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S&P Rates Progressive Corp.'s $300M Shelf Preliminary A+/A

17 April 1998

S&P Rates Progressive Corp.'s $300M Shelf Preliminary A+/A

    NEW YORK, April 16 -- Standard & Poor's today assigned its
preliminary single-'A'-plus/single-'A' senior debt and subordinated debt
ratings to Progressive Corp.'s $300 million shelf registration filed on March
31, 1998.  The counterparty credit rating is single-'A'-plus.
    Major Rating Factors:
    -- Excellent business review. Progressive is the fifth largest writers of
       automobile insurance in the U.S. with an impressive 3.3% market share.
       The company has built a strong franchise based on superior service and
       competitive pricing.
    -- Excellent operating performance. Progressive Corp. generated a healthy
       10% and 13% return on revenue over the last two years.  On a statutory
       basis, the combined ratio was a superior 91.8% in 1997 and 90% in 1996.
       Standard & Poor's believes that Progressive will continue to maintain
       combined ratios below its target of 96% in the near term.
    -- Lean and efficient operations.  For a company that has very strong ties
       to its agency force, Progressive has been remarkably successful in
       increasing the efficiency of its operations.  The overall statutory
       expense ratio was a strong 20.7% versus 33.5% in 1991.  Progressive has
       a creative commission structure that compensates based on retention and
       profitability.
    -- Aggressive growth mode.  Standard & Poor's believes that Progressive's
       rapid growth is not sustainable in the long run.  In the short term,
       management has been pro-active in developing its infrastructure to
       support growth in the 20%-25% range.
    -- Financial Leverage.  Progressive's financial leverage has declined
       dramatically from 61% in 1990 to 27% at year-end 1997.  Standard &
       Poor's believes that Progressive will opportunistically manage its
       capital structure to support the capital needs of its operating
       subsidiaries.  Going forward, fixed charge coverages should be very
       strong in the 8%-10% range.
    -- Year 2000 liability issues.  Progressive, through its Professional
       Liability Group, writes Director's and Officer's liability for
       community banks.  This makes Progressive susceptible to year 2000
       liability issues.  Progressive is, however, well ahead of some of its
       peers with only 200 (17% of the total) policies remaining without
       exclusions.  Standard & Poor's believes that management will closely
       monitor this issue.

    OUTLOOK: STABLE
    Standard & Poor's expects that Progressive will continue to maintain a
combined ratio below 96%.  In the absence of any extraordinary event,
financial leverage will be in the 30% range.  Acquisitions, if any, will be
small in the $50 million-$100 million range.  Investments will be made to
build infrastructure to support growth, Standard & Poor's said. -- CreditWire

SOURCE  Standard & Poor's CreditWire