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S&P Rates Progressive Southeastern Insurance 'AApi'

18 November 1998

S&P Rates Progressive Southeastern Insurance 'AApi'

    NEW YORK, Nov. 17 -- Standard & Poor's today assigned its
double-'Api' (Very Strong) insurer financial strength rating to Progressive
Southeastern Insurance Co.
    The company is licensed in seven states.  Its major line of business is
personal auto insurance, and it is a subsidiary of Progressive Corp.
(single-'A'-plus/Stable/--), the fifth-largest writer of automobile insurance
in the U.S. The company commenced operations in 1980.

    The following factors were incorporated in the double-'Api' rating:
    -- Progressive Southeastern participates in the Progressive Casualty
       Intercompany Pool and retained 1% of the pool's business in 1998.
    -- Capitalization for the intercompany pool is very strong for year-end
       1997 at 173% (unadjusted) under Standard & Poor's capital adequacy
       model.
    -- The Progressive group has been remarkably successful in increasing the
       efficiency of its operations.  The overall statutory expense ratio was
       a strong 23.4% in 1997 versus 37.1% in 1991.
    -- Operating performance for the intercompany pool is very strong, with
       return on revenue averaging 12.4% from 1993 to 1997.  Although the pool
       is consistently profitable on an underwriting basis, its earnings are
       more volatile than that of most higher rated insurers.
    -- While the pool's business is focused on personal auto insurance, this
       concentration is offset by the geographic diversity of the pool's
       premiums.

    'Pi' ratings, denoted 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.  Pi ratings 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.