Progressive Corp (PGR) — Q3 2025 Earnings Call Transcript

Good morning, and thank you for joining us today for Progressive's third quarter investor event. I'm Doug Constantine, Treasury Controller, and I'll be the 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 on 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 CFO and a question-and-answer session with members of our leadership team. Introductory comments by our CFO 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, 2024, as supplemented by our Form 10-Q for the first, second, and third quarters of 2025, where you will find discussions of the risk factors affecting our business, safe harbor statements related to the 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 CFO, John Sauerland, who will kick us off with some introductory comments. John?

Good morning, and thank you for joining Progressive's Third Quarter 2025 Investor Relations Call. We had an excellent quarter with an 89.5 combined ratio, 10% premium growth, and policies in force growth of 12% versus a year ago. That policies in force growth equates to 4.2 million more policyholders or almost 7 million more vehicles in force than a year ago. While growth is lower than in recent years, we are still gaining significant market share and capitalizing on the opportunities for growth through robust media spend and competitive rates. Year-to-date, our combined ratio is 87.3%, with 13% premium growth and comprehensive income of $10 billion, which is over 30% ahead of 2024. Rounding out our key performance metrics, our trailing 12-month comprehensive return on equity stands at 37.1%. Before moving to questions, we'd like to take a moment to offer more commentary on the $950 million estimate for policyholder credit expense for Personal Auto customers in Florida that we recognized in September. Florida is Progressive's largest market, and we are the leading provider of Personal Auto insurance in Florida. In 2023, Florida legislators responded to rapidly rising insurance rates by passing House Bill 837, which, among other things, moved Florida to a modified comparative negligent system, meaning drivers who are more than 50% at fault for an accident could no longer sue for damages, and this allowed for one-way attorney fees. Since House Bill 837 took effect, our average loss cost or pure premiums for Florida injury claims are down between 10% and 20%, and the percentage of Florida personal injury protection claims, for which we receive lawsuits is down around 60%. While we have been responsive in reflecting these changes in our loss costs through two rate reductions for Florida consumers in the past year and another plan for December, the drop in loss cost was more pronounced than we expected. Additionally, obviously, there was significant risk of very costly storms in Florida, and we have seen virtually none in 2025. The Florida excess profits law calls for the return of profits in excess of 500 basis points better than our filed and approved underwriting profit margin over a three accident year period. And at quarter end, we estimated that liability at $950 million. For perspective, in 2022 alone, inclusive of Hurricane Ian, our Personal Auto combined ratio was over 100, and those results translated to around a $750 million decrease in the excess profits equation for the periods that included 2022. Our Florida auto business is now more than 50% bigger than in 2022. We applaud the legislative changes in House Bill 837, resulting in more affordable personal auto insurance premiums for consumers, and desire to continue to grow our presence in Florida. Our loss reserves will continue to develop as we handle more claims into the new system, and our estimate for the policyholder credit expense for the 2023 to 2025 period will develop accordingly, with monthly adjustments showing up in the expense line on our income statement. Naturally, going forward, our intent is to manage profitability in Florida to avoid excess profits. And finally, in response to questions we received, while a few other states have statutes covering excess profits, we don't currently foresee other similar exposures. Thank you again for joining us, and we'll now take your questions.

This concludes the previously recorded portion of today's event. We now have members of our management team available live to answer questions.

My first question is on advertising spend. Ad spending this quarter in terms of dollar amount is fairly similar to the last quarter. Just given the increased competition, policy in force growth has decelerated, specifically in Personal Auto. I'm curious if there's a way to think about ad spending going forward. Clearly, these policies are very profitable. Do you need to maintain the current level of ad spending in an increasingly competitive environment? Just curious how you should think about ad spending going forward?

Yes, Bob, we monitor that every month on an ongoing basis and monitor most importantly, efficiency. So we want to make sure our cost per sale is lower than our targeted acquisition cost, and that remains to be the case. So Pat Callahan and his team, we do a lot of our buying of advertising internally. They look at it overall for a year, with things you have to buy in advance. But ongoing, we have the lever to increase or decrease depending on competition. That's what we'll continue to do. Again, our operating goal is to continue to grow as fast as we can, and advertising is a great lever to reach that goal.

Okay. Just to clarify that point a bit, when you say you're buying ads a year in advance, does that mean your advertising budget is essentially fixed for the next year, or are there options to adjust it? Or is it still somewhat uncertain? I’d like to get some clarification on that.

We'll make some purchases in advance to secure discounted rates, but most of the ads we buy are through the auction, where we have the flexibility to adjust our spending as needed, as you have seen in the past several years.

My first question, I was hoping you could just comment on the competitive environment in general and what you observed in the Q3, and I guess, like a forward view, right, we've seen others pivot to growth as we move through the year? And just how has that impacted that combined, right, with the fact that we're in this environment where you guys said in the Q, you don't need that much rate right now? How does that help you formulate your view about growth, right, both in the near term, like in the fourth quarter, but then also as we think about 2026?

Thanks, Elyse, and I appreciate you mentioning our strong growth in Q3 of '24. It's interesting to note that despite the slowdown, our growth on such a large base has been significant. As expected, the competitive landscape has intensified, which we were prepared for. That foresight allowed us to capture the growth we did. Competition is beneficial for customers and consumers alike, and we are committed to exploring various avenues for continued growth. We have multiple strategies tailored to different states and channels, focusing on groups like Sams, Wrights, and Robinsons. The biggest growth opportunity lies with Robinsons, targeting a $230 billion addressable market where we currently hold a small share. This presents extensive potential. As we look beyond the fourth quarter into 2026 and 2027, our emphasis will be on Robinsons due to our significantly improved position compared to a few years back. We've made necessary adjustments, including rate increases and policy changes, and our calendar year combined ratio for property currently stands at around 78%. Though some of this is due to favorable reserve development and a lack of storms in 2025, it's still a strong position. Our growth strategy hinges on a readiness framework that evaluates adequate rate levels, product segmentation, cost sharing, interstate diversification, and regulatory conditions. We're targeting growth in approximately 33 states, with 20 classified as growth states and 13 being more volatile where we will proceed cautiously. This broadens our opportunity for Robinsons and growth overall. As John noted, while we usually discuss policies in force, our year-over-year growth shows an increase from 4.2 million policies to about 7 million vehicles in force. This growth, particularly in the Robinsons sector, is promising as these households tend to have multiple cars and products. With competition and numerous growth initiatives on the horizon, we are excited about the future.

And then my follow-up is just, I guess, on margins and tariffs. It seems like from the Q commentary that you guys really have not seen an impact yet. So I just want to make sure I'm reading the comments correctly. And then, do you guys still expect that perhaps we could see an impact on loss trend in margins as we move through the balance of the year?

Yes, you understood that correctly. We haven't observed much regarding that issue. It could be due to existing inventory and changes in the tariff situation. However, we are still anticipating low single-digit impacts, and our margins can accommodate that. Therefore, we are not particularly concerned about tariffs at this time. Although that could change, for now, we are not overly worried.

My first question is on, hopefully, teasing out premiums per policy when we just kind of prudently divide premiums by PIF, and this is for Personal Auto. It's been slightly negative for a while now, which appears to be different from the kind of the flattish pricing you've been speaking to. So trying to tease out whether the negativity is coming from just some of the Florida rate reductions? Is the December one going to be a large one if you want to preview that? Or is it coming from just other actions you're talking about policyholders switching to lower-cost policies, et cetera?

Yes, I think there are several factors at play. Our average written premium has been impacted by rate decreases, and notably, there was a significant increase in 2023 into 2024 due to inflation-driven hikes. While we might see some reactions related to growth, achieving 12% growth on top of a previous 14% is quite remarkable. We're generally quite pleased with any double-digit growth, especially considering our 89.5% rate along with a $950 million accrual. The situation in Florida is just that, and we'll provide updates as we gain more information. As John mentioned, we'll keep adjusting our accrual as the year progresses. In a few weeks, you'll find out if the accrual has risen or fallen for October, and we need to be mindful of potential late-year storms since in 2024, we saw instances like Helene and Milton occurring in September and October. Overall, I feel optimistic about our current position. If we had prior knowledge about Florida’s situation, we might have acted differently, but overall, I believe we've managed it well. We are a significant player in the market. I'd also like to acknowledge Governor DeSantis and Commissioner Yaworsky for their legislative initiative with House Bill 837, which has made a substantial positive impact on Florida's insurance landscape. After almost 40 years in this industry, I could not have anticipated these beneficial changes for Florida consumers. We will continue to monitor the situation, but I am confident that in terms of premium per policy, we will always remain competitive, and shifts in segments will factor into our overall calculations.

Okay. Got it. Maybe pivoting to Tricia, can you discuss your comments about share buybacks potentially being a more significant lever than in the past? Should we interpret that as suggesting the special dividend might instead be used for buybacks given current valuations, or should we consider both options? Any clarification would be helpful.

Yes. When we have excess capital, we consider it in three ways. As I mentioned in response to Elyse's questions, we aim to continue growing and are taking actions to support that. We also look at share buybacks if we believe the stock is undervalued. We prioritize buying enough shares to offset stock compensation each year, and you'll find the actual number of shares we repurchase monthly along with the average price in our upcoming monthly release. We have a company-wide 10b5-1 plan that specifies price points for buying back stock when we see it under our value. You'll see the actions we took in October shortly. Additionally, we’ve had discussions with the Board of Directors regarding a potential dividend. Ultimately, the decision rests with them, and we will have another conversation in December. During this time, we will monitor our capacity for further buybacks as well as what a dividend could be. These discussions are ongoing within our organization and with our Board of Directors.

So just, Tricia, just to be clear, were you signaling a change in capital management tone by stating the buyback language? Or are you saying this is just business as usual discussion with the Board?

We are very aware of when the shares are below their intrinsic value, and typically, if we have the capital, we take action in those situations.

I have a question about your Florida excess profit statute. When you perform the same exercise next year, let's call it, September for accident years '24 to '26 to see if you owe any excess profits in early '27. Is there a scenario where you'll be paying another Florida excess profit statute given all the favorable reserve development you experienced in the state in recent years? Or do the excess credits you're paying in '26 basically neutralize a lot of those excess profits that you could owe in '27?

Well, we don't know. As I mentioned earlier, we will continue to refine our accrual each month for this three-year trailing period. By the end of this year, we will have a clearer understanding of the neutralized amount. The challenging aspect, especially regarding Florida, is that the storm season usually occurs at the end of the year. Therefore, we anticipate another decrease in December and will monitor that closely. I think John indicated that we will do everything possible to prevent a similar situation in 2027 for the years 2026, 2025, and 2024. However, we feel confident about our current accrual and will keep adjusting it as needed.

Okay. And you saw that Florida auto business is more than 50% bigger now than in '22, and you're managing the profitability in Florida to avoid those excess profits and you took two rate cuts and you're going to take another one. So my question is on bundling. Can you share how much of your homeowner policies have grown in Florida? And how you're thinking about your property exposure relative to your risk appetite?

Our property growth in Florida has been limited. A few years back, we assessed our policies in Florida to reach our current level of readiness growth. We had a significant amount of DP-3 and coastal properties, which led to many nonrenewals that we transferred to another company to write. Currently, we will write some new business in Florida, primarily focusing on new construction. As we have discussed, we recognize Florida as a volatile market, so we won't pursue aggressive growth there. Instead, we will expand where we believe we can achieve our target profit margins, but the growth in our property book has not been substantial.

I had a question just on competition in Personal Auto. Most competitors have been increasing marketing spending in recent months. Many have alluded to potential price reductions as well just given strong margins. So your comments on competition, is that what they reflect? Or are you seeing competitors get more aggressive with pricing and writing business either with sort of implied losses or very low margins, so just whether it’s exactly rational?

Yes, I believe we are experiencing all of that. There have been significant price declines, and we've noticed an increase in advertising, which contributes to our competitiveness. This is beneficial for consumers. When we evaluate our strategic pillars, this is an essential aspect, but it's also crucial to maintain a strong brand, which continues to evolve and help us remain relevant. We need broad coverage that meets customers' shopping preferences, and we achieve that through our independent agent channel and direct channel, along with various options for purchasing our products and those of our partners. Additionally, a key factor in Progressive's success is our people and culture, which can be difficult to quantify. Our recent Gallup survey placed us in the 99th percentile for culture and engagement, which is vital when it comes to executing on growth initiatives, cost reduction, or launching new products. All of these elements are priorities for us. Regarding competition, we are observing increased advertising and a much more competitive pricing landscape.

Okay. And then maybe on a different topic, if I think about your commercial lines business, I would have thought that it would be growing at a fairly fast clip since you were expanding your target markets, broadening coverage, adding new types of coverages, policies. And if we look at the numbers the last couple of years, they've been high single digits, which is decent, but high single-digit premium growth the last couple of quarters. I think premium growth has actually been negative off of modest comp. So how do you think about, like maybe talk about your aspirations or growth potential of your Commercial Lines business over the longer term?

Yes, I think we have significant long-term aspirations. FHT has posed some challenges, as it was a higher margin business, but we've seen a slowdown in growth there due to both rate and non-rate factors. Meanwhile, we've experienced growth in business owners and contractors, which generally have lower premiums, and we've introduced some six-month policies. The data supports this trend. However, you're right; we have identified a few areas where we've grown over the years and are eager to gain a deeper understanding of them. We have intricate plans to drive growth in several areas, though I won't go into detail on those today. I prefer to keep those plans under wraps for now, but we do believe there is significant growth potential in Commercial Lines.

In your letter and previous comments, you've talked about new products, your Personal Auto product, 8.9 and 9.0 and then in the property area, your next-gen product, 5.0. So as we're sitting here on the outside watching these developments, trying to understand what does Personal Auto product 9.0 mean versus product 8.9 and is the difference that material? And the same question would be applied to the property next-generation product, too?

Yes, that's a great question. I would say that we're not very creative when naming our new product models. You'll see that we have versions like 5.0 and 5.1 in property, and 8.9 and 9.1 in personal auto. A few years ago, probably around 2016, we decided we wanted to accelerate the development of our models to include more predictive variables related to loss costs or to expand specific segments like the Robinsons. That's the reason behind our approach. I won't go into the specific variables, but we have large R&D teams continuously working on these product models. Pat, would you like to add anything?

Sure. So from a product perspective, we try to do a couple of things every time we roll out a new product. And the first is primarily to match rate to risk better than we did in the prior product. And insurance is a scale game. We have more data than most competitors, and our product is more complex. So we have more segmented or finite data than virtually all competitors in the market. So that data enables us to solve what predicts and fits losses more precisely or more accurately than others can. So the first and foremost is to match rate to risk. Second, though, is to introduce differentiating coverages that meet consumers' needs to transfer risk to us as the carrier to smooth household cash flows. So a couple of examples of that between 8.9 and 9.0. So 8.9, we introduced Progressive vehicle protection. Think of it as mechanical breakdown coverage for vehicles that supplements a new car warranty and provides things like lost key fob and dent and ding repair as well as supplementing the OEM warranty as the powertrain warranty or bumper-to-bumper warranty kind of runs off on a new car. And 9.0, similarly, we come out with new segmentation where we solve all the math and the factors to fit the loss curve more precisely while also introducing with 9.0 embedded renters. So now you can embed and buy renters insurance coverage as part of your progressive auto policy. So we recognize that renters insurance is a potential gateway product for us in the property space, and we want to make sure that we are attracting multiline customers early in their insurance shopping and buying journey, and we want to protect their household goods as part of a renter's product and allow them to move them into a home or a condo as they change their living situation. So really, a couple of things we do with every product, but primarily it's solve the math to make sure we're as accurate as we can, leveraging our massive scale; and secondarily, get that product to market as quick as possible.

I'm going to shift the conversation to technology and autonomous driving. The new cars being released come with a lot of embedded technologies, some of which can drive themselves, particularly the new Tesla. So, as we consider Progressive, what’s your perspective on this emerging technology? Looking ahead, perhaps 15 years from now when we have a fully autonomous environment, could you share how the company is thinking about this? Any insights would be appreciated.

We've been paying attention to this for many years. Our first runway model was developed in 2012 to understand the implications of safer cars. Safer vehicles benefit the world, and we see that as a positive development. We're integrating this understanding into our products by considering vehicles with safer components, similar to how we approach seat belts or backup cameras. We're currently revising our model to predict the impact of these developments. We've gathered extensive data, comparing it to the Waymo cars in Austin, and our partnerships with TNCs show that there hasn't been a significant change, even with increased Waymo usage. We're closely monitoring these trends. Years ago, we created a framework to identify growth opportunities, not only in our traditional areas like private passenger and commercial auto, but also in expanding our commercial product offerings. This includes our BOP fleet and partnerships with TNCs, along with smaller areas we believe will grow in the future. We aim to execute, expand, and explore to ensure our model remains strong as cars become safer and accident frequency declines. We continuously evaluate our strategies because it's vital for society and for identifying growth opportunities leveraging our resources. The timeline for fully autonomous vehicles remains uncertain; predictions from 2012 didn't materialize by 2019. We are aware of the challenges ahead and will pursue growth in diverse areas going forward.

First one I had is on shopping and retention. I was just interested if you could compare sort of the time period where you're taking bigger increases or the industry is taking bigger increases in the shopping activity that was going on then in sort of reaction to higher prices as opposed to maybe what you're expecting over the next 12 months on retention related more to, well, you could shop and go get a lower price potentially somewhere. Are you seeing different kinds of sensitivity to that related to up in pricing versus potential for down?

Yes. I mean I think we're seeing a lot of shopping, which means all customers are going to shop including ours, and you see that in our PLE. Our feeling is just as we talked about in the Q, oftentimes, our customers will reach out to us, and we can do a policy review with our cancer preservation team to see if there's something we can do to help them out from a price perspective. If we end up writing a brand-new policy, that starts the clock ticking. So that is a little bit of a headwind to PLE, but not when we think about our consumer life expectancy, our household life expectancy. When you look at that, we don't share that data externally. We share PLE. But if you look at our, say, household life expectancy of having a product with Progressive, that's relatively flat. So we feel decent about that. Now if you shop and you end up leaving us, we believe that is just adverse selection because we believe we have the most current up-to-date price, as Pat talked about and I talked about briefly. Our models are constantly changing and revising them to make them more specific to rate versus risk. And if you end up leaving, we believe that we have more data than wherever that customer is going to in terms of profitability.

Got it. That's helpful. And then going back to the capital discussion. I mean, M&A was something you didn't mention as much relative to like the buyback and variable dividend conversation. And just in light of that conversation you had on autonomous and potentially expanding into other products and so forth. I mean, how does M&A fit into that? How do you think about M&A over a little bit longer time period? And why wouldn't you use a really strong capital position now to explore that?

Mergers and acquisitions are quite complex. Over the past decade, we've made a few targeted acquisitions. For example, we acquired ASI, now known as Progressive Home, to gain bundled customers and access to them, particularly through the agency channel. We also bought Protective a few years back to enhance our fleet capacity, and we will continue to work on that within our Commercial Lines segment. However, acquisitions and their integrations can be challenging, so we prioritize finding the right company with a compatible culture that can add value. If we're considering growth and come across a company with a significant private passenger auto segment that we believe we can acquire, we are cautious about paying a premium for that. We have a corporate development team that constantly assesses opportunities to ensure they align with our growth strategy, and we want to maintain financial flexibility for potential opportunities. This is a standard practice for companies like ours. John, could you please provide an overview of our capital structure and our approach to regulatory contingencies and excess?

Mergers and acquisitions would be one way we plan to use our excess capital. However, reinvesting in our core business is always our top priority because we've seen strong returns there. We've also discussed dividends and buybacks, and as Tricia mentioned, we believe the stock is undervalued. We will be repurchasing shares when we have the capital available, and currently, our capital position is strong. We have a corporate development team that is actively exploring opportunities focused on expanding Progressive's offerings, rather than adding to our core products. Our growth in market share indicates that we can efficiently and effectively acquire business in the marketplace, and we believe that's the best approach.

A couple of things. I'm looking at the Travelers numbers and the Allstate numbers and Hartford's and I have some guesses around GEICO's numbers looking at what they've done. And it doesn't seem like they're growing very quickly as Progressive's on net policy count growth has decelerated. I'm not looking for you to name names, maybe you have some thoughts on where the business is churning to, whether it's mutual, whether it's smaller competitors who are stronger than they've been in the past, whether it's direct business that's going to agencies. Where do you think the churn is moving towards?

I won't specifically address competitors, but some have been exclusive and now have access to the independent agent channel. Others that were direct are attempting to enter the agency channel. We have always maintained a broad approach. This versatility is integral to our growth and strategy, as we prioritize being accessible to our customers. While I won't detail the sources of our growth, it's important to emphasize that our achievements are significant, marking the best year in Progressive's history. Much of this success is attributed to us, and we are optimistic about continuing our growth. As mentioned in previous calls, I want to highlight that, despite the notable success, we have still managed to add 4.2 million new policies year-over-year, which is remarkable considering our margins. This positions us well to foster continued growth, particularly with our efficient media spending strategies.

And then changing gears a little bit and following up on some other questions. From 2007 to 2019, the dividend program at Progressive is pretty formulaic. We could play at home using gain share month-to-month to figure it out. And then I think in '19, you said there were so many opportunities for investment that you don't want to be forced into that paradigm, and it became less possible for us to follow along. And now, while you said when the stock is attractive to us, we would also be repurchasers of that, if that were the right thing to do. Is there any formula or way that investors can think about the transparency of capital return the way it was prior to the 2020 year?

Probably not. That approach was quite standard, and one of the reasons for transitioning away from the gain share model was that we were experiencing high growth and needed that capital to expand. We didn't want to commit to payouts when reinvesting that capital in our growth was more beneficial. While that program was effective during that period, it no longer met our needs. Currently, we have substantial capital. The Board will decide on matters regarding stock buybacks as part of our 10b5-1. They will ensure that any capital return to shareholders is executed thoughtfully. I can't provide a specific formula because we want to retain flexibility and consider multiple contingencies. As I mentioned in my letter, we feel that we currently have excess capital.

I would like to add some points regarding our regulatory capital needs. Historically, our Personal Auto business has operated in the 3:1 range, and for home, it's about half of that. Recently, we've received approval in several key markets to increase that ratio to 3.5:1, mainly for our Personal Auto business, allowing us to enhance our operating leverage. We have calculated the required surplus necessary for growth going forward, along with a contingency capital layer that remains unaffected by the regulatory adjustments. This contingency is designed to keep the probability of requiring additional surplus very low. Any capital exceeding that, we prefer to reinvest, but we also consider dividends and buybacks if we believe our stock is undervalued. We can estimate the capital exceeding what is needed for regulatory and contingency purposes, which would be the basis for a variable dividend. Ultimately, the board will decide the portion of that capital, but this provides a framework for understanding both excess capital and potential variable dividends.

I was hoping you could give us a little bit more thought on and information on the severity trends for auto, both the private passenger and Commercial Auto businesses. It looks like severity is accelerating a little bit in Personal Auto and a little bit more about why that may or may not be happening. And similarly, in Commercial Auto, you've got some peers who have had some pretty significant troubles in that line. Any thoughts on where you may or may not be experiencing similar trends for them?

Yes, Paul, that's a good question. Just as a reminder, when we examine severity trends, we report on incurred amounts, while many of our competitors focus on paid amounts. For instance, when comparing our physical damage from the third quarter of 2024 to 2025, it seems to show an increase of about 7%. We experienced a significant reduction in reserves in the third quarter of 2024, roughly 2.5 points. This means there’s about a 4.5-point difference compared to the 7-point figure. This might lead to some discrepancies in comparisons. In terms of bodily injury, special damages are outpacing attorney representation, and medical costs have risen as well. Additionally, certain states have increased their minimum limits. Overall, we believe our severity aligns closely with the industry standards in the private passenger auto sector. Regarding commercial lines, I think we are in a stronger position than most competitors since we got ahead of rate adjustments. Severity is increasing, but we also face challenges related to high limits and attorney involvement. Nevertheless, we are optimistic about our margins and our potential for growth.

Maybe a second question and a different one. Could you talk a little bit about the level of telematics and whether or not we're getting to at least closer to a point where that is a more mature part of what it does in terms of usage and the ability to slice and dice?

Telematics has always been an important aspect of our understanding. I mentioned some specific data about our OBD device, particularly concerning vehicle mileage. We know that vehicle miles traveled have decreased by about 4% this quarter. These metrics help us analyze changes in frequency and severity. Our mobile device, which most customers in 47 states prefer, plays a significant role as well. It provides a substantial opportunity for safer drivers to significantly reduce their insurance rates. This is a crucial aspect of our offering. We gather extensive data from millions of miles driven, which continues to enhance our insights. I'm not sure if that fully addressed your question.

No, I was just trying to get a sense of whether or not we're getting to a point where the amount of folks that are using the telematics is where you can sort of a maximum given how a certain percentage will never use it, right? So just whether or not we're getting towards the maturity of the product itself.

I think we have an opportunity to increase that specifically on the agency channel is what I would say.

Yes. What I would add to that is Telematics is a really predictive rating variable but it's not one size fits all. So we continue to collect data. We continue to innovate, and we continue to refine how we use that data against what you would expect to see from similar drivers and similar vehicles to rate more accurately. So Telematics is a broad brush. And while we're seeing strong consumer adoption, and I think your intuition there is that consumers are getting more comfortable with monitoring on a continuous basis, which, as Tricia mentioned, is just a great way to modify their own behavior to control their insurance costs. But we are not standing still by any means. We have an entire team that leverages larger and larger data sets on a continuous basis to refine how accurately we can use it to ensure that people are getting the most competitive price that's personalized for them and how they drive.

One important aspect to mention, which relates to consumer safety, is our capability to understand when individuals have been in accidents. Whether it's a tow-truck or an ambulance, this understanding plays a crucial role in ensuring that our customers feel cared for when using our Snapshot devices or mobile applications.

I just had a follow-up on what's going on in Florida and I wanted to know if I'm thinking about something right. But clearly, that's been an important market for Progressive. I think you guys have top market share there by a mile. I guess my perception has always been an important reason for that is it's a tricky market to underwrite. But talking about the listing of some of the tort reforms, it sounds like it's become a more insurable market. So I guess my concern would be, just like any state where you have meaningful amounts of tort reform kind of creates a lever for competition to come in. So I'm wondering if I'm thinking about that right or if it's something maybe that's unique to Florida that we wouldn't necessarily see in some random state like Minnesota?

Yes, I believe every state has its own specific characteristics. You mentioned Minnesota, and I have a lot of insights about the high PIP coverage there. The reality is that increased competition will emerge due to tort reform, which is a positive development. We are particularly ahead in this regard since Florida has been our largest market for quite some time, and we are confident about our position there. We are committed to growing in Florida and believe that having appropriate rates and legislative changes will ultimately benefit everyone, especially consumers.

Got it. I need to improve my understanding of Minnesota, my apologies for that, Tricia. Regarding your mention in the 10-Q, I was curious if the trend of customers replacing existing policies with new progressive policies had a significant effect on the number of new issued applications.

Yes, I think it does and had a meaningful impact on the PLE numbers because this is a very unusual dynamic that's been happening. And I think I've heard in other calls, it's happening in some of our competitors. So yes, I don't have the specifics for you. But I think customers are super sensitive right now. We get it. We're doing our best to keep rates stable, lowering rates when it makes sense and we believe that we can grow in certain demographics. But I think it's meaningful kind of across the board.

Yes. I think the ultimate metric, Ryan, is PIF growth. So yes, you're right. To the extent we are rewriting more customers, those we do report as new customers. But at the end of the day, the PIF count and VIF count to previous conversations, I think, is what you should look at in terms of our growth and our market share.

I was hoping just to touch a little bit on pricing. And I was a little surprised by the stable pricing that you put through in the third quarter, just given how strong the margins are even if we put in sort of like a normal catastrophe loss level for the auto business. Is this something that you guys are considering? Is there something on the horizon that would prevent you from doing this? It didn't sound like you were concerned really about tariffs. But just trying to get you just a sense for how you're thinking about potentially lowering price to accelerate growth and also improve retention.

Yes, we have definitely been considering that. Initially, we were more cautious when the tariffs were introduced. Now that things appear more stable, we’re somewhat less worried. However, that could still change. In this quarter, we reduced rates in around 10 states and increased rates in about 6. We are very strategic about our approach regarding channels, products, and states, but our goal is to grow. We will examine this for both growth and retention while reducing rates. We want to ensure that in a competitive market, if we lower rates, we also achieve some growth. We do not want to diminish our margins without seeing an increase in growth. Thus, we are focusing on each state to determine when we can achieve growth, as unit growth is crucial. We acknowledge that we have some margin flexibility, which is what we are currently evaluating at the individual state and DMA level.

Got it. As we consider the effects of collision avoidance systems and ADAS on the fleet, I’ve noticed that for a decade leading up to 2019, the industry frequency remained relatively stable. However, since then, despite the impact of COVID, there has been a significant decline. I'm curious if you could elaborate on this decrease and the ongoing improvements in frequency, and how we might interpret these changes in relation to the long-term growth of the business.

I can't predict the future, but if we exclude the unusual years during COVID when driving patterns were disrupted, frequency has been declining for the last 50 years. As vehicles become safer and laws pertaining to DUIs and other offenses have become stricter, that’s a positive development. However, this has been counterbalanced to some extent by an increase in severity. When we analyze our models for future planning, we see that severity has increased at a much higher rate than frequency. We will continue to monitor various factors such as parts availability, the ability to repair vehicles, and the skilled talent necessary for these increasingly complex repairs. While these are uncertain, they are areas of ongoing focus as we develop our three-year strategy.

The number of cars on the road has also increased. The average age of those vehicles has gone up as well. All these factors, along with premiums, frequency, and severity, influence the size of the marketplace. In fact, the market has grown faster than we initially expected when we started evaluating the long-term potential of the Personal Auto marketplace.

The first one, and this is I know it seems like it comes up every quarter, but on the PLE drop, can you talk maybe a little bit, is it mix driven this quarter that's kind of dropping everything? Or is it kind of across all the cohorts that you're seeing the drops in PLE?

I think it's probably more evident in Sams. I'm not completely certain, but I believe it's mostly consistent across the board. It seems that everyone is shopping. When we analyze our business mix and consider growth as we look through our quarter and reflect on our prospects and conversion, we can observe that while this is linked to consumers coming in, we think it has an effect. Pat, do you have anything to add?

Yes, it's pretty much across the board, but driven by different aspects. Sams are obviously more price-sensitive and household costs are rising. On the Robinsons side, we have taken some action to redistribute our book and to limit access to our property product at some agencies, which affects where they place that business and whether it stays with us. So we are seeing it more broadly.

We've exhausted our scheduled time. And so that concludes our event. Those left in the queue can direct their questions directly to me. Alissa, I will hand the call back over to you for closing scripts.