It's risky business, and Progressive loves it. Long a leader in nonstandard, high-risk personal auto insurance, Progressive has motored beyond its traditional business into standard-risk and preferred auto insurance, as well as other personal-use vehicle coverage (motorcycles, RVs, and snowmobiles) through carriers including majority-owned American Strategic Insurance. Progressive also offers commercial policies for heavy trucks, vans, and lighter trucks. It writes a bit of professional liability insurance for directors and officers, as well. The company markets directly to consumers online and by phone, and through more than 35,000 independent agents who account for the majority of its business.
Personal insurance accounted for 83% of the company's 2015 revenues while commercial auto represented 12%. Other indemnity and service business accounts for less than 1% of the company's revenues, while fees and other revenues account for 1%. Progressive offers coverage to auto insurance customers, underwritten by third-party insurance carriers. Progressive also offers personal umbrella insurance that provides coverage for the extras in life, such as personal injury and legal defense. Majority-owned subsidiary American Strategic Insurance provides home insurance. Progressive had 14.3 million policies in force at the end of 2015.
Progressive has more than 50 subsidiaries, one mutual insurance affiliate, and a limited partnership investment affiliate.
Progressive operates more than 450 offices throughout the US and sells personal auto insurance on via Internet in Australia.
In addition to its headquarters, additional offices, and call center operations in Mayfield Village, Ohio, the company owns locations in Colorado Springs, Colorado; Tampa and St. Petersburg, Florida; and Tempe, Arizona.
Sales and Marketing
Its US customer service group (which support policy servicing, agency distribution, claims, and direct sales operations) are located at call centers in Mayfield Village, Ohio; Tampa and St. Petersburg, Florida; Sacramento, California; Tempe, Arizona; and Colorado Springs, Colorado.
Progressive sells its personal lines through more than 35,000 independent agencies and through partnerships with other insurance companies and financial institutions. It also sells directly to customers online and by telephone.
Commercial lines are distributed directly and through independent agencies.
Total advertising costs in 2015 were $748.3 million, up from $681.8 million in 2014 and $619.8 million in 2013.
Organic growth has lifted the company's revenues every year since 2008. Revenue grew 8% in 2015 on growth in the personal lines of business as rates increased and customers bought higher premium policies. Policy growth and higher average premium policies also led to an overall 15% increase on commercial lines premiums. The company has been working on providing its customers with new insurance options (as well as increasingly investing in marketing efforts), which has paid off in higher revenues. For example, higher media spend helped the company secure more than 400,000 new policies during 2015.
Net income, which had risen in 2013 and 2014, remained relatively flat at some $1.3 billion in 2015 (a 1% decline from 2014). The higher revenues that year were partially offset by higher losses and loss adjustment expenses, cutting into the firm's bottom line. Cash flow from operations has been rising for the past few years (with the exception of a dip in 2014) and, in 2015, it rose 33% to $2.3 billion. That increase was largely driven by an increase in unearned premiums and loss adjustment expense reserves.
Unlike some insurers who, in fat markets, earn more from their investments than their premiums, more than 90% of Progressive's revenues have historically come from policy premiums.
The company's actual insurance operations have remained profitable and grown as it has entered into new geographic markets and expanded distribution of its personal auto products online. Already among the leading US auto insurers based on premiums (just behind State Farm and Allstate), Progressive is aiming to be on top.
Because it is fairly easy for customers to switch auto insurers, Progressive competes on price and accessibility. To attract new customers the company's television ads featuring its perky spokesperson "Flo" have shot up the company's brand recognition. Operating on the premise that a few drivers are responsible for the majority of claims and that previous risk models were incomplete, Progressive is now also offering rates that are tied to actual usage.
To retain customers, Progressive is promoting its non-auto personal products through bundled packages with lower auto rates. Once a customer has bought a bundled package of home/auto/umbrella coverage, they are also much less likely to switch insurance providers.
Progressive expanded its product line in 2015 by launching travel insurance and wedding/event insurance. Also that year, it introduced its Snapshot mobile application program which monitors drivers' habits for potential discounts on coverage.
In 2014, the company introduced its agency auto product in Massachusetts; with this launch, Progressive now offers Agency and Direct auto insurance in every US state.
Mergers and Acquisitions
In 2015, Progressive acquired a majority stake (67%) of ARX Holding, a homeowners' insurance carrier, for $875 million. That deal expanded its product portfolio; Progressive intends to acquire the rest of the firm it doesn't already own by the year 2021.