What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-08-01 · 145 added, 134 removed, 987 unchanged (22% of the section changed)

2 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Six Months

Periods Ended June 30, 2023 2022 2023 2022

Three Months Nine Months

Periods Ended September 30, 2023 2022 2023 2022

(millions — except per share amounts)

19 unchanged sentences

Income (loss) before income taxes 1,410.2 142.5 2,400.3 ( 103.2 )

Provision (benefit) for income taxes 90.3 ( 93.0 ) 196.8 ( 16.7 )

Provision for income taxes 288.9 18.4 485.7 1.7

Net income (loss) 1,121.3 124.1 1,914.6 ( 104.9 )

20 unchanged sentences

Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(millions — except per share amounts) 2023 2022 2022

59 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

Three Months Six Months

Periods Ended June 30, 2023 2022 2023 2022

Three Months Nine Months

Periods Ended September 30, 2023 2022 2023 2022

(millions — except per share amounts)

35 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30, 2023 2022

Nine Months Ended September 30, 2023 2022

Cash Flows From Operating Activities

40 unchanged sentences

Cash, cash equivalents, restricted cash, and restricted cash equivalents – January 1 220.9 202.1

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

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

$ 138.4 $ 365.3

3 unchanged sentences

BASIS OF REPORTING AND ACCOUNTING

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

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

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

The results of operations for the period ended June 30, 2023, are not necessarily indicative of the results expected for the full year.

The results of operations for the period ended September 30, 2023, are not necessarily indicative of the results expected for the full year.

These consolidated financial statements and the notes thereto should be read in conjunction with Progressive’s audited financial statements and accompanying notes included in Exhibit 13 to our Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report to Shareholders).

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We perform analyses to evaluate our premiums receivable for expected credit losses.

See the 2022 Annual Report to Shareholders for a discussion on our premiums receivable allowance for credit loss policy.

See our 2022 Annual Report to Shareholders for a discussion on our premiums receivable allowance for credit loss policy.

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

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

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

(millions) 2023 2022 2023 2022

5 unchanged sentences

1 Represents the incremental increase in other underwriting expenses.

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

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

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

Property and Equipment

Included in other assets in the consolidated balance sheets are “held for sale” property.

Included in other assets in our consolidated balance sheets are “held for sale” property.

When property is transferred to held for sale, the property is written down to its fair value less estimated costs to sell the property.

At June 30, 2023 and 2022, and December 31, 2022, we had held for sale property of $ 59.5 million, $ 24.9 million, and $ 48.7 million, respectively.

At September 30, 2023 and 2022, and December 31, 2022, we had held for sale property of $ 81.6 million, $ 47.4 million, and $ 48.7 million, respectively.

Earnings Per Share

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See Note 9 – Dividends for further discussion.

For periods 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.

New Accounting Standards

12 unchanged sentences

(Losses) Fair

June 30, 2023

September 30, 2023

Available-for-sale securities:

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(Losses) Fair

June 30, 2022

September 30, 2022

Available-for-sale securities:

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$ 55,316.0 $ 13.9 $ ( 3,551.5 ) $ 1,769.9 $ 53,548.3 100.0 %

1 At June 30, 2023, we had $ 248.0 million of net unsettled security purchase transactions included in other liabilities, compared to $ 34.4 million included in other assets at December 31, 2022.

At June 30, 2022, our net unsettled security transactions were $ 0 .

The total fair value of the portfolio at June 30, 2023 and 2022, and December 31, 2022, included $ 4.3 billion, $ 4.9 billion, and $ 4.4 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

At June 30, 2023, bonds and certificates of deposit in the principal amount of $ 616.8 million were on deposit to meet state insurance regulatory requirements.

1 At September 30, 2023 and 2022, we had $ 167.3 million and $ 74.7 million, respectively, of net unsettled security purchase transactions included in other liabilities, compared to $ 34.4 million included in other assets at December 31, 2022.

The total fair value of the portfolio at September 30, 2023 and 2022, and December 31, 2022, included $ 4.1 billion, $ 4.2 billion, and $ 4.4 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

At September 30, 2023, bonds and certificates of deposit in the principal amount of $ 612.4 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, 2023 or 2022, or December 31, 2022.

At June 30, 2023, 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, 2023 or 2022, or December 31, 2022.

At September 30, 2023, 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 did no t have any open repurchase or reverse repurchase transactions positions at June 30, 2023 and 2022, or December 31, 2022, and did not enter into any such transactions during the first six months of 2023.

We did no t have any open repurchase or reverse repurchase transactions positions at September 30, 2023 and 2022, or December 31, 2022, and did not enter into any such transactions during the first nine months of 2023.

During 2022, however, we did invest in repurchase transactions that had an immaterial impact on our results of operations and cash flows.

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) 2023 2022 Dec.

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Total hybrid securities $ 1,077.7 $ 1,235.6 $ 1,221.7

we use the fair value option 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, 2023, was:

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 use the fair value option 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 September 30, 2023, was:

(millions) Cost Fair Value

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Value Unrealized

June 30, 2023

September 30, 2023

government obligations 173 $ 34,293.8 $ ( 2,098.4 ) 37 $ 16,686.2 $ ( 557.6 ) 136 $ 17,607.6 $ ( 1,540.8 )

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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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Total fixed maturities 1,468 $ 44,315.9 $ ( 3,551.5 ) 873 $ 28,119.4 $ ( 1,505.0 ) 595 $ 16,196.5 $ ( 2,046.5 )

As of June 30, 2023, we had six securities that had their credit ratings downgraded during the quarter, with a combined fair value of $ 66.5 million and an unrealized loss of $ 7.1 million.

During the third quarter 2023, the credit ratings of our U.S.

government obligations went down due to two major credit rating agencies rating U.S.

government debt at AA+ instead of AAA.

Additionally, we had 14 securities in other fixed-maturity sectors that had their credit ratings downgraded, with a combined fair value of $ 144.2 million and an unrealized loss of $ 7.1 million as of September 30, 2023.

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 2023 or 2022, and did no t have a material credit loss allowance balance as of June 30, 2023 and 2022, or December 31, 2022.

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 2023 or 2022, and did no t have a material credit loss allowance balance as of September 30, 2023 and 2022, or December 31, 2022.

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

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The NPV was then compared to the security’s current amortized value to determine if a credit loss existed.

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, 2023 and 2022, and December 31, 2022, we believe none of the unrealized losses were related to material credit losses on any specific securities, or in the aggregate.

In the event that the NPV was below the amortized value, and the amount was determined to be material individually, or in the 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 September 30, 2023 and 2022, and December 31, 2022, we believe none of the unrealized losses were related to material credit losses on any individual security, 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, 2023 and 2022, and December 31, 2022, 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, 2023 and 2022, or December 31, 2022.

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, 2023 and 2022, and December 31, 2022, 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) 2023 2022 2023 2022

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

For the first six months of 2023, the gross gains in common equities reflected sales of securities, as part of our plan to incrementally reduce risk in the portfolio in response to the potential of a more difficult economic environment over the near term.

For the first nine months of both 2023 and 2022, the gross gains in common equities reflected sales of securities, as part of our plan to incrementally reduce risk in the portfolio in response to our view of the potential of a more difficult economic environment in both years.

The gross 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.

In addition, during 2023, we selectively sold securities, which were primarily corporate debt securities and commercial mortgage-backed securities.

gross loss incurred in our nonredeemable preferred stocks is primarily related to the sale of certain of our holdings in U.S.

In addition, during 2023, we selectively sold securities, which were primarily corporate debt securities and commercial mortgage-backed

The gross loss incurred in our nonredeemable preferred stocks was primarily related to the sale of certain holdings in U.S.

bank preferred stocks.

The other asset gain for 2023, related to proceeds received as the result of litigation in conjunction with three renewable energy investments we made from 2016 through 2018 (the original investments were previously written down in full).

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 is 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

The following table reflects our holding period realized gains (losses) recognized on equity securities held at the respective periods ended September 30:

Three Months Nine Months

(millions) 2023 2022 2023 2022

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Net holding period gains (losses) recognized during the period on equity securities held at period end $ ( 80.2 ) $ ( 140.7 ) $ ( 0.5 ) $ ( 2,164.1 )

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) 2023 2022 2023 2022

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Net investment income $ 503.0 $ 327.8 $ 1,365.5 $ 850.8

On a year-over-year basis, investment income (interest and dividends) increased 64 % and 55 % for the first three and six months of 2023, respectively, and the recurring investment book yield increased 36 % and 42 % for the first three and six months of 2023, respectively, compared to the same periods last year.

The increases are primarily due

to an increase in interest rates on floating-rate securities in our portfolio, an increase in average assets resulting from premium growth, and investing new cash and cash from maturities in higher interest rate securities given the rising interest rate environment.

On a year-over-year basis, investment income (interest and dividends) increased 53 % and 59 % for the three and nine months ended September 30, 2023, respectively, and the recurring investment book yield increased 32 % and 39 % for the three and nine months ended September 30, 2023, respectively, compared to the same periods last year.

The increases are primarily due to an increase in interest rates on floating-rate securities in our portfolio, an increase in average assets resulting from premium growth, and investing new cash and cash from maturities in higher interest rate securities given the rising interest rate environment.

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, 2023

September 30, 2023

Fixed maturities:

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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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These securities are held at their original cost, adjusted for any accretion of discount, since that value very closely approximates what an active market participant would be willing to pay for such securities.

The remainder of our short-term investments are classified as Level 2 and are not priced

externally since these securities continually trade at par value.

The remainder of our short-term investments are classified as Level 2 and are not priced externally since these securities continually trade at par value.

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, 2023, vendor-quoted prices represented 92 % of our Level 1 classifications (excluding short-term investments), compared to 87 % and 90 % at June 30, 2022 and December 31, 2022, respectively.

At September 30, 2023, vendor-quoted prices represented 93 % of our Level 1 classifications (excluding short-term investments), compared to 90 % at both September 30, 2022 and December 31, 2022.

The securities quoted by vendors in Level 1 primarily 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 active exchanges.

At June 30, 2023 and 2022, and December 31, 2022, 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 %.

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.

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

All Level 1 preferred stocks with active exchange quotes were sold as of September 30, 2023.

At September 30, 2023, vendor-quoted prices comprised 99 % of our Level 2 classifications (excluding short-term investments and common stock), while dealer-quoted prices represented the remaining 1 %, compared to 98 % and 2 %, respectively, at both September 30, 2022 and December 31, 2022.

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.

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.

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

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 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 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 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, credit quality, and coupon, 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 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, duration, credit quality, and coupon 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.

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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 prices to previous market valuation prices.

Additionally, we review on a monthly basis our external sales transactions and compare the actual final market sales prices to previous market valuation prices.

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 marketplace and affect a particular security’s price at sale.

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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.

The Level 2 common stock held at June 30, 2022, was transferred to Level 3 at December 31, 2022.

At June 30, 2023 and 2022, and December 31, 2022, we did no t have any securities in our fixed-maturity portfolio listed as Level 3.

During the first six months of 2023 and 2022, there were no material assets or liabilities measured at fair value on a nonrecurring basis, other than goodwill.

One of our Level 3 financial nonredeemable preferred stocks was exchanged into common equity during third quarter 2023 and the security was sold prior to September 30, 2023.

The Level 2 common stock held at September 30, 2022, was transferred to Level 3 at December 31, 2022.

At September 30, 2023 and 2022, and December 31, 2022, we did no t have any securities in our fixed-maturity portfolio listed as Level 3.

During the first nine months of 2023 and 2022, there were no material assets or liabilities measured at fair value on a nonrecurring basis, other than goodwill.

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

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, 2023 and 2022:

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, 2023 and 2022:

Level 3 Fair Value

(millions) Fair Value at March 31, 2023 Calls/

(millions) Fair Value at June 30, 2023 Calls/

Paydowns/Other Purchases Sales Net Realized

1 unchanged sentence

Valuation Net

In (Out) Fair Value at June 30, 2023

In (Out) Fair Value at September 30, 2023

Equity securities:

8 unchanged sentences

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:

8 unchanged sentences

Level 3 Fair Value

(millions) Fair Value at Dec.

31, 2022 Calls/

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

Paydowns/Other Purchases Sales Net Realized

1 unchanged sentence

Valuation Net

In (Out) Fair Value at June 30, 2023

In (Out) Fair Value at September 30, 2023

Equity securities:

7 unchanged sentences

Level 3 Fair Value

(millions) Fair Value at Dec.

31, 2021 Calls/

(millions) Fair Value at December 31, 2021 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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$ 127.7 $ 1.3 $ 0 $ ( 15.0 ) $ ( 17.2 ) $ 3.8 $ 0 $ 100.6

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at June 30, 2023 and 2022, and December 31, 2022:

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at September 30, 2023 and 2022, and December 31, 2022:

Quantitative Information about Level 3 Fair Value Measurements

($ in millions) Fair Value at June 30, 2023 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

($ in millions) Fair Value at September 30, 2023 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, 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 Dec.

31, 2022 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

($ in millions) Fair Value at December 31, 2022 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

Equity securities:

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Debt at each of the balance sheet periods consisted of:

June 30, 2023 June 30, 2022 December 31, 2022

September 30, 2023 September 30, 2022 December 31, 2022

(millions) Carrying

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Consistent with the other senior notes issued by Progressive, interest on this note is payable semiannually, principal is due at maturity, and the note is 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, 2023 and 2022, and December 31, 2022.

There was no short-term debt outstanding at September 30, 2023 and 2022, and December 31, 2022.

During the second quarter 2023, The Progressive Corporation amended its line of credit with PNC Bank, National Association (PNC), to increase the maximum principal amount to $ 300 million from the previous amount of $ 250 million and extend the expiration date to April 30, 2024.

Subject to the terms and conditions of the line of credit documents, advances under the line of credit (if any) will bear interest at a variable rate equal to 1-month term Secured Overnight Financing Rate (SOFR) plus 1.10 %.

Each advance must be repaid on the 30 th day after the date of the advance or, if earlier, April 30, 2024, the expiration date of

the line of credit.

Subject to the terms and conditions of the line of credit documents, advances under the line of credit (if any) will bear interest at a variable rate equal to the 1-month term Secured Overnight Financing Rate (SOFR) plus 1.10 %.

Each advance must be repaid on the 30 th day after the date of the advance or, if earlier, April 30, 2024, the expiration date of the line of credit.

Prepayments are permitted without penalty.

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We review our deferred tax assets regularly for recoverability.

At June 30, 2023 and 2022, and December 31, 2022, we determined that we did no t need a valuation allowance on our gross deferred tax assets.

At September 30, 2023 and 2022, and December 31, 2022, 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.

At June 30, 2023 and 2022, and December 31, 2022, the net deferred tax asset includes a gross deferred tax asset of $ 703.7 million, $ 583.0 million, and $ 742.9 million, respectively, related to unrealized losses on fixed-maturity

We believe this deferred tax asset will be realized based on the existence of prior year capital gains, current temporary differences related to unrealized gains in our equity portfolio, and other tax planning strategies.

At June 30, 2023 and 2022, and December 31, 2022, we had no reserves for uncertain tax positions.

The effective tax rate for the three and six months ended June 30, 2023, was 20.7 % and 19.9 %, respectively, compared to 14.6 % and 6.8 % for the same periods last year.

The lower effective tax rates for the three and six months ended June 30, 2022, were in part due to the goodwill impairment charge, partially offset by our permanent tax differences having a greater impact on the effective rate given our pretax loss for the periods.

At September 30, 2023 and 2022, and December 31, 2022, the net deferred tax asset includes a gross deferred tax asset of $ 807.0 million, $ 827.7 million, and $ 742.9 million, respectively, related to unrealized losses on fixed-maturity securities.

We believe this deferred tax asset will be realized based on the existence of

prior year capital gains, current temporary differences related to unrealized gains in our equity portfolio, and other tax planning strategies.

At September 30, 2023 and 2022, and December 31, 2022, we had no reserves for uncertain tax positions.

The effective tax rate for the three and nine months ended September 30, 2023, was 20.5 % and 20.2 %, respectively, compared to 12.9 % and ( 1.6 )% for the same periods last year.

The lower effective tax rates for the three and nine months ended September 30, 2022, were due in part to the low amount of income (loss) before taxes during those periods, resulting in permanent tax differences having a greater impact on the effective rate.

The low effective tax rate for the nine months ended September 30, 2022, was also due to a goodwill impairment charge (see Note 12 – Goodwill and Intangible Assets for further discussion).

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

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

September 30,

(millions) 2023 2022

10 unchanged sentences

Total paid 30,346.0 25,130.9

Net balance at June 30

Net balance at September 30

28,636.1 24,597.8

Plus reinsurance recoverables on unpaid losses 4,941.2 6,034.0

Balance at June 30

Balance at September 30

$ 33,577.3 $ 30,631.8

We experienced unfavorable reserve development of $ 1,110.5 million and $ 144.9 million during the first six months of 2023 and 2022, respectively, which is reflected as “incurred related to prior years ” in the table above.

Year-to-date June 30, 2023

We experienced unfavorable reserve development of $ 1,147.0 million and $ 52.8 million during the first nine months of 2023 and 2022, respectively, which is reflected as “incurred related to prior years ” in the table above.

Year-to-date September 30, 2023

• The unfavorable prior year reserve development included approximately $ 929 million attributable to accident year 2022, $ 108 million to accident year 2021, and the remainder to accident years 2020 and prior.

• Our perso nal auto products incurred about $ 866 million of unfavorable loss and loss adjustment expense (LAE) reserve development, with the Agency and Direct auto businesses each contributing about half.

About half of the unfavorable development was attributable to higher than anticipated severity in auto property and physical damage coverages, while the remaining unfavorable development was primarily due to increased loss costs in Florida injury and medical coverages and, to a lesser extent, higher than anticipated late reported injury claims.

• Our Commercial Lines business experienced about $ 224 million of unfavorable development, primarily due to higher than anticipated severity and frequency of late reported injury claims.

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 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 LAE 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.

Over half of the unfavorable development was attributable to higher than anticipated severity in auto property and physical damage coverages, while the remaining unfavorable development was primarily due to increased loss costs in Florida injury and medical coverages and, to a lesser extent, higher than anticipated late reported injury claims;

partially offset by lower than expected loss adjustment expenses.

• Our Commercial Lines business experienced about $ 277 million of unfavorable development, primarily driven by higher than anticipated severity and frequency of late reported injury claims, with about half of the unfavorable development attributable to our transportation network company (TNC) business.

Year-to-date September 30, 2022

• Approximately $ 45 million of the unfavorable prior year reserve development was attributable to accident year 2021 and $ 29 million to 2019 and prior accident years, partially offset by $ 21 million of favorable development attributable to accident year 2020.

• Our personal auto products incurred about $ 28 million of favorable loss and 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 LAE 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 TNC business.

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, 2023 and 2022, and December 31, 2022, were $ 68.0 million, $ 140.6 million, and $ 125.9 million, respectively.

The amount of reverse repurchase commitments, which are not considered part of the investment portfolio, held by these subsidiaries at September 30, 2023 and 2022, and December 31, 2022, were $ 79.7 million, $ 123.0 million, and $ 125.9 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 participants.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(millions) 2023 2022

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In the respective periods, we paid the following:

Six Months Ended June 30,

Nine Months Ended September 30,

(millions) 2023 2022

13 unchanged sentences

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,

2023 2022 2023 2022

24 unchanged sentences

NA = Not applicable

1 Personal auto insurance accounted for 94 % of the total Personal Lines segment net premiums earned during the three and six months ended June 30, 2023 and 2022;

1 Personal auto insurance accounted for 94 % of the total Personal Lines segment net premiums earned during the three and nine months ended September 30, 2023 and 2022;

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

2 For the three and six months ended June 30, 2023, pretax profit (loss) included $ 2.8 million and $ 7.8 million, respectively, of amortization expense associated with intangible assets attributable to our Property segment, and $ 5.0 million and $ 19.1 million for the same periods in 2022.

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

2 For the three and nine months ended September 30, 2023, pretax profit (loss) included $ 2.9 million and $ 10.7 million, respectively, of amortization expense associated with intangible assets attributable to our Property segment, and $ 5.0 million and $ 24.1 million for the same periods in 2022.

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

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

11 unchanged sentences

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,

2023 2022 2023 2022

14 unchanged sentences

Total underwriting operations 7.6 92.4 0.8 99.2 2.8 97.2 3.5 96.5

1 Included in the three and six months ended June 30, 2023, is 0.4 points and 0.6 points, respectively, of amortization expense associated with intangible assets and 0.9 points and 1.7 points, respectively, for the three and six months ended June 30, 2022.

Following is a summary of our common and preferred share dividends that were declared and/or paid during the six months ended June 30, 2023 and 2022:

1 Included in the three and nine months ended September 30, 2023, is 0.5 points and 0.6 points, respectively, of amortization expense associated with intangible assets and 0.9 points and 1.4 points, respectively, for the three and nine months ended September 30, 2022.

Following is a summary of our common and preferred share dividends that were declared and/or paid during the nine months ended September 30, 2023 and 2022:

(millions, except per share amounts) Amount

1 unchanged sentence

Common – Quarterly Dividends:

August 2023 October 2023 $ 0.10 $ 58.5

May 2023 July 2023 0.10 58.5

1 unchanged sentence

December 2022 January 2023 0.10 58.5

August 2022 October 2022 0.10 58.5

May 2022 July 2022 0.10 58.5

2 unchanged sentences

Preferred Dividends:

August 2023 September 2023 20.67700 10.3

May 2023 June 2023 18.92463 9.5

December 2022 March 2023 26.875 13.4

August 2022 September 2022 26.875 13.4

December 2021 March 2022 26.875 13.4

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

Beginning March 15, 2023, the annual dividend rate for our Series B Preferred Shares switched to a floating rate equal to the three-month London Interbank Offered Rate (LIBOR), or a comparable successor base rate, plus a spread of 2.539 % applied to the stated amount per share.

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

Beginning March 15, 2023, the annual dividend rate for our Series B Preferred Shares switched to a floating rate equal to the three-month London Interbank Offered Rate (LIBOR) plus a spread of 2.539 % applied to the stated amount per share.

We, as calculation agent under our Series B Preferred Shares, determined that the reference rate for the Series B Preferred Shares, for any determination date after June 30, 2023, shall be the sum of (i) 3-Month CME Term SOFR plus (ii) a tenor spread adjustment of 0.26161 %, and (iii) a spread of 2.539 %.

The new reference rate became effective for the dividend period determination date commencing September 15, 2023.

The reference rate was determined in

accordance with the successor base rate provisions of the Series B Preferred Shares and the Adjustable Interest Rate (LIBOR) Act and the regulation issued by the Board of Governors of the Federal Reserve System on December 16, 2022, implementing the LIBOR Act.

During the floating rate period, dividends on the Series B Preferred Shares will be payable quarterly, if and when declared by the Board of Directors.

11 unchanged sentences

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

Balance at March 31, 2023 $ ( 2,793.3 ) $ 594.6 $ ( 2,198.7 ) $ ( 2,183.1 ) $ ( 14.4 ) $ ( 1.2 )

Balance at June 30, 2023 $ ( 3,369.6 ) $ 715.6 $ ( 2,654.0 ) $ ( 2,638.7 ) $ ( 14.3 ) $ ( 1.0 )

Other comprehensive income (loss) before reclassifications:

7 unchanged sentences

Total other comprehensive income (loss) ( 491.6 ) 103.2 ( 388.4 ) ( 388.6 ) 0.2 0

Balance at June 30, 2023 $ ( 3,369.6 ) $ 715.6 $ ( 2,654.0 ) $ ( 2,638.7 ) $ ( 14.3 ) $ ( 1.0 )

Balance at September 30, 2023 $ ( 3,861.2 ) $ 818.8 $ ( 3,042.4 ) $ ( 3,027.3 ) $ ( 14.1 ) $ ( 1.0 )

Components of Changes in

7 unchanged sentences

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

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:

7 unchanged sentences

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

18 unchanged sentences

Total other comprehensive income (loss) ( 304.3 ) 63.9 ( 240.4 ) ( 241.0 ) 0.4 0.2

Balance at June 30, 2023 $ ( 3,369.6 ) $ 715.6 $ ( 2,654.0 ) $ ( 2,638.7 ) $ ( 14.3 ) $ ( 1.0 )

Balance at September 30, 2023 $ ( 3,861.2 ) $ 818.8 $ ( 3,042.4 ) $ ( 3,027.3 ) $ ( 14.1 ) $ ( 1.0 )

Components of Changes in

17 unchanged sentences

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 )

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

7 unchanged sentences

homeowner claims handling practices and procedures;

our assessment of fees related to insufficient funds or reversed payments;

interpretations of the provisions of our insurance policies;

7 unchanged sentences

alleged violation of the Telephone Consumer Protection Act;

vendor data security;

commercial disputes, including breach of contract;

a small business grant program;

and certain employment practices, including claims relating to pay practices and fair employment practices, among other matters.

As of June 30, 2023, lawsuits have been certified or conditionally certified as class/collective actions in cases alleging:

As of September 30, 2023, lawsuits have been certified or conditionally certified as class/collective actions in cases alleging:

we improperly reduce or deny UIM benefits in New Mexico;

we improperly value total loss claims in Florida, New York, and Washington;

we improperly value total loss claims in Florida, Georgia, New York, Pennsylvania, and Washington;

we improperly fail to pay fees and taxes associated with total losses in Florida,

3 unchanged sentences

we improperly fail to timely process and pay PIP claims in Texas;

we improperly reduce or deny first-party medical benefits in Arkansas;

and that certain of our compensation practices and overtime payment practices are improper, including our classification of certain employees as exempt from overtime pay requirements.

5 unchanged sentences

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, 2023 and 2022, or December 31, 2022, and there were no material settlements during 2022 or the first six months of 2023.

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, 2023 and 2022, or December 31, 2022, and there were no material settlements during 2022 or the first nine months of 2023.

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 2022 Annual Report to Shareholders.

2 unchanged sentences

GOODWILL AND INTANGIBLE ASSETS

The majority of the goodwill recorded as of June 30, 2023 and 2022, and December 31, 2022, related to the April 1, 2015, acquisition of a controlling interest in ARX Holding Corp.

During the six months ended June 30, 2023, there were no changes to the carrying amount of goodwill.

The majority of the goodwill recorded as of September 30, 2023 and 2022, and December 31, 2022, related to the April 1, 2015, acquisition of a controlling interest in ARX Holding Corp.

During the nine months ended September 30, 2023, there were no changes to the carrying amount of goodwill.

In the second quarter 2022, we performed an interim impairment test of our goodwill allocated to the ARX

5 unchanged sentences

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

(millions) June 30, 2023 June 30, 2022 December 31, 2022

(millions) September 30, 2023 September 30, 2022 December 31, 2022

Intangible assets subject to amortization $ 62.5 $ 79.4 $ 73.9

5 unchanged sentences

Intangible assets subject to amortization consisted of the following:

(millions) June 30, 2023 June 30, 2022 December 31, 2022

(millions) September 30, 2023 September 30, 2022 December 31, 2022

Category Gross

9 unchanged sentences

Total $ 231.9 $ 169.4 $ 62.5 $ 231.9 $ 152.5 $ 79.4 $ 231.9 $ 158.0 $ 73.9

Amortization expense was $ 3.1 million and $ 8.5 million for the three and six months ended June 30, 2023, respectively, compared to $ 5.5 million and $ 20.1 million during the same periods last year.

Amortization expense was $ 2.9 million and $ 11.4 million for the three and nine months ended September 30, 2023, respectively, compared to $ 5.4 million and $ 25.5 million during the same periods last year.

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