Progressive Corporation

Human capital and workforce · Key personnel dependence and succession

Our success depends on our ability to attract, develop, compensate, motivate, and retain talented employees, including executives, other key managers, and employees with strong technical, analytical, and other skills and know-how necessary for us to run our insurance businesses.

Corporate governance · Internal controls and risk management

We have policies and procedures in place to promote ethical conduct and compliance with law by our employees, but these policies and procedures may not be fully effective. As a result, we could be exposed to financial loss, disruption of business, litigation, and regulatory assessments.

Corporate governance · Ethics and compliance culture

Misconduct or fraudulent acts by employees, agents, and third parties may expose us to financial loss, disruption of business, and/or regulatory assessments. Our company and the insurance industry are inherently susceptible to past and future misconduct or fraudulent activities by employees, agents, vendors, customers, and other third parties.

Reputation and brand · Brand damage and negative publicity

We must maintain a brand and reputation that is recognized and trusted by consumers. Our brand and reputation also could be adversely affected by situations that reflect negatively on us, whether due to our business practices, adverse financial developments, perceptions of our corporate governance, perceptions of our purpose-driven brand, how we address employee matters and concerns, our approach to environmental and social (Sustainability) and corporate responsibility matters.

Market position and competition · Pricing pressure and margin compression

Historically, the auto and property insurance markets have been described as cyclical, with periods of relatively strong profitability being followed by increased pricing competition among insurers. This price competition, which is sometimes referred to as a 'soft market,' can adversely affect revenue and profitability levels.

Customer and revenue · Changing customer preferences and behavior

Technological and societal changes may lead to changes in customers' preferences as to how they want to interact with us. In addition, innovations by competitors or other market participants may increase the level of competition in the industry.

Customer and revenue · Customer concentration and key customer dependence

Additionally, our Commercial Lines business may be adversely affected by a loss of or reduction in geographic coverage from one or more customers, including transportation network company customers.

Market position and competition · Disruptive competitors and new market entrants

Other companies, potentially including existing insurance companies, vehicle manufacturing companies, 'insurtech' companies, and other well-financed companies seeking new opportunities, or new competitors with technological or other innovations, also have entered these markets and may continue to do so in the future.

Credit and liquidity · Liquidity and cash flow constraints

The inability to access our cash accounts or to convert investments into cash on favorable terms when we desire to do so may materially and adversely affect our business, cash flows, and capital position. We rely on our ability to access our cash accounts at banks and other financial institutions to operate our business.

Credit and liquidity · Credit risk and customer defaults

Our financial condition may be adversely affected if one or more parties with which we enter into significant contracts or transact business (including under certain government programs) become insolvent, experience other financial difficulties, or default in the performance of contractual or reimbursement obligations.

Market and investment · Market volatility and economic cycles

Historically, the auto and property insurance markets have been described as cyclical, with periods of relatively strong profitability being followed by increased pricing competition among insurers. The ability to discern at any point in time whether we are in a 'hard' or 'soft' market is often difficult.

Market and investment · Investment portfolio performance

If the fixed-income or equity portfolios, or both, were to suffer a substantial decrease in value, our financial position, and results of operations could be materially adversely affected. Under these circumstances, our income from these investments could be materially reduced, and declines in the value of our securities could further reduce our reported earnings and capital levels.

Capital structure and performance · Dividend policy and capital allocation

Our dividend policy likely will result in varying amounts being paid to our common shareholders, or no payment in some periods, and the dividend policy ultimately may be changed in the discretion of the Board of Directors. The frequency and amount of dividends, if any, may vary, perhaps significantly, from the amounts paid in preceding periods.

Natural and catastrophic events · Climate change and environmental impact

Moreover, climate change may be contributing to the increase in frequency of severe weather events and other natural disasters, how long they last, and how much insured damage they cause, and may change where the events occur.

Social and demographic · Stakeholder activism and pressure

The negative impacts of these or other events may be aggravated as consumers, regulators, and other stakeholders increase or change their expectations, or adopt conflicting expectations, regarding the conduct of large public companies, sustainability and corporate responsibility efforts, programs, and initiatives, and corporate governance and Sustainability standards.

Natural and catastrophic events · Pandemic and public health crises

Our business and results of operations could be adversely affected by epidemics, pandemics, or other widespread health risks. An epidemic, pandemic, or other widespread health risk could exacerbate the impacts of many of the other risk factors described above and adversely affect our business.

Industry regulation · Capital and liquidity requirements

Our insurance subsidiaries may be limited in the amount of dividends that they can pay, which in turn may limit our ability to repay indebtedness, make capital contributions to other subsidiaries or affiliates, pay dividends to shareholders, repurchase securities, or meet other obligations. Insurance regulatory authorities require insurance companies to maintain specified minimum levels of statutory capital and surplus.

Data and privacy · Data protection and privacy laws

Data privacy and security laws and regulations impose complex compliance and reporting requirements and challenges. Various jurisdictions have enacted or are considering privacy and security legislation or regulations. Each jurisdiction's unique requirements, and the variations across the jurisdictions, present further ongoing compliance challenges.

Digital transformation and innovation · Technology implementation and upgrades

Ongoing competitive, technological, regulatory, informational, and other developments result in significant levels of complexity in our products and in the systems and processes we use to run our businesses. Complexity and legacy systems may, among other potential difficulties, create barriers to innovation or the provision of high-quality products and customer and agent experiences with the speed and agility that may be required; require us to modify our business practices, adopt new software, systems or technology, or replace outdated software, systems or technology.

Technology infrastructure · Cloud services and data center operations

Our increasing reliance on third-party systems including 'cloud computing' environments and software as a service applications. Complexity and legacy systems may, among other potential difficulties, create barriers to innovation or the provision of high-quality products and customer and agent experiences.