A.M. Best Comments On Progressive's Capital Management Initiatives

Business Wire, Sept 14, 2004

OLDWICK, N.J. -- A.M. Best Co. acknowledges Progressive's capital management efforts, which include the payment of dividends from its insurance operating subsidiaries to carry out a one time repurchase of up to 17.1 million shares of The Progressive Corporation's (NYSE: PGR) outstanding common stock via a Dutch auction tender offer. The company, in its discretion, may purchase up to an additional 4.4 million shares if the tender offer is over subscribed at the clearing price. The resulting transaction is projected to raise the net premiums written to surplus ratio of Progressive's insurance operating subsidiaries to approximately 3.0 to 1.0 at December 31, 2004. While Progressive maintains high underwriting leverage, driven by significant premium growth in recent years, this is mitigated by consistently strong operating earnings that have contributed to solid annual surplus growth. Consequently, Progressive's financial strength and debt ratings remain unaffected. (See a complete list of ratings below.)

The ratings reflect Progressive's solid capitalization, strong operating performance and sustainable competitive advantages, which have enabled it to become a market leader in the private passenger automobile insurance sector. The strong operating performance is derived from underwriting earnings and steady net investment income growth, resulting in significant annual surplus growth. Progressive continues to benefit from an innovative management team with creative operating strategies, brand name recognition, a dynamic multiple channel distribution platform and extensive utilization of cutting edge underwriting and claims handling technology.

The rating further considers the financial flexibility of The Progressive Corporation, which maintains moderate financial leverage, a conservative portfolio and excellent cash flow to fund fixed charges. Although the share repurchase will reduce the funds held at Progressive Investment Company, Inc., a non-insurance investment affiliate, it will still maintain a substantial amount of liquid assets that provide a source of funds for interest expense, debt maturity and most importantly for capital allocation to the operating entities.

For a complete list of The Progressive Corporation's financial strength and debt ratings, please visit http://www.ambest.com/press/091402progressive.pdf.> For current Best's ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit http://www.ambest.com/pc.> A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.