PROGRESSIVE CORPOH

Previous wording

During the first quarter 2024, The Progressive Corporation’s insurance subsidiaries recognized strong growth in both premiums and policies in force, compared to the same period last year, and generated an underwriting profit significantly better than our 4% companywide calendar-year underwriting profit goal.

Current wording

During the second quarter 2024, The Progressive Corporation’s insurance subsidiaries recognized strong growth in both premiums and policies in force, compared to the same period last year, and generated an underwriting profit 4.1 points better than our 4% companywide calendar-year underwriting profit goal.

Previous wording

Net premiums written and earned increased 18% and 19%, respectively, compared to the same period last year, with all operating segments contributing to the growth. For the quarter, we generated $19.0 billion of net premiums written, which was an increase of $2.9 billion, compared to the first quarter 2023.

Current wording

Net premiums written and earned increased 22% and 19%, respectively, during the second quarter 2024 compared to the same period last year, with all operating segments contributing to the growth. For the quarter, we generated $17.9 billion of net premiums written, which was an increase of $3.2 billion, compared to the second quarter 2023.

Previous wording

Profitability for the quarter was strong with our companywide combined ratio for the first quarter 2024 of 86.1, which was 12.9 points better than the first quarter last year and 9.9 points better than our calendar-year underwriting profitability goal. Several factors contributed to the significant year-over-year improvement in our underwriting profit. The average earned premiums per policy were higher than the prior year first quarter in all of our operating segments, primarily due to the rate increases we took during 2023 to meet our companywide profitability target. Also, on a year-over-year basis for the first quarter, our incurred personal auto accident frequency decreased 9% and, while severity was up 3%, we are starting to see indications that severity trends are stabilizing. In addition, in the first quarter 2024, we had favorable prior accident years reserve development of 0.1 points, compared to unfavorable development in the first quarter last year of 4.6 points. Lastly, our companywide expense ratio was 2.3 points lower in the first quarter 2024, compared to the same period last year, in large part due to a 7% decrease in advertising spend. We are increasing our media spend to maximize growth and will continue to do so as long as we remain on track to achieve our target profitability and generate sales at a cost below the maximum amount we are willing to spend to acquire a new customer.

Current wording

Several factors contributed to the significant year-over-year improvement in our underwriting profit. The average earned premium per policy on our vehicle businesses were higher than the prior year second quarter, primarily due to the rate increases we took, during 2023, to meet our companywide profitability target.

Previous wording

The quarter-over-prior-year quarter increase in comprehensive income reflected the increase in net income partially offset by the change in net unrealized losses on our fixed-maturity securities during the periods. During the first quarter 2024, net unrealized losses increased, compared to a decrease in net unrealized losses in the first quarter last year, with both periods primarily driven by the then-current interest rate environment, with a moderate decline in interest rates during the first quarter last year.

Current wording

In addition to the increases in net income, the increase in comprehensive income also reflected the decrease in the net unrealized losses on our fixed-maturity securities during the second quarter 2024, compared to the increase in unrealized losses during the second quarter last year. The change in the unrealized losses during both periods were primarily driven by the then-current economic environment.

Previous wording

Total capital (debt plus shareholders’ equity) at March 31, 2024, was $28.7 billion, which was up $1.5 billion from year-end 2023. During the first quarter 2024, we earned $2.1 billion of comprehensive income, which was offset by the $0.5 billion redemption of all of our outstanding Serial Preferred Shares, Series B, during the quarter, as discussed in further detail in Financial Condition below.

Current wording

Total capital (debt plus shareholders’ equity) at June 30, 2024, was $30.2 billion, which was up $3.0 billion from year-end 2023. During the first half of 2024, we earned $3.7 billion of comprehensive income, which was in part offset by the $0.5 billion redemption of all of our outstanding Serial Preferred Shares, Series B, during the first quarter, as discussed in further detail in Financial Condition below.

Previous wording

During the first quarter 2024, all of our operating segments were profitable with Personal Lines, Commercial Lines, and Property reporting combined ratios of 84.5, 91.8, and 93.4, respectively. Personal Lines is comprised of both our personal auto and special lines products, with the latter typically having lower losses during the first quarter due to the seasonal nature of these products (e.g., motorcycles, boats, and RVs). The special lines profitability during the first quarter contributed just over a 1 point favorable impact to our total Personal Lines combined ratio. During the quarter, all of our operating segments benefited from higher average earned premiums per policy, lower incurred loss frequency and severity trends, and lower expense ratios, with Personal Lines also benefiting from favorable prior accident year reserve development.

Current wording

Personal Lines is comprised of both our 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., motorcycles, boats, and RVs). The special lines profitability had minimal impact to our total Personal Lines combined ratio during the second quarter 2024.

Previous wording

As a result of the rate actions we took during 2023 to help achieve our target profit margin, we currently believe that, in most states, we are adequately priced in our personal auto and core commercial auto (which exclude our transportation network company (TNC) business, business owners’ policy (BOP), and Progressive Fleet & Specialty (previously referred to as Protective Insurance)) products. We will continue to monitor the factors that could impact our loss costs for both our vehicle and Property businesses, which may include new and used car prices, miles driven, driving patterns, loss severity, weather events, building materials, construction costs, inflation, and other components, on a state-by-state basis, and adjust rates as we deem appropriate. We currently anticipate that aggregate rate changes throughout 2024 will be of lesser magnitude than those taken in each of the prior two years, but we will continue to evaluate our rate need and adjust rates as we deem necessary.

Current wording

We will continue to monitor the factors that could impact our loss costs for both our vehicle and Property businesses, which may include new and used car prices, miles driven, driving patterns, loss severity, weather events, building materials, construction costs, inflation, and other components, on a state-by-state basis. We currently anticipate that aggregate vehicle rate changes throughout 2024 will be of lesser magnitude than those taken in each of the prior two years, but we will continue to evaluate our rate need and adjust rates as we deem necessary.

Previous wording

Throughout the first quarter 2024, we continued to lift the non-rate actions implemented last year, on a state-by-state basis, as our focus shifted from achieving our target profit margin to maximizing profitable growth.

Current wording

Throughout the second quarter 2024, we continued to lift the non-rate actions implemented last year in our vehicle businesses, in all but a few states, as our focus shifted from achieving our target profit margin to driving growth, delivering competitive rates to consumers, and providing an exceptional customer experience to our policyholders.

Previous wording

For the first quarter 2024, net premiums written grew 18% compared to the first quarter last year, with all segments showing strong growth. Personal Lines net premiums written grew 20%, with the Agency and Direct distribution channels growing 18% and 21%, respectively. Commercial Lines net premiums written grew 11% and Property grew 17%. Changes in net premiums written are a function of new business applications (i.e., policies sold), business mix, premium per policy, and retention.

Current wording

For the second quarter 2024, net premiums written grew 22%, compared to the second quarter last year, with all segments showing strong growth. Personal Lines net premiums written grew 26%, with the Agency and Direct distribution channels growing 22% and 29%, respectively. Commercial Lines net premiums written grew 6% and Property grew 11%. Changes in net premiums written are a function of new business applications (i.e., policies sold), business mix, premium per policy, and retention.

Previous wording

New applications in our core commercial auto business increased 2% during the first quarter 2024, compared to the same period last year. Excluding the impact of the for-hire transportation business market target (BMT), which had a year-over-year decrease in new applications, our core commercial auto new application growth would have been 9% during the first quarter 2024. The for-hire transportation BMT continues to be adversely impacted by challenging freight market conditions that have caused a decline in the active number of motor carriers in this BMT.

Current wording

New applications in our core commercial auto business increased 7% during the second quarter 2024, compared to the same period last year. Excluding the impact of the for-hire transportation business market target (BMT), which had a year-over-year decrease in new applications, our core commercial auto new application growth would have been 13% during the second quarter 2024. The for-hire transportation BMT continues to be adversely impacted by challenging freight market conditions that have caused a decline in the active number of motor carriers in this BMT.

Previous wording

New applications in the Property business were up 31% over the first quarter last year as we continued to focus on growing new business in less volatile weather states and home and auto bundles, as well as lower risk properties, such as new construction or homes with newer roofs, in regions where our appetite to write new business is limited.

Current wording

New applications in the Property business were up 35% over the second quarter last year, driven by significant growth in our renters policies. In addition, we continued to focus on growing new business in less volatile weather states and home and auto bundles, as well as lower-risk properties, such as new construction or homes with newer roofs, in regions where our appetite to write new business is limited. Compared to the end of the second quarter last year, policies in force grew about 20% in the less volatile weather states and decreased about 6% in the coastal and hail-prone states.

Previous wording

During the first quarter 2024, on a year-over-year basis, average written premium per policy grew 14% in personal auto, 10% in core commercial auto, and 2% in Property. The growth in personal auto, commercial auto, and Property primarily reflected rate increases taken throughout 2023, in response to rising loss costs, that continued to be earned through the first quarter 2024. The rate increases taken in commercial auto were, in part, offset by a shift in the mix of business, primarily driven by decreased demand in our for-hire transportation product.

Current wording

During the second quarter 2024, on a year-over-year basis, average written premium per policy grew 11% in personal auto and 8% in core commercial auto, and was down 4% in Property. The growth in personal auto and commercial auto primarily reflected rate increases taken throughout 2023, that continued to be earned through the second quarter 2024. The rate increases taken in commercial auto were, in part, offset by a shift in the mix of business, primarily driven by decreased demand in our for-hire transportation BMT. The decrease in Property average written premium per policy reflected a shift in the mix of business as we continued to focus on growing in less volatile weather states. We are also seeing a mix shift towards more renters policies which have lower average written premiums. These mix shifts were partially offset by rate increases taken over the last 12 months and higher premium coverages reflecting increased property values. Given that our commercial auto and Property policies are predominately written for 12-month terms, rate actions take longer to earn in for these products.

Previous wording

We believe a key element in improving the accuracy of our rating is Snapshot®, our usage-based insurance offering. During the first quarter 2024, the adoption rates for consumers enrolling in the program decreased about 20% in Agency auto and was flat in Direct auto, compared to the first quarter 2023. The decrease in the Agency auto adoption rate primarily reflects a shift in the mix of agencies through which we wrote new business during the first quarter 2024, as a result of the rate and non-rate actions implemented after the first quarter of 2023. As we continue to lift certain non-rate restrictions during 2024, we would expect the mix of agencies where we write new business will begin to shift in the direction of the agency mix that was in place prior to the implementation of those restrictions. Snapshot is available in all states, other than California, and our latest segmentation model was available in states that represented about 70% of our countrywide personal auto premium at March 31, 2024. We continue to invest in our mobile application, with mobile devices being chosen for Snapshot monitoring for the majority of new enrollments.

Current wording

We believe a key element in improving the accuracy of our rating is Snapshot®, our usage-based insurance offering. During the second quarter 2024, the adoption rates for consumers enrolling in the program decreased about 15% in Agency auto and increased about 5% in Direct auto, compared to the second quarter 2023. The decrease in the Agency auto adoption rate primarily reflected a shift in the mix of agencies through which we wrote new business during the second quarter 2024, as a result of the rate and non-rate actions implemented after the first quarter 2023. As we continue to relax restrictions on new business and get back into the independent agents’ quote flows, we expect the mix of agencies where we write new business will begin to shift in the direction of the agency mix that was in place prior to the implementation of those restrictions. Snapshot is available in all states, other than California, and our latest segmentation model was available in states that represented about 70% of our countrywide personal auto premium at June 30, 2024. We continue to invest in our mobile application, with mobile devices being chosen for Snapshot monitoring for the majority of new enrollments.

Previous wording

We realize that to grow policies in force, it is critical that we retain our customers for longer periods. Consequently, increasing retention continues to be one of our most important priorities. Our efforts to increase our share of multi-product households remains a key initiative and we will 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, Commercial Lines, and Property businesses.

Current wording

We realize that to grow policies in force, it is critical that we retain our customers for longer periods. Consequently, increasing retention continues to be one of our most important priorities. Our efforts to increase our share of Progressive auto and home 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, Commercial Lines, and Property businesses.

Previous wording

We evaluate total 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, this measure is more responsive to current experience and may be an indicator for the future trend of our 12-month measure. As of the end of the first quarter 2024, our trailing 12-month total personal auto policy life expectancy increased 20%, compared to last year. The Agency and Direct channels trailing 12-month measure was up 28% and 13%, respectively. As of the end of the first quarter 2024, we have seen improvement in our trailing 12-month policy life expectancy on a year-over-year basis for each of the last ten months. Rate increases could have an adverse impact on our retention, as potentially indicated by our total personal auto trailing 3-month policy life expectancy no longer showing improvement, compared to the same period last year.

Current wording

We evaluate total 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, this measure is more responsive to current experience and may be an indicator for the future trend of our 12-month measure. As of the end of the second quarter 2024, our trailing 12-month total personal auto policy life expectancy increased 9%, compared to last year. The Agency and Direct channels trailing 12-month measure was up 18% and 2%, respectively. As of the end of the second quarter 2024, we saw improvement in our trailing 12-month policy life expectancy on a year-over-year basis for each of the last trailing 12 months. We believe the 12-month measure was positively impacted by a shift in the mix of business, in addition to our competitiveness in the marketplace throughout 2023, following the rate increases that we took in 2022 ahead of many of our competitors. However, our total personal auto trailing 3-month policy life expectancy was down 5% at the end of the second quarter 2024, due to rate and non-rate actions put in place throughout 2023, compared to the 40% increase experienced in the same period last year, which we believe reflected our competitiveness in the marketplace in the prior year. Our trailing 3-month policy life expectancy was flat compared to the first quarter 2024.

Previous wording

At the end of the first quarter 2024, our trailing 12-month policy life expectancy increased 6% in special lines, 11% in Property, and decreased 15% in Commercial Lines, compared to the same period last year. The decrease in Commercial Lines policy life expectancy in all BMTs, reflected rate and non-rate actions taken in 2023 to achieve our target profitability, as well as the continued decrease in demand in the for-hire transportation BMT.

Current wording

At the end of the second quarter 2024, our trailing 12-month policy life expectancy increased 3% in special lines, 5% in Property, and decreased 19% in Commercial Lines, compared to the same period last year. The decrease in Commercial Lines policy life expectancy in all BMTs, reflected rate and non-rate actions taken in 2023 to achieve our target profitability, as well as the continued decrease in demand in the for-hire transportation BMT.

Previous wording

The fair value of our investment portfolio was $69.0 billion at March 31, 2024, compared to $66.0 billion at December 31, 2023. The increase from year-end 2023 primarily reflected cash flows from operations, in part offset by the redemption of all of our outstanding Serial Preferred Shares, Series B, and the payment of our annual variable common share dividends.

Current wording

The fair value of our investment portfolio was $72.4 billion at June 30, 2024, compared to $66.0 billion at December 31, 2023. The increase from year-end 2023 primarily reflected cash flows from operations, in part offset by the redemption of all of our outstanding Serial Preferred Shares, Series B, and the payment of our annual variable common share dividends.

Previous wording

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 both March 31, 2024 and December 31, 2023, 7% of our portfolio was allocated to Group I securities and 93% to Group II securities.

Current wording

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 both June 30, 2024 and December 31, 2023, 7% of our portfolio was allocated to Group I securities with the remainder to Group II securities.

Previous wording

Our recurring investment income generated a pretax book yield of 3.7% for the first quarter 2024, compared to 3.0% for the same period in 2023. The increase from prior year primarily reflected investing new cash from operations, and proceeds from maturing bonds, in higher coupon rate securities. Our investment portfolio produced a fully taxable equivalent (FTE) total return of 0.8% and 2.3% for the first quarter 2024 and 2023, respectively. Our fixed-income and common stock portfolios had FTE total returns

Current wording

Our recurring investment income generated a pretax book yield of 3.9% for the second quarter 2024, compared to 3.1% for the same period in 2023. The increase from prior year primarily reflected investing new cash from operations, and proceeds from maturing bonds, in higher coupon rate securities. Our investment portfolio produced a fully taxable equivalent (FTE) total return of 0.9% and 0% for the second quarter 2024 and 2023, respectively. Our fixed-income and common stock portfolios had FTE total returns of 0.8% and 3.6%, respectively, for the second quarter 2024, compared to (0.4)% and 9.0%, respectively, last year. The increase in the fixed-income portfolio FTE total return, compared to last year, primarily reflected movements in Treasury yields year-over-year. The decrease in the common stock portfolio total return reflected general market conditions in the respective periods.

Previous wording

At March 31, 2024, the fixed-income portfolio had a weighted average credit quality of AA- and a duration of 3.2 years, compared to AA and 3.0 years at March 31, 2023 and AA- and 3.0 years at December 31, 2023. Our decrease in weighted average credit quality compared to March 31, 2023, was mainly due to a second major credit rating agency downgrading U.S. Treasury debt to AA+ from AAA during the third quarter 2023, which led us to lower our U.S. Treasury positions to AA+. During first quarter 2024, we took advantage of higher interest rates to increase the portfolio duration.

Current wording

At June 30, 2024, the fixed-income portfolio had a weighted average credit quality of AA- and a duration of 3.2 years, compared to AA and 2.9 years at June 30, 2023 and AA- and 3.0 years at December 31, 2023. Our decrease in weighted average credit quality compared to June 30, 2023, was mainly due to a second major credit rating agency downgrading U.S. Treasury debt to AA+ from AAA during the third quarter 2023, which led us to lower our U.S. Treasury positions to AA+. During 2024, our duration was increased to take advantage of higher yields in the market.

Previous wording

At March 31, 2024, we continued to maintain a relatively conservative investment portfolio with a greater allocation to cash and treasuries and relatively shorter interest rate risk. We believe that this portfolio allocation, coupled with a lack of maturities of our outstanding debt until 2027, positions us well to benefit from a higher interest rate environment. We also believe that we are in a very strong position to face the current dynamic operating and investment marketplaces as we move into the second quarter of 2024.

Current wording

At June 30, 2024, we continued to maintain a relatively conservative investment portfolio with a greater allocation to cash and treasuries. We believe that this portfolio allocation, coupled with a lack of maturities of our outstanding debt until 2027, positions us well to benefit from a higher interest rate environment. We also believe that we are in a very strong position to face the current dynamic operating and investment marketplaces as we move into the third quarter of 2024.

Previous wording

Operations generated positive cash flows of $4.2 billion and $2.4 billion for the three months ended March 31, 2024 and 2023, respectively. The increase in operating cash flow for the first three months of 2024 compared to 2023 is primarily attributable to collecting more premiums in 2024 relative to paying losses. The increase in premiums collected were mostly driven by rate increases and policies in force growth. While loss payments also increased during the first three months of 2024, primarily due to higher loss severity trends, the increase in loss payments was not as substantial as the increase in premiums. We believe cash flows will remain positive in the reasonably foreseeable future and do not expect we will have a 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.

Current wording

Operations generated positive cash flows of $7.5 billion and $4.8 billion for the six months ended June 30, 2024 and 2023, respectively. The increase in operating cash flow for the first six months of 2024, compared to 2023, was primarily driven by the growth in profit from our underwriting operations. We believe cash flows will remain positive in the reasonably foreseeable future and do not expect we will have a 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.

Previous wording

As of March 31, 2024, we held $39.9 billion in short-term investments and U.S. Treasury securities, which represented about 58% of our total portfolio. Based on our portfolio allocation and investment strategies, we believe that we have sufficient readily available marketable securities to cover our claims payments and short-term obligations in the event our cash flows from operations were to be negative. 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, 2023, for a discussion of certain matters that may affect our portfolio and capital position.

Current wording

As of June 30, 2024, we held $41.6 billion in short-term investments and U.S. Treasury securities, which represented nearly 60% of our total portfolio. Based on our portfolio allocation and investment strategies, we believe that we have sufficient readily available marketable securities to cover our claims payments and short-term obligations in the event our cash flows from operations were to be negative. 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, 2023, for a discussion of certain matters that may affect our portfolio and capital position.

Previous wording

Our total capital (debt plus shareholders’ equity) was $28.7 billion, based on book value, at March 31, 2024, compared to $23.3 billion at March 31, 2023, and $27.2 billion at December 31, 2023. The increase from December primarily reflected the comprehensive income recognized during the first three months of 2024, mainly driven by our underwriting profitability, partially offset by the redemption of all of the outstanding Serial Preferred Shares, Series B. During the first quarter 2024, we redeemed all of the outstanding Serial Preferred Shares,

Current wording

Our total capital (debt plus shareholders’ equity) was $30.2 billion, based on book value, at June 30, 2024, compared to $23.6 billion at June 30, 2023, and $27.2 billion at December 31, 2023. The increase from December primarily reflected the comprehensive income recognized during the first six months of 2024, mainly driven by our underwriting profitability, partially offset by the redemption of all of the outstanding Serial Preferred Shares, Series B. During the first quarter 2024, we redeemed all of the outstanding Serial Preferred Shares, Series B, at the stated amount of $1,000 per share, for an aggregate payout of $507.8 million, including accrued and unpaid dividends to, but excluding February 22, 2024, which was the redemption date. Our debt-to-total capital ratio was 22.8% at June 30, 2024, 29.2% at June 30, 2023, and 25.4% at December 31, 2023.

Previous wording

While our financial policies include a goal of maintaining debt below 30% of total capital at book value, we recognize that various factors, including rising interest rates, widening credit spreads, declines in the equity markets, or erosion in operating results, may result in that ratio exceeding 30% at times. In such a situation, we may choose to remain above 30% for some time, dependent upon market conditions and the capital needs of our operating businesses. We will continue to monitor this ratio, market conditions, and our capital needs going forward.

Current wording

Our financial policies include a goal of maintaining debt below 30% of total capital at book value. While we are comfortably below that target at June 30, 2024, we recognize that various factors, including rising interest rates, widening credit spreads, declines in the equity markets, or erosion in operating results, may result in that ratio exceeding 30% at times. In such a situation, we may choose to remain above 30% for some time, dependent

Previous wording

During the first three months of 2024, we returned capital to shareholders primarily through common share dividends and common share repurchases. In March 2024, our Board of Directors declared a $0.10 per common share dividend, or $58.6 million in the aggregate, that was paid in April 2024. In January 2024, we also paid common share dividends declared in the fourth quarter 2023, in the aggregate amount of $497.9 million, or $0.85 per share (see Note 9 – Dividends for further discussion).

Current wording

During the first six months of 2024, 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 2024. These dividends, which were each $58.6 million in the aggregate, were paid in April 2024 and July 2024. In January 2024, we also paid common share dividends declared in the fourth quarter 2023, in the aggregate amount of $497.9 million, or $0.85 per share (see Note 9 – Dividends for further discussion).

Previous wording

Consistent with 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 2024, we repurchased 0.2 million common shares, at a total cost of $37.1 million, to satisfy tax withholding obligations in connection with the vesting of

Current wording

Consistent with 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 six months of 2024, we repurchased 0.3 million common shares, at a total cost of $48.0 million, including 0.1 million shares in the second quarter 2024, both in the open market and to satisfy tax withholding obligations in connection with the vesting of equity awards under our 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 to expand our business operations.

Previous wording

At March 31, 2024, we had $3.2 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. As of March 31, 2024, our estimated consolidated statutory surplus was $24.6 billion.

Current wording

At June 30, 2024, we had $4.1 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. As of June 30, 2024, our estimated consolidated statutory surplus was $24.8 billion.

Previous wording

During the first three months of 2024, our contractual obligations and critical accounting policies have not changed materially from those discussed in our 2023 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 disclosed in our 2023 Annual Report to Shareholders.

Current wording

During the first six months of 2024, our contractual obligations and critical accounting policies have not changed materially from those discussed in our 2023 Annual Report to Shareholders. During the second quarter 2024, we increased our noncancellable purchase obligation commitments for reinsurance contracts by $352.0 million, primarily related to the renewal of our catastrophe excess of loss per occurrence reinsurance program, bringing our total commitments related to reinsurance contracts to $384.1 million at June 30, 2024. There have not been any other material changes in off-balance-sheet leverage, which includes purchase obligations, from those discussed in our 2023 Annual Report to Shareholders.

Previous wording

1 Personal auto products accounted for 96% and 95% of the total Personal Lines segment net premiums written during the three months ended March 31, 2024 and 2023, respectively; our special lines products accounted for the balance.

Current wording

1 Personal auto products accounted for 92% of the total Personal Lines segment net premiums written during the three months ended June 30, 2024 and 2023, and 94% and 93% during the six months ended June 30, 2024 and 2023, respectively; our special lines products accounted for the balance.

Previous wording

While our personal auto policies primarily have 6-month terms, we write 12-month auto policies in our Platinum agencies to promote bundled auto and home growth. At March 31, 2024 and 2023, 14% of our Agency auto policies in force were 12-month policies. To the extent our Agency application mix of annual policies grows, the shift in policy term could increase our written premium mix by channel as 12-month policies have about twice the amount

Current wording

While our personal auto policies primarily have 6-month terms, we write 12-month auto policies in our Platinum agencies to promote bundled auto and home growth. At June 30, 2024 and 2023, 13% and 14%, respectively, of our Agency auto policies in force were 12-month policies. To the extent our Agency application mix of annual policies grows, the shift in policy term could increase our written premium mix 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 products are written for 12-month terms.

Previous wording

At March 31, 2024, about 90% 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. To serve our direct channel customers, we continue to expand our product offerings, including adding states where we offer our BOP product, as well as adding these product offerings to our digital platform that serves direct small business consumers (BusinessQuote Explorer®). Our core commercial auto business written through the direct channel represented about 11% of our total core commercial auto premiums written for the three months ended March 31, 2024 and 2023.

Current wording

At June 30, 2024, about 90% 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. To serve our direct channel customers, we continue to expand our product offerings, including adding states where we offer our BOP product, as well as adding these product offerings to our digital

Previous wording

Our Property business writes residential property insurance for homeowners, other property owners, renters, and umbrella insurance. About three-fourths of our Property business is generated through the independent agency channel with the balance in the direct channel. All of our Property policies have 12-months terms.

Current wording

Our Property business writes residential property insurance for homeowners, other property owners, and renters, and umbrella insurance. Just over three-fourths of our Property business is generated through the independent agency channel with the balance in the direct channel. All of our Property policies have 12-month terms.

Previous wording

Several factors contributed to the significant increase in underwriting profit for the first quarter 2024, compared to the first quarter 2023. As a result of the rate increases we took throughout 2023, our personal and core commercial auto average written premium per policy were up 14% and 10%, respectively, and Property was up 2% year over year. Also, on a year-over-year basis for the first quarter, our incurred personal auto accident frequency decreased 9% and, while severity was up 3%, we are starting to see indications that severity trends are stabilizing. During the first quarter 2024, we recognized favorable prior accident years development, compared to significant unfavorable development in the first quarter last year, which accounted for 4.7 points on a quarter-over-prior-year quarter basis.

Current wording

Several factors contributed to the significant increase in underwriting profit for the three and six months ended

Previous wording

Lastly, our companywide expense ratio was 2.3 points lower in the first quarter 2024, compared to the same period last year, in large part due to a 7% decrease in advertising spend. We are increasing our media spend to maximize growth and will continue to do so as long as we remain on track to achieve our target profitability.

Current wording

Partially offsetting the factors that favorably impacted our underwriting results for the second quarter 2024, was an increase in our companywide expense ratio of 2.5 points, compared to the same period last year, due in large part to a 147% increase in advertising spend during the quarter. We increased our media spend to maximize growth and will continue to do so as long as we remain on track to achieve our target profitability.

Previous wording

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 vehicle businesses, are influenced by inflation and driving patterns, among other factors, some of which are discussed below. In our Property business, severity is primarily a function of construction costs and the age of the structure.

Current wording

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 vehicle businesses, are influenced by inflation and driving patterns, among other factors, some of which are discussed below. In our 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.

Previous wording

Our total loss and LAE ratio decreased 10.6 points for the first quarter 2024, compared to the same period last year, primarily due to a decrease in loss frequency, higher premium per policy, and favorable prior accident years reserve development in the first quarter 2024, compared to unfavorable development in the first quarter last year, partially offset by higher loss severity as discussed below. On an accident year basis, our first quarter 2024 loss and LAE ratio was 5.9 points lower than the first quarter 2023.

Current wording

Our total loss and LAE ratio decreased 11.0 points for the second quarter 2024, compared to the same period last year, and 10.8 points on a year-to-date basis, primarily due to a decrease in loss frequency, relatively flat personal auto severity, higher vehicle premium per policy, and favorable prior accident years reserve development in 2024, compared to unfavorable development in the first half of last year. On an accident year basis, our loss and LAE ratio was 7.3 points and 6.6 points lower for the three and six months ended June 30, 2024, respectively, compared to the same periods last year.

Previous wording

In the three months ended March 31, 2024, our catastrophe losses reflected severe weather events throughout the United States, with five states (Texas, Missouri, Florida, Oregon, and California) contributing just over half 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.

Current wording

In the second quarter 2024, our catastrophe losses reflected severe weather events throughout the United States, with nearly 40% of the storm losses in Texas. Weather events in Florida, Colorado, Missouri, and Nebraska contributed about another 30% to the total catastrophe losses for the quarter. 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.

Previous wording

Changes in our estimate of our ultimate losses on catastrophes currently reserved, along with potential future catastrophes, could have a material impact on our financial condition, cash flows, or results of operations. We reinsure various risks including, but not limited to, catastrophic losses. We do not have catastrophe-specific reinsurance for our Personal Lines or commercial auto businesses, but we reinsure portions of our Property business. The Property business reinsurance programs include catastrophe 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 Progressive Fleet & Specialty business.

Current wording

Changes in our estimate of our ultimate losses on catastrophes currently reserved, along with potential future catastrophes, could have a material impact on our financial condition, cash flows, or results of operations. We reinsure various risks including, but not limited to, catastrophic losses. We do not have catastrophe-specific reinsurance for our Personal Lines or commercial auto businesses, but we reinsure portions of our Property business. The Property business 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-

Previous wording

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. For 2024, we entered into a new catastrophe aggregate excess of loss reinsurance contract that has multiple layers of coverage, with the first retention layer

Current wording

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. During the second quarter 2024, we entered into new reinsurance contracts under our per occurrence excess of loss program for our Property business. The reinsurance program has a retention threshold for losses and allocated loss adjustment expenses (ALAE) from a single catastrophic event of $200 million. 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 including the Florida Hurricane Catastrophe Fund that is specific to Florida, this coverage reaches an estimated $2.3 billion.