Good morning. And thank you for joining us today for Progressive’s Third Quarter Investor Event. I am Doug Constantine, Director of Investor Relations, and I will be your moderator for today’s event. The company will not make detailed comments related to its results in addition to those provided in its annual report on Form 10-K, quarterly reports on Form 10-Q, and the letter to shareholders, which have been posted to the company’s website. Although our quarterly investor relations events often include a presentation on a specific portion of our business, we will instead use the 60 minutes scheduled for today’s event for introductory comments by our CEO, and a question-and-answer session with members of our leadership team. The introductory comments by our CEO were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 60 minutes scheduled for this event for live questions-and-answers with members of our leadership team. As always, discussions in this event may include forward-looking statements. These statements are based on management’s current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today’s event. Additional information concerning those risks and uncertainties is available in our annual report on Form 10-K for the year ended December 31, 2023, as supplemented by our Form 10-Q for the first, second, and third quarters of 2024, where you will find discussions of the risk factors affecting our business, Safe Harbor statements related to forward-looking statements, and other discussions of the challenges we face. These documents can be found via the Investor Relations section of our website at investors.progressive.com. To begin today, I’m pleased to introduce our CEO, Tricia Griffith, who will kick us off with some introductory comments. Tricia?

Good morning and thank you for joining us today. I’d like to begin today by extending my sympathies to those affected by Hurricanes Helene and Milton. The scenes of destruction were truly heart-wrenching and the human toll of these storms was devastating. As the cleanup efforts continue, I’m heartened to know that Progressive’s excellent claims staff is standing by to assist our customers in their greatest time of need. In fact, I’ve heard countless versions of stories like the one I’m about to share with you. This is when our customers need us most, and when we shine the brightest. My name is Anne-Marie and my fiancé is Timothy. We just lost our RV with this last Hurricane Helene. I’ve been in Tampa for two months sitting by Timothy’s bedside while he fought cancer. I’m happy to say that he is in remission. I came back to Fort Myers Beach to meet with the adjuster, Ray. I would like to tell you about my encounter with this lovely gentleman. Ray was prompt, professional and showed compassion for my loss of our home. He is the perfect person to be assessing the damages of one’s property. I cannot say enough positive things about Ray. He is one of a kind and it was a pleasure to meet under these horrible circumstances. That’s what it’s all about. To my clients’ colleagues, you amaze me every day. Thank you from the bottom of my heart for all that you do each and every day. Turning towards results. The third quarter was one of our strongest in our history. Across our businesses, we added almost 1.6 million policies in force, the most we’ve ever added in a quarter. This brings the total policies added this year to nearly 4.2 million, truly a remarkable feat. The magnitude of this growth during the year requires increases in sales, servicing, and claims staffing, and our teams have met the challenge, enabling us to maximize growth while providing the quality experience our customers expect of us. Throughout the third quarter, we experienced very strong demand for our Personal Lines products across both channels. While direct channel new application growth responded almost immediately to our increase in media spend and the release of non-rate actions earlier in the year, as evidenced by the channel’s stronger new business growth in Q2, the agency channel’s growth potential wasn’t fully realized until the last few weeks of the second quarter. The result is a third quarter where our growth machine was firing on all cylinders with clear results in both channels experiencing record levels of new applications. To-date, the level of ambient shopping and Personal Auto remains very high, ambient capitalized on that. In Q3 2024, we spent more on media than in any quarter in our history. The result was a higher number of direct channel prospects than any quarter in our history, surpassing Q2 2024, the previous record holder. Additionally, conversion is strong, suggesting that we are well-priced compared to the competition. Though the fourth quarter, especially November and December, are historically lower in sales volume, we believe that we can continue to position ourselves to capture more than our fair share of prospects from the marketplace. The record growth is even more impressive when you consider our profit margins. Our year-to-date combined ratio through Q3 was very strong. Though the cost of Hurricane Milton are not reflected in our Q3 numbers, 2024 is still shaping up to be one of the best non-pandemic years in our history. Growing at our pace with record profits is a testament to the investment we’ve made in segmentation over the years and we’re not standing still. Our newest product model, which continues to add further segmentation in our Personal Auto products, is available in states that represent about one-third of our net written premium. You’ll recall that in 2022 and 2023, the Commercial Auto market was impacted by many of the same inflationary pressures as Personal Lines. In response to the rising loss costs, we took double-digit rate increases in 2023. In Q3 2024, we reported our third straight quarter of quarter-over-quarter improvement in our loss and LAE ratio for Commercial Lines. Our results in part from the rate we took in 2023, earning in, which is a slower process in Commercial Lines, since the majority of our policies are 12 months. Growth has been more difficult in that line as the softness in the truck market has offset solid growth in our other non-trucking business market targets. As our competitors catch up in rate, however, we are optimistic that we’re well-positioned for more growth in the future. The third quarter results in Property were excellent at a 78.5 combined ratio, after almost 30 points of favorable development on storms from the first half of the year, and despite the 21 points of losses incurred by Hurricane Helene. However, two hurricanes striking Florida only a week apart underscores our need to risk adjust our Property business. Our efforts here are evident with Q3 PIF growth in what we consider to be less volatile weather-related states of 19%, compared to a decrease of 9% in the volatile weather states. Risk adjustment has been and will be a year-long effort, but we are making progress. As always, our goal is to have all of our reporting segments meet their profitability targets, and we continue to make headway in our Property business with improved segmentation in our 5.0 product model and adjustments to our underwriting appetite. Ultimately, when I look across our results today, I see a huge amount of opportunity. While we can’t know exactly what the future holds or what the market will bring, I believe that we are in a good position to be flexible and to react to whatever comes our way. The actions we take today are what position us for what we achieve next year and I firmly believe that we are in a good position headed into 2025. While there will undoubtedly be challenges, I’m already looking forward to what I anticipate will be a great fourth quarter and a strong 2025. Thank you again and I will now take your questions.

This concludes the recorded portion of today’s event. We now have members of our management team available live to answer questions. We will now take our first question.

Our first question comes from the line of Josh Shanker with Bank of America. Your line is now open.

Thank you for taking my question. Good morning. When we consider the potential for growing at a 96% combined ratio or better, is that linked to revenue growth or policy count growth? I'm asking because some believe Progressive has strong margins, which may suggest potential price reductions in the near future. However, would Progressive reduce prices without seeing a corresponding increase in policy count growth?

Good morning, Josh. That’s a good question. We look at both when we talk about growing as fast as we can. Some of our internal measures, success rates are based on our average PIF growth. And we always talk about our preferred growth is our unit growth because trends can ebb and flow, as you see in the last several years. So that’s our preferred method. Obviously, we want to stay ahead of trend, and we know that retention is very helpful if we have stable rates. So we want to get as many new apps in the door as possible through obviously our increased media spend, but then we want to keep those, and so I think it’s a balance of everything. So premium, we always want to stay ahead of trend and make at least that $0.04 and unit growth, we want to grow as fast as we can as long as we can service our customers in the way they deserve. Does that answer your question?

Are the margins favorable? More importantly, does Progressive believe that the current margins are so attractive that they should consider price reductions in the near future?

We will closely monitor the trends related to price cuts. As mentioned in the previous quarter, we implemented price cuts in about nine states, while some states experienced slight increases. Our goal is to leverage the current margins to drive growth, maintaining our media spend to support organic growth. However, we will also encounter instances where we need to raise rates. We aim to keep our rates stable and ensure we remain proactive, and we believe we are well-positioned for continued growth.

Thank you very much.

Thanks, Josh.

Thank you for your questions. Our next question comes from a line of Bob Huang with Morgan Stanley. Your line is now open.

Hey. Good morning. Good morning. Maybe just a follow-up on that, but more on the competitive environment perspective. As we think about your ad spending and as we think about your advantages in pricing or competitiveness in pricing, but if competition were to intensify in 2025 and going forward, how effective do you feel the ad spending and then the pricing side will be? Like, should we expect that incremental ad spend, but the effectiveness of the ad spend maybe will come down a little bit? Like, curious your view on this.

I believe competitors have taken this opportunity to adjust their rates, and while we see some customers returning, it's not happening as quickly as it did for us in media. We will always evaluate media based on efficiency, and as long as our cost per sale remains favorable compared to our targeted acquisition costs, we will continue to invest to attract and convert more customers. With our current margins, we're committed to advancing our media efforts and driving growth. We feel well-positioned, especially in what we believe is still a tough market where consumers continue to shop, ensuring our rates remain stable. Additionally, we have been investing in advertisements that focus on our mission, not just on acquiring new business. We aim to enhance awareness of our purpose, which is to help people progress and live life fully. We've recently launched our Purpose Anthem ads to communicate this, emphasizing that progress takes time. You can find more about our purpose on the Progressive website. These ads are designed for a delayed response but we believe they will resonate well with our identity as a company. We are enthusiastic about our growth and value competition. While we anticipate competition will maintain competitive rates and be visible in media, we're ready for it.

Thank you. very helpful.

You might also have some response to both those questions.

Thank you. very helpful.

The way we operationalize in the marketplace, our objectives there is for our product managers, and they are managing at the state and product level, and they are assessing the competitive landscape where we sit by segment. They understand elasticity by channel and by locale, and they’re making the calls that level to decide what we should be doing with price. Obviously the 96% is the objective, but to the extent we can manage and grow a lot beneath that, the product managers are going to make those calls. So I think that I understand the questions, but I think understanding how we operationalize that in the marketplace is really important to understand our model.

Thank you for that. My second question is about retention. In your 10-Q commentaries regarding the Personal Auto business, you've noted that policy life expectancy has been extended for over a year and has now stabilized. If I recall correctly, your pricing is tied to the expected lifecycle of a policy. If that lifecycle remains stable going forward, should we anticipate that the positive impact on the combined ratio will be less significant in the future? In other words, should we assume that some slight pricing adjustments will be necessary as that lifecycle stabilizes instead of continuing to improve? Am I still with you?

Excuse me, everyone. One moment as we reconnect the speakers.

Okay. Thanks, Victoria. I apologize for that. I thought that was on your end, but it was on our end. And so if we have questions at the end of the hour, we’ll certainly elongate the time. So Bob, you were asking your second question and I think it was about retention. I think I must have jinxed us because this weekend when I was preparing, I’m like, this is one of the best quarters in the history of Progressive. This is going to be great, and then of course, our computer crashed. So apologies again.

Yeah. Can you guys hear me?

Yes.

Can you guys hear me? Okay. Excellent. Yeah. I’m sure you’ll have even better quarters down the road. So, yeah. Question on retention. Your policy life expectancy is kind of, was growing over the last few quarters and now it’s normalizing. Would that have a headwind to your combined ratio as given that you’re essentially pricing towards an expected life expectancy for every policy or you don’t think that’s an issue?

Well, yeah, I mean, I think retention is kind of our Holy Grail. So it’s always an issue to grow our units. So the T12 has been pretty flat and that’s really a lot to do with some of the actions that we’ve taken across the board. T3 was down and that’s a lot on the comparison of last year when it was up 35%. But yeah, we watch that closely. We don’t want to spend all of the media money to have customers come in and then just leave. So our focus really is those stable rates and great service to continue to improve retention. Do you want to add anything, Pat or John?

No. I think that’s good. Thanks.

Thanks, Bob. Sorry about that again.

Thank you. Really appreciate it.

Thank you for your questions. Our next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is now open.

Hi. Yes. Good morning. My first question, Tricia, I think you did hit on a little bit in your prepared remarks, but it was just about just the Q4, right? I think typically sometimes there’s slower growth because of the holidays and vacation. I’m just trying, want to understand how you think about that dynamic playing out this year, just given continued elevated shopping, as well as your marketing spend and how we could think about PIF gains in the last quarter of the year?

We will continue our efforts through the end of 2024, aiming to capture a larger share of shoppers, even if there are fewer shoppers in November and December due to the holidays. It's important to maintain consistent media spending instead of cutting back, as we want to be ready for the typical increase in shopping that occurs in the first quarter. Our focus is on ensuring we are in a better position relative to our peers, and we believe we are.

And then my second question, right? And obviously record growth here for Progressive this year, as you think about the environment, right? You guys are obviously taking less rate, industry, right? Perhaps a bit behind you guys. How do you think about 2025? I know there’s a lot of different variables, but just from a growth perspective sitting here today, how do you think next year could play out?

Yeah. We feel really good and bullish about 2025. And you’re going to look at some stats that we talked about in our Q. I mean, 117% new app growth on the direct side, 98% on the agency side. Those are massive amounts. And obviously the comps will be more difficult, but that doesn’t mean on a relative basis, in a unit basis, we’re not going to grow literally as fast as we can. And we feel so much better about our rates, especially on the private passenger auto part, commercial and product. We’re still having rate earn in, but we feel bullish about our positioning as well and our de-risking on the Property side. We feel like we really look at our growth from our strategic pillars. So we’ve got a great culture and great people. We are very adequately staffed, especially in our call center organizations for sales and service and our claims organization to take care of our customers. We reduce our expenses on the non-acquisition expense ratio because we care deeply about those competitive rates. We continue our segmentation. So you’ve got people and culture, you’ve got competitive rates, you’ve got our brand, which continues to evolve and you’ve got our broad coverage. We’re going to be where, when, and how customers want to shop. With those four strategic pillars and where we’re at from a pricing perspective and a marketing perspective, I think, we have a huge opportunity in 2025.

Thank you.

Thanks, Elyse.

Thank you for your questions. Our next question comes from the line of Michael Phillips with Oppenheimer. Your line’s open.

Thanks. Good morning. I wanted to, oops, sorry, thanks. I wanted to drill down on the frequency severity trends that you put on the queue, specifically the BI liability. It looks like, anything to make of, it looks like the severity kind of moved up a bit and frequency kind of didn’t improve as much as 2Q. Anything to make of that? Thanks.

Yeah. From a BI perspective, it’s a little bit higher some of the other line coverage. Mostly that is in higher large losses and more soft tissue injuries where there are attorney-repped. So that ends up usually being more expensive. And I’m sure you’re reading a lot on social inflation, and we have seen across the industry some pretty elevated jury verdicts that we believe are pretty egregious. So we’re always keeping our eye on that. And bodily injury trends are less of a step function than were what happened with like used car prices where there was just sort of a confluence of events in terms of shortages of chips and all the things that came into play when car prices were risen. When you look at the history of BI trend, it sort of continues to move up based on attorney representation, based on medical bills, et cetera. So we’re not too concerned about one quarter, and we feel like we have our arms around the BI trends.

Okay. Good. Thank you. And then second question just on homeowners. Can you remind us where you are with I guess the PIF reductions and cat exposed dates?

We discussed our growth in Policies in Force, which is up 19% in our growth states and down 9% in more volatile states. Our de-risking program remains strong, with 16 points year-to-date and 20 points over the last twelve months, still needing to earn an additional 5 points this year. We are also seeing rates elevating. We believe we lead the industry in segmentation, especially in auto and Commercial Auto, and we will continue to advance in Property. Last year, we exited around 115,000 homes in Florida, which is a process that takes time due to communication with insureds and the potential for moratoriums. We are also exiting DP3 coverage in many states, having received approval in about 22 states and working with more. Our focus is on sharing costs; we don't want homeowners to simply act as maintenance programs, so we are implementing mandatory wind and hail deductibles. We are also in discussions with our agents to prioritize high-quality bundled business, especially in owner-occupied homes. It's a comprehensive plan that we anticipated would take time. Despite the challenges of having two significant hurricanes in a short period, I am optimistic about our current position and future plans.

Okay. Thank you very much. Appreciate it.

Thanks, Michael.

Thank you for your question. Our next question comes from the line of Gregory Peters with Raymond James. Your line is now open.

Good morning, everyone. I know you’ve mentioned trying to leverage your agent compensation program to reward profitable business. Maybe you can spend a minute and just give us a snapshot if you’ve changed how you’re rewarding your agents and how they’re helping you underwrite business, new business as it comes in the door.

Yeah. I’ll let Pat give more color than I will, but we’re constantly evolving our agents, and we have agents that are more specialized. It’s preferred bundling. We have our platinum agents. We have agents that have typically been more on SAMs, maybe some mom and pops, but we constantly evolve our compensation to make sure that we put high-quality business on the books, but also reward those agents for that business. Pat, do you want to give any more color on that?

Sure. We have an aligned national commission structure that we have in place for either our Property agents, so those with the full suite of products or those without access to our Property products. And those matrices are designed to reward higher quality business and greater volume of business. And over time, what we see is agents respond well to understanding what the targets are, understanding how the framework works, and understanding how their behaviors and the actions allocating different business to Progressive can result in better compensation for their agencies. Now, Tricia mentioned on the quality side of things, as we pivot and start to invest more to turn the Property business around, there are tactics within the agency channel that will ensure that agents know they have to be bundling business with us, they have to write with our underwriting guidelines in mind, and we measure that through underwriting cancel rates, and they have to produce a certain amount of volume to retain their Property appointment with us. And we think those three in combination with a very clear, transparent national compensation plan, agents understand what we’re offering, how we fit in their agencies, and ultimately, how we can mutually benefit by producing high quality, profitable business.

Makes sense. For my follow-up question, in your letter, Tricia, you said you have nearly 4.2 million more policies in force than you did at the end of last year. In response to some of the questions in your prepared remarks, you talked about how you’re fully staffed. Maybe you can give us a sense of how you’re keeping fully staffed with such tremendous growth in a macro environment, it seems, full employment, and maybe segue, one of the things that we never get much information from you or many of your peers is how you’re deploying technology and artificial intelligence, and maybe that’s helping you with the growth in policy in force. So any commentary on that would be great.

Yeah. That’s a really great question. So what we’ve been doing, the only time that I can recall we had difficulty in hiring and retaining was sort of when the wage wars started right after the pandemic. So after that, we’ve done a couple of things. We’ve hired well in advance of need. So when you think about being a fully licensed sales rep in our call center or a fully trained claims rep out in the field, it takes some time. And so that’s, well, it may be a more expensive venture at first blush. We think that pays for itself because we have high-quality people handling your calls, handling your claims. And in fact, we were able to deploy between our own employees and independent appraisers to help us with the storms. 2,300 people sort of fed in the street, getting early contacts and early closures in our catastrophes, which is what our customers need us most. So we feel really good about that. From a technology and efficiency perspective, we are always talking about how do we become more efficient? One, to keep prices competitive, but two, can we take easier claims, easier calls out of the system and have humans actually handle the more complex calls? So we have overall what you can call it, AI, ChatGPT, large language models. We’ve been working on those for a long time to become more efficient. We’ve had a chatbot in our call centers for over a decade because we found out we were getting repetitive calls that really didn’t require human intervention, and that took out about 15% of our calls. On the claim side, we have a lot of automation with our estimates. We have tagged millions and millions of pictures to be able to do that. And of course, we want to make sure that we do have human intervention to make sure we always pay the right amount and that we’re accurate in that part of it. But we’re very technology-driven. Besides being efficient, we want to be innovative. And we want to continue to learn and make sure that we use the highly trained individuals that we have for the most complex parts of our business. So we use a lot of AI. Maybe that’s something we can talk about at a later deep dive when we have some time in one of the quarters that we do that. But we feel like that’s a key part overall in our efficiency, which is key to our growth.

Thank you for the detail.

Thank you.

Thank you for your question. Our next question comes from the line of Jimmy Bhullar with JPMorgan. Your line is now open.

Hi. Good morning. Most of my questions have been answered, but I noticed that many of your competitors are focusing on growth as their margins improve. I'm curious about what you are observing regarding their marketing spending and pricing strategies. Should we expect your growth to slow over the next few quarters as the market becomes more competitive?

I believe we are ahead of the competition. We recognized what was necessary early on, and we raised rates significantly to align with market trends. This quick action has positioned us well for growth, and we are seeing improved margins compared to our competitors. I expect that they will continue to grow as some have started increasing their media spending. Competition can be beneficial, and it requires all of us to perform strategically. While I cannot predict our exact growth rate, we have internal models guiding us, and I feel optimistic about closing out 2024 and entering 2025. I am confident we will keep gaining traction, although there are always uncertainties like weather that we’ve encountered in recent years.

Okay.

Yeah. The only thing that I would add is…

…and then…

…spending more.

Hold on for a second, Jimmy. I think I wanted Pat to add on some color on that for you.

The only thing I would add is that segmentation matters. So spending more isn’t necessarily going to drive the outcome folks desire. It’s spending it smartly and understanding the lifetime value of the customer and the media that we use to reach those customers. So we think given our scale and given the analytics we have in place, we are creating segmentation in the media world like we have in the product segmentation space. And that segmentation enables us to understand where to spend more efficiently based on who we’re able to acquire, and it’s not just about spending more overall, it’s spending it in the right places. Additionally, I think when you see what we do on the product segmentation side, we do think that creating adverse selection for our competitors through matching rate to risk more precisely does inflate their trend differently than ours over time and that synthetic trend we think requires them over time to potentially have to adjust rates differently than we have. So we’re pretty confident that at this point, we are efficient in our spend. And as Tricia mentioned, we monitor it extremely closely and we’ll adjust as needed over time, but we play our game and we managed our economics and they look good at this point.

Thanks. And it seems like obviously there’s been a lot of talk about Personal interest in Commercial Lines. Can you just talk about what you’re seeing in terms of long-term trends in Personal Auto as it relates to litigation, attorney rep rates, and stuff?

Yeah. Attorney rep rates have risen over the years. Again, not as a function, they’ve risen, you can probably tell just by advertising from that perspective. Medical trends, as you know, from just medical insurance have continued to go up. So it’s continued to trend upward, we priced for that. And some of the social inflation, like I said, with some egregious verdicts in the industry are always troublesome because it ends up, consumers have to pay for that, and so we always want to get our arms around. It’s really about doing what we have done well for many, many years and that is making sure that our customers know we’re there for them, that they can trust us to do the right thing by them, and that I try to get out in front of the claim with contacts and resolution as quickly as possible or when it’s a longer-term claim to make sure that we communicate and respect their needs along the way. So that’s what we’ve been doing since we rolled out IR years and years ago, or immediate response, I should say years ago. Just get in front of the customers, make sure they know we’re there, and we want them to trust us and that we’ll be fair.

Thank you.

Thank you for your question. Our next question comes from the line of David Motemaden with Evercore. Your line is now open.

Good morning. I have a question regarding the auto policy in force growth. I'm curious if Hurricane Helene had a significant effect in Florida or the Carolinas on auto shopping and policy gains at the end of September, and whether Hurricane Milton is causing any issues with retention or shopping due to the effects of that storm.

Yes. I wouldn’t say anything. The PIF growth wouldn’t come from that necessarily. Obviously, there’ll be some total loss vehicles that when they replace, we hope they’ll be Progressive. I think that, I had asked John Murphy, our President of Claims, a while ago if we were seeing issues with inventory for new cars, I thought that could be something that could be a headwind for consumers, and they didn’t see inventory issues. There’s enough inventory, we believe, on the street to be able to take care of those customers. But the storm, although they were big, I don’t think would move the needle on either of those.

Got it. Thanks. Regarding the cost per sale you mentioned, last quarter it was about 30% below your targeted acquisition rate. I'm curious about its status in the third quarter, especially as some competition re-enters the market. Additionally, could you discuss the ambient shopping levels? They appear to be high, but have they decreased at all over the past three months? Thank you.

Yeah. I’m going to try to answer that. You were breaking up a little bit. I would say we continue to see elevated shopping, continue to see a hard market, and so we’re going to leverage that. And again, I talked a little bit in an earlier answer on we’ve got our sort of direct response, which we see right away with our highest NP6, which are new prospects, which of course, we equate to our, the apps that are such high growth on both the direct and agency side, but then also some delayed response. And so we believe ambient shopping is still up because even with the increased amount that we’ve spent and we’ll spend in quarter four on the delayed response ad, we’re still seeing that shopping. So we feel good about that. I want to make sure I answered your question because you were breaking up a little bit. Does that answer your question?

Yeah. That does help on the ambient shopping. I had just asked on just how much below the targeted acquisition spend the cost per sale is. In third quarter, I think it was 30% below in the first half of the year. Is that still pretty far below your target?

All I’m saying is that it’s still below tax. So our CPS for quarter three is still below our target acquisition cost. And again, like Pat said, we continue, and I just had an incredible two-day media business review. We continue to understand exactly how to reach the consumers we want to reach and get more efficient with doing that all across the board. I think normally we’ll talk about mass media spend, and that’s a portion of our spend, but there’s so many other ways that we are able to be on the short list for consumers who are shopping. So we feel good about where we’re at right now with CPS below tax.

Great. Thank you.

Thank you.

Thank you for your question. Our next question comes from the line of Brian Meredith with UBS. Your line is now open.

Yeah. Thanks. Tricia, I was hoping you could comment a little bit about this really favorable frequency we’ve been seeing for the last 12 months. Is this something you think is sustainable? Is it a function of the hard market and auto insurance? What is your perspective on it?

Thanks, Brian. What we've observed is that the largest portion of this is related to our preferred mix, which has increased, resulting in a lower frequency. We're slightly less negative than we were previously, but still at negative 5. We'll continue to monitor this as we expand and add more customers. It's important for us to achieve our target profit margins both on a calendar year basis and in terms of lifetime value.

Got you. So mix. Got you. And then second question just quickly.

Yeah.

Where are new money yields relative to book yields right now in the investment portfolio? Is there still some uplift in book yields going forward, do you think?

Yeah. I’ll let Jon Bauer get on because he’s always on these calls and never gets to talk. But yeah, we’ve been happy that we’ve been able to invest new money into higher yielding performance. And Jon, I’ll let you go into some of the detail.

Thank you very much. Over the past few years, and particularly in recent months, we've seen considerable volatility in interest rates, especially as we approach the election and the Federal Reserve begins to lower rates. Our portfolio has a relatively short duration of just over three years. The main factors that will affect the new money yields compared to the book yields are the current level of interest rates, which have increased significantly since the third quarter, and our allocation of funds between cash, treasuries, and other risk products. Currently, we maintain a conservative allocation, and shifting that could improve book yields over time. Additionally, if interest rates hold steady at their current levels, we could see an increase in prospective book yields. However, it's important to note that our investment strategy at Progressive is focused on achieving a total rate of return. Thus, the book yield reflects the choices we make, but our primary goal is to maximize overall returns in the long run. Does that address your question?

Yeah. That does. That’s terrific. Thank you.

Thank you for your question. Our next question comes from the line of Meyer Shields with KBW. Your line is now open.

Great. Great. Thank you very much. So in the past, I know we’ve talked about the ordered pairs where sometimes, I guess, Progressive will maintain excess profits if the growth trade-off isn’t necessarily worth it. I was hoping you could give us some insight into how much of the Personal Line margin outperformance this year is sort of ordered pairs dependent, and how much of it is just the fact that you’ve been surprised by loss trends?

I believe Pat can provide further insight into this. The margin is influenced by many factors, such as our efficiency in spending to attract more customers. I wouldn’t classify it as excess profits. Instead, we analyze every dollar we earn and project the potential outcomes based on our frequency and severity trends, as well as our spending to acquire new and renewal business. We evaluate each state and product individually and then consolidate that information. If we find we’re not spending efficiently, we’ll either improve our efficiency or reduce our spending. If our margins decrease, we will scale back accordingly. We have various strategies, but ultimately, our goal is to grow as quickly as possible while maintaining our margins at or below 96%. Pat, would you like to add anything?

I would say that the growth we're experiencing was unexpected earlier this year. We were preparing for a slowdown to achieve profitability in 2023, but as we lessened some verification measures and became more competitive with our billing options, we've seen substantial growth, as reflected in our reports. We didn't start the year expecting to achieve this level of profit and growth over an extended period. Currently, we've slightly lowered rates in several states. Our product managers continually analyze the competitive landscape, evaluating customer demand and the efficiency of our media spending. As we approach the slower shopping season, we'll monitor our spending and rate levels to ensure we can grow as quickly as our staffing and service capabilities allow. We have significant comparisons coming up next year, and we feel optimistic about closing out this year. However, I believe the growth we've seen was not something we initially planned for to this extent. With competitors increasing rates and limiting access to new business, our media efficiency improves when there are fewer competitors vying for clicks with competitive rates for shoppers.

Yeah. What I would add on that as well is and we talked about this a little bit when we had our media deep dive a quarter or so ago. We are so flexible with our media spend. And the last couple of years, unfortunately we’ve had to pull back because of margins. This year, Pat and his team have come to me to increase media on several occasions, and being able to be that nimble to do that and not say, okay, we have a budget at the beginning of the year which we do, we set a budget for a year we think will happen. But having that flexibility and turning things on and off pretty quickly to sort of open up or close the spigot has been key this year to open up the spigot.

Okay. That’s very helpful, very detailed. Thank you. Can you give us an insight into, I know there’s obviously this ongoing regional mix shift in Property? What are the other steps that are appropriate to get that line targeted to mine ratios?

I believe it's definitely due to the rate increases we've implemented, the geographic mix, and the segmentation that will continue to grow. It's also about cost sharing with customers, such as with wind and hail deductibles. Additionally, our agency is focused on ensuring we have strong owner-occupied homes that are bundled. It's not just one factor; it's all the various elements I've mentioned before. This process takes time, and we are monitoring it closely with a dedicated team that continually assesses where we should be and where adjustments are needed. There are many factors involved, and I am confident that we will get it right.

Okay. Great. Thank you so much.

Thank you, Meyer.

Thank you for your question. Our next question comes from the line of Mike Zaremski with BMO. Your line is now open.

Hey. Great. Good morning. As a follow-up to, I think it was Brian’s question about frequency, the curve being, your frequency is even better than its historic relationship to the industry. You talked about the mix towards preferred helping. I’m just curious, is there a partial offset longer term? Should just the preferred customer have a different or higher severity inflation trend line than the average of the book?

I don't believe there's anything significant in that. I think preferred customers might have access to more products. Clearly, we are considering the risk-to-reward aspect. It could become more stable with additional products that we offer. Additionally, frequency has been declining for the past 50 or 60 years. I'm uncertain about what stable frequency means, as it has been quite unpredictable over the last four years. However, we are eager to pursue any business opportunities available to us. Sam Sands writes for Robinsons as long as we achieve our target profit margin. So, we are completely open for any consumer business as long as we can reach those target profit margins. Thank you, Mike.

Okay. Got it. And my follow-up is switching gears to the competitive environment. So if we think about your average peer, they sell a lot more home insurance than Progressive does and they bundle a lot of that with auto. And I know you guys are obviously increasing your share on home and bundles, but still, I think it’s much smaller than your average competitor or some of your larger competitors. So I’m curious, given home insurance is still a hard market and will be for the foreseeable future, is that dynamic causing any of your peers the need to increase the bundle pricing more so than you all are, which is kind of helping you in the competitive environment for you all to gain customers? If that was my question, if you follow it.

I think it's challenging because competitors have different approaches. Some are growing and have property but aren't using their own policies. Others have already reduced their risk and can grow, though not necessarily in areas with unpredictable weather. Many captive agencies are very loyal because their offerings are bundled for an extended period. That's ideally where we want to be, whether the home is under our policies or with our trusted carriers. We aim to provide comprehensive coverage that aligns with how and when customers prefer to shop. We definitely want to offer more bundled options, but those bundles need to be profitable. When customers reach out to us, we want to ensure they receive what they need, whether through our Home Quote Explorer, Auto Quote Explorer, or Business Quote Explorer. Ideally, we want them to use our services, but if not, we have partners to assist them. While we monitor the competitive landscape, our focus remains on our strategy, especially in property as we grow and develop. You're correct; our market share is likely smaller than that of some competitors, and we intend to increase it gradually to make thoughtful decisions for the company's long-term success.

That appears to have been our final question and so that concludes our event. Again, we apologize for the technical difficulties. Victoria, I will hand the call back over to you for the closing scripts.

That concludes the Progressive Corporation third quarter investor event. Information about a replay of the event will be available on the Investor Relations section of Progressive’s website for the next year. You may now disconnect your line.