PROGRESSIVE CORPOH

Previous 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.

Current wording

During the third 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 of 11.0 points, which was 3.4 points better than the third quarter last year and better than our 4% companywide calendar-year underwriting profit target.

Previous wording

On a companywide basis, we ended the quarter with 32.3 million policies in force, which was 9% greater than the same period last year. During the first six months of 2024, we added 2.6 million policies in force companywide, with our personal auto products representing 2.0 million of the increase. Personal auto new business applications were up significantly from the second quarter last year, reflecting our continued efforts to focus on driving growth. During the quarter we increased our advertising spend, continued to unwind non-rate restrictions we put in place throughout 2023 to manage profitability, and worked closely with our independent agents to get back into their quote flows. We also focused on delivering competitive rates to consumers and had eight personal auto states with small rate decreases during the second quarter.

Current wording

On a companywide basis, we ended the third quarter 2024 with 33.9 million policies in force, which was 14% greater than the same period last year. Policies in force grew by 1.6 million during the third quarter 2024 and by nearly 4.2 million since year end 2023, with our personal auto products contributing about 80% of the increase for both periods. The policies in force growth reflected significant personal auto new business application growth, compared to the third quarter last year. During the third quarter 2024, we continued to increase our advertising spend, unwind non-rate restrictions, and work closely with our independent agents to leverage our agent compensation program to reward writing profitable business as we remained focused on driving growth. We also continued to focus on delivering competitive rates to consumers. During the third quarter 2024, we increased personal auto rates less than 1% in the aggregate and had nine personal auto states with small rate decreases during the third quarter.

Previous 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.

Current wording

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

Previous wording

In addition to rate increases, on a year-over-year basis for the second quarter, our incurred personal auto accident frequency decreased 8% and severity was relatively flat, which is an indication that severity trends are stabilizing. Also contributing to the profitability improvement was favorable prior accident years reserve development of 0.3 points in the second quarter 2024, compared to unfavorable development in the second quarter last year of 3.4 points.

Current wording

In addition to rate increases, on a year-over-year basis for the third quarter, our incurred personal auto accident frequency decreased 5% and severity trends remained relatively stable, with a 1% increase over the prior year. Also contributing to the profitability improvement was favorable prior accident years reserve development of 0.7 points in the third quarter 2024, compared to unfavorable development in the third quarter last year of 0.2 points.

Previous 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.

Current wording

To assist our customers impacted by Hurricanes Helene and Milton, we deployed over 2,300 claim representatives and independent adjusters. 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

Partially offsetting the favorable impact to profitability from the improved loss ratios, was an increase in our expense ratio of 2.5 points over the second quarter 2023. On a quarter-over-prior-year quarter basis, during the second quarter 2024, our advertising spend increased nearly 150%, which brought our year-to-date advertising costs to $1.6 billion, as we focused on maximizing growth. We will continue this focus 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

Partially offsetting the impact the improved loss ratio had on profitability, was a 4.8 point increase in our expense ratio over the third quarter 2023, primarily driven by increased advertising expense. During the third quarter 2024, on a quarter-over-prior-year quarter basis, our advertising spend increased nearly 400%, bringing our year-to-date advertising costs to $2.8 billion. We will continue to advertise to maximize growth as long as the advertising spend is efficient and we remain on track to achieve our target profitability.

Previous wording

The year-over-year increase in underwriting profitability was the primary contributor to the $1.1 billion increase in net income and the $1.7 billion increase in comprehensive income for the second quarter 2024. During the quarter, recurring investment income increased 51%, primarily due to investing new cash from operations and proceeds from maturing bonds in higher coupon rate securities. However, in the second quarter 2024, the portfolio recognized net realized losses on securities, compared to net realized gains in the same period last year, which more than offset the increase in the recurring investment income generated during the quarter.

Current wording

For the third quarter 2024, the year-over-year increase in underwriting profitability was the primary contributor to the $1.2 billion increase in net income. The remainder of the increase reflected an increase in recurring investment income and net realized gains during the third quarter 2024, compared to net realized losses in the same period last year. During the third quarter 2024, pretax recurring investment income increased 45%, primarily due to investing new cash from operations and proceeds from maturing bonds in higher coupon rate securities.

Previous 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.

Current wording

Comprehensive income increased $3.2 billion over the third quarter last year. In addition to the increase in net income, during the third quarter 2024, the net unrealized losses on our fixed-maturity securities decreased $1.6 billion, compared to an increase in net unrealized losses of $0.4 billion for 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.

Previous 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.

Current wording

At September 30, 2024, total capital (debt plus shareholders’ equity) was $34.1 billion, which was an increase of $6.9 billion from year-end 2023. During the first nine months of 2024, we earned $7.6 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

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.

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). Our special lines products experienced an underwriting loss during the third quarter 2024, primarily due to catastrophe losses impacting these products along with standard seasonality. In total, the special lines products contributed nearly 2 points of an unfavorable impact to our total Personal Lines combined ratio during the third quarter 2024.

Previous wording

During the quarter, our vehicle businesses benefited from higher average earned premium per policy and lower incurred loss frequency trends, with Personal Lines also benefiting from lower incurred severity trends and favorable prior accident years reserve development.

Current wording

During the quarter, our vehicle businesses’ profitability benefited from higher average earned premium per policy, lower incurred loss frequency trends, and favorable prior

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 have taken, and when necessary will continue to take, rate increases in our TNC business to address profitability issues. In our Property business, during the second quarter 2024, we increased rates about 4% countrywide, in the aggregate, which follows an increase of about 6% in the first quarter 2024 and an aggregate increase of about 17% on a trailing 12-month basis.

Current wording

accident years reserve development. 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. As a result of the rate increases previously taken, during the third quarter 2024, we continued to experience underwriting profitability in our TNC business. In our Property business, during the third quarter 2024, we increased rates about 6% countrywide, in the aggregate, which brings our year-to-date rate increases to about 16% and an aggregate increase of about 20% on a trailing 12-month basis.

Previous 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.

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. Aggregate vehicle rate changes year to date have been modest, relative to the prior two years, and we expect rates to stay stable in the fourth quarter 2024.

Previous 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.

Current wording

Throughout the third quarter 2024, we continued to lift the temporary non-rate actions implemented last year in our vehicle businesses, 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 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.

Current wording

For the third quarter 2024, all segments generated strong net premiums written growth. Personal Lines premiums written grew 29%, with the Agency and Direct distribution channels growing 26% and 31%, respectively. Commercial Lines net premiums written grew 7%. In our Property business, net premiums written grew 9%. 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

In the second quarter 2024, we experienced a significant increase in Personal Lines new business applications, primarily reflecting increased advertising spend, the reversal of the non-rate restrictions, and our efforts to get back into the independent agents’ quote flows. New personal auto applications increased 34% for the second

Current wording

In the third quarter 2024, we experienced a significant increase in Personal Lines new business applications, primarily reflecting increased advertising spend, the reversal of the non-rate restrictions, and our efforts to get back into the independent agents’ quote flows. New personal auto applications increased 110% for the third quarter 2024, compared to a decrease of 20% in the third quarter last year.

Previous 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.

Current wording

New applications in our core commercial auto business increased 11% during the third quarter 2024, compared to the same period last year, primarily due to an increase in quote volume in our business auto and contractor business market targets (BMT) and improved conversion in all of our BMTs, other than for-hire transportation, as discussed below. 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 17% during the third 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 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.

Current wording

New applications in the Property business were up 42% over the third 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, home and auto bundles, and 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 third quarter last year, policies in force grew about 19% in the less volatile weather states and decreased about 9% in the coastal and hail-prone states.

Previous 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.

Current wording

During the third quarter 2024, on a year-over-year basis, average written premium per policy grew 5% in personal auto and 2% in core commercial auto, and was down 9% in Property. The growth in personal auto and commercial auto primarily reflected rate increases taken throughout 2023. 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 in our Property business 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 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.

Current wording

We believe a key element in improving the accuracy of our rating is Snapshot®, our usage-based insurance offering for our personal auto product. During the third quarter 2024, compared to the same period last year, the adoption rates for consumers enrolling in the program increased slightly in Agency auto, following significant decreases in the first and second quarters of 2024, and increased 10% in Direct auto. The increase in the Agency auto adoption rate reflected a shift in the mix of agencies through which we wrote new business, as we continued to relax restrictions on new business and get back into the independent agents’ quote flows. The increase in the Direct auto adoption rate primarily reflected enhancements in the Direct quoting process, in addition to the continued rollout of our newest Snapshot model. 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 September 30, 2024. We continue to invest in our mobile application, with

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 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.

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 third quarter 2024, our trailing 12-month total personal auto policy life expectancy was flat, compared to last year. The Agency channel trailing 12-month measure was up 8%, while the Direct channel was down 6%. Our total personal auto trailing 3-month policy life expectancy was down 6% at the end of the third quarter 2024, due to rate and non-rate actions put in place throughout 2023, compared to the 35% increase experienced in the same period last year, which we believe reflected competitor rate increases in the prior year.

Previous 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.

Current wording

At the end of the third quarter 2024, our trailing 12-month policy life expectancy increased 1% in special lines and decreased 20% in Commercial Lines and 6% in Property, compared to the same period last year. The decrease in Commercial Lines policy life expectancy was in all BMTs, and 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 $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.

Current wording

The fair value of our investment portfolio was $79.4 billion at September 30, 2024, compared to $66.0 billion at December 31, 2023. The increase from year-end 2023 primarily reflected cash flows from insurance operations and positive investment returns, partially offset by the redemption of all of our outstanding Serial Preferred Shares, Series B, and the payment of our annual variable common share dividend.

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 June 30, 2024 and December 31, 2023, 7% of our portfolio was allocated to Group I securities with the remainder 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 September 30, 2024 and December 31, 2023, 6% and 7%, respectively, 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 3.9% 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.

Current wording

Our recurring investment income generated a pretax book yield of 4.0% for the third quarter 2024, compared to 3.3% 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 4.0% and (0.2)% for the third quarter 2024 and 2023, respectively. Our fixed-income and common stock portfolios had FTE total returns of 3.9% and 5.8%, respectively, for the third quarter 2024, compared to (0.1)% and (3.1)%, 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 increase in the common stock portfolio total return reflected general market conditions in the respective periods.

Previous 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.

Current wording

At September 30, 2024 and 2023, and December 31, 2023, the fixed-income portfolio had a weighted average credit quality of AA-. At September 30, 2024, the fixed-income portfolio duration was 3.3 years, compared to 2.9 years at September 30, 2023, and 3.0 years at December 31, 2023. During 2024, our duration was increased to take advantage of higher yields in the market.

Previous 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.

Current wording

At September 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 the current interest rate environment. We also believe that we are in a very strong position to face the current dynamic investment marketplace as we move into the fourth quarter of 2024.

Previous 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.

Current wording

Operations generated positive cash flows of $12.1 billion and $8.2 billion for the nine months ended September 30, 2024 and 2023, respectively. The increase in operating cash flow for the first nine 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 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 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.

Current wording

As of September 30, 2024, we held $45.2 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 $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.

Current wording

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 20.2% at September 30, 2024, 28.4% at September 30, 2023, and 25.4% at December 31, 2023.

Previous 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

Current wording

Our financial policies include a goal of maintaining debt below 30% of total capital at book value. While we are well below that target at September 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 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.

Previous wording

None of the covenants on our outstanding debt securities include rating or credit triggers that would require an adjustment of interest rates or an acceleration of principal payments in the event that our debt securities are downgraded by a rating agency. In April 2024, we renewed the unsecured discretionary line of credit (the Line of Credit) with PNC Bank, National Association, in the maximum principal amount of $300 million. We did not engage in short-term borrowings, including any borrowings under our Line of Credit, to fund our operations or for liquidity purposes during the reported periods.

Current wording

None of the covenants on our outstanding debt securities include rating or credit triggers that would require an adjustment of interest rates or an acceleration of principal payments in the event that our debt securities are downgraded by a rating agency. During the second quarter 2024, we renewed the unsecured discretionary line of credit (the Line of Credit) with PNC Bank, National Association, in the maximum principal amount of $300 million. We did not engage in short-term borrowings, including any borrowings under our Line of Credit, to fund our operations or for liquidity purposes during the reported periods.

Previous 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).

Current wording

During the first nine 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 each of the first three quarters of 2024. These dividends, which were each $58.6 million in the aggregate, were paid in April 2024, July 2024, and October 2024. In January 2024, we also paid a common share dividend 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 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.

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 nine months of 2024, we repurchased 0.7 million common shares, at a total cost of $133.8 million, including 0.4 million shares in the third 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 of our business.

Previous 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.

Current wording

At September 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 and other opportunities. As of September 30, 2024, our estimated consolidated statutory surplus was $27.2 billion.

Previous 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.

Current wording

2024, we increased our noncancellable purchase obligation commitments for reinsurance, primarily related to the renewal of our catastrophe excess of loss per occurrence reinsurance program. At September 30, 2024, our total commitments related to reinsurance contracts were $203.8 million, which is net of payments made during the third quarter. 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 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.

Current wording

1 Personal auto products accounted for 95% and 94% of the total Personal Lines segment net premiums written during the three and nine months ended September 30, 2024, and 94% during the three and nine months ended September 30, 2023; 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 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.

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 September 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 changes, the shift in policy term could impact our written premium mix in the Agency channel as

Previous wording

Our Commercial Lines business writes auto-related liability and physical damage insurance, business-related general liability and property insurance predominately for small businesses, and workers’ compensation insurance primarily for the transportation industry. Our Commercial Lines business operates in the following five traditional business market targets (BMT):

Current wording

Our Commercial Lines business writes auto-related liability and physical damage insurance, business-related general liability and property insurance predominately for small businesses, and workers’ compensation insurance primarily for the transportation industry. Within our Commercial Lines business, our core commercial auto business operates in the following five traditional business market targets (BMT):

Previous 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

Current wording

At September 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 can offer our BOP product, as well as adding these product offerings to our digital platform that allows direct small business consumers to obtain quotes for our products and products offered from a select group of unaffiliated carriers (BusinessQuote Explorer®). Our core commercial auto business written through the direct channel represented 11% and 10% of our total core commercial auto premiums written for the nine months ended September 30, 2024 and 2023, respectively.