The Progressive Corporation (PGR) Earnings

Management highlights

- **Leadership & Succession Planning** • Pat Callahan, Personal Lines President, will retire in January 2027, after 24 years with the company, and will remain in an advisory role to the CEO. • Lori Niederst appointed to the newly created role of Chief Personal Lines Officer, drawing from her deep experience across CRM, human resources, and claims to lead the segment. • Progressive maintains deep internal talent development and robust multi-year succession planning as a core competitive strength. - **Core Strategic Framework** • The company's long-standing four strategic pillars remain in place: 1) People and culture as the foundational competitive advantage; 2) Broad needs: serving customers across their lifetime insurance needs to improve retention; 3) Leading, innovative brand; 4) Competitive pricing driven by underwriting and operational discipline. • Corporate objective remains to grow as fast as possible while maintaining a combined ratio at or below 96% for personal auto, with higher profitability requirements for property due to its greater volatility and capital needs. - **Property Business Turnaround Completion** • The multi-year property turnaround is substantially complete, with 41 of 48 states now classified as healthy and ready for disciplined growth (up from 18 in May 2025), representing 82% of the total property market (up from 40%). • Key improvements achieved: 1) 23% reduction in high weather-risk state total insured value mix, a 33% decline in modeled 1-in-100-year probable maximum loss (PML) while total book value grew 30%; 2) Deployment of granular by-peril pricing, updated product segmentation models (93% of premium on 5.0+ product models), new national risk selection models, expanded cost-sharing, targeted high-risk nonrenewals (73% complete for wildfire/wind pool exposures), and agent distribution remediation (92% complete or in progress); 3) Quote availability (percentage of quotes eligible for binding without extra review) has more than doubled since Q3 2024, enabling new business volume growth after the intentional slowdown during the turnaround. - **Robinsons (Bundled Auto/Home) Growth Strategy** • The Robinsons segment generates 70% higher lifetime premium than monoline auto and 5x the lifetime premium of Sams, making it the company's largest untapped growth opportunity. • Auto-led customer journey dynamic: Most bundled shopping starts with auto (more frequent renewals, larger budget item), and Progressive's leading auto market position gives it a strong starting point to convert shoppers to bundled policies. • Channel-specific plans: Direct channel already has solid Robinsons growth, with the HomeQuote Explorer (HQX) platform supporting 6 million annual quotes across 26 carrier options, driving 13% growth in Robinsons brand consideration over three years. Agency channel has far larger untapped opportunity, with investments focused on extending existing easy-to-use auto agent infrastructure to property/bundling, and the Platinum incentive program that aligns agent compensation with bundled customer retention and growth. • Graduation strategy: Build customer relationships early via products like embedded renters insurance, then cross-sell additional products as customer needs evolve, creating a pipeline of future Robinsons customers. 0.5 million new Robinsons customers have been created via graduation efforts since 2023. - **AI and Technology Initiatives** • Progressive has been a technology and AI-forward company for decades, with predictive AI already in widespread use. The company now has dozens of advanced generative and agentic AI initiatives underway across the business, with an AI Strategy Council overseeing enterprise-wide coordination and a responsible AI committee to ensure ethical deployment. • Early AI gains are expected to impact expense ratios first (particularly for loss adjustment expenses), with potential future improvements to loss costs as initiatives mature.

Guidance

- No explicit numerical guidance provided for full-year 2026, but management maintains its long-standing core growth and profitability targets: grow as fast as possible while holding the combined ratio at or below 96% for personal lines auto, and meet targeted return on capital requirements for property. • Management remains on track to reach a 3.5:1 premium-to-surplus ratio for the vast majority of its insurance entities by the end of 2026, up from prior lower levels, which will magnify returns from the company's operating competitive advantage. • Management expects Commercial Lines to enter a new growth phase, citing positive early indicators including positive new application growth, 30% year-over-year medium fleet PIF growth, and the highest medium fleet quoting volume in five years. • Long-term, management views the Robinsons segment as having a very large growth runway, with the now-completed property turnaround positioning the company to capture meaningful share gains over time.

Segment performance

Personal Lines Auto: Progressive achieved the milestone of being the largest U.S. personal auto writer in the trailing 12-month period by direct premiums written, with over 40 million total policies in force (PIFs) company-wide. Personal Lines total PIF growth was 8% year-over-year, including 8% growth in agency auto and 10% growth in direct auto. For Q2 2026, direct auto new business apps hit the sixth highest level on record, and overall private passenger auto added 2.2 million PIFs year-over-year. Personal Lines Property: After a multi-year turnaround, the property segment delivered a 75 combined ratio in 2025, with a year-to-date 2026 combined ratio of 78. Direct written premium for property has grown 3.7x since 2015, and the segment is now a top 12 U.S. homeowners carrier. PIF growth for property was 1% year-over-year, impacted by intentional nonrenewal of high-risk exposures during the turnaround. Special Lines: PIF growth was 6% year-over-year. Commercial Lines: Commercial Lines is at a growth turning point, with positive new application growth in Q2 (strongest in June 2026), medium fleet PIF growth up 30% year-over-year, and higher quoting volume than any point since the Protective acquisition five years prior. The segment remains profitable while the broader industry commercial combined ratio is still around 104%. The U.S. personal auto market is divided into four customer segments by Progressive: Sams (15% of market), Dianes (24%), Wrights (27%), and Robinsons (35% of market, bundled auto/home). Progressive has high single-digit market share in Robinsons, compared to strong double-digit share in the other three segments, creating large untapped growth potential.

Risks & headwinds

- The personal auto market is experiencing increasing competition, with more carriers taking on additional risk to gain growth amid softening market conditions, leading to rising acquisition costs and downward pressure on pricing. • Property insurance carries inherent volatility from catastrophic weather events, even after portfolio rebalancing, and growth in high-risk states will be constrained to maintain profitability targets. • Regulatory constraints can slow the rollout of updated pricing and product models in some states, limiting near-term growth opportunities in those markets. • Auto accident frequency and mileage trends can shift unexpectedly, creating potential deviation from expected loss trends.

Analyst Q&A

• Q: What is the current outlook for personal auto growth, broken out by channel, amid rising competitive pressures?

  A: While growth has moderated from the peak 2024-2025 levels, Progressive remains strongly outperforming peers: in Q1 2026, Progressive grew direct written premiums by $1.3 billion, while the next 19 largest carriers lost a combined $1.3 billion. Total company-wide PIFs surpassed 40 million, with 8% PL PIF growth (8% for agency auto, 10% for direct auto). Management is taking targeted action to support growth: rate decreases in 16 states (37% of total premium) in Q2, 30 states (63% of premium) year-to-date, and increased advertising spend (up 16% year-over-year to $1.4 billion in Q2) and agent incentives, while keeping cost per sale below target. Growth remains the priority, but management will not chase underpriced volume, a discipline that has delivered long-term share gains.

• Q: What is the update on moving to a 3.5:1 premium-to-surplus ratio, and how does this tie to capital return plans?

  A: The company remains on track to reach the 3.5:1 ratio for most entities by the end of 2026, after progress in 2025 and continued movement in mid-2026. Capital management priorities are unchanged: first reinvest capital into the high-ROE business, then return excess capital to shareholders. Elevated share repurchases this year reflect this policy, as excess capital from moving to higher leverage is returned. Management evaluates share repurchases based on intrinsic value and valuation benchmarks, and will continue to balance dividends and buybacks for returning excess capital.

• Q: Florida moved from a constrained yellow growth state to open green this year: is this due to tort reform, larger capital base, or portfolio changes? What is the outlook for growth there?

  A: The primary driver is prior portfolio action: nonrenewal of high-risk coastal and older building code properties materially reduced 1-in-100-year PML. Florida tort reform has also helped improve overall industry profitability in the state. Growth will only occur in line with targeted profit margins, regardless of capital levels, and expansion will be focused and disciplined, working with agency partners to grow selectively while maintaining strict underwriting standards.

• Q: What frequency loss trends is Progressive seeing, and is there evidence of an uptick like some peers have noted?

  A: Auto frequency was down 2.5% in Q2 2026, and down 2% for the trailing 12-month period. Vehicle miles traveled were down 4 points in the quarter, and no upward tick in frequency has been observed. Commercial Lines frequency is also down, driven by favorable mix shifts, so overall trends are stable and aligned with management expectations.

• Q: Robinsons share growth has been slow historically: what is structurally different now, and would you consider M&A to speed up growth?

  A: Past slow growth was due to historical catastrophic losses and underinvestment in property segmentation, modeling, and cost sharing capabilities that matched Progressive's auto franchise strength. The multi-year turnaround has addressed these gaps: the company now has the right technology, talent, and portfolio balance to grow profitably. Management is focused on organic growth with the existing platform, and has not indicated a need for M&A to capture the Robinsons opportunity.