What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 155 added, 154 removed, 967 unchanged (24% of the section changed)

2 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Six Months

Periods Ended June 30, 2022 2021 2022 2021

Three Months Nine Months

Periods Ended September 30, 2022 2021 2022 2021

(millions — except per share amounts)

16 unchanged sentences

Goodwill impairment 1

224.8 0 224.8 0

Total expenses 12,637.7 11,720.2 36,244.1 32,203.8

1 unchanged sentence

Income (loss) before income taxes 142.5 139.0 ( 103.2 ) 3,006.1

Provision (benefit) for income taxes ( 93.0 ) 209.1 ( 16.7 ) 597.0

Provision for income taxes 18.4 20.5 1.7 617.5

Net income (loss) 124.1 118.5 ( 104.9 ) 2,388.6

18 unchanged sentences

Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(millions — except per share amounts) 2022 2021 2021

60 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

Three Months Six Months

Periods Ended June 30, 2022 2021 2022 2021

Three Months Nine Months

Periods Ended September 30, 2022 2021 2022 2021

(millions — except per share amounts)

20 unchanged sentences

( 58.4 ) ( 58.4 ) ( 175.2 ) ( 175.2 )

Cash dividends declared on Serial Preferred Shares, Series B ($ 26.875 , $ 26.875 , $ 26.875 , and $ 26.875 per share)

( 13.4 ) ( 13.4 ) ( 13.4 ) ( 13.4 )

Reinvested dividends on restricted stock units ( 0.3 ) ( 0.4 ) ( 0.6 ) ( 1.2 )

11 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2022 2021

Nine Months Ended September 30, 2022 2021

Cash Flows From Operating Activities

28 unchanged sentences

Net unsettled security transactions ( 68.7 ) 304.2

Acquisition of Protective Insurance Corporation, net of cash, cash equivalents, and restricted cash acquired 0 ( 313.2 )

Acquisition of Protective Insurance Corporation, net of cash, cash equivalents, and restricted cash equivalents acquired 0 ( 313.2 )

Purchases of property and equipment ( 245.0 ) ( 188.3 )

8 unchanged sentences

Payment of acquired company debt 0 ( 20.0 )

Payments of debt 0 ( 500.0 )

Net cash provided by (used in) financing activities 1,205.1 ( 3,525.5 )

1 unchanged sentence

Cash, cash equivalents, restricted cash, and restricted cash equivalents – January 1

Cash, cash equivalents, restricted cash, and restricted cash equivalents – June 30

Cash, cash equivalents, restricted cash, and restricted cash equivalents – September 30

$ 365.3 $ 285.5

4 unchanged sentences

The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, were necessary for a fair statement of the results for the interim periods presented.

The results of operations for the period ended June 30, 2022, are not necessarily indicative of the results expected for the full year.

The results of operations for the period ended September 30, 2022, are not necessarily indicative of the results expected for the full year.

These consolidated financial statements and the notes thereto should be read in conjunction with Progressive’s audited financial statements and accompanying notes included in Exhibit 13 to our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report to Shareholders).

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The following table summarizes changes in our allowance for credit loss exposure on our premiums receivable:

Three Months Six Months

Periods Ended June 30, 2022 2021 2022 2021

Three Months Ended September 30, Nine Months Ended September 30,

(millions) 2022 2021 2022 2021

Allowance for credit losses, beginning of period $ 265.8 $ 245.2 $ 280.4 $ 356.2

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3 Represents portion of allowance that is reversed when premiums receivable are written off.

The year-over-year increase in the balance of the allowance for credit losses at June 30, 2022, compared to June 30, 2021, primarily reflects a higher amount of premiums receivable determined to be at risk of being uncollectible, driven by the growth in our premiums receivable balance.

During the first six months of 2021, we experienced greater collections than anticipated, in part due to changes in consumer spending habits and government stimulus spending during the period, which resulted in a lower “increase in allowance ” when compared to the six months ended June 30, 2022.

Premiums receivable balances are written off once we have exhausted our collection efforts.

We recognized higher write-offs during the six months ended June 30, 2021, reflecting the premiums receivable that were reserved during 2020, when moratoriums and billing leniency efforts were put into place during the novel coronavirus, COVID-19, pandemic, which delayed the write-off of these uncollectible balances into 2021.

Property and Equipment

Other assets on the consolidated balance sheets include certain long-lived assets that are considered “ held for sale.

” The carrying value of these held-for-sale assets was $ 24.9 million at June 30, 2022, $ 57.5 million at June 30, 2021, and $ 10.8 million at December 31, 2021.

” The carrying value of these held-for-sale assets was $ 47.4 million at September 30, 2022, $ 12.6 million at September 30, 2021, and $ 10.8 million at December 31, 2021.

Goodwill and Intangible Assets

In preparation of the second quarter 2022 financial statements, we evaluated goodwill for impairment using a quantitative approach given changes in circumstances that indicated that the carrying value of certain portions of goodwill may not be recoverable.

We evaluate goodwill for impairment using a qualitative or quantitative approach annually and when changes in circumstances indicate the carrying value of certain portions of goodwill may not be recoverable.

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

Earnings per Common Share

For the three and six months ended June 30, 2022, earnings per common share were calculated using basic average equivalent shares since diluted earnings per share would be antidilutive given the net loss reported for both periods.

Amounts are reported on a diluted basis for the second quarter and first six months of 2021.

When a net loss is reported, earnings per common share are calculated using basic average equivalent shares since diluted earnings per share would be antidilutive given the net loss reported for the period.

Amounts are reported on a diluted basis for all other periods presented.

Note 2 Investments — The following tables present the composition of our investment portfolio by major security type.

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(Losses) Fair

June 30, 2022

September 30, 2022

Available-for-sale securities:

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(Losses) Fair

June 30, 2021

September 30, 2021

Available-for-sale securities:

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$ 48,363.0 $ 612.6 $ ( 138.1 ) $ 3,449.9 $ 52,287.4 100.0 %

Included in the table above is a $ 52.5 million fair value ($ 25.0 million cost) reclassification from nonredeemable preferred stock to common equities to reflect the prior year conversion of a security and to conform to the current year classification.

($ in millions) Cost Gross

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$ 47,572.7 $ 387.4 $ ( 316.0 ) $ 3,870.0 $ 51,514.1 100.0 %

1 Includes $ 0 , $ 412.1 million, and $ 143.4 million of net unsettled security purchase transactions at June 30, 2022 and 2021, and December 31, 2021, respectively, with the offsetting payable included in other liabilities.

The total fair value of the portfolio at June 30, 2022 and 2021, and December 31, 2021, included $ 4.9 billion, $ 3.3 billion, and $ 4.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

At June 30, 2022, bonds and certificates of deposit in the principal amount of $ 468.9 million were on deposit to meet state insurance regulatory requirements.

1 Includes $ 74.7 million, $ 399.7 million, and $ 143.4 million of net unsettled security purchase transactions at September 30, 2022 and 2021, and December 31, 2021, respectively, with the offsetting payable included in other liabilities.

The total fair value of the portfolio at September 30, 2022 and 2021, and December 31, 2021, included $ 4.2 billion, $ 2.9 billion, and $ 4.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

At September 30, 2022, bonds and certificates of deposit in the principal amount of $ 468.7 million were on deposit to meet state insurance regulatory requirements.

We did no t hold 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 June 30, 2022 or 2021, or December 31, 2021.

At June 30, 2022, we did no t hold any debt securities that were non-income producing during the preceding 12 months.

government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at September 30, 2022 or 2021, or December 31, 2021.

At September 30, 2022, we did no t hold any debt securities that were non-income producing during the preceding 12 months.

Short-Term Investments Our short-term investments may include commercial paper and other investments that are expected to mature or are redeemable within one year.

We invested in repurchase and reverse repurchase transactions during 2022 and 2021, but did no t have any open positions at June 30, 2022 and 2021, or December 31, 2021.

To the extent we enter into repurchase or reverse repurchase transactions, consistent with past practice, we would elect not to offset these transactions and would report them on a gross basis on our consolidated balance sheets, despite the option to elect to offset these transactions as long as they were with the same counterparty and subject to an enforceable master netting arrangement.

We invested in repurchase and reverse repurchase transactions during 2022 and 2021, but did no t have any open positions at September 30, 2022 and 2021, or December 31, 2021.

To the extent we enter into repurchase or reverse repurchase transactions, consistent with past practice, we would elect not to offset these transactions and would report them on a gross basis in our consolidated balance sheets, despite the option to elect to offset these transactions as long as they were with the same counterparty and subject to an enforceable master netting arrangement.

Hybrid Securities Certain securities in our fixed-maturity portfolio are accounted for as hybrid securities because they contain embedded derivatives that are not deemed to be clearly and closely related to the host investments.

These securities are reported at fair value:

September 30,

(millions) 2022 2021 December 31, 2021

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Since the embedded derivatives (e.g., change-in-control put option, debt-to-equity conversion, or any other feature unrelated to the credit quality or risk of default of the issuer that could impact the amount or timing of our expected future cash flows) do not have observable intrinsic values, we have elected to record the changes in fair value of these securities through income as a component of net realized gains or losses.

Fixed Maturities The composition of fixed maturities by maturity at June 30, 2022, was:

Fixed Maturities The composition of fixed maturities by maturity at September 30, 2022, was:

(millions) Cost Fair Value

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Value Unrealized

June 30, 2022

September 30, 2022

government obligations 157 $ 22,385.4 $ ( 1,855.4 ) 103 $ 16,085.8 $ ( 1,095.6 ) 54 $ 6,299.6 $ ( 759.8 )

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Value Unrealized

June 30, 2021

September 30, 2021

government obligations 73 $ 13,352.8 $ ( 95.9 ) 65 $ 12,152.6 $ ( 70.1 ) 8 $ 1,200.2 $ ( 25.8 )

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Total fixed maturities 806 $ 26,867.3 $ ( 316.0 ) 781 $ 25,840.8 $ ( 281.6 ) 25 $ 1,026.5 $ ( 34.4 )

The increase in the number of securities in an unrealized loss position since both June 30, 2021 and December 31, 2021, was primarily the result of an increase in interest rates.

As of June 30, 2022, we had two corporate debt securities and one residential mortgage-backed security that had their credit ratings downgraded during the quarter, with a combined fair value of $ 18.3 million and an unrealized loss of $ 2.1 million.

The increase in the number of securities in an unrealized loss position since both September 30, 2021 and December 31, 2021, was primarily the result of an increase in interest rates.

As of September 30, 2022, we had five corporate debt securities that had their credit ratings downgraded during the quarter, with a combined fair value of $ 99.3 million and an unrealized loss of $ 23.7 million.

A review of the securities in an unrealized loss position indicated that the issuers were current with respect to their interest obligations and that there was no evidence of deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity.

Allowance For Credit and Uncollectible Losses We are required to measure the amount of potential credit losses for all fixed-maturity securities in an unrealized loss position.

We did no t record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible during the first six months of 2022 or 2021, and did no t have a material credit loss allowance balance as of June 30, 2022 and 2021, or December 31, 2021.

We did no t record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible during the first nine months of 2022 or 2021, and did no t have a material credit loss allowance balance as of September 30, 2022 and 2021, or December 31, 2021.

We considered several factors and inputs related to the individual securities as part of our analysis.

9 unchanged sentences

In the event that the NPV was below the amortized value, and the amount was determined to be material individually, or in aggregate, a credit loss would be deemed to exist, and either an allowance for credit losses would be created, or if an allowance currently existed, either a recovery of the previous allowance, or an incremental loss, would be recorded to net realized gains (losses) on securities.

As of June 30, 2022 and 2021, and December 31, 2021, we believe none of the unrealized losses relate to material credit losses on any specific securities, or in the aggregate, based on our review.

As of September 30, 2022 and 2021, and December 31, 2021, we believe none of the unrealized losses relate to material credit losses on any specific securities, or in the aggregate.

We continue to expect all the securities in our portfolio to pay their principal and interest obligations.

In addition, we reviewed our accrued investment income outstanding on those securities in an unrealized loss position at June 30, 2022 and 2021, and December 31, 2021, to determine if the accrued interest amounts were determined to be uncollectible.

Based on our analysis, we believe the issuers have sufficient liquidity and capital reserves to meet their current interest, and future principal, obligations and, therefore, did no t write off any accrued income as uncollectible at June 30, 2022 and 2021, or December 31, 2021.

Realized Gains (Losses) The components of net realized gains (losses) for the three and six months ended June 30, were:

Three Months Six Months

In addition, we reviewed our accrued investment income outstanding on those securities in an unrealized loss position at September 30, 2022 and 2021, and December 31, 2021, to determine if the accrued interest amounts were determined to be uncollectible.

Realized Gains (Losses) The components of net realized gains (losses) for the three and nine months ended September 30, were:

Three Months Nine Months

(millions) 2022 2021 2022 2021

19 unchanged sentences

Corporate and other debt securities ( 14.0 ) ( 0.7 ) ( 51.8 ) ( 6.1 )

Residential mortgage-backed securities 0 ( 0.3 ) 0 ( 0.3 )

Commercial mortgage-backed securities ( 44.8 ) ( 0.5 ) ( 58.6 ) ( 1.6 )

30 unchanged sentences

Realized gains (losses) on securities sold are computed using the first-in-first-out method.

During the second quarter 2022, we sold securities in our common equity portfolio, which were in a realized gain position, as part of our plan to incrementally reduce risk in the portfolio in response to the likelihood of a more difficult economic environment over the near term.

The majority of the sales in the fixed-maturity portfolio were from U.S.

The loss from the fixed-maturity sales reflected the continued rise in interest rates throughout 2022, which resulted in valuation declines for most of our available-for-sale securities.

The majority of the sales in the fixed-maturity portfolio during the first nine months of 2022 were from U.S.

Treasuries, which were sold to shorten duration.

The loss from the fixed-maturity sales reflects the continued rise in interest rates during the second quarter 2022, which resulted in valuation declines for most of our available-for-sale securities.

During the third quarter 2022, we selectively sold securities, which were primarily commercial mortgage-backed securities.

During the first nine months of 2022, we sold common equity securities, which were in a realized gain position, as part of our plan to incrementally reduce risk in the portfolio in response to the likelihood of a more difficult economic environment over the near term.

The other asset impairment loss was recorded as a result of our investment in a federal new markets tax credit fund, which was entered into during the second quarter 2021, and reported in other assets in the consolidated balance sheets.

The following table reflects our holding period realized gains (losses) recognized on equity securities held at the respective quarter ends:

Three Months Six Months

Three Months Nine Months

(millions) 2022 2021 2022 2021

2 unchanged sentences

Net holding period gains (losses) recognized during the period on equity securities held at period end $ ( 140.7 ) $ ( 16.9 ) $ ( 2,164.1 ) $ 479.8

Net Investment Income The components of net investment income for the three and six months ended June 30, were:

Three Months Six Months

Net Investment Income The components of net investment income for the three and nine months ended September 30, were:

Three Months Nine Months

(millions) 2022 2021 2022 2021

19 unchanged sentences

Net investment income $ 327.8 $ 202.3 $ 850.8 $ 621.3

On a year-over-year basis, investment income (interest and dividends) increased 39 % and 24 % for the first three and six months of 2022, respectively, compared to the same periods last year, due to an increase in average assets resulting from premium growth, underwriting profitability, and investing the $ 1.5 billion of proceeds from debt issued in March 2022.

The recurring investment book yield increased 19 % for the second quarter 2022 and 7 % for the first six months of 2022, compared to the same periods in 2021, reflecting investing new cash and cash from maturities in higher interest rate securities given the rising interest rate environment.

On a year-over-year basis for the three and nine months ended September 30, 2022, investment income (interest and dividends) increased 60 % and 36 %, respectively, compared to the same periods last year, primarily due to an increase in interest rates on floating-rate securities in our portfolio and purchases of new investments with higher coupon rates.

The recurring investment book yield increased 39 % for the third quarter 2022 and 16 % for the first nine months of 2022, compared to the same periods in 2021, reflecting investing new cash and cash from maturities in higher interest rate securities given the rising interest rate environment.

Note 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:

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(millions) Level 1 Level 2 Level 3 Total Cost

June 30, 2022

September 30, 2022

Fixed maturities:

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(millions) Level 1 Level 2 Level 3 Total Cost

June 30, 2021

September 30, 2021

Fixed maturities:

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These securities are classified as Level 2 since they are primarily longer-dated securities issued by municipalities that contain either liquidity facilities or mandatory put features within one year.

At June 30, 2022, vendor-quoted prices represented 87 % of our Level 1 classifications (excluding short-term investments), compared to 81 % and 79 % at June 30, 2021 and December 31, 2021, respectively.

At September 30, 2022, vendor-quoted prices represented 90 % of our Level 1 classifications (excluding short-term investments), compared to 82 % and 79 % at September 30, 2021 and December 31, 2021, respectively.

The securities quoted by vendors in Level 1 primarily represent our holdings in U.S.

1 unchanged sentence

The balance of our Level 1 pricing comes from quotes obtained directly from trades made on active exchanges.

At both June 30, 2022 and December 31, 2021, vendor-quoted prices comprised 98 % of our Level 2 classifications (excluding short-term investments and common stock), while dealer-quoted prices represented the remaining 2 %, compared to 99 % and 1 % at June 30, 2021.

At both September 30, 2022 and December 31, 2021, vendor-quoted prices comprised 98 % of our Level 2 classifications (excluding short-term investments and common stock), while dealer-quoted prices represented the remaining 2 %, compared to 97 % and 3 % at September 30, 2021.

In our process for selecting a source (e.g., dealer or 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.

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We then evaluate inputs relevant for each class of securities disclosed in the preceding hierarchy tables.

For our structured debt securities, including commercial, residential, and other asset-backed securities, we evaluate available market-related data for these and similar securities related to collateral, delinquencies, and defaults for historical trends and reasonably estimable projections, as well as historical prepayment rates and current prepayment assumptions and cash flow estimates.

For structured debt securities, including commercial, residential, and other asset-backed securities, we evaluate available market-related data for these and similar securities related to collateral, delinquencies, and defaults for historical trends and reasonably estimable projections, as well as historical prepayment rates and current prepayment assumptions and cash flow estimates.

We further stratify each class of our structured debt securities into more finite sectors (e.g., planned amortization class, first pay, second pay, senior, subordinated, etc.) and use duration, credit quality, and coupon to determine if the fair value is appropriate.

For our corporate debt and preferred stock (redeemable and nonredeemable) portfolios, as well as the notes issued by The Progressive Corporation (see Note 4 – Debt ), we review securities by duration, coupon, and credit quality, as well as changes in interest rate and credit spread movements within that stratification.

For corporate debt and preferred stock (redeemable and nonredeemable) portfolios, as well as the notes issued by The Progressive Corporation (see Note 4 – Debt ), we review securities by duration, coupon, and credit quality, as well as changes in interest rate and credit spread movements within that stratification.

The review also includes recent trades, including:

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and industry specific economic news as it comes to light.

For our municipal securities (e.g., general obligations, revenue, and housing), we stratify the portfolio to evaluate securities by type, coupon, credit quality, and duration to review price changes relative to credit spread and interest rate changes.

For municipal securities (e.g., general obligations, revenue, and housing), we stratify the portfolio to evaluate securities by type, coupon, credit quality, and duration to review price changes relative to credit spread and interest rate changes.

Additionally, we look to economic data as it relates to geographic location as an indication of price-to-call or maturity predictors.

For municipal housing securities, we look to changes in cash flow projections, both historical and reasonably estimable projections, to understand yield changes and their effect on valuation.

Lastly, for our short-term securities, we look at acquisition price relative to the coupon or yield.

For short-term securities, we look at acquisition price relative to the coupon or yield.

Since our short-term securities are typically 90 days or less to maturity, with the majority listed in Level 2 being 30 days or less to redemption, we believe that acquisition price is the best estimate of fair value.

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Since these securities represent less than 0.1% of our total portfolio, we will continue to include them in our Level 3 disclosures and report the activity from these investments as “other” changes in the summary of changes in fair value table and categorize these securities as “pricing exemption securities” in the quantitative information table.

During 2021, we reclassified a Level 3 nonredeemable preferred stock held at December 31, 2020 to a Level 3 common stock to reflect that the security had converted during 2020.

The security was transferred to Level 2 at December 31, 2021.

At June 30, 2022 and 2021, and December 31, 2021, we did no t have any securities in our fixed-maturity portfolio listed as Level 3.

Other than goodwill, during the second quarter and first six months of 2022 and 2021, there were no material assets or liabilities measured at fair value on a nonrecurring basis.

The Level 3 common stock held at September 30, 2021 was transferred to Level 2 at December 31, 2021.

At September 30, 2022 and 2021, and December 31, 2021, we did no t have any securities in our fixed-maturity portfolio listed as Level 3.

Other than goodwill, during the third quarter and first nine months of 2022 and 2021, there were no material assets or liabilities measured at fair value on a nonrecurring basis.

During the second quarter 2022, we determined that the fair value of the goodwill related to our ARX Holding Corp.

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Due to the relative size of the Level 3 securities’ fair values compared to the total portfolio’s fair value, any changes in pricing methodology would not have a significant change in valuation that would materially impact net or comprehensive income.

The following tables provide a summary of changes in fair value associated with Level 3 assets for the three and six months ended June 30, 2022 and 2021:

The following tables provide a summary of changes in fair value associated with Level 3 assets for the three and nine months ended September 30, 2022 and 2021:

Level 3 Fair Value

(millions) Fair Value at March 31, 2022 Calls/

(millions) Fair Value at June 30, 2022 Calls/

Paydowns/Other Purchases Sales Net Realized

1 unchanged sentence

Valuation Net

In (Out) Fair Value at June 30, 2022

In (Out) Fair Value at September 30, 2022

Equity securities:

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Level 3 Fair Value

(millions) Fair Value at March 31, 2021 Calls/

(millions) Fair Value at June 30, 2021 Calls/

Paydowns/Other Purchases Sales Net Realized

1 unchanged sentence

Valuation Net

In (Out) Fair Value at June 30, 2021

In (Out) Fair Value at September 30, 2021

Equity securities:

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Valuation Net

In (Out) Fair Value at June 30, 2022

In (Out) Fair Value at September 30, 2022

Equity securities:

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Valuation Net

In (Out) Fair Value at June 30, 2021

In (Out) Fair Value at September 30, 2021

Equity securities:

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$ 54.8 $ 9.5 $ 67.2 $ ( 5.0 ) $ ( 4.5 ) $ 55.9 $ 0 $ 177.9

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at June 30, 2022 and 2021, and December 31, 2021:

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at September 30, 2022 and 2021, and December 31, 2021:

Quantitative Information about Level 3 Fair Value Measurements

($ in millions) Fair Value at June 30, 2022 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

($ in millions) Fair Value at September 30, 2022 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

Equity securities:

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Quantitative Information about Level 3 Fair Value Measurements

($ in millions) Fair Value at June 30, 2021 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

($ in millions) Fair Value at September 30, 2021 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

Equity securities:

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Total Level 3 securities $ 177.9

The table was updated to agree with the current year presentation and to reflect the purchase of a nonredeemable preferred stock security in the second quarter 2020 that was subject to an automatic conversion to common stock during third quarter 2020.

Quantitative Information about Level 3 Fair Value Measurements

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Note 4 Debt — Debt at each of the balance sheet periods consisted of:

June 30, 2022 June 30, 2021 December 31, 2021

September 30, 2022 September 30, 2021 December 31, 2021

(millions) Carrying

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2.50 % Senior Notes due 2027 (issued:

$ 500.0 , August 2016)

497.9 471.3 497.5 529.9 497.7 517.9

2.50 % Senior Notes due 2027 (issued:

$ 500.0 , March 2022)

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Consistent with the other senior notes issued by Progressive, interest on these notes is payable semiannually, principal is due at maturity, and the notes are redeemable, in whole or in part, at any time, subject to a treasury “make whole” provision.

There was no short-term debt outstanding at June 30, 2022 and December 31, 2021.

Short-term debt outstanding at June 30, 2021 consisted of the $ 500 million 3.75 % Senior Notes that matured in August 2021.

There was no short-term debt outstanding at September 30, 2022 and 2021, and December 31, 2021.

The Progressive Corporation has a line of credit with PNC Bank, National Association (PNC), in the maximum principal amount of $ 250 million, which has the same terms as the line of credit with PNC that expired in April 2022.

See the 2021 Annual Report to Shareholders for terms of this line of credit.

See the 2021 Annual Report to Shareholders for a discussion of the terms of this line of credit.

We had no borrowings under the line of credit during the periods presented.

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We review our deferred tax assets regularly for recoverability.

At June 30, 2022 and 2021, and December 31, 2021, we determined that we did no t need a valuation allowance on our gross deferred tax assets.

At September 30, 2022 and 2021, and December 31, 2021, we determined that we did no t need a valuation allowance on our gross deferred tax assets.

Although realization of the deferred tax assets is not assured, management believes that it is more likely than not the deferred tax assets will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes.

For the six months ended June 30, 2022, there have been no material changes in our reserve for uncertain tax positions.

The effective tax rate for the three and six months ended June 30, 2022, was 14.6 % and 6.8 %, respectively, compared to 20.9 % and 20.8 % for the same periods last year.

Excluding the effect of the goodwill impairment, which was a one-time charge, the effective tax rate for the three and six months ended June 30, 2022, were 22.6 % and 79.9 %, respectively.

The higher effective rates for the current quarter and year, excluding the goodwill impairment charge, are in part due to our permanent tax differences having a greater impact on the effective rate given our pretax loss, compared to pretax income in the same periods last year.

For the nine months ended September 30, 2022, there have been no material changes in our reserve for uncertain tax positions.

The effective tax rate for the three and nine months ended September 30, 2022, was 12.9 % and ( 1.6 )%, respectively, compared to 14.7 % and 20.5 % for the same periods last year.

The difference between our effective tax rate and the statutory rate, for the three months ended September 30, 2022 and 2021, and the nine months ended September 30, 2022, is primarily driven by the low amount of income (loss) before taxes during those periods.

The provision for income taxes differed from the statutory rate as follows:

Three Months Ended September 30, Nine Months Ended September 30,

($ in millions) 2022 2021 2022 2021

Income (loss) before income taxes $ 142.5 $ 139.0 $ ( 103.2 ) $ 3,006.1

Tax at statutory federal rate $ 29.9 21.0 % $ 29.2 21.0 % $ ( 21.7 ) 21.0 % $ 631.3 21.0 %

Tax effect of:

Goodwill impairment 0 0 0 0 47.2 ( 45.7 ) 0 0

Stock-based compensation ( 9.6 ) ( 6.7 ) ( 7.9 ) ( 5.7 ) ( 17.7 ) 17.2 ( 19.2 ) ( 0.6 )

State income taxes, net of federal taxes 4.5 3.2 5.5 4.0 9.7 ( 9.4 ) 17.7 0.6

Tax-preferenced investment income ( 2.8 ) ( 2.0 ) ( 3.3 ) ( 2.4 ) ( 9.5 ) 9.2 ( 10.0 ) ( 0.3 )

Tax credits ( 5.2 ) ( 3.6 ) ( 3.7 ) ( 2.7 ) ( 9.4 ) 9.1 ( 6.1 ) ( 0.2 )

Nondeductible compensation expense 1.8 1.3 1.9 1.4 5.4 ( 5.2 ) 5.6 0.2

Tax deductible dividends ( 0.4 ) ( 0.3 ) ( 0.5 ) ( 0.4 ) ( 1.4 ) 1.4 ( 1.6 ) ( 0.1 )

Other items, net 0.2 0 ( 0.7 ) ( 0.5 ) ( 0.9 ) 0.8 ( 0.2 ) ( 0.1 )

Total income tax provision $ 18.4 12.9 % $ 20.5 14.7 % $ 1.7 ( 1.6 ) % $ 617.5 20.5 %

Note 6 Loss and Loss Adjustment Expense Reserves — Activity in the loss and loss adjustment expense reserves is summarized as follows:

September 30,

(millions) 2022 2021

12 unchanged sentences

Total paid 25,130.9 20,863.9

Net balance at June 30

Net balance at September 30

24,597.8 21,103.8

Plus reinsurance recoverables on unpaid losses 6,034.0 4,822.5

Balance at June 30

Balance at September 30

$ 30,631.8 $ 25,926.3

1 Net reserves acquired in the Protective Insurance acquisition.

We experienced unfavorable reserve development of $ 144.9 million and $ 197.0 million during the first six months of 2022 and 2021, respectively, which is reflected as “incurred related to prior years ” in the table above.

Year-to-date June 30, 2022

• Approximately $ 97 million of the unfavorable prior year reserve development was attributable to accident year 2021, $ 16 million to accident year 2020, and the remainder to accident years 2019 and prior.

• Our personal auto products incurred about $ 45 million of unfavorable loss and loss adjustment expense (LAE) reserve development, with the Agency and Direct auto businesses each contributing about half.

The unfavorable development was primarily attributable to higher than anticipated severity and frequency of auto property damage payments on previously closed claims and late reported injury claims, partially offset by more subrogation and salvage recoveries and lower loss adjustment expenses than originally anticipated.

• Our Commercial Lines business experienced about $ 98 million of unfavorable development, primarily due to higher than anticipated severity and frequency of late reported claims.

Year-to-date June 30, 2021

• Approximately $ 100 million of the unfavorable prior year reserve development was attributable to accident year 2019 and $ 114 million to 2018 and prior accident years, partially offset by favorable development attributable to accident year 2020.

• Our personal auto products incurred about $ 111 million of unfavorable loss and LAE reserve development, with about $ 67 million attributable to the Agency business.

The unfavorable development was primarily attributable to a higher than anticipated frequency of reopened personal injury protection (PIP) claims, primarily in Florida, and higher than anticipated bodily injury severity, partially offset by less late reported claims than anticipated for accident year 2020.

• Our Commercial Lines business experienced about $ 73 million of unfavorable development, primarily due to increased injury severity, and the emergence of large injury claims at rates higher than originally anticipated primarily in Texas and Florida.

• Our Property business experienced about $ 20 million of unfavorable development, primarily due to higher than anticipated severity, reopen activity in Florida, and loss adjustment expense for prior loss years.

• Our special lines business experienced about $ 7 million of favorable development.

We experienced unfavorable reserve development of $ 52.8 million and $ 156.8 million during the first nine months of 2022 and 2021, respectively, which is reflected as “incurred related to prior years ” in the table above.

Year-to-date September 30, 2022

• The unfavorable prior year reserve development included approximately $ 45 million attributable to accident year 2021 and $ 29 million to 2019 and prior accident years, partially offset by $ 21 million favorable development attributable to accident year 2020.

• Our personal auto products incurred about $ 28 million of favorable loss and loss adjustment expense (LAE) reserve development, with about $ 25 million attributable to the Direct business.

The favorable development was primarily attributable to more subrogation and salvage recoveries and lower loss adjustment expenses than originally anticipated, partially offset by higher than anticipated severity and frequency of auto property damage payments on previously closed claims and late reported injury claims.

• Our Commercial Lines business experienced about $ 77 million of unfavorable development, primarily due to higher than anticipated severity of injury case reserves and higher than anticipated severity and frequency of late reported claims in our transportation network company business.

• Our Property business experienced minimal unfavorable prior accident year development, which was almost completely offset by minimal favorable development in our special lines products.

Year-to-date September 30, 2021

• The unfavorable prior year reserve development included $ 109 million attributable to accident year 2019 and $ 113 million to 2018 and prior accident years, partially offset by favorable development attributable to accident year 2020.

• Our personal auto products incurred $ 48 million of unfavorable loss and LAE reserve development, with about $ 44 million attributable to the Agency business.

The unfavorable development was primarily attributable to a higher than anticipated frequency of reopened personal injury protection claims, primarily in Florida, and higher than anticipated bodily injury severity, partially offset by less late reported claims than anticipated for accident year 2020 and lower adjusting expenses than anticipated.

• Our Commercial Lines business experienced $ 91 million of unfavorable development, primarily due to increased injury severity and the emergence of large injury claims, at rates higher than originally anticipated, primarily in Texas and Florida.

• Our Property business experienced $ 31 million of unfavorable development, primarily due to higher than anticipated severity and reopened claims activity in Florida.

• Our special lines products experienced about $ 12 million of favorable development.

Note 7 Supplemental Cash Flow Information — Cash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments of funds held in bank demand deposit accounts by certain subsidiaries.

The amount of reverse repurchase commitments, which are not considered part of the investment portfolio, held by these subsidiaries at June 30, 2022 and 2021, and December 31, 2021, were $ 140.6 million, $ 90.5 million, and $ 137.1 million, respectively.

The amount of reverse repurchase commitments, which are not considered part of the investment portfolio, held by these subsidiaries at September 30, 2022 and 2021, and December 31, 2021, were $ 123.0 million, $ 134.6 million, and $ 137.1 million, respectively.

Restricted cash and cash equivalents include collateral held against unpaid deductibles and cash that is restricted to pay flood claims under the National Flood Insurance Program’s “Write Your Own” program, for which certain subsidiaries are administrators.

Non-cash activity included the following in the respective periods:

Six Months Ended June 30,

Nine Months Ended September 30,

(millions) 2022 2021

6 unchanged sentences

We paid the following in the respective periods:

Six Months Ended June 30,

Nine Months Ended September 30,

(millions) 2022 2021

6 unchanged sentences

Our service businesses provide insurance-related services, including processing Commercial Automobile Insurance Procedures/Plans (CAIP) business and serving as an agent for homeowners, general liability, and workers’ compensation insurance, among other products, through programs in our direct Personal Lines and Commercial Lines businesses.

As previously discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, during the third quarter 2022, our CAIP service contract expired and we did not renew the contract.

This non-renewal will not materially affect our financial condition, results of operations, or cash flows.

All segment revenues are generated from external customers;

1 unchanged sentence

Following are the operating results for the respective periods:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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Consolidated total $ 12,780.2 $ 142.5 $ 11,859.2 $ 139.0 $ 36,140.9 $ ( 103.2 ) $ 35,209.9 $ 3,006.1

$ 11,519.2 $ ( 635.9 ) $ 11,905.5 $ 999.2 $ 23,360.7 $ ( 245.7 ) $ 23,350.7 $ 2,867.1

NA = Not applicable

1 Personal auto products accounted for 94 % of the total Personal Lines segment net premiums earned during the three and six months ended June 30, 2022 and 2021;

1 Personal auto products accounted for 94 % of the total Personal Lines segment net premiums earned during the three and nine months ended September 30, 2022 and 2021;

our special lines products (e.g., motorcycles, ATVs, RVs, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

2 The total pretax loss, including goodwill impairment, for the Property segment was $ 381.7 million and $ 373.4 million for the three and six months ended June 30, 2022, respectively.

For the three and six months ended June 30, 2022, pretax profit (loss) also included $ 5.0 million and $ 19.1 million, respectively, of amortization expense associated with acquisition-related intangible assets attributable to our Property segment, and $ 14.1 million and $ 28.3 million for the same periods in 2021.

2 The total pretax loss, including goodwill impairment, for the Property segment was $ 514.4 million for the nine months ended September 30, 2022.

For the three and nine months ended September 30, 2022, pretax profit (loss) also included $ 5.0 million and $ 24.1 million, respectively, of amortization expense associated with acquisition-related intangible assets attributable to our Property segment, and $ 14.2 million and $ 42.5 million for the same periods in 2021.

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

2 unchanged sentences

5 Revenues represent recurring investment income and total net realized gains (losses) on securities;

pretax profit is net of investment expense.

pretax profit (loss) is net of investment expense.

Our management uses underwriting margin and combined ratio as primary measures of underwriting profitability.

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Following are the underwriting margins and combined ratios for our underwriting operations for the respective periods:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

14 unchanged sentences

Total underwriting operations 0.8 99.2 ( 0.4 ) 100.4 3.5 96.5 4.4 95.6

1 Included in the three and six months ended June 30, 2022, is 0.9 points and 1.7 points, respectively, of amortization expense associated with intangible assets and 2.8 points and 2.9 points, respectively, for the three and six months ended June 30, 2021.

Note 9 Dividends — Following is a summary of our common and preferred share dividends that were declared and/or paid during the six months ended June 30, 2022 and 2021:

1 Included in the three and nine months ended September 30, 2022, is 0.9 points and 1.4 points, respectively, of amortization expense associated with intangible assets and 2.7 points and 2.8 points, respectively, for the same periods in 2021.

Note 9 Dividends — Following is a summary of our common and preferred share dividends that were declared and/or paid during the nine months ended September 30, 2022 and 2021:

(millions, except per share amounts) Amount

1 unchanged sentence

Common - Quarterly Dividends:

August 2022 October 2022 $ 0.10 $ 58.5

May 2022 July 2022 0.10 58.5

1 unchanged sentence

December 2021 January 2022 0.10 58.5

August 2021 October 2021 0.10 58.5

May 2021 July 2021 0.10 58.5

4 unchanged sentences

Preferred Dividends:

August 2022 September 2022 26.875 13.4

December 2021 March 2022 26.875 13.4

August 2021 September 2021 26.875 13.4

December 2020 March 2021 26.875 13.4

1 The accrual is based on an estimate of common shares outstanding as of the record date and the common share accrual is recorded as a part of accounts payable, accrued expenses, and other liabilities on the consolidated balance sheets.

1 The common share dividend accrual is based on an estimate of common shares outstanding as of the record date and all accruals are recorded as a part of accounts payable, accrued expenses, and other liabilities on the consolidated balance sheets until paid.

See Note 14 – Dividends in our 2021 Annual Report to Shareholders for a discussion of our quarterly and annual common share dividends and our preferred share dividend policies, including a discussion of the $ 1.50 per common share, or $ 876.5 million in the aggregate, 2021 annual variable common share dividend that was declared and paid in the fourth quarter 2021.

8 unchanged sentences

comprehensive

income (loss) Total net unrealized gains (losses) on securities Net unrealized gains (losses) on forecasted transactions Foreign

Balance at March 31, 2022 $ ( 1,753.4 ) $ 367.6 $ ( 1,385.8 ) $ ( 1,370.7 ) $ ( 14.7 ) $ ( 0.4 )

income (loss) Total net unrealized gains (losses) on securities Net unrealized losses on forecasted transactions Foreign

Balance at June 30, 2022 $ ( 2,795.5 ) $ 586.5 $ ( 2,209.0 ) $ ( 2,193.5 ) $ ( 14.7 ) $ ( 0.8 )

Other comprehensive income (loss) before reclassifications:

Investment securities ( 1,223.3 ) 256.9 ( 966.4 ) ( 966.4 ) 0 0

( 1,246.7 ) 261.8 ( 984.9 ) ( 984.9 ) 0 0

Foreign currency translation adjustment ( 0.9 ) 0.2 ( 0.7 ) 0 0 ( 0.7 )

( 0.5 ) 0.1 ( 0.4 ) 0 0 ( 0.4 )

Total other comprehensive income (loss) before reclassifications ( 1,224.2 ) 257.1 ( 967.1 ) ( 966.4 ) 0 ( 0.7 )

( 1,247.2 ) 261.9 ( 985.3 ) ( 984.9 ) 0 ( 0.4 )

Reclassification adjustment for amounts realized in net income by income statement line item:

2 unchanged sentences

Total reclassification adjustment for amounts realized in net income ( 58.6 ) 12.4 ( 46.2 ) ( 46.1 ) ( 0.1 ) 0

( 205.1 ) 43.0 ( 162.1 ) ( 162.1 ) 0 0

Total other comprehensive income (loss) ( 1,165.6 ) 244.7 ( 920.9 ) ( 920.3 ) 0.1 ( 0.7 )

Balance at June 30, 2022 $ ( 2,795.5 ) $ 586.5 $ ( 2,209.0 ) $ ( 2,193.5 ) $ ( 14.7 ) $ ( 0.8 )

Balance at September 30, 2022 $ ( 3,961.1 ) $ 831.2 $ ( 3,129.9 ) $ ( 3,113.8 ) $ ( 14.6 ) $ ( 1.5 )

Components of Changes in

6 unchanged sentences

comprehensive

income (loss) Total net unrealized gains (losses) on securities Net unrealized gains (losses) on forecasted transactions Foreign

Balance at March 31, 2021 $ 504.6 $ ( 112.3 ) $ 392.3 $ 407.7 $ ( 15.4 ) $ 0

income (loss) Total net unrealized gains (losses) on securities Net unrealized losses on forecasted transactions Foreign

Balance at June 30, 2021 $ 619.6 $ ( 136.4 ) $ 483.2 $ 498.8 $ ( 15.1 ) $ ( 0.5 )

Other comprehensive income (loss) before reclassifications:

Investment securities ( 117.9 ) 24.8 ( 93.1 ) ( 93.1 ) 0 0

174.7 ( 36.7 ) 138.0 138.0 0 0

Foreign currency translation adjustment ( 0.3 ) 0.1 ( 0.2 ) 0 0 ( 0.2 )

( 0.6 ) 0.1 ( 0.5 ) 0 0 ( 0.5 )

Total other comprehensive income (loss) before reclassifications ( 118.2 ) 24.9 ( 93.3 ) ( 93.1 ) 0 ( 0.2 )

174.1 ( 36.6 ) 137.5 138.0 0 ( 0.5 )

Reclassification adjustment for amounts realized in net income by income statement line item:

2 unchanged sentences

Total reclassification adjustment for amounts realized in net income 46.2 ( 9.6 ) 36.6 36.7 ( 0.1 ) 0

59.1 ( 12.5 ) 46.6 46.9 ( 0.3 ) 0

Total other comprehensive income (loss) ( 164.4 ) 34.5 ( 129.9 ) ( 129.8 ) 0.1 ( 0.2 )

Balance at June 30, 2021 $ 619.6 $ ( 136.4 ) $ 483.2 $ 498.8 $ ( 15.1 ) $ ( 0.5 )

Balance at September 30, 2021 $ 455.2 $ ( 101.9 ) $ 353.3 $ 369.0 $ ( 15.0 ) $ ( 0.7 )

Components of Changes in

7 unchanged sentences

income (loss) Total net

on securities Net

transactions Foreign

on securities Net unrealized losses on forecasted transactions Foreign

Balance at December 31, 2021 $ 52.3 $ ( 11.6 ) $ 40.7 $ 56.2 $ ( 14.9 ) $ ( 0.6 )

1 unchanged sentence

Investment securities ( 4,321.7 ) 907.6 ( 3,414.1 ) ( 3,414.1 ) 0 0

( 3,098.4 ) 650.7 ( 2,447.7 ) ( 2,447.7 ) 0 0

Foreign currency translation adjustment ( 1.1 ) 0.2 ( 0.9 ) 0 0 ( 0.9 )

( 0.2 ) 0 ( 0.2 ) 0 0 ( 0.2 )

Total other comprehensive income (loss) before reclassifications ( 4,322.8 ) 907.8 ( 3,415.0 ) ( 3,414.1 ) 0 ( 0.9 )

( 3,098.6 ) 650.7 ( 2,447.9 ) ( 2,447.7 ) 0 ( 0.2 )

Reclassification adjustment for amounts realized in net income by income statement line item:

2 unchanged sentences

Total reclassification adjustment for amounts realized in net income ( 309.4 ) 65.0 ( 244.4 ) ( 244.1 ) ( 0.3 ) 0

( 250.8 ) 52.6 ( 198.2 ) ( 198.0 ) ( 0.2 ) 0

Total other comprehensive income (loss) ( 4,013.4 ) 842.8 ( 3,170.6 ) ( 3,170.0 ) 0.3 ( 0.9 )

Balance at June 30, 2022 $ ( 2,795.5 ) $ 586.5 $ ( 2,209.0 ) $ ( 2,193.5 ) $ ( 14.7 ) $ ( 0.8 )

Balance at September 30, 2022 $ ( 3,961.1 ) $ 831.2 $ ( 3,129.9 ) $ ( 3,113.8 ) $ ( 14.6 ) $ ( 1.5 )

Components of Changes in

6 unchanged sentences

comprehensive

income (loss) Total net unrealized gains (losses) on securities Net unrealized gains (losses) on forecasted transactions Foreign

income (loss) Total net unrealized gains (losses) on securities Net unrealized losses on forecasted transactions Foreign

Balance at December 31, 2020 $ 1,187.4 $ ( 255.7 ) $ 931.7 $ 947.3 $ ( 15.6 ) $ 0

12 unchanged sentences

Total other comprehensive income (loss) ( 732.2 ) 153.8 ( 578.4 ) ( 578.3 ) 0.6 ( 0.7 )

Balance at June 30, 2021 $ 619.6 $ ( 136.4 ) $ 483.2 $ 498.8 $ ( 15.1 ) $ ( 0.5 )

Balance at September 30, 2021 $ 455.2 $ ( 101.9 ) $ 353.3 $ 369.0 $ ( 15.0 ) $ ( 0.7 )

In an effort to manage interest rate risk, we entered into forecasted transactions on certain of Progressive’s debt issuances.

3 unchanged sentences

In addition, The Progressive Corporation and/or its subsidiaries are named as defendants in a number of class action or individual lawsuits that challenge certain of the operations of the subsidiaries.

These cases include and/or typically have included those alleging damages as a result of, among other things, our subsidiaries’ methods used for evaluating and paying medical or injury claims or benefits, including, but not limited to, certain bodily injury, personal injury protection, uninsured motorist/underinsured motorist (UM/UIM), and medical payment claims and for reimbursing medical costs incurred by Medicare/Medicaid beneficiaries;

These cases include and/or typically have included those alleging damages as a result of, among other things:

our subsidiaries’ methods used for evaluating and paying medical or injury claims or benefits, including, but not limited to, certain bodily injury, personal injury protection, uninsured motorist/underinsured motorist (UM/UIM), and medical payment claims and for reimbursing medical costs incurred by Medicare/Medicaid beneficiaries;

other claims handling procedures, including, but not limited to, challenges relating to our network of repair facilities, our methods used for estimating physical damage to vehicles for repair purposes and for evaluating the actual cash value of total loss vehicles, our payment of fees and taxes, our subrogation practices, our salvage practices, and our handling of diminution of value claims;

3 unchanged sentences

our insurance product design;

our premium actions in response to the COVID-19 pandemic;

certain of our premium actions, including those in response to the COVID-19 pandemic;

rating practices;

10 unchanged sentences

Although outcomes of pending cases are uncertain until final disposition, we establish accruals for these lawsuits when it is probable that a loss has been or will be incurred and we can reasonably estimate potential loss exposure, which may include a range of loss.

As to lawsuits for which the loss is considered neither probable or estimable, or is considered probable but not estimable, we do not establish an accrual.

As to lawsuits for which the loss is considered neither probable nor estimable, or is considered probable but not estimable, we do not establish an accrual.

Nevertheless, we continue to evaluate pending litigation to determine if any losses not deemed probable and estimable become so, at which point we would establish an accrual at our best estimate of the loss or range of loss.

With respect to our pending lawsuits that are not related to claims under insurance policies, the accruals that we have established, if any, were not material at June 30, 2022 and 2021, or December 31, 2021, and there were no material settlements during 2021 or the first six months of 2022.

With respect to our pending lawsuits that are not related to claims under insurance policies, the accruals that we have established, if any, were not material at September 30, 2022 and 2021, or December 31, 2021, and there were no material settlements during 2021 or the first nine months of 2022.

For most of these lawsuits, we do not consider any losses to be both probable and estimable, and we are unable to estimate a meaningful range of loss, if any, at this time, due to the factors discussed in Note 12 – Litigation in our 2021 Annual Report to Shareholders.

2 unchanged sentences

Note 12 Goodwill and Intangible Assets

The majority of the goodwill recorded as of June 30, 2022 and 2021, and December 31, 2021, related to the April 1, 2015, acquisition of a controlling interest in ARX.

In connection with the preparation of our second quarter 2022 financial results, we recorded an impairment loss of $ 224.8 million, which is disclosed as a separate line item in our consolidated statements of comprehensive income.

The majority of the goodwill recorded as of September 30, 2022 and 2021, and December 31, 2021, related to the April 1, 2015, acquisition of a controlling interest in ARX.

In the second quarter 2022, we performed an interim impairment test of our goodwill allocated to the ARX reporting unit and recorded an impairment loss of $ 224.8 million, which is disclosed as a separate line item in our consolidated statements of comprehensive income.

The impairment loss was fully allocated to our Property segment.

There were no previously recorded accumulated impairment losses and there are no other accumulated goodwill impairment losses on any of the outstanding goodwill.

We performed the interim test of our goodwill for impairment for the ARX reporting unit.

There were no previously recorded goodwill impairment losses on any of the outstanding goodwill.

The indicators of impairment primarily related to the magnitude of recent weather events relative to forecasted expectations, as well as other factors impacting our plans to restore our Property business to target profitability in a timely fashion and the subsequent reduced forecasted profitability of ARX.

As a result, we determined it was more likely than not that the fair value of the ARX reporting unit was less than its carrying value.

The quantitative goodwill impairment assessment consisted of comparing the fair value of the reporting unit to its carrying value.

To determine the fair value of a reporting unit, we use a discounted cash flow model.

The model uses assumptions including, but not limited to, discount rate, and forecasted growth, profitability, investment return, and capital requirements.

The assumptions and estimates are consistent with those we believe other non-related marketplace participants would use and are based on management’s best estimates at the time of the analysis.

The calculated fair value of the ARX reporting unit was below its carrying value at June 30, 2022, which resulted in recording a goodwill impairment.

The model uses assumptions including, but not limited to, discount rate, forecasted growth, profitability, investment return, and capital requirements.

The assumptions and estimates were consistent with those we believe other non-related marketplace participants would use and were based on management’s best estimates at the time of the analysis.

The calculated fair value of the ARX reporting unit was below its carrying value at June 30, 2022, which resulted in recording the goodwill impairment.

There was no indication of impairment on the remaining $ 227.9 million goodwill, of which 98 % was attributable to our Personal Lines Agency business and related to the ARX acquisition.

1 unchanged sentence

The following table is a summary of the net carrying amount of other intangible assets:

(millions) June 30, 2022 June 30, 2021 December 31, 2021

(millions) September 30, 2022 September 30, 2021 December 31, 2021

Intangible assets subject to amortization $ 79.4 $ 119.5 $ 104.9

5 unchanged sentences

Intangible assets subject to amortization consisted of the following:

(millions) June 30, 2022 June 30, 2021 December 31, 2021

(millions) September 30, 2022 September 30, 2021 December 31, 2021

Category Gross

10 unchanged sentences

Total $ 231.9 $ 152.5 $ 79.4 $ 488.1 $ 368.6 $ 119.5 $ 488.1 $ 383.2 $ 104.9

Amortization expense was $ 5.5 million and $ 20.1 million for the three and six months ended June 30, 2022, respectively, compared to $ 14.3 million and $ 28.5 million during the same periods last year.

During the first quarter 2022, the policies in

force intangible asset, with a gross carrying value of $ 256.2 million, was fully amortized.

Note 13 New Accounting Standards — We did not adopt any new accounting standards during the six months ended June 30, 2022.

Amortization expense was $ 5.4 million and $ 25.5 million for the three and nine months ended September 30, 2022, respectively, compared to $ 14.6 million and $ 43.1 million during the same periods last year.

During the first quarter 2022, the policies in force intangible asset, with a gross carrying value of $ 256.2 million, was fully amortized.

Note 13 New Accounting Standards — We did not adopt any new accounting standards during the nine months ended September 30, 2022.

We assessed the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on our consolidated financial statements as well as material updates to previous assessments, if any, from our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

There were no new material accounting standards issued in the six months ended June 30, 2022, that are expected to impact The Progressive Corporation or its subsidiaries.

There were no new material accounting standards issued in the nine months ended September 30, 2022, that are expected to impact The Progressive Corporation or its subsidiaries.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements