What changed in this filing

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Item 1. Financial Statements

2024-05-06 compared with 2023-10-31 · 169 added, 327 removed, 805 unchanged (38% of the section changed)

2 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Nine Months

Periods Ended September 30, 2023 2022 2023 2022

Three Months Ended March 31, 2024 2023

(millions — except per share amounts)

15 unchanged sentences

Interest expense 69.6 63.3

Goodwill impairment 0 0 0 224.8

Total expenses 14,302.6 13,748.8

Net Income (Loss)

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

Income before income taxes 2,939.9 554.4

Provision for income taxes 608.5 106.5

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

Net income 2,331.4 447.9

Other Comprehensive Income (Loss)

5 unchanged sentences

Computation of Earnings Per Common Share

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

Preferred share dividends 1

10.4 6.7 27.2 20.1

Net income (loss) available to common shareholders $ 1,110.9 $ 117.4 $ 1,887.4 $ ( 125.0 )

Net income $ 2,331.4 $ 447.9

Preferred share dividends and other 1

Net income available to common shareholders $ 2,314.4 $ 440.6

Average common shares outstanding - Basic 585.4 584.9

3 unchanged sentences

Earnings per common share $ 3.94 $ 0.75

1 Changed to a floating dividend rate in March 2023.

See Note 1 – Basis of Reporting and Accounting for further discussion.

1 All of our outstanding Serial Preferred Shares, Series B, were redeemed in February 2024.

See Note 9 – Dividends for further discussion.

See notes to consolidated financial statements.

1 unchanged sentence

Consolidated Balance Sheets

September 30, December 31,

March 31, December 31,

(millions — except per share amounts) 2024 2023 2023

27 unchanged sentences

756.3 949.0 880.8

Goodwill 227.9 227.9 227.9

Intangible assets, net of accumulated amortization of $ 170.0 , $ 153.1 , and $ 158.6

74.9 91.8 86.3

Net federal deferred income taxes 1,031.8 1,057.0 936.0

8 unchanged sentences

Serial Preferred Shares (authorized 20.0 )

Serial Preferred Shares, Series B, no par value (cumulative, liquidation preference $ 1,000 per share) (authorized, issued, and outstanding 0.5 )

Serial Preferred Shares, Series B, no par value (cumulative, liquidation preference $ 1,000 per share) (authorized, issued, and outstanding of 0 , 0.5 , and 0.5 )

0 493.9 493.9

16 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

Three Months Nine Months

Periods Ended September 30, 2023 2022 2023 2022

Three Months Ended March 31, 2024 2023

(millions — except per share amounts)

1 unchanged sentence

Balance, beginning of period $ 493.9 $ 493.9

Redemption of Serial Preferred Shares, Series B 1

Balance, end of period 0 493.9

13 unchanged sentences

Balance, beginning of period 18,800.5 15,721.2

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

Net income 2,331.4 447.9

Treasury shares purchased ( 36.1 ) ( 31.7 )

2 unchanged sentences

Cash dividends declared on Serial Preferred Shares, Series B ($ 15.688377 and $ 0 per share) 1

( 10.3 ) ( 13.4 ) ( 19.8 ) ( 13.4 )

Reinvested dividends on restricted stock units ( 0.2 ) ( 0.3 )

6 unchanged sentences

Total shareholders’ equity $ 21,811.3 $ 16,868.4

1 See Note 9 – Dividends for further discussion.

There are 5.0 million Voting Preference Shares authorized;

3 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2023 2022

Three Months Ended March 31, 2024 2023

Cash Flows From Operating Activities

Net income (loss) $ 1,914.6 $ ( 104.9 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 2,331.4 $ 447.9

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 69.7 68.0

Amortization of intangible assets 11.4 25.5

Net amortization (accretion) of fixed-income securities ( 7.5 ) ( 5.0 )

2 unchanged sentences

Net (gains) losses on disposition of property and equipment ( 1.7 ) 16.5

Goodwill impairment 0 224.8

Premiums receivable ( 2,234.3 ) ( 1,994.5 )

22 unchanged sentences

Cash Flows From Financing Activities

Redemption of Serial Preferred Shares, Series B ( 500.0 ) 0

Dividends paid to common shareholders ( 497.9 ) ( 58.5 )

1 unchanged sentence

Acquisition of treasury shares for restricted stock tax liabilities ( 37.1 ) ( 32.7 )

Acquisition of treasury shares acquired in open market ( 27.5 ) ( 2.4 )

Net proceeds from debt issuances 496.3 1,486.0

Net cash provided by financing activities 207.8 1,205.1

Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 82.5 ) 163.2

Net cash used in financing activities ( 1,042.8 ) ( 104.6 )

Increase in cash, cash equivalents, restricted cash, and restricted cash equivalents 68.3 67.7

Cash, cash equivalents, restricted cash, and restricted cash equivalents – January 1 99.6 220.9

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

Cash, cash equivalents, restricted cash, and restricted cash equivalents – March 31

$ 167.9 $ 288.6

3 unchanged sentences

BASIS OF REPORTING AND ACCOUNTING

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 accompanying consolidated financial statements include the accounts of The Progressive Corporation and 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 September 30, 2023, are not necessarily indicative of the results expected for the full year.

The results of operations for the period ended March 31, 2024, 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, 2023 (2023 Annual Report to Shareholders).

Insurance Premiums and Receivables

Premiums Receivable

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

1 unchanged sentence

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

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

Three Months Ended March 31,

(millions) 2024 2023

2 unchanged sentences

( 148.2 ) ( 119.3 )

( 140.2 ) ( 101.7 ) ( 381.8 ) ( 306.0 )

Allowance for credit losses, end of period $ 327.7 $ 340.9

1 Represents the incremental increase in other underwriting expenses.

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

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

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

Property and Equipment

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 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.

Included in other assets in our consolidated balance sheets are “held for sale” properties of $ 169.8 million, $ 67.8 million, and $ 77.2 million at March 31, 2024 and 2023, and December 31, 2023, respectively.

When properties are determined to be “held for sale,” the property is written down to its fair value less estimated costs to sell, as applicable.

The increase in the March 31, 2024, balance from December 31, 2023, was primarily driven by a decision in the first quarter to sell certain regional properties to optimize our real estate portfolio by consolidating employees into already existing alternative properties.

Earnings Per Share

Net income is reduced by preferred share dividends to determine net income available to common shareholders and is used in our calculation of the per common share amounts.

Beginning March 15, 2023, the annual dividend rate for our Series B Preferred Shares switched to a floating rate.

The floating nature of the dividend rate will impact the amount of the adjustment required to calculate net income available to common shareholders.

We redeemed all of our outstanding Serial Preferred Shares, Series B, in February 2024.

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.

To determine net income available to common shareholders, which is used in the calculation of the per common share amounts, we reduced net income by preferred share dividends, and, for 2024,

• underwriting discounts and commissions on the preferred share issuance,

• initial issuance costs related to the preferred shares, and

• excise taxes related to the preferred share redemption.

New Accounting Standards

During the first quarter 2023, the Financial Accounting Standards Board issued an Accounting Standards Update (ASU), which permits an election to amortize the cost of tax equity investments to the provision for income taxes if certain conditions are met.

Currently, these investments are accounted for under the equity method of accounting.

This ASU will be effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2023 (2024 for calendar-year companies).

If elected, this standard must be applied on either a modified retrospective or a retrospective basis.

We intend to adopt the new standard under the modified retrospective basis, however, we do not expect this standard to have a material impact on our financial condition or results of operations.

On January 1, 2024, we started to amortize the remaining original cost of tax equity investments to the provision for income taxes, since certain conditions were met, on the modified retrospective basis, pursuant to an Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board.

Previously, these investments were accounted for under the equity method of accounting.

The adoption of the ASU had no cumulative effect on retained earnings and did not have a material impact on our financial condition or results of operations.

The amount of income tax credits and investment amortization recognized for the first quarter 2024, and the carrying amount of the tax credit investments at March 31, 2024, were not material to our financial condition or results of operations and, therefore, no additional disclosure is provided.

Reclassification

Goodwill and intangible assets are included in other assets in our consolidated balance sheets and the amortization of intangible assets in other, net, in cash provided by operating activities in our consolidated statements of cash flows.

The March 31, 2023, amounts, which were presented separately on the balance sheet and statement of cash flows in the prior year, were reclassified to conform to the current year presentation.

The following tables present the composition of our investment portfolio by major security type.

6 unchanged sentences

(Losses) Fair

September 30, 2023

March 31, 2024

Available-for-sale securities:

19 unchanged sentences

(Losses) Fair

September 30, 2022

March 31, 2023

Available-for-sale securities:

39 unchanged sentences

$ 65,914.9 $ 312.2 $ ( 2,346.8 ) $ 2,118.3 $ 65,998.6 100.0 %

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.

1 At March 31, 2024 and 2023, we had $ 16.2 million and $ 22.8 million, respectively, of net unsettled security purchase transactions included in other liabilities, compared to $ 45.6 million included in other assets at December 31, 2023.

The total fair value of the portfolio at March 31, 2024 and 2023, and December 31, 2023, included $ 3.2 billion, $ 4.1 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 March 31, 2024, bonds and certificates of deposit in the principal amount of $ 672.4 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 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.

government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at March 31, 2024 or 2023, or December 31, 2023.

At March 31, 2024, 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 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) 2024 2023 Dec.

5 unchanged sentences

Total hybrid securities $ 957.6 $ 1,197.3 $ 1,010.3

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:

Fixed Maturities The composition of fixed maturities by maturity at March 31, 2024, was:

(millions) Cost Fair Value

12 unchanged sentences

Value Unrealized

September 30, 2023

March 31, 2024

government obligations 139 $ 32,968.1 $ ( 1,327.3 ) 37 $ 21,634.6 $ ( 295.1 ) 102 $ 11,333.5 $ ( 1,032.2 )

11 unchanged sentences

Value Unrealized

September 30, 2022

March 31, 2023

government obligations 148 $ 19,446.8 $ ( 1,209.6 ) 40 $ 5,938.5 $ ( 127.5 ) 108 $ 13,508.3 $ ( 1,082.1 )

21 unchanged sentences

Total fixed maturities 1,223 $ 44,062.1 $ ( 2,346.8 ) 126 $ 13,347.6 $ ( 119.3 ) 1,097 $ 30,714.5 $ ( 2,227.5 )

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.

We had seven securities that had their credit ratings downgraded during the first quarter 2024, with a combined fair value of $ 58.2 million and an unrealized loss of $ 8.2 million as of March 31, 2024.

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 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 did no t record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible during the first three months of 2024 or 2023, and did no t have a material credit loss allowance balance as of March 31, 2024 and 2023, or December 31, 2023.

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

6 unchanged sentences

If we were likely to, or intended to, sell prior to a potential recovery, we would write off the unrealized loss.

For those securities that we determined we were not likely to, or did not intend to, sell prior to a potential recovery, we

performed additional analysis to determine if the loss was credit related.

For those securities that we determined we were not likely to, or did not intend to, sell prior to a potential recovery, we performed additional analysis to determine if the loss was

credit related.

For securities subject to credit related loss, we calculated the net present value (NPV) of the cash flows expected (i.e., expected recovery value) using the current book yield for each security.

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

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

Three Months Nine Months

In the event that the NPV was below the amortized value, and the amount was determined to be material on any specific security, 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 March 31, 2024 and 2023, and December 31, 2023, we believe that none of the unrealized losses on our fixed-maturity securities were related to material credit losses on any specific securities, or in the aggregate.

We continue to expect all the securities in our fixed-maturity 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 March 31, 2024 and 2023, and December 31, 2023, to determine if the accrued interest amounts were uncollectible.

Realized Gains (Losses) The components of net realized gains (losses) for the three months ended March 31, were:

(millions) 2024 2023

2 unchanged sentences

government obligations $ 0 $ 3.8

State and local government obligations 0.3 0

Corporate debt securities 2.9 0.1

Residential mortgage-backed securities 0 0 0 0.7

Other asset-backed securities 0 0 0 0.1

Total available-for-sale securities 3.2 3.9

11 unchanged sentences

Other asset-backed securities ( 0.1 ) ( 0.2 )

Redeemable preferred stocks ( 0.3 ) 0

Short-term investments 0 ( 0.1 )

10 unchanged sentences

Corporate debt securities ( 11.9 ) ( 20.3 )

Residential mortgage-backed securities 0 0 0 0.7

Commercial mortgage-backed securities ( 4.3 ) ( 34.5 )

Other asset-backed securities ( 0.1 ) ( 0.2 )

Redeemable preferred stocks ( 0.3 ) 0

Short-term investments 0 ( 0.1 )

5 unchanged sentences

Subtotal net realized gains (losses) on security sales ( 146.5 ) ( 43.5 )

Gain 8.4 0 21.6 0

Impairment 0 ( 2.3 )

6 unchanged sentences

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

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

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

During the first three months of 2024, the majority of our gross realized losses on security sales were U.S.

Treasury Notes that were sold for duration management.

We also sold corporate debt securities with less attractive risk/reward profiles and select commercial mortgage-backed securities.

During the first quarter 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 our view of the potential of a more difficult economic environment.

The gross loss incurred in our nonredeemable preferred stocks,

during the first quarter 2023, 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 our consolidated balance sheets.

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

In addition, during the first quarter last year, we selectively sold securities, which were primarily corporate debt securities and commercial mortgage-backed securities.

The other asset gain for the first three months of 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 following table reflects our holding period realized gains (losses) recognized on equity securities held at the respective periods ended March 31:

(millions) 2024 2023

2 unchanged sentences

Net holding period gains (losses) recognized during the period on equity securities held at period end $ 294.9 $ 90.5

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

Three Months Nine Months

Net Investment Income The components of net investment income for the three months ended March 31, were:

(millions) 2024 2023

19 unchanged sentences

Net investment income $ 611.9 $ 414.1

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.

On a year-over-year basis, investment income (interest and dividends) increased 47 % and recurring investment book yield increased 23 % for the three months ended March 31, 2024, compared to the same period last year.

The increases primarily reflected investing new cash from operations and proceeds from maturing bonds in higher coupon rate securities.

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:

13 unchanged sentences

(millions) Level 1 Level 2 Level 3 Total Cost

September 30, 2023

March 31, 2024

Fixed maturities:

31 unchanged sentences

(millions) Level 1 Level 2 Level 3 Total Cost

September 30, 2022

March 31, 2023

Fixed maturities:

69 unchanged sentences

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 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.

At March 31, 2024, vendor-quoted prices represented 92 % of our Level 1 classifications (excluding short-term investments), compared to 91 % at March 31, 2023 and 93 % at December 31, 2023.

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.

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.

All Level 1 preferred stocks with active exchange quotes were sold during 2023.

At both March 31, 2024 and December 31, 2023, vendor-quoted prices comprised 100 % of our Level 2 classifications (excluding short-term investments), compared to 98 % at March 31, 2023;

the remaining 2 % at March 31, 2023 were dealer-quoted prices.

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.

12 unchanged sentences

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.

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.

16 unchanged sentences

This analysis provides us with additional comfort regarding the source’s process, the quality of its review, and its willingness to improve its analysis based on feedback from clients.

We believe this effort helps ensure that we are reporting the most representative fair values for our securities.

We believe this effort helps ensure that we are

reporting the most representative fair values for our securities.

After all the valuations are received and our review of Level 2 securities is complete, if the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected securities to Level 3.

8 unchanged sentences

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.

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.

At both March 31, 2024 and December 31, 2023, we held one privately held fixed-maturity security that is classified as a Level 3 investment.

At March 31, 2023, we did no t have any securities in our fixed-maturity portfolio listed as Level 3.

During the first three months of 2024 and for the full year of 2023, there were no material assets or liabilities measured at fair value on a nonrecurring basis.

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 nine months ended September 30, 2023 and 2022:

Level 3 Fair Value

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

Paydowns/Other Purchases Sales Net Realized

on Sales Change in

Valuation Net

In (Out) Fair Value at September 30, 2023

Equity securities:

Nonredeemable preferred stocks:

$ 56.0 $ ( 8.1 ) $ 0 $ 0 $ 0 $ 0 $ 0 $ 47.9

15.8 0 0 0 0 0 0 15.8

Common equities:

Common stocks 18.3 8.1 0 ( 10.0 ) 8.9 ( 7.0 ) 0 18.3

Other risk investments 21.9 0.7 0 0 0 0 0 22.6

Total Level 3 securities

$ 112.0 $ 0.7 $ 0 $ ( 10.0 ) $ 8.9 $ ( 7.0 ) $ 0 $ 104.6

Level 3 Fair Value

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

Paydowns/Other Purchases Sales Net Realized

on Sales Change in

Valuation Net

In (Out) Fair Value at September 30, 2022

Equity securities:

Nonredeemable preferred stocks:

$ 64.9 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 64.9

17.0 0 0 0 0 0 0 17.0

Common equities:

Common stocks 0 0 0 0 0 0 0 0

Other risk investments 18.5 0.2 0 0 0 0 0 18.7

Total Level 3 securities

$ 100.4 $ 0.2 $ 0 $ 0 $ 0 $ 0 $ 0 $ 100.6

The following tables provide a summary of changes in fair value associated with Level 3 assets for the three months ended March 31, 2024 and 2023:

Level 3 Fair Value

3 unchanged sentences

Valuation Net

In (Out) Fair Value at September 30, 2023

In (Out) Fair Value at March 31, 2024

Fixed maturities:

Corporate debt securities $ 3.0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 3.0

Equity securities:

11 unchanged sentences

Valuation Net

In (Out) Fair Value at September 30, 2022

In (Out) Fair Value at March 31, 2023

Equity securities:

3 unchanged sentences

Common equities:

Common stocks 18.3 0 0 0 0 0 0 18.3

Other risk investments 19.8 0.5 0 0 0 0 0 20.3

1 unchanged sentence

$ 121.9 $ 0.5 $ 0 $ 0 $ 0 $ 0 $ 0 $ 122.4

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:

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at March 31, 2024 and 2023, and December 31, 2023:

Quantitative Information about Level 3 Fair Value Measurements

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

($ in millions) Fair Value at March 31, 2024 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

Fixed maturities:

Corporate debt securities $ 3.0 Market comparables Weighted average market capitalization price change % ( 2.3 )% to 1.2 %

Equity securities:

5 unchanged sentences

Quantitative Information about Level 3 Fair Value Measurements

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

($ in millions) Fair Value at March 31, 2023 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

Equity securities:

Nonredeemable preferred stocks $ 83.8 Market comparables Weighted average market capitalization price change % 2.7 % to 23.3 %

Common stocks 18.3 Market comparables Weighted average market capitalization price change % ( 51.3 )% to 48.3 %

Subtotal Level 3 securities 102.1

3 unchanged sentences

($ in millions) Fair Value at December 31, 2023 Valuation Technique Unobservable Input Range of Input Values Increase (Decrease) Weighted Average Increase (Decrease)

Fixed maturities:

Corporate debt securities $ 3.0 Market comparables Weighted average market capitalization price change % 0.3 % to 7.7 %

Equity securities:

5 unchanged sentences

Debt at each of the balance sheet periods consisted of:

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

March 31, 2024 March 31, 2023 December 31, 2023

(millions) Carrying

44 unchanged sentences

Total $ 6,889.7 $ 6,297.8 $ 6,389.3 $ 5,881.0 $ 6,888.6 $ 6,431.3

The Progressive Corporation issued $ 500.0 million of 4.95 % Senior Notes due 2033 in May 2023 in an underwritten public offering.

The net proceeds from the issuance, after deducting underwriters’ discounts, commissions, and other issuance costs, was approximately $ 496.3 million.

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 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 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.

The line of credit is uncommitted and, as such, all advances are subject to PNC’s discretion.

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

There was no short-term debt outstanding as of the end of all the periods presented.

The Progressive Corporation has a line of credit with PNC Bank, National Association, in the maximum principal amount of $ 300 million.

See the 2023 Annual Report to Shareholders for a discussion of the terms of this line of credit.

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

The effective tax rate for the three months ended March 31, 2024, was 20.7 % , compared to 19.2 % for the same period last year, with the change primarily due to our permanent tax differences having a lower impact on our effective rate due to increased profitability in the current year.

Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates.

We review our deferred tax assets regularly for recoverability.

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.

At March 31, 2024 and 2023, and December 31, 2023, 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 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).

At March 31, 2024 and 2023, and December 31, 2023, the net deferred tax asset includes a

gross deferred tax asset of $ 482.5 million , $ 582.6 million, and $ 427.3 million, respectively, related to unrealized losses on fixed-maturity securities.

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

We had net current income taxes payable of $ 961.8 million , $ 203.3 million, and $ 311.8 million at March 31, 2024 and 2023, and December 31, 2023, respectively, included in accounts payable, accrued expenses, and other liabilities on our consolidated balance sheets.

The increase in income taxes payable was primarily driven by the increase in profitability during the first quarter 2024.

At March 31, 2024 and 2023, and December 31, 2023, we had no reserves for uncertain tax positions.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

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

September 30,

(millions) 2024 2023

10 unchanged sentences

Total paid 10,392.7 9,698.8

Net balance at September 30

Net balance at March 31

30,179.1 25,725.3

Plus reinsurance recoverables on unpaid losses 4,651.9 5,301.1

Balance at September 30

Balance at March 31

$ 34,831.0 $ 31,026.4

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

We experienced favorable reserve development of $ 11.4 million during the first three months of 2024, compared to unfavorable development of $ 621.2 million for the same period last year, which is reflected as “incurred related to prior years ” in the table above.

First Quarter 2024

• The favorable prior year reserve development included approximately $ 50 million of favorable development attributable to accident year 2023 and $ 15 million to accident year 2022;

partially offset by unfavorable development attributable to accident years 2021 and prior.

• Our perso nal auto products incurred about $ 100 million of favorable loss and loss adjustment expense (LAE) reserve development, in part due to lower than anticipated frequency in Florida following tort reform that passed in the first quarter 2023, with about 60 % attributable to the Agency auto business and the balance in the Direct auto business.

• Our Commercial Lines business experienced about $ 70 million of unfavorable development, primarily driven by higher than anticipated severity in our commercial auto business for California and New York.

First Quarter 2023

• The unfavorable prior year reserve development included approximately $ 498 million attributable to accident year 2022, $ 30 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.

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.

• Our personal auto products incurred about $ 428 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 in auto property and physical damage coverages, higher than anticipated late reported injury claims, and, to a lessor extent, increased loss costs in Florida injury and medical coverages in small part due to the impact of the legislation enacted in March 2023 in Florida.

• Our Commercial Lines business experienced about $ 144 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 injury claims.

• Our Property business experienced $ 42 million of unfavorable development, primarily from higher than anticipated claims expenses and higher than anticipated severity in our homeowner liability peril and umbrella products.

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 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.

The amount of overnight reverse repurchase commitments, which are not considered part of the investment portfolio, held by these subsidiaries at March 31, 2024 and 2023, and December 31, 2023, were $ 107.7 million, $ 177.5 million, and $ 68.2 million, respectively.

Restricted cash and restricted 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:

Nine Months Ended September 30,

Three Months Ended March 31,

(millions) 2024 2023

6 unchanged sentences

In the respective periods, we paid the following:

Nine Months Ended September 30,

Three Months Ended March 31,

(millions) 2024 2023

5 unchanged sentences

Our Commercial Lines segment writes auto-related liability and physical damage insurance, business-related general liability and property insurance predominately for small businesses, and workers’ compensation insurance primarily for the transportation industry.

Our Property segment writes residential property insurance for homeowners, other property owners, and renters.

Our service businesses provide insurance-related services, including 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 disclosed in our 2022 Annual Report to Shareholders, during 2022, our contract to act as a servicing agent for processing Commercial Automobile Insurance Procedures/Plans (CAIP) business expired during the third quarter 2022 and we did not renew the contract.

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

Our Property segment writes residential property insurance for homeowners, other property owners, and renters, and

umbrella insurance.

Our service businesses provide insurance-related services, including 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.

All segment revenues are generated from external customers;

1 unchanged sentence

Following are the operating results for the respective periods:

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

2023 2022 2023 2022

Three Months Ended March 31,

(millions) Revenues Pretax

Profit (Loss) Revenues Pretax

Profit (Loss)

5 unchanged sentences

Commercial Lines 2,557.4 209.0 2,356.1 37.2

631.8 74.6 561.0 ( 141.0 ) 1,852.8 ( 164.9 ) 1,689.6 ( 289.6 )

Property 712.8 46.9 598.7 ( 32.7 )

Other indemnity 2

2 unchanged sentences

Fees and other revenues 3

223.7 NA 181.4 NA 656.6 NA 531.9 NA

236.5 NA 206.2 NA

Service businesses 84.2 ( 7.9 ) 72.5 ( 9.8 )

1 unchanged sentence

773.2 767.5 491.4 485.9

Interest expense NA ( 69.7 ) NA ( 63.1 ) NA ( 198.7 ) NA ( 180.4 )

Property - Goodwill impairment 2

NA 0 NA 0 NA 0 NA ( 224.8 )

Interest expense NA ( 69.6 ) NA ( 63.3 )

Consolidated total $ 17,242.5 $ 2,939.9 $ 14,303.2 $ 554.4

NA = Not applicable

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;

1 Personal auto insurance accounted for 95 % and 94 % of the total Personal Lines segment net premiums earned during the three months ended March 31, 2024 and 2023, respectively;

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 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.

2 Includes other underwriting business and run-off operations.

10 unchanged sentences

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

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

2023 2022 2023 2022

Three Months Ended March 31,

Under-writing

2 unchanged sentences

Margin Combined

Ratio Under-writing

Margin Combined

Ratio Under-writing

Margin Combined

Personal Lines

3 unchanged sentences

Commercial Lines 8.2 91.8 1.6 98.4

11.8 88.2 ( 25.1 ) 125.1 ( 8.9 ) 108.9 ( 17.1 ) 117.1

Property 6.6 93.4 ( 5.5 ) 105.5

Total underwriting operations 13.9 86.1 1.0 99.0

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:

Following is a summary of our common and preferred share dividends that were declared and/or paid during the three months ended March 31, 2024 and 2023:

(millions, except per share amounts) Amount

Declared Payable Per Share Accrued/Paid 1

Common – Annual-Variable Dividends:

December 2023 January 2024 $ 0.75 $ 439.3

Common – Quarterly Dividends:

August 2023 October 2023 $ 0.10 $ 58.5

May 2023 July 2023 0.10 58.5

March 2024 April 2024 0.10 58.6

December 2023 January 2024 0.10 58.6

August 2022 October 2022 0.10 58.5

May 2022 July 2022 0.10 58.5

March 2023 April 2023 0.10 58.5

1 unchanged sentence

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

January 2024 2

February 2024 15.688377 7.8

December 2022 March 2023 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 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.

See Note 14 – Dividends in our 2022 Annual Report to Shareholders for a discussion of our quarterly and annual common share dividends and our preferred share dividend policies.

2 During the first quarter 2024, we redeemed all of the outstanding Serial Preferred Shares, Series B, at the stated amount of $ 1,000 per share, for an aggregate payout of $ 507.8 million, including accrued and unpaid dividends of $7.8 million to, but excluding, February 22, 2024, which was the redemption date.

See Note 14 – Dividends in our 2023 Annual Report to Shareholders for a discussion of the dividend policies related to our common shares and our preferred shares, prior to redemption.

OTHER COMPREHENSIVE INCOME (LOSS)

9 unchanged sentences

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

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:

Investment securities ( 547.4 ) 114.9 ( 432.5 ) ( 432.5 ) 0 0

Foreign currency translation adjustment 0 0 0 0 0 0

Total other comprehensive income (loss) before reclassifications ( 547.4 ) 114.9 ( 432.5 ) ( 432.5 ) 0 0

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

Net realized gains (losses) on securities ( 55.6 ) 11.7 ( 43.9 ) ( 43.9 ) 0 0

Interest expense ( 0.2 ) 0 ( 0.2 ) 0 ( 0.2 ) 0

Total reclassification adjustment for amounts realized in net income ( 55.8 ) 11.7 ( 44.1 ) ( 43.9 ) ( 0.2 ) 0

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

Accumulated Other

Comprehensive Income (after tax)

(millions) Pretax total

comprehensive

income (loss) Total tax

benefit After tax total

comprehensive

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 )

Balance at December 31, 2023 $ ( 2,052.9 ) $ 437.2 $ ( 1,615.7 ) $ ( 1,600.8 ) $ ( 14.0 ) $ ( 0.9 )

Other comprehensive income (loss) before reclassifications:

7 unchanged sentences

Total other comprehensive income (loss) ( 263.3 ) 55.4 ( 207.9 ) ( 207.8 ) 0.1 ( 0.2 )

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

Balance at March 31, 2024 $ ( 2,316.2 ) $ 492.6 $ ( 1,823.6 ) $ ( 1,808.6 ) $ ( 13.9 ) $ ( 1.1 )

Components of Changes in

11 unchanged sentences

Investment securities 705.6 ( 148.2 ) 557.4 557.4 0 0

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

Total other comprehensive income (loss) before reclassifications 705.6 ( 148.2 ) 557.4 557.4 0 0

4 unchanged sentences

Total other comprehensive income (loss) 763.6 ( 160.3 ) 603.3 603.2 0.1 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

Accumulated Other

Comprehensive Income (after tax)

(millions) Pretax total

comprehensive

income (loss) Total tax

benefit After tax total

comprehensive

income (loss) Total net unrealized gains (losses) 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 )

Other comprehensive income (loss) before reclassifications:

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

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

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

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

Net realized gains (losses) on securities ( 309.0 ) 64.9 ( 244.1 ) ( 244.1 ) 0 0

Interest expense ( 0.4 ) 0.1 ( 0.3 ) 0 ( 0.3 ) 0

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

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

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

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

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

2 unchanged sentences

We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, The Progressive Corporation and/or its 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 (PIP), 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, the application of a negotiation adjustment in calculating total loss valuations, our payment of fees and taxes, our subrogation practices, our salvage practices, and our handling of diminution of value claims;

homeowner claims handling practices and procedures;

interpretations of the provisions of our insurance policies;

our insurance product design;

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

rating practices;

certain marketing, sales, services, implementation and renewal practices and procedures, including with respect to accessibility and privacy;

our usage-based insurance program;

certain relationships with independent insurance agents;

patent matters;

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 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, Georgia, New York, Pennsylvania, and Washington;

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

Michigan, and New York;

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

The nature and volume of litigation pending against The Progressive Corporation and/or its insurance subsidiaries is similar to that which was disclosed in Note 12 – Litigation in our 2023 Annual Report to Shareholders.

As of March 31, 2024, lawsuits have been certified or conditionally certified as class/collective actions in cases alleging:

we improperly value total loss claims in Colorado, Georgia, Indiana, New York, and Pennsylvania;

we improperly fail to pay fees and taxes associated with total losses in Michigan and New York;

we improperly adjust medical bills in Washington;

we improperly calculate basic economic loss as it relates to wage loss coverage in New York;

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

we improperly fail to timely process and pay personal injury protection claims in Texas;

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

1 unchanged sentence

Other insurance companies face many of these same issues.

We plan to contest the pending lawsuits vigorously, but may pursue settlement negotiations in some cases, as we deem appropriate.

1 unchanged sentence

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 September 30, 2023 and 2022, or December 31, 2022, and there were no material settlements during 2022 or the first nine months of 2023.

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 either our best estimate of the loss or the lower end of the range of loss.

Lawsuits arising from insurance policies and operations, including but not limited to allegations involving claims adjustment and vehicle valuation, may be filed contemporaneously in multiple states.

As of March 31, 2024, we are named as defendants in class action lawsuits pending in multiple states alleging that we improperly value total loss vehicle physical damage claims through the application of a negotiation adjustment in calculating such valuations, which includes five states in which classes have been certified, as noted above, and lawsuits styled as putative class actions pending in additional states.

These lawsuits, which were filed at different times by different plaintiffs, feature certain similar claims and also include different allegations and are subject to various state laws.

While we believe we have meritorious defenses and we are vigorously contesting these lawsuits, an unfavorable result in, or a settlement of, a significant number of these lawsuits could, in aggregation, have a material adverse effect on our financial condition, cash flows, and/or results of operations.

Based on information known at March 31, 2024, we determined that losses from these lawsuits are reasonably possible but neither probable nor reasonably estimable.

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 March 31, 2024 and 2023, or December 31, 2023, and there were no material settlements during 2023 or the first three months of 2024.

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 2023 Annual Report to Shareholders.

In the event that any one or more of these lawsuits results in a substantial judgment against us, or settlement by us, or if our accruals (if any) prove to be inadequate by a significant amount, the resulting liability could have a material adverse effect on our consolidated financial condition, cash flows, and/or results of operations.

In the event that any one or more of these lawsuits results in a substantial judgment against us, or settlement by us, or if our accruals (if any) prove to be inadequate, the resulting liability could have a material adverse effect on our consolidated financial condition, cash flows, and/or results of operations.

For a further discussion on our pending litigation and related reserving policies, see Note 12 – Litigation in our 2023 Annual Report to Shareholders.

GOODWILL AND INTANGIBLE ASSETS

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

reporting unit and recorded an impairment loss of $ 224.8 million .

The impairment loss was fully allocated to our Property operating segment.

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

See Note 15 – Goodwill and Intangible Assets in our 2022 Annual Report to Shareholders for a discussion of our goodwill impairment evaluation.

Intangible Assets

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

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

Intangible assets subject to amortization $ 62.5 $ 79.4 $ 73.9

Indefinite-lived intangible assets 1

12.4 12.4 12.4

Total $ 74.9 $ 91.8 $ 86.3

1 Indefinite-lived intangible assets are comprised of state insurance and agent licenses.

State insurance licenses were previously subject to amortization under superseded accounting guidance and have $ 0.6 million of accumulated amortization for all periods presented.

Intangible assets subject to amortization consisted of the following:

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

Category Gross

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Agency relationships $ 159.2 $ 96.7 $ 62.5 $ 159.2 $ 85.3 $ 73.9 $ 159.2 $ 88.1 $ 71.1

Software rights 69.1 69.1 0 69.1 64.8 4.3 69.1 67.0 2.1

Trade name 3.6 3.6 0 3.6 2.4 1.2 3.6 2.9 0.7

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

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