Fitch Affirms Progressive’s Ratings; Outlook Stable

Fitch Ratings has affirmed the ‘AA-‘ Issuer Default Rating (IDR) and ‘A+’ senior debt ratings of The Progressive Corporation (Progressive, NYSE: PGR). Fitch has also affirmed the ‘AA+’ Insurer Financial Strength (IFS) rating of Progressive’s operating subsidiaries. Refer to the rating list below for all ratings. The Rating Outlook for all ratings is Stable.

The ratings and Rating Outlook reflect Progressive’s excellent operating performance; pricing and underwriting expertise; personal auto insurance franchise; modest catastrophe risk; conservative investment allocation and strong capital position. Progressive’s overall GAAP combined ratios for nine months ended Sept. 30, 2007 and 2006 were 91.8% and 86.4%, respectively.

Progressive’s strong capital position is highlighted in Fitch’s new stochastic economic capital model, Prism, where the company’s Prism score is 215% of the ‘AAA’ level of capital for year-end 2006. Fitch has also vetted Progressive’s internal capital model and views Progressive as one of the industry leader’s in risk management.

Conversely, the ratings also reflect Progressive’s declining growth rate, limited product diversification, and modest reserve position. Progressive also employs a moderate amount of financial leverage. As of Sept. 30, 2007 the company had earnings based interest coverage of 18.4 times (x) and a debt-to-capital ratio of 29% but when equity adjusting the $1 billion hybrid 19%.

Fitch believes Progressive’s primary goal is the achievement of a 96% GAAP combined ratio. Thus, Fitch expects that Progressive’s premium growth rate will depend on its ability to achieve its profitability goal and that growth will moderate if competition in the auto insurance industry increases. Fitch also considers Progressive’s loss reserves to be adequate and expects that loss reserve development, if any, will generally be modest.

The Progressive Corporation is an insurance holding company based in Mayfield Village, OH. The company sells personal and commercial automobile insurance through independent agent and direct distribution channels.

Fitch has affirmed the following companies:

The following are members of Progressive Direct Holdings:

Mountain Laurel Assurance. Co.

Progressive Advanced Insurance Company

Progressive Choice Ins Co

Progressive Direct Insurance Co

Progressive Freedom Ins Co

Progressive Garden State Ins Co

Progressive Marathon Ins Co

Progressive MAX Ins Co

Progressive Paloverde Ins. Co.

Progressive Premier Ins. Co. of IL

Progressive Select Insurance Co.

Progressive Universal Ins. Co. of IL

–Insurer Financial Strength ‘AA+’/Stable Outlook.

The following are members of Drive Insurance Holdings:

Drive New Jersey Ins Co

Progressive American Ins. Co.

Progressive Bayside Ins. Co.

Progressive Casualty Ins. Co.

Progressive Classic Insurance Co

Progressive Gulf Ins. Co.

Progressive Hawaii Ins. Co.

Progressive Michigan Ins. Co.

Progressive Mountain Insurance Co

Progressive Northeastern Ins. Co.

Progressive Northern Ins. Co.

Progressive Northwestern Ins.

Progressive Preferred Ins. Co.

Progressive Security Ins. Co.

Progressive Southeastern Ins. Co.

Progressive Specialty Ins. Co.

Progressive West Ins. Co.

–Insurer Financial Strength ‘AA+’/Stable Outlook.

The following are members of Progressive Commercial Holdings:

Artisan & Truckers Casualty Co

Progressive Express Ins. Co.

United Financial Casualty Co

–Insurer Financial Strength ‘AA+’/Stable Outlook.

Fitch has affirmed the following ratings:

The Progressive Corporation

–Issuer Default Rating (IDR) ‘AA-‘/Stable Outlook;

–Senior debt ‘A+’/Stable Outlook;

–$347.7 million 6.375% due Jan. 15, 2012 ‘A+’/Stable Outlook;

–$148.9 million 7.0% due Oct. 1, 2013 ‘A+’/Stable Outlook;

–$294.1 million 6.625% due March 31, 2029 ‘A+’/Stable Outlook;

–$393.7 million 6.25% due Dec. 1, 2032 ‘A+’/Stable Outlook;

–Junior subordinate debentures ‘A’/Stable Outlook.

–$1 billion 6.70% due June 18, 2067 ‘A’/Stable Outlook.

The following ratings have been withdrawn:

Progressive County Mutual Ins Co.

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.