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 85% of the company's 2014 revenues while commercial auto represented 9%. Other indemnity and service business accounts for less than 1% of the company's revenues, while fees and other revenues account for 2%. 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. The company had 13.8 million policies in force at the end of 2014.
Progressive has more than 50 subsidiaries, one mutual insurance affiliate, and a limited partnership investment affiliate.
Progressive operates 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, 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; Austin, Texas; Tampa, Florida; Sacramento, California; Tempe, Arizona; and Colorado Springs, Colorado.
Total advertising costs in 2014 were $681.8 million, up from $619.8 million in 2013.
Organic growth has lifted the company's revenues every year since 2008. They grew by 7% in 2014 on growth in the personal lines of business as rates increased and customers bought higher premium policies. Commercial product rate increases also led to an overall premium increase. 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.
Net income increased 10% in 2014 to $1.3 billion, thanks to the higher revenue. Despite that growth, cash flow from operations slid 9% to $1.7 billion as more cash was used in premiums receivable and less cash was provided by loss 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.
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.