A.M. Best Affirms Rating for Progressive Casualty Pool

March 3, 2003

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) for the Progressive Casualty Pool, (Mayfield Village, Ohio).
At the same time, A.M. Best has affirmed the “a+” senior debt rating for The Progressive Corporation’s existing debt securities and the indicative rating of “a+” for senior debt under the company’s $650 million shelf registration, of which $250 million remains. The rating outlooks are stable.

The ratings reflect Progressive’s solid capitalization, excellent operating performance and sustainable competitive advantages, which have enabled it to become a market leader in the private passenger automobile insurance industry. The group’s strong operating performance is derived from steadily increased levels of investment income and profitable underwriting results, which have resulted in solid 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.

Furthermore, Progressive benefits from its extensive data mining capabilities and technology advantages that enable detailed pricing of various risk classes and distribution sources.

The ratings further consider Progressive’s financial flexibility, which maintains moderate financial leverage, excellent cash flow to fund fixed charges and access to capital markets. Progressive ranks among the top ten property/casualty groups in the United States in terms of net premiums written.

These positive rating factors are partially offset by Progressive’s above average underwriting leverage, which was driven by aggressive growth in net premiums written and associated liabilities, although this has been partially mitigated by favorable operating earnings.

A significant portion of premium growth was reflective of rate adequacy, improved customer retention and an increase in new business policies that resulted from competitor rate increases, as well as underwriting restrictions, withdrawals or moratoriums by other national and regional insurers.

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