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Letter to the Editor

Progressive Corporation Announces Fourth Quarter Results

MAYFIELD VILLAGE, Ohio -- The Progressive Corporation has reported fourth quarter 2001 net income per share of $1.67, compared to $.64 per share earned in the same period last year. Net income for the quarter was $124.7 million, compared to $48.0 million in the fourth quarter 2000. Investment income, including net realized gains/losses on security sales, was $85.4 million before taxes and $62.6 million after taxes, compared to $127.4 million before taxes and $89.3 million after taxes for the fourth quarter 2000. Fourth quarter 2001 results include net realized losses on security sales of $23.1 million, or $.20 per share, compared to net realized gains of $26.2 million, or $.23 per share, last year.

For the fourth quarter 2001, operating income was $139.7 million, compared to $50.1 million last year. Operating income per share was $1.87, compared to $.67 in the fourth quarter last year. There were no one-time items in the fourth quarter 2001. One-time items in the fourth quarter 2000 totaled $27.4 million, $.26 per share or 1.4 points, and included expenses associated with the termination of a Strategic Alliance relationship, termination of the company's defined benefit pension plan and the realization of a foreign currency translation loss associated with the substantial liquidation of its foreign subsidiary.

Fourth quarter 2001 results include expenses of $14.3 million, .8 points or $.12 per share, for exposure to guaranty fund assessments, primarily related to the Reliance Insurance Company insolvency.

The GAAP combined ratio (CR) was 94.4 for the fourth quarter 2001, compared to 102.3 for the same period last year. Net premiums earned increased 16 percent to $1,899.2 million from $1,632.0 million last year. Net premiums written for the quarter, which continue to be influenced by Progressive's shift to six-month policies during the past year, increased 37 percent to $1,816.7 million, compared to $1,322.0 million last year.

For the year ended December 31, 2001, net income was $411.4 million, or $5.48 per share, compared to $46.1 million, or $.62 per share, for 2000. Operating income was $485.5 million, or $6.47 per share, compared to $55.4 million, or $.75 per share, last year. The CR was 95.2 for 2001, compared to 104.4 in 2000. Net premiums earned for the year ended December 31, 2001, increased 13 percent to $7,161.8 million from $6,348.4 million for the same period last year. Net premiums written increased 17 percent to $7,260.1 million for the year ended December 31, 2001, compared to $6,196.1 million last year. Investment income was $301.7 million before taxes and $223.4 million after taxes, compared to $402.1 million before taxes and $289.3 million after taxes last year. Year-to-date 2001 results include net realized losses on security sales of $111.9 million, or $.97 per share, compared to net realized gains of $16.9 million, or $.15 per share, last year.

For the fourth quarter 2001, net premiums written in Personal Lines increased 36 percent to $1,610.4 million, compared to $1,187.8 million last year. The Personal Lines CR was 94.7 for the fourth quarter 2001, compared to 103.2 last year. For the year ended December 31, 2001, net premiums written in Personal Lines increased 15 percent to $6,476.4 million, compared to $5,651.5 million last year. The Personal Lines CR was 95.5 for the year ended December 31, 2001, compared to 105.2 last year.

In addition to its Personal Lines business, Progressive'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. Fourth quarter 2001 revenues were $198.8 million, compared to $140.2 million last year. The pretax operating profit was $17.9 million for the fourth quarter 2001, compared to $9.7 million last year. Revenues for the year ended December 31, 2001, were $692.7 million, compared to $504.9 million last year. The pretax operating profit was $58.7 million for the year ended December 31, 2001, compared to $25.5 million last year.

During the fourth quarter 2001, the company repurchased 55,866 of its Common Shares at an average cost of $143.98 per share.

Progressive, with headquarters in Mayfield Village, Ohio, is the fourth largest U. S. private passenger auto insurance company.

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