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Press release from Business Wire

A.M. Best Affirms Ratings of The Progressive Corporation and Its Subsidiaries

Wednesday, February 01, 2012

A.M. Best Affirms Ratings of The Progressive Corporation and Its Subsidiaries10:00 EST Wednesday, February 01, 2012 OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa” of the Progressive Agency Pool, Progressive Direct Pool and ProgressiveCommercial Auto Group (collectively known as Progressive) and their respective members. A.M. Best also has affirmed the FSR of A (Excellent) and ICR of “a+” of National Continental Insurance Company. Additionally, A.M. Best has affirmed the ICR of “a” and all debt ratings of the parent holding company, TheProgressive Corporation [NYSE: PGR]. The outlook for all ratings is stable. All companies are headquartered in Mayfield Village, OH. (See below for a detailed listing of the companies and ratings.) The ratings reflect Progressive's favorable capitalization, strong operating performance and sustainable competitive advantages. Progressive's capitalization has benefitted from consistently favorable underwriting results and a rebound in its investment portfolio since the market downturn of 2008-2009. Progressive continues to benefit from an innovative management team, brand name recognition, a multiple channel distribution platform and innovative underwriting and claims handling technology. In addition, Progressive's direct operations have continued to witness favorable growth, reflective of improved brand recognition. These positive rating factors are partially offset by Progressive's high underwriting leverage relative to industry averages. In addition, although financial leverage at the holding company was somewhat elevated in 2011 compared to earlier years, A.M. Best expects the company to improve from year end with the retirement of $350 million of its senior debt, which matured in January. Progressive has historically operated with elevated underwriting leverage; however, its debt-to-adjusted capitalization remains within A.M. Best's expectations. While Progressive is well positioned at its current rating level, negative rating actions could occur if its operating performance, and consequently, risk-adjusted capitalization falls below expectations for its current ratings. In addition, negative rating actions could occur if capital erosion occurs due to the company's investment volatility or increased risk appetite. Alternatively, positive rating actions could occur if over the next several years Progressive's operating performance consistently exceeds its peer group by a significant margin and its risk-adjusted capitalization significantly improves. The FSR of A+ (Superior) and ICRs of “aa” have been affirmed for the Progressive Agency Pool and its following members: Progressive Casualty Insurance CompanyProgressive Northern Insurance CompanyProgressive Northwestern Insurance CompanyProgressive Specialty Insurance CompanyProgressive Preferred Insurance CompanyProgressive Classic Insurance CompanyProgressive American Insurance CompanyProgressive Gulf Insurance CompanyProgressive Bayside Insurance CompanyProgressive Mountain Insurance CompanyProgressive Southeastern Insurance CompanyProgressive Hawaii Insurance Corp.Progressive Michigan Insurance CompanyProgressive Security Insurance CompanyProgressive West Insurance CompanyDrive New Jersey Insurance CompanyProgressive County Mutual Insurance Company The FSR of A+ (Superior) and ICRs of “aa” have been affirmed for the Progressive Direct Pool and its following members: Progressive Direct Insurance CompanyProgressive Marathon Insurance CompanyProgressive Max Insurance CompanyProgressive Advanced Insurance CompanyProgressive Universal Insurance Company Progressive Premier Insurance Company of IllinoisProgressive Paloverde Insurance CompanyMountain Laurel Assurance CompanyProgressive Choice Insurance CompanyProgressive Select Insurance CompanyProgressive Freedom Insurance CompanyProgressive Garden State Insurance Company The FSR of A+ (Superior) and ICRs of “aa” have been affirmed for the Progressive Commercial Auto Group and its following members: Artisan & Truckers Casualty CompanyProgressive Express Insurance CompanyUnited Financial Casualty Company The following debt ratings have been affirmed: TheProgressive Corporation— -- “a” on $150 million 7.000% senior unsecured notes, due 2013 -- “a” on $300 million 6.625% senior unsecured notes, due 2029 -- “a” on $400 million 6.250% senior unsecured notes, due 2032 -- “a” on $500 million 3.75% senior unsecured notes, due 2021 -- “bbb+” on $1 billion 6.7% junior subordinated debentures, due 2067 (of which $756 million remains outstanding) The principal methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Rating Members of Insurance Groups”; “Catastrophe Analysis in A.M. Best Ratings”; “Equity Credit for Hybrid Securities”; and “A.M. Best's Ratings & the Treatment of Debt.” Best's Credit Rating Methodology can be found at Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.A.M. BestNeil Das Gupta, 908-439-2200, ext. 5206Senior Financial Analystneil.dasgupta@ambest.comorRachelle Morrow, 908-439-2200, ext. 5378Senior Manager, Public Relationsrachelle.morrow@ambest.comorJoseph Burtone, 908-439-2200, ext. 5125Assistant Vice Presidentjoseph.burtone@ambest.comorJim Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public