The Progressive Insurance Company, Mayfield, Ohio, is finding both top- and bottom-line growth more challenging to achieve, said its chief executive officer in the annual report released yesterday.

Glenn Renwick said that while net written premium last year rose 5 percent over 2004, “this is the smallest gain of the last five years in both absolute and percentage terms, but not out of synch with our expectations or our forecast of industrywide auto premiums for 2005.”

The company approved a new variable dividend policy that Bear Stearns analyst David Small noted would have paid $1.66 per share last year if it had been in place instead of the 12 cents paid per share under the current policy.

“While we consider this a move in the right direction, it does not address the company's current substantial excess cash position,” Mr. Small wrote.

A softening auto market has created problems for Progressive in that competitors such as Allstate have reported higher retentions as customers shy away from rate-shopping. “Management expects margin compression due to modestly increasing severity coupled with price reductions as the personal auto market softens,” Mr. Small wrote.

He added: “While the company admits it contributed in its 'own small way' to the last soft market, we wonder if the company's aggressive growth strategy has had a more profound impact on the cycle now and whether some of management's commentary is self-fulfilling, since Progressive has doubled its market share over the last five years.”

But Mr. Renwick did not paint an entirely gloomy picture. He noted that the calendar year underwriting profit of 11.9 percent was almost eight points over management expectations, while shareholders' return on equity was 25 percent.

Special Reports /

Progressive Sees Shrinking Growth

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