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Letter to the Editor

Progressive Corporation Announces Second Quarter Results

MAYFIELD VILLAGE, Ohio -- The Progressive Corporation has reported second quarter 2001 operating income per share of $1.42, which excludes net realized losses on security sales and nonrecurring items, compared to $.06 in the second quarter last year. For the current quarter, nonrecurring items consist of $2.1 million, or $.02 per share, of severance and other costs related to the Company's reduction in force in New York. For the second quarter last year, nonrecurring items included $1.7 million, or $.02 per share, of severance costs primarily incurred due to the restructuring of the Company's organization at the general manager level. Operating income for the second quarter was $107.0 million, compared to $4.0 million in the second quarter 2000. Included in operating results for the second quarter 2001, were $30.4 million, $.26 per share or 1.7 points, of catastrophe losses, compared to $11.3 million, $.10 per share or .7 points, for the same period last year. The GAAP combined ratio (CR) was 96.4 for the second quarter 2001, compared to 105.0 for the same period last year. Net premiums written for the quarter increased 10 percent to $1,838.8 million, compared to $1,674.0 million last year.

Net income per share was $1.38 for the second quarter 2001, compared to a net loss of $.19 per share earned in the same period last year. Net income for the quarter was $103.7 million, compared to a net loss of $14.1 million in the second quarter 2000. Investment income, including net realized losses on security sales, was $100.9 million before taxes and $72.5 million after taxes, compared to $67.9 million before taxes and $52.1 million after taxes for the second quarter 2000. Second quarter 2001 results include net realized losses on security sales of $3.1 million, or $.03 per share, compared to net realized losses of $26.2 million, or $.23 per share, last year.

For the six months ended June 30, 2001, operating income per share was $2.60 compared to an operating loss per share of $.45 last year. Year-to- date operating income was $195.3 million, compared to an operating loss of $32.6 million for the same period last year. Net income was $190.3 million, or $2.54 per share, compared to a net loss of $60.7 million, or $.83 per share, for the first six months of 2000. The CR was 96.9 for the first half of 2001, compared to 106.9 in 2000. Year-to-date net premiums written increased 7 percent to $3,541.6 million, compared to $3,313.7 million last year. Investment income was $195.9 million before taxes and $140.8 million after taxes, compared to $143.2 million before taxes and $107.8 million after taxes last year. Year-to-date results include net realized losses on security sales of $5.6 million, or $.05 per share, compared to net realized losses of $41.6 million, or $.37 per share, last year.

Progressive's Personal Lines business units write insurance for private passenger automobiles and recreation vehicles. For the second quarter 2001, net premiums written in Personal Lines increased 7 percent to $1,632.1 million, compared to $1,526.1 million last year. The Personal Lines CR was 96.9 for the second quarter 2001, compared to 105.6 last year. For the six months ended June 30, 2001, net premiums written in Personal Lines increased 4 percent to $3,171.4 million, compared to $3,042.7 million last year. The Personal Lines CR was 97.3 for the six months ended June 30, 2001, compared to 107.8 last year.

In addition to its Personal Lines business, the Company's other lines of business include writing insurance for small fleets of commercial vehicles, lenders' collateral protection, and directors' and officers' liability, and providing related services. Second quarter 2001 revenues were $163.7 million, compared to $120.7 million last year. The pretax operating profit was $14.0 million for the second quarter 2001, compared to $3.5 million last year. Revenues for the six months ended June 30, 2001 were $311.6 million, compared to $232.9 million last year. The pretax operating profit was $24.8 million for the six months ended June 30, 2001, compared to $11.0 million last year.

During the quarter, the Company repurchased 200,000 of its Common Shares in the open market at an average cost of $133.47 per share.

Progressive, with headquarters in Mayfield Village, Ohio, is the fourth largest U. S. private passenger auto insurance company. In business since 1937, the Company provides all drivers with competitive rates and 24-hour, in-person and online services. The Company sells its products over the phone at 1-800-PROGRESSIVE(SM), online at progressive.com and through more than 30,000 independent agencies throughout the U.S.

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