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Item 2. Management’s Discussion and Analysis

2025-08-04 compared with 2025-05-05 · 326 added, 265 removed, 609 unchanged (49% of the section changed)

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

The Progressive Corporation’s insurance subsidiaries recognized substantial year-over-year growth in both premiums and policies in force during the first quarter 2025, compared to the same period last year, while maintaining an underwriting profit better than our 4% companywide calendar-year underwriting profit goal.

We wrote $22.2 billion of net premiums written during the first quarter 2025, which was $3.2 billion more than we generated during the same period last year, and reported an underwriting profit margin of 14.0%.

During the first three months of 2025, companywide net premiums written and earned increased 17% and 20%, respectively, compared to the same period last year, and policies in force increased 18%.

Companywide policies in force grew by 1.3 million policies since December 31, 2024, and by 5.5 million since March 31, 2024, to end the first quarter 2025 with 36.3 million policies in force.

Our Personal Lines segment experienced strong year-over-year growth for the first quarter 2025, with net premiums written increasing 20% and policies in force up 18%, compared to the same period in the prior year.

This growth was primarily in our personal auto products and reflects new application growth mainly attributable to increased advertising spend and our continued efforts to work closely with our independent agents and to leverage our agent compensation program to reward writing profitable business.

In Commercial Lines, we experienced solid growth with net premiums written up 5% and policies in force up 6%, during the first quarter 2025, compared to the same period last year.

The growth in Commercial Lines premiums written primarily reflected the renewal of certain transportation network company (TNC) business policies that have higher rates and projected mileage, which is the basis for computing premiums, than the policies that renewed in the first quarter 2024.

During the first quarter 2025, on a countrywide basis, we increased personal auto rates less than 1% and increased our personal property rates about 2%, in the aggregate.

In our core commercial auto businesses (which excludes our TNC business, our Progressive Fleet & Specialty Programs (Fleet & Specialty) products, and our business owners’ policy (BOP) product), we increased rates in the aggregate about 1% during the first quarter 2025.

We currently believe we are adequately priced in our personal auto products in most states and will continue to monitor the impact from tariffs and potential changes in the regulatory environment.

We expect both the personal property and core commercial auto products to have near double-digit rate increases through the remainder of 2025.

Starting in the first quarter 2025, the U.S.

The Progressive Corporation’s insurance subsidiaries recognized substantial year-over-year growth in both premiums and policies in force during the second quarter 2025, compared to the same period last year, while maintaining an underwriting profit better than our 4% companywide calendar-year underwriting profit goal.

During the second quarter 2025, we wrote $20.1 billion of net premiums written, which was $2.2 billion more than we generated during the same period last year.

Companywide net premiums written and earned increased 12% and 18%, respectively, during the second quarter 2025, compared to the same period last year.

Policies in force increased 15%, or by 5.0 million policies, compared to June 30, 2024;

with policies in force increasing by 1.0 million in the second quarter 2025.

We experienced profitable growth during the second quarter 2025, with a strong underwriting profit margin of 13.8%.

Our Personal Lines segment experienced strong year-over-year growth for the second quarter 2025, with net premiums written increasing 15% and policies in force up 16%, over the significant growth we experienced in the second quarter 2024.

This growth was primarily driven by our personal auto products and reflects new and renewal application growth, which we believe is mainly attributable to increased advertising spend, competitively priced products, and our agency incentive compensation programs.

In Commercial Lines, we experienced a decrease in net premiums written of 6% during the second quarter 2025, compared to the same period last year, despite experiencing policies in force growth of 6%.

The decline in net premiums written during the quarter was primarily driven by changes in the length of policy terms and related renewal timing for certain transportation network company (TNC) business policies.

These policies were renewed for a 6-month term in the second quarter 2024 and subsequently renewed for a 12-month term in the fourth quarter 2024.

In addition, our contractor and business auto business market targets (BMT) experienced a shift to a greater mix of policies with 6-month terms, compared to the second quarter 2024.

As 12-month policies have about twice the amount of net premiums written compared to 6-month policies, the shift negatively impacted average premiums.

During the second quarter 2025, on a countrywide basis, we decreased personal auto rates less than 1% and increased our personal property rates about 4%, in the aggregate.

rates in the aggregate about 3% during the second quarter 2025.

While we currently believe we are adequately priced in our personal auto products in most states, starting in the first quarter 2025, the U.S.

government announced additional tariffs on goods imported into the U.S.

from numerous countries, which have, in response, resulted in additional tariffs against the U.S.

We regularly model the potential impact tariffs could have on vehicle loss costs, the supply chain, the availability of parts, and general inflation, among other factors, although the dynamic international trade environment currently prevents us from accurately predicting how tariffs will ultimately impact our business.

While our focus has been on trying to maintain stable rates for customers, tariffs and other retaliatory actions will likely result in higher loss costs, which could result in a reduction in profitability and higher than currently anticipated rate increases throughout 2025 and 2026.

For the first quarter 2025, the year-over-year increase in net income primarily reflected an increase in underwriting income.

The increase in recurring investment income, was offset by net realized losses during the first quarter 2025, compared to net realized gains in the same period last year.

Comprehensive income increased $1.3 billion over the first quarter last year, which was primarily driven by a $0.9 billion decrease in net unrealized losses on our fixed-maturity securities, compared to a $0.2 billion net unrealized loss increase in the same period last year.

The change in the unrealized losses we recognized during both periods were primarily driven by the then-current economic environment.

At March 31, 2025, total capital (debt plus shareholders’ equity) was $35.8 billion, which was an increase of $3.4 billion from year-end 2024, primarily due to the $3.5 billion of comprehensive income earned in the first quarter 2025.

While our focus has been on trying to maintain stable rates for customers, effective tariffs and other retaliatory actions will likely result in higher loss costs, which could result in a reduction in profitability and the possible need for higher than currently anticipated rate increases throughout 2025 and 2026.

While we expect to continue increasing rates in our personal property and core commercial auto products through the remainder of 2025, we will continue to monitor the impact from tariffs and other potential changes in the regulatory environment as we evaluate the possible need for additional rate increases.

For the second quarter 2025, the $1.7 billion year-over-year increase in net income reflected an increase in both underwriting income and total net investment income, with the change in net unrealized losses on our fixed-maturity securities also contributing positively to our growth in comprehensive income.

At June 30, 2025, total capital (debt plus shareholders’ equity) was $39.5 billion, which was an increase of $7.0 billion from year-end 2024, primarily driven by the $7.1 billion of comprehensive income earned in the first half of 2025.

Insurance Operations

Our underwriting profit margin was 14.0% during the first quarter 2025, compared to 13.9% during the first quarter 2024.

Our Personal Lines and Commercial Lines operating segments both generated strong profitability for the first three months of 2025.

While underwriting profitability was relatively flat on a year-over-year basis, for the first quarter 2025, our companywide loss and loss adjustment expense (LAE) ratio decreased 2.0 points, which was mostly offset by a 1.9 point increase in the expense ratio.

The decrease in the loss and LAE ratio was primarily driven by favorable prior accident years reserve development and decreased incurred personal and commercial auto accident frequency.

The increase in our companywide expense ratio during the first quarter 2025 primarily reflected increased advertising expense.

During the first quarter 2025, our advertising spend was $1.3 billion, which was 86%, or 2.3 points, greater than the first quarter last year.

Our underwriting profit margin was 13.8% during the second quarter 2025, compared to 8.1% during the second quarter 2024.

Our Personal Lines and Commercial Lines operating segments both generated strong profitability for the second quarter 2025, with margins of 14.0% and 13.2%, respectively.

Underwriting profit was up significantly on a year-over-year basis, for the second quarter 2025, with our companywide loss and loss adjustment expense (LAE) ratio decreasing 6.1 points.

The decrease in the loss and LAE ratio was primarily driven by a decrease in catastrophe losses in Personal Lines and by favorable prior accident years reserve development in both Personal Lines and Commercial Lines.

We closely manage our expenses, monitoring both acquisition expenses and non-acquisition expenses, which we view as an important measure of operational efficiency as we seek to deliver our most competitive rates to consumers.

We will continue to advertise to maximize growth as long as the advertising spend is efficient and we remain on track to achieve our calendar-year profitability goal.

During the second quarter 2025, our advertising spend was $1.2 billion, which was 35%, or 0.7 points, greater than the second quarter last year.

The expense ratio impact from increased advertising spend was partially offset by a decrease in certain general expenses.

Our Personal Lines segment is comprised of our personal vehicle and property products.

Personal Lines vehicles include both personal auto and special lines products.

Our Personal Lines profitability for the first quarter 2025 was 14.3%, with personal vehicle and property products reporting 14.3% and 12.8%, respectively.

In total, our special lines products, which are generally used less in cold weather months, had about a 1 point favorable impact on our total personal vehicle combined ratio for the first quarter 2025.

Personal Lines vehicles include both personal auto and special lines products, with the latter typically having higher losses during the warmer weather months, due to the seasonal nature of these products (e.g., recreational vehicles, such as motorcycles, RVs, and watercraft).

Our Personal Lines underwriting margin for the second quarter 2025 was 14.0%, with personal vehicle and property products reporting 13.8% and 16.4%, respectively.

The special lines profitability had minimal impact to our personal vehicle combined ratio during the second quarter 2025.

Our Commercial Lines segment includes our core commercial auto products, TNC business, Fleet & Specialty products, and BOP product.

Our total Commercial Lines underwriting profitability for the first quarter 2025 was 12.5%.

During the first quarter 2025, our personal auto and core commercial auto businesses’ profitability benefited from higher average earned premium per policy, lower incurred loss frequency trends, and, in personal auto, favorable prior accident years reserve development.

For the first quarter 2025, both segments generated strong net premiums written growth.

Personal Lines net premiums written grew 20%, with the agency and direct personal vehicle businesses growing 17% and 25%, respectively, while personal property premium growth was flat.

Commercial Lines net premiums written grew 5%.

Our total Commercial Lines underwriting profitability for the second quarter 2025 was 13.2%.

For the second quarter 2025, Personal Lines generated strong net premiums written growth of 15%, with the agency and direct personal vehicle businesses and property business growing 11%, 20%, and 2%, respectively, compared to the same period last year.

Commercial Lines net premiums written decreased 6%.

Changes in net premiums written are a function of new business applications (i.e., policies sold), business mix, premium per policy, and retention.

During the first quarter 2025, we experienced a significant increase in total Personal Lines new business applications, primarily driven by increases in our personal vehicle products, due to increased advertising spend, our efforts to get back into the independent agents’ quote flows, and our competitiveness in the marketplace.

New personal auto applications increased 32% during the first quarter 2025, compared to the same period in the prior year.

In our personal property business, significant growth in new applications in our renters policies was offset by declines in our homeowners, condo, and dwelling products.

The new application growth in our homeowners/condo products was down just over 55% on a year-over-year basis for the first quarter 2025, with decreases in both less volatile weather-related states and in the more volatile

weather-related markets (e.g., coastal and hail-prone states).

During the first quarter 2025, in our personal property business, we continued to focus on improving profitability and reducing exposure in more volatile weather-related markets, and, where permitted, on slowing growth and non-renewing policies.

We prioritized insuring lower-risk properties (e.g., new construction, existing homes with newer roofs), accepting new business for homeowners/condo products only when bundled with a Progressive personal auto policy, where permitted, and continued to exit the non-owner-occupied home market.

In addition, we expanded our cost sharing through mandatory wind and hail deductibles and roof depreciation schedules in markets where permitted.

We plan to continue these actions during the remainder of 2025 in the more volatile weather-related markets and will continue to assess rate adequacy, at the state level, to determine readiness for new business growth.

Total Commercial Lines net premiums written growth primarily reflected the renewal of certain of our TNC policies, due to rate increases and higher projected mileage for 2025, compared to 2024, which is the basis for computing premiums.

Net premiums written growth for our core commercial auto products, which excludes the impact of the TNC renewal, was flat on a year-over-year basis.

New applications in our core commercial auto business increased 8% during the first quarter 2025, compared to the same period last year, primarily due to an increase in quote volume and improved conversion in all of our business market targets (BMT), other than for-hire transportation and for-hire specialty, as discussed below.

Excluding the impact of the for-hire transportation and specialty BMTs, which had a year-over-year decrease in new applications, our core commercial auto new application growth would have been 15% during the first quarter 2025.

During the second quarter 2025, we experienced an increase in both total Personal Lines new and renewal business applications, primarily driven by significant increases in our personal vehicle products, due to continued increased advertising spend, our continued efforts to get back into independent agents’ quote flows, and our competitiveness in the marketplace.

New and renewal personal auto applications increased 8% and 22%, respectively, during the second quarter 2025, on top of the significant growth we experienced in the same period last year.

In our personal property business, significant growth in new applications in our renters policies was offset by declines in our homeowners product, which we define as our total personal property business excluding renters and umbrella products.

For the second quarter 2025, the new

business applications in our homeowners product decreased just over 50%, compared to the same period last year, with decreases in both less volatile weather-related states and in the more volatile weather-related markets (e.g., coastal and hail-prone states).

During the second quarter 2025, in our personal property business, we continued to focus on improving profitability and reducing exposure in more volatile weather-related markets, and, where permitted, on slowing growth and non-renewing policies.

We prioritized insuring lower-risk properties (e.g., new construction, existing homes with newer roofs), accepting new business for our homeowners product only when bundled with a Progressive personal auto policy, where permitted, and continued to exit the non-owner-occupied home market.

In addition, we maintained our cost sharing through mandatory wind and hail deductibles and roof depreciation schedules in most markets.

We believe these actions adversely impacted new business application growth.

We plan to continue these actions during the remainder of 2025 in the more volatile weather-related markets and will determine readiness for new business growth at the state level based on our concentration risks, product segmentation, rate adequacy, and cost sharing execution.

The total Commercial Lines net premiums written decrease during the second quarter 2025 primarily reflected changes in the renewal timing for certain TNC policies and a shift in the length of policy terms in the core commercial auto contractor and business auto BMTs, compared to the second quarter 2024, as previously discussed.

Excluding the TNC business, total Commercial Lines net premiums written was down 2% on a year-over-year basis.

New and renewal business applications in our core commercial auto products increased 3% and 5%, respectively, during the second quarter 2025, compared to the same period last year.

The new business application growth was primarily due to an increase in quote volume in all BMTs and improved conversion in all BMTs, other than for-hire transportation and for-hire specialty.

Excluding the impact of the for-hire transportation BMT, which had a year-over-year decrease in new applications, our core commercial auto new application growth would have been 8% during the second quarter 2025.

The for-hire transportation BMT continued to be adversely impacted by challenging freight market conditions that have caused a decline in the active number of motor carriers in this BMT.

During the first quarter 2025, on a year-over-year basis, average written premium per policy was flat in personal auto and decreased 10% and 6% in our personal property and core commercial auto products, respectively.

In aggregate, we took minimal personal auto rate increases during the first quarter 2025 on a companywide basis.

The decrease in personal property average written premium per policy was due to a shift in the mix of business to more renters policies, which have lower average written premiums, and our continued focus on slowing growth in more volatile weather-related markets, which generally have higher risk and, therefore, higher average premiums per policy.

During the second quarter 2025, on a year-over-year basis, average written premium per policy decreased 1% in personal auto and 6% in both our personal property and core commercial auto products.

In aggregate, we took minimal personal auto rate decreases during the second quarter 2025.

which generally have higher risk and, therefore, higher average premiums per policy.

These mix shifts in our personal property business were partially offset by aggregate rate increases of 14% taken over the last 12 months and higher premium coverages reflecting increased property values.

The decrease in average written premium per policy in our core commercial auto products was due to a shift in the mix of business, primarily driven by decreased demand in our for-hire transportation BMT and, to a lesser extent, the for-hire specialty BMT, partially offset by rate increases of about 6%, in the aggregate, over the trailing 12 months.

The decrease in average written premium per policy in our core commercial auto products was due to a shift in the mix of business, primarily driven by decreased demand in our for-hire transportation BMT and, to a lesser extent, the for-hire specialty BMT, as well as a shift in policy term towards more 6-month policies in our contractor and business auto BMTs.

This decrease was partially offset by rate increases of about 7%, in the aggregate, over the trailing 12 months.

Given that our personal property and commercial auto policies are predominately written for 12-month terms, rate actions take longer to earn into premium for these products.

We will continue to monitor the factors that could impact our loss costs for both segments, which may include tariffs, as discussed above, new and used car prices, miles driven, driving patterns, loss severity, weather events, building materials, construction costs, inflation, and other factors, on a state-by-state basis.

We will continue to monitor the factors that could impact our loss costs for both segments, which may include tariffs, as previously discussed, new and used car prices, miles driven, driving patterns, loss severity, weather events, building materials, construction costs, inflation, and other factors, on a state-by-state basis.

We believe a key element in improving the accuracy of our personal auto rating is Snapshot ® , our usage-based insurance offering.

During the first quarter 2025, the personal auto adoption rates for consumers enrolling in the program decreased 1% in agency and increased 9% in direct, compared to the same period last year.

The increase in the direct adoption rate primarily reflected enhancements in the direct quoting process, in addition to the continued rollout of our newest Snapshot model.

During the second quarter 2025, the personal auto adoption rates for consumers enrolling in the program decreased 2% in agency and increased 6% in direct, compared to the same period last year.

Snapshot is available in all states, other than California, and our latest segmentation model was available in states that represented 78% of our countrywide personal auto net premiums written (excluding California) on a trailing 12-month basis at quarter end.

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Our efforts to increase our share of Progressive auto and personal property bundled households (i.e., Robinsons) remains a key initiative, and we plan to continue to make investments to improve the customer experience in order to support that goal.

Policy life expectancy, which is our actuarial estimate of the average length of time that a policy will remain in force before cancellation or lapse in coverage, is our primary measure of customer retention in our Personal Lines and Commercial Lines businesses.

Policy life expectancy, which is our actuarial estimate of the average length of time that a newly written policy will remain in force before cancellation or lapse in coverage, is our primary measure of customer retention in our Personal Lines and Commercial Lines businesses.

In personal auto, we evaluate personal auto retention using a trailing 12-month and a trailing 3-month policy life expectancy.

Although the latter can reflect more volatility and is more sensitive to seasonality, we believe this measure is more responsive to current experience and may be an indicator for the future trend of our 12-month measure.

Our trailing 12-month total personal auto policy life expectancy was down 5% year over year for the first quarter 2025.

On a trailing 3-month basis, our personal auto policy life expectancy was down 6% for the first

quarter 2025, compared to the same period last year, which we believe is due to increased shopping and the competitiveness in the marketplace.

Our trailing 12-month policy life expectancy was down 17% for our personal property products.

Our personal property retention decreased primarily as a result of a mix shift to more renters policies, which generally have a lower policy life expectancy, our actions to non-renew certain policies, and rate increases.

For our core commercial auto products, our trailing 12-month policy life expectancy decreased 6%, compared to the prior year.

While still below the prior year, the policy life expectancy has experienced sequential month-over-month improvement since the end of the third quarter 2024, which we believe is due to the moderation of our rate increases, compared to competitor rate increases, improving our competitiveness in the marketplace.

The decrease in the core commercial auto policy life expectancy was across all BMTs, except tow, which reflected rate actions taken in 2023 and 2024, as well as the continued decrease in demand in the for-hire transportation BMT.

The fair value of our investment portfolio was $83.7 billion at March 31, 2025, compared to $80.3 billion at December 31, 2024.

Although the latter can reflect more volatility and is more sensitive to seasonality, we believe this measure is more responsive to current experience and may

be an indicator for the future trend of our 12-month measure.

Our trailing 12-month total personal auto policy life expectancy was down 5% year over year for the second quarter 2025.

On a trailing 3-month basis, our personal auto policy life expectancy was down 7% for the second quarter 2025, compared to the same period last year, which we believe is due to a shift in the mix of business, increased shopping, and increased competition in the marketplace.

Our trailing 12-month policy life expectancy was down 17% for our personal property products year over year for the second quarter 2025.

We believe our personal property retention decreased primarily as a result of a mix shift to more renters policies, rate increases, and the non-renewal of certain policies.

For our core commercial auto products, our trailing 12-month policy life expectancy increased 5%, compared to the prior year, which we believe is due to the moderation of our rate increases, compared to competitor rate increases, and our improving competitiveness in the marketplace.

The increase in the core commercial auto policy life expectancy was across all BMTs, except in for-hire specialty and for-hire transportation, which we believe is due to various initiatives to help with improving policy life expectancy such as payment and renewal reminders.

The fair value of our investment portfolio was $88.6 billion at June 30, 2025, compared to $80.3 billion at December 31, 2024.

The increase from year-end 2024 reflected positive cash flows from insurance operations and investment returns, partially offset by the payment of our annual variable common share dividend.

Our asset allocation strategy is to maintain 0%-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in Group II securities (the securities allocated to Group I and II are defined below under Results of Operations – Investments ).

At March 31, 2025 and December 31, 2024, 5% and 6%, respectively, of our portfolio was allocated to Group I securities with the remainder to Group II securities.

Our recurring investment income generated a pretax book yield of 4.1% for the first quarter 2025, compared to 3.7% for the same period in 2024.

The increase from prior year primarily reflected investing new cash from insurance operations, and proceeds from maturing bonds, in higher coupon rate securities.

Our investment portfolio produced a fully taxable equivalent (FTE) total return of 2.2% and 0.8% for the first quarter 2025 and 2024, respectively.

Our fixed-income and common stock portfolios had FTE total returns of 2.5% and (5.0)%, respectively, for the first quarter 2025, compared to 0.3% and 9.9%, respectively, last year.

The increase in the fixed-income portfolio FTE total return primarily reflected movements in Treasury yields year-over-year.

The decrease in the common stock portfolio FTE total return reflected general market conditions.

At March 31, 2025 and 2024, and December 31, 2024, the fixed-income portfolio had a weighted average credit quality of AA-.

At March 31, 2025, the fixed-income portfolio duration was 3.4 years, compared to 3.2 years at March 31, 2024, and 3.3 years at December 31, 2024.

At June 30, 2025 and December 31, 2024, 5% and 6%, respectively, of our portfolio was allocated to Group I securities with the remainder to Group II securities.

Our recurring investment income generated a pretax book yield of 4.2% for the second quarter 2025, compared to 3.9% for the same period in 2024.

The increase from the prior year primarily reflected investing new cash from insurance operations, and proceeds from maturing bonds, in higher coupon rate securities.

Our investment portfolio produced a fully taxable equivalent (FTE) total return of 2.1% and 0.9% for the second quarter 2025 and 2024, respectively.

Our fixed-income and common stock portfolios had FTE total returns of 1.7% and 10.9%, respectively, for the second quarter 2025, compared to 0.8% and 3.6%, respectively, last year.

The increase in the fixed-income portfolio FTE total return primarily reflected movements in U.S.

Treasury yields year-over-year.

increase in the common stock portfolio FTE total return reflected general market conditions.

At June 30, 2025 and 2024, and December 31, 2024, the fixed-income portfolio had a weighted average credit quality of AA-.

At June 30, 2025, the fixed-income portfolio duration was 3.4 years, compared to 3.2 years at June 30, 2024, and 3.3 years at December 31, 2024.

During 2025, we increased our duration to take advantage of higher yields in the market.

At March 31, 2025, we continued to maintain a relatively conservative investment portfolio with a greater allocation to cash and treasuries.

At June 30, 2025, we continued to maintain a relatively conservative investment portfolio with a greater allocation to cash and treasuries.

We believe that this portfolio allocation positions us well to benefit from the continuing dynamic market environment.

We believe that we are in a very strong position as we move into the second quarter of 2025.

We believe the investment portfolio is in a very strong position as we move into the third quarter of 2025.

FINANCIAL CONDITION

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As primarily an auto insurer, our claims liabilities generally have a short-term duration.

Operations generated positive cash flows of $5.1 billion and $4.2 billion for the three months ended March 31, 2025 and 2024, respectively.

The increase in operating cash flow for the first three months of 2025, compared to the same period last year, was in part driven by the growth in profit from our underwriting operations.

Operations generated positive cash flows of $9.2 billion and $7.5 billion for the six months ended June 30, 2025 and 2024, respectively.

The increase in operating cash flow for the first six months of 2025, compared to the same period last year, was in part driven by the growth in profit from our underwriting operations.

We believe cash flows will remain positive in the foreseeable future and do not expect we will need to raise capital to support our operations in that timeframe, although changes in market or regulatory conditions affecting the insurance industry, or other unforeseen events, may necessitate otherwise.

As of March 31, 2025, we held $46.9 billion in short-term investments and U.S.

Treasury securities, which represented 56% of our total portfolio at quarter end.

As of June 30, 2025, we held $48.9 billion in short-term investments and U.S.

Treasury securities, which represented about 55% of our total portfolio at quarter end.

Based on our portfolio allocation and investment strategies, we believe that we have sufficient readily available marketable securities to cover our claim payments and short-term obligations in the event our cash flows from operations were to be negative.

Treasury securities are viewed as having lower risk than many other investment opportunities, the U.S.

Treasury announced it had reached its authorized borrowing limit and defaults under government obligations, including payments related to U.S.

Treasury securities, could occur as soon as this summer.

Although not likely probable, it is possible that the federal government could fail to raise the federal debt ceiling to avoid default.

Any such default would likely have a material adverse impact on our cash flows and the value of our portfolio and our capital position.

See Item 1A, Risk Factors in our Form 10-K filed with the U.S.

Securities and Exchange Commission for the year ended December 31, 2024, for a discussion of certain matters that may affect our portfolio and capital position.

Our total capital (debt plus shareholders’ equity) was $35.8 billion, based on book value, at March 31, 2025, compared to $28.7 billion at March 31, 2024, and $32.5 billion at

December 31, 2024.

The increase from year-end 2024, primarily reflected the comprehensive income recognized during the first three months of 2025.

Our debt-to-total capital ratio was 19.2% at March 31, 2025, 24.0% at March 31, 2024, and 21.2% at December 31, 2024.

See Item 1A, Risk Factors in our Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission for the year ended December 31, 2024 (our 2024 Form 10-K), for a discussion of certain matters that may affect our portfolio and capital position.

Our total capital (debt plus shareholders’ equity) was $39.5 billion, based on book value, at June 30, 2025, compared to $30.2 billion at June 30, 2024, and $32.5 billion at December 31, 2024.

The increase from year-end 2024, primarily reflected the comprehensive income recognized during the first six months of 2025.

Our debt-to-total capital ratio was 17.5% at June 30, 2025, 22.8% at June 30, 2024, and 21.2% at December 31, 2024.

Our debt-to-total capital ratios were consistent with our financial policy of maintaining a ratio of less than 30%.

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We seek to deploy capital in a prudent manner and use multiple data sources and modeling tools to estimate the frequency, severity, and correlation of identified exposures, including, but not limited to, catastrophic and other insured losses, natural disasters, and other significant business interruptions, to estimate our potential capital needs.

During the first three months of 2025, we returned capital to shareholders primarily through common share dividends and common share repurchases.

In March 2025, our Board of Directors declared a $0.10 per common share dividend, or $59 million in the aggregate, that was paid in April 2025.

During the first six months of 2025, we returned capital to shareholders primarily through common share dividends and common share repurchases.

Our Board of Directors declared a $0.10 per common share dividend in both the first and second quarters of 2025.

These dividends, which were $59 million and $58 million, respectively, in the aggregate, were paid in April 2025 and July 2025.

In January 2025, we also paid common share dividends declared in the fourth quarter 2024, in the aggregate amount of $2.7 billion, or $4.60 per share (see Note 9 – Dividends for further discussion).

Pursuant to our financial policies, we repurchase common shares to neutralize dilution from equity-based compensation granted during the year and opportunistically when we believe our shares are trading below our determination of long-term fair value.

During the first three months of 2025, we repurchased 0.2 million common shares, at a total cost of $54 million, to satisfy tax withholding obligations in connection with the vesting of equity awards under our employee equity compensation plans.

We will continue to make decisions on returning

capital to shareholders based on the strength of our overall capital position, the capital strength of our subsidiaries, and potential capital needs of our business.

At March 31, 2025, we had $3.5 billion in a consolidated, non-insurance subsidiary of the holding company that can be used to fund corporate obligations and provide additional capital to the insurance subsidiaries to fund potential future growth and other opportunities.

As of March 31, 2025, our estimated consolidated statutory surplus was $29.6 billion.

During the first quarter 2025, our contractual obligations and critical accounting policies have not changed materially from those discussed in our 2024 Annual Report to Shareholders.

There have not been any material changes in off-balance-sheet leverage, which includes purchase obligations and catastrophe excess of loss reinsurance contracts, from those discussed in our 2024 Annual Report to Shareholders.

During the first six months of 2025, we repurchased 0.3 million common shares, at a total cost of $67 million, including 0.1 million shares in the second quarter 2025, both in the open market and to satisfy tax withholding obligations in connection with the vesting of equity awards under our employee equity compensation plans.

We will continue to make decisions on returning capital to shareholders based on the strength of our overall capital position, the capital strength of our subsidiaries, and the potential capital needs of our business.

At June 30, 2025, we had $5.0 billion in a consolidated, non-insurance subsidiary of the holding company that can be used to fund corporate obligations and provide additional capital to the insurance subsidiaries to fund potential future growth and other opportunities.

As of June 30, 2025, our estimated consolidated statutory surplus was $31.1 billion.

During the first six months of 2025, our contractual obligations and critical accounting policies have not changed materially from those discussed in our 2024 Annual Report to Shareholders.

There have not been any material changes in off-balance-sheet leverage, which includes purchase obligations, from those discussed in our 2024 Annual Report to Shareholders.

On July 4, 2025, H.R.

1, “An Act to provide for reconciliation pursuant to title II of H.

14” (the Act) was signed into law by the President of the United

The Act contains numerous tax provisions applicable to corporations.

We are in the process of evaluating the provisions applicable to Progressive and, while this assessment is not yet complete, we do not currently expect the Act will have a material effect on our financial condition or results of operations.

Since Florida insurance reform was enacted in early 2023, we have seen lower loss costs on certain types of personal auto accident claims and favorable reserve development, and we have experienced strong profitability in our Florida personal auto business.

In response to these trends, we have lowered Florida personal auto rates twice in the last year.

Despite these actions, it is possible that our profit for personal auto in Florida for the 2023 to 2025 period will exceed the statutory profit limit that a Florida statute imposes on the profit that any insurance group can earn on personal auto insurance over any three-calendar-year period and that we will need to pay any profit above

the limit to all Florida personal auto policyholders active at December 31, 2025.

We are not currently able to determine whether we will exceed the permitted profit limit because several factors can impact the determination.

The Atlantic hurricane season continues through late November 2025, and the risk of hurricanes impacting Florida through that time is relatively high.

In addition, any reserve development through the first quarter 2026 on losses for accident years 2023 through 2025 will impact the statutory calculations.

Finally, other factors described in Item 1A, Risk Factors in our 2024 Form 10-K that may impact our ability to establish accurate loss reserves could impact these determinations.

We expect to be able to reasonably estimate any potential exposure by the end of the fourth quarter 2025, and to pay amounts owed, if any, during late 2025 or 2026.

Based upon our capital planning and forecasting efforts, we believe we have sufficient capital resources and cash flows from operations to support our current business, scheduled principal and interest payments on our debt, anticipated quarterly dividends on our common shares, our contractual obligations, and other expected capital requirements for the foreseeable future.

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Our Commercial Lines segment writes auto-related liability and physical damage insurance, business-related general liability and commercial property insurance predominantly for small businesses, and workers’ compensation insurance primarily for the transportation industry and includes our core commercial auto products, TNC business, Fleet & Specialty products, and BOP product.

Of our total Commercial Lines segment, our core commercial auto products represented about 80% of net premiums written and our TNC business represented about 15%, both on a trailing 12-month basis, as of the end of the first quarter 2025.

Therefore, much of the following discussion focuses only on our core commercial auto products.

The following table shows the composition of our companywide net premiums written, by segment, for the respective periods:

Three Months Ended March 31,

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

2025 2024 2025 2024

Personal Lines

Agency 37 % 37 % 35 % 36 %

Direct 47 44 46 43

Property 4 5 4 4

Total Personal Lines 88 86 85 83

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While our personal auto policies primarily have 6-month terms, to promote bundled personal auto and property growth, we write 12-month personal auto policies in our Platinum agencies.

At March 31, 2025 and 2024, 12% and 14%, respectively, of our agency personal auto policies in force were 12-month policies.

At June 30, 2025 and 2024, 11% and

13%, respectively, of our agency personal auto policies in force were 12-month policies.

To the extent our agency application mix of annual personal auto policies changes, the shift in policy term could impact our average premiums in the agency channel, as 12-month policies have about twice the amount of net premiums written compared to 6-month policies.

Our special lines and personal property products are written for 12-month terms.

About 55% and 70%, respectively, of our special lines products and personal property business net premiums written was generated through the independent agency channel, with the balance through the direct channel.

About 55% and 70%, respectively, of our special lines products and personal property business net premiums written during the second quarter 2025 was generated through the independent agency channel, with the balance through the direct channel.

Within our Commercial Lines segment, our core commercial auto business operates in the following five traditional business market targets (BMT):

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• business auto.

At March 31, 2025, about 90% of Commercial Lines policies in force had 12-month terms.

At June 30, 2025, about 85% of Commercial Lines policies in force had 12-month terms.

The majority of our Commercial Lines business is written through the independent agency channel, although we continue to focus on growing our direct business, with about 10% of our core commercial auto premiums written through the direct channel.

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For the respective periods, our underwriting profitability results were as follows:

Three Months Ended March 31,

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

2025 2024 2025 2024

Profit (Loss) Underwriting

Profit (Loss)

($ in millions) $ Margin $ Margin

($ in millions) $ Margin $ Margin $ Margin $ Margin

Personal Lines

5 unchanged sentences

Other indemnity 1

(4) NM (1) NM (8) NM (1) NM

Total underwriting operations $ 2,808 13.8 % $ 1,386 8.1 % $ 5,525 13.9 % $ 3,636 10.9 %

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

While our underwriting profit margin was relatively flat on a year-over-year basis for the first quarter 2025, our companywide loss and loss adjustment expense (LAE) ratio decreased 2.0 points, which was mostly offset by a 1.9 point increase in the expense ratio.

The decrease in the loss and LAE ratio was primarily driven by favorable prior accident years reserve development and decreased incurred personal and commercial auto accident frequency.

The increase in our companywide expense ratio during the first quarter 2025, primarily reflected increased advertising expense.

During the first quarter 2025, our advertising spend was $1.3 billion, which was 86%, or 2.3 points, greater than the first quarter last year.

See the Losses and Loss Adjustment Expenses (LAE) section below for further discussion of our catastrophe losses, frequency and severity trends, and reserve development recognized during the periods and the Underwriting Expense section for further discussion of our advertising and non-acquisition expenses.

The increase in our underwriting profit margin on a year-over-year basis for the second quarter 2025 was due to a decrease in our companywide loss and LAE ratio of 6.1 points.

On a year-to-date basis, the loss and LAE ratio decreased 4.1 points.

The decrease in the loss and LAE ratio during the second quarter 2025 was primarily driven by a decrease in catastrophe losses in Personal Lines and by favorable prior accident years reserve development in both Personal Lines and Commercial Lines.

During the second quarter 2025, our advertising spend was $1.2 billion, which was 35%, or 0.7 points, greater than the

second quarter last year, and $2.5 billion during the first half of 2025, which was 57%, or 1.5 points, greater than the same period last year.

The expense ratio impact from increased advertising spend was partially offset by a decrease in non-acquisition expenses.

See the Losses and Loss Adjustment Expenses (LAE) section below for further discussion of our catastrophe losses, auto frequency and severity trends, and reserve development recognized during the periods and the Underwriting Expenses section for further discussion of our advertising and non-acquisition expenses.

Further underwriting results for our Personal Lines business, Commercial Lines business, and our underwriting operations in total, were as follows:

Three Months Ended March 31,

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

Underwriting Performance 1

2025 2024 Change

2025 2024 Change 2025 2024 Change

Personal Lines

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Losses and Loss Adjustment Expenses (LAE)

Three Months Ended March 31,

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

(millions) 2025 2024 2025 2024

3 unchanged sentences

Claims costs, our most significant expense, represent payments made, and estimated future payments to be made, to or on behalf of our policyholders, including expenses needed to adjust or settle claims.

Claims costs are a function of loss severity and frequency and, for our personal auto and core commercial auto businesses, are influenced by inflation and driving patterns, among other

factors, some of which are discussed below.

Claims costs are a function of loss severity and frequency and, for our personal auto and core commercial auto businesses, are influenced by inflation and driving patterns, among other factors, some of which are discussed below.

In our personal property business, severity is primarily a function of construction costs and the age and complexity of the structure, among other factors.

Accordingly, anticipated changes in these factors are taken into account when we establish premium rates and loss reserves.

Loss reserves are estimates of future costs and our reserves are adjusted as underlying assumptions change and information develops.

Our total loss and LAE ratio decreased 2.0 points for the first quarter 2025, compared to the same period last year, primarily due to increased favorable prior accident years reserve development and a decrease in loss frequency in the first quarter 2025, compared to the same period last year.

On an accident year basis, our loss and LAE ratio was 0.7 points lower than the first quarter 2024.

Loss reserves

are estimates of future costs and our reserves are adjusted as underlying assumptions change and information develops.

Our total loss and LAE ratio decreased 6.1 points and 4.1 points, for the three and six month periods ended June 30, 2025, respectively, compared to the prior year periods, primarily due to a decrease in catastrophe losses and to favorable prior accident years reserve development.

On an accident year basis, our loss and LAE ratio was 4.8 points and 2.8 points lower for the second quarter and first half of 2025, respectively, compared to the same periods last year.

The following table shows our consolidated catastrophe losses and related combined ratio point impact, excluding loss adjustment expenses, incurred during the periods:

Three Months Ended March 31,

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

2025 2024 2025 2024

($ in millions) $ Point 1

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1 Represents catastrophe losses incurred during the period, including the impact of reinsurance, as a percent of net premiums earned for each segment.

In the three months ended March 31, 2025, our catastrophe losses reflected severe weather events throughout the United States, with Texas accounting for nearly 40% of the losses.

In the second quarter 2025, our catastrophe losses reflected severe weather events throughout the United States, with Texas accounting for about one third of the losses.

We have responded, and plan to continue to respond, promptly to catastrophic events when they occur in order to provide high-quality claims service to our customers.

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We do not have catastrophe-specific reinsurance for our personal auto, special lines, or core commercial auto businesses.

The personal property business reinsurance programs include catastrophe per occurrence excess of loss contracts and aggregate excess of loss contracts.

For the personal property business and certain BOP product coverages, reinsurance programs include catastrophe per occurrence excess of loss contracts and aggregate excess of loss contracts.

We also purchase excess of loss reinsurance on our workers’ compensation insurance and our higher-limit commercial auto liability product offered by our Fleet & Specialty business, and on certain BOP product coverages.

We evaluate our reinsurance programs during the renewal process, if not more frequently, to ensure our programs continue to effectively address the company’s risk tolerance.

With respect to our personal property business, in the first quarter 2025, we entered into a new catastrophe

aggregate excess of loss reinsurance contract for claims occurring in 2025 that has multiple layers of coverage.

The first retention layer threshold ranges from $450 million to $475 million, excluding named tropical storms and hurricanes, and the second retention layer threshold is $525 million, including named tropical storms and hurricanes.

During the second quarter 2025, we entered into new reinsurance contracts under our per occurrence excess of loss program for our personal property business.

This reinsurance program has a retention threshold for losses and allocated loss adjustment expenses (ALAE) from a single catastrophic event of $200 million for a storm outside of Florida and $75 million for a storm in Florida.

In general, our program includes coverage for $2.0 billion in losses and ALAE with additional substantial coverage for a second or third hurricane.

When considering coverage specific to Florida, including the Florida Hurricane Catastrophe Fund, this coverage reaches an estimated $2.2 billion.

For 2025, we also entered into a new catastrophe aggregate excess of loss reinsurance contract for claims occurring in 2025 that has multiple layers of coverage.

The first retention layer threshold ranges from $450 million to $475 million, excluding named tropical storms and hurricanes,

and the second retention layer threshold is $525 million, including named tropical storms and hurricanes.

The first and second layers provide coverage up to $75 million and $100 million, respectively.

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While the total coverage limit and per-event retention will evolve to fit the growth of our business, we expect to remain a consistent purchaser of reinsurance coverage.

While the availability of reinsurance is subject to many forces outside of our control, the types of reinsurance that

we elected to purchase during the first quarter 2025 were readily available and competitively priced.

While the availability of reinsurance is subject to many forces outside of our control, the types of reinsurance that we elected to purchase during the first half of 2025 were readily available and competitively priced.

On a year-over-year basis, we did not incur a material change in the aggregate costs of our reinsurance programs.

See Item 1A, Risk Factors in our 2024 Form 10-K filed with the U.S.

Securities and Exchange Commission, for the year ended December 31, 2024, for a discussion of certain risks related

to catastrophe events.

See Item 1, Business – Reinsurance on Form 10-K for a discussion of our various reinsurance programs.

See Item 1A, Risk Factors in our 2024 Form 10-K for a discussion of certain risks related to catastrophe events.

See Item 1, Business – Reinsurance in our 2024 Form 10-K for a discussion of our various reinsurance programs.

The following discussion of our severity and frequency trends in our personal auto business excludes comprehensive coverage because of its inherent volatility, as it is typically linked to catastrophic losses generally resulting from adverse weather.

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On a calendar-year basis, the change in total personal auto incurred severity (i.e., average cost per claim, including both paid losses and the change in case reserves) over the prior-year period, was as follows:

Quarter Year-to-date

Coverage Type 2025 2025

Bodily injury 12% 10%

Collision 1 3

Personal injury protection (3) (6)

Property damage 4 3

The year-over-year increase in total severity, in part, reflects the impact of lower salvage and subrogation recoveries on total loss claims during the first quarter of 2025, compared to higher recoveries in the first quarter last year.

Excluding the impact of these recoveries, the change in severity for collision would have been consistent with that of property damage.

The year-over-year increase in total severity was predominantly driven by increased bodily injury coverage reserves, compared to the same periods last year, due to higher medical costs and a higher rate of litigated injury claims.

To address inherent seasonality trends and lessen the effects of month-to-month variability in the commercial auto products, we use a trailing 12-month period in assessing severity.

Since the loss patterns in the core commercial auto products are not indicative of our other commercial auto products (i.e., TNC and Fleet & Specialty businesses), disclosing severity and frequency trends excluding those businesses is more representative of our overall experience for the majority of our commercial products.

As of the end of the first quarter 2025, our core commercial auto products’ trailing 12-month incurred

severity increased 10%, compared to the same period last year, in part, due to prior years unfavorable development.

As of the end of the second quarter 2025, our core commercial auto products’ trailing 12-month incurred severity increased 7%, compared to the same period last year, in part, due to increased medical costs.

It is a challenge to estimate future severity, but we continue to monitor changes in the underlying costs, such as tariffs, general inflation, used car prices, vehicle repair costs, medical costs, health care reform, court decisions, and jury verdicts, along with regulatory changes and other factors that may affect severity.

The change in total personal auto incurred frequency, on a calendar-year basis, over the prior-year period, was as follows:

Quarter Year-to-date

Coverage Type 2025 2025

3 unchanged sentences

Property damage (3) (2)

The year-over-year decrease in frequency, in part, reflects a shift in the mix of business to a more preferred tier of customers (i.e., Wrights and Robinsons) and lower vehicle miles traveled during the first quarter 2025, compared to the same period last year.

On a trailing 12-month basis, our core commercial auto products’ incurred frequency decreased 8% during the first quarter 2025, in part, due to a shift in the mix of business compared to the same period last year.

Total (4) (3)

The year-over-year decrease in frequency, in part, reflects a shift in the mix of business to a more preferred tier of customers (i.e., Wrights and Robinsons) and lower vehicle miles traveled during the first half of 2025, compared to the same periods last year.

On a trailing 12-month basis, our core commercial auto products’ incurred frequency decreased 8% through the second quarter 2025, we believe, in part, due to a shift in the mix of business and lower vehicle miles traveled compared to the same period last year.

We closely monitor changes in frequency, but the degree or direction of near-term frequency change is not something that we are able to predict with any certainty.

We will continue to analyze trends to distinguish changes in our experience from other external factors, such as changes in the number of vehicles per household, miles driven, vehicle usage, gasoline prices, advances in vehicle safety, and unemployment rates, versus those resulting from shifts in the mix of our business or changes in driving patterns, and the ridesharing economy to allow us to react quickly to price for these trends and to reserve more accurately for our loss exposures.

We will continue to analyze trends to distinguish changes in our experience from other external factors, such as changes in the number of vehicles per household, miles driven, vehicle usage, gasoline prices, advances in vehicle safety, and unemployment rates, versus those resulting from shifts in the mix of our business, changes in driving patterns, and the ridesharing economy, to allow us to react quickly to price for these trends and to reserve more accurately for our loss exposures.

The table below presents the actuarial adjustments implemented and the loss reserve development experienced on a companywide basis in the following periods:

Three Months Ended March 31,

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

($ in millions) 2025 2024 2025 2024

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Our ability to meet this objective is impacted by many factors, such as the factors impacting severity estimates described above and storms occurring close to quarter end.

As reflected in the table above, we experienced favorable prior accident years development during the first three months of 2025, compared to relatively flat prior accident years development for the same period last year.

The favorable development during the first three months of 2025 was, in part, due to lower than anticipated severity and frequency in Florida personal auto and, for personal property, favorable development on 2024 catastrophe events.

As reflected in the table above, we experienced favorable prior accident years development during the first six months of 2025 and 2024.

The favorable development during the first six months of 2025 was, in part, due to lower than anticipated severity and frequency in Florida and lower litigation defense costs across most states in the personal auto business.

See Note 6 – Loss and Loss Adjustment Expense Reserve s to the consolidated financial statements for a more detailed discussion of our prior accident years reserve development and Critical Accounting Policies in our 2024 Annual Report to Shareholders for discussion of the application of estimates and assumptions in the establishment of our loss reserves.

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The underwriting expense ratio is our underwriting expenses, net of certain fees and other revenues, expressed as a percentage of net premiums earned.

For the first quarter 2025, our underwriting expense ratio was up 1.9 points, compared to the same period last year.

The increase was primarily attributable to the increase in our advertising spend, partially offset by growth in net premiums earned.

In total, our companywide advertising spend increased 86%, or 2.3 points, in the first quarter 2025, compared to the same period last year.

Our total advertising spend for the first quarter 2025, was $1.3 billion, compared to $0.7 billion in the first quarter 2024.

Our advertising spend in the first quarter 2025 exceeded the amount of advertising spend for any previous quarterly period.

We invested heavily during the first quarter of the year to capture consumer shopping, and will continue to advertise to maximize growth, as long as we remain on track to achieve our profitability goal and can acquire customers at or below our target acquisition cost.

To analyze underwriting expenses, we also review our non-acquisition expense ratio (NAER), which excludes costs related to policy acquisition (e.g., advertising and agency commissions) from our underwriting expense ratio.

For the second quarter and first half of 2025, our underwriting expense ratio was up 0.4 points and 1.1 points, respectively, compared to the same periods last year.

Both increases were primarily attributable to the increase in our advertising spend.

In total, our companywide advertising spend increased 35%, or 0.7 points, in the second quarter, and 57% or 1.5 points, for the first six months of 2025, compared to the same periods last year.

Our total advertising spend for the first half of 2025, was $2.5 billion, compared to $1.6 billion in the first half of 2024.

We invested heavily during the first half of the year to capture consumer shopping, and will continue to advertise to maximize growth, as long as we remain on track to achieve our profitability goal and can acquire customers at or below our target acquisition cost.

To analyze underwriting expenses, we also review our non-acquisition expense ratio (NAER), which excludes costs related to policy acquisition (e.g., advertising and agency

commissions) from our underwriting expense ratio.

By excluding acquisition costs from our underwriting expense ratio, we are able to understand costs other than those necessary to acquire new policies and grow the business.

During the first quarter 2025, our NAER decreased 0.3

points in our personal vehicle business and increased 1.2 points and 0.1 points in our personal property and core commercial auto businesses, respectively, compared to the same period last year.

During the second quarter 2025, our NAER decreased 0.4 points in our personal vehicle business and increased 0.9 points and 0.5 points in our personal property and core

commercial auto businesses, respectively, compared to the same period last year.

On a year-to-date basis, our NAER decreased 0.3 points in our personal vehicle business, and increased 1.1 points and 0.4 points in our personal property and core commercial auto businesses, respectively.

We remain committed to efficiently managing operational non-acquisition expenses.

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Policies in force, our preferred measure of growth since it removes the variability due to rate changes or mix shifts, represents all policies for which coverage was in effect as of the end of the period specified.

Three Months Ended March 31,

($ in millions) 2025 2024 % Growth

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

($ in millions) 2025 2024 % Growth 2025 2024 % Growth

Net Premiums Written

5 unchanged sentences

Commercial Lines 2,363 2,508 (6) 6,296 6,256 1

Other indemnity 1

0 1 NM 0 1 NM

Total underwriting operations $ 20,076 $ 17,902 12 % $ 42,282 $ 36,864 15 %

6 unchanged sentences

Commercial Lines 2,765 2,664 4 5,464 5,222 5

Other indemnity 1

1 0 NM 1 0 NM

Total underwriting operations $ 20,310 $ 17,209 18 % $ 39,719 $ 33,358 19 %

NM = Not meaningful

1 Includes other underwriting business and run-off operations.

(# in thousands) 2025 2024 % Growth

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In our discussion below, we report our personal auto and personal property business results separately as components of our Personal Lines segment to provide a further understanding of our products.

Our personal auto business discussions are further separated between the agency and direct distribution channel.

For the three months ended March 31, 2025, 42% of our personal auto business was written through the agency channel and 58% was written through the direct channel.

Our personal auto business discussions are further separated between the agency and direct distribution channels.

For the three months ended June 30, 2025, 44% of our personal auto business was written through the agency channel and 56% was written through the direct channel.

While consumer segment results varied by channel, as discussed below, our total personal auto business experienced overall growth in policies in force, new business applications, quotes, and conversion during the second quarter and first half of 2025, compared to the same periods last year.

Personal Auto - Agency

The year-over-year changes our personal auto agency business were as follows:

Change Over Prior Year Quarter

The year-over-year changes in our personal auto agency business were as follows:

Change Over Prior Year

Quarter Year-to-date

2025 2024 2025 2024

New 6 % 13 % 17 % (1) %

Renewal 19 9 18 8

Total 16 9 18 6

Written premium per policy

New (6) 6 (5) 5

Renewal (3) 14 (2) 16

Total (3) 12 (2) 13

Policy life expectancy

2 unchanged sentences

The personal auto agency business includes business written by more than 40,000 independent insurance agencies that represent Progressive, as well as brokerages in New York and California.

During the first quarter 2025, we generated new agency personal auto application growth in 47 states and the District of Columbia, including nine of our top 10 largest agency states.

Compared to the same period in the prior year, new application and policy in force growth varied by consumer segment:

• Sams experienced a low double-digit increase in policies in force, with a significant increase in new applications during the first quarter 2025;

• Dianes and Wrights experienced significant policies in force and new application growth during the first quarter 2025;

• Robinsons had a high single-digit increase in policies in force, with a significant decline in new applications during the first quarter 2025.

During the first quarter 2025, on a year-over-year basis, we experienced an increase in agency auto quote volume of 16%, with a rate of conversion (i.e., converting a quote to a

sale) increase of 11%, compared to the same period last year.

All four of our consumer segments experienced an increase in both quote volume and conversion during the first quarter 2025, compared to the same period in the prior year, except Robinsons who had a single-digit decline in quotes and a significant decline in conversion.

New applications, quotes, and conversion declined in Robinsons year over year due to several initiatives implemented in our personal property business that were focused on improving profitability, as discussed in the Personal Property section below.

During the second quarter 2025, we generated new agency personal auto application growth in 32 states and the District of Columbia, including seven of our top 10 largest agency states.

Compared to the same periods in the prior year, new applications increased 6% during the second quarter 2025, primarily driven by significant growth for Sams and Dianes, which more than offset a decrease in new

applications for Robinsons, while Wrights experienced flat growth.

For the first six months of 2025, all consumer segments experienced an increase in new application growth, except for Robinsons who experienced a decline.

All consumer segments saw an increase in policies in force at the end of the second quarter 2025, compared to the same period last year.

During the second quarter and first six months of 2025, on a year-over-year basis, we experienced an increase in agency auto quote volume of 7% and 12%, respectively, with a rate of conversion (i.e., converting a quote to a sale) decrease of 2% for the quarter and an increase of 4% on a year-to-date basis, compared to the same periods last year.

For both the second quarter and first six months of 2025, all consumer segments experienced an increase in quote volume, compared to the same periods in the prior year, except Robinsons, who decreased substantially.

Both Sams and Dianes experienced an increase in conversion during the second quarter and first half of 2025, with Wrights and Robinsons experiencing a decrease, compared to the same periods last year.

The increase in new applications, quotes, and conversion for Sams were, in part, driven by lifting certain underwriting restrictions that were in place at the beginning of 2024.

The decline in new applications, quotes, and conversion for Robinsons, compared to the prior year periods, was due to several initiatives implemented in our personal property business that were focused on improving profitability, as discussed in the Personal Property section below.

These initiatives, which began during the last half of 2024, focused primarily on home and condo coverages and impacted growth in bundled auto and homeowner policies.

Our personal auto rates were relatively stable during the quarter.

The decrease in written premium per policy for new and renewal personal auto agency business during the first quarter 2025, compared to the same period last year, was in part, attributable to a shift in the mix of business, including a shift to a higher percentage of 6-month policies, which have about half of the amount of net premiums written as policies with 12-month terms.

Our trailing 3- and 12-month policy life expectancy in the agency auto business experienced a decrease at the end of the first quarter 2025, on a year-over-year basis, which we believe is primarily driven by a shift in the mix of business and increased consumer shopping.

The decrease in written premium per policy for new and renewal personal auto agency business during the second quarter and first six months of 2025, compared to the same periods last year, was, in part, attributable to rate decreases in certain markets, including Florida, and a shift in the mix of business, including a shift to a higher percentage of 6-month policies, which have about half of the amount of net premiums written as policies with 12-month terms.

Our trailing 3- and 12-month policy life expectancy in the agency auto business experienced a decrease at the end of the second quarter 2025, on a year-over-year basis, which we believe is primarily driven by a shift in the mix of business to more Sams and increased consumer shopping.

Personal Auto - Direct

The year-over-year changes in our personal auto direct business were as follows:

Change Over Prior Year Quarter

Change Over Prior Year

Quarter Year-to-date

2025 2024 2025 2024

New 9 % 50 % 21 % 17 %

Renewal 25 8 23 10

Total 21 17 22 12

Written premium per policy

Renewal 1 12 1 13

Total 1 10 1 12

Policy life expectancy

2 unchanged sentences

The personal auto direct business includes business written directly by Progressive online or by phone.

During the first quarter 2025, we generated new direct personal auto application growth in 48 states and the District of Columbia, including nine of our top 10 largest direct states.

During the first quarter 2025, each of our consumer segments experienced a significant increase in new applications year over year.

During the second quarter 2025, we generated new direct personal auto application growth in 39 states and the District of Columbia, including seven of our top 10 largest direct states.

Compared to the same periods in the prior year, all four consumer segments experienced moderate growth in new applications, except Sams, who experienced significant growth for the second quarter 2025, with all four consumer segments experiencing significant growth for the first half of 2025.

Policies in force grew between 17% and 24% in each consumer segment, compared to the same period last year.

During the first quarter 2025, direct personal auto quote volume increased 22%, with a rate of conversion increase of 8%, compared to the same period last year, primarily driven by increased advertising spend and our competitiveness in the marketplace.

All consumer segments saw a significant increase in quotes and a modest increase in the rate of conversion during the first quarter 2025, except for Robinsons where conversion was flat.

During the second quarter and first six months of 2025, direct personal auto quote volume increased 2% and 12%, respectively, with a rate of conversion increase of 6% and 7%, compared to the same periods last year, primarily driven by increased advertising spend and our competitiveness in the marketplace.

For the second quarter 2025, Sams and Robinsons experienced quote volume growth higher than the total, Dianes experienced flat growth, and the Wrights experienced a decline, compared to the same period last year.

All consumer segments experienced quote volume growth for the first half of 2025.

For the second quarter and first half of 2025, all consumer segments experienced an increase in conversion, except for Robinsons, who experienced a slight decline.

The personal property profitability initiatives that negatively affected Robinsons new application, quote, and conversion growth in the agency channel were not as impactful to the direct channel as the majority of the property business bundles with personal auto in the direct channel is written through unaffiliated third-party carriers, which remain available even when we restrict writing our personal property products.

Written premium per policy increased for new and renewal personal auto direct business during the first quarter 2025, compared to the same period last year, primarily driven by the rate increases made during the last 12 months.

Our trailing 3- and 12-month policy life expectancy in the direct auto business experienced a decrease at the end of the first quarter 2025, on a year-over-year basis, which we believe is primarily driven by a shift in the mix of business and increased consumer shopping.

Our personal auto rates were relatively stable during the quarter, resulting in relatively steady written premium per

policy during the second quarter and first six months of 2025, compared to the same periods last year.

Our trailing 3- and 12-month policy life expectancy in the direct auto business experienced a decrease at the end of the second quarter 2025, on a year-over-year basis, which we believe is primarily driven by a shift in the mix of business and increased consumer shopping.

Personal Property

The year-over-year changes in our personal property business were as follows:

Change Over Prior Year Quarter

Change Over Prior Year

Quarter Year-to-date

2025 2024 2025 2024

New (11) % 35 % (6) % 33 %

Renewal 14 6 13 7

Total 4 16 6 15

Written premium per policy

New (33) (10) (37) (5)

Renewal (3) 2 (3) 4

Total (6) (4) (7) (1)

Policy life expectancy

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Our personal property business insurance is written in the agency and direct channels.

In addition to reducing our geographic footprint in more volatile weather-related markets (e.g., coastal and hail-

prone states), we continued to focus on achieving profitability goals in markets that are less susceptible to

catastrophes for our homeowners products, which we define as our total personal property business excluding renters and umbrella products.

In the growth-oriented states, policies in force increased 14% on a year-over-year basis as of March 31, 2025.

Policies in force decreased 12% in the volatile weather states as of the end of the first quarter 2025, compared to the same period in the prior year.

During the first quarter 2025, we continued several initiatives, including:

In addition to reducing our geographic footprint in more volatile weather-related markets (e.g., coastal and hail-prone states), we continued to focus on achieving profitability goals in markets that are less susceptible to catastrophes for our homeowners product, which we define as our total personal property business excluding renters and umbrella products.

In the growth-oriented states, homeowners product policies in force increased 7% on a year-over-year basis as of June 30, 2025.

Policies in force decreased 15% in the volatile weather states as of the end of the second quarter 2025, compared to the same period in the prior year.

We believe actions taken to address profitability adversely impacted new business application growth.

During the first half of 2025, we continued several initiatives, including:

(i) prioritizing insuring lower-risk properties (e.g., new construction, existing homes with newer roofs);

(ii) having underwriting restrictions in place in most states, to only accept new personal property business (e.g., home or condo) when the property policy is bundled with a Progressive personal auto policy, where permitted;

(ii) having underwriting restrictions in place in most states, to only accept new homeowners product business when the property policy is bundled with a Progressive personal auto policy, where permitted;

(iii) restricting new business and non-renewing policies that provide coverage for non-owner-occupied properties (e.g., short-term vacation rental, secondary residence, etc.) in the majority of states;

and, (iv) expanding our cost sharing with policyholders through mandatory wind and hail deductibles and roof depreciation schedules in markets where permitted.

In addition, beginning in the second quarter 2024, following the required filings and notices, we began our efforts to non-renew up to 115,000 Property policies in Florida.

and, (iv) expanding our cost sharing with policyholders through

mandatory wind and hail deductibles and roof depreciation schedules in markets where permitted.

In addition, beginning in the second quarter 2024, following the required filings and notices, we began our efforts to non-renew about 115,000 property policies in Florida.

This effort slowed while the moratoriums were in place in response to Hurricanes Helene and Milton, which temporarily limited an insurer’s ability to non-renew policies, but resumed once the moratoriums expired in December 2024.

We currently expect this effort to be substantially completed by the end of the second quarter 2025.

To try to ease the disruption of the non-renewals to our customers and agents, we reached an agreement with an unaffiliated Florida insurer to offer replacement policies to many of these policyholders, subject to the insurer’s underwriting and financial guidelines and agent appointments where applicable.

Our written premium per policy decreased on a year-over-year basis for the first quarter 2025, primarily attributable to a shift in the mix of business to more renters policies, which have lower average written premiums, and a decline in homeowners policies in force in both volatile weather-related markets and non-owner-occupied properties, which both have higher average premiums.

The effect of these declines were partially offset by rate increases taken during 2024 and higher premium coverages reflecting increased property values.

During the first quarter 2025, we increased rates, in aggregate, about 2% in our personal property business.

This effort was substantially completed by the end of the second quarter 2025.

Our written premium per policy decreased on a year-over-year basis for the second quarter and first six months of 2025, primarily attributable to a shift in the mix of business to more renters policies, which have lower average written premiums, and a decline in homeowners policies in force in both volatile weather-related markets and non-owner-occupied properties, which both have higher average premiums.

The effect of these declines were partially offset by rate increases taken during the last 12 months and higher premium coverages reflecting increased property values.

During the second quarter 2025, we increased rates, in aggregate, about 4% in our personal property business, bringing the year-to-date aggregate rate increase to 6%.

We intend to continue to make targeted rate increases in states where we are not achieving our profitability goals.

The policy life expectancy in our personal property business shortened during the first quarter 2025, compared to the same period last year, which we believe is primarily driven by a shift in the mix of business to more renters policies, the non-renewals for certain policies in volatile weather states, and rate increases made during the last 12 months.

The policy life expectancy in our personal property business shortened during the second quarter 2025, compared to the same period last year, which we believe is primarily driven by a shift in the mix of business to more renters policies, the non-renewals for certain policies in volatile weather states, and rate increases made during the last 12 months.

Commercial Lines

The following table and discussion focuses on our core commercial auto products, which accounted for about 80% of our Commercial Lines segment net premiums written on a trailing 12-month basis, as of the end of the first quarter 2025.

Year-over-year changes in our core commercial auto products were as follows:

Change Over Prior Year Quarter

Change Over Prior Year

Quarter Year-to-date

2025 2024 2025 2024

New 3 % 7 % 6 % 4 %

Renewal 5 1 5 1

Total 5 4 5 2

Written premium per policy

New (7) 1 (7) 2

Renewal (6) 13 (5) 13

Total (6) 8 (6) 9

Policy life expectancy

Trailing 12 months

During the first quarter 2025, core commercial auto new application growth was positive in each of our BMTs, except for the for-hire transportation and for-hire specialty

During the second quarter and first six months of 2025 on a year-over-year basis, core commercial auto new application growth was positive in our tow, contractor, and business auto BMTs.

The for-hire transportation BMT continued to be adversely impacted by challenging freight market conditions that have continued to cause a decline in the active number of motor carriers in this BMT.

During the first quarter 2025, quote volume and conversion increased about 3% and 5%, respectively, in our core commercial auto products, compared to the same period last year.

The effect of the previously discussed rate increases had on written premium per policy for our core commercial auto business was offset by the change in the mix of business written, compared to the first quarter 2024.

During the first quarter 2025, we increased rates, in aggregate, about 1% in our core commercial auto products.

Policies in force grew in all of our BMTs, except in the for-hire transportation and for-hire specialty BMTs.

During the second quarter and first six months of 2025, quote volume increased about 4% and 3%, respectively, while conversion decreased 1% and increased 2%, in our core commercial auto products, compared to the same periods last year.

The effect the previously discussed rate increases had on written premium per policy for our core commercial auto business was offset by a shift in the mix of business, primarily driven by a decreased demand for products in our for-hire transportation BMT and, to a lesser extent, our for-hire specialty BMT.

Written premium per policy was also impacted by a shift to a greater mix of policies with 6-month terms in our contractor and business auto BMTs, which have about half the amount of net premiums written as 12-month policies.

During the second quarter 2025, we increased rates, in aggregate, about 3% in our core commercial auto products, bringing the year-to-date aggregate rate increase to 4%.

We will continue to evaluate our rate need and adjust rates as we deem necessary.

Our policy life expectancy decreased in all BMTs, except for tow, which we believe is due to rate and non-rate actions, as well as the continued decrease in demand in the for-hire transportation BMT.

As of the end of the first quarter 2025, policy life expectancy has experienced sequential month-over-month improvement since the end of the third quarter 2024, which we believe is due to the moderation of our rate increases, compared to competitor rate increases, improving our competitiveness in the marketplace.

Our policy life expectancy increased in all BMTs, except in for-hire specialty and for-hire transportation for the second quarter 2025, compared to the same period last year.

As of the end of the second quarter 2025, policy life expectancy has experienced sequential month-over-month improvement since the end of the third quarter 2024.

We believe this improvement is due to the moderation of our rate increases, compared to competitor rate increases, and various initiatives, such as payment and renewal reminders.

RESULTS OF OPERATIONS – INVESTMENTS

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The fully taxable equivalent (FTE) total return includes recurring investment income, adjusted to a fully taxable amount for certain securities that receive preferential tax treatment (e.g., municipal securities), and total net realized, and changes in total net unrealized, gains (losses) on securities.

The following table summarizes investment results for the periods ended March 31:

The following table summarizes investment results for the periods ended June 30:

Three Months Six Months

2025 2024 2025 2024

Pretax recurring investment book yield (annualized) 4.2 % 3.9 % 4.2 % 3.8 %

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The increase in the fixed-income portfolio FTE total return, compared to last year, primarily

reflected movement in Treasury yields year-over-year.

reflected movement in U.S.

Treasury yields year-over-year.

The common stock FTE total return reflected general market conditions.

A further break-down of our FTE total returns for our fixed-income portfolio for the periods ended March 31, follows:

A further break-down of our FTE total returns for our fixed-income portfolio for the periods ended June 30, follows:

Three Months Six Months

2025 2024 2025 2024

Fixed-income securities:

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(years) Average Rating 1

March 31, 2025

June 30, 2025

government obligations $ 46,810 52.8 % 4.4 AA+

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Residential mortgage-backed securities 2,660 3.0 2.5 AA+

Commercial mortgage-backed securities 4,825 5.8 1.6 A+

Commercial mortgage-backed securities 5,049 5.7 1.6 AA-

Other asset-backed securities 6,650 7.5 1.1 AA

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$ 88,610 100.0 % 3.4 AA-

March 31, 2024

June 30, 2024

government obligations $ 40,894 56.5 % 4.0 AA+

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Corporate and other debt securities 13,146 18.1 2.6 BBB+

Residential mortgage-backed securities 383 0.6 0.5 A+

Residential mortgage-backed securities 976 1.3 3.2 AA+

Commercial mortgage-backed securities 3,970 5.5 2.0 A+

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To the extent the weighted average of the ratings falls between AAA and AA+, we assign an internal rating of AAA-.

2 At March 31, 2025 and 2024 and December 31, 2024, we had $297 million, $16 million, and $125 million, respectively, of net unsettled security transactions included in other liabilities.

The total fair value of the portfolio at March 31, 2025 and 2024 and December 31, 2024, included $3.5 billion, $3.2 billion, and $6.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

A portion of the investments held at December 31, 2024 were sold and proceeds used to pay our common share dividends in January 2025;

2 At June 30, 2025 and 2024 and December 31, 2024, we had $303 million, $74 million, and $125 million, respectively, of net unsettled security transactions included in accounts payable, accrued expenses, and other liabilities on our consolidated balance sheets.

The total fair value of the portfolio at June 30, 2025 and 2024 and December 31, 2024, included $5.0 billion, $4.1 billion, and $6.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

A portion of the investments held at December 31, 2024 were sold and proceeds were used to pay our common share dividends in January 2025;

see Note 9 – Dividends for additional information.

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The following table shows the composition of our Group I and Group II securities:

March 31, 2025 March 31, 2024 December 31, 2024

June 30, 2025 June 30, 2024 December 31, 2024

($ in millions) Fair

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Unrealized Gains (Losses)

As of March 31, 2025, our fixed-maturity portfolio had total after-tax net unrealized losses, which are recorded as part of accumulated other comprehensive income (loss) on our consolidated balance sheets, of $0.5 billion, compared to $1.8 billion and $1.4 billion at March 31, 2024 and December 31, 2024, respectively.

The decrease in total unrealized losses from March 31, 2024 and December 31, 2024, was due to valuation increases across all fixed-maturity sectors, most prominently in our U.S.

As of June 30, 2025, our fixed-maturity portfolio had total after-tax net unrealized losses, which are recorded as part of accumulated other comprehensive income (loss) on our consolidated balance sheets, of $0.1 billion, compared to $1.7 billion and $1.4 billion at June 30, 2024 and December 31, 2024, respectively.

The decrease in total unrealized losses from June 30, 2024 and December 31, 2024, was due to valuation increases across all fixed-maturity sectors, most prominently in our U.S.

Treasury, corporate and other debt, and commercial mortgage-backed portfolios as lower interest rates and, in some cases, tighter credit spreads drove strong portfolio performance.

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Holding Period Gains (Losses)

The following table provides the balance and activity for both the gross and net holding period gains (losses) for the three months ended March 31, 2025:

The following table provides the balance and activity for both the gross and net holding period gains (losses) for the six months ended June 30, 2025:

(millions) Gross Holding

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Equity securities 1

(207) (9) (216)

Total changes in holding period securities 152 3 155

Balance at March 31, 2025

Balance at June 30, 2025

Hybrid fixed-maturity securities 16 (6) 10

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Following are the primary exposures for our fixed-income portfolio.

Interest Rate Risk Our duration of 3.4 years at March 31, 2025, 3.2 years at March 31, 2024, and 3.3 years at December 31, 2024 fell within our acceptable range of 1.5 to 5.0 years.

Interest Rate Risk Our duration of 3.4 years at June 30, 2025, 3.2 years at June 30, 2024, and 3.3 years at December 31, 2024, fell within our acceptable range of 1.5 to 5.0 years.

The duration distribution of our fixed-income portfolio, excluding short-term investments, represented by the interest rate sensitivity of the comparable benchmark U.S.

Treasury Notes, was:

Duration Distribution March 31, 2025 March 31, 2024 December 31, 2024

Duration Distribution June 30, 2025 June 30, 2024 December 31, 2024

1 year 11.2 % 9.5 % 9.6 %

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Credit Risk This exposure is managed by maintaining an A minimum weighted average portfolio credit quality rating, as defined by NRSROs.

At March 31, 2025 and 2024, and December 31, 2024, our weighted average credit quality rating was AA-.

At June 30, 2025 and 2024, and December 31, 2024, our weighted average credit quality rating was AA-.

The credit quality distribution of the fixed-income portfolio was:

Average Rating 1

March 31, 2025 March 31, 2024 December 31, 2024

June 30, 2025 June 30, 2024 December 31, 2024

AAA 12.8 % 12.1 % 12.6 %

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1 The credit quality ratings are assigned by NRSROs.

Concentration Risk We did not have any investments in a single issuer, either overall or in the context of individual asset classes and sectors, that exceeded our thresholds during the first quarter 2025.

Prepayment and Extension Risk We did not experience significant adverse prepayment or extension of principal relative to our cash flow expectations in the portfolio during the first quarter 2025.

Prepayment and Extension Risk We did not experience significant adverse prepayment or extension of principal relative to our cash flow expectations in the portfolio during the second quarter 2025.

Liquidity Risk Our overall portfolio remains very liquid and we believe that it is sufficient to meet expected near-term liquidity requirements.

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The duration of our U.S.

government obligations, which are included in the fixed-income portfolio, was comprised of the following at March 31, 2025:

government obligations, which are included in the fixed-income portfolio, was comprised of the following at June 30, 2025:

($ in millions) Fair

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Five to seven years 17,067 5.7

Seven to ten years 2 7.8

Treasury Notes $ 46,810 4.4

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(at period end) 1

March 31, 2025

June 30, 2025

Residential mortgage-backed securities $ 2,660 $ 14 18.5 % 2.5 AA+

Commercial mortgage-backed securities 4,825 (319) 34.1 1.6 A+

Commercial mortgage-backed securities 5,049 (276) 35.2 1.6 AA-

Other asset-backed securities 6,650 (18) 46.3 1.1 AA

Total asset-backed securities $ 14,359 $ (280) 100.0 % 1.6 AA

March 31, 2024

Residential mortgage-backed securities $ 383 $ (9) 3.7 % 0.5 A+

June 30, 2024

Residential mortgage-backed securities $ 976 $ (7) 8.7 % 3.2 AA+

Commercial mortgage-backed securities 3,970 (487) 35.3 2.0 A+

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1 The credit quality ratings are assigned by NRSROs.

Residential Mortgage-Backed Securities (RMBS) The following table details the credit quality rating and fair value of our RMBS, along with the loan classification and a comparison of the fair value at March 31, 2025, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Residential Mortgage-Backed Securities (at March 31, 2025)

Residential Mortgage-Backed Securities (RMBS) The following table details the credit quality rating and fair value of our RMBS, along with the loan classification and a comparison of the fair value at June 30, 2025, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

($ in millions)

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Our RMBS portfolio consists of deals that are backed by high-credit quality borrowers and/or those that have strong structural protections through underlying loan collateralization.

During the first quarter of 2025, we continued to increase our exposure in this portfolio through purchases in both the primary and secondary markets with securities that had shorter spread durations.

Our additions were concentrated in investment-grade securities, while also increasing our allocation to Fannie Mae and Freddie Mac credit risk transfer securities.

Commercial Mortgage-Backed Securities (CMBS) The following table details the credit quality rating and fair value of our CMBS, along with a comparison of the fair value at March 31, 2025, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Commercial Mortgage-Backed Securities (at March 31, 2025)

During the second quarter of 2025, we continued to increase our exposure in this portfolio through purchases in both the primary and secondary markets.

Our additions were concentrated in high-quality investment-grade securities.

Commercial Mortgage-Backed Securities (CMBS) The following table details the credit quality rating and fair value of our CMBS, along with a comparison of the fair value at June 30, 2025, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

($ in millions)

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when we assigned the NAIC ratings for our CMBS, 85% of our non-investment-grade securities were rated investment grade and reported as Group II securities, with the remainder classified as Group I.

During the first quarter 2025, there was strong new issuance activity in the CMBS market and deals backed by office properties were the largest source of new issuances in the single-borrower market.

Growth in the portfolio was largely driven by additions of investment-grade-rated securities backed by industrial logistics, grocery-anchored retail, and self-storage properties.

As of March 31, 2025, we had no delinquencies in our CMBS portfolio.

The following table shows the composition of our CMBS portfolio by maturity year and sector:

Commercial Mortgage-Backed Securities Sector Details (at March 31, 2025)

During the second quarter 2025, our allocation to CMBS remained relatively stable.

While CMBS credit spreads widened in the beginning of the quarter, they tightened back in and ended the quarter close to unchanged.

We purchased securities in both the primary and secondary markets during the quarter.

We focused on buying high-quality securities in sectors including apartments, grocery-anchored shopping centers, logistics, and self-storage.

As of June 30, 2025, we had no delinquencies in our CMBS portfolio.

The following table shows the composition of our CMBS portfolio by maturity year and sector at June 30, 2025:

($ in millions)

Office Lab Office Multi-family Multi-family IO Retail Industrial Self- Storage Casino Total Average Original LTV Average Current DSCR

Office Lab Office Multi-family Multi-family IO Industrial Self- Storage Casino Data Center Retail Total Average Original LTV Average Current DSCR

2025 $ 0 $ 0 $ 0 $ 18 $ 0 $ 0 $ 0 $ 0 $ 0 $ 18

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2031 246 95 0 0 0 0 0 0 0 341 66.5 2.0

2032 20 0 0 0 0 0 0 0 0 20 68.0 1.7

Total fair value $ 1,865 $ 367 $ 775 $ 127 $ 683 $ 662 $ 285 $ 65 $ 220 $ 5,049

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The DSCR reported in the table is calculated based on the most currently available net operating income and mortgage payments for the borrower.

Other Asset-Backed Securities (OABS) The following table details the credit quality rating and fair value of our OABS, along with a comparison of the fair value at March 31, 2025, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

Other Asset-Backed Securities (at March 31, 2025)

Other Asset-Backed Securities (OABS) The following table details the credit quality rating and fair value of our OABS, along with a comparison of the fair value at June 30, 2025, to our original investment value (adjusted for returns of principal, amortization, and write-downs):

($ in millions)

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Increase (decrease) in value 0.3 % 0 % (5.1) % (2.1) % 0.3 % (0.5) % (0.3) %

During the first quarter 2025, we selectively added securities to the OABS portfolio that we viewed as having attractive spreads and potential returns.

During the second quarter 2025, we selectively added securities to the OABS portfolio that we viewed as having attractive spreads and potential returns.

The securities we acquired were predominantly in the automobile and equipment categories in highly rated, senior, and short-tenor debt tranches.

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STATE AND LOCAL GOVERNMENT OBLIGATIONS

The following table details the credit quality rating of our state and local government obligations (municipal securities) at March 31, 2025, without the benefit of credit or bond insurance:

Municipal Securities (at March 31, 2025)

The following table details the credit quality rating of our state and local government obligations (municipal securities) at June 30, 2025, without the benefit of credit or bond insurance:

Average Rating General

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AA 538 1,028 1,566

Non-rated 0 0 0

Total $ 1,195 $ 1,409 $ 2,604

Total fair value $ 1,266 $ 1,698 $ 2,964

Included in revenue bonds were $734 million of single-family housing revenue bonds issued by state housing finance agencies, of which $358 million were supported by

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the remaining 17% were collateralized by Fannie Mae and Freddie Mac mortgages.

Although credit spreads of municipal bonds widened, we still viewed most of the market as relatively unattractive.

We selectively added to the municipal portfolio during the first quarter 2025, with a focus on high-quality securities with shorter maturities, which we viewed as having more favorable risk/reward profiles.

While credit spreads of municipal bonds widened in the beginning of the second quarter 2025, they tightened back in and ended the quarter close to unchanged.

We selectively added short-duration bonds to the portfolio during the second quarter, and as a result, municipal securities as a percentage of the total fixed-income portfolio increased modestly.

CORPORATE AND OTHER DEBT SECURITIES

The following table details the credit quality rating of our corporate and other debt securities at March 31, 2025:

Corporate and Other Debt Securities (at March 31, 2025)

The following table details the credit quality rating of our corporate and other debt securities at June 30, 2025:

Average Rating Consumer Industrial Communication Financial Services Technology Basic Materials Energy Total

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Total fair value $ 5,063 $ 2,281 $ 618 $ 6,164 $ 1,661 $ 240 $ 2,095 $ 18,122

The size of our corporate and other debt portfolio increased to $16.0 billion at March 31, 2025, from $14.0 billion at

December 31, 2024.

Credit spreads provided more reward for the risks during the quarter.

At March 31, 2025 and

December 31, 2024, corporate and other debt securities made up approximately 20% and 18%, respectively, of our fixed-income portfolio.

The duration of the corporate and other debt portfolio increased slightly to 2.7 years at March 31, 2025, from 2.6 years at December 31, 2024.

The size of our corporate and other debt portfolio increased to $18.1 billion at June 30, 2025, from $16.0 billion at

March 31, 2025.

We selectively added securities as volatility provided periods with attractive credit spreads during the quarter.

At June 30, 2025 and March 31, 2025, corporate and other debt securities made up approximately 21% and 20%, respectively, of our fixed-income portfolio.

The duration of the corporate and other debt portfolio increased slightly to 2.8 years at June 30, 2025, from 2.7 years at March 31, 2025.

NONREDEEMABLE PREFERRED STOCKS

The table below shows the exposure break-down of our nonredeemable preferred stocks by sector and rating at March 31, 2025:

Nonredeemable Preferred Stocks (at March 31, 2025)

The table below shows the exposure break-down of our nonredeemable preferred stocks by sector and rating at June 30, 2025:

Financial Services

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Although a nonredeemable preferred stock will remain outstanding if not called, its interest rate duration will reflect the variable nature of the dividend.

At March 31, 2025, our non-investment-grade nonredeemable preferred stocks were with issuers that maintain investment-grade senior debt ratings.

At June 30, 2025, our non-investment-grade nonredeemable preferred stocks were with issuers that maintain investment-grade senior debt ratings.

We also face the risk that dividend payments could be deferred for one or more periods or skipped entirely.

As of March 31, 2025, we expect all of these securities to pay their dividends in full and on time.

As of June 30, 2025, we expect all of these securities to pay their dividends in full and on time.

Approximately 97% of our nonredeemable preferred stocks pay dividends that have tax preferential characteristics, while the balance pay dividends that are fully taxable.

At March 31, 2025, the nonredeemable preferred stock portfolio fair value was $0.6 billion, which is a slight decrease from $0.7 billion at December 31, 2024.

This decline was primarily due to nonredeemable preferred stocks that were called or sold because they had less attractive risk/reward profiles.

At June 30, 2025, the nonredeemable preferred stock portfolio fair value was $0.5 billion, which is a slight decrease from $0.6 billion at March 31, 2025.

This decline was primarily due to nonredeemable preferred stocks that were called during the quarter.

Common Equities

Common equities, as reported on our consolidated balance sheets, were comprised of the following:

($ in millions) March 31, 2025 March 31, 2024 December 31, 2024

($ in millions) June 30, 2025 June 30, 2024 December 31, 2024

Common stocks $ 3,703 99.1 % $ 3,272 99.3 % $ 3,550 99.3 %

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The majority of our common stock portfolio consists of individual holdings selected based on their contribution to the correlation with the Russell 1000 Index.

We held 702 out of 1,008, or 70%, of the common stocks comprising the index at March 31, 2025, which made up 94% of the total market capitalization of the index.

At both March 31, 2025 and 2024, the year-to-date GAAP income total return was within our targeted tracking error of +/- 50 basis points.

We held 685 out of 1,015, or 67%, of the common stocks comprising the index at June 30, 2025, which made up 93% of the total market capitalization of the index.

At both June 30, 2025 and 2024, the year-to-date GAAP income total return was within our targeted tracking error of +/- 50 basis points.

At December 31, 2024, the full year GAAP income total return did not meet our targeted tracking error.

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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 2. Management’s Discussion and Analysis