DCR Assigns 'AA+' CPA Ratings to Progressive
12 October 1999
DCR Assigns 'AA+' CPA Ratings to Progressive CHICAGO, Oct. 12 -- Duff & Phelps Credit Rating Co. (DCR)
assigned claims paying ability ratings of 'AA+' (Double-A-Plus) to 24 pooled
and reinsured members of the Progressive Casualty Insurance Group. The group
represents substantially all of the personal lines insurance operations of The
Progressive Corporation . DCR also assigned its 'A+'
(Single-A-Plus) rating to PGR's senior debt. The rating outlooks are stable.
The ratings reflect PGR's underwriting profitability supported by a strong
brand name, wide product offering, superior 24-hour claims handling and
excellent market segmentation skills. The ratings also consider PGR's
abilities to grow its franchise in recent years at a rate well above peer
averages, and DCR's belief that PGR's competitive advantages will likely allow
it to continue to take market share from competitors and maintain
above-average growth rates. The ratings additionally reflect the quality of
earnings throughout this growth period, as reflected in consistently adequate
reserving levels.
At the same time, the rating considers PGR's higher-than-average operating
leverage, limited product diversification and the dividend demands imposed
upon the operating subsidiaries to support holding company debt. The rating
recognizes that advertising and marketing costs of growing market share in a
competitive environment will place downward pressure on near-term earnings.
The Progressive Corporation is an insurance holding company based in
Mayfield Village, Ohio. The company focuses on selling personal lines
(predominately automobile insurance) and a small amount of commercial
insurance. Products are sold through 30,000 independent agents; directly
through the company's http://www.progressive.com Web site and 800-AUTO-PRO
number; and through alliances, affinity groups and
national brokers.
PGR's strategy is to extensively research and segment its target markets
to offer customers a wide selection of limits, deductibles and payment plans.
The company offers auto insurance products for nonstandard, standard and
preferred risks. The company also concentrates on rapidly settling claims to
limit losses under a unique 24-hour, seven-day-a-week operation.
The Progressive Corporation reported assets of $9.2 billion and
shareholders' equity of $2.7 billion as of March 31, 1999. Net written
premium from all insurance operations was $5.3 billion in 1998 on $2.0 billion
of statutory surplus as of December 31, 1998. Underwriting results have been
excellent with a 1998 statutory combined ratio of 93.3% and a five-year
average of 93.6%.
The debt ratings consider PGR`s moderate degree of financial leverage
and its reliance upon dividends from its insurance subsidiaries to meet its
debt servicing needs. At March 31, 1999, the company's debt-to-total capital
ratio was 29 percent. DCR believes this ratio will decline as PGR retires
debt coming due in 1999 and 2000 with the proceeds from its March 1999 notes
offering.
DCR's ratings of PGR are listed below:
Consolidated Claims Paying Ability:
The Progressive Corporation`aa+` (Double-a-Plus)
Claims Paying Ability:
Halcyon Insurance Company `AA+` (Double-A-Plus)
Mountain Laurel
Insurance Company `AA+` (Double-A-Plus)
Progressive American
Insurance Company `AA+` (Double-A-Plus)
Progressive Bayside
Insurance Company `AA+` (Double-A-Plus)
Progressive Casualty
Insurance Company `AA+` (Double-A-Plus)
Progressive Classic
Insurance Company `AA+` (Double-A-Plus)
Progressive Consumers
Insurance Company `AA+` (Double-A-Plus)
Progressive County Mutual
Insurance Company `AA+` (Double-A-Plus)
Progressive Express
Insurance Company `AA+` (Double-A-Plus)
Progressive Gulf
Insurance Company `AA+` (Double-A-Plus)
Progressive Hawaii
Insurance Company `AA+` (Double-A-Plus)
Progressive Michigan
Insurance Company `AA+` (Double-A-Plus)
Progressive Mountain
Insurance Company `AA+` (Double-A-Plus)
Progressive Northeastern
Insurance Company `AA+` (Double-A-Plus)
Progressive Northern
Insurance Company `AA+` (Double-A-Plus)
Progressive Northwestern
Insurance Company `AA+` (Double-A-Plus)
Progressive Paloverde
Insurance Company `AA+` (Double-A-Plus)
Progressive Preferred
Insurance Company `AA+` (Double-A-Plus)
Progressive Premier
Insurance Company of Ill. `AA+` (Double-A-Plus)
Progressive Security
Insurance Company `AA+` (Double-A-Plus)
Progressive Southern
Insurance Company `AA+` (Double-A-Plus)
Progressive Specialty
Insurance Company `AA+` (Double-A-Plus)
Progressive Universal
Insurance Company of Ill. `AA+` (Double-A-Plus)
Progressive West
Insurance Company `AA+` (Double-A-Plus)
Fixed-Income Securities Ratings:
The Progressive Corporation Senior Debt `A+` (Single-A-Plus)
The Progressive Corporation Subordinated Debt `A+` (Single-A-Plus)
DCR is a leading global rating agency with 33 local market offices
providing ratings and research on debt issues and insurance claims paying
ability in more than 50 countries. DCR provides more than 600 claims paying
ability and debt ratings on life & health, property & casualty, title, bond
and mortgage insurers in 13 countries.
For additional information visit DCR's Web site at http://www.dcrco.com
(Quick Search: Progressive). DCR's research is also available on Bloomberg at
DCR and First Call's BondCall Direct/Research Direct at
http://www.firstcall.com, as well as through other third-party providers.
NOTE: PGR has declined to enter into a formal ratings relationship with
DCR. Although certain non-public information requested by DCR has been
provided by PGR, the above ratings are not supported by a contractual
agreement that requires PGR to keep DCR fully informed of all future
developments that could affect the rating. The rating is provided by DCR as a
service to those organizations and institutions that use and publish DCR
ratings.
