Best Affirms Progressive and Subs ‘A+’ Ratings; Outlook Stable

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa” of the Progressive Agency Pool, Progressive Direct Pool and Progressive Commercial Auto Group (collectively known as Progressive) and their respective members.

Best also affirmed the FSR of ‘A’ (Excellent) and ICR of “a+” of National Continental Insurance Company, as well as the ICR of “a” and all debt ratings of the parent holding company, The Progressive Corporation.

The outlook for all of the ratings is stable. All the companies are headquartered in Mayfield Village, Ohio.

The ratings reflect Progressive’s “solid capitalization, strong operating performance and sustainable competitive advantages,” said Best. “Progressive’s capitalization has benefitted from sustained underwriting profitability and a rebound in its investment portfolio since 2008.

“Progressive continues to benefit from an innovative management team, brand name recognition, a multiple channel distribution platform and innovative underwriting and claims handling technology. In addition, Progressive’s direct operations have exhibited favorable growth, reflective of improved brand recognition.

As partial offsetting factors, Best cited Progressive’s “high underwriting leverage relative to industry averages. In addition, although financial leverage at the holding company improved in 2010, financial leverage remains higher than 2006 and prior years.” However, Best also noted that Progressive has historically operated with elevated underwriting leverage, and debt-to-adjusted capitalization remains within its expectations.”

Best summarized the companies included in the ratings announcement as follows:
The FSR of ‘A+’ (Superior) and ICRs of “aa” have been affirmed for the Progressive Agency Pool and its following members:
• Progressive Casualty Insurance Company
• Progressive Northern Insurance Company
• Progressive Northwestern Insurance Company
• Progressive Specialty Insurance Company
• Progressive Preferred Insurance Company
• Progressive Classic Insurance Company
• Progressive American Insurance Company
• Progressive Gulf Insurance Company
• Progressive Bayside Insurance Company
• Progressive Mountain Insurance Company
• Progressive Southeastern Insurance Company
• Progressive Hawaii Insurance Corp.
• Progressive Michigan Insurance Company
• Progressive Security Insurance Company
• Progressive West Insurance Company
• Drive New Jersey Insurance Company
• Progressive County Mutual Insurance Company

The FSR of ‘A+’ (Superior) and ICRs of “aa” have been affirmed for the Progressive Direct Pool and its following members:
• Progressive Direct Insurance Company
• Progressive Marathon Insurance Company
• Progressive Max Insurance Company
• Progressive Advanced Insurance Company
• Progressive Universal Insurance Company
• Progressive Premier Insurance Company of Illinois
• Progressive Paloverde Insurance Company
• Mountain Laurel Assurance Company
• Progressive Choice Insurance Company
• Progressive Select Insurance Company
• Progressive Freedom Insurance Company
• Progressive Garden State Insurance Company

The FSR of ‘A+’ (Superior) and ICRs of “aa” have been affirmed for the Progressive Commercial Auto Group and its following members:
• Artisan & Truckers Casualty Company
• Progressive Express Insurance Company
• United Financial Casualty Company

The following debt ratings have been affirmed:
The Progressive Corporation—
— “a” on $350 million 6.375 percent senior unsecured notes, due 2012
— “a” on $150 million 7.000 percent senior unsecured notes, due 2013
— “a” on $300 million 6.625 percent senior unsecured notes, due 2029
— “a” on $400 million 6.250 percent senior unsecured notes, due 2032
— “bbb+” on $1 billion 6.7 percent junior subordinated debentures, due 2067 (of which $777.1 million remains outstanding

Source: A.M. Best