The Progressive Corporation (PGR)

Earnings Call: Q1 2021

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May 5, 2021

Welcome to the Progressive Corporation's First Quarter Investor Event. The company will not make detailed comments related to quarterly results in addition to those provided in its quarterly report on Form 10 Q and the letter to shareholders, which have been posted to the company's website, although CEO, Tricia Griffith, will make a brief statement. The company will then use the remainder of the event to respond to questions. Acting as moderator for the event will be Progressive's Director of Investor Relations, Mr. Constantine. At this time, I will turn the event over to Mr. Constantine. Thank you, Jitamra, and good morning. Although our quarterly Investor Relations events typically 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 CEO and a question and answer session with members of our leadership team. Questions can only be asked by telephone dial in participants. Dial in instructions can maybe found at investors. Progressive.com/events. 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 This is available in our annual report on Form 10 ks for the year ended December 31, 2020, as supplemented by our 10 Q report for the Q1 of 2021, Our CEO, Tricia Gervis, will make some introductory comments. Tricia? Thanks, Doug. Good morning and welcome to Progressive's first Quarter Conference Call. We appreciate you joining us. During our Q4 call, we took the opportunity to reflect on 2020 and the emotional toll of the pandemic and social unrest. Now with the Q1 of 2021 behind us, We look forward with the optimism that the vaccine rollout brings and the hope of a return to normalcy. Our people are showing tremendous resilience in the face of hardships a willingness to react to whatever comes next with a positive attitude, which allow us to continue to deliver fantastic results. This quarter, our net premiums written growth was 19% and we reported a healthy combined ratio of 89.3. All lines were profitable with the exception of property where catastrophic weather losses added 30.6 points to the combined ratio. Policies in force growth continues to be strong at 12% and I'm most excited to report that we passed the milestones of 17,000,000 personal auto PIFs, 5,000,000 special line PIFs and 25,000,000 company wide PIFs during the Q1. I also want to point out that this is the first time since In quarter of 2004 that we reported double digit growth in personal auto, special lines and commercial lines policies in force. We couldn't be prouder that so many people trust Progressive to protect some of their most important assets. I'd like to take some time to address the effects the pandemic will have on our year over year comparative results for the next several months. March was the 1st month where we saw the effect of the pandemic in our previous year's results. So it feels like a good time to give some further insight into our March 2021 results and to remind everyone of the actions that we took in 2020 that could affect our year over year comparison. This quarter we reported 14% new app growth in personal lines and 29% new app growth in commercial lines. The year over year growth reflects 2 items, The effect of the stimulus package and a denominator that includes the onset of the pandemic in which shopping virtually stalled. Even considering the effects of the We've often said that PIF growth is our preferred measure of growth. This is a great example why Since the denominator was only nominally affected by the pandemic. Last year's new business metrics continued to be affected by the pandemic well into the summer of 20 Funny, though not always negatively. In mid April 2020, the first wave of stimulus checks were released, which restarted new business shopping. We We took actions to support our customers, including our April relief program, which we believe will have an impact on many key metrics, including our expense ratio. At the end of April May of 2020, our personal auto customers received monthly premium credits of 20%, which provided financial assistance to our customers, but also increased our expense ratio. In addition, as part of the April relief program, we initiated payment and billing leniency, which temporarily increased our bad debt expense, but also increased our policy retention. Both policy in force counts and retention metrics were affected by billing leniency. In commercial lines, our TNC business saw a Sudden and dramatic decrease in miles driven and estimated future miles to be driven in March of 2020, which contributed to the significant commercial lines net Premiums written increased in March of 2021, as noted in our March release. Miles driven in those premiums Our property results continue to be rocked by catastrophic losses. In the Q1, which is normally a relatively quiet quarter for cat losses, property business significant losses. Further, the hailstorms in Texas and Oklahoma that occurred in late April appear to be another large event. While it's too early to assess our ultimate exposure, I'll take this opportunity to remind everyone that we have an $80,000,000 retention threshold from a single storm under our occurrence excess of loss reinsurance program. We'll have more details on the late April events in our April release, which is currently scheduled for May 19th. I'd also like to take a moment to thank everyone who participated in the perception study we commissioned at the beginning of the year. It was encouraging to see all The positive comments we received is helpful to receive feedback on ways we can improve. One opportunity that we heard loud and clear was the desire to return to the quarterly call format we had before the pandemic, one in which senior managers from around the organization would present on various aspects of the business. We intend to return to this format during at least 2 of the calls each year, starting with the August call, where we will highlight Looking forward into the rest of 2021, I'm filled with a sense of optimism. While the pandemic is Far from over and we still have many challenges ahead of us, I think pride in the strength of our business, the resilience of our people and have confidence that the plans we have in place We'll likely continue to deliver great results in the coming quarters. Thank you. And I'm ready to take the first question to Samira. Thank you. In order to get as many questions as possible, please limit yourself to one question and one follow-up. Your first response is from Elyse Greenspan with Wells Fargo. Please go ahead. Hi, thanks. Good morning. My first Question was on the frequency disclosure in the 10 Q. Your frequency was down for all coverages except collision in the Q1. I was just interested in knowing why is it getting more color on what was going on? Yes. We are We're assessing that right now. When we look at the gap in PD and Collision, at least one other competitor had similar results. We believe in part it is due To our CWP rates being different in PD and Collision. So right now, Elyse, we're having Gary Tracos Group and our claims control group Dig in a little bit deeper. The reporting is similar, CDP rate is different. So we're trying to discern exactly what that is. Okay. That's helpful. And then in terms of direct, you saw some pretty strong new app growth there. And you also saw strong renewal growth as well. So I guess my question is, is the new business penalty significant? And is it being masked by the increase that you're also seeing within your renewal business as well? I think whenever we get acquired new business, we're obviously going to spend more for it in terms of both advertising, which Sizing, which you saw increased 25% on the direct citing commissions. So I don't know that the penalty is extraordinary. John, you can weigh in a little bit on that. The renewal, 1, we're proud of our service and our rates. So we know that some of the retention gains are likely due What has happened during the pandemic in terms of non cancellation, etcetera, but I wouldn't say that there's a big penalty. I would agree. The new business growth is certainly a function of denominator. We all recognize that, but it's also a function of 25% more advertising spend. That's that, but it's also a function of 25% more advertising spend. And we always like to reiterate that we are only spending when we believe it to be efficient. But in terms of a penalty, the mix in terms of policies and premium new to renewal is Fairly stable even when you're growing your business a lot, the business as mature as our businesses are. And then just one quick follow-up on my first question. When you said CWP, I just want to make sure that is that Claims with payments, when you were discussing the ProAgia question, I had to start. I'm sorry about that, Elyse. We have a lot of acronym here. Claims without payment. So claims that come in and then we close them because we no longer see an exposure. Okay. Thank you. I was just going to clarify, the trend for closed without payments for collision has been going down. It actually Predates the pandemic, and for property damage, it's been going up. So that obviously affects the total frequency number. Sorry, next question? Your next response is from Greg Peters with Raymond James. Please go ahead. Good morning. My first question will be on commission rates. I know some of your competitors have Lightened up on the commissions they pay their agents. This has happened in the auto business, but we're also in the property business. A lot of the regional carriers have been slammed with high combined ratios and underwriting losses and we're also hearing them Apply pressure on commission rates. Can you talk to us about your view on commission rates? Give us a synopsis of the history and then what do you think is It's going to happen in 2021. I mean the history of our commission, right, so we try to look at an aggregate right around 10, 10.5. And then it's different depending on the type of customer that comes in, if things are bundled. We obviously have 1,000 platinum agents to get a higher commission because they are bundling the auto and home, those Robinson's customers. And if you bring in a group of customers that we believe Are going to be they're short term. The commission might be less. Again, the aggregate is we try to keep around 10%, 10.5%. And we also do have some preferred programs and bonuses for agents Depending on their loss performance. It's not across the board. It's with specific agents. Do you want to add anything, John? The 10 point The Tricia's sighting is generally where we run-in our auto business. On the property side, we have a higher commission rate. But the overarching objective here is to ensure we have competitive prices. That means we have to have competitive commissions as well as competitive Other costs, what we call non acquisition expense ratio or costs. And so really it's the combination of go to market in terms of having a competitive Aggregate expense ratio, both those come into play and obviously a commission at which we think our agents We'll thrive. So there has been downward movement from competitors. You're right. I think we have seen Some positives to that to some degree because our commissions are more like competitors these days than perhaps they were previously, but we couldn't really tease out Any specific impact to that, that's where you're going. Thank you for that answer. My next question will focus on the Because it does stand out for its underwriting result, which is very unprogressive like. I'm wondering if the view on the property business at this point in time is more of a loss leader to drive retention in the Robinsons And so you're willing to sacrifice your margins in order to drive up retention? Or alternatively, do you also have this Overarching objective to eventually get that business down to, I think your corporate target is 96 combined ratio, maybe it's lower because it's property, but Some color there would be helpful. Yes. No, we do not want to be a loss leader. We a profit is one of our core values. We have a very specific target margin for our property business that, as you stated, rolls up to our 96. We've just been riddled with a lot of catastrophes. It's also a fairly newer business for us in terms of segmentation. So if you look at over the How much we've improved and continued to improve at a really quick rate or segmentation in auto. We anticipate They will do that in home. So we have new product models. We have our R and D group working on the right product models, which Could be year of roof and we've also had some restrictions for customers in the hail prone states To have them buy relatively higher deductibles for Wind and Hill because we've seen that that really causes a lot. In addition, we have done a lot of rate increases. So in 2020, we took about 11.5 points, another close to 1 point In Q1, and we have another 4.2 expected in quarter 2. So we continue to raise rates to ultimately get to that goal. Now what we're happy with and I wrote it in my letter is the fact that we are getting a high percentage of bundled customer On both the direct and agency side. And what we know on the agency side is without having a property product, we would not have gotten likely have not gotten most of Auto. So we want those, but we want to make our target margins across the board period. So that's what we're working towards. We really have, along with industry, been rocked with We've been rocked with catastrophes and of course, we also have reinsurance, heavily reinsurance on the property side to protect the downside. But no, we're not thrilled with those results, and we're going to continue to chip away to get to our ultimate goal. Thank you for the answer. Thank you, Greg. Thank you. Your next response is from Michael Phillips with Morgan Stanley. Please go ahead. Thanks. Thank you. Good morning, everybody. First question on telematics and outside of pricing. We've seen some competitors talk about Increasing telematics and claims. And I guess I'm curious if you could talk about any value that you're currently getting from snapshotting claims? And then related, is there any opportunities maybe outside of pricing segmentation for Snapshot to, I guess, extend the period You collect data from Snapshot to help in other areas besides price segmentation. Thanks, Michael. We've been testing and looking into Claims and snapshot, understanding the facts of loss, fraud, other things for quite some time. I think we've had 150 Customers that are currently that we currently have access to claims information should they have a loss and we'll have more to come on that. We've been working on that for a while, but we think it is an important next step for the use in our telematics. And We've talked off and on too about do we have continuous monitoring? Would that help not only with understanding The likelihood of changing driving behavior, but also could help with other necessary things that customers have grown accustomed to in terms of Added services like tows and gas stations and things like that. So that is on our list as well. Currently, obviously, during The pandemic, our big effort was to try to understand vehicle miles driven and how that relates To work from home versus not work from home, etcetera, as well as some of the other items we've talked about April relief that I've talked about in terms of actually a shorter monitoring period to give people who believe that they're driving less the ability to It proves that through data and gives them a lesser rate. But we've been on the UBI Bandwagon for a couple of decades. We'll continue to do so. We do so on both the personal auto and the commercial auto side. Really happy with our smart haul results, Very successful and the program is very profitable on the commercial auto side because that's a big expense for Truckers, but I mean all those things are on our agenda and we continue to invest a lot in this area. The other thing, I don't know if we call it telematics or not, that is evolving is dashcam video. So Especially in the commercial space, those devices are frequently 1 and the same and with higher limits in the commercial space, if you have video, It can be extremely helpful in resolving claims because some of those vehicles are targeted because of the limits. And if you have video that clearly shows it was staged, it resolves the claims very quickly. So telematics is certainly a benefit. Obviously profitability and rating side, as Trish mentioned, evolving for claims for personal and evolving for commercial as well, including Dash Okay, great. Thank you, guys. Second question, you got some kudos this weekend from the friends in Omaha On your lead you have in telematics and risk based pricing. But I guess if we look at and they said they're going to start to do more. I would think that that gap could narrow possibly. If we combine that with if we look at some states where The use of credit score and use of telematics has been limited if not all about bands and these aren't small states, Mass New York as an example. They're the lead from that competitor is pretty significant over you in terms of market share gains. So I guess if we combine those two things and credit score may start to fade away in other states and then their use of telematics may start to pick up, How do you think about that competitive dynamic between you and them in states as the overall market shifts away from credit and they start to shift more towards telematics? Yes, great question. I'll just I'll use the G word. So yes, GEICO did or Berkshire talked a lot about it. And they're a formidable competitor. And We like the competition because it makes us better and it's better for customers. Here's how we think about segmentation. We have we've had an edge on a lot of our Competitors for many, many years now, and we're not going to stop. And we believe rate to risk has a lot to do with many different variables, insurance credit scores being one of them, Usage based insurance being one of them, but there are a lot of other variables. We will comply with the regulators. We believe they help to match rate Risks are correlated to ultimate losses, which is really important for all consumers to keep the rates competitive. So I'm not surprised that they're going to spend more money on that. We also will be spending more money on continuation of our Many, many,000,000,000 miles of snapshot data on both the auto side and the commercial auto side. So We like the competition. We think it was great. And now, 10 years ago, I might not have said this, but now we have head to head brands. So You may like her or you may not, but you know who Flow is and we're very proud of Flow, the network and all the So I think going head to head on all those things is a good thing. I've always been competitive And we like to I think it makes us better. It makes sure that you don't just rest on your laurels. So we will react to whatever we need to react and continue to invest In segmentation, especially in usage based insurance, but other segmentation variables as well as our brand, our broad coverage And the people and culture at Progressive. And we think all those together are really winning formula. Okay. Thank you, George. Appreciate it. Thank you. Your next response is from David Mote Matin with Evercore ISI. Hi, good morning. I had a question, Tricia, in your letter, you spoke Robinson PIF growth up 20% in the direct channel and up 16% in the agency channel. I guess I'm wondering If you could just sort of level set us here and just think about what percent of the book now is bundled customers And also maybe just talk a bit about margin differential and policy life expectancy differential, where that stands Yes. So we're very happy about the increase in Robinson. That's really what our goal has been to have those bundled customers. We've added Some platinum agents on the agency side. I would say our total book of Robinson's right now is right around 10%, which is much higher than it was many years ago. So we continue to kind of gain that momentum in Robinson's. And what was the other part of your question? Profitability. Profitability. Yes, they are preferred customers. So we believe they are more profitable. And on the retention side, The retention is dramatically different, not just on the Robinson side, but as you have more and more policies with us. So that's why it's so important for us to continue to give people a reason to stay for decades decades to be able to have Products that can all come from the same carrier, whether or not we write it on our paper or not. So, yes, so that's preferred customer and we want wider margins there and the retention is longer. So our target, just for clarification, across The customer segments for auto is pretty on a lifetime basis is consistent. So obviously Our loss costs vary at times and frankly during the pandemic, more preferred customers who have the ability to work Home have been driving less than other customers whose professions require them to drive to the office. So We might have different margins by segment in the near term due to extenuating circumstances. Our target margin across its customer segment is consistent, just to 96. Got it. Thank you. And then maybe just switching gears a little bit, just over to the severity side of the equation, Just thinking about loss costs, it didn't look like you saw a big increase in severity this quarter. Property damage severity was flattish, collision up a little bit. But Obviously hearing a lot about supply shortages, chip shortages. Just wondering how you're thinking about severity as we go forward Combined with the mix of maybe claims coming back a little bit, so the mix of claims might be somewhat Of a tailwind for severity, where you have a bit more fender benders and that could potentially bring it down. But sort of Just maybe at a high level, just want to get your take in terms of where you expect severity to go just given everything That we're seeing in the macro environment right now? I wish I knew the answer to that question. That is such a tough one. We are Seeing some losses come back, especially now it makes sense on the special line side. We'll watch that closely. We haven't been Yes, from the semiconductor shortage, we watch those things closely. Some of the severity we'll look at in terms of our average Premium is down a little bit and we've had a lot of cat losses. So all those things play into it. And then of course, it really does like you said, It plays into it in terms of what do people do as different states open. So will there be more highway travel because you're packing up the kids to go Graham and Grandpa, will that cause less volatile accidents we've been seeing? Obviously, the congestion Is less in the pandemic than it will be. So we're watching all of those things closely. And And we're going to be able to react to those. And we've never been in this situation. So we watch closely with not just our UBI data, But some other data that we're starting to glean in terms of understanding when more people are starting to work from the office. And so we Some occupations and some data shows some people are already there, some people are there a little bit more often. We're going to continue Because we think that could creep up pretty quickly and we want to be on top of that. Thank you. That makes sense. And maybe just following up on that point, was any of that just sort of, I guess, caution and uncertainty? Did that come through? Because it looks like you guys After decreasing rates last year, it looks like you increased rates in auto, obviously not a little bit by a little bit under 1%, But did that have any influence on that rate change? Well, we look at all the trends in terms of what we do. So after we took the credit, Then we looked across the board and we looked state by state, product by product, channel by channel. And our goal was always to take Small buy to the apple because our customers, we know they want rate stability. And so we felt great at the end of this year and now we're doing the same thing. We're taking a look And different states have very different attributes in terms of increases in frequency and severity and driving behavior. So That less than 1% is just based on us looking at the data and making tweaks. And we'll do that the rest of this year as we see things unfold. So it's really using the data and then saying, okay, we need a little bit more on in this product, in this data, in this channel. And that's why think the way we're set up is so good because we're a machine that can react pretty quickly to those trends as they unfold. Got it. Thank you. Thanks. Your next response is from Josh Shanker with Bank of America. Please go ahead. Yes, good morning. Thank you for taking my questions. Just a clarification, please, on the March 17th Shopping Day. The biggest shopping day you've seen, when people got their stimulus checks, are these SAMs with discontinuous coverage Who've come back into the insured population, along those lines, I mean, I know you are you'll certainly break that business, But it obviously doesn't have a lot of persistency. I'm just trying to understand the surge related to the stimulus and what that means maybe for April, May. Thanks, Josh. And actually for years, if you go back, we presented this in a IR meeting probably maybe 7 or 8 years ago. We Saw that shopping when people get their earned income tax stimulus from the government. And it is largely Sam's. It is other people that I think Other constituents that have lost their insurance or couldn't afford to it, but in a large part, Sam's. And our theory on Sam's, we grew up with them, we love them as long we can make our target margins. So the stimulus just exacerbated that. These are people that are trying to do the right thing and maybe lost coverage and want to get That started and will continue to be something where we'll increase shopping behavior for the industry as a whole. But yes, in large part, it is predominantly Sam's. Okay. And then just following on David's severity question, we've obviously heard a lot about lumber prices Going up and we've heard about rental car issues and whatnot. Those issues have seemed very, very close to What might be a severity inflation related issue for Progressive. In your current pricing, are the inflation issues that are Sort of kitchen table issues that everybody knows about, is that captured in how you're pricing right now? Or is that going to contribute to future rates? We look at all the macroeconomics that are going on and react to that on a severity basis. I would say on the rental coverage, Especially for our first party, we have contracts in place to minimize the amount that you pay per day on a rental. So we feel good about that. We also believe on the rental side that if you get out there and see the car, customers want their Car back in their driveway. So we really do try to compress the time with which to get the car back into at or better shape than before the accident. So we've always pride ourselves on the actual time that that takes, which of course affects rental. On lumber, we will start See that unfolds and if we believe that it is a piece of the severity, we will price that in future rate increases. Yes, Josh, as you know, insurance is an interesting product because you truly don't know the cost of goods sold until A year from now in case of home. But in our rate indications is what we call them forward looking process to say what should our price level be Over the coming 12, 18, whatever months, we are selecting trends for frequency and severity and they are informed, as Tricia said, by macro and Economic views, but also a little more specific views such as the cost of lumber, but obviously That is a near term spike over the long term. We're not sure where that goes. And we would have taken a little more holistic approach to Selecting, in that case, the severity trend for the price level going forward. All right. Well, There's lots to digest in there and I appreciate the answers. Thanks, Josh. Thank you. Your next response is from Gary Ransom with Dowling and Partners. Please go ahead. Good morning. I wanted to ask about quoting and Conversion, I think I see your conversion is up a lot. That probably is explained by accurate matching of price and risk. But on the quote side, you're doing something powerful that gets people in the funnel in the first place and you have a big flow of customers. So if I'm sitting at home, whether I have a stimulus So if I'm sitting at home, whether I have a stimulus check or not, maybe I'm a Robinson. At some point, I decide I'm going to go shopping. Just wondering what's sort of the key ingredients of being successful at getting that Customer in to get a Progressive quote? Yes, Gary. I think a lot of it is our brand. So we started out I started out one of the answers with 10 years ago, 11 years ago, our brand would be different. It's about awareness. And people know who Progressive is. They know our brand. It's a solid brand. It's a reputable brand. So that's kind of awareness gets you On the shortlist, and then when you're on the shortlist and you shop, our competitive prices and our broad coverage So we believe that we've obviously spent a lot more on brand, another 25% increase in this quarter. And again, we're Spending a lot in expanding our broad coverage. So if you're sitting on the couch and you're Robinson and you want to buy an auto and home on your phone or your I, Pat, you want to call in or you want to go to your agent. We try to be where, when and how you want to shop just to make it easy for our customers. And then you have competitive prices. I think that is really important and that goes of course into our segmentation and understanding rate to risk. Gary, to that I would add, Much of our advertising is mass media, but a massive portion of our advertising Spend is in digital media and that can be sort of display stuff, but it is increasingly what we Digital Auctions and there are multiple digital auction marketplaces on the web these days and I would give huge kudos to our Digital Media Group because they use the analytical powers that are inherent in progressive people And make great real time decisions, meaning where should we spend more, where should we spend less. They also do it recognizing lifetime value of the prospects That are looking to quote. So you can imagine if we have a longer retaining customer and it's direct, we can spend more. If it's shorter, you get the whole Concept there. So I think we are pretty good in that space and that has been a space that has been growing for us A lot for a number of years now. The other important thing to do is once you get the person in the front door, you got to get them to the And that is not as simple as you might assume. There are multiple avenues where customers can decide to quit the quoting process And we optimize continuously to make that funnel that starts at the top of the flow, as you said, Get as efficient as possible to get them a quote and then obviously to translate that quote to a buy. So I think a lot of this is our great people, great analytical skills, Massive data sets and I think we're doing some impressive things there. And the only thing I could say, this is a little bit off, but once they're in And you do have an incident or an accident. I believe we have industry leading claims service. We're out there. We care. We're there when you need us most. I talked about that a lot when there's cats that we can't control the weather, all we can control is how we treat you as a customer and we've always gotten really high marks on that. Did you have another question, Gary? Yes, I was just going to follow-up on the 25% ad spend too. Based on what you said, is that is it reasonable to Assume that a lot of that growth was more in the digital space? Yes. When we look over the years and we look at take the last 10, 15 years when we look when people bought on phones to now when they're buying digital, it is the highest rate of growth. Yes. Just one little more on the same topic. Just is if I look at the body of Science that you're putting into this in terms of the quoting process and all of that and kind of compare it to the body of science you have For matching price and risk, are they both just as robust? I think so. I mean, I think when you look at our ability to continue to have new product models coming out where we can even more accurately price rate the risk Can get to that preferred customer. We just continue to excel in that. And then on the buying analytical side, I'll concur with John, we have an incredible team. We do a lot of our buying in house, so it's proprietary to us. We have an incredible team that understands both the art and science around branding and then getting in our customers at or below our allowable cost. So both Our highly analytical teams of people that we continue to invest in. I appreciate that. Thank you. Thanks, Gary. Thank you. Your next response is from the line of Adam Klauber with William Blair. Please go ahead. Thanks. Good morning. Commercial the commercial auto is clearly growing Carter's comparisons, but I think you called out that the for hire is growing rapidly and again that makes sense with the economy ticking off. Yes, what are you doing different in that line of business? And in particular, is more of that business being distributed through the direct and digital? Yes, I think we were ready, not intentionally, but when the pandemic happened and more truck Drivers decided to go from big firms to their own, buy their own tractor trailer because spot rate coverage went up. So we were ready And we're priced well. And we look at that very closely because we've grown substantially, both On both on the direct side and the agency side, we for many years, we sold the Majority of our all of our commercial auto on the agency side, but again, we want to be where, when and how our customers want to shop. So There was for commercial auto overall, not necessarily for higher trucking, the highest growth Both in the direct commercial auto ever came in March of this year. And that's we normalized for our 4 or 5 week month. It only bested by January of this year and then August of last year. So we were ready kind of make hay when the And Shines, you're ready for when this happened. We feel great about the trends and the underlying costs. We also Are careful about that because it is high limit coverage. And so we have selected a 12% severity And making us very comfortable with our reserves. I think we're in the right place at the right time. We feel like we're more than accurately reserved or accurately reserved And we're excited about this new business on both the direct and agency. Great. Okay. And then my follow-up. In your letter, you mentioned that VMT is down 8% to 10% versus prior year through the end of March and the week of April, you say that frequency of claims compared to last year's coming up, but in end of March, early April, But as frequency of claims, how does frequency of claims in the end of March, early April compare to say 2017 through 2019? Well, comparing it let's go first and compare it to what's happening now. So VMTs were down about 10% to 12% in March, early April. Then it went down to 8% to 10%. It's back up to 10% to 12%. Claims has not caught up yet. We are starting just in very recent data, starting to see features grow, hasn't caught up yet, not Surprising. Compared to 2017 through 2019, what would you say, John? Well, so we don't actually Provide our raw frequency numbers. So I'm sure you're trying to do that math yourself, but we don't give you the exact data for it. Recognize as well that Overall frequency trends for a number of years now have been negative. Obviously with the pandemic, it took a step Function down. We look at the frequency and we look at a lot of things not only versus 2019 but Sort of a range of 17 to 19 and frequency is still down from we'll call that generally that area, but recognize as well that Before the pandemic, frequency was dropping. So I'm sure we're trying to do a look through to what is April, May, June, etcetera, look like And it's even difficult for us to know, but I wouldn't forget those long term frequency trends For a lot of reasons, have been negative. And of course, over the longer term, offset more than offset by severity, and that's the industry has been growing, but I would think through that when you're trying to project out what frequency is going to look like for the rest of the year. Thanks a lot. Thank you. Thank you. Your next response is from Shracey Bengeki of Barclays. Please go ahead. Thank you. Just a follow-up on loss trends. Are you anticipating any delays in seeing Claims as the economy reopens, I'm thinking about medical procedures that might have been delayed during a pandemic. Are you booking extra IBNR for that possibility? Well, when we get an injury claim Or a PIP claim or a medical claim, well specifically injury. We have an estimate on what we believe will be The cost depending again how long that claim is open and what actually happened. And then the adjusters can come in and see if they believe it's less or more And it can be influenced by data as it unfolds. I think early on, we saw sort of a stall, Not necessarily in treatments, but more importantly, I think surgeries. And of course, there's not A huge amount of surgeries in DIs. A lot of our injuries are soft tissue injuries. And so a lot of those can even heal on their own. What we did see was a closure of Corse. And so we can see that open up as well. But I don't but That data that we have years and years' worth should already be priced in. Got it. Also in your view, what is quality of drivers in the for hire space as folks are looking for employment. I think that varies. I think that really varies. We feel great about the business that we are putting on our books. We watch that very closely. I think a lot of it depends Just like an auto on driver maturity. And right now with the driver shortage, we can see you can see that changing overall in the industry. We have not seen that, but we'll watch Closely to make sure again that we price Rate to Risk for that segment. Thank you. Thanks, Tracy. Thank you. Your next response is from Behir Shields with KBW. Please go ahead. Thanks. I know, because you talked in the past about how severity is reasonably predictable in auto And frequency less so, so you have to respond to that. I was hoping you could talk about how you view that in the context of the property book where policies are 12 months rather than Yes, I think largely in property, we look at the age of the structure, the age of the roof, the location, is it a hail etcetera, and that's right now. We're going to continue to understand deeper segmentation in the property space. And so I think that will change over time and we'll have more variables that we look at even on the property side. Really, the property, the Outcome, the CR has been really solely on catastrophes and really a lot in Texas. I mean, there's been Several things in Texas that have happened, but we look at that. And because of that, I talked about the rate increases we put into place last year and next year. We will also look at making sure that we have certain restrictions where we believe we may or may not want to grow. Do you want No, I think it's very similar. And obviously the models usually call a trend to date with those trends that take into account Durations of policies, you mentioned property as being 12 months. The commercial business is predominantly 12 months as well. And we have I think it's close to 10% now of our agency book on 12 month policy, somewhere around there. So it's the same process. It's just A further out trend too generally. Okay. That's helpful. If you can switch quickly to the small, I guess, the boss side of commercial. Does the current competitive environment change the timeline for progressive ramping up there? Well, when the pandemic initially started, we rolled up off in a few states and we kind of took a pause to reassess Not whether we're going to go in, but just reassess sort of what states we want to do, audit our computer system, etcetera. And we are now rolling out very quickly in many, many states. We're very excited about it. Remember, when we think about Many, many states. We're very excited about it. Remember, when we think about small business, we think about employees of 20 or less, almost Businesses, that is growing very rapidly, albeit on a very small base, but we're excited about what we're learning. We feel good about where we're at from a rate perspective. So we and Carrie can talk about this more in August. I'm going to have her comments. I know there's a lot of questions on commercial, and I'll outline where we're at on all the BMTs and especially BOP and Small Business and Fleet. But no, we're very excited to continue to roll that out aggressively. Okay, great. Thank you very much. Thanks, Your next response is from Brian Meredith with UBS. Please go ahead. Yes, thanks. Good morning, Trish. Quick question here for you. Can we dissect the rate or the average written premium per policy decline a little bit here? How much of that is Rate driven, the minus 3% versus how much is just rising deductibles or changes in coverages that the customers have been Implementing during the economic downturn? I would say the majority of it is our rates, our reduction in rates. We had several customers Sometimes they were delaying payments, but not huge changes in coverages. I would say rate would be the Primary reason behind our reduction of our written premium. Great. That's helpful. And then my second question, I'm just So I know a lot of homeowners and policies have, we'll call it inflation cards or inflation protections in them that are built in that Kind of gradually raise your premiums over time to account for inflation. Does your auto insurance policies carry that as well? Is that perhaps a potential offset here if we do see some rising in severity? We have some things that we had in place for years That actually take a factor into place every month for inflation on the auto side. Yes. It's to the degree that Transpires in home, generally the home is driven predominantly by the replacement cost inflation. So something like Lumber would be factored into how we would assess your replacement cost at your renewal. On the auto side, we have built in what we call Monthly rating factors. So this is just an acknowledgment that generally speaking over time trend in average losses is Positive. And so we bake that into the pricing algorithm so that every month we see modest Increases in premiums in those states. We don't have that in all states. It's not a huge impact on average premium. It does help ensure, all else equal, a positive trend in average premium in auto. Great. Thank you. Appreciate it. Thank you. Your next response is from Josh Shanker with Bank of America. Please go ahead. Thank you for taking more than one question from me. I appreciate it. I noticed that sequential policy count growth In property, was the best in March 2021 since I guess going back to September 2018, I know there's a lot of new housing starts and people are moving houses and whatnot, but also there's the amount of appetite that Progressive might have for warning those risks. It does seem that your growth in property slowed down in the last few years And maybe it's accelerating right now. Can we talk a little about appetite, how it relates both to your desire to convert to Robinson's And in general, how it relates to cat aggregation and whatnot? And is the funnel opening up for property compared to where it was a year ago? Yes, I think it depends on the stage, so a couple of things. 1, we've invested a lot on the direct side with our HomeQuote Explorer H2X. So having So property and other third party non affiliated companies we work with. So we've continued to do that and continue to have more and more companies have a buy button, which makes it really easy to be able to combine the Autohome and buy it online. On the agency side, we've increased Our platinum agents have a little bit over 4,000 platinum agents now. So again, more ability to buy those. On the we want to make money On the property side, and so we have been I think we're in 47 states now. We want to go across the country. And for years, we were we had a lot of density in Texas, Florida, that area and we continue to, but we also want to grow out of those and do the right thing in terms of segmentation. So our appetite is we want to grow as fast as we can. But our other part of that, of course, is we want to make our target profit margins. So we look at those states, we look at I have to try to understand where we believe the underlying price is accurate. And as I said, we are increasing rates And trying to understand segmentation a little bit more deeply. So we want to grow there. We want to grow Robinson's. That's one of the reasons why we've made so many big investments, But we need to make money on that product. Can you give us any sense about how the percentage of auto policies you have that are bundled whether by a progressive property policy or a HomeQuote Explore policy? Yes, the HomeQuote Explorer. So I would say overall, in Robinson's take that, we're about 10%. 10% of your auto market share is robust at this point? Yes. Okay, great. Thank you. Thank you. Your next response is from David Mote Matson with Evercore ISI. Hi. Thanks for taking the other question for me. Tricia, I just wanted to just maybe talk about the road test offering in a bit more detail And just see where that stands, if you have plans to roll it out on a broader scale and how much how traction has been there? You know what, we've been we continue to be challenged a little bit with the economics on road test. So we're redefining some of the metrics and I would say on that more to come. We continue to develop there, but we need to make the economics work. Got it. And what is it about the economics, maybe flesh that out a little bit, like what is the sticking point That you see that make it hard for the economics to work there? There's several different things. I'd rather have Outline exactly what's working, when it's working, and hopefully that will be soon. Okay. That's fair. Thank you. Thank you. Thank you. Your next response is from Elyse Greenspan with Wells Fargo. Please go ahead. Hi, thanks. My first question on you guys obviously just announced the Protective acquisition and I recognize you're So that closes to give us more details there. But just as you broadly think about additional M and A from here, I know obviously Progressive has often shied away from M and A except in a couple of unique circumstances. So can you just provide us kind of your current view And anything that might cause you to pursue additional transactions down the road? We have Our corporate development department that is under Andrew Quigg in our strategy group, they always kind of like searches the landscape to see things. Acquisitions are hard and it's hard for us specifically I think because of our culture and that's why the limited number that we've done we have felt have great Products, great culture, fit with us and could be cumulative. So I've talked a few times about the ASI acquisition. We didn't have The ability to bundle customers in agency channel that gives us that. We talked a little bit about the protective and thank you Allowing us to talk more about that after the transaction closes. So I will always look at what does it bring to Progressive So that we can't grow organically or that will help us get to market faster. And that's kind of how I see it. And we're always Taking a look, but again, I want to be able to it doesn't give us access to customers, access to technology or the ability to get to market faster is kind of how I look at acquisitions. Great. And then my second question, you had mentioned that Snapshot is in the lead product last Quarter and then there was a little bit of color within your rebuttal letter in the queue. But I'm just wondering, it seems like It's still early, but are there any like observations that you noticed kind of some switching right to that shorter Having carried relative to other products or just in general observation? Yes. So we have it in 43 Again, like you said earlier, so it could unfold, we sent out communications to about 14,000,000 customers and about 40,000 of those enrolled, so to have that 30 days. So far 9,400 have reached that 30 day point A pretty small percentage, about 4% have called us to join the program. And we still feel very proud of the fact that we did that because it does allow people To reduce their rates if they're driving less or their behavior of driving differs. So again, we still have Some time before all the customers roll out, but a relatively small percentage has actually joined the Snapshot program. Is the idea to keep this going, like obviously it was tied right to the pandemic and the impact that that's had on driving behavior, but the idea to keep an option of A shorter driving monitor period available indefinitely or is there kind of you only might have this for a certain time period? Yes. We have this program in place till July this year. Okay. Thanks. I appreciate the color. Thanks, Elyse. We've exhausted our scheduled time. And so that concludes our event. Tamara, I will hand the call back over to you for closing scripts. 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