0.3
Change in Valuation	(0.3)		1.0
Net Transfers in (out)	0	[1]	0	[2]
Ending Fair value	$ 11.5		$ 11.8

[1] The $(15.4) million was transferred out of Level 3 into Level 2 due to the availability of vendor pricing on a residential mortgage-backed security.

[2] The net $(41.5) million of transfers out of Level 3 included: a $12.1 million transfer into Level 3 and subsequent transfer out of Level 3 at $(15.1) million due to sufficient trade volume, a $(53.1) million transfer out of Level 3 due to the availability of vendor pricing on a redeemable preferred stock, and $14.6 million of transfers into Level 3 due to the lack of trade volume.

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REPORTING AND ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2011

Interest Capitalized

Total capitalized interest, which primarily relates to capitalized software projects, for the years ended December 31, was:

(millions)	Capitalized Interest
2011	$	.4
2010		1.1
2009		2.6

Share Based Compensation and Related Tax Benefits

The total compensation expense recognized for our stock-based compensation for the years ended December 31, was:

(millions)	2011		2010		2009
Pretax expense	$	50.5	$	45.9	$	40.3
Tax benefit		17.7		16.1		14.1

Supplemental Cash Flow Information

Non-cash activity includes declared but unpaid dividends. For the years ended December 31, we paid the following:

(millions)	2011		2010		2009
Income taxes, net of refunds	$	435.0	$	434.0	$	461.7
Interest		129.5		138.4		144.7

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Unrealized Gains (Losses) from Debt Hedges Included in Accumulated Other Comprehensive Income (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2007
6.375% Senior Notes due 2012
Debt Instrument [Line Items]
Unrealized gain (loss)	$ 18.4
Unamortized Balance	0.2
3.75% Senior Notes due 2021
Debt Instrument [Line Items]
Unrealized gain (loss)	(5.1)
Unamortized Balance	(5.0)
6 5/8% Senior Notes due 2029
Debt Instrument [Line Items]
Unrealized gain (loss)	(4.2)
Unamortized Balance	(3.5)
6.25% Senior Notes due 2032
Debt Instrument [Line Items]
Unrealized gain (loss)	5.1
Unamortized Balance	4.4
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067
Debt Instrument [Line Items]
Unrealized gain (loss)	34.4	34.4
Unamortized Balance	$ 16.1

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SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2011
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	$ 14,912.2
Fair Value	15,963.0
Amount At Which Shown In The Balance Sheet	15,963.0
Fixed maturities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	11,455.7
Fair Value	11,759.3
Amount At Which Shown In The Balance Sheet	11,759.3
Fixed maturities | Bonds | US Government and Government Agencies and Authorities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2,842.7
Fair Value	2,963.0
Amount At Which Shown In The Balance Sheet	2,963.0
Fixed maturities | Bonds | State and local government obligations
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,938.6
Fair Value	2,002.1
Amount At Which Shown In The Balance Sheet	2,002.1
Fixed maturities | Bonds | Public Utility, Bonds
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	97.8
Fair Value	97.5
Amount At Which Shown In The Balance Sheet	97.5
Fixed maturities | Bonds | Corporate And Other Debt Securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	2,703.7
Fair Value	2,798.7
Amount At Which Shown In The Balance Sheet	2,798.7
Fixed maturities | Bonds | Asset-backed Securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	3,493.6
Fair Value	3,524.1
Amount At Which Shown In The Balance Sheet	3,524.1
Fixed maturities | Redeemable preferred stocks
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	379.3
Fair Value	373.9
Amount At Which Shown In The Balance Sheet	373.9
Equity securities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,904.7
Fair Value	2,651.9
Amount At Which Shown In The Balance Sheet	2,651.9
Equity securities | Common Stocks, by Industry | Utilities
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	113.7
Fair Value	147.4
Amount At Which Shown In The Balance Sheet	147.4
Equity securities | Common Stocks, by Industry | Financials
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	203.0
Fair Value	224.7
Amount At Which Shown In The Balance Sheet	224.7
Equity securities | Common Stocks, by Industry | Industrials
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,114.3
Fair Value	1,473.5
Amount At Which Shown In The Balance Sheet	1,473.5
Equity securities | Nonredeemable preferred stocks
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	473.7
Fair Value	806.3
Amount At Which Shown In The Balance Sheet	806.3
Short-term investments
Summary of Investments, Other than Investments in Related Parties, Reportable Data [Line Items]
Cost	1,551.8	[1]
Fair Value	1,551.8	[1]
Amount At Which Shown In The Balance Sheet	$ 1,551.8	[1]

[1] Includes $10.0 million in treasury bills issued by the Australian government.

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STATUTORY FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2011

STATUTORY FINANCIAL INFORMATION

8.  STATUTORY FINANCIAL INFORMATION

Consolidated statutory surplus was $5,269.2 million and $5,073.0 million at December 31, 2011 and 2010, respectively. Statutory net income was $1,001.7 million, $1,049.1 million, and $1,300.8 million for the years ended December 31, 2011, 2010, and 2009, respectively.

At December 31, 2011, $472.6 million of consolidated statutory surplus represented net admitted assets of our insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum statutory surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the companies are licensed.

During 2011, the insurance subsidiaries paid aggregate cash dividends of $874.9 million to the parent company. Based on the dividend laws currently in effect, the insurance subsidiaries could pay aggregate dividends of $1,195.8 million in 2012 without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of previous dividends paid by the applicable subsidiary.

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Underwriting Margins and Combined Ratios for our Underwriting Operations (Detail) (Underwriting Operations Segment)	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Segment Reporting Information [Line Items]
Underwriting Margin	7.00%		7.60%		8.40%
Combined Ratio	93.00%		92.40%		91.60%
Personal Lines
Segment Reporting Information [Line Items]
Underwriting Margin	6.80%		7.00%		7.60%
Combined Ratio	93.20%		93.00%		92.40%
Personal Lines | Agency Channel
Segment Reporting Information [Line Items]
Underwriting Margin	7.40%		8.10%		7.80%
Combined Ratio	92.60%		91.90%		92.20%
Personal Lines | Direct Channel
Segment Reporting Information [Line Items]
Underwriting Margin	6.10%		5.40%		7.20%
Combined Ratio	93.90%		94.60%		92.80%
Commercial Auto
Segment Reporting Information [Line Items]
Underwriting Margin	9.10%		12.50%		14.20%
Combined Ratio	90.90%		87.50%		85.80%
Other Indemnity
Segment Reporting Information [Line Items]
Underwriting Margin		[1]		[1]		[1]
Combined Ratio		[1]		[1]		[1]

[1] Underwriting margins/combined ratios are not meaningful (NM) for our other indemnity businesses due to the low level of premiums earned by, and the variability of loss costs in, such businesses.