Hello, everyone. Thank you for joining us, and welcome to The Progressive Corporation Third Quarter 2026 Investor Call. I will now hand the conference over to Julianna Paterra.
Good morning, and thank you for joining us today for Progressive's third quarter investor event. I am Julianna Paterra, Director of Investor Relations, and I will be 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 to 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 CEO and Chief Personal Lines Officer in a question-and-answer session with members of our leadership team. These introductory comments were previously recorded.
Upon completion of the previously recorded remarks, we will use the balance of the 60 minutes scheduled for the 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, 2025, as supplemented by our Form 10-Q for the third quarter of 2026, where you will find discussions of the risk factors affecting our business, safe harbor statements related to 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 am pleased to introduce our CEO, Tricia Griffith, who will kick us off with some introductory comments. Tricia?
Good morning, everyone, and thanks for joining us. We delivered another strong quarter with continued growth and healthy underwriting margins. These results reflect the outstanding work of our people and their continued focus on executing our strategy. For the third quarter, net premiums written grew 4% to $22.3 billion, and at quarter end, we had approximately 40.5 million policies in force. While year-over-year PIF growth moderated slightly to 6%, we feel very good about that level of growth given the size of our customer base. Of course, we want units to increase, so we continue to create plans for growth in both our personal lines and commercial lines segments, and we will advertise to maximize growth as long as that spend remains efficient. Even as growth moderates, our relative performance remains strong, underscoring the resilience of our business.
I am really proud of these results and, more importantly, of how we are achieving them. We will be diligent and focused on what we have always believed is important: growing as fast as we can while maintaining our underwriting discipline. We feel really good about where we are. Maintaining that momentum over the long-term also requires us to keep evolving how we compete. Innovation has long been central to how Progressive competes. We have consistently developed and applied technology to make insurance easier to understand, buy, and use, and we have invested in digital experiences that help customers engage with us easily and confidently. Over many years, we have been early developers and adopters of tools such as chatbots and predictive AI to enhance pricing, underwriting, marketing, customer retention, and the accuracy and efficiency of claims handling. That foundation has been an important contributor to our performance, particularly over the past decade.
We are now in the next generation of technology, including generative and agentic AI, with the same long-term mindset. We believe these capabilities have the potential to influence nearly every part of our business over time, including growth, customer experience, underwriting, claims, and operating efficiency. Our goal is to study, learn, and grow, considering opportunities across the short, medium, and long-term, while remaining focused on measurable improvements in outcomes. To support that learning, we have made generative AI tools broadly available across the organization. We already have dozens of advanced AI initiatives in production that are delivering meaningful results with a clear line of sight to significantly more value. We also established an AI Strategy Council to evaluate the longer-term opportunities and implications of these technologies.
While we do not plan to discuss specific applications that we believe are competitively sensitive, we want to be clear that this work is active, enterprise-wide, and grounded in practical business outcomes. At the same time, we are mindful of the risks associated with advanced AI and are taking a disciplined and responsible approach. Consistent with our core values, our responsible AI governance and risk management program draws on talent from across the enterprise and is designed to support the responsible use of AI for our customers, claimants, consumers, employees, job applicants, and other constituencies while meeting our compliance obligations. AI is also considered through our enterprise risk management process, and our board, including its technology committee, oversees technology-related risks and opportunities.
We believe this combination of innovation, strong governance, and a focus on measurable outcomes positions us well to capture the long-term potential of AI while managing its risks thoughtfully. Generally, when customers shop more, we win. Recent history has underscored that. In both 2024 and 2025, we captured over 40% share of shoppers while holding less than 20% in market share, and took over one point of share in 2024 and nearly two points of share in 2025. From what we can see so far year- to- date, we continue to take more than our fair share of shoppers. Regardless of the shopping environment, we are comfortable losing new business volume when competing against rates that we believe are underpriced. Over the long-term, this discipline has proven to generate market share gains for Progressive.
Looking at where we stand today, we are leaning in by testing and researching agentic technology ourselves. Customers appear to be doing the same, though at a very small scale. Over the last few weeks, we estimate we received agentic inbound interactions representing a rounding error relative to our overall volume. Activity we see today suggests much of this usage reflects experimentation rather than true shopping intent. While the usage seems limited today, we believe there is a high likelihood that agentic AI changes some aspect of consumer shopping behavior. Historically, when shopping behavior has changed, we have been at the forefront of that change. Lastly, I want to take a moment to thank Pat Callahan for his hard work and dedication in both preparing and executing on our IR calls over the past decade.
Your insights and steady leadership have played a significant role in our success, and your contributions have been deeply appreciated by everyone in this room, and I am sure on this call. While you will certainly be missed in this setting, I am pleased that we will still have the opportunity to work closely together as you take on several strategic initiatives. I know you will bring the same level of commitment, creativity, and excellence to those efforts, and I look forward to seeing the impact you will make. Thank you again for everything you have done, and I wish you well in your retirement from PL president, and look forward to working beside you in this new capacity. Now I will hand it over to Lori to introduce Jim Curtis.
Thanks, Tricia. I have been fortunate to work beside Pat for over a decade in various roles, and I have learned a great deal from him. I know the same is true for Jim Curtis, who was recently named our next Personal Lines President. Jim has been with Progressive for 31 years. He joined in 1995 as a customer service representative when we were roughly a $2.5 billion company. Since then, he has led a wide range of business functions, including auto pricing, product management, and our Progressive Advantage Agency. Most recently, Jim served as our Personal Lines Controller and then our National Auto Leader, where he was responsible for shaping the strategy and growth of our largest product line. Over the past five years, Jim helped steer Personal Lines through the pandemic and the inflationary period that followed. He has seen this business from more angles than most Progressive people.
Jim brings the depth and continuity that's critical in this role, but he's also just a great example of the talent and succession strategy at Progressive, having started his career as a call center consultant and now leading our largest business. Now we can open it up for questions.
This concludes the previously recorded portion of today's event. We now have members of our management team available live to answer questions. Questions can only be submitted over the phone by pressing star one on your keypad. In order to get as many questions as possible, please limit yourself to one question and one follow-up. We will now take our first question.
Your first question comes from the line of Josh Shanker with Bank of America. Your line is open. Please go ahead.
Yeah, thank you for taking my question, and good morning, everybody. If I look at the policy count growth of the company, it's been decelerating and even declined in the direct channel during two different months this past year. But when I look at the tendency and see new policy applications, the growth demands are about the same, and really we're talking about a decline in retention. Over the past 20 years, Progressive has made huge strides in retention. The first question, I guess, is do you think that this is merely cyclicality and that retention should go up in the future as shopping behaviors subside? Or B, are we in a new market where shopping is a permanent feature of consumer behavior, and what does that mean for the amount you're paying in terms of ad spend to generate that business?
Wow, Josh, that's like five questions in one. I may have to get some help here. I'll talk a little bit about policy growth on the Commercial Lines side. I'll have Lori talk about it on the private passenger auto side, and then Jim and I will tag team on the retention piece. We're extremely proud that we grew 263,000 PIFs this quarter, especially on the base of how large we are, so we continue to be proud of that. One piece of data that gets to your question on, do you think the shopping will continue, which of course we don't know, is there's a demand meter that LexisNexis puts out, and the Q2 results would say that 47% of policies were shopped in the trailing 12-month period, which seems pretty high.
In addition, we have our own data that says we've been quoted over 50 million times on the auto alone. That seems like a lot of shopping, so I think shopping has really increased based on affordability across not just insurance, but fuel prices, grocery prices, et cetera. I do think shopping has been at an all-time high, and we're seeing it kind of level out, albeit really high. Our focus will continue to be to grow. When you think about retention and you go back to after COVID, all the volatile years, the retention has gone up and down, really depending on mix, on shopping. It's just a timing thing.
Not that we don't care deeply about retention, but if you look at our post-COVID period, in that time that was so volatile, up and down with inflation and then us getting rate, giving rate, and we added more than 12.5 million PIFs, doubled our premium by 38, added $38 billion, and that translated to five points of market share. In these volatile times, that's really where we prevail. Again, we are still pushing the envelope on growth and balancing growth and profitability. Lori, why don't you give a little bit about the policy growth on the private passenger auto side, and then Jim, why don't you add in some on retention?
Sure. Josh, as your question implies, September was a softer month. The month-over-month decline in auto PIFs was driven primarily by new direct applications, which follows historical seasonality that includes a decline in the second half of the year. I would say these month-to-month variances may start to be more pronounced now that our growth rate is down from the historical highs that we've experienced over the last few years. Overall, competition is intense in both channels. Carriers are trading margin for growth with rate reductions, increased advertising, higher agent commissions. In direct, we're spending more too. Competition is driving up acquisition costs, but we're going to stay disciplined and only acquire customers within our targets. In the agency channel specifically, we're benefiting from some of the investments that we've made in agent compensation and incentives.
We are benefiting also from new relationships with independent agents and agency networks. Then there is the continual shift of business from captive to independent agency channel that is benefiting us as well. Conversions are up from a year ago, which is being led by direct, and so it tells us we remain competitive when shoppers come to us. Tricia put our growth into perspective. I think it is worth noting that the last industry reporting, which is for the second quarter, it reflects our growth of almost $800 million in premiums over the prior year, while our nine largest competitors lost $1.1 billion between them. So despite the competitive environment, we continue to outperform the industry. I would make no mistake about it, we are very focused on growth right now in both channels and with all of our products.
Thanks, Lori. As it relates to just general retention, I would point out that our current PLE comparison is to a period of unprecedented volatility, which drives changes in both mix and market condition. We believe our current level of PLE is simply reverting to a more normalized level. In that regard, we look at our new business conversion as a primary means to understand our competitiveness, and it is worth noting that that remains elevated across a comparison to recent years. As it relates to current retention efforts, we certainly have a playbook and tactics in play that help our customers maintain competitive rates on their policies. Lastly, I would leave you with, aside from our PLE performance, we also just gauge renewal acceptance. In any given month, we have data that would show that roughly 90% or greater of customers will accept their renewal offer.
I think I blew through commercial lines. I got excited to talk about private passenger, but commercial lines really contributed significantly on the growth in premium for sure, 9% net premium written growth, 5% PIF growth, and new business applications are up 11%, and retention looks good on both a trailing three and trailing 12. So we are excited about where we are at in commercial. We have taken a couple rate decreases in very specific segments where we had the margin to do so in the states to do so, and we feel very bullish about our growth opportunities on the commercial lines side.
Well, thank you. I will let other people ask questions. Appreciate all the answers.
Thanks, Josh.
Your next question comes from the line of Bob Huang with Morgan Stanley. Your line is open. Please go ahead.
Hi, good morning. Given the higher interest rate and investment yield, as you are thinking about rate filings, would regulators push back on any rate increases as ROE naturally drifts higher due to higher interest rate environment? Do you need to resubmit any rate filings due to the fact that investment yield is changing?
No, those two typically are bifurcated. That is very much on our investment side, and regulators look to make sure their rates are adequate and not excessive and actuarially justified.
Okay. Really appreciate that. Then, just given that the agentic environment is obviously being slowly introduced into the distribution system, do you see agentic AI or any type of automated shopping capabilities potentially change the lead gen world? Would that be something that impacts Progressive?
Yeah, I'll let Lori take a deeper dive on that, but here's how I would start that, Bob. I would say that we've had a strategic pillar, we've had four, but one specific one for a long time, and that is broad coverage. So, we are going to be where, when, and how customers want to shop and be serviced for their insurance. So, years ago, we started in the independent agent channel, and no one thought anyone would buy insurance over the internet. We saw that coming in 1995. We were out there selling auto on the internet. Then we've continued to evolve, whether it's our AutoQuote Explorer, BusinessQuote Explorer, HomeQuote Explorer. We feel the same way about agentic, and we're doing a lot of testing internally as well, but we see the same way.
If that's how consumers want to shop, we will be there for them, and we will be there to make sure that they get what they need in the right way, the right coverage, et cetera. Lori, do you want to talk a little bit about what you're seeing since CRM falls under your purview?
Sure. Yeah, I mean, historically, when shopping increases, Progressive gains market share. Agentic shopping, as Tricia said, we believe creates the potential for elevated and sustained levels of shopping. So, that's why we see this as an opportunity. Tricia mentioned in her opening comments that the level of shopping that we're seeing today is really a fraction of our direct quote volume, but it's still very early. We're monitoring closely, and we're preparing, assuming that agentic shopping has the potential to become an important acquisition channel for us. So, we look at a number of factors when we analyze shopping behavior, and if or when is more likely customer behavior changes, our intent's going to remain to make Progressive easy to find, easy to quote, and easy to buy.
Your next question comes from the line of Gregory Peters with Raymond James. Your line is open. Please go ahead.
Good morning. I will just ask one question in two parts. I was looking at the letter, and you talked about the non-acquisition expense ratio improving. Then in your previous answer, you mentioned how commission, there might be some upward pressure on commission. I was wondering if you could just comment on those two variables, give some more color.
Yeah. We consider commission and acquisition expense. The non-acquisition expense are all other expenses, and those are just us getting more efficient, making sure as we roll out new technologies, we get more efficient. We look at a bunch of different internal data on that. As an example, our PIFs per FTE, per full-time equivalent, are up over 10%. We are excited about the efficiencies we are gaining as we see more technology solutions, more process solutions. Our non-acquisition expense ratio, we will always focus on. In fact, we have reduced that a half a point a year over the last 15 years, and we will continue to put pressure on that because we know that equates to giving more competitive rates in the system.
On the overall expense ratio, we will spend efficiently both on the direct side and the agent side to spur on growth, and that is where we will give commissions for business that we think is important. As an example, bundled, auto, home, et cetera, and that is really where that comes from. Thank you.
Thank you.
Your next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open. Please go ahead.
Hi, thanks. Good morning. My first question, I wanted to go back to just what you were talking about with September, and new business in direct, trending negatively. I think you guys mentioned that there was some seasonality in the back half of the year. How do we think about, I guess, the remaining months of Q3 and then into Q4 as you think about just the level of new business on direct and how that could triangulate into PIF on the personal auto side. I am not sure if you can give us a sense of how things have trended in October.
Yeah, I cannot give you anything that we have not published. We will obviously, and Lori said this, we will continue to push for growth, and we will spend while it is efficient. So, there is some seasonality to growth, which is sometimes people find unusual, but there is some seasonality. I will say that we have seen a lot of the direct competitors sort of get off the bench and start to be in the auction environment, which makes acquisition costs a little bit more competitive. Now, we will continue to push, again, as long as it is competitive. We have seen some competitors spend beyond what we would think we would spend for those policies, and so we are okay to lose in that for those policies because we are not going to buy business if we do not think it is economically prudent. So, I do not know how it will all turn out.
Obviously, I have an idea of October, but we're going to keep pushing the envelope, be efficient, and treat our customers the way they've come to expect.
My follow-up is on the advertising side because obviously, we've seen advertising continues to be up on a year-over-year basis. As you guys think about just the fourth quarter and you made comments on this call and just in the 10-Q about continuing to spend as long as it's efficient. How do you think we'll continue to see elevated ad spend through the fourth quarter and then into 2027 based on just your views of the overall current environment?
I think we'll just have to see how that plays out in terms of our efficiency. We keep very close tab on our cost per sale versus our targeted acquisition cost, and we always want to write to a 96 lifetime, so that's how we look at it. If we believe we can get growth and we believe it's efficient, we'll spend. If not, we'll pull back a little bit.
Your next question comes from the line of Mike Zaremski with BMO Capital Markets. Your line is open. Please go ahead.
Hey, thanks. Good morning. Could you, switching to the auto insurance loss cost environment, maybe you can kind of give us any updates on what you're thinking and seeing on the severity side of the equation. We're seeing, and I think your disclosed severity includes reserve movements, which have been great. Is anything changing on bodily injury or personal injury protection? We've seen some of the numbers move around in the Qs.
Yeah. Our severity is incurred, so it does include reserving. It's been fairly benign, right around 4%. I would say it's been sort of the same culprits as we've seen in the past in terms of medical costs, more attorney rep claims. I will say we did see an increase in severity on the PIP side, and that has been in the majority New York and then somewhat New Jersey based on the fact that they had very low PIP severity in Q3 2025. I'll let Andrew give a little bit more detail on that.
Yeah. On the severity side, as Tricia said, overall we feel as though the environment's benign. Our BI severity was a bit lower in the past quarter versus year to date. There's some things that impact that. We report incurred severity, not paid severity like some of our competitors. That does include some actuarial adjustments, closure rates, things like that. But within severity, injury is definitely what we're paying attention to. We look at the year-to-date number for BI, which is more like 6% severity trend, is a good indication of where things are going. PIP did stick out this quarter. When I think about PIP, I do think about the fact that it's different by state. There's some mix between states that's impacting the severity trend in the quarter. But the Northeast is a place where we do see some higher severity trends.
We called out New York in our 10-Q. Florida is a place, though, where we've seen the trends be more benign. It's a bit of a mixed bag on the PIP side. It depends on the state, and there's definitely some state mix contributions that are there. Overall, though, on severity, we feel pretty good. We're watching the injury side in particular.
Great. My follow-up, switching gears to personal property home insurance. You did a good job on the last call explaining to us how you're opening up your appetite. You talked about the new sales environment in the shareholder letter. Curious about the competitive environment there. Do you feel that you could grow meaningfully more on home and it can move the needle on auto as well, given the bundled nature? Or is it a very competitive environment that we should be kind of careful about accelerating the growth rate from here? Thanks.
Yeah, I'll open it up and then pass it over to Jim to give more details. We were excited about laying out what John and Lori did last quarter. In fact, Pat, Lori, Jim, and I had the privilege of meeting with some of our platinum, our top agents that sell auto home last week at an event and had a lot of conversations. They're getting very excited that we're more open for business and they want to do those bundles. I think the opportunity is one of our largest opportunities over the next couple of years. I'm excited about it. We're in such a different position, investing in people, processes. I wrote in my letter about our new claims training center out in Phoenix. We're super excited about having hands-on information and training for people that do the property claims.
We're very excited about where we're at. We're on target with our plan. We just want to make sure that we open it up and we don't swing the pendulum. Do you want to talk any more about it, Jim?
Yeah, sure. I would just reinforce that Robinsons continued to be a huge opportunity of growth for us. We would estimate that that segment alone is roughly 40% of the auto and home market. While it's probably a little too early to evaluate our efforts following on our progress in property, we're pleased with the results. We mentioned in the Q that our homeowner volume, new business volume was up 22%, and it really just reflects our increased availability and broadening acceptability. We're starting to see signs of that within our agency business on increased demand or increased quoting in Robinsons. When you start to see an increased demand, you'll see a natural downward pressure on conversion, but certainly within what we would talk about as our expected response. We continue to be bullish on the opportunity we have in both channels in Robinsons growth.
Thank you.
Your next question comes from the line of Andrew Andersen with Jefferies. Your line is open. Please go ahead.
Hey. Good morning. Following up on that last answer there. The agency auto Robinson quote volume seems relatively strong, but conversion and PIF are a bit lighter there. Could you talk about where customers are falling out of the funnel and how much of that reflects the total household proposition versus maybe just the competitiveness of the auto quote itself?
I think it's a lot, and Jim, weigh in, or actually any of you weigh in. I think a lot of it is sometimes timing of the auto and property quote and when we get those. We have a program that we're working with on agents to make sure that if they have the auto now and they haven't had the property, we sync those up. I think sometimes it's a timing thing. Sometimes it's a discount where some companies might have a deeper discount, sometimes we will. I think it's really timing. I think the overall point that Jim made was this is such an opportunity for us, and we will make sure that we are competitive while reaching our target profit margins.
We owe that to our customers, we owe that to our agent partners, and that's really been our approach for this really exceptional opportunity that is in front of us. Thank you.
Thanks. When you talk about the non-acquisition expense productivity gains, how do you view the permanent productivity gains versus maybe temporary leverage from prior years' pricing and premium growth? I guess, how sensitive do you find that non-acquisition expense ratio relative to NPE growth?
I mean, I think it's sensitive because it's a ratio, but I think over time, we've gone up and down, and we try to look at it obviously on a percentage basis, but we look at it on an absolute basis as well in terms of how we spend our money. Are we getting what we want? We're surgical about every technology project, every process project to make sure that it makes us more efficient, if that's the reason we're doing it. We have a three-year goal that we create every three years, or we're year two into it, that we present to the board on how we can continue to reduce expenses, because again, we want to have our prices competitive.
I'd just add in, Andrew, that the month-to-month, the NAER, the non-acquisition expense ratio, it can be somewhat volatile, but over the years, it has moved pretty steadily. The actions we're taking, we feel good that they're translating into lower costs that we can deliver to our customers, which means that we can have lower prices and gain more market share over time. So, I don't view these as a blip. I think we're on the right trajectory for long-term lower cost structure for the business.
Yeah, Andrew, I would only add the reason that we should have confidence is because both in claims and in our CRM organization, we're investing in technology that helps our customers self-serve easier, and we're seeing some pretty steep increases with customers' willingness to both shop, service, and start their claims process themselves and using the technology that we're investing in. There's real reason to believe that that's sustainable.
Your next question comes from the line of Tracy Benguigui with Wolfe Research. Your line is open. Please go ahead.
Thank you. No policyholder credit expense was booked in September versus last year. Does that signal no Florida excess profit return in 2027, or is that simply a change in your cadence of making these estimates? Relatedly, I'm just wondering how much of that $1.3 billion of year-to-date auto favorable reserve releases came from Florida?
Yeah. The reserve development, some came from Florida, but it diminished towards the last part of the year, or the second part of the year. We feel like we're in a good position in Florida from an excess, or lack thereof, perspective for 2027. I think the development was kind of across the board and in many different areas.
Yeah, I'd just add in, on the reserve side, personal auto BI has been a driver of our favorable reserve development. That's across the country. Florida has a contribution, but in general, it's been more BI across the country. On the Florida credit side, we have not changed our approach there. We evaluate that position every month. We do not believe that an accrual is necessary at this point. We'll monitor with each month, but we currently don't believe it's probable that we'll need credits or refunds for Florida. I think we've done a great job adjusting to the Florida environment. We've been able to lower rates for customers and continue to grow that business. We feel good about our Florida position.
Excellent. Also, about 63% of your year-to-date releases came from the 2025 accident year. I'm wondering how that plays into your 2026 loss picks.
Jim, you want to talk about that?
Yeah. What was the I missed the last part of that question.
How does the 63% came from the prior two years, 2025 and 2024, how does that go into our loss picks for 2027?
On the loss picks, I would just share that, for starters, we evaluate our rate adequacy or loss picks for 2027 at the state level and do so on an accident year basis. In many of the states, we enjoy the benefit of scale and the ability to look back on shorter durations to set rates. We would capture the reserve adequacy in the accident period for which it's realized and then evaluate with typical actuarial approach on rate adequacy.
Jim commented on the rate side, which is incredibly important to make sure we get the right rates out on the street. Tracy, on the reserve side, setting reserves for our financials, we have a fantastic actuarial team. They have been working hard to make sure we get our reserves correct. We do it every quarter, but certainly as we approach the end of the year, and so there's been a focus on that. We believe we have the right adequate reserves currently, and we will continue to strive to have minimal variation in those reserves as we set them at the end of the year.
Your next question comes from the line of David Motemaden with Evercore ISI. Your line is open. Please go ahead.
Hey, thanks. Good morning. Just another question just on agentic AI or AI agents. Tricia, you spoke about how, even though it's limited today, that you think that if agentic AI changes consumer shopping behavior, you guys are usually at the forefront of that change and capitalizing on that. Can you just talk about some of the things you're working on to be able to capitalize on this potential change in shopping behavior?
Yeah, David, we are working on a bunch of different things. We have a lot of different tests and pilots, and we're involved with many different vendors as we think about this, because we do believe it could absolutely change behavior, and we want to be out in front of it. I hesitate to share many details because I really want to do more than tell at this juncture, and that's why I tried to put a little bit of that in my opening comments. What I'll say is, when we have a more cogent, solid story to tell you the results of many of those tests, which we believe are very positive, we'll have another deep dive sometime in the future.
Okay. Thanks. Fair enough. For my second question, I'm wondering, there's been some press out there of some of your competitors who are more exclusive agent-focused, changing or potentially changing in the future some of their agent compensation structures. I'm just wondering if you're seeing any impact of that on shopping activity out there, particularly in the bundled market.
I don't think we've seen anything yet, and I hesitate to talk about what companies are doing, but we do believe that is an opportunity for us as more and more companies either sort of change their compensation or more actually flock to the independent agent channel, because we think that is a great channel for choice for customers, and we believe when there's more choices and more competition, we win.
Your next question comes from the line of Matthew Heimermann with Citi. Your line is open. Please go ahead.
Hi. Good morning. I guess I'd like to better understand some of the technical and legal challenges you think you need to tackle to allow customers to shop and buy with the assistance of agentic tools.
I think there's a lot, and that's why I think there's a lot to unfold and learn and understand, especially because this is a regulated industry. Consumers want to feel comfortable and good that they've picked the right coverages to protect them. They want to make sure it's at a fair price. There's a lot that goes into this. I think you captured it, Matthew. It's way more complex than just getting a rate for rate, because underneath all of the rates that we give, whether in the independent agent channel or the direct channel, there's a lot of variables, a lot of information, a lot of external information that we have to gather. There will be challenges, but that's not unlike challenges we see anytime something changes.
We'll be at the forefront, and we will make sure that whatever we do, we do it in the right way.
More to come there. I guess the follow-up question being, changing gears, there's litigation in some states. There's congressional investigations potentially on the horizons around claims handling practices in the industry. I'm curious on the property side in particular, given that's a capability that you've invested in and now own as opposed to outsource parts of, if there are any noticeable differences in kind of your approach and processes, and what informs those relative to competitors?
It's hard to say because I don't have their manuals of how they do things. I will tell you how we do, because this is sort of where I grew up. We are always going to do the right thing by our customer. If we're on a balance of what to do, we always go towards the customer. This is in the moment where they need us most, especially in likely their most expensive thing they'll ever own. That's one of the reasons why we invested, because we wanted our people there with our customers and making sure that they're spoken to with respect, that they're cared for, and that they know that they got what they paid for. So, that's why we're investing so much on the property side.
We're very proud of our claims service and have been proud for decades of how much we put into our training, and we're doing that, and that's exactly why we decided to do it on the property side. I really can't speak to the competition, though.
Your next question comes from the line of Paul Newsome with Piper Sandler. Your line is open. Please go ahead.
Good morning. I probably could write this answer for you, but I think it's worth asking. I think the big fear is that something that you've seen in the increased shopping behavior or the potential for AI changes your history of taking fairly small bites when you try to change prices. I mean, it's worth reiterating just your approach towards actual price changes and how we should think about the potential for you or your competitors taking pretty big changes in the future if the environment changes.
I think no matter what the environment, we are going to remain disciplined. People want stable rates. Customers want stable rates, and so we're going to do that. We have so much data that that's our competitive advantage. Our biggest competitive advantage, I believe, with prices is our industry-leading segmentation, including our UBI, our Snapshot. So, it'll be a different way with which customers want to shop possibly, but we're going to keep our discipline, because I'm not going to swing the pendulum. We will always work towards our target profit margins that we set.
I'd just add on that, Progressive, we have a history of competing in different shopping environments. An example is in the independent agent channel, where with some agents, we're shopped on a comparative rater against many other brands, and we believe we compete very effectively there. In the direct channel, often people come directly to Progressive and get one quote. Sometimes, though, we offer them quotes of other companies. We've had a history of being able to both engage one-on-one with customers when they're getting a single quote, but also engage in a competitive environment with many quotes. That makes us confident that as the environment changes, we can remain nimble and respond to it effectively.
Yeah, I guess one of the things I would-
Great. Thanks.
challenge-
Appreciate the help.
Hold on. Pat's going to add something real quick.
Yeah, just a quick, you mentioned a step change in kind of rating. Unless there's a massive change in acquisition costs, I think our ability to leverage our scale, leverage our data, and actually revise rates more frequently and with a smaller magnitude is essential to winning with more frequent shopping that potentially is automated or done by an agent. I just challenge your proposition that big changes may come out of this. I think it's the carriers who are equipped to more precisely and more rapidly adjust rates on a small basis to ensure, as the machines shop more often, that you've got your best, most competitive, most accurate rate out on the street almost continuously.
Appreciate that. That's all I want to ask. Thank you for the help.
Thank you.
Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.
Yeah, thanks. For my first question, just curious, Commercial Lines for the quarter, if I look at your, we'll call it combined ratio or loss ratio ex-reserving, it's kind of mid-95 or mid-90s combined ratios. Is there something unusual that happened this quarter that really caused it to pop up, or is this kind of a new level that we should expect?
No, I don't think you should necessarily expect it as a new level. August, there was some combined ratios up due to some higher reserving. In September, we would call it as a month of just some elevated, it's typically elevated in terms of volatility. We're watching those closely, but obviously, we're still sub-93 for the quarter, so we feel good about it. But no, I don't think you'd necessarily have that as the new normal, because those two months were a little bit volatile based on different things.
Makes sense. Thanks. Then second question, just pivoting over to personal auto. Claims frequency trends continue to be quite favorable for you all, and I think the industry. I'm just curious, are you factoring in, call it this favorable claims frequency we've seen for at least the last couple years, into pricing right now? Is maybe there a new outlook that y'all have, or your long-term outlook on frequency may be changing given what's going on with ADAS technology and all that stuff for cars?
Yeah. We look at all the technology, and we can talk about the pricing. I'll have Jim talk about the pricing. What we're seeing and what we're watching probably more closely is driving behavior, and driving is still down about 3%, and not sure if that's the new normal. We're seeing a lot of the driving on non-commute miles, like travel miles, which have less frequency. We'll watch those to see if those persist, as we think about pricing.
Yeah, and I would just reiterate a point I made in an earlier reply, that when we think about rate adequacy and specifically future trends, we do so at the state level. So we'll pick up variation across jurisdiction or market. While frequency is a portion of what we evaluate when we think about future inflation, there's also certainly correlations and offsets with severity and our mix of business. So, we'll factor in all 3, understand if we see a drop in frequency, but as illustratively, it's a function of technology and there's an offsetting increase in severity, we'll pick that up and then basically look to see with some degree of reasonable accuracy what we think our best estimate is of future overall loss costs.
Thanks, Jim. Thanks, Brian.
Your next question comes from the line of Alex Scott with Barclays. Your line is open. Please go ahead.
Hey, good morning. Wanted to ask on capital deployment and maybe just remind us your priorities, particularly as we're heading into the end of the year when sometimes you've done a special dividend.
Yeah, I'll have Andrew take that. I'll have him talk, like you said, about how we think about capital and how we think about excess capital.
Yeah, Alex. I will start by just reiterating our three layers of capital that we think about at Progressive. The first layer is regulatory capital. This is the required capital from our regulators, and here an important metric we think about is our premium to surplus ratio. I will remind you that two of our regulators have allowed us, provided clearance to move personal auto to a 3.5 to 1, which is a higher level of operating leverage than we have had historically in those jurisdictions for personal auto. Other environments and other products have different levels, different thresholds for that same premium to surplus metric. But that first layer is about regulatory capital. The second layer is our contingent capital.
There, we try to think about one in 200-year events and the impact on our balance sheet and make sure that we have enough capital to withstand those events. Above that is what we consider to be additional or excess capital, and that is where I think both internally and externally we are focused on, is what that looks like and what we should be thinking about there. We have had a strong year of profitable execution, and that has resulted in really strong capital generation. With the capital we generate, our most important use of funds is to fund our core business, which we have grown by $3.5 billion in net written premium so far in 2026. Beyond funding business growth, we take a disciplined approach to that additional capital layer. We try to optimize our balance sheet and maximize shareholder returns.
We talked about this in the March investor call, and we look at really three options for that additional capital. The first one is share repurchase. In 2026, we already repurchased $1.6 billion in stock, which is about $1.5 billion more than we repurchased last year. We still have a quarter left in the year, and so it could certainly go up. While our strong profitability metrics are similar to last year, we have spent considerably more capital on share repurchases than we did last year. The second bucket of options we look at are around strategic options. We will continue to evaluate strategic options available to our operating business or in our investment portfolio that may require capital. Our final bucket is dividends.
Finally, our board will consider declaring a variable dividend while also taking account the financial flexibility that we want to have as a company. The decision there depends on our other options and opportunities. Dividends are just one aspect of the larger conversation around capital, and we continue to iterate through those three options for additional capital to optimize our balance sheet and maximize shareholder value. We will continue to do that as we go towards the end of the year, and our board will make a decision on the dividends later in the year.
Thanks, Andrew.
Thanks. That's all I have.
Thanks, Alex.
Your next question comes from the line of Meyer Shields with Keefe, Bruyette & Woods. Your line is open. Please go ahead.
Great. Thanks so much, and good morning. Tricia, your letter mentioned entering California with a BOP product. I was hoping you could update us on where you are in small commercial in terms of growing as fast as possible.
We're in 47 states. California is exciting because it has so many small businesses. It's obviously very new, so we don't have a lot of data on that. We are on track with our plan that Karen rolled out some years ago in terms of increasing. I believe we are continuing to evolve that plan because we think there's even more opportunity. So, that's another one of those areas, like I talked about property, that I believe in the next several years we have a lot of runway to grow. I'm very excited about it.
Okay, thanks. Unrelated follow-up, I guess. If we assume that there's a lot more shopping and maybe lower conversion rates in an agentic AI world, are there any expenses associated with issuing quotes that require a shift in business model? I'm thinking, like, paying for credit scores, but I don't know if there's a more broad issue.
Yeah, I'm sure there will be. I don't know that we're at that point yet. I mean, I think from a conversion perspective, we're excited about that. I'm not sure if I'm answering your question, but yeah, there will be expenses related to information we need to accurately quote, but there'll be expenses or savings related to things being more from an agentic perspective.
The only thing I would add is that, I mean, we feel generally if shopping increases, that benefits Progressive because that means more consumers are going to see the competitive rates that we have available. So, we'll continue to watch that, but that's not one of the primary things that we're looking at right now.
Okay, thank you.
Your next question comes from the line of Yaron Kinar with Mizuho. Your line is open. Please go ahead.
Thank you. Good morning. So, on your comment regarding advertising to maximize growth as long as that spend remains efficient, are there changes to advertising channels that you're prioritizing when considering normalizing retention?
Yeah, I mean, we look at that all the time to see what the efficiency is both on a monetary basis and a conversion basis, and we look also what competitors are doing. As an example, I talked a little bit about not spending in channels where it's not economically viable or prudent for us. We don't do that across the board, whether it's agency or direct. Yeah, our story is basically, we buy a lot of our media internally. We think that's one of our secret sauces. We understand the conversion rate from where we're advertising. We'll keep trying to capitalize on that, given our large budget.
Maybe just one addition there. In addition to optimizing around the conversion, we optimize around the lifetime value of the customers that are coming in. To your question, retention's already part of that calculation, and as it changes by advertising channel, we're able to make sure that our lifetime values reflect any dynamics there.
Thanks. That's very helpful. For my second question, if I could shift gears to the investment portfolio. As the company shifts that portfolio to take on a bit more risk, per comments you made, I think, in previous calls. What's the capital impact from this? I guess what I'm trying to get at is, does it potentially lower your investment leverage, or can it become a headwind to your move to extend premium and surplus to 3.5 x?
I'll have Andrew start with that, and maybe if you need Jonathan to weigh in on some more details, you could do that.
Yeah, I'll start, and then John can add on. Our regulatory capital layer, I talked about the three capital layers in the previous question. The first layer was regulatory capital. For that, as we go through the calculations with our regulators around RBC and IRIS ratios, certainly our investment mix has an impact there. We mostly talk about premium and surplus because that is an IRIS ratio that is most impactful on the amount of capital we need to hold in the regulatory layer, but investments do play a role there. Secondly, when we calculate contingent capital layers, we also include our investment mix there and make sure that, as we think about a one in 200-year event, it's reflective of our investments. To your question, yes, investments impact both of those.
That being said, they are not driving major changes today, and it doesn't hold us back from doing what we think is right from a shareholder value perspective. We do consider the impact on capital when we're making investment choices, but it is not a huge driver today of our investment selection. Jonathan Bauer, I don't know if you want to add on anything there.
Yeah, thanks. The only thing that I would just echo in terms of what Andrew's saying is, the leadership team at Progressive, be it on the investment side, CFO, CEO, with Andrew and Tricia, we are always talking about the best way that we could drive long-term shareholder value. You can be assured when we think about investment risk that we would take now or in the future, it would only be decided in the realm of, this is the right use of capital that would drive overall shareholder returns for Progressive. We are all very much focused on how do we have the return on equity and the growth that we're looking for to drive the business forward.
It's a great question, and those conversations are always had, be it any of the realms that Andrew talked about in terms of use of capital for share repurchase, dividends, or strategic or investment risk. Those are all the questions we're asking ourselves, and our focus is on driving long-term shareholder value.
Your next question comes from the line of Pablo Singzon with JP Morgan. Your line is open. Please go ahead.
Hi, good morning. Combined ratios in the homeowners book have been very good for some time already, with or without catastrophes. Do you think that goes up the more you push into the bundled market? If you have a 96% target for personal auto, do you have a similar target in mind for homeowners?
Yeah, we don't actually share our individual targets for different products, and we are pleased with the combined ratios that we have been enjoying. However, we do want to grow, so that could push it up a little bit, and obviously catastrophes are a part of it, and we have those typically baked in on a low, but it's been a very low cat year. I mean, we're going to grow as fast as we can, and the 70s combined ratio probably isn't long-term strategic if we want to grow. We'll definitely, in the aggregate, be at or below 96.
I would just add, as it relates to our calendar year performance, we are still getting some measure of tailwind on the rate action we've taken over the past couple years. Just a reminder that we sell annual policies, so that tailwind will persist longer relative to what we would experience in auto.
This concludes the Q&A session, and this concludes today's call. Thank you for attending. You may now disconnect.