S&P Affirms Progressive Casualty, Mbrs `AApi' FSR

    NEW YORK--Standard & Poor's--March 5, 2001-- Standard & Poor's today affirmed its double-'Api' financial strength rating on Progressive Casualty Insurance Co. and its affiliated pool members.
    The rating is based on the companies' extremely strong capitalization, good operating performance, and expanding product breath and distribution channels.
    Progressive Casualty Insurance Co. is the lead company, with 53% of the pool. The other pool members are: Progressive Northern Insurance Co.(12%), Progressive Northwestern Insurance Co. (12%), Progressive Preferred Insurance Co. (6%), Progressive Specialty Insurance Co. (7%), Progressive Classic Insurance Co., (3%) Progressive American Insurance Co. (2%), Progressive Gulf Insurance Co. (2%), Progressive Southeastern Insurance Co. (1%), Progressive Bayside Insurance Co. (1%), and Progressive Mountain Insurance Co. (1%).
    Progressive Casualty Insurance Co. directly owns 100% of Progressive Specialty Insurance Co. and Progressive Gulf Insurance Co. and is itself wholly owned by The Progressive Corp. , an insurance holding company domiciled in Ohio (counterparty credit rating single-'A'-plus).
    The operations of companies owned by The Progressive Corp. combine to form the fourth largest writer of private passenger auto and personal-use vehicles (motorcycles, recreational vehicles, and snowmobiles) in the U.S. The group also writes small commercial fleets, lender's collateral protection, and directors and officers liability insurance. Its products are distributed primarily through independent general agents and direct sales, including the Internet.
    The companies, based in Mayfield Village, Ohio, and licensed in all states and territories, derive more than half of their business from Florida, New York, Texas, California, and Pennsylvania. The Progressive companies date back to 1937 and have grown to $2.2 billion in surplus at year-end 2000.

    Major Rating Factors:

    -- Capitalization was very strong on a consolidated basis, as indicated by a Standard & Poor's capital adequacy ratio of 161.5% at year-end 1999. Group surplus increased by $231.3 million in 1999.

    -- Consolidated operating performance has been good, with the time-weighted ROR of 9% from 1996 to 1999, although net income fell by $127.7 million in 1999.

    -- The group has strong reserves, with a consistent and favorable two-year loss reserve development averaging 17.6% with respect to surplus since 1995, and ranging from 33.2% redundant (negative development) to 11.6% redundant.

    -- The group, which historically has been a leader in nonstandard, high-risk personal auto coverage, has expanded into the standard and preferred automobile market, which accounted for 57% of direct business in 1999, compared with 53% in 1998. The group's Internet sales have increased to 15% of its business for 2000 from 7% in 1999.

    -- The Progressive Corp. significantly reduced its long-term debt-to-equity ratio to 26% by year-end 2000 from 38% in 1999.

    Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.
    Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said.---CreditWire.