PROGRESSIVE CORP/OH/ 10-K (Annual Reports) 2009-02-25

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2008
or
® Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-9518
THE PROGRESSIVE CORPORATION

(Exact n am e of re gistran t as spe cifie d in its ch arte r)
Ohio 34-0963169
(State or oth e r jurisdiction (I.R.S . Em ploye r
incorporation or organ iz ation) Ide n tification No.)
6300 Wilson Mills Road, Mayfield Village, Ohio 44143

(Addre ss of prin cipal e xe cu tive office s) (Zip C ode )
(440) 461-5000
(Re gistran t’s te le ph on e n u m be r, inclu ding are a code )
Securities registered pursuant to Section 12(b) of the Act:
Title of e ach class Nam e of e ach e xch an ge on wh ich re giste re d

Common Shares, $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:

None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ® No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ® Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. x Yes ® No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ®
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large accelerated filer x Accelerated filer ®
Non-accelerated filer ® (Do not check if a smaller reporting company) Smaller reporting company ®
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ® Yes x No
The aggregate market value of the voting stock held by non-affiliates of the registrant at June 30, 2008: $11,621,202,821
The number of the registrant’s Common Shares, $1.00 par value, outstanding as of January 31, 2009: 676,728,335
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 24, 2009, and the Annual Report to
Shareholders for the year ended December 31, 2008, included as Exhibit 13 to this Form 10-K, are incorporated by reference in Parts I, II, III, and
IV hereof.
INTRODUCTION
Portions of the information included in The Progressive Corporation’s Proxy Statement for the Annual Meeting of Shareholders to be held on
April 24, 2009 (the “Proxy Statement”) have been incorporated by reference herein and are identified under the appropriate items in this Form
10-K. The 2008 Annual Report to Shareholders (the “Annual Report”) of The Progressive Corporation and subsidiaries, which will be attached
as an Appendix to the 2009 Proxy Statement, is included as Exhibit 13 to this Form 10-K. Cross references to relevant sections of the Annual
Report are included under the appropriate items of this Form 10-K.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
The Progressive insurance organization began business in 1937. The Progressive Corporation, an insurance holding company formed in 1965,
currently has 58 subsidiaries and 1 mutual insurance company affiliate. Progressive’s insurance subsidiaries and affiliate provide personal and
commercial automobile insurance and other specialty property-casualty insurance and related services throughout the United States. Our
property-casualty insurance products protect our customers against losses due to collision and physical damage to their motor vehicles and
uninsured and underinsured bodily injury, and liability to others for personal injury or property damage arising out of the use of those
vehicles. Our non-insurance subsidiaries generally support our insurance and investment operations.
(b) Financial Information About Segments

Incorporated by reference from Note 10 - Segment Information in our Annual Report, which is included as Exhibit 13 to this Form 10-K.
(c) Narrative Description of Business

We offer a number of personal and commercial property-casualty insurance products primarily related to motor vehicles. Net premiums written
were $13.6 billion in 2008, compared to $13.8 billion in 2007 and $14.1 billion in 2006. Our combined ratio, calculated in accordance with
accounting principles generally accepted in the United States of America (GAAP), was 94.6 in 2008, 92.6 in 2007, and 86.7 in 2006.
Organization
We write private passenger auto insurance and the majority of our special lines products in all 50 states; we began writing auto and boat
insurance in Massachusetts during 2008. We also write private passenger auto in the District of Columbia. We write commercial auto policies
in 49 states; we do not currently write commercial auto in Hawaii or the District of Columbia.
Auto insurance differs greatly by community because regulations and legal decisions vary by state and because, among other factors, traffic,
law enforcement, cultural attitudes, insurance agents, medical services, and auto repair services vary by community. To respond to these local
differences, we are organized as follows:
• Our Personal Lines product management group is organized by state into four geographic regions, led by a general manager for
each region for our private passenger auto products. The special lines product management group is organized by product and led
by a general manager.
• Our Commercial Auto business is organized by state with product managers responsible for local implementation. These state-level
managers are led by a general manager.
• Our Claims business area, which supports both the Personal Lines and Commercial Auto businesses, is organized into six
geographic regions, with a general manager responsible for each region.
• Our business area general managers each report to one of our Group Presidents (discussed below).
Our Direct sales and customer service groups, located at call centers in Mayfield Village, Ohio; Austin, Texas; Tampa, Florida; Sacramento,
California; Tempe, Arizona; and Colorado Springs, Colorado, support our underwriting and claims operations.
Our executive management team sets policy and makes key strategic decisions and includes the Chief Executive Officer, Chief Financial Officer,
Chief Legal Officer, Chief Investment Officer, Chief Marketing Officer, Chief Information Officer, and Chief Human Resource Officer, as well as
our three Group Presidents (Personal Lines, Commercial Lines, and Claims). The Group Presidents are responsible for the development and
management of our product offerings and customer service processes that are tailored to the unique characteristics and purchasing
preferences of customers who shop for and select our insurance products.
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Personal Lines
Our Personal Lines segment writes insurance for private passenger automobiles and recreational and other vehicles. This business generally
offers more than one program in a single state, with each program targeted to a specific distribution channel, market, or customer group. The
Personal Lines business accounted for approximately 87% of total net premiums written for each of the last three years. Our strategy is to be a
competitively priced provider of a full line of auto insurance products with superior service, distributed through whichever channel the
customer prefers.
We ranked fourth in industry market share for 2007 based on net premiums written and believe that we held that position for 2008. There are
approximately 360 competitors in the total private passenger auto market. Progressive and the other leading 15 private passenger auto insurers,
each of whom write over $2 billion of premiums, comprise about 75% of this market. For 2008, the estimated industry net premiums written for
personal auto insurance in the United States was $159.9 billion, and our share of this market was approximately 7.2%, compared to $159.1
billion and 7.3%, respectively, in 2007, and $160.2 billion and 7.4% in 2006. Except as otherwise noted, all industry data and our market share or
ranking in the industry either were derived directly from data reported by A.M. Best Company, Inc. (“A.M. Best”) or were estimated using
A.M. Best data as the primary source.
Private passenger automobile insurance represented approximately 90% of our total Personal Lines net premiums written for the last three
years. Volume potential is driven by our price competitiveness, brand recognition, service quality, and the actions of our competitors, among
other factors. See “Competitive Factors” on page 4 of this report for further discussion.
Our specialty Personal Lines products include insurance for motorcycles, recreational vehicles, mobile homes, watercraft, snowmobiles, and
similar items. Due to the nature of these products, we typically experience higher losses during the warmer weather months. Our competitors
are specialty companies and large multi-line insurance carriers. Although industry figures are not available, based on our analysis of this
market, we believe that we are one of the largest participants in the specialty personal lines market, and that we have been the market share
leader for the motorcycle product since 1998.
The Personal Lines business is generated either by independent agents and brokers or written directly online or by phone. The Agency
business includes business written by our network of more than 30,000 independent insurance agencies located throughout the United States,
as well as brokerages in New York and California. These independent insurance agents and brokers have the ability to place business with
Progressive for specified insurance coverages within prescribed underwriting guidelines, subject to compliance with company-mandated
procedures. Our guidelines prescribe the kinds and amounts of coverage that may be written and the premium rates that may be charged for
specified categories of risk. The agents and brokers do not have authority on behalf of Progressive to establish underwriting guidelines,
develop rates, settle or adjust claims, or enter into other transactions or commitments. The Agency business also writes through strategic
alliance business relationships with other insurance companies, financial institutions, and national agencies. In 2008, the total net premiums
written through the Agency business represented 62% of our Personal Lines volume, compared to 63% in 2007 and 64% in 2006.
The Direct business includes business written directly by us online and over the phone. Net premiums written in the Direct business were
38%, 37%, and 36% of our Personal Lines volume in 2008, 2007, and 2006, respectively.
We also currently offer a personal umbrella insurance product in 24 states through certain independent agents and to Direct business
customers via telephone. We began offering this product in select markets in 2006 and have been expanding into additional markets as we
have evaluated and met certain performance criteria. We plan to continue the roll-out in both channels during 2009.
Progressive Home Advantage, our offering which combines a Progressive auto policy with a homeowner’s or renter’s policy underwritten by
Homesite Insurance, expanded in 2008. We provide this option to customers in 46 states for Direct buyers and in 33 states for Agency
customers. In 2009, we plan to make this offering available through additional agents.
Commercial Auto
The Commercial Auto business writes primary liability and physical damage insurance for automobiles and trucks owned by small businesses
and represented approximately 13% of our total net premiums written for each of the last three years. The majority of our Commercial Auto
customers insure three or fewer vehicles. The Commercial Auto business, which is primarily distributed through the independent agency
channel, operates in the specialty truck and business auto markets. The specialty truck commercial auto market, which accounts for slightly
more than half of our total Commercial Auto premiums and approximately 40% of the vehicles we insure in this business, includes dump trucks,
logging trucks, tow trucks, local cartage, and other short-haul commercial vehicles. The remainder is in the business auto market, which
includes autos, vans, and pick-up trucks used by artisans, such as contractors, landscapers, and plumbers, and a variety of other small
businesses. In 2007, we introduced cargo and general liability insurance in select markets, with further state expansion in 2008. Although
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the Commercial Auto business differs from Personal Lines auto in its customer bases and products written, both businesses require the same
fundamental skills, including disciplined underwriting and pricing, as well as excellent claims service. There are approximately 360 competitors
in the total commercial auto market. We primarily compete with 33 other large companies/groups, each with over $190 million of commercial
auto premiums written annually. These leading commercial auto insurers comprise about 75% of this market. Our Commercial Auto business
ranked third in the commercial auto insurance market for 2007, and we believe that we could rank third, or possibly fourth, for 2008.
Other Indemnity Businesses

Our other indemnity businesses, which represented less than 1% of our net premiums written in each of the last three years, primarily include
writing professional liability insurance for community banks, principally directors and officers liability insurance. We reinsure the majority of
the risk on these coverages with a small mutual reinsurer controlled by its bank customers and various other reinsurance entities. The program,
sponsored by the American Bankers Association, insures over 1,700 banks, representing every state. In addition, our other indemnity
businesses include managing our run-off businesses.
Service Businesses
Our service businesses provide insurance-related services and represented less than 1% of our revenues in each of the last three years. Our
principal service business is providing policy issuance and claims adjusting services for the Commercial Auto Insurance Procedures/Plans
(CAIP), which are state-supervised plans serving the involuntary market. The decrease in service business revenues reflects the continuing
cyclical downturn in the involuntary commercial auto market. We have previously competed with two other carriers for the majority of the
CAIP market. However, one of these other carriers ceased writing new business in the second quarter 2008, and the remaining carrier recently
announced that it will cease writing new business in early 2009. This will leave us as the largest CAIP provider countrywide. Although we
expect that our market share will be increasing, we may not realize an immediate effect to revenues as the cyclical downturn in the CAIP market
continues. In addition, we do not expect any increase in revenues to be material to our financial results. As a service provider, we collect fee
revenue that is earned on a pro rata basis over the term of the related policies. We cede 100% of the premiums and losses to the state plans.
Reimbursements to us from the CAIP plans are required by state laws and regulations. Material violations of contractual service standards can
result in ceding restrictions for the affected business. We have maintained, and plan to continue to maintain, compliance with these standards.
Any changes in our participation as a CAIP service provider would not materially affect our financial condition, results of operations, or cash
flows.
Claims
We manage our claims handling on a companywide basis through approximately 460 claims offices located throughout the United States. In
addition, we have in operation 54 centers, in 41 metropolitan areas across the country, that provide our concierge level claims service. These
facilities are designed to provide end-to-end resolution for auto physical damage losses. Customers can choose to bring their vehicles to one
of these sites, where they can pick up a rental vehicle. Our representatives will then write the estimate, select a qualified repair shop, arrange
the repair, including pick up and delivery of the vehicle, and inspect the vehicle once the repairs are complete. We received a U.S. patent in
2008 for this innovative approach to the vehicle repair process, which increases consumer satisfaction, increases our productivity, and
improves the cycle time and quality of repairs. Concierge level of claims service is our primary approach to damage assessment and
coordination of vehicle repairs at authorized auto repair facilities in these markets.
Competitive Factors
The automobile insurance and other property-casualty markets in which we operate are highly competitive. Property-casualty insurers
generally compete on the basis of price, consumer recognition, coverages offered and other product features, claims handling, financial
stability, customer service, and geographic coverage. Vigorous competition is provided by large, well-capitalized national companies, some of
which have broad distribution networks of employed or captive agents, and by smaller regional insurers. Over the last few years, comparative
rating services have gained prominence, adding transparency to industry pricing, and many of our competitors have significantly increased
their advertising and marketing efforts and/or expanded their online service offerings. These changes have further intensified the competitive
nature of the automobile and other property-casualty insurance markets.
We rely heavily on technology and extensive data gathering and analysis to segment markets and price accurately according to risk potential.
We have remained competitive by refining our risk measurement and price segmentation skills, closely managing expenses, and achieving
operating efficiencies. Superior customer service, fair and accurate claims adjusting, and strong brand recognition are also important factors in
our competitive strategy.
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State Insurance Licenses

Progressive’s insurance subsidiaries operate under licenses issued by various state insurance authorities. These licenses may be of perpetual
duration or renewable periodically, provided the holder continues to meet applicable regulatory requirements. Our licenses govern the kinds of
insurance coverages that may be written by our insurance subsidiaries in the issuing state. Such licenses are normally issued only after the
filing of an appropriate application and the satisfaction of prescribed criteria. All licenses that are material to the subsidiaries’ businesses are in
good standing.
Insurance Regulation
Progressive’s insurance subsidiaries are generally subject to regulation and supervision by insurance departments of the jurisdictions in
which they are domiciled or licensed to transact business. At least one of our insurance subsidiaries is licensed and subject to regulation in
each of the 50 states and the District of Columbia. The nature and extent of such regulation and supervision varies from jurisdiction to
jurisdiction. Generally, an insurance company is subject to a higher degree of regulation and supervision in its state of domicile. Progressive’s
insurance subsidiaries and its affiliate are domiciled in the states of Florida, Indiana, Louisiana, Michigan, New Jersey, New York, Ohio, Texas,
and Wisconsin. State insurance departments have broad administrative powers relating to licensing insurers and agents, regulating premium
changes and policy forms, establishing reserve requirements, regulating compliance with statutory accounting methods, and the content of
statutory financial reports, and regulating the type and amount of investments permitted. Rate regulation varies from “use and file,” to “file
and use,” to prior approval.
Insurance departments are charged with the responsibility of ensuring that insurance companies maintain adequate capital and surplus and
comply with a variety of operational standards. Insurance companies are generally required to file detailed annual and other reports with the
insurance department of each jurisdiction in which they conduct business. Insurance departments are authorized to make periodic and other
examinations of regulated insurers’ financial condition and operations to monitor financial stability of the insurers and to ensure adherence to
statutory accounting principles and compliance with state insurance laws and regulations.
Insurance holding company laws enacted in many jurisdictions grant to insurance authorities the power to regulate acquisitions of insurers
and certain other transactions and to require periodic disclosure of certain information. These laws impose prior approval requirements for
certain transactions between regulated insurers and their affiliates and generally regulate dividend and other distributions, including loans and
cash advances, between regulated insurers and their affiliates. See the “Dividends” discussion in Item 5(c) herein for further information on
these dividend limitations.
Under state insolvency and guaranty laws, regulated insurers can be assessed or required to contribute to state guaranty funds to cover
policyholder losses resulting from the insolvency of other insurers. Insurers are also required by many states, as a condition of doing
business in the state, to provide coverage to certain risks which are not insurable in the voluntary market. These “assigned risk” plans
generally specify the types of insurance and the level of coverage that must be offered to such involuntary risks, as well as the allowable
premium. Many states also have involuntary market plans which hire a limited number of servicing carriers to provide insurance to involuntary
risks. These plans, through assessments, pass underwriting and administrative expenses on to insurers that write voluntary coverages in
those states.
Insurance companies are generally required by insurance regulators to maintain sufficient surplus to support their writings. Although the ratio
of writings to surplus that the regulators will allow is a function of a number of factors (including applicable law, the type of business being
written, the adequacy of the insurer’s reserves, and the quality of the insurer’s assets), the annual net premiums that an insurer may write have
historically been perceived to be limited to a specified multiple of the insurer’s total policyholders’ surplus, generally 3 to 1. Thus, the amount
of an insurer’s surplus, in certain cases, may limit its ability to grow its business. At year-end 2008, the combined premiums to surplus ratio for
all Progressive insurance companies was 3.0 to 1; in addition, we have access to $1.0 billion in a non-insurance subsidiary, portions of which
could be contributed to the capital of our insurance subsidiaries to support growth as needed. The National Association of Insurance
Commissioners (NAIC) also has developed a risk-based capital (RBC) program to enable regulators to take appropriate and timely regulatory
actions relating to insurers that show signs of weak or deteriorating financial condition. RBC is a series of dynamic surplus-related formulas
that contain a variety of factors that are applied to financial balances based on the degree of certain risks, such as asset, credit, and
underwriting risks. Progressive’s RBC ratios are well in excess of minimum requirements.
Many states have laws and regulations that limit an insurer’s ability to exit a market. For example, certain states limit an automobile insurer’s
ability to cancel or non-renew policies. Certain states also prohibit an insurer from withdrawing one or more lines of business from the state,
except pursuant to a plan that is approved by the state insurance department. The state insurance department may disapprove a plan that may
lead to market disruption. Laws and regulations that limit the cancellation or non-renewal of policies, or that subject program withdrawals to
prior approval requirements, may restrict an insurer’s ability to exit unprofitable markets or businesses.
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Regulation of insurance constantly changes as real or perceived issues and developments arise. Some changes may be due to economic
developments, such as changes in investment laws made to recognize new investment products; other changes result from such general
pressures as consumer resistance to price increases and concerns relating to insurer rating and underwriting practices and solvency. In recent
years, legislation, regulatory measures, and voter initiatives have been introduced, and in some cases adopted, which deal with use of non-
public consumer information, use of financial responsibility, and credit information in underwriting, insurance rate development, rate of return
limitations, rate determination, and the ability of insurers to cancel or non-renew insurance policies, reflecting concerns about consumer
privacy, coverage, availability, prices, and alleged discriminatory pricing. In addition, from time to time, the United States Congress and certain
federal agencies investigate the current condition of the insurance industry to determine whether federal regulation is necessary.
In a number of states, Progressive’s insurance subsidiaries use financial responsibility or credit information (credit) as part of the underwriting
or rating process. This practice is expressly authorized by the federal Fair Credit Reporting Act, and our information demonstrates that credit is
an effective predictor of insurance risk. The use of credit in underwriting and rating is the subject of significant regulatory and legislative
activity. Regulators and legislators have expressed a number of concerns related to the use of credit, including: questions regarding the
accuracy of credit reports, perceptions that credit may have a disparate effect on the poor and certain minority groups, the perceived lack of a
demonstrated causal relationship between credit and insurance risk, the treatment of persons with limited or no credit, the impact on credit of
extraordinary life events (e.g., catastrophic injury or death of a spouse), and the credit attributes applied in the credit scoring models used by
insurers. A number of state insurance departments have issued bulletins, directives, or regulations to regulate the use of credit by insurers. In
addition, a number of states are considering or have passed legislation to regulate insurers’ use of credit. Also, at the direction of Congress,
the Federal Trade Commission studied the effects of the use of credit information on the availability and affordability of insurance and the
extent to which credit information impacted the availability and affordability of insurance by geography, income, ethnicity, and race. As a
result of this study, it is possible that Congress or one or more states may enact further legislation affecting the use of credit in underwriting
and rating.
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Statutory Accounting Principles

Our results are reported in accordance with GAAP, which differ in certain respects from amounts reported under statutory accounting
principles (SAP) prescribed by insurance regulatory authorities. Certain significant differences are described below:
C ate gory GAAP Accou n tin g S AP Accoun tin g

Acquisition Commissions, premium taxes, and other variable costs Commissions, premium taxes, and all other acquisition
Expenses incurred in connection with writing new and renewal expenses are expensed as incurred.
business are capitalized and amortized pro rata over the
policy term as premiums are earned.
Non-admitted Premium receivables are reported net of an allowance for Premium receivables over 90 days past due are “non-
Assets doubtful accounts. admitted,” which means they are excluded from surplus.
For premium receivables less than 90 days past due, we
also estimate a bad debt reserve.
Furniture, equipment, application software, leasehold Excluding computer equipment and operating software,
improvements, and prepaid expenses are capitalized and the value of all other furniture, equipment, application
amortized over their useful lives or periods benefited. software, leasehold improvements, and prepaid
expenses, net of accumulated depreciation or
amortization, is non-admitted against surplus. Computer
equipment and operating software are capitalized,
subject to statutory limitations based on surplus, and
depreciated over three years.
Deferred tax assets are recorded based on estimated future Deferred tax assets that do not meet certain statutory
tax effects attributable to temporary differences. A requirements for recognition are non-admitted against
valuation allowance would be recorded for any tax surplus.
benefits that are not expected to be realized.
Reinsurance Ceded reinsurance balances are shown as an asset on the Ceded unearned premiums are netted against the
balance sheet as “prepaid reinsurance premiums” and “unearned premiums” liability. Ceded unpaid loss and
“reinsurance recoverables.” loss adjustment expense (LAE) amounts are netted
against “loss and LAE reserves.” Only ceded paid loss
and LAE are shown as a “reinsurance recoverables”
asset.
Investment Fixed-maturity securities, which are classified as available- Fixed-maturity securities are reported at amortized cost
Valuation for-sale, are reported at current fair values. or the lower of amortized cost or fair value, depending on
the class of security.
Preferred stocks, both redeemable and nonredeemable, are Redeemable preferred stocks are reported at amortized
reported at quoted fair values. cost or the lower of amortized cost or fair value,
depending on the class of security. Nonredeemable
preferred stocks are reported at quoted fair value.
Federal Income Federal tax expense and tax liability or recoverable For income statement reporting, federal tax expense only
Taxes balances include current and deferred income taxes. includes the current tax provision. Deferred taxes are
posted to surplus. SAP deferred tax assets are subject to
certain limitations on admissibility.
Investments
Our approach to investment and capital management seeks to ensure that we have sufficient capital to support all of the insurance premiums
that we can profitably write. Our portfolio is invested primarily in short-term and intermediate-term, investment-grade fixed-income securities.
Our investment portfolio had a fair value of $13.0 billion at December 31, 2008, compared to $14.2 billion at December 31, 2007. Investment
income (loss) is affected by the variability of cash flows to or from the portfolio, shifts in the type and quality of investments in the portfolio,
changes in yield, and other factors. Investment income (loss), including net realized gains (losses) on securities, before expenses and taxes,
was $(807.4) million in 2008, compared to $787.1 million in 2007 and $638.1 million in 2006. For more detailed discussion, see Management’s
Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form
10-K.
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Employees
The number of employees, excluding temporary employees, at December 31, 2008, was 25,929, all of whom were employed by subsidiaries of
The Progressive Corporation.
Liability for Property-Casualty Losses and Loss Adjustment Expenses

The consolidated financial statements include the estimated liability for unpaid losses and loss adjustment expenses (LAE) of Progressive’s
insurance subsidiaries. Our objective is to ensure that total reserves (i.e., case reserves and incurred but not recorded reserves, or “IBNR”) are
adequate to cover all loss costs, while sustaining minimal variation from the time reserves are initially established until losses are fully
developed. The liabilities for losses and LAE are determined using actuarial and statistical procedures and represent undiscounted estimates
of the ultimate net cost of all unpaid losses and LAE incurred through December 31 of each year. These estimates are subject to the effect of
future trends on claims settlement, among other factors. These estimates are continually reviewed and adjusted as experience develops and
new information becomes known. Adjustments, if any, relating to accidents that occurred in prior years are reflected in the current results of
operations and are referred to as “development” of the prior year estimates. A detailed discussion of our loss reserving practices can be found
in our “Report on Loss Reserving Practices,” which was filed with the Securities and Exchange Commission (SEC) on Form 8-K on June 30,
2008, as well as in section “V. Critical Accounting Policies” of our Management’s Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K. The accompanying tables present information
concerning our property-casualty losses and LAE.
The following table provides a reconciliation of beginning and ending estimated liability balances for the last three years:
RECONCILIATION OF NET RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
(m illion s) 2008 2007 2006

Balance at January 1 $ 5,942.7 $5,725.0 $5,660.3
Less reinsurance recoverables on unpaid losses 287.5 361.4 347.2
Net balance at January 1 5,655.2 5,363.6 5,313.1
Incurred related to:
Current year 9,981.8 9,845.9 9,641.8
Prior years 33.2 80.3 (246.9)
Total incurred 10,015.0 9,926.2 9,394.9
Paid related to:
Current year 6,700.4 6,737.2 6,682.3
Prior years 3,036.9 2,897.4 2,662.1
Total paid 9,737.3 9,634.6 9,344.4
Net balance at December 31 5,932.9 5,655.2 5,363.6
Plus reinsurance recoverable on unpaid losses 244.5 287.5 361.4
Balance at December 31 $ 6,177.4 $5,942.7 $5,725.0
Our objective is to establish case and IBNR reserves that are adequate to cover all loss costs, while sustaining minimal variation from the date
that the reserves are initially established until losses are fully developed. Our reserves developed unfavorably in both 2008 and 2007,
compared to favorable development in 2006. Total development consists of net changes made by our actuarial department on prior accident
year reserves, based on regularly scheduled reviews, claims settling for more or less than reserved, emergence of unrecorded claims at rates
different than reserved, and changes in reserve estimates by claim representatives. In 2008, an increase in the number of late reported
Commercial Auto claims, and an increase in the estimated severity on these claims, was a primary contributor to the unfavorable development.
The unfavorable development in 2007 was due to the settlement of some large outstanding litigation, the number of large losses emerging from
prior accident years being more than anticipated, plus the result of reviews of large bodily injury and uninsured motorist claims. The favorable
development in 2006 reflected the recognition of lower severity for prior accident years than had been previously estimated.
In establishing loss reserves, we take into account projected changes in claim severity caused by anticipated inflation and a number of factors
that vary with the individual type of policies written. These severities are projected based on historical trends adjusted for anticipated changes
in underwriting standards, inflation, policy provisions, claims resolution practices, and general economic trends. These anticipated trends are
reconsidered periodically based on actual development and are modified if necessary.
We have not entered into any loss reserve transfers or similar transactions having a material effect on earnings or reserves.
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ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSES DEVELOPMENT

(millions)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
LIABILITY FOR UNPAID LOSSES
AND LAE - GROSS $2,188.6 $2,416.2 $2,986.4 $3,238.0 $3,813.0 $4,576.3 $5,285.6 $5,660.3 $5,725.0 $5,942.7 $6,177.4
LESS: REINSURANCE
RECOVERABLE ON UNPAID
LOSSES 242.8 216.0 201.1 168.3 180.9 229.9 337.1 347.2 361.4 287.5 244.5
LIABILITY FOR UNPAID LOSSES

AND LAE - NET1 1,945.8 2,200.2 2,785.3 3,069.7 3,632.1 4,346.4 4,948.5 5,313.1 5,363.6 5,655.2 5,932.9
PAID (CUMULATIVE) AS OF:
One year later 1,082.8 1,246.5 1,409.3 1,601.7 1,860.7 2,233.8 2,355.5 2,662.1 2,897.4 3,036.9
Two years later 1,487.9 1,738.5 2,047.2 2,290.7 2,688.9 3,148.1 3,430.6 3,931.0 4,240.4 —
Three years later 1,680.6 2,001.4 2,355.0 2,655.8 3,084.6 3,642.5 3,999.9 4,584.7 — —
Four years later 1,785.7 2,126.4 2,514.6 2,821.0 3,291.6 3,873.0 4,269.6 — — —
Five years later 1,836.4 2,191.4 2,586.3 2,910.2 3,381.7 3,977.1 — — — —
Six years later 1,865.3 2,225.5 2,631.2 2,945.7 3,416.7 — — — — —
Seven years later 1,883.4 2,248.1 2,647.3 2,959.6 — — — — — —
Eight years later 1,895.2 2,258.5 2,653.9 — — — — — — —
Nine years later 1,900.3 2,261.2 — — — — — — — —
Ten years later 1,900.9 — — — — — — — — —
LIABILITY RE-ESTIMATED AS OF:
One year later 1,916.0 2,276.0 2,686.3 3,073.2 3,576.0 4,237.3 4,592.6 5,066.2 5,443.9 5,688.4
Two years later 1,910.6 2,285.4 2,708.3 3,024.2 3,520.7 4,103.3 4,485.2 5,130.5 5,469.8 —
Four years later 1,908.2 2,272.3 2,666.9 2,982.7 3,457.8 4,070.0 4,471.0 — — —
Five years later 1,919.0 2,277.5 2,678.5 2,993.7 3,475.4 4,073.7 — — — —
Six years later 1,917.6 2,284.9 2,683.7 3,002.5 3,472.5 — — — — —
Nine years later 1,928.5 2,290.8 — — — — — — — —
Ten years later 1,927.2 — — — — — — — — —
NET CUMULATIVE
DEVELOPMENT:
FAVORABLE/(UNFAVORABLE) $ 18.6 $ (90.6) $ 96.7 $ 69.1 $ 159.6 $ 272.7 $ 477.5 $ 219.5 $ (106.2) $ (33.2)
PERCENTAGE2 1.0 (4.1) 3.5 2.3 4.4 6.3 9.6 4.1 (2.0) (.6)
RE-ESTIMATED LIABILITY FOR
UNPAID LOSSES AND LAE -
GROSS $2,170.9 $2,515.2 $2,892.4 $3,190.6 $3,715.6 $4,391.2 $4,860.2 $5,495.0 $5,853.6 $6,009.7
LESS: RE-ESTIMATED
REINSURANCE RECOVERABLE
ON UNPAID LOSSES 243.7 224.4 203.8 190.0 243.1 317.5 389.2 401.4 383.8 321.3
RE-ESTIMATED LIABILITY FOR

UNPAID LOSSES AND LAE - NET1 $1,927.2 $2,290.8 $2,688.6 $3,000.6 $3,472.5 $4,073.7 $4,471.0 $5,093.6 $5,469.8 $5,688.4
GROSS CUMULATIVE
DEVELOPMENT:
FAVORABLE/(UNFAVORABLE) $ 17.7 $ (99.0) $ 94.0 $ 47.4 $ 97.4 $ 185.1 $ 425.4 $ 165.3 $ (128.6) $ (67.0)
1
Represents loss and LAE reserves net of reinsurance recoverable on unpaid losses at the balance sheet date.
2
Cumulative development ÷ liability for unpaid losses and LAE - Net.
The above table presents the development of balance sheet liabilities for losses and LAE from 1998 through 2007. The top line of the table
shows the estimated liability for unpaid losses and LAE recorded at the balance sheet date for each of the indicated years for the property-
casualty insurance subsidiaries only. This liability represents the estimated amount of losses and LAE for claims that were unpaid at the
balance sheet date, including IBNR. The table also presents the re-estimated
9
liability for unpaid losses and LAE on a gross basis, with separate disclosure of the re-estimated reinsurance recoverable on unpaid losses.
The upper section of the table (labeled “Paid (Cumulative) as of:”) shows the cumulative amount paid with respect to the previously recorded
liability as of the end of each succeeding year. The lower portion of the table (labeled “Liability Re-estimated as of:”) shows the re-estimated
amount of the previously recorded liability based on experience as of the end of each succeeding year. The re-estimated amount is the sum of
the paid amounts above and the outstanding reserve for occurrences prior to the reserve date. The estimate is increased or decreased as more
information about the claims becomes known for individual years. For example, as of December 31, 2008, our insurance subsidiaries had paid
$2.26 billion of the currently estimated $2.29 billion of losses and LAE that had been unpaid at the end of 1999; thus, an estimated $29.6 million
of losses incurred through 1999 remain unpaid as of the current financial statement date.
The net cumulative development represents the aggregate change in the ultimate loss estimate over all prior years. For example, the 1998
liability has developed favorably by $18.6 million over ten years. That amount has been reflected in income over the ten years and had the
largest impact on the income in calendar year 1999. The effects on income during the past three years due to changes in estimates of the
liabilities for losses and LAE are shown in the reconciliation table on page 8 as the “prior years” contribution to incurred losses and LAE.
In evaluating this information, note that each cumulative development amount includes the effects of all changes in amounts during the
current year for prior periods. For example, the amount of the development related to losses settled in 2008, but incurred in 2005, will be
included in the cumulative development amount for years 2005, 2006, and 2007. Conditions and trends that have affected development of the
liability in the past may not necessarily occur in the future. Accordingly, it generally is not appropriate to extrapolate future development
based on this table.
From 1998 through 2001, while we experienced an increase in bodily injury severity, our developed reserves were within $100 million each year,
or 4%, of our original estimates. The bodily injury severity change was much lower than we expected between 2002 and 2005; thus, the reserve
run-off for these years was very favorable following the end of each year, or about 4% to 10% of our original carried amounts. During 2007 and
2008, the 2006 and 2007 year-end reserves experienced unfavorable development as higher than anticipated severity estimates were realized. In
2008, the estimated severity for the two most recent prior accident years (2007 and 2006) both increased less than 1.0% for personal auto and
increased 3.9% and 1.0%, respectively, for Commercial Auto. For older accident years, the changes in estimated severity were generally
downward.
Although the detail is not presented in the table on page 9, we also re-estimate the reinsurance recoverable on unpaid losses each year. The
top of the table shows the amount of reinsurance recoverable on unpaid losses that we had at the end of the calendar year, while the bottom
shows the reserves re-estimated based on development in subsequent years. For example, at December 31, 2007, we estimated our reinsurance
recoverable on unpaid losses to be $287.5 million. During 2008, these reserves developed unfavorably by $33.8 million, bringing the re-
estimated reinsurance recoverable on unpaid losses to $321.3 million, as shown at the bottom of the table.
The Analysis of Loss and Loss Adjustment Expenses Development table on page 9 is constructed from Schedule P, Part-1, from the
Consolidated Annual Statements of Progressive’s insurance subsidiaries, as filed with the state insurance departments.
(d) Financial Information About Geographic Areas.

Progressive operates throughout the United States.
(e) Available Information.

Our Web site is located at progressive.com. As soon as reasonably practicable, we make all documents that we file with, or furnish to, the SEC,
including our reports on Form 10-K, Form 10-Q, and Form 8-K, and any amendments to these reports, available free of charge via our Web site
at progressive.com/investors. These reports are also available on the SEC’s Web site: http://www.sec.gov.
10
ITEM 1A. RISK FACTORS

Progressive’s business involves various risks and uncertainties, certain of which are discussed in this section. Management divides these
risks into three broad categories in assessing how they may affect our ability to achieve our business objectives:
• Operating Risks are those stemming from external or internal events or circumstances that directly or indirectly may affect our
insurance operations.
• Investing Risks are uncertainties relating to the performance and preservation of our investment portfolios.
• Financing Risks generally relate to our ability to obtain capital, when necessary, to pay or otherwise perform our obligations,
including obligations under any debt instruments issued, and to earn the cost of equity capital.
Although we have organized risks generally according to these categories in the discussion below, it should be noted that many of the risks
may have ramifications in more than one category. For example, although presented as an Operating Risk below, state regulation of insurance
companies may also affect our investing and financing activities. Similarly, while setting insurance rates, establishing loss reserves and
adjusting claims are properly discussed as Operating Risks, errors in these disciplines may have an impact on the investing and financing
areas as well. The categories, therefore, should be viewed as a starting point for understanding the significant risks facing us and not as a
limitation on the potential impact of the matters being discussed.
This information should be considered carefully together with the other information contained in this report and in the other reports and
materials filed by us with the SEC, as well as news releases and other information publicly disseminated by us from time to time.
It should be noted that our business and that of other insurers may be adversely affected by a downturn in general economic conditions and
other forces beyond our control. Issues such as unemployment rates, sales of new vehicles, inflation or deflation, stock market valuations,
interest rates, consumer confidence and construction spending, among a host of other factors, will have a bearing on the amount of insurance
that is purchased by consumers and small businesses. In addition, other risks and uncertainties not presently known to us or that we currently
believe to be immaterial may also adversely affect our business. If any such risks or uncertainties, or any of the following risks or uncertainties,
develop into actual events, we could experience a materially adverse effect on our business, financial condition, cash flows or results of
operations. In that case, the market price of our common shares could decline materially.
I. Operating Risks
We compete in the automobile insurance and other property-casualty markets, which are highly competitive.
We face vigorous competition from large, well-capitalized national companies and smaller regional insurers. Other large national and
international insurance or financial services companies also may enter these markets in the future. Many of these companies have substantial
resources, experienced management and sophisticated marketing, underwriting and pricing strategies. Our business focuses on insurance for
personal automobiles and recreation vehicles and on commercial auto policies for small businesses. Competitors may offer consumers
combinations of auto policies and other insurance products or financial services that we do not offer. We could be adversely affected by the
failure to generate new business, or to retain a sufficient percentage of our current customers, as a result of competitors offering similar
insurance products at lower prices or offering bundled products or services and by other competitor initiatives. The automobile insurance
industry is a relatively mature industry, in which brand recognition, operational effectiveness (including, for example, rate and claim-paying
accuracy, customer experience, and application of information technology), pricing, and cost control are major competitive factors.
Historically, the auto insurance industry has been known as a cyclical industry, which has been defined by 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. Unexpected increases in the insurers’ underlying costs (such as vehicle repair
costs, medical costs and the expenses to resolve claims) can further decrease profits or result in underwriting losses. As the insurers recognize
this situation (which can occur at different times for different companies), the historical reaction has been for insurers to raise their rates
(sometimes referred to as a “hard market”) in an attempt to restore profit to acceptable levels. As more insurers react in this way, profit levels in
the industry may increase to a point where some insurers begin to lower their rates, starting the cycle over again. In the past, this cycle has
generally played out over a number of years. We cannot determine whether such cyclicality is currently impacting the auto insurance market,
nor can we predict whether it will do so in the future.
From time to time, we undertake strategic initiatives to maintain and improve our competitive position in auto insurance markets. Based on a
culture that encourages innovation, these strategies at times involve significant departures from our, and/or our competitors’, then-current or
historical modes of doing business, and these changes must be instituted in the context of a complicated regulatory environment. As such,
our innovations may entail a degree of complexity and risk that
11
makes their implementation a challenge, and our efforts may not ultimately achieve anticipated business goals. In addition, these initiatives
may disrupt our relationships with certain of our customers and producers (i.e., agents and brokers). Our ability to develop and implement
such strategic initiatives that are accepted and valued by our customers and create a sustainable advantage is critical, however, to maintaining
or enhancing our competitive position; if we fail to do so, our business could be materially adversely affected.
At the same time, innovations by competitors or other market participants may increase the level of competition in the industry. This can
include product, pricing or marketing innovations, new or improved services, technology advances, or new modes of doing business that
enhance the customer’s ability to shop and compare prices from multiple companies, among other initiatives. Our ability to react to such
advances and then navigate the new competitive environment is also important to our success.
We undertake distinctive advertising campaigns, and other efforts to improve brand recognition, generate new business and increase the
retention of our current customers. If these campaigns or efforts are unsuccessful or are less effective than those of competitors, our business
could be materially adversely affected. We believe that improving the effectiveness of our advertising campaigns relative to those of our
competitors is particularly important given the continuing high level of advertising and marketing efforts within the automobile insurance
market.
The highly competitive nature of the markets in which we compete could also result in the failure of one or more major competitors. In the
event of a failure of a major insurer, we could be adversely affected, as our company and other insurance companies may be required under
state-mandated plans to absorb the losses of the failed insurer, and we could be faced with an unexpected surge in new business from the
failed insurer’s former policyholders.
Our ability to attract, develop and retain talented employees, managers and executives, and to maintain appropriate staffing levels, is
critical to our success.
Our success depends on our ability to attract, develop and retain talented employees, including executives and other key managers. Our loss
of certain key officers and employees, or the failure to attract and develop talented new executives and managers with a variety of
backgrounds and experiences, could have a materially adverse effect on our business.
In addition, we must forecast volume and other factors in changing business environments (for multiple business units and in many
geographic markets) with reasonable accuracy and adjust our hiring programs and employment levels accordingly. Our failure to recognize the
need for such adjustments, or our failure or inability to react appropriately on a timely basis, could lead either to over-staffing (which would
adversely affect our cost structure) or under-staffing (impairing our ability to service our ongoing and new business) in one or more business
units or locations. In either such event, our financial results and customer relationships could be materially adversely affected.
We further believe that our success depends, in large part, on our ability to maintain and improve the staffing models and employee culture
that we have developed over the years. Our ability to do so may be impaired as a result of litigation against us, other judicial decisions,
legislation or regulations at the state or federal level or other factors in the employment marketplace. In such events, the productivity of certain
of our workers and the efficiency of our operations could be adversely affected, which could lead to an erosion of our operating performance
and margins.
The Progressive Corporation and its insurance subsidiaries are subject to a variety of complex federal and state laws and regulations.
Progressive’s insurance businesses operate in a highly regulated environment. Our insurance subsidiaries are subject to regulation and
supervision by state insurance departments in all 50 states and the District of Columbia, each of which has a unique and complex set of laws
and regulations. In addition, certain federal laws impose additional requirements on businesses, including insurers. Our insurance subsidiaries’
ability to comply with these laws and regulations at reasonable costs, and to obtain necessary regulatory action in a timely manner, is and will
continue to be critical to our success.
Certain states impose restrictions on, or require prior regulatory approval of, various actions by regulated insurers, which may adversely affect
our insurance subsidiaries’ ability to operate, innovate and obtain necessary rate adjustments in a timely manner. Our compliance efforts are
further complicated by changes in laws or regulations applicable to insurance companies, such as, in recent years, legislative and regulatory
initiatives concerning the use of nonpublic consumer information and related privacy issues, the use of credit scoring in underwriting and
efforts to freeze, set or roll back insurance premium rates or limit the rate of return that an insurance company may earn. Insurance laws and
regulations may limit our insurance subsidiaries’ ability to underwrite and price risks accurately, prevent our subsidiaries from obtaining timely
rate changes to recognize increased or decreased costs, restrict our subsidiaries’ ability to discontinue unprofitable businesses or exit
unprofitable markets, prevent insurers from terminating policies under certain circumstances or prescribe the form and content of certain
disclosures and notices to policyholders. In addition, laws in certain states mandate that insurance companies pay assessments arising in a
number of circumstances, including to pay claims upon the insolvency of
12
other insurance companies or to cover losses in state-provided insurance programs for high risk auto and homeowners coverages. Compliance
with insurance-related laws and regulations often results in increased costs, which can be substantial, to our insurance subsidiaries. These
costs, in turn, may adversely affect our profitability or our ability or desire to grow our business in the applicable jurisdictions.
In addition, the innovative strategies that we pursue in our efforts to compete may deviate from standard practices in the industry. These
innovations often involve significant complexity and, as a result, can be a challenge to implement, requiring us to effectively deploy our
management and other resources. This may create the potential for errors or inaccuracies in our implementation of the strategy. If we are
alleged to have damaged or otherwise disadvantaged consumers, competitors or other industry participants as a result, we could be subject to
regulatory or other official investigations and sanctions, as well as litigation from third parties.
The failure to comply with this complex variety of laws and regulations, or the alleged failure to so comply, by us or other companies in the
insurance, financial services or related industries, also could result in actions or investigations by regulators, state attorneys general or other
law enforcement officials. Such actions and investigations, and any determination that we have not complied with an applicable law or
regulation, could potentially lead to fines and penalties, adverse publicity and damage to our reputation in the marketplace, and in extreme
cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions. In addition, The Progressive Corporation and its
subsidiaries could face individual and class action lawsuits by its insureds and other parties for alleged violations of certain of these laws or
regulations.
New legislation or regulations may be adopted in the future which could adversely affect our operations or ability to write business profitably
in one or more states. In addition, from time to time, the United States Congress and certain federal agencies investigate the current condition
of the insurance industry to determine whether federal regulation is necessary. We are unable to predict whether any such laws will be enacted
and how and to what extent such laws and regulations would affect our businesses.
State insurance regulation may create risks and uncertainties for Progressive’s insurance subsidiaries in other ways as well. For further
information on these risks and uncertainties, see the “Insurance Regulation” discussion beginning on page 5 of this report.
Lawsuits challenging our business practices, and those of our competitors and other companies, are pending and more may be filed in the
future.
The Progressive Corporation and/or its subsidiaries are named as defendants in putative class action and other lawsuits challenging various
aspects of the subsidiaries’ business operations. Other such litigation may arise in the future concerning similar or other business practices.
These lawsuits include cases alleging damages as a result of our subsidiaries’ total loss evaluation methodology; use of credit in underwriting
and related requirements under the federal Fair Credit Reporting Act; methods used for evaluating and paying certain bodily injury, personal
injury protection and medical payment claims; other claims handling procedures; interpretations of the provisions of our insurance policies;
and policy implementation and renewal procedures, among other matters. From time to time, we also may be involved in litigation or other
disputes alleging that our subsidiaries’ business practices or systems violate the patent, trademark or other intellectual property rights of third
parties. Additional litigation may be filed against us concerning our employment-related practices, allegations of medical and attorney
malpractice and other general liability causes of action arising from our operations. In addition, lawsuits have been filed, and other lawsuits
may be filed in the future, against our competitors and other businesses, and although we are not a party to such litigation, the results of those
cases may create additional risks for, and/or impose additional costs and/or limitations on, our subsidiaries’ business operations.
Lawsuits against us often seek significant monetary damages. Moreover, as courts resolve individual or class action litigation in insurance or
related fields, a new layer of court-imposed regulation could emerge, resulting in material increases in our costs of doing business.
Litigation is inherently unpredictable. Except to the extent we have established reserves with respect to particular lawsuits that are currently
pending against us, we are unable to predict the effect, if any, that these pending or any future lawsuits may have on our business, operations,
profitability or financial condition. For further information on pending litigation, see Note 12—Litigation in our Annual Report, which is
included as Exhibit 13 to this Form 10-K.
Our success depends on our ability to underwrite risks accurately and to charge adequate rates to policyholders.
Our financial condition, cash flows and results of operations depend on our ability to underwrite and set rates accurately for a full spectrum of
risks. The role of the pricing function is to ensure that rates are adequate to generate sufficient premium to pay losses, loss adjustment
expenses, underwriting expenses and to earn a profit.
13
Pricing involves the acquisition and analysis of historical accident and loss data, and the projection of future accident trends, loss costs and
expenses, for each of our products in multiple risk tiers and many different markets. As a result, our ability to price accurately is subject to a
number of risks and uncertainties, including, without limitation:
• the availability of sufficient reliable data,
• uncertainties inherent in estimates and assumptions, generally,
• our ability to conduct a complete and accurate analysis of available data,
• our ability to timely recognize changes in trend and to predict both the severity and frequency of future losses with reasonable
accuracy,
• our ability to predict changes in certain operating expenses with reasonable accuracy,
• the development, selection and application of appropriate rating formulae or other pricing methodologies,
• our ability to innovate with new pricing strategies, and the success of those innovations,
• our ability to predict policyholder retention accurately,
• unanticipated court decisions, legislation or regulatory action,
• ongoing changes in our claim settlement practices,
• changing driving patterns,
• unexpected changes in the medical sector of the economy, including medical costs, and
• unanticipated changes in auto repair costs, auto parts prices and used car prices.
The realization of one or more of such risks may result in our pricing being based on inadequate or inaccurate data or inappropriate analyses,
assumptions or methodologies, and may cause us to estimate incorrectly future changes in the frequency or severity of claims. As a result, we
could underprice risks, which would negatively affect our underwriting profit margins, or we could overprice risks, which could reduce our
volume and competitiveness. In either event, our operating results, financial condition and cash flows could be materially adversely affected.
In addition, underpricing insurance policies over time could erode the capital position of one or more of our insurance subsidiaries,
constraining our ability to write new business.
Our success depends on our ability to establish accurate loss reserves and to adjust claims accurately.
Our financial statements include loss reserves, which represent our best estimate of the amounts that the subsidiaries ultimately will pay on
claims that have been incurred, and the related costs of adjusting those claims, as of the date of the financial statements. There is inherent
uncertainty in the process of establishing property and casualty loss reserves, which can arise from a number of factors, including:
• the availability of sufficient reliable data,
• the difficulty in predicting the rate and direction of changes in frequency and severity trends in multiple markets,
• unexpected changes in medical and auto repair costs,
• unanticipated changes in governing statutes and regulations,
• new or changing interpretations of insurance policy provisions by courts,
• inconsistent decisions in lawsuits regarding coverage and changing theories of liability,
• ongoing changes in our claim settlement practices,
• the accuracy of our estimates of the frequency or severity of claims that have been incurred but not reported as of the date of the
financial statements,
• the accuracy and adequacy of actuarial techniques and databases used in estimating loss reserves, and
• the accuracy of estimates of total loss and loss adjustment expenses as determined by our employees for different categories of
claims.
As a result of these and other risks and uncertainties, the ultimate paid losses and loss adjustment expenses may deviate, perhaps
substantially, from point-in-time estimates of such losses and expenses, as reflected in the loss reserves included in our financial statements.
Consequently, ultimate losses paid could materially exceed loss reserves and have a materially adverse effect on our results of operations,
liquidity or financial position. Further information on our loss reserves can be found in the “Liability for Property-Casualty Losses and Loss
Adjustment Expenses” discussion beginning on page 8 of this report, as well as our “Report on Loss Reserving Practices,” which was filed
with the SEC on Form 8-K on June 30, 2008.
Likewise, we must accurately evaluate and pay claims that are made under our policies. Many factors can affect our ability to pay claims
accurately, including the training, experience and skill of our claims representatives, the extent of and our ability to recognize fraudulent claims,
the claims organization’s culture and the effectiveness of our management, our ability to develop or select and implement appropriate
procedures, technologies and systems to support our claims functions and the success of our concierge-level claims services program. Our
failure to pay claims fairly and accurately could result in unanticipated costs to us, lead to material litigation, undermine customer goodwill and
our reputation in the marketplace and impair our brand image and, as a result, materially adversely affect our financial results, prospects and
liquidity.
14
Our financial performance may be materially adversely affected by severe weather conditions or other catastrophic losses.
Catastrophes can be caused by natural events, such as hurricanes, tornadoes, windstorms, earthquakes, hailstorms, severe winter weather and
fires, or other events, such as explosions, terrorist attacks, riots, hazardous material releases, medical epidemics, utility outages or interruptions
of communications facilities. The extent of insured losses from a catastrophe is a function of both our total net insured exposure in the area
affected by the event and the nature and severity of the event. In addition, our business could be further impaired if a significant portion of
our business or systems were shut down by, or if we were unable to gain access to certain of our facilities as a result of, such an event. Most
of our past catastrophe-related claims have resulted from severe storms. The incidence and severity of catastrophes are inherently
unpredictable. When they occur with enough severity, our financial performance, cash flows and results of operations could be materially
adversely affected.
Our business depends on the uninterrupted operation of our facilities, systems and business functions, including our information
technology and other business systems.
Our business is highly dependent upon our employees’ ability to perform, in an efficient and uninterrupted fashion, necessary business
functions (such as Internet support and 24-hour call centers), processing new and renewal business, and processing and paying claims and
other obligations. A shut-down of, or inability to access, one or more of our facilities, a power outage, or a failure of one or more of our
information technology, telecommunications or other systems for any reason, including failures that might occur as existing systems are
replaced or upgraded, could significantly impair our ability to perform such functions on a timely basis. In addition, because our information
technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand
for such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or repeated, such a business
interruption, system failure or service denial could result in a deterioration of our ability to write and process new and renewal business,
provide customer service, pay claims in a timely manner or perform other necessary business functions. This could result in a materially
adverse effect on our business results, prospects, and liquidity, as well as damage to customer goodwill.
Our business is highly dependent on access to, and the performance of, the financial markets to provide us with the ability to liquidate
securities and transfer or receive funds on a timely basis. Disruptions in financial markets, or an interruption or breakdown in the federal wire
transfer systems, could limit our ability to meet payment obligations. A mismatch or timing difference between our cash inflows and our cash
needs, or the inability to convert investment securities into cash when needed, could also adversely affect our ability to make timely payments.
A security breach of our computer systems or other operations could also interrupt or damage our operations; infect, corrupt or destroy data
or systems; subject us to liability if confidential customer information is misappropriated; and significantly damage our reputation. Despite the
implementation of security measures, including hiring an independent firm to perform intrusion vulnerability testing of our computer systems,
these systems may be vulnerable to physical or electronic break-ins, computer viruses, programming errors, attacks by third parties or similar
disruptive problems. Any compromise of security could deter people from entering into transactions that involve transmitting confidential
information to our systems, which could have a material adverse effect on our business.
We rely heavily on credit card acceptance for premium payment and settlement of claims deductibles. Data security standards for merchants
and service providers that accept credit card payments are prescribed by the PCI Security Standards Council (PCI), an independent body
formed by an association of the major credit card vendors. These standards are intended to promote a common set of data security measures
to help ensure the safe handling of sensitive information by companies accepting credit card payments. In September 2008, an independent
organization recognized by PCI for such purposes certified Progressive as being in compliance with the current PCI standards. The PCI data
security standards, however, will likely evolve over time to address emerging payment security risks and other issues, requiring additional
compliance efforts by us and recertification of our processes. Our intention is to maintain compliance with PCI’s data security standards. The
failure to do so could result in contractual fines or disruption of our ability to receive credit card payments.
II. Investing Risks

The performance of our fixed-income and equity investment portfolios is subject to a variety of investment risks.
Our investment portfolio is comprised principally of fixed-income securities and common equities. Our fixed-income portfolio is actively
managed by our investment group and includes short-term investments, fixed-maturity securities and preferred stocks. The performance of the
fixed-income portfolio is subject to a number of risks, including:
• Interest rate risk – the risk of adverse changes in the value of fixed-income securities as a result of increases in the market interest rates.
• Credit risk – the risk that the value of certain investments may become impaired due to the deterioration in financial condition of, or the
liquidity available to, one or more issuers of those instruments or, in the case of asset-backed
15
securities, due to the deterioration of the loans or other assets that underlie the securities, which, in each case, also includes the risk of
permanent loss.
• Concentration risk – the risk that the portfolio may be too heavily concentrated in the securities of one or more issuers, sectors or
industries, which could result in a significant decrease in the value of the portfolio in the event of a deterioration of the financial condition,
performance or outlook of those issuers, sectors or industries.
• Prepayment or extension risk (applicable to certain securities in the portfolio, such as residential mortgage-backed securities) – the risk that,
as interest rates change, the principal of such securities may be repaid earlier than anticipated, or that a security may not be redeemed when
anticipated, adversely affecting the value of or income from such securities and the portfolio.
• Liquidity risk – the risk that we will not be able to convert investment securities into cash on favorable terms and on short notice, or that we
will not be able to sell them at all, when we desire to do so. Disruptions in the financial markets, or a lack of buyers for the specific securities
that we are trying to sell, could prevent us from liquidating securities or cause a reduction in prices to levels that are not acceptable to us.
In addition, the success of our investment strategies and asset allocations in the fixed-income portfolio may vary depending on the market
environment. The fixed-income portfolio’s performance also may be adversely impacted if there is a lack of transparency regarding the
businesses of issuers of securities that we purchase, if credit ratings assigned to such securities by nationally recognized credit rating
agencies are based on incomplete information or prove unwarranted, or if our risk mitigation strategies are ineffective for the applicable market
conditions, among other factors.
The common equity portfolio, which is managed by a third party to track the Russell 1000 index, is subject to general movements in the values
of equity markets and to the changes in the prices of the securities we hold. An investment that is designed to track an index such as the
Russell 1000 does not reduce the risks inherent in equity investing and is not necessarily less risky than other equity investment strategies.
Equity markets, sectors, industries, and individual securities may be subject to periods of high volatility and may be subject to some of the
same risks that affect our fixed-income portfolio, discussed above. For example, a rapid rise in interest rates may cause equity prices to fall,
particularly those of interest-sensitive companies. In addition, even though the Russell 1000 index is broadly diversified, significant portions
of the index may be concentrated in one or more sectors, such as the financial services industry, which may adversely affect the performance
of our common equity portfolio when such a sector underperforms. A decline in the aggregate value of the equities that make up the index
would be expected to result in a commensurate decline in the value of our common equity portfolio.
Both the fixed-income and the common equity portfolios are also subject to risks inherent in the nation’s and world’s capital markets. The
functioning of those markets, the values of the investments we hold and our ability to liquidate them may be adversely affected if those
markets are disrupted or otherwise affected by significant negative factors, including, without limitation:
• local, national or international events, such as power outages, system failures, wars or terrorist attacks;
• a recession, depression or other adverse developments in either the U.S. or other economies that adversely affects the value of
corporate, municipal and asset-backed securities held in our portfolio;
• financial weakness or failure of one or more financial institutions that play a prominent role in securities markets or act as a
counterparty for various financial instruments, such as derivative transactions, which could further disrupt the markets or cause us
to incur losses if counterparties to one or more of our transactions should default;
• inactive markets for specific kinds of securities, or for the securities of certain issuers or in certain sectors, which could result in
decreased valuations and impact our ability to sell a specific security or a group of securities at a reasonable price when desired;
• the failure, or perceived failure, of governmental attempts to stabilize specific companies or groups of companies through capital
injections, to shore up markets or otherwise to spur economic recovery or growth, or the government fails or refuses to engage in
such efforts;
• a significant change in inflation expectations, or the onset of deflation or stagflation; and
• a significant devaluation of governmental or private sector credit, currencies or financial markets, or other factors or events.
If the fixed-income or equity portfolios, or both, were to be impaired by market, sector or issuer-specific conditions to a substantial degree, our
liquidity, financial position and financial results could be materially adversely affected. Under these circumstances, our income from these
investments could be materially reduced, and declines in the value of certain securities could further reduce our reported earnings and capital
levels. A decrease in value of an insurance company’s investment portfolio could also put the subsidiary at risk of failing to satisfy regulatory
minimum capital requirements. If we, at that time, are unable to supplement the subsidiary’s capital from The Progressive Corporation’s other
assets or by issuing debt or equity securities on acceptable terms, our business could be materially adversely affected.
16
See Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report, which is included as
Exhibit 13 to this Form 10-K, for additional discussion of the composition of our investment portfolio as of December 31, 2008 and on the
market risk associated with our investment portfolio.
III. Financing Risks

Our insurance subsidiaries may be limited in the amount of dividends that they can pay to the holding company, which in turn may limit
the holding company’s ability to pay dividends to shareholders, repay indebtedness or make capital contributions to its other subsidiaries
or affiliate.
The Progressive Corporation is a holding company with no business operations of its own. Consequently, if its subsidiaries are unable to pay
dividends or make other distributions to The Progressive Corporation, or are able to pay only limited amounts, Progressive may be unable to
pay dividends to shareholders, make payments on its indebtedness, meet its other obligations, repurchase its common shares, or make capital
contributions to or otherwise fund its subsidiaries or affiliate. Each insurance subsidiary’s ability to pay dividends to the holding company
may be limited by one or more of the following factors:
• State insurance regulatory authorities require insurance companies to maintain specified minimum levels of statutory capital and surplus.
• State regulations restrict the amounts available for distribution based on either net income or surplus of the insurance company.
• Competitive pressures require our insurance subsidiaries to maintain financial strength ratings.
• In certain jurisdictions, prior approval must be obtained from state regulatory authorities for the insurance subsidiaries to pay dividends or
make other distributions to affiliated entities, including the holding company.
Further information on state insurance laws and regulations which may limit the ability of our insurance subsidiaries to pay dividends can be
found in Item 5(c), “Dividends,” herein.
The Progressive Corporation’s annual dividend policy will result in a variable payment to shareholders each year, or no payment in some
years, and the dividend program ultimately may be changed.
We have previously announced our intention to pay a dividend to shareholders on an annual basis under a formula that multiplies our annual
after-tax underwriting income by a percentage factor set by the Board of Directors (20% for each of 2008 and 2009) and then by the Gainshare
factor (determined under our employee Gainsharing (cash bonus) plans based on the operating performance of our principal insurance
businesses). To the extent our after-tax comprehensive income, which includes net investment income, realized investment gains and losses
and the change in unrealized investment gains and losses, is less than after-tax underwriting income, no dividend will be payable. For 2008,
this calculation resulted in no dividend being paid to shareholders.
Because the dividend calculation is performance-based, the amount (if any) to be paid in any particular year may not be subject to accurate
prediction and will likely vary, perhaps significantly, from the amounts paid in the preceding year(s). As a result, the amount paid may be
inconsistent with some shareholders’ expectations. In addition, although we have announced our intent to repeat the annual dividend in 2009
(to be paid early in 2010), the dividend, if any, would not be declared by the Board until December 2009, and the Board could decide to alter our
policy or not to pay the annual dividend for 2009 or future years. Such an action by the Board could result from, among other reasons,
changes in the insurance marketplace, changes in our performance or capital needs, changes in federal income tax laws, or disruptions of
national or international capital markets or other events affecting our liquidity or financial position as described above under “Investing
Risks.” Any such change could adversely affect investors’ perceptions of the company and the value of, or the total return of an investment
in, our stock.
Our financial condition may be adversely affected if one or more parties with which we enter into significant contracts becomes insolvent,
experiences other financial hardship or defaults in the performance of contractual obligations.
Our business is dependent on the performance by third parties of their responsibilities under various contractual relationships. These include,
for example, contracts for the acquisitions of goods and services (such as telecommunications and information technology equipment and
support, and other services that are integral to our operations), private labeling arrangements and arrangements for transferring certain of our
risks (including reinsurance used by us in connection with certain of our insurance products and our corporate insurance policies). In
addition, from time to time, we enter into significant financial instruments, such as derivative transactions, with major banks or other financial
institutions. If one or more of these parties were to default on the performance of their obligations under their respective contracts or
determine to abandon or terminate support for a system, product or service that is significant to our business, we could suffer significant
financial losses, operational problems and brand risk, which could in turn adversely affect our financial performance, cash flows or results of
operations and cause damage to our reputation.
17
If we fail to maintain sufficient capital to support our business, our financial condition and our ability to grow could be adversely
affected.
We intend to maintain capital levels as necessary to pay all claims and other business expenses, to support the growth of our insurance
businesses, and to provide for additional protection against possible large, unexpected losses. The appropriate level of capital at any time is
estimated by management based, in part, on current and anticipated business results and growth prospects, and projections of the levels of
capital needed to protect us against unexpected events within a confidence level prescribed by management. The amount of capital that we
seek to maintain is driven by our assessment of potential exposures and correlations to our underwriting, investing and operating risks,
including those discussed in these Risk Factors. The estimates for unexpected events are internally produced and are the result of extensive
analysis and modeling of the types of risks that we are likely to face. While our techniques for estimating our capital needs are continually
enhanced, our ability to predict accurately the nature, size and scope of unexpected events is inherently uncertain.
The amount of capital that we hold at any given time is determined by the performance of our insurance operations and investing results
(including investment income, valuation changes in our portfolio, and the realization of any deferred tax benefits), as well as by our capital
management activities, such as the payment of cash dividends, repurchases of our common shares, the establishment of credit lines and the
issuance by us of debt, equity or other securities. If we experience losses in our insurance operations or from our investment portfolio, our
capital levels may be reduced, perhaps significantly. If our capital level turns out to be lower than the amount needed at a given time, our
financial condition could be materially adversely affected and our ability to grow the insurance business could be constrained until additional
sources of capital are found. Such a deterioration of our financial condition could adversely affect the perception of our company by third
parties (such as rating agencies, underwriters, and institutional and other investors), and as a result, our ability to gain access to debt or
equity markets at favorable rates could be adversely impacted, and the price of our common shares could fall significantly.
In addition, the recoverability of our deferred tax assets is predicated on the market valuation of our invested assets and certain tax planning
strategies that in part depend on substantial recovery to original cost for our fixed-income securities and redeemable preferred stocks. Should
fair values of such securities decline or not substantially recover in value, a valuation allowance against the related deferred tax assets may
become necessary, which would reduce our capital levels.
Our access to capital markets, our ability to enter into new financing arrangements, obligations to post collateral under certain derivative
contracts, and our business operations are dependent on favorable evaluations and ratings by credit and other rating agencies.
Our credit and financial strength is evaluated and rated by various rating agencies, such as Standard & Poor’s, Moody’s Investors Service
and A.M. Best. Progressive and its insurance subsidiaries currently enjoy favorable, stable ratings. Downgrades in our credit ratings could
adversely affect our ability to access the capital markets and/or lead to increased borrowing costs in the future (although the interest rates we
pay on our current indebtedness would not be affected). Perceptions of our company by investors, producers, other businesses and
consumers could also be significantly impaired. In addition, a downgrade could trigger contractual obligations in certain derivative
transactions requiring us to post collateral in amounts then owed to the other party in cash or high grade assets. Downgrades in the ratings of
our insurance subsidiaries could likewise negatively impact our operations, potentially resulting in lower or negative premium growth. In any
such event, our financial performance could be materially adversely affected.
We do not manage to short-term earnings expectations; our goal is to maximize the long-term value of the enterprise, which at times may
adversely affect short-term results.
We believe that shareholder value will be increased in the long run if we meet or exceed the financial goals and policies that we establish each
year. We do not manage our business to maximize short-term stock performance or the amount of the dividend that may be paid under our
annual variable dividend policy or otherwise. We also do not provide earnings estimates to the market and do not comment on earnings
estimates by analysts. As a result, our reported results for a particular period may vary, perhaps significantly, from investors’ expectations,
which could result in significant volatility in our stock price.
In addition, due to our focus on the long-term value of the enterprise, we may undertake business strategies and establish related financial
goals for a specific year that are designed to enhance our longer-term position, while understanding that such strategies may not always
similarly benefit short-term performance, such as our annual underwriting profit or earnings per share. Such strategies, for example, may
involve a reduction in premiums for certain products or customers to support growth or enhance retention of current customers.
Consequently, these strategies may adversely affect short-term performance and may result in additional volatility in our stock price.
ITEM 1B. UNRESOLVED STAFF COMMENTS

We currently do not have any unresolved comments from the SEC staff.
18
ITEM 2. PROPERTIES
All of our properties are owned or leased by subsidiaries of The Progressive Corporation. Progressive’s corporate headquarters is located on a
42-acre parcel in Mayfield Village, Ohio. We also have a 72-acre corporate office complex near the headquarters. Buildings on these two sites
contain approximately 1.6 million square feet of office space.
We also own: seven other buildings in Cleveland, Ohio suburbs near the corporate office complexes; four buildings in Tampa, Florida; five
buildings in Colorado Springs, Colorado; and a building in each of the following cities: Albany, New York; Ft. Lauderdale, Florida; Plymouth
Meeting, Pennsylvania; Tempe, Arizona; and Tigard, Oregon. Two of these buildings are partially leased to non-affiliates. In total, these
buildings contain approximately 2.0 million square feet of office, warehouse, and training facility space. These facilities are occupied by our
business units or other supporting operations and are not segregated by industry segment. We also own 57 acres of vacant land in Mayfield
Village and 15 acres in Colorado Springs near our corporate facilities.
We own 40 buildings and lease another 13 to provide concierge-level claims service at various locations throughout the United States. In
addition, our facility in Tempe, Arizona is also partially used as a claims service center. In total, these additional buildings contain
approximately .8 million square feet.
We lease approximately 1.2 million square feet of office and warehouse space at various locations throughout the United States for our
business units and corporate functions. In addition, we lease approximately 460 claims offices, consisting of approximately 3.3 million square
feet, at various locations throughout the United States. These leases are generally short-term to medium-term leases of standard commercial
office space.
ITEM 3. LEGAL PROCEEDINGS

None. For a discussion of litigation we currently face, see Note 12—Litigation in our Annual Report, which is included as Exhibit 13 to this
Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of 2008.
EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference from information with respect to executive officers of The Progressive Corporation and its subsidiaries set forth in
Item 10 in Part III of this Form 10-K.
19
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
(a) Market Information
Progressive’s Common Shares, $1.00 par value, are traded on the New York Stock Exchange under the symbol PGR. The high and low prices
set forth below are as reported on the consolidated transaction reporting system.
Divide n ds
De clare d
Pe r
Ye ar Q u arte r High Low C lose S h are
2008 1 $19.84 $15.00 $16.07 $ —
2 21.31 16.11 18.72 —
3 20.71 15.70 17.40 —
4 17.59 10.29 14.81 —
$21.31 $10.29 $14.81 $ —
2007 1 $24.75 $20.91 $21.82 $ —
2 25.16 21.55 23.93 2.0000
3 24.10 18.88 19.41 —
4 20.50 17.26 19.16 .1450
$25.16 $17.26 $19.16 $ 2.1450
The closing price of our Common Shares on January 31, 2009, was $12.15.
(b) Holders
There were 3,840 shareholders of record on January 31, 2009.
(c) Dividends
See the table above for the frequency and amount of cash dividends paid on our Common Shares, $1.00 par value, for the last two years.
During 2006, Progressive’s Board of Directors approved a plan to replace our previous quarterly dividend policy with an annual variable
dividend beginning in 2007. The annual variable dividend is based on a formula that multiplies our annual after-tax underwriting income by a
target percentage factor and then by a companywide performance factor (known as our Gainshare factor). For 2007, 2008, and 2009, the Board
determined the target percentage of after-tax underwriting income to be 20%. The Gainshare factor can range from zero to two and is
determined by comparing operating performance for the year to certain predetermined profitability and growth objectives. The Gainshare factor
is also used in connection with our cash bonus program for employees and is approved by the Compensation Committee of the Board
annually. To the extent the Gainshare factor was zero or if comprehensive income (which includes net investment income as well as both
realized gains and losses and the change in unrealized gains and losses during the period) was less than after-tax underwriting income, no
annual variable dividend would be paid. In addition, although it is our intent to calculate an annual dividend based on the formula outlined, the
Board could decide to alter our policy or not to pay the annual dividend for 2009 or future years, at any time prior to the declaration of the
dividend for the year. Such an action by the Board could result from, among other reasons, changes in the insurance marketplace, changes in
our performance or capital needs, changes in federal income tax laws, disruptions of national or international capital markets, or other events
affecting our business, liquidity, or financial position. Based on our 2008 results, our after-tax comprehensive loss was less than after-tax
underwriting income, therefore, the Board of Directors determined that no dividend would be paid for 2008.
In June 2007, the Board declared an extraordinary dividend of $2.00 per common share. The extraordinary dividend was part of a plan to
restructure our capital position during the year and is described in Management’s Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report, which is included as Exhibit 13 to this Form 10-K.
To the extent we elect to defer the payment of interest on our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067, we may
be restricted from declaring any dividends. See Note 4 – Debt in our Annual Report, which is included as Exhibit 13 to this Form 10-K for
further discussion. Our intent is to pay interest on the Debentures as and when due.
20
Consolidated statutory policyholders’ surplus was $4.5 billion on December 31, 2008, and $4.6 billion on December 31, 2007. At December 31,
2008, $469.8 million of consolidated statutory policyholders’ surplus represented net admitted assets of Progressive’s insurance subsidiaries
and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of domicile. Generally, the net admitted
assets of insurance companies that, subject to other applicable insurance laws and regulations, are available for transfer to the parent
company cannot include the net admitted assets required to meet the minimum statutory surplus requirements of the states where the
companies are licensed. The companies may be licensed in states other than their states of domicile, however, which may have higher minimum
statutory surplus requirements. Based on the dividend laws currently in effect, the insurance subsidiaries may pay aggregate dividends of
$505.5 million in 2009 without prior approval from regulatory authorities, provided the dividend payments are not within 12 months of previous
dividends paid by the applicable subsidiary.
(d) Securities Authorized for Issuance Under Equity Compensation Plans

The following information is set forth with respect to our equity compensation plans at December 31, 2008.
EQUITY COMPENSATION PLAN INFORMATION
W e ighte d C u m u lative Nu m be r of S e cu ritie s

Nu m be r of S e cu ritie s Ave rage Exe rcise Nu m be r of Re m aining Available
to be Issu e d u pon Price of S e cu ritie s for Fu ture Issu an ce
Exe rcise of O u tstan ding Awarde d as Un de r Equ ity
Plan C ate gory O u tstan ding O ptions O ptions Re stricte d S tock C om pe n sation Plans
Equity compensation plans approved by
security holders:
Employee Plans:
2003 Incentive Plan — — 11,908,916 8,424,255
1995 Incentive Plan1 8,503,273 $ 7.71 1,402,320 —
Subtotal Employee Plans 8,503,273 7.71 13,311,236 8,424,255
Director Plans:
2003 Directors Equity Incentive
Plan — — 411,145 988,855
1998 Directors’ Stock Option
Plan1 401,357 8.60 — —
Subtotal Director Plans 401,357 8.60 411,145 988,855
Equity compensation plans not approved by
security holders:
None
Total 8,904,630 $ 7.75 13,722,381 9,413,110
1
These plans have expired and no further awards may be made thereunder.
(e) Performance Graph

Incorporated by reference from the Performance Graph section in our Annual Report, which is included as Exhibit 13 to this Form 10-K.
(f) Recent Sales of Unregistered Securities

None.
21
(g) Share Repurchases
ISSUER PURCHASES OF EQUITY SECURITIES
Total Num be r of S h are s

2008 Purchase d as Part of Maxim u m Nu m be r of S h are s
C ale n dar Total Num be r of Ave rage Price Publicly An n ou n ce d Plans Th at May Ye t Be Purchase d
Mon th S h are s Purchase d Paid pe r S h are or Program s Un de r the Plans or Program s
October 6,290 $ 13.26 51,347,422 48,652,578
November — — 51,347,422 48,652,578
December 120,505 14.71 51,467,927 48,532,073
Total 126,795 $ 14.64
Progressive’s financial policies state that we will repurchase shares to neutralize dilution from equity-based compensation in the year of
issuance and to return underleveraged capital to investors. See Note 9—Employee Benefit Plans, “Incentive Compensation Plans” in our
Annual Report, which is included as Exhibit 13 to this Form 10-K, for a summary of our restricted stock grants.
In June 2007, the Board approved an authorization to repurchase up to 100 million common shares. This Board authorization will expire on
June 30, 2009. Shares repurchased under this authorization may be accomplished through open market purchases or otherwise, and may
include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934.
In the fourth quarter 2008, all repurchases were accomplished through the open market in conjunction with our incentive compensation plans.
ITEM 6. SELECTED FINANCIAL DATA

(millions—except per share amounts)
For th e ye ars e n de d De ce m be r 31,

2008 2007 2006 2005 2004
Total revenues $12,840.1 $14,686.8 $14,786.4 $14,303.4 $13,782.1
Net income (loss) (70.0) 1,182.5 1,647.5 1,393.9 1,648.7
Per share:1
Net income (loss)2 (.10) 1.65 2.10 1.74 1.91
Dividends — 2.1450 .0325 .0300 .0275
Comprehensive income (loss) (614.7) 1,071.0 1,853.1 1,347.8 1,668.5
Total assets 18,250.5 18,843.1 19,482.1 18,898.6 17,184.3
Debt outstanding 2,175.5 2,173.9 1,185.5 1,284.9 1,284.3
1
All per share amounts were adjusted for the May 18, 2006, 4-for-1 stock split.
2
Since we reported a net loss for 2008, the calculated diluted earnings per share was antidilutive; therefore, basic earnings per share is
disclosed. For all other periods, diluted earnings per share is disclosed.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated by reference from Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual
Report, which is included as Exhibit 13 to this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risk are incorporated by reference from section “IV. Results of Operations –
Investments” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, as described in Item 7 above.
Additional information is incorporated by reference from the “Quantitative Market Risk Disclosures” section in our Annual Report, which is
included as Exhibit 13 to this Form 10-K.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements of Progressive, along with the related notes, supplementary data, and report of the independent
registered public accounting firm, are incorporated by reference from our Annual Report, which is included as Exhibit 13 to this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES

Progressive, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and
procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and
communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures.
The Chief Executive Officer and the Chief Financial Officer reviewed and evaluated Progressive’s disclosure controls and procedures as of the
end of the period covered by this report. Based on that review and evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that Progressive’s disclosure controls and procedures are effectively serving the stated purposes as of the end of the period
covered by this report.
Management’s Report on Internal Control over Financial Reporting is incorporated by reference from our Annual Report, which is included
as Exhibit 13 to this Form 10-K.
The attestation of the registered public accounting firm is incorporated by reference from our Annual Report, which is included as Exhibit 13 to
this Form 10-K.
There has been no change in Progressive’s internal control over financial reporting during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION

None.
23
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information relating to all of the directors, and the individuals who have been nominated for election as directors at the 2009 Annual Meeting
of Shareholders of the Registrant, is incorporated herein by reference from the section entitled “Item 1: Election of Directors” in the Proxy
Statement.
Information relating to executive officers of Progressive follows. Unless otherwise indicated, the executive officer has held the position(s)
indicated for at least the last five years.
Nam e Age O ffice s He ld an d Last Five Ye ars’ Busin e ss Expe rie n ce

Glenn M. Renwick 53 President and Chief Executive Officer; President, Chairman of the Board and Chief Executive Officer of
Progressive Casualty Insurance Company, the principal subsidiary of the Registrant, prior to April 2004
Brian C. Domeck 49 Vice President and Chief Financial Officer beginning in March 2007; Demand Manager for the Direct
Business prior to January 2007
Charles E. Jarrett 51 Vice President, Secretary, and Chief Legal Officer
Thomas A. King 49 Vice President and Treasurer
Jeffrey W. Basch 50 Vice President and Chief Accounting Officer
John A. Barbagallo 49 Commercial Lines Group President, including Agency Operations, since September 2007; Agency
Group President from May 2006 to September 2007; Agency Business General Manager of the Atlantic
Region from January 2005 to May 2006; Agency Business General Manager of the Great Plains Region
prior to January 2005
Lawrence W. Bloomenkranz 51 Chief Marketing Officer since April 2008; Vice President of Brand Management, Advertising and
Sponsorships for the United Parcel Service of America, Inc. prior to April 2008
William M. Cody 46 Chief Investment Officer
Susan Patricia Griffith 44 Claims Group President since March 2008; Chief Human Resource Officer prior to March 2008
Valerie Krasowski 43 Chief Human Resource Officer since August 2008; Special Lines General Manager from March 2006 to
August 2008; Director of Regional Marketing from March 2005 to March 2006; Director of Total
Rewards prior to March 2005
John P. Sauerland 44 Personal Lines Group President since September 2007; Direct Group President from June 2006 to
September 2007; Claims General Manager of the Midwest Region prior to June 2006
Raymond M. Voelker 45 Chief Information Officer
24
Section 16(a) Beneficial Ownership Reporting Compliance. Incorporated by reference from the “Section 16(a) Beneficial Ownership
Reporting Compliance” section of the Proxy Statement (which can be found in “Security Ownership of Certain Beneficial Owners and
Management”).
Code of Ethics. Progressive has a Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and other senior financial officers.
This Code of Ethics is available, without charge, at: progressive.com/governance, or may be requested in print by writing to: The Progressive
Corporation, Investor Relations, 6300 Wilson Mills Road, Box W33, Mayfield Village, Ohio 44143.
We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, and waivers from, the provisions of
the foregoing Code of Ethics by posting such information on our Internet Web site at: progressive.com/governance.
Shareholder-Proposed Candidate Procedures. There were no material changes to Progressive’s shareholder-proposed candidate procedures
during 2008. The description of those procedures is incorporated by reference from the “Shareholder-Proposed Candidate Procedures” section
of the Proxy Statement (which can be found in “Other Board of Directors Information”).
Audit Committee. Incorporated by reference from the “Audit Committee” section of the Proxy Statement (which can be found in “Other Board
of Directors Information”).
Financial Expert. Incorporated by reference from the “Audit Committee Financial Expert” section of the Proxy Statement (which can be found
in “Other Board of Directors Information”).
ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference from the sections of the Proxy Statement entitled “Compensation Discussion and Analysis,” “Executive
Compensation,” “Other Board of Directors Information: Compensation Committee Interlocks and Insider Participation,” and “Compensation
Committee Report.”
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Incorporated by reference from the section of the Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and
Management.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated by reference from the section of the Proxy Statement entitled “Other Board of Directors Information” subsections “Board of
Directors Independence Standards and Determinations” and “Certain Relationships and Related Transactions.”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Incorporated by reference from the section of the Proxy Statement entitled “Other Independent Registered Public Accounting Firm
Information.”
25
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Listing of Financial Statements
The following consolidated financial statements included in Progressive’s 2008 Annual Report, which is included as Exhibit 13 to this
Form 10-K, are incorporated by reference in Item 8:
• Report of Independent Registered Public Accounting Firm
• Consolidated Statements of Income—For the Years Ended December 31, 2008, 2007, and 2006
• Consolidated Balance Sheets—December 31, 2008 and 2007
• Consolidated Statements of Changes in Shareholders’ Equity—For the Years Ended December 31, 2008, 2007, and 2006
• Consolidated Statements of Cash Flows—For the Years Ended December 31, 2008, 2007, and 2006
• Notes to Consolidated Financial Statements
• Supplemental Information (Unaudited)
(a)(2) Listing of Financial Statement Schedules

The following financial statement schedules, Report of Independent Registered Public Accounting Firm and Consent of Independent
Registered Public Accounting Firm are included in Item 15(c):
• Schedule I - Summary of Investments - Other than Investments in Related Parties
• Schedule II - Condensed Financial Information of Registrant
• Schedule III - Supplementary Insurance Information
• Schedule IV - Reinsurance
• Schedule VI - Supplemental Information Concerning Property-Casualty Insurance Operations
• Report of Independent Registered Public Accounting Firm on Financial Statement Schedules
• Consent of Independent Registered Public Accounting Firm
• No other schedules are required to be filed herewith pursuant to Article 7 of Regulation S-X.
(a)(3) Listing of Exhibits

See exhibit index contained herein beginning at page 39. Management contracts and compensatory plans and arrangements are identified
in the Exhibit Index as Exhibit Nos.10.2 through 10.55.
(b) Exhibits
The exhibits in response to this portion of Item 15 are submitted concurrently with this report.
(c) Financial Statement Schedules
26
SCHEDULE I — SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
(millions)
De ce m be r 31, 2008
Am ou n t At
W h ich S h own
In Th e
Fair Balan ce
Type of Inve stm e n t C ost Value Sheet
Available-for-sale
Fixed maturities:
Bonds:
United States Government and government agencies and authorities1 $ 3,565.7 $ 3,693.6 $ 3,693.6
States, municipalities, and political subdivisions 3,041.4 3,004.4 3,004.4
Foreign government obligations 16.2 16.4 16.4
Public utilities — — —
Corporate and other debt securities 694.2 642.3 642.3
Asset-backed securities 2,590.6 2,202.1 2,202.1
Redeemable preferred stock 387.2 387.9 387.9
Total fixed maturities 10,295.3 9,946.7 9,946.7
Equity securities:
Common stocks:
Public utilities 40.7 54.1 54.1
Banks, trusts, and insurance companies 78.4 99.4 99.4
Industrial, miscellaneous, and all other 434.5 574.3 574.3
Nonredeemable preferred stocks 1,131.3 1,150.0 1,150.0
Total equity securities 1,684.9 1,877.8 1,877.8
Short-term investments:
Other short-term investments 1,153.6 1,153.6 1,153.6
Total investments $13,133.8 $12,978.1 $ 12,978.1
1
Includes $96.3 million of gains on our open interest rate swap positions. For further information, see Note 2 – Investments in our Annual
Report, which is included as Exhibit 13 to this Form 10-K.
Progressive did not have any securities of any one issuer with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at
December 31, 2008.
27
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF INCOME
THE PROGRESSIVE CORPORATION (PARENT COMPANY)
(millions)
Ye ars En de d De ce m be r 31,
2008 2007 2006
Revenues
Dividends from subsidiaries* $ 300.5 $1,507.7 $1,635.5
Intercompany investment income* 41.3 92.6 85.9
341.8 1,600.3 1,721.4
Expenses
Interest expense 146.3 114.1 81.3
Deferred compensation1 (5.7) (2.7) (4.4)
Other operating costs and expenses 3.4 4.7 3.0
144.0 116.1 79.9
Income before income taxes and other items below 197.8 1,484.2 1,641.5
Income tax provision (benefit) (36.4) (9.0) 1.7
Net income – parent company only 234.2 1,493.2 1,639.8
Net income (loss) of subsidiaries after current year dividend distributions (304.2) (310.7) 7.7
Net income (loss) – consolidated $ (70.0) $1,182.5 $1,647.5
*1 Eliminated in consolidation.
See Note 5—Employee Benefit Plans on page 31.
See notes to condensed financial statements.
28
SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CONDENSED BALANCE SHEETS
(millions)
De ce m be r 31,
2008 2007
ASSETS
Investment in non-consolidated affiliates $ 1.0 $ 1.0
Investment in subsidiaries* 4,873.7 5,420.0
Receivable from investment subsidiary* 1,392.7 1,710.4
Intercompany receivable* 103.0 84.4
Income taxes 67.6 46.0
Other assets 56.1 81.3
TOTAL ASSETS $6,494.1 $7,343.1
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued expenses $ 103.3 $ 135.1
Dividend payable — 98.6
Debt 2,175.5 2,173.9
Total liabilities 2,278.8 2,407.6
Shareholders’ equity:
Common Shares, $1.00 par value (authorized 900.0 shares; issued 797.9 and 798.1, including treasury shares
of 121.4 and 117.9) 676.5 680.2
Paid-in capital 892.9 834.8
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on investment in equity securities of consolidated subsidiaries (76.8) 465.0
Net unrealized gains on forecasted transactions 24.9 27.8
Retained earnings 2,697.8 2,927.7
Total shareholders’ equity 4,215.3 4,935.5
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $6,494.1 $7,343.1
* Eliminated in consolidation.
29
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CONDENSED STATEMENTS OF CASH FLOWS
(millions)
Ye ars En de d De ce m be r 31,
2008 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (70.0) $ 1,182.5 $ 1,647.5
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (income) loss of subsidiaries after current year dividend distributions 304.2 310.7 (7.7)
Amortization of stock-based compensation 1.8 1.7 1.6
Changes in:
Intercompany receivable (18.6) 24.7 (22.1)
Accounts payable and accrued expenses (31.2) 4.3 5.1
Income taxes (21.6) (38.5) 19.0
Other, net 27.4 (3.2) (9.6)
Net cash provided by operating activities 192.0 1,482.2 1,633.8
CASH FLOWS FROM INVESTING ACTIVITIES:

Additional investments in equity securities of consolidated subsidiaries (270.1) (36.9) (176.1)
Received from (paid to) investment subsidiary 317.7 476.0 (200.3)
Net cash provided by (used in) investing activities 47.6 439.1 (376.4)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of stock options 27.0 30.8 43.3
Tax benefit from exercise/vesting of stock-based compensation 11.1 15.5 38.8
Proceeds from debt — 987.3 —
Payment of debt — — (100.0)
Dividends paid to shareholders (98.3) (1,406.5) (25.0)
Acquisition of treasury shares (179.4) (1,548.4) (1,214.5)
Net cash used in financing activities (239.6) (1,921.3) (1,257.4)
Change in cash — — —
Cash, beginning of year — — —
Cash, end of year $ — $ — $ —
30
SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

NOTES TO CONDENSED FINANCIAL STATEMENTS
The accompanying condensed financial statements of The Progressive Corporation (parent company) should be read in conjunction with the
consolidated financial statements and notes thereto of The Progressive Corporation and subsidiaries’ Annual Report to Shareholders, which
is included as Exhibit 13 to this Form 10-K.
Note 1. Statements of Cash Flows — For the purpose of the Statements of Cash Flows, cash includes only bank demand deposits. The
Progressive Corporation does not hold any cash but has unrestricted access to funds maintained in a non-insurance, investment subsidiary to
meet its holding company obligations; at year-end 2008, $1.0 billion of marketable securities were available in this company. The Progressive
Corporation paid income taxes of $258.0 million in 2008, $526.0 million in 2007, and $739.0 million in 2006, respectively. Total interest paid was
$144.7 million in 2008, $110.1 million in 2007, and $81.3 million in 2006. Non-cash activity includes declared but unpaid dividends, changes in
the net unrealized gains (losses) on investment securities, and the contribution from The Progressive Corporation of its common shares to
certain subsidiaries, subject to restricted stock awards granted to employees. In addition, in 2006, non-cash activity included the reclass of the
liability for deferred restricted stock compensation due to the adoption of SFAS 123(R).
The Progressive Corporation effected a 4-for-1 stock split in the form of a stock dividend to shareholders on May 18, 2006. We reflected the
issuance of the additional common shares by transferring $585.9 million from retained earnings to the common stock account. All share, per
share, and equivalent share amounts and stock prices were adjusted to give effect to the split. Treasury shares were not split.
Note 2. Income Taxes — The Progressive Corporation files a consolidated federal income tax return with all subsidiaries and acts as an agent
for the consolidated tax group when making payments to the Internal Revenue Service. Income taxes in the accompanying Condensed Balance
Sheets are comprised of the parent company’s net deferred tax assets offset by the consolidated group’s net income taxes
payable/recoverable. The Progressive Corporation and its subsidiaries have adopted, pursuant to a written agreement, a method of allocating
consolidated federal income taxes. Amounts allocated to the subsidiaries under the written agreement are included in “Intercompany
Receivable” in the accompanying Condensed Balance Sheets.
Note 3. Investment in Consolidated Subsidiaries — The Progressive Corporation, through its investment in consolidated subsidiaries,
recognizes the changes in unrealized gains (losses) on available-for-sale securities of the subsidiaries. These amounts were:
(m illion s) 2008 2007 2006

Increase (decrease) in unrealized gains:
Available-for-sale: fixed maturities $(397.9) $ 49.8 $ 38.2
equity securities (435.7) (252.6) 279.9
Deferred income taxes 291.8 71.0 (111.4)
$(541.8) $(131.8) $ 206.7
Note 4. Debt — The information relating to debt is incorporated by reference from Note 4 – Debt in our Annual Report, which is included as
Exhibit 13 to this Form 10-K.
Note 5. Employee Benefit Plans — The information relating to incentive compensation plans and deferred compensation is incorporated by
reference from Note 9 - Employee Benefit Plans in our Annual Report, which is included as Exhibit 13 to this Form 10-K.
31
SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

(millions)
Fu ture
policy
be n e fits, O the r
losse s, policy Be n e fits, Am ortiz ation
De fe rre d claim s, claim s claim s, of de fe rre d
policy an d an d Ne t losse s, an d policy O the r Ne t
acqu isition loss Un e arn e d be n e fits Pre m ium inve stm e n t se ttle m e n t acqu isition ope ratin g pre m ium s
S e gm e n t costs 1 e xpe n se s 1 pre m ium s 1 payable 1 re ve n u e incom e 1,2 e xpe n se s costs e xpe n se s writte n
Year ended
December 31, 2008:
Personal
Lines $11,847.8 $ 8,716.2 $ 1,147.9 $ 1,348.2 $ 11,878.8
Commercial
Auto 1,762.2 1,290.2 203.3 174.6 1,704.8
Other
indemnity 21.4 8.6 6.9 .6 20.7
Total $ 414.0 $ 6,177.4 $ 4,175.9 $ — $13,631.4 $ 628.9 $ 10,015.0 $ 1,358.1 $ 1,523.4 $ 13,604.3
Year ended
December 31, 2007:
Personal
Lines $12,009.0 $ 8,625.7 $ 1,183.9 $ 1,359.3 $ 11,921.2
Commercial
Auto 1,846.9 1,288.3 210.5 162.4 1,828.9
Other
indemnity 21.5 12.2 5.5 4.5 22.4
Total $ 426.3 $ 5,942.7 $ 4,210.4 $ — $13,877.4 $ 668.4 $ 9,926.2 $ 1,399.9 $ 1,526.2 $ 13,772.5
Year ended
December 31, 2006:
Personal
Lines $12,241.0 $ 8,254.7 $ 1,231.4 $ 1,249.6 $ 12,208.8
Commercial
Auto 1,851.9 1,129.2 209.8 146.4 1,898.0
Other
indemnity 25.0 11.0 .7 6.8 25.2
Total $ 441.0 $ 5,725.0 $ 4,335.0 $ — $14,117.9 $ 635.9 $ 9,394.9 $ 1,441.9 $ 1,402.8 $ 14,132.0
1
Progressive does not allocate assets, liabilities, or investment income to operating segments.
2
Excludes net realized gains (losses) on securities.
32
SCHEDULE IV — REINSURANCE
(millions)
Assum e d Pe rce n tage

C e de d to From of Am ou n t
Gross O the r O the r Assum e d
Ye ar En de d: Am ou n t C om panie s C om panie s Ne t Am ou n t to Ne t
December 31, 2008
Premiums earned:
Property and liability insurance $13,810.1 $ 178.7 $ — $ 13,631.4 —
December 31, 2007

Premiums earned:
December 31, 2006

Premiums earned:
33
SCHEDULE VI — SUPPLEMENTAL INFORMATION CONCERNING PROPERTY—CASUALTY INSURANCE OPERATIONS

(millions)
Losse s an d Loss Adju stm e n t

Expe n se s Incu rre d Re late d to Paid Losse s an d Loss
Ye ar En de d C u rre n t Ye ar Prior Ye ars Adjustm e n t Expe n se s
December 31, 2008 $ 9,981.8 $ 33.2 $ 9,737.3
December 31, 2007 $ 9,845.9 $ 80.3 $ 9,634.6
December 31, 2006 $ 9,641.8 $ (246.9) $ 9,344.4
Pursuant to Rule 12-18 of Regulation S-X. See Schedule III, page 32, for the additional information required in Schedule VI.
34
Report of Independent Registered Public Accounting Firm on Financial Statement Schedules
To the Board of Directors and Shareholders of The Progressive Corporation:

Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report
dated February 25, 2009 appearing in the 2008 Annual Report to Shareholders of The Progressive Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement
schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects,
the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP

Cleveland, Ohio
February 25, 2009
35
Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on:
Form Filing No. Filing Date

S-3 333-143824 June 18, 2007
S-8 333-104646 April 21, 2003
S-8 333-104653 April 21, 2003
S-8 333-41238 July 12, 2000
S-8 333-51613 May 1, 1998
S-8 333-25197 April 15, 1997
S-8 33-57121 December 29, 1994
S-8 33-64210 June 10, 1993
S-8 33-51034 August 20, 1992
S-8 33-38793 February 4, 1991
S-8 33-37707 November 9, 1990
S-8 33-33240 January 31, 1990
S-8 33-16509 August 14, 1987
of The Progressive Corporation of our report dated February 25, 2009 relating to the financial statements and the effectiveness of internal
control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-
K. We also consent to the incorporation by reference of our report dated February 25, 2009 relating to the financial statement schedules, which
appears in this Form 10-K.

Cleveland, Ohio
February 25, 2009
36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
February 25, 2009 By: /s/ Glenn M. Renwick

Glenn M. Renwick
Director, President, and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
* Director, Chairman of the Board February 25, 2009

Peter B. Lewis
/s/ Glenn M. Renwick Director, President, and Chief Executive Officer February 25, 2009
Glenn M. Renwick
/s/ Brian C. Domeck Vice President and Chief Financial Officer February 25, 2009
Brian C. Domeck
/s/ Jeffrey W. Basch Vice President and Chief Accounting Officer February 25, 2009
Jeffrey W. Basch
* Director February 25, 2009

Charles A. Davis

Roger N. Farah

Stephen R. Hardis

Bernadine P. Healy, M.D.

Jeffrey D. Kelly

Abby F. Kohnstamm
37

Norman S. Matthews

Patrick H. Nettles, Ph.D.

Donald B. Shackelford

Bradley T. Sheares, Ph.D.
* Charles E. Jarrett, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to powers of
attorney duly executed by such persons.
By: /s/ Charles E. Jarrett February 25, 2009

Charles E. Jarrett
Attorney-in-fact
38
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
Re g. S-K, Exh ibit If Incorporate d by Re fe re n ce , Docu m e n ts with
Ite m 601 No. De scription of Exh ibit W h ich Exh ibit was Pre viously File d with S EC
(3)(i) 3.1 Amended Articles of Incorporation of The Progressive Quarterly Report on Form 10-Q (filed with SEC on May 6,
Corporation (as amended April 18, 2008) 2008; Exhibit 3.1 therein)
(3)(ii) 3.2 Code of Regulations of The Progressive Corporation (as Quarterly Report on Form 10-Q (filed with SEC on May 6,
amended April 18, 2008) 2008; Exhibit 3.2 therein)
(4) 4.1 364-Day Secured Liquidity Credit Facility Agreement dated Current Report on Form 8-K (filed with SEC on January 7,
as of December 31, 2008 between The Progressive 2009; Exhibit 4.1 therein)
Corporation and National City Bank
(4) 4.2 Form of 6.375% Senior Notes due 2012, issued in the Annual Report on Form 10-K (filed with SEC on February
aggregate principal amount of $350,000,000 under the 1993 28, 2006; Exhibit 4(I) therein)
Senior Indenture (see exhibit 4.7 below), as amended and
supplemented
(4) 4.3 Form of 7% Notes due 2013 issued in the aggregate Annual Report on Form 10-K (filed with SEC on March 1,
principal amount of $150,000,000 under the 1993 Senior 2005; Exhibit 4(E) therein)
Indenture, as amended and supplemented
(4) 4.4 Form of 6 5/8% Senior Notes due 2029, issued in the Annual Report on Form 10-K (filed with SEC on March 4,
aggregate principal amount of $300,000,000 under the 1993 2004; Exhibit 4(I) therein)
Senior Indenture, as amended and supplemented
(4) 4.5 Form of 6.25% Senior Notes due 2032, issued in the Annual Report on Form 10-K (filed with SEC on February
aggregate principal amount of $400,000,000 under the 1993 27, 2008; Exhibit 4.5 therein)
Senior Indenture, as amended and supplemented
(4) 4.6 Form of 6.70% Fixed-to-Floating Rate Junior Subordinated Current Report on Form 8-K (filed with SEC on June 22,
Debentures due 2067 issued in the aggregate principal 2007; Exhibit 4.3 therein)
amount of $1,000,000,000 under the Junior Subordinated
Indenture (see exhibit 4.13 below), as amended and
supplemented
(4) 4.7 Indenture dated as of September 15, 1993 between Registration Statement No. 333-48935 (filed with SEC on
Progressive and State Street Bank and Trust Company March 31, 1998; Exhibit 4.1 therein)
(successor in interest to The First National Bank of Boston),
as Trustee (“1993 Senior Indenture”) (including table of
contents and cross-reference sheet)
39
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
(4) 4.8 First Supplemental Indenture dated March 15, 1996 to the Registration Statement No. 333-01745 (filed with SEC on
1993 Senior Indenture between Progressive and State Street March 15, 1996; Exhibit 4.2 therein)
Bank and Trust Company, evidencing the designation of
State Street Bank and Trust Company as successor Trustee
under the 1993 Senior Indenture
(4) 4.9 Second Supplemental Indenture dated February 26, 1999 to Registration Statement No. 333-100674 (filed with SEC on
the 1993 Senior Indenture between Progressive and State October 22, 2002; Exhibit 4.3 therein)
Street Bank and Trust Company, as Trustee
(4) 4.10 Third Supplemental Indenture dated December 7, 2001 to the Registration Statement No. 333-100674 (filed with SEC on
1993 Senior Indenture between Progressive and State Street October 22, 2002; Exhibit 4.4 therein)
Bank and Trust Company, as Trustee
(4) 4.11 Fourth Supplemental Indenture dated November 21, 2002 to Registration Statement No. 333-143824 (filed with SEC on
the 1993 Senior Indenture between Progressive and State June 18, 2007; Exhibit 4.5 therein)
Street Bank and Trust Company, as Trustee
(4) 4.12 Fifth Supplemental Indenture dated June 13, 2007 to the Registration Statement No. 333-143824 (filed with SEC on
1993 Senior Indenture between Progressive and U.S. Bank June 18, 2007; Exhibit 4.6 therein)
National Association, evidencing the designation of U.S.
Bank National Association as successor Trustee under the
Senior Indenture
(4) 4.13 Junior Subordinated Indenture dated as of June 21, 2007 Current Report on Form 8-K (filed with SEC on June 22,
between Progressive and The Bank of New York Trust 2007; Exhibit 4.1 therein)
Company, N.A., Trustee (“Junior Subordinated Indenture”)
(including table of contents and cross-reference sheet)
(4) 4.14 First Supplemental Indenture dated June 21, 2007 to the Current Report on Form 8-K (filed with SEC on June 22,
Junior Subordinated Indenture between Progressive and 2007; Exhibit 4.2 therein)
The Bank of New York Trust Company, N.A., as Trustee
(4) 4.15 Replacement Capital Covenant dated June 21, 2007, of The Current Report on Form 8-K (filed with SEC on June 22,
Progressive Corporation 2007; Exhibit 4.4 therein)
(10)(ii) 10.1 Sublease Agreement for Aircraft Hangar dated as of August Current Report on Form 8-K (filed with SEC on September
21, 2006 between Progressive Casualty Insurance Company 20, 2006; Exhibit 10(A) therein)
and Acme Operating Corporation
40
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
(10)(iii) 10.2 The Progressive Corporation 2006 Gainsharing Plan Current Report on Form 8-K (filed with SEC on February 9,
2006; Exhibit 10(A) therein)
(10)(iii) 10.3 Amendment to The Progressive Corporation 2006 Quarterly Report on Form 10-Q (filed with SEC on May 4,
Gainsharing Plan 2006; Exhibit 10(A) therein)
(10)(iii) 10.4 The Progressive Corporation 2007 Gainsharing Plan Annual Report on Form 10-K (filed with SEC on February
28, 2007; Exhibit 10.8 therein)
(10)(iii) 10.5 The Progressive Corporation 2008 Gainsharing Plan Annual Report on Form 10-K (filed with SEC on February
27, 2008; Exhibit 10.6 therein)
(10)(iii) 10.6 2006 Progressive Capital Management Bonus Plan Current Report on Form 8-K (filed with SEC on February 9,
2006; Exhibit 10(C) therein)
(10)(iii) 10.7 The Progressive Corporation 2007 Executive Bonus Plan Current Report on Form 8-K (filed with SEC on February 8,
2007; Exhibit 10(A) therein)
(10)(iii) 10.8 The Progressive Corporation 2006 Information Technology Current Report on Form 8-K (filed with SEC on February 9,
Incentive Plan 2006; Exhibit 10(B) therein)
(10)(iii) 10.9 The Progressive Corporation 2007 Information Technology Annual Report on Form 10-K (filed with SEC on February
Incentive Plan (terminated as of December 31, 2007) 28, 2007; Exhibit 10.16 therein)
(10)(iii) 10.10 The Progressive Corporation 1995 Incentive Plan Annual Report on Form 10-K (filed with SEC on February
28, 2006; Exhibit 10(R) therein)
(10)(iii) 10.11 Form of Non-Qualified Stock Option Agreement under The Annual Report on Form 10-K (filed with SEC on February
Progressive Corporation 1995 Incentive Plan 27, 2008; Exhibit 10.18 therein)
(10)(iii) 10.12 Form of Objective-Based (now known as Performance- Annual Report on Form 10-K (filed with SEC on February
Based) Non-Qualified Stock Option Agreement under The 28, 2006; Exhibit 10(T) therein)
Progressive Corporation 1995 Incentive Plan
(10)(iii) 10.13 Form of The Progressive Corporation 1995 Incentive Plan Annual Report on Form 10-K (filed with SEC on March 1,
Restricted Stock Award Agreement (Time-Based Award) 2005; Exhibit 10(T) therein)
(10)(iii) 10.14 The Progressive Corporation 2003 Incentive Plan Registration Statement No. 333-104646 (filed with SEC on
April 21, 2003; Exhibit 4(a) therein)
(10)(iii) 10.15 First Amendment to The Progressive Corporation 2003 Current Report on Form 8-K (filed with SEC on February 8,
Incentive Plan 2007; Exhibit 10(B) therein)
41
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
(10)(iii) 10.16 Form of The Progressive Corporation 2003 Incentive Plan Registration Statement No. 333-104646 (filed with SEC on
Restricted Stock Award Agreement (Time-Based Award) April 21, 2003; Exhibit 4(b) therein)
(for 2003)
(10)(iii) 10.17 Form of The Progressive Corporation 2003 Incentive Plan Quarterly Report on Form 10-Q (filed with SEC on May 10,
Restricted Stock Award Agreement (Time-Based Award) 2004; Exhibit 10(A) therein)
(for 2004 through February 2007)
(10)(iii) 10.18 Form of The Progressive Corporation 2003 Incentive Plan Current Report on Form 8-K (filed with SEC on March 26,
Restricted Stock Award Agreement (Time-Based Award) 2007; Exhibit 10.1 therein)
(for March 2007 and thereafter)
(10)(iii) 10.19 Form of The Progressive Corporation 2003 Incentive Plan Quarterly Report on Form 10-Q (filed with SEC on May 10,
Restricted Stock Award Agreement (Performance-Based 2004; Exhibit 10(B) therein)
Award) (for 2004 through February 2007)
(10)(iii) 10.20 Form of The Progressive Corporation 2003 Incentive Plan Current Report on Form 8-K (filed with SEC on March 26,
Restricted Stock Award Agreement (Performance-Based 2007; Exhibit 10.2 therein)
Award) (for March 2007 and thereafter)
(10)(iii) 10.21 The Progressive Corporation 2003 Directors Equity Registration Statement No. 333-104653 (filed with SEC on
Incentive Plan April 21, 2003; Exhibit 4(a) therein)
(10)(iii) 10.22 Amendment No. 1 to The Progressive Corporation 2003 Annual Report on Form 10-K (filed with SEC on March 4,
Directors Equity Incentive Plan 2004; Exhibit 10(V) therein)
(10)(iii) 10.23 Form of The Progressive Corporation 2003 Directors Equity Quarterly Report on Form 10-Q (filed with SEC on May 10,
Incentive Plan Restricted Stock Award Agreement (for 2004 2004; Exhibit 10(C) therein)
and thereafter)
(10)(iii) 10.24 The Progressive Corporation Executive Deferred Filed herewith
Compensation Plan (2003 Amendment and Restatement)
(10)(iii) 10.25 First Amendment to The Progressive Corporation Executive Annual Report on Form 10-K (filed with SEC on March 4,
Deferred Compensation Plan (2003 Amendment and 2004; Exhibit 10(Y) therein)
Restatement)
(10)(iii) 10.26 Second Amendment to The Progressive Corporation Annual Report on Form 10-K (filed with SEC on March 4,
Executive Deferred Compensation Plan (2003 Amendment 2004; Exhibit 10(Z) therein)
and Restatement)
42
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
(10)(iii) 10.27 Third Amendment to The Progressive Corporation Current Report on Form 8-K (filed with SEC on March 17,
Executive Deferred Compensation Plan (2003 Amendment 2005; Exhibit 10(A) therein)
and Restatement)
(10)(iii) 10.28 Fourth Amendment to The Progressive Corporation Current Report on Form 8-K (filed with SEC on December
Executive Deferred Compensation Plan (2003 Amendment 13, 2005; Exhibit 10(B) therein)
and Restatement)
(10)(iii) 10.29 The Progressive Corporation Executive Deferred Current Report on Form 8-K (filed with SEC on December
Compensation Plan (2008 Amendment and Restatement) 20, 2007; Exhibit 10.1 therein)
(10)(iii) 10.30 Form of The Progressive Corporation Executive Deferred Current Report on Form 8-K (filed with SEC on December
Compensation Plan Deferral Agreement 10, 2004; Exhibit 10(a) therein)
(10)(iii) 10.31 Form of The Progressive Corporation Executive Deferred Annual Report on Form 10-K (filed with SEC on March 4,
Compensation Plan Performance-Based Restricted Stock 2004; Exhibit 10(AC) therein)
Deferral Agreement (for 2004)
Compensation Plan Performance-Based Restricted Stock 10, 2004; Exhibit 10(c) therein)
Deferral Agreement (for 2005)
(10)(iii) 10.33 Form of The Progressive Corporation Executive Deferred Annual Report on Form 10-K (filed with SEC on February
Compensation Plan Performance-Based Restricted Stock 28, 2006; Exhibit 10(CA) therein)
Deferral Agreement (for 2006 and thereafter)
(10)(iii) 10.34 Form of The Progressive Corporation Executive Deferred Filed herewith
Compensation Plan Time-Based Restricted Stock Deferral
Agreement (for 2003)
(10)(iii) 10.35 Form of The Progressive Corporation Executive Deferred Annual Report on Form 10-K (filed with SEC on March 4,
Compensation Plan Time-Based Restricted Stock Deferral 2004; Exhibit 10(AE) therein)
Compensation Plan Time-Based Restricted Stock Deferral 10, 2004; Exhibit 10(b) therein)
(10)(iii) 10.37 Form of The Progressive Corporation Executive Deferred Annual Report on Form 10-K (filed with SEC on February
Compensation Plan Time-Based Restricted Stock Deferral 28, 2006; Exhibit 10(CB) therein)
Agreement (for 2006 and thereafter)
43
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
(10)(iii) 10.38 The Progressive Corporation Executive Deferred Schedule TO (filed with SEC on September 14, 2004;
Compensation Trust (November 8, 2002 Amendment and Exhibit (d)(25) therein)
Restatement)
(10)(iii) 10.39 First Amendment to Trust Agreement between Fidelity Schedule TO (filed with SEC on September 14, 2004;
Management Trust Company and Progressive Exhibit (d)(26) therein)
(10)(iii) 10.40 Second Amendment to The Progressive Corporation Quarterly Report on Form 10-Q (filed with SEC on August
Executive Deferred Compensation Trust 2, 2007; Exhibit 10.1 therein)
(10)(iii) 10.41 Third Amendment to The Progressive Corporation Annual Report on Form 10-K (filed with SEC on February
Executive Deferred Compensation Trust 27, 2008; Exhibit 10.54 therein)
(10)(iii) 10.42 Fourth Amendment to The Progressive Corporation Filed herewith
Executive Deferred Compensation Trust
(10)(iii) 10.43 The Progressive Corporation Directors Deferral Plan (2008 Current Report on Form 8-K (filed with SEC on December
Amendment and Restatement) 20, 2007; Exhibit 10.2 therein)
(10)(iii) 10.44 The Progressive Corporation Directors Restricted Stock Annual Report on Form 10-K (filed with SEC on March 4,
Deferral Plan 2004; Exhibit 10(AH) therein)
(10)(iii) 10.45 First Amendment to The Progressive Corporation Directors Current Report on Form 8-K (filed with SEC on December
Restricted Stock Deferral Plan 13, 2005; Exhibit 10(A) therein)
(10)(iii) 10.46 The Progressive Corporation Director Restricted Stock Current Report on Form 8-K (filed with SEC on December
Deferral Plan (2008 Amendment and Restatement) 20, 2007; Exhibit 10.3 therein)
(10)(iii) 10.47 First Amendment to The Progressive Corporation Director Filed herewith
Restricted Stock Deferral Plan (2008 Amendment and
Restatement)
(10)(iii) 10.48 Form of The Progressive Corporation Directors Restricted Current Report on Form 8-K (filed with SEC on December
Stock Deferral Plan Deferral Agreement 10, 2004; Exhibit 10(d) therein)
(10)(iii) 10.49 The Progressive Corporation 1990 Directors’ Stock Option Annual Report on Form 10-K (filed with SEC on February
Plan (Amended and Restated as of April 24, 1992 and as 27, 2008; Exhibit 10.64 therein)
further amended on July 1, 1992)
44
EXHIBIT INDEX
Exh ibit No. Form

Un de r 10-K
(10)(iii) 10.50 The Progressive Corporation 1998 Directors’ Stock Option Annual Report on Form 10-K (filed with SEC on February
Plan 27, 2008; Exhibit 10.65 therein)
(10)(iii) 10.51 Director Compensation Schedule for 2003, 2004, and 2005 Annual Report on Form 10-K (filed with SEC on March 1,
2005; Exhibit 10(AW) therein)
(10)(iii) 10.52 Director Compensation Schedule for 2006 and 2007 Current Report on Form 8-K (filed with SEC on February 9,
2006; Exhibit 10(D) therein)
(10)(iii) 10.53 Director Compensation Schedule for 2008 and 2009 Filed herewith
(10)(iii) 10.54 The Progressive Corporation Executive Separation Current Report on Form 8-K (filed with SEC on December
Allowance Plan (2006 Amendment and Restatement) 13, 2006; Exhibit 10(A) therein)
(10)(iii) 10.55 First Amendment to The Progressive Corporation Executive Quarterly Report on Form 10-Q (filed with SEC on
Separation Allowance Plan (2006 Amendment and November 1, 2007; Exhibit 10.1 therein)
Restatement)
(11) 11 Computation of Earnings Per Share Filed herewith
(13) 13 The Progressive Corporation 2008 Annual Report to Filed herewith
Shareholders
(21) 21 Subsidiaries of The Progressive Corporation Filed herewith
(23) 23 Consent of Independent Registered Public Accounting Firm Incorporated herein by reference to page 36 of this Annual
Report on Form 10-K
(24) 24 Powers of Attorney Filed herewith
(31) 31.1 Rule 13a-14(a)/15d-14(a) Certification of the Principal Filed herewith
Executive Officer, Glenn M. Renwick
(31) 31.2 Rule 13a-14(a)/15d-14(a) Certification of the Principal Filed herewith
Financial Officer, Brian C. Domeck
(32) 32.1 Section 1350 Certification of the Principal Executive Officer, Filed herewith
Glenn M. Renwick
(32) 32.2 Section 1350 Certification of the Principal Financial Officer, Filed herewith
Brian C. Domeck
(99) 99 Letter to Shareholders from Glenn M. Renwick, President Filed herewith
and Chief Executive Officer
No other exhibits are required to be filed herewith pursuant to Item 601 of Regulation S-K.
45
Exhibit 10.24
THE PROGRESSIVE CORPORATION EXECUTIVE

DEFERRED COMPENSATION PLAN
( 2003 Amendment and Restatement)

TABLE OF CONTENTS
PAGE NO .
ARTICLE 1
DEFINITIONS
1.1 “Affiliated Company” 1

1.2 “Account” or “Deferral Account” 1
1.3 “Award” 1
1.4 “Beneficiary” 1
1.5 “Change in Control” 1
1.6 “Code” 1
1.7 “Committee” 1
1.8 “Company” 1
1.9 “Company Stock Fund” 2
1.10 “Deduction Limitation” 2
1.11 “Deferral Agreement” 2
1.12 “Deferral” 2
1.13 “Disabled” and “Disability” 2
1.14 “Distribution Event” 2
1.15 “Eligible Executive” 2
1.16 “ERISA” 2
1.17 “Fixed Deferral Period” 3
1.18 “Gainsharing Award” 3
1.19 “Incentive Plan” 3
1.20 “Investment Fund” 3
1.21 “Participant” 3
1.22 “Performance-Based Restricted Stock Award” 3
1.23 “Plan” 3
1.24 “Plan Year” 3
1.25 “Restricted Stock” 3
1.26 “Restricted Stock Award” 3
1.27 “Stock” 3
1.28 “Termination of Employment” 3
1.29 “Time-Based Restricted Stock Award” 3
1.30 “Trust” 4
1.31 “Trust Agreement” 4
1.32 “Trustee” 4
1.33 “Valuation Date” 4
1.34 “Withdrawal Date” 4
ARTICLE 2
DEFERRAL OF AWARDS
2.1 Method of Deferral 4
2.2 Deferral Agreement Provisions 4
2.3 Fixed Deferral Periods 5
ARTICLE 3
DISTRIBUTIONS AND WITHDRAWALS
3.1 Date of Distribution 6
3.2 Method of Distribution 6
3.3 Amount of Distribution 7
3.4 Form of Distribution 7
3.5 Withdrawal Election 7
ARTICLE 4
ACCOUNTS
4.1 Establishment of Deferral Accounts 8
4.2 Investment of Accounts 8
4.3 Valuation of Investment Funds 8
4.4 Valuation of Accounts 9
4.5 Nature of Accounts 9
4.6 Account Statements 9
ARTICLE 5
INVESTMENT FUNDS
5.1 Investment Funds 9
5.2 Investment Elections of Participants 10
5.3 Transfers 10
5.4 Special Rules for Restricted Stock 10
5.5 Nature of Investment Funds 10
5.6 Liquidation of Investment Funds 10
ARTICLE 6
TRUST
6.1 Establishment of Trust 11
ARTICLE 7
PLAN OPERATION AND ADMINISTRATION
7.1 Powers of Committee 11
7.2 Nondiscriminatory Exercise of Authority 12
7.3 Reliance on Tables, etc 12
7.4 Indemnification 12
7.5 Notices to Committee 12
ARTICLE 8
CLAIMS PROCEDURES
8.1 Establishment of Claims Procedures 13
8.2 Claims Denials 13
8.3 Appeals of Denied Claims 13
8.4 Review of Appeals 14
8.5 Extensions 14
ARTICLE 9
AMENDMENT AND TERMINATION OF THE PLAN
9.1 Amendment 14
9.2 Termination 15
9.3 Liquidation of the Trust 15
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Headings 15
10.2 Plan Not Contract of Employment 15
10.3 Severability 16
10.4 Prohibition on Assignment 16
10.5 Number and Gender 16
10.6 Governing Law 16
10.7 Satisfaction of Claims 16
10.8 No Liability 16
10.9 Tax Withholding 17
10.10 Facility of Payment 17
10.11 Repayment of Awards 17
10.12 Stock Subject to the Plan 17
THE PROGRESSIVE CORPORATION EXECUTIVE

DEFERRED COMPENSATION PLAN
(2003 Amendment and Restatement)
WHEREAS, The Progressive Corporation maintains The Progressive Corporation Executive Deferred Compensation Plan pursuant to a 2000
Amendment and Restatement and the First Amendment thereto; and
WHEREAS, it is desired to further amend and restate the Plan;
NOW, THEREFORE, effective March 1, 2003 the Plan is hereby amended and restated in its entirety to provide as follows:
ARTICLE 1
DEFINITIONS
1.1 “Affiliated Company” means any corporation included in the affiliated group of corporations as defined in Section 1504 of the Code
(determined without regard to 1504(b)) of which the Company is the common parent corporation.
1.2 “ Account” or “ Deferral Account” shall have the meaning set forth in Section 4.1.
1.3 “Award” means a Gainsharing Award or Restricted Stock Award.
1.4 “Beneficiary” means such person(s) as the Participant has designated. A Participant may change his/her Beneficiary designation at
any time. All Beneficiary designations (including changes) shall be made in writing on such forms as the Committee shall prescribe, and shall
become effective only when received and accepted by the Committee; provided, however, that a Beneficiary designation (including a change)
received by the Committee after the designating Participant’s death shall be disregarded. In the absence of a Beneficiary designation, or if the
designated Beneficiary is no longer living or in existence at the time of the Participant’s death, all distributions payable from the Plan upon the
Participant’s death shall be paid to the Participant’s estate.
1.5 “Change in Control” means a “Change in Control” or “Potential Change in Control” within the meaning of The Progressive
Corporation 2003 Incentive Plan (as amended from time to time).
1.6 “Code” means the Internal Revenue Code of 1986, as amended.
1.7 “Committee” means the Compensation Committee of the Board of Directors of the Company, or any successor committee.
1.8 “Company” means The Progressive Corporation, an Ohio corporation, or its successors.
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1.9 “Company Stock Fund” means an Investment Fund consisting of Stock and cash, and administered in accordance with such rules
regarding reinvestment of dividends and treatment of fractional shares as the Committee shall prescribe.
1.10 “Deduction Limitation” means the following described limitation on a payment that may otherwise be distributable under the Plan. If
the Committee determines in good faith prior to a Change in Control that there is a reasonable likelihood that any compensation paid to a
Participant for a taxable year of the Company would not be deductible by the Company solely by reason of the limitation under Code
Section 162(m), then to the extent deemed necessary by the Committee to ensure that the entire amount of any distribution to the Participant
pursuant to this Plan prior to a Change in Control is deductible, the Committee may elect to defer all or any portion of a distribution under this
Plan. Any amounts deferred pursuant to this limitation shall continue to be deemed to be invested as provided in Article 5. The amounts so
deferred (subject to investment gains and losses) shall be distributed to the Participant or his or her Beneficiary (if the Participant dies) at the
earliest possible date, as determined by the Committee in good faith, on which the deductibility of compensation paid or payable to the
Participant for the taxable year of the Company during which the distribution is made will not be limited by Code Section 162(m), or, if earlier,
upon a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to any distributions
made after a Change in Control.
1.11 “Deferral Agreement” means an agreement entered into by an Eligible Executive pursuant to Article 2.
1.12 “Deferral” means an amount credited to a Deferral Account pursuant to a Deferral Agreement.
1.13 “Disabled” and “Disability” means that a Participant is expected to be unable to perform the duties of his usual occupation for at
least twelve (12) consecutive months, as determined by the Committee.
1.14 “Distribution Event” means, as to each Participant, the earliest of the following events:
(i) the Participant’s death;
(ii) the Participant’s Termination of Employment; or
(iii) Change in Control.
1.15 “Eligible Executive” means any executive of the Company or any Affiliated Company who is designated in writing as an Eligible
Executive by the Committee, excluding, however, individuals who are not residents of the United States or are not working at a location in the
United States.
1.16 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
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1.17 “Fixed Deferral Period” shall have the meaning set forth in Section 2.3.
1.18 “Gainsharing Award” means any bonus or other incentive award payable with respect to a Plan Year under The Progressive
Corporation 2003 Gainsharing Plan, The Progressive Corporation 2003 Information Technology Incentive Plan, 2003 Progressive Capital
Management Bonus Plan, The Progressive Corporation 1999 Executive Bonus Plan (as amended on January 31, 2003) or any other plan or
program as may be designated by the Committee.
1.19 “Incentive Plan” means The Progressive Corporation 2003 Incentive Plan, as amended from time to time.
1.20 “Investment Fund” means a device established from time to time by the Committee pursuant to Section 5.1 that is used to calculate
gains and losses in amounts deferred by Participants under the Plan.
1.21 “Participant” means an Eligible Executive who has deferred receipt of a portion of any Gainsharing Award or Restricted Stock Award
pursuant to a Deferral Agreement. Participation shall begin on the date that a Deferral Account is established in the name of the Participant
and shall end on the date that the Participant dies or receives a distribution of the balance of all his/her Deferral Accounts.
1.22 “Performance-Based Restricted Stock Award” means an Award of “Performance-Based Restricted Stock”, as defined in the
Incentive Plan.
1.23 “Plan” means The Progressive Corporation Executive Deferred Compensation Plan (2003 Amendment and Restatement), as set forth
herein and as it may be amended from time to time.
1.24 “Plan Year” means 2003 and each subsequent calendar year.
1.25 “Restricted Stock” means an award of shares of Stock that is made pursuant to the Incentive Plan and is subject to restrictions.
1.26 “Restricted Stock Award” means an award of Restricted Stock under the Incentive Plan.
1.27 “Stock” means the Common Shares, $1.00 par value, of the Company.
1.28 “Termination of Employment” means the voluntary or involuntary cessation of a Participant’s active employment with the Company
and all Affiliated Companies as a result of any reason other than death, Disability and approved leave of absence.
1.29 “Time-Based Restricted Stock Award” means an Award of “Time-Based Restricted Stock”, as defined in the Incentive Plan.
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1.30 “Trust” shall mean the trust maintained pursuant to the Trust Agreement and known as The Progressive Corporation Executive
Deferred Compensation Trust.
1.31 “Trust Agreement” shall mean the agreement of trust between the Company and the Trustee executed in furtherance of the Plan, as
the same may be amended from time to time.
1.32 “Trustee” shall mean the person selected from time to time by the Company to serve as trustee under the Trust Agreement.
1.33 “Valuation Date” shall mean each day that the New York Stock Exchange is open for trading.
1.34 “Withdrawal Amount” shall have the meaning provided in Article 3.
ARTICLE 2
DEFERRAL OF AWARDS
2.1 Method of Deferral.

Each Eligible Executive may elect to defer receipt of all or a portion of his/her Gainsharing Award and/or the entirety of any of his/her
Restricted Stock Awards in respect of any Plan Year by signing a Deferral Agreement and delivering it to the Committee or by completing a
Deferral Agreement and transmitting it to the Committee via the Company’s electronic mail system. If a Gainsharing Award is payable in
installments, each installment, whether or not payable in the same Plan Year, shall be subject to the same Deferral Agreement. Any taxes or
other amounts due with respect to any deferred Gainsharing Award or Restricted Stock Award shall be paid by the Eligible Executive to the
Company no later than the date specified by the Company.
2.2 Deferral Agreement Provisions.

Each Deferral Agreement must satisfy all of the following requirements:
(a) it must be in the form specified by the Committee;
(b) it must be delivered in writing, or transmitted electronically, to the Committee in accordance with such procedures as the
Committee may establish from time to time.
(c) it must be irrevocable;
(d) as to deferrals of Gainsharing Awards, it must apply to only one such Award;
(e) as to deferrals of Restricted Stock Awards, it must apply to all Time-Based Restricted Stock Awards granted during the Plan
Year, all Performance-Based Restricted Stock Awards granted during the Plan Year, or both;
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(f) it must be delivered to the Committee in writing, or received by the Committee via the Company’s electronic mail system, (i) as to
each Gainsharing Award, prior to the Plan Year in which the Gainsharing Award will be earned, and (ii) as to each Restricted Stock
Award, prior to the date the Restricted Stock Award is granted;
(g) as to deferrals of Gainsharing Awards, it must specify the percentage of the Eligible Executive’s Gainsharing Award to be
deferred, which percentage shall not be less than ten percent (10%). The same deferral percentage shall apply to each installment of
a Gainsharing Award covered by the Deferral Agreement. However, a Deferral Agreement may provide for the deferral of a
percentage of that portion of a Gainsharing Award that exceeds a specified gross dollar amount, which percentage shall not be less
than ten percent (10%). Notwithstanding the preceding provisions of this Section 2.2(g), no Deferral shall be less than such dollar
amount as the Committee may specify from time to time;
(h) as to deferral of a Restricted Stock Award, it must apply to the entirety of each Time-Based Restricted Stock Award granted
during the Plan Year, the entirety of each Performance-Based Restricted Stock Award granted during the Plan Year, or both;
(i) it must specify whether the balance of the Deferral Account to be established pursuant to that Deferral Agreement will be
distributed in a lump sum, in three (3) annual installments, in five (5) annual installments, or in ten (10) annual installments; and
(j) it must contain such other provisions, conditions and limitations as may be required by the Company or the Committee.
2.3 Fixed Deferral Periods.

If an Eligible Executive wishes to defer receipt of all or a portion of any Award for a fixed period of time (“Fixed Deferral Period”), then his/her
Deferral Agreement relating to such Award shall specify that Fixed Deferral Period. Such Fixed Deferral Period shall not be less than three
(3) years following (i) in the case of a deferral of all or a portion of a Gainsharing Award, the end of the Plan Year in which the Gainsharing
Award will be earned and (ii) in the case of a deferral of a Restricted Stock Award, the end of the Plan Year in which the last of the restrictions
applicable to the Restricted Stock Award expire, and, as to all Awards, shall end on the date the Eligible Executive attains age 43, 47, 51, 55 or
59, as elected by the Eligible Executive in his/her Deferral Agreement. In the case of a Restricted Stock Award as to which restrictions expire in
installments, the Fixed Deferral Period must end on the same date for all installments. Notwithstanding the preceding provisions of this
Section 2.3, Eligible Executives may not elect a Fixed Deferral Period with respect to the deferral of any Performance-Based Restricted Stock
Award.
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ARTICLE 3
DISTRIBUTIONS AND WITHDRAWALS
3.1 Date of Distribution.

Distribution of the balance of each Deferral Account of a Participant shall be made or shall commence within thirty (30) days following the
earlier of (i) the date a Distribution Event occurs, (ii) the date on which the Fixed Deferral Period, if any, applicable to such Account expires, or
(iii) the date, if any, selected by the Company, in its sole discretion, pursuant to Section 9.2. If distribution is to be made in installments,
payment of installments following the first installment shall be made within thirty (30) days following each anniversary of the date referred to in
clause (i) or (ii) of the preceding sentence, as applicable, until all installments have been paid. The Committee, in its sole discretion, may also
permit distribution of the balance of all of a Participant’s Deferral Accounts to be made or commence at any time following the date the
Participant is determined by the Committee to be Disabled. If the Committee approves such a Disability distribution, no further Deferrals shall
be made with respect to the Disabled Participant following the date of the Committee’s approval, and each Deferral Agreement to which such
Participant is a party shall be of no further effect.
3.2 Method of Distribution.

Each distribution of the balance of a Deferral Account shall be made to the Participant, except that any such distribution made on account of
the Participant’s death shall be made to the Participant’s Beneficiary. Each distribution made on account of the Participant’s death, termination
of the Plan or a Change in Control shall be paid in a lump sum. Each distribution made on account of the Participant’s Termination of
Employment or expiration of a Fixed Deferral Period shall be paid in either a lump sum or installments, as specified in the applicable Deferral
Agreement. Each distribution made on account of the Participant’s Disability shall be paid in either a lump sum or installments, as determined
by the Committee in its sole discretion. If a Participant elects to receive (or, in the case of Disability, begins receiving) payment in installments
and dies prior to payment of all installments, the balance remaining unpaid at his/her death shall be paid to his/her Beneficiary in a lump sum.
Installment payments shall be paid in three (3) annual installments, in five (5) annual installments or in ten (10) annual installments, as specified
in the applicable Deferral Agreement. Notwithstanding the preceding provisions of this Section 3.2, a Participant may elect to change the
method of distribution elected in respect of any distribution to be made on account of Termination of Employment or expiration of a Fixed
Deferral Period to any of the four permissible options (lump sum, in three (3) annual installments, in five (5) annual installments or in ten
(10) annual installments). Each such change must be made in writing on such forms as the Committee shall specify and must be delivered to
the Committee at least one (1) year prior to Termination of Employment or expiration of the Fixed Deferral Period.
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3.3 Amount of Distribution.

The amount of each lump sum payment shall be equal to the balance of the Deferral Account, as of the Valuation Date immediately preceding
the date of distribution. The amount of each installment payment shall be equal to the balance of the Deferral Account as of the Valuation Date
immediately preceding the date of payment multiplied by a fraction, the numerator of which is one and the denominator of which is the number
of years remaining in the period over which installments are to be paid. Installment distributions to be made in Stock shall be rounded to the
nearest whole share. Notwithstanding anything in the Plan to the contrary, all distributions, except those made on account of a Change in
Control, are subject to the Deduction Limitation.
3.4 Form of Distribution.

All distributions shall be made in cash, except that a distribution representing amounts invested in the Company Stock Fund shall be made in
Stock with any fractional shares of Stock to be made in cash.
3.5 Withdrawal Election.

A Participant may elect at any time to withdraw all of his/her Deferral Account balances, less a withdrawal penalty equal to 10% of such
amount (the net amount shall be referred to as the “Withdrawal Amount”). This election can be made at any time before or after Disability,
death or Termination of Employment, and whether or not the Participant is in the process of being paid pursuant to an installment payment
schedule. No partial withdrawals of the Withdrawal Amount shall be allowed. The Withdrawal Amount shall be paid in a lump sum, except to
the extent the Deduction Limitation requires otherwise. The Participant shall make a withdrawal election by giving the Committee advance
written notice of the election in a form specified by the Committee. The election shall be irrevocable. The Participant shall be paid (or, if the
Deduction Limitation applies, commence to be paid) the Withdrawal Amount within 30 days after the Committee’s receipt of his/her election.
Once the Withdrawal Amount is paid, or commences to be paid, the Participant’s participation in the Plan shall terminate and the Participant
shall not be eligible to participate in the Plan thereafter. If the Deduction Limitation applies, the entire balance of all of the Participant’s Deferral
Accounts shall be reduced by the 10% withdrawal penalty effective on the date that payment of the Withdrawal Amount is to commence, even
though final payment of the last portion of the Withdrawal Amount will not be made until permitted by the Deduction Limitation provisions.
Any portion of the Withdrawal Amount not paid immediately shall continue to be deemed to be invested as provided in Article 5. If a
Participant dies prior to payment of any portion of a Withdrawal Amount, the remaining portion shall be paid to his/her Beneficiary in a lump
sum, subject to the Deduction Limitation. The provisions of Section 3.4 shall apply to all withdrawals under this Section 3.5.
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ARTICLE 4
ACCOUNTS
4.1 Establishment of Deferral Accounts.

The Committee shall establish a Deferral Account in the name of each Participant for each Gainsharing Award, or portion thereof, and each
Restricted Stock Award that is the subject of a Deferral Agreement. As to Deferrals of Gainsharing Awards, each such Account shall be
established as of the first date that such Gainsharing Award, or portion thereof, otherwise would have been paid to the Participant. As to
deferrals of Restricted Stock Awards, each such Account shall be established as of the date that the restrictions applicable to such Restricted
Stock Award expire. In the case of a Restricted Stock Award as to which the restrictions expire at different times for different portions of the
Award, such Account shall be established as of the date the first of such restrictions expires. Each Deferral Account shall be credited with the
deferred portion of such Award at the time the Account is established, or, in the case of a Restricted Stock Award as to which the restrictions
expire at different times for different portions of the Award, from time-to-time as such restrictions expire. Thereafter, all Deferral Accounts shall
be valued and administered as provided in this Article. Notwithstanding anything in the Plan to the contrary, the Trustee may combine two
(2) or more of any Participant’s Deferral Accounts into a single Account, if the Deferral Accounts to be combined (i) are subject to Fixed
Deferral Periods ending on the same date or (ii) are not subject to Fixed Deferral Periods at all.
4.2 Investment of Accounts.

All credits to a Deferral Account of a Participant shall be deemed to be invested in such Investment Fund or Funds as the Participant shall
elect from time to time in accordance with Article 5. The number of shares of Stock to be credited to a Participant’s Account by virtue of a
Participant’s initial election to invest a portion of a Deferral in the Company Stock Fund shall be determined on the date of the Deferral in
accordance with such procedures as the Committee shall establish, based on the weighted average price paid for all shares of Stock purchased
by the Trustee and deposited in the Trust on that date pursuant to Article 6. Notwithstanding the preceding provisions of this Section 4.2 all
credits to a Deferral Account of a Participant relating to a deferred Restricted Stock Award shall be deemed to be invested in the Company
Stock Fund until six (6) months and one (1) day following the expiration of the restrictions applicable to such Award, unless otherwise
determined by the Committee at or after the deferral of such Award. Thereafter, the preceding provisions of this Section 4.2 shall apply.
4.3 Valuation of Investment Funds.

As of each Valuation Date, the Trustee shall compute the value of each Investment Fund from which shall be determined the net gain or loss
of such Investment Fund since the immediately preceding Valuation Date. The net gain or loss shall include any unrealized and realized profits
and losses, and any dividends, interest or other income and any expenses which are due or accrued, but shall not include distributions from
such Investment Fund. In determining the value of each Investment Fund, the Trustee shall use the following values:
-8-
securities listed on any nationally recognized securities exchange shall be valued at the closing price reported on any such exchange on the
Valuation Date, or, if there were no sales on the Valuation Date, then at the last quoted bid price on the Valuation Date. Securities not listed on
a recognized securities exchange shall be valued at the last quoted closing bid price on the Valuation Date. A unit of participation in a common
trust fund maintained by the Trustee or a share in a mutual fund shall be valued at the unit value, or share price respectively, in effect at the
close of business on the Valuation Date. Securities with respect to which there were no available sale prices or bid prices on the Valuation
Date, and any other investments, shall be valued at prices deemed by the Trustee to represent the fair market value thereof on the Valuation
Date.
4.4 Valuation of Accounts.

As of each Valuation Date, the net gain or loss of each Investment Fund shall be allocated among the appropriate Deferral Accounts in
accordance with such procedures as the Committee shall establish, which procedures shall apply uniformly to all Participants.
4.5 Nature of Accounts.

All credits to each Deferral Account of each Participant shall be recorded as a liability on the books of the Company. However, no Participant
or Beneficiary shall have any proprietary rights of any nature with respect to any Account of any Participant or with respect to any funds,
securities or other property owned by the Company or any Affiliated Company that is held in the Trust or that otherwise may be represented
from time to time by Investment Funds. All payments under the Plan shall be made from the Trust or from the Company’s general funds and in
no event shall any Participant or Beneficiary have any claims or rights to any payment hereunder that are superior to any claims or rights of
any general creditor of the Company.
4.6 Account Statements.

The Committee will furnish each Participant, or make available to each Participant on-line, periodic statements of the value of each of his/her
Deferral Accounts.
ARTICLE 5
INVESTMENT FUNDS
5.1 Investment Funds.

The Committee shall establish and maintain the Company Stock Fund and such other Investment Funds as are specified from time to time by
the Company. In this regard, the Company may choose to offer as Investment Funds any investment vehicles, including without limitation:
(i) securities issued by investment companies advised by affiliates of the Trustee, (ii) guaranteed investment contracts recommended by the
Trustee, and (iii) collective investment trusts maintained by the Trustee.
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5.2 Investment Elections of Participants.

Each Participant shall make an investment election in the manner prescribed by the Committee, directing the manner in which his/her Deferrals
shall be deemed to be invested. Each investment election must be made at the time the applicable Deferral Agreement is signed and may be
changed upon notice to the Committee at any time prior to the deemed deposit of the applicable Deferral into one or more Investment Funds.
Such elections and notices to the Committee must be made in writing or through the Company’s electronic mail system in accordance with
such procedures as the Committee may prescribe. Each Participant may make a separate investment election for each of his/her Deferral
Accounts. Each investment election shall specify that Deferrals shall be deemed to be deposited in one or more of the Investment Funds in
percentages that are each an integral multiple of 1% and that in the aggregate equal 100% of the Deferral.
5.3 Transfers. Amounts deemed to be invested in an Investment Fund pursuant to this Section may be transferred to another Investment
Fund in accordance with such procedures and limitations as the Committee shall prescribe. The procedures and limitations prescribed by the
Committee may include, without limitation, provisions which (i) limit transfers to specified dollar amounts or percentages (ii) limit the number of
transfers that each Participant may make each Plan year (iii) limit the dates as of which transfers may become effective and (iv) impose waiting
periods or other restrictions in connection with multiple transfers in and out of the same Investment Fund. All such procedures and limitations
shall apply uniformly to similarly situated Participants.
5.4 Special Rule for Restricted Stock Awards. Notwithstanding the preceding provisions of this Article 5, each Deferral of a Restricted
Stock Award shall be deemed to be invested in the Company Stock Fund until six (6) months and one (1) day following the date the
restrictions applicable to such Restricted Stock Award expire, unless otherwise determined by the Committee at or after the deferral of such
Award. Thereafter, the Participant may transfer all or a portion of such Deferral to another Investment Fund in accordance with the preceding
provisions of this Article 5.
5.5 Nature of Investment Funds.

Notwithstanding anything in the Plan, Trust or any Deferral Agreement to the contrary, no Participant shall have any rights or interests in any
particular funds, securities or property of the Company, any Affiliated Company or the Trust, or in any investment vehicle in which Deferrals
are deemed to be invested, by virtue of any investment election made by the Participant under the Plan, any deemed investment under the Plan
or any transactions engaged in by the Trust. Each Deferral Account, however, shall be credited/charged in accordance with Article 4 with
gains/losses as if the Participant in fact had made a corresponding actual investment.
5.6 Liquidation of Investment Funds.

If any Investment Fund is liquidated or otherwise ceases to exist without a successor, then that portion of each Account balance that
previously has been deemed to have been invested in that Investment Fund shall be deemed to have been transferred to an
- 10 -
Investment Fund consisting of money market instruments, or, if none, such other Investment Fund selected by the Committee.
ARTICLE 6
TRUST
6.1 Establishment of Trust.

The Company shall establish and maintain a Trust to provide a source of funds to assist the Company in meeting its liabilities under the Plan.
Within thirty (30) days following the end of each Plan Year ending after the Trust has become irrevocable pursuant to the Trust Agreement,
the Company shall be required to irrevocably deposit additional cash or other property to the Trust in an amount sufficient to pay each
Participant or Beneficiary the benefits payable pursuant to the terms of the Plan as of the close of that Plan year.
The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan Participants and general creditors of the Company as set forth herein and in the Trust
Agreement. Plan Participants and their Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and the Trust Agreement shall be mere unsecured contractual rights of Plan Participants and their
Beneficiaries against Company. Any assets held by the Trust will be subject to the claims of the Company’s general creditors under federal
and state law in the event of Insolvency, as defined in the Trust Agreement. All assets deposited in the Trust shall be held, administered and
distributed by the Trustee in accordance with the Trust Agreement. The Company shall pay directly, or reimburse the Trustee for, all taxes due
in respect of any income or gains on Trust assets.
ARTICLE 7
PLAN OPERATION AND ADMINISTRATION
7.1 Powers of Committee.

The Committee will have full power to administer the Plan. Such power includes, but is not limited to, the following authority:
(a) to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan;
(b) to interpret the Plan and to decide all matters arising thereunder, including the right to resolve or remedy any ambiguities, errors,
inconsistencies or omissions. All such interpretations shall be final and binding on all parties;
(c) to compute the amounts payable to any Participant or Beneficiary or other person in accordance with the provisions of the Plan;
- 11 -
(d) to authorize disbursements from the Trust or the Plan;

(e) to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under
ERISA, the Code or other applicable law;
(f) to appoint such agents, counsel, accountants and consultants as may be desirable to assist in administering the Plan;
(g) To exercise the other powers that are expressly granted to it herein, or that are impliedly necessary for it to carry out any of its
responsibilities hereunder; and
(h) by written instrument, to delegate any of the foregoing powers.
7.2 Nondiscriminatory Exercise of Authority.

The Committee shall exercise its authority in a nondiscriminatory manner so that all persons similarly situated will receive substantially the
same treatment.
7.3 Reliance on Tables, etc.

The Committee will be entitled, to the extent permitted by law, to rely conclusively on all tables, valuations, certificates, opinions and reports
which are furnished by any accountant, Trustee, counsel or other expert retained by the Committee to assist it in administering the Plan.
7.4 Indemnification.
In addition to whatever rights of indemnification to which employees, officers and directors of the Company and the Affiliated Companies may
be entitled under the articles of incorporation, regulations or bylaws of the Company or the Affiliated Companies, under any provision of law,
or under any other agreement, the Company shall satisfy any liabilities actually and reasonably incurred by any such employee, officer or
director, including expenses, attorneys’ fees, judgments, fines and amounts paid in settlement, in connection with any threatened, pending, or
completed action, suit, or proceeding which is related to the exercise or failure to exercise by such person or persons of any of the powers,
authority, responsibilities, or discretion of the Company, the Affiliated Companies or the Committee provided under the Plan or the Trust
Agreement, or reasonably believed by such person or persons to be provided thereunder, and any action taken by such person or persons in
connection therewith.
7.5 Notices to Committee.

The Committee shall designate one or more addresses to which notices and other communications to the Committee shall be sent. No notice or
other communication shall be considered to have been given to or received by the Committee until it has been delivered to the Committee’s
attention at one of such designated addresses.
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ARTICLE 8
CLAIMS PROCEDURES
8.1 Establishment of Claims Procedures

The Committee shall establish reasonable procedures under which a claimant, who may be a Participant, or Beneficiary, or his/her
duly authorized representative, may present a claim for benefits under this Plan.
8.2 Claims Denials

Unless such claim is allowed in full by the Committee, written notice of the denial shall be furnished to the claimant within ninety
(90) days (which may be extended by a period not to exceed an additional ninety (90) days if special circumstances so require and
written notice to the claimant is given prior to the expiration of the initial ninety (90) day period describing such circumstances and
indicating the date by which the Committee expects to render its determination) setting forth the following in a manner calculated to
be understood by the claimant:
(i) The specific reason(s) for the denial;
(ii) Specific reference(s) to any pertinent provision(s) of the Plan or rules promulgated pursuant thereto on which the
denial is based;
(iii) A description of any additional information or material as may be necessary to perfect the claim, together with an
explanation of why it is necessary;
(iv) A description of the Plan’s claims review procedures and the time limits applicable to such procedures, including a
statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit
determination on review; and
(v) An explanation of the steps to be taken if the claimant wishes to resubmit his/her claim for review.
8.3 Appeals of Denied Claims

Within a reasonable period of time after the denial of the claim, but in any event, not to be more than sixty (60) days, the claimant or
his/her duly authorized representative may make written application to the Committee for a review of such denial. The claimant or
his/her representative, may, upon request and free of charge, review or receive copies of documents, records and other information
relevant to the claimant’s claim for benefits, and may submit written comments, documents, records and other information relating
to the claim for benefits.
- 13 -
8.4 Review of Appeals

If an appeal is timely filed, the Committee shall conduct a full and fair review of the claim and mail or deliver to the claimant its
written decision within sixty (60) days after the claimant’s request for review (which may be extended by a period not to exceed an
additional sixty (60) days if special circumstances or a hearing so require and written notice to the claimant is given prior to the
expiration of the initial sixty (60) day period describing such special circumstances and indicating the date by which the Committee
expects to render its determination). In conducting its review, the Committee shall take into account all comments, documents,
records and other information submitted by the claimant relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination. The Committee’s decision on review shall:
(i) Be written in a manner calculated to be understood by the claimant;
(ii) State the specific reason(s) for the decision;
(iii) Make specific reference to pertinent provision(s) of the Plan;
(iv) State that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant to the claimant’s claim for benefits; and
(v) Include a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA.
8.5 Extensions
If a period of time is extended, as permitted under Sections 8.2 and 8.4 above, due to a claimant’s failure to submit information to
decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of
the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.
ARTICLE 9
AMENDMENT AND TERMINATION OF THE PLAN
9.1 Amendment.
The Company may amend the Plan and Trust Agreement in any respect at any time for any reason by action of the Committee without liability
to any Participant, Beneficiary or other person for any such amendment or for any other action taken pursuant to this Section 9.1, provided
that any amendment required to be approved by the Company’s shareholders pursuant to Section 162(m) of the Code shall not be effective
until approved by the
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Company’s shareholders in accordance with the requirements of Section 162(m) and further provided that no such amendment shall be made
retroactively in a manner that would deprive any Participant of any rights or benefits which have accrued to his/her benefit under the Plan as
of the date such amendment is proposed to be effective, unless such amendment is necessary to comply with applicable law.
9.2 Termination.
The Company may terminate the Plan at any time for any reason by action of the Committee without any liability to any Participant, Beneficiary
or other person for any such termination or for any other action taken pursuant to this Section 9.2. Following termination of the Plan, and
notwithstanding the provisions of any Deferral Agreement entered into prior to such termination, no additional Deferrals may be made
hereunder, but all existing Accounts shall continue to be administered in accordance with the Plan, as in effect immediately prior to
termination, and shall be distributed in accordance with such terms of the Plan and the applicable Deferral Agreements, unless and until the
Company elects to accelerate distribution as provided below. At any time on or after the effective date of termination of the Plan, the
Company, in its sole discretion, may elect to accelerate the distribution of the entire balance of each Participant’s Accounts. Such accelerated
distributions shall be made in accordance with Article 3, except that all distributions shall be made in a lump sum based on the value of the
Accounts, determined as of the Valuation Date immediately preceding the date of distribution. Upon the completion of distributions to all
Participants or Beneficiaries, as the case may be, no Participant, Beneficiary or person claiming under or through them, will have any claims in
respect of the Plan.
9.3 Liquidation of the Trust.

The Trust shall continue in existence after the termination of the Plan for such period of time as may be required to complete the liquidation
thereof in accordance with the terms of this Article 9.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Headings.
The headings of the Plan have been inserted for convenience of reference only and are not to be deemed controlling in any constructions of
the provisions herein (other than with respect to defined terms).
10.2 Plan Not Contract of Employment.

The existence of the Plan shall not create, evidence or change any contract of employment with any Participant. The right of the Company and
all Affiliated Companies to take corrective, disciplinary or other action with respect to their employees, including terminating their respective
employment at any time for any reason, shall not be affected by any
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provision of this Plan, and the Company and the Affiliated Companies will not be deemed responsible to provide continuing employment for
any reason, at any time solely by reason of this Plan.
10.3 Severability.
If any provision of the Plan shall be invalid, such provision shall be fully severable, and the remainder of the Plan and the application thereof
shall not be affected thereby.
10.4 Prohibition on Assignment.

No right or interest under the Plan of any Participant or Beneficiary shall be subject at any time or in any manner to anticipation, alienation,
assignment (either at law or in equity), encumbrance (as security or otherwise), garnishment, levy, execution, or other legal or equitable
process, and no Participant or Beneficiary shall have the power at any time or in any manner to anticipate, transfer, assign (either at law or in
equity), alienate, or subject to attachment, garnishment, levy, execution or other legal or equitable process, or in any way encumber, such
Participant’s or Beneficiary’s rights or interests under the Plan, and any attempt to do so shall be void; provided, however, that the Company
shall have the unrestricted right to set off against or recover out of any payments due a Participant or Beneficiary at the time such payments
would have otherwise been payable hereunder, any amounts owed the Company or any Affiliated Company by such Participant or
Beneficiary.
10.5 Number and Gender.

Any use of the singular shall be interpreted to include the plural and the plural the singular. Any use of the masculine, feminine or neuter shall
be interpreted to include the masculine, feminine and neuter, as the context shall require.
10.6 Governing Law.

To the extent not preempted by Federal law, the provisions of the Plan shall be construed, regulated and administered under the laws of the
State of Ohio.
10.7 Satisfaction of Claims.

Any payment to any Participant or Beneficiary in accordance with the terms of the Plan shall, to the extent thereof, be in full satisfaction of all
claims hereunder, whether they be against the Company, the Committee, or the Trustee, any of whom may require the Participant or Beneficiary
(or legal representative), as a condition precedent to such payment to execute a release and receipt therefor.
10.8 No Liability.
Participation in the Plan is entirely at the risk of each Participant. Neither the Company, any Affiliated Company, the Committee, the Trustee
nor any other person associated with the Plan shall have any liability for any loss or diminution in the value of Accounts, or for any
- 16 -
failure of the Plan to effectively defer recognition of income or to achieve any Participant’s desired tax treatment or financial results.
10.9 Tax Withholding.

All payments under the Plan shall be subject to federal, state and local income tax withholding and other legally required deductions.
10.10 Facility of Payment.

If the Committee determines that a Participant or Beneficiary entitled to receive a payment under this Plan is (at the time such payment is to be
made) a minor or physically, mentally or legally incompetent to receive such payment and that another person or an institution has legal
custody of such minor or incompetent individual, the Committee may cause payment to be made to such person or institution having custody
of such Participant or Beneficiary. Such payment, to the extent made, shall operate as a complete discharge of obligation by the Committee, the
Company, the Trustee and the Trust.
10.11 Repayment of Awards.

If any amount credited to a Deferral Account represents a portion of an Award that is subsequently found to be repayable by the Participant
to the Company or any Affiliated Company pursuant to the plan pursuant to which the Award was made, the amount of that credit shall
nevertheless remain unaffected by that repayment obligation, and the Participant shall make the required repayment out of his/her own funds.
10.12 Stock Subject to the Plan.

Subject to adjustment as provided below, the total number of shares of Stock reserved and available for issuance in connection with the Plan
is 848,598. Any Stock issued hereunder may consist, in whole or in part, of authorized and unissued shares or treasury shares. If there is a
merger, reorganization, consolidation, recapitalization, share dividend, share split, reverse split, combination of shares or other change in
corporate structure of the Company affecting the Stock, such substitution or adjustment shall be made in the aggregate number of shares of
Stock reserved for issuance under the Plan, and in the number of shares deemed to be held in any Account, as may be approved by the
Committee in its sole discretion.
10.13 The Addendum attached hereto entitled “Addendum to The Progressive Corporation Executive Deferred Compensation Plan
(“Plan”) Re: Former Participants under the Midland Companies Amended and Restated Director and Executive Cash or Deferred Compensation
Plan” is hereby incorporated herein by reference and made a part hereof.
- 17 -
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officers as of this 1st day of March,
2003.
By: Charles E. Jarrett

Title: Chief Legal Officer
- 18 -
Exhibit 10.34
The Progressive Corporation

Executive Deferred Compensation Plan
Time-Based Restricted Stock Deferral Agreement
THIS DEFERRAL AGREEMENT is entered into pursuant to the provisions of The Progressive Corporation Executive Deferred Compensation
Plan (“Plan”). All capitalized terms in this Agreement shall have the meanings ascribed to them in the Plan.
1. Deferral Election. I hereby elect to defer receipt of all Time-Based Restricted Stock Awards granted to me in 2003 under The Progressive
Corporation 2003 Incentive Plan. This election shall become effective as of the date the restrictions applicable to such Awards (or portion
thereof) expire and shall not apply to any Award (or portion thereof) that fails to vest free of all restrictions.
2. Fixed Deferral Period. (The Plan gives you the option of electing a Fixed Deferral Period. If you elect a Fixed Deferral Period, the balance of
your Deferral Account established pursuant to this Agreement will be distributed to you within 30 days after the end of the Fixed Deferral
Period, or, if earlier, the date you die or incur a Termination of Employment or the date a Change in Control occurs. If you do not elect a Fixed
Deferral Period, your Account will be distributed upon the earlier of the date you die or incur a Termination of Employment or the date a
Change in Control occurs.)
Please check one of the following:

I elect a Fixed Deferral Period ending upon attainment of age
43
47
51
55
59
(Must attain age selected at least 3 years after the end of the calendar year in which the Restricted Stock Award becomes fully vested. For
example, if a Time-Based Restricted Stock Award vests in three equal installments in years 2006, 2007 and 2008, you must select an age
you will attain at least 3 years after the last installment vests (in this case, your age no earlier than 2011.)
OR
I do not wish to elect a Fixed Deferral Period.
3. Method of Distribution. I hereby elect that any distribution of the balance of the Deferral Account established pursuant to this Agreement
made on account of Termination of Employment or expiration of a Fixed Deferral Period be paid as follows: (check one)
in a single lump sum payment
OR in
Three annual installments

Five annual installments
Ten annual installments
I understand that Plan distributions made on account of reasons other than Termination of Employment or expiration of a Fixed Deferral Period
will be made in a single lump sum payment, unless the Plan provides otherwise. I understand that I may change the method of distribution
elected above at least one year prior to the date of distribution to the extent permitted by the Plan.
4. Investment of Deferral Account. I understand that each amount credited to the Deferral Account established pursuant to this Agreement
shall be deemed to be invested in The Progressive Corporation Stock Fund for six months and one day following the date that such amount is
first credited to such Deferral Account. Thereafter, I understand that I may elect to have such amount deemed to be invested in one or more of
the other Investment Funds available under the Plan. I also understand that these deemed investments are merely devices used to
-1-
determine the amount payable to me under the Plan and do not provide me with any actual rights or interests in any particular funds, securities
or property of the Company, any Affiliated Company or the Trust, in any stock of The Progressive Corporation or in any Investment Funds
offered under the Plan. I also understand that my right to receive distributions under the Plan makes me a general creditor of the Company with
no greater right or priority than any other general creditor of the Company.
5. Miscellaneous. I understand that this Agreement is subject to the terms, conditions and limitations of the Plan, as in effect from time to time,
in all respects and that, except as expressly permitted by the Plan, all elections made in this Agreement are irrevocable. I acknowledge that I
have received, read and understand the Plan Description dated March, 2003 relating to the Plan. I agree to accept as final and binding all
decisions and interpretations of the Committee relating to the Plan, the Trust and this Agreement.
NAME OF ELIGIBLE EXECUTIVE:

DATE:
SSN:
Your electronic submission of this Election Form will create a date/time stamp and serve as your signature
Received and accepted on behalf of the Committee this day of , .
-2-
Exhibit 10.42
FOURTH AMENDMENT TO THE PROGRESSIVE CORPORATION

EXECUTIVE DEFERRED COMPENSATION TRUST
(November 8, 2002, Amendment and Restatement)
THIS FOURTH AMENDMENT, dated and effective as of the nineteenth day of May, 2008, except as otherwise set forth herein, by and
between Fidelity Management Trust Company (the “Trustee”) and The Progressive Corporation (“Company”);
WITNESSETH:
WHEREAS, the Trustee and Company heretofore entered into a Trust Agreement dated November 8, 2002, with regard to The
Progressive Corporation Executive Deferred Compensation Trust (the “Trust”); and
WHEREAS, the Company has informed the Trustee that effective after the close of business on May 19, 2008, the assets of the Fidelity
Dividend Growth Fund shall be frozen to new contributions and exchanges in; and
WHEREAS, the Company now desires, and hereby directs the Trustee, in accordance with Section 5 and Subsection 8(g) of the Trust
Agreement, effective after the close of business on May 19, 2008, to redirect all participant contributions directed to the Fidelity Dividend
Growth Fund to be invested in the Vanguard Institutional Index Fund (a/k/a Vanguard Institutional Index Fund – Institutional Shares). The
parties hereto agree that the Trustee shall have no discretionary authority with respect to this redirection directed by the Company. Any
variation from the procedure described herein may be instituted only at the express written direction of the Company; and
WHEREAS, the Company hereby directs the Trustee, in accordance with Section 5 and Subsection 8(g) of the Trust Agreement, effective
after the close of business on August 19, 2008, to liquidate all participant balances held in the Fidelity Dividend Growth Fund at its net asset
value on such day, and to invest the proceeds in the Vanguard Institutional Index Fund (a/k/a Vanguard Institutional Index Fund –
Institutional Shares) at its net asset value on such day. The parties hereto agree that the Trustee shall have no discretionary authority with
respect to this sale and transfer directed by the Company. Any variation from the procedure described herein may be instituted only at the
express written direction of the Company; and
WHEREAS, the Trustee and Company now desire to amend said Trust Agreement as provided for in Section 12 thereof;
NOW THEREFORE, in consideration of the above premises, the Trustee and Company hereby amend the Trust Agreement by:
(1) Effective after the close of business on May 19, 2008, amending the “investment options” section of Schedule “A” to delete the
reference to the “Fidelity Dividend Growth Fund” and replace it with “Fidelity Dividend Growth Fund (frozen to new contributions
and exchanges in)”.
(2) Effective after the close of business on August, 19, 2008, amending the “investment options” section of Schedule “A” to delete the
following:
• Fidelity Dividend Growth Fund (frozen to new contributions and exchanges in)
1
IN WITNESS WHEREOF, the Trustee and Company have caused this Fourth Amendment to be executed by their duly authorized
officers. By signing below, the undersigned represent that they are authorized to execute this document on behalf of the respective parties.
Notwithstanding any contradictory provision of the Trust Agreement that this document amends, each party may rely without duty of inquiry
on the foregoing representation.
THE PROGRESSIVE CORPORATION FIDELITY MANAGEMENT TRUSTCOMPANY
By: /s/ Charles E. Jarrett By: /s/ Carolyn Redden

Its authorized signatory Its authorized signatory
Name: Charles E. Jarrett Name: Carolyn Redden

Title: Secretary Title: Contracts SVP
Date: May 15, 2008 Date: June 20, 2008
2
Exhibit 10.47
FIRST AMENDMENT TO
DIRECTORS RESTRICTED STOCK DEFERRAL PLAN
(2008 Amendment and Restatement)
WHEREAS, The Progressive Corporation (“Company”) maintains The Progressive Corporation Directors Restricted Stock Deferral Plan
pursuant to the 2008 Amendment and Restatement thereof; and
WHEREAS, it is desired to amend the Plan further;
NOW, THEREFORE, effective January 23, 2009, the Plan is hereby amended in the respects hereinafter set forth:
1. The first sentence of Section 4.1 of the Plan is hereby amended and restated in its entirety to provide as follows:
“Each eligible director who elects to participate in this Plan for any Plan Year shall file a Deferral Election with the Committee
before the beginning of such Plan Year, or before such later date as may be permitted by law, provided that any director was
not a director during the previous two (2) Plan Years may file a Deferral Election with the Committee (i) within thirty
(30) days after he/she is elected to the Board and (ii) prior to the grant of Restricted Stock which is the subject of such
Deferral Election.”
2. Except as expressly set forth in this Amendment, the terms and provisions of the Plan shall remain unchanged and continue in full
force and effect.
IN WITHESS WHEREOF, the Company has caused this Amendment to be executed by a duly authorized officer as of the 3rd day of
February, 2009.
By: /s/ Charles E. Jarrett

Title: Secretary
Exhibit 10.53
2008 and 2009 Board of Directors Compensation
C om pe n sation C om pone n t Am ou n t
Board Retainer $120,000
Audit Committee Chair Retainer $ 65,000
Audit Committee Member Retainer $ 45,000
Compensation Committee Chair Retainer $ 45,000
Compensation Committee Member Retainer $ 40,000
Investment Committee Chair Retainer $ 45,000
Investment Committee Member Retainer $ 40,000
Additional Committee Chair Retainer* $ 15,000
Additional Committee Member Retainer* $ 10,000
Chairman of the Board $225,000
* Excludes Executive Committee.
Exhibit 11

COMPUTATION OF EARNINGS PER SHARE
(millions—except per share amounts)
2008 2007 2006

Pe r Pe r Pe r
Ye ars En de d De ce m be r 31, Am ou n t S h are Am ou n t S h are Am ou n t S h are
Basic:
Net income (loss) $ (70.0) $ (.10) $1,182.5 $ 1.66 $1,647.5 $ 2.13
Average shares outstanding 668.0 710.4 774.3
Diluted:
Net income (loss)1 $ (70.0) $ (.10) $1,182.5 $ 1.65 $1,647.5 $ 2.10

Net effect of dilutive stock-based compensation 5.9 8.1 9.5
Total 673.9 718.5 783.8
1
Since we reported a net loss for 2008, the calculated diluted earnings per share was antidilutive; therefore, basic earnings per share is
disclosed as our diluted per share amount for 2008.
Exhibit 13

2008 ANNUAL REPORT TO SHAREHOLDERS
App.-A-1
The Progressive Corporation and Subsidiaries

Consolidated Statements of Income
For the years ended December 31,
(m illions—e xcept pe r s hare am ounts ) 2008 2007 2006

Revenues
Net premiums earned $13,631.4 $13,877.4 $14,117.9
Investment income 637.7 680.8 647.8
Net realized gains (losses) on securities (1,445.1) 106.3 (9.7)
Service revenues 16.1 22.3 30.4
Total revenues 12,840.1 14,686.8 14,786.4
Expenses
Losses and loss adjustment expenses 10,015.0 9,926.2 9,394.9
Policy acquisition costs 1,358.1 1,399.9 1,441.9
Other underwriting expenses 1,523.4 1,526.2 1,402.8
Investment expenses 8.8 12.4 11.9
Service expenses 20.4 20.5 24.4
Interest expense 136.7 108.6 77.3
Total expenses 13,062.4 12,993.8 12,353.2
Net Income (Loss)
Income (loss) before income taxes (222.3) 1,693.0 2,433.2
Provision (benefit) for income taxes (152.3) 510.5 785.7
Net income (loss) $ (70.0) $ 1,182.5 $ 1,647.5
Computation of Earnings Per Share
Basic:
Per share $ (.10) $ 1.66 $ 2.13
Diluted:
Net effect of dilutive stock-based compensation 5.9 8.1 9.5
Total equivalent shares 673.9 718.5 783.8
Per share1 $ (.10) $ 1.65 $ 2.10
1 For 2008, amount represents basic earnings per share since diluted earnings per share w as antidilutive due to the net loss for the year.
See notes to consolidated financial statements.
App.-A-2

Consolidated Balance Sheets
December 31,
(m illions) 2008 2007

Assets
Investments—Available-for-sale, at fair value:
Fixed maturities (amortized cost: $10,295.3 and $9,135.6) $ 9,946.7 $ 9,184.9
Equity securities:
Nonredeemable preferred stocks (cost: $1,131.3 and $2,578.1) 1,150.0 2,270.3
Common equities (cost: $553.6 and $1,361.0) 727.8 2,327.5
Short-term investments (amortized cost: $1,153.6 and $382.4) 1,153.6 382.4
Total investments 12,978.1 14,165.1
Cash 2.9 5.8
Accrued investment income 125.7 142.1
Premiums receivable, net of allowance for doubtful accounts of $113.7 and $118.1 2,408.6 2,395.1
Reinsurance recoverables, including $44.0 and $47.6 on paid losses 288.5 335.1
Prepaid reinsurance premiums 62.4 69.8
Deferred acquisition costs 414.0 426.3
Income taxes 821.6 106.0
Property and equipment, net of accumulated depreciation of $653.6 and $605.7 997.1 1,000.4
Other assets 151.6 197.4
Total assets $18,250.5 $18,843.1
Liabilities and Shareholders’ Equity
Unearned premiums $ 4,175.9 $ 4,210.4
Loss and loss adjustment expense reserves 6,177.4 5,942.7
Accounts payable, accrued expenses, and other liabilities1 1,506.4 1,580.6
Debt2 2,175.5 2,173.9
Total liabilities 14,035.2 13,907.6
Common Shares, $1.00 par value (authorized 900.0; issued 797.9 and 798.1, including treasury shares of
121.4 and 117.9) 676.5 680.2
Paid-in capital 892.9 834.8
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on securities (76.8) 465.0
Net unrealized gains on forecasted transactions 24.9 27.8
Retained earnings 2,697.8 2,927.7
Total shareholders’ equity 4,215.3 4,935.5
Total liabilities and shareholders’ equity $18,250.5 $18,843.1
1 See Note 12 – Litigation and Note 13 – Commitments and Contingencies for further discussion.
2 Consists of long-term debt. See Note 4 – Deb t for further discussion.
App.-A-3

Consolidated Statements of Changes in Shareholders’ Equity
(m illions—e xcept pe r s hare am ounts ) 2008 2007 2006

Retained Earnings
Balance, Beginning of year $2,927.7 $ 4,646.9 $ 4,726.0
Net income (loss) (70.0) $ (70.0) 1,182.5 $1,182.5 1,647.5 $1,647.5
Cash dividends declared on common shares ($0,
$2.145, and $.0325 per share) — (1,507.6) (25.0)
Treasury shares purchased1 (157.1) (1,388.4) (1,111.6)
Capitalization of stock split — — (585.9)
Other, net2 (2.8) (5.7) (4.1)
Balance, End of year $2,697.8 $ 2,927.7 $ 4,646.9
Accumulated Other Comprehensive Income (Loss), Net
of Tax
Balance, Beginning of year $ 492.8 $ 604.3 $ 398.7
Changes in:
Net unrealized gains (losses) on securities (541.8) (131.8) 206.7
Net unrealized gains on forecasted
transactions (2.9) 20.3 (1.1)
Other comprehensive income (loss) (544.7) (544.7) (111.5) (111.5) 205.6 205.6
Balance, End of year $ (51.9) $ 492.8 $ 604.3
Comprehensive Income (Loss) $(614.7) $1,071.0 $1,853.1
Common Shares, $1.00 Par Value
Stock options exercised 3.5 3.4 3.7
Treasury shares purchased1 (9.9) (72.9) (39.1)
Restricted stock issued, net of forfeitures 2.7 1.7 .2
Capitalization of stock split — — 585.9
Balance, End of year $ 676.5 $ 680.2 $ 748.0
Paid-In Capital
Stock options exercised 23.5 27.4 39.6
Tax benefits from exercise/vesting of stock-based
compensation 11.1 15.5 38.8
Treasury shares purchased1 (12.4) (87.1) (63.8)
Restricted stock issued, net of forfeitures (2.7) (1.7) (.2)
SFAS 123(R) reclass3 — — (51.5)
Other2 3.5 5.3 8.5
Balance, End of year $ 892.9 $ 834.8 $ 847.4
Unamortized Restricted Stock
Balance, Beginning of year $ — $ — $ (62.7)
SFAS 123(R) reclass3 — — 62.7
Balance, End of year $ — $ — $ —
Total Shareholders’ Equity $4,215.3 $ 4,935.5 $ 6,846.6
1 Progressive did not split its treasury shares in conjunction w ith the May 18, 2006, 4-for-1 stock split. In 2006, w e repurchased 3,182,497 common shares
prior to the stock split and 35,887,246 common shares subsequent to the stock split.
2 Primarily reflects activity associated w ith our deferred compensation and incentive plans.
3 Upon adoption of SFAS 123(R), companies w ere required to eliminate any unearned compensation (i.e., contra-equity) accounts against the appropriate
equity accounts. As a result, as of January 1, 2006, w e w ere required to reclassify $62.7 million of “Unamortized restricted stock,” of w hich $51.5 million
related to equity aw ards and $11.2 million related to liability aw ards.
There are 20.0 million Serial Preferred Shares authorized; no such shares are issued or outstanding.
There are 5.0 million Voting Preference Shares authorized; no such shares have been issued.
App.-A-4

Consolidated Statements of Cash Flows
(m illions) 2008 2007 2006

Cash Flows From Operating Activities
Net income (loss) $ (70.0) $ 1,182.5 $ 1,647.5
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation 99.1 106.9 103.4
Amortization of fixed-income securities 249.6 284.1 225.6
Net realized (gains) losses on securities 1,445.1 (106.3) 9.7
Net loss on disposition of property and equipment 1.6 .4 .9
Changes in:
Premiums receivable (13.5) 103.1 2.5
Reinsurance recoverables 46.6 98.7 (28.1)
Prepaid reinsurance premiums 7.4 19.7 14.2
Deferred acquisition costs 12.3 14.7 3.8
Income taxes (423.8) (30.3) 10.1
Unearned premiums (34.5) (124.6) (.1)
Loss and loss adjustment expense reserves 234.7 217.7 64.7
Accounts payable, accrued expenses, and other liabilities (101.2) 2.4 7.1
Other, net 61.3 (4.5) (64.3)
Net cash provided by operating activities 1,549.2 1,791.0 2,024.6
Cash Flows From Investing Activities
Purchases:
Fixed maturities (7,593.9) (8,184.6) (6,294.9)
Equity securities (598.3) (1,490.3) (1,131.6)
Short-term investments—auction rate securities (631.5) (7,156.6) (2,999.3)
Sales:
Fixed maturities 5,629.5 8,327.6 5,668.2
Equity securities 1,401.0 775.2 323.1
Short-term investments—auction rate securities 631.5 7,325.4 3,215.5
Maturities, paydowns, calls, and other:
Fixed maturities 505.5 557.9 686.1
Equity securities 34.9 10.7 223.5
Net sales (purchases) of short-term investments—other (771.0) 30.0 (22.3)
Net unsettled security transactions 177.2 35.1 (116.6)
Purchases of property and equipment (98.5) (136.3) (334.3)
Sale of property and equipment 1.1 2.0 15.4
Net cash provided by (used in) investing activities (1,312.5) 96.1 (767.2)
Cash Flows From Financing Activities
Proceeds from exercise of stock options 27.0 30.8 43.3
Tax benefits from exercise/vesting of stock-based compensation 11.1 15.5 38.8
Proceeds from debt1 — 1,021.7 —
Payment of debt — — (100.0)
Dividends paid to shareholders (98.3) (1,406.5) (25.0)
Acquisition of treasury shares (179.4) (1,548.4) (1,214.5)
Net cash used in financing activities (239.6) (1,886.9) (1,257.4)
Increase (decrease) in cash (2.9) .2 —
Cash, Beginning of year 5.8 5.6 5.6
Cash, End of year $ 2.9 $ 5.8 $ 5.6
1 Includes a $34.4 million pretax gain received upon closing a forecasted debt issuance hedge. See Note 4 – Debt for further discussion.
App.-A-5

Notes to Consolidated Financial Statements
December 31, 2008, 2007, and 2006
1. REPORTING AND ACCOUNTING POLICIES
Nature of Operations The Progressive Corporation, an insurance holding company formed in 1965, owned 58 subsidiaries and had
1 mutual insurance company affiliate as of December 31, 2008. Our insurance subsidiaries provide personal and commercial
automobile insurance and other specialty property-casualty insurance and related services throughout the United States. Our
Personal Lines segment writes insurance for private passenger automobiles and recreational vehicles through both an independent
insurance agency channel and a direct channel. Our Commercial Auto segment writes primary liability and physical damage
insurance for automobiles and trucks owned by small businesses through both the independent agency and direct channels.
Basis of Consolidation and Reporting The accompanying consolidated financial statements include the accounts of The
Progressive Corporation, its subsidiaries, and affiliate. All of the subsidiaries and the mutual company affiliate are wholly owned or
controlled. We achieve control of our mutual company affiliate through a 100% reinsurance contract and a management service
contract between a wholly-owned insurance subsidiary and such affiliate. All intercompany accounts and transactions are
eliminated in consolidation.
Estimates We are required to make estimates and assumptions when preparing our financial statements and accompanying notes
in conformity with accounting principles generally accepted in the United States of America (GAAP). As estimates develop into fact
(e.g., losses are paid), results may, and will likely, differ from those estimates.
Investments Progressive’s fixed-maturity, equity securities, and short-term investments are accounted for on an available-for-sale
basis. See Note 2 – Investments for the detailed composition of our investment portfolio.
Fixed-maturity securities include debt securities and redeemable preferred stocks, which may have fixed or variable principal
payment schedules, may be held for indefinite periods of time, and may be used as a part of our asset/liability strategy or sold in
response to changes in interest rates, anticipated prepayments, risk/reward characteristics, liquidity needs, or other economic
factors. These securities are carried at fair value with the corresponding unrealized gains (losses), net of deferred income taxes,
reported in accumulated other comprehensive income. Fair values are obtained from recognized pricing services or are quoted by
market makers and dealers, with limited exceptions discussed in Note 3 – Fair Value.
Included in the fixed-maturity portfolio are asset-backed securities. The asset-backed securities are accounted for under the
retrospective method, in general. Under the current accounting guidance, the prospective method is used primarily for interest-only,
non-investment-grade asset-backed securities, and certain asset-backed securities with sub-prime loan exposure, where there is a
greater risk of non-performance, or where it is possible the initial investment may not be substantially recovered. The retrospective
method recalculates yield assumptions (based on changes in interest rates or cash flow expectations) historically to the inception
of the investment, and applies the required adjustment, if any, to the cost basis, with the offset recorded to investment income. The
prospective method requires a calculation of future expected repayments and resets the yield to allow for future period adjustments;
no current period impact to investment income or the securities cost is made based on the cash flow update. Prepayment
assumptions are based on market expectations and are updated at each periodic cash flow review period.
Equity securities include common stocks, nonredeemable preferred stocks, and other risk investments and are reported at quoted
fair values. Changes in fair value of these securities, net of deferred income taxes, are reflected as unrealized gains (losses) in
accumulated other comprehensive income. To the extent we hold any foreign equities or foreign currency hedges, any change in
value due to exchange rate fluctuations would be limited by foreign currency hedges, if any, and would be recognized in income in
the current period.
Short-term investments can include auction rate securities (i.e., certain municipal bonds and preferred stocks). Due to the nature of
auction rate securities, these securities are classified as short-term based upon their expected auction date (generally 7-49 days)
rather than on their contractual obligation (which are greater than one year at original issuance). In the event that an auction fails,
the security may need to be reclassified from short-term. In addition to auction rate securities, short-term investments may include
Eurodollar deposits, commercial paper, and other securities expected to mature within one year. Changes in fair value of these
securities, net of deferred income taxes, are reflected as unrealized gains (losses) in accumulated other comprehensive income.
App.-A-6
Trading securities are securities bought principally for the purpose of sale in the near term. To the extent we have trading securities,
changes in fair value would be recognized in income in the current period. Derivative instruments which may be used for trading
purposes or classified as trading derivatives due to the characteristics of the transaction are discussed below.
Derivative instruments may include futures, options, forward positions, foreign currency forwards, interest rate swap agreements,
and credit default swaps and may be used in the portfolio for general investment purposes or to hedge the exposure to:
¡ Changes in fair value of an asset or liability (fair value hedge);
¡ Foreign currency of an investment in a foreign operation (foreign currency hedge); or
¡ Variable cash flows of a forecasted transaction (cash flow hedge).
To the extent we have derivatives held or issued for general investment purposes, these derivative instruments are recognized as
either assets or liabilities and measured at fair value with changes in fair value recognized in income as a component of net realized
gains (losses) on securities during the period of change.
Derivatives designated as hedges are required to be evaluated on established criteria to determine the effectiveness of their
correlation to, and ability to reduce the designated risk of, specific securities or transactions. Effectiveness is required to be
reassessed regularly. Hedges that are deemed to be effective would be accounted for as follows:
¡ Fair value hedge: changes in fair value of the hedge, as well as the hedged item, would be recognized in income in the period of
change while the hedge was in effect.
¡ Foreign currency hedge: changes in fair value of the hedge, as well as the hedged item, would be reflected as a change in
translation adjustment as part of accumulated other comprehensive income. Gains and losses on the foreign currency hedge
would offset the foreign exchange gains and losses on the foreign investment as they are recognized into income.
¡ Cash flow hedge: changes in fair value of the hedge would be reported as a component of accumulated other comprehensive
income and subsequently amortized into earnings over the life of the hedged transaction.
If a hedge is deemed to become ineffective and discontinued, the following accounting treatment would be applied:
¡ Fair value hedge: the derivative instrument would continue to be adjusted through income, while the adjustment in the change in
value of the hedged item would be reflected as a change in unrealized gains (losses) as part of accumulated other comprehensive
income.
¡ Foreign currency hedge: changes in the value of the hedged item would continue to be reflected as a change in translation
adjustment as part of accumulated other comprehensive income, but the derivative instrument would be adjusted through income
for the current period.
¡ Cash flow hedge: changes in fair value of the derivative instrument would be reported in income for the current period (see Note 4
– Debt for discussion regarding a forecasted debt issuance hedge we held in 2007).
For all derivative positions, net cash requirements are limited to changes in fair values, which may vary based upon changes in
interest rates, currency exchange rates, and other factors. Exposure to credit risk is limited to the carrying value; collateral may be
required to limit credit risk. We have elected not to offset fair value amounts that arise from derivative positions with the same
counterparty under a master netting arrangement.
Investment securities are exposed to various risks such as interest rate, market, credit, and liquidity risk. Fair values of securities
fluctuate based on the nature and magnitude of changing market conditions; significant changes in market conditions could
materially affect the portfolio’s value in the near term. We continually monitor our portfolio for price changes, which might indicate
potential impairments, and perform detailed reviews of securities with unrealized losses based on predetermined guidelines. In such
cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to (i) fundamental factors
specific to the issuer, such as financial conditions, business prospects, or other factors, or (ii) market-related factors, such as
interest rates or equity market declines. When a security in our investment portfolio has an unrealized loss in fair value that is
deemed to be other-than-temporary, we reduce the book value of such security to its current fair value, recognizing the decline as a
realized loss in the income statement. Any future changes in fair value, either increases or decreases, are reflected as changes in
unrealized gains (losses) as part of accumulated other comprehensive income.
Realized gains (losses) on securities are computed based on the first-in first-out method and also include write-downs on available-
for-sale securities considered to have other-than-temporary declines in fair value, as well as holding period valuation changes on
derivatives.
App.-A-7
Insurance Premiums and Receivables Insurance premiums written are earned into income on a pro rata basis over the period of
risk, based on a daily earnings convention. Accordingly, unearned premiums represent the portion of premiums written that is
applicable to the unexpired risk. We provide insurance and related services to individuals and small commercial accounts
throughout the United States, and offer a variety of payment plans. Generally, premiums are collected prior to providing risk
coverage, minimizing our exposure to credit risk. We perform a policy level evaluation to determine the extent to which the
premiums receivable balance exceeds the unearned premiums balance. We then age this exposure to establish an allowance for
doubtful accounts based on prior experience.
Deferred Acquisition Costs Deferred acquisition costs include commissions, premium taxes, and other variable underwriting and
direct sales costs incurred in connection with writing business. These costs are deferred and amortized over the policy period in
which the related premiums are earned. We consider anticipated investment income in determining the recoverability of these
costs. Management believes that these costs will be fully recoverable in the near term. We do not defer any direct-response
advertising costs.
Loss and Loss Adjustment Expense Reserves Loss reserves represent the estimated liability on claims reported to us, plus
reserves for losses incurred but not recorded (IBNR). These estimates are reported net of amounts estimated to be recoverable from
salvage and subrogation. Loss adjustment expense reserves represent the estimated expenses required to settle these claims and
losses. The methods of making estimates and establishing these reserves are reviewed regularly, and resulting adjustments are
reflected in income currently. Such loss and loss adjustment expense reserves are susceptible to change in the near term.
Reinsurance Our reinsurance transactions primarily include premiums written under state-mandated involuntary plans for
commercial vehicles (Commercial Auto Insurance Procedures/Plans–“CAIP”) and premiums ceded to state-provided reinsurance
facilities, for which we retain no loss indemnity risk (see Note 7 – Reinsurance for further discussion). We also cede a portion of the
premiums in our non-auto programs to limit our exposure in those particular markets. Prepaid reinsurance premiums are earned on
a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written.
Income Taxes The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are
recorded based on the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates.
The principal assets and liabilities giving rise to such differences are write-downs of investment securities determined to be other-
than-temporarily impaired, net unrealized gains (losses) on securities, loss reserves, unearned premiums reserves, deferred
acquisition costs, and non-deductible accruals. We review our deferred tax assets for recoverability. Although realization of the
deferred tax asset is not assured, management believes it is more likely than not that the deferred tax asset will be realized based
on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes. See Note 5
–Income Taxes for further discussion.
Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is
recognized over the estimated useful lives of the assets using accelerated methods for computer equipment and the straight-line
method for all other fixed assets. The useful lives range from 3 to 4 years for computer equipment, 10 to 40 years for buildings and
improvements, and 3 to 10 years for all other property and equipment. Land and buildings comprised 78% and 80% of total property
and equipment at December 31, 2008 and 2007, respectively. Property and equipment include capitalized software developed or
acquired for internal use. Total interest capitalized was $5.0 million in 2008 and $2.4 million in both 2007 and 2006, relating to
construction projects and capitalized computer software costs.
Guaranty Fund Assessments We are subject to state guaranty fund assessments, which provide for the payment of covered
claims or other insurance obligations of insurance companies deemed insolvent. These assessments are accrued after a formal
determination of insolvency has occurred, and we have written the premiums on which the assessments will be based.
Service Revenues and Expenses Our service businesses provide insurance-related services. Service revenues consist primarily of
fees generated from processing business for involuntary CAIP plans and are earned on a pro rata basis over the term of the related
policies. Service expenses include acquisition expenses for the involuntary plans, which are deferred and amortized over the period
in which the related revenues are earned, and costs associated with our other service products.
Stock-Based Compensation As of January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards
123 (revised 2004), “Share-Based Payment” (SFAS 123(R)), which requires the measurement and recognition of compensation
expense for all share-based payment awards made to employees and directors, using the modified prospective method. As a
result, our consolidated financial statements for the year ended December 31, 2006, reflected the effect of SFAS 123(R),
App.-A-8
including the reclassification of any unamortized restricted stock (i.e., unearned compensation) against paid-in capital for restricted
stock awards accounted for as “equity awards” and against other liabilities for the restricted stock awards accounted for as “liability
awards” (i.e., 2003 and 2004 restricted stock awards deferred pursuant to our deferred compensation plans).
Pursuant to the modified prospective application, we were required to expense the fair value at the grant date of our unvested
outstanding stock options. No stock options have been granted after December 31, 2002. We did not incur any additional expense
relating to currently outstanding stock options subsequent to 2006, since the final vesting date of stock options previously granted
was January 1, 2007. Beginning in 2003, we began issuing restricted stock awards, both time-based and performance-based, as
our form of equity compensation to key members of management and non-employee directors in lieu of stock options; our current
equity compensation program does not contemplate the issuance of stock options. Compensation expense for restricted stock
awards is recognized over the respective vesting periods. Beginning in 2007, the expense for restricted stock is representative of
the effect on net income for future periods.
For the years ended December 31, 2008, 2007, and 2006 the pretax expense of our stock-based compensation was $34.5 million,
$26.5 million, and $27.6 million, respectively, (tax benefit of $12.1 million, $9.3 million, and $9.7 million), of which $1.3 million of the
2006 expense related to our unvested outstanding stock options.
In addition, in conjunction with the Financial Accounting Standards Board (FASB) Staff Position No. FAS 123(R)-3, “Transition
Election Related to Accounting for Tax Effects of Share-Based Payment Awards,” we elected to adopt the alternative transition
method for calculating the tax effects of stock-based compensation pursuant to SFAS 123(R). The alternative transition method
includes simplified methods to establish the beginning balance of the additional paid-in capital pool related to the tax effects of
employee stock-based compensation, and to determine the subsequent effect on the paid-in capital pool and the consolidated
statements of cash flows of the tax effects of employee stock-based compensation awards that were outstanding upon the adoption
of SFAS 123(R).
We record an estimate for expected forfeitures of restricted stock based on our historical forfeiture rates. In addition, we shorten the
vesting periods of certain stock-based awards based on the “qualified retirement” provisions in our incentive compensation plans,
under which (among other provisions) the vesting of 50% of outstanding time-based restricted stock awards will accelerate upon
retirement if the participant is 55 years of age or older and satisfies certain years-of-service requirements. The cumulative effect of
adopting these changes under SFAS 123(R) was not material to our financial condition, cash flows, or results of operations for the
year ended December 31, 2006.
Earnings Per Share Basic earnings per share are computed using the weighted average number of common shares outstanding,
excluding both time-based and performance-based unvested restricted stock awards. Diluted earnings per share include common
stock equivalents assumed outstanding during the period. Our common stock equivalents include stock options and time-based
restricted stock awards accounted for as equity awards. In determining the denominator for our diluted earnings per share, we
include the impact of pro forma deferred tax assets pursuant to the alternative transition method under SFAS 123(R) for purposes of
calculating assumed proceeds under the treasury stock method. In periods where we report a net loss, the calculated diluted
earnings per share is antidilutive, therefore, basic earnings per share is disclosed.
Supplemental Cash Flow Information Cash includes only bank demand deposits. We paid income taxes of $258.0 million,
$526.0 million, and $739.0 million in 2008, 2007, and 2006, respectively. Total interest paid was $144.7 million during 2008, $110.1
million during 2007, and $81.3 million during 2006. Non-cash activity includes declared but unpaid dividends, changes in the net
unrealized gains (losses) on investment securities, and in 2006, the reclass of the liability for deferred restricted stock
compensation due to the adoption of SFAS 123(R).
Progressive effected a 4-for-1 stock split in the form of a stock dividend to shareholders on May 18, 2006. We reflected the
issuance of the additional common shares by transferring $585.9 million from retained earnings to the common stock account. All
share, per share, and equivalent share amounts and stock prices were adjusted to give effect to the split. Treasury shares were not
split.
App.-A-9
2. INVESTMENTS
The composition of the investment portfolio at December 31 was:
% of
Net Total
Gross Gross Realized Portfolio
Unre alized Unre alized Gains Fair (at fair
($ in m illions) Cost Gains Los s e s (Loss e s ) 1 Value value )
2008
Fixed maturities:
U.S. government obligations $ 3,565.7 $ 129.0 $ (1.1) $ — $ 3,693.6 28.5%
State and local government obligations 3,041.4 53.1 (90.1) — 3,004.4 23.1
Foreign government obligations 16.2 .2 — — 16.4 .1
Corporate debt securities 694.2 2.5 (54.4) — 642.3 4.9
Asset-backed securities 2,590.6 2.4 (390.9) — 2,202.1 17.0
Redeemable preferred stocks 387.2 8.7 (8.0) — 387.9 3.0
Total fixed maturities 10,295.3 195.9 (544.5) — 9,946.7 76.6
Other short-term investments 1,153.6 — — — 1,153.6 8.9
Nonredeemable preferred stocks 1,131.3 73.5 (17.3) (37.5) 1,150.0 8.9
Total fixed income 12,580.2 269.4 (561.8) (37.5) 12,250.3 94.4
Common equities 553.6 203.5 (29.3) — 727.8 5.6
Total portfolio2,3 $13,133.8 $ 472.9 $ (591.1) $ (37.5) $12,978.1 100.0%
2007
Fixed maturities:
U.S. government obligations4 $ 1,166.7 $ 40.4 $ — $ — $ 1,207.1 8.5%
State and local government obligations 3,706.3 44.0 (5.2) — 3,745.1 26.5
Foreign government obligations 29.9 .3 — — 30.2 .2
Corporate debt securities 1,075.0 12.1 (8.7) — 1,078.4 7.6
Asset-backed securities 2,503.6 35.9 (27.9) — 2,511.6 17.7
Redeemable preferred stocks 654.1 4.4 (46.0) — 612.5 4.3
Total fixed maturities 9,135.6 137.1 (87.8) — 9,184.9 64.8
Other short-term investments 382.4 — — — 382.4 2.7
Nonredeemable preferred stocks 2,578.1 6.0 (306.4) (7.4) 2,270.3 16.0
Total fixed income 12,096.1 143.1 (394.2) (7.4) 11,837.6 83.5
Common equities 1,361.0 986.8 (20.3) — 2,327.5 16.5
Total portfolio2,3 $13,457.1 $ 1,129.9 $ (414.5) $ (7.4) $14,165.1 100.0%
1 Represents net holding period gains (losses) on certain hybrid securities (discussed below ).
2 At December 31, 2008 and 2007, w e had $254.2 million and $77.0 million of unsettled security transactions (offset in other liabilities), respectively.
3 December 31, 2008 and 2007 totals include $1.0 billion and $2.1 billion, respectively, of securities in the portfolio of a consolidated, non-insurance subsidiary
of the holding company, net of any unsettled security transactions.
4 Balance at December 31, 2007 includes $34.1 million of collateral in the form of Treasury Notes delivered to a counterparty on an open derivative position;
the position w as closed in 2008. See the Derivative Instruments section below for further discussion.
Our fixed-maturity securities include debt securities and redeemable preferred stocks. Our nonredeemable preferred stock portfolio
includes perpetual preferred stocks that have call features with fixed-rate coupons, whereby the change in value of the call features
is a component of the overall change in value of the preferred stocks (i.e., hybrid securities). At December 31, 2008 and 2007, our
nonredeemable preferred stock portfolio included $53.0 million and $81.1 million in fair value, respectively, of such hybrid securities.
Short-term investments can include auction rate securities (i.e., certain municipal bonds and preferred stocks); we held no auction
rate securities at December 31, 2008 or 2007. Our other short-term investments include Eurodollar deposits, commercial paper,
and other investments which are expected to mature within one year. Common equities include common stocks and other risk
investments (i.e., private equity investments and limited partnership interests in private equity and mezzanine funds).
App.-A-10
Our securities are reported at fair value, with the changes in fair value of these securities (other than hybrid securities and derivative
instruments) reported as a component of accumulated other comprehensive income, net of deferred income taxes. See Note 11 –
Other Comprehensive Income (Loss) for changes in net unrealized gains (losses) during the period. The change in fair value of the
hybrid securities and derivative instruments is recorded as a component of net realized gains (losses) on securities.
At December 31, 2008, bonds in the principal amount of $131.3 million were on deposit to meet state insurance regulatory and/or
rating agency requirements. We did not have any securities of any one issuer with an aggregate cost or fair value exceeding 10% of
total shareholders’ equity at December 31, 2008 or 2007. At December 31, 2008, we had fixed-maturity securities with a fair value
of $1.1 million that were non-income producing during the preceding 12 months.
Net Investment Income The components of net investment income for the years ended December 31 were:
(m illions) 2008 2007 2006

Fixed maturities $438.4 $478.6 $481.7
Nonredeemable preferred stocks 144.5 126.9 84.4
Common equities 38.9 46.2 43.1
Auction rate municipal obligations 1.4 2.6 1.8
Auction rate preferred stocks — .8 5.8
Other short-term investments 14.5 25.7 31.0
Investment income 637.7 680.8 647.8
Investment expenses (8.8) (12.4) (11.9)
Net investment income $628.9 $668.4 $635.9
App.-A-11
Net Realized Gains (Losses) The components of net realized gains (losses) on securities for the years ended December 31 were:
(m illions) 2008 2007 2006

Gross realized gains on security sales
Fixed maturities $ 266.0 $113.3 $ 37.9
Nonredeemable preferred stocks1 11.6 2.1 .6
Auction rate municipal obligations — .1 .1
Subtotal 598.3 170.9 63.3
Gross realized losses on securities sales
Fixed maturities (17.4) (21.7) (60.9)
Nonredeemable preferred stocks1 (541.8) (2.2) (11.1)
Common equities (179.3) (33.4) (8.8)
Auction rate municipal obligations — — (.1)
Auction rate preferred stocks — — (.2)
Subtotal (738.5) (57.3) (81.1)
Net realized gains (losses) on security sales
Fixed maturities 248.6 91.6 (23.0)
Nonredeemable preferred stocks1 (530.2) (.1) (10.5)
Auction rate municipal obligations — .1 —
Auction rate preferred stocks — — (.2)
Subtotal (140.2) 113.6 (17.8)
Other-than-temporary impairment losses2
Fixed maturities (408.8) (1.9) (1.5)
Nonredeemable preferred stocks (941.3) (17.4) —
Common equities (43.0) (.3) (.4)
Subtotal (1,393.1) (19.6) (1.9)
Net holding period gains (losses)
Hybrid preferred stocks (73.6) (7.4) —
Derivatives 161.8 19.7 10.0
Subtotal 88.2 12.3 10.0
Total net realized gains (losses) on securities $(1,445.1) $106.3 $ (9.7)
1 Excludes gross holding period gains (losses) on hybrid securities.
2 Amounts represent w rite-dow ns for securities held at December 31 of each year.
Gross realized gains and losses were the result of customary investment sales transactions in our fixed-income portfolio, affected
by movements in credit spreads and interest rates, sales of our common stock to reduce our risk exposure, rebalancing of our
equity-indexed portfolio, and holding period valuation changes on derivatives. In addition, in 2007, gains and losses also reflected
the sale of securities to fund our $1.4 billion extraordinary dividend payment in September 2007. Also included are write-downs for
securities determined to be other-than-temporarily impaired in our fixed-maturity and/or equity portfolios. These write-downs were
the result of fundamental matters related to either specific issues or issuers and/or the significant decline in the credit and
mortgage-related market, and were taken because we were unable to objectively determine that these securities would
substantially recover in the near term. For our preferred stocks, we elected to use an equity model for assessing other-than-
temporary impairments because our preferred stocks have both equity- and debt-like characteristics and are currently trading
similar to equity instruments, despite recent guidance issued by the SEC that the use of a debt model would be permitted. In
assessing the need to record a valuation allowance for tax purposes against the deferred benefit associated with losses on these
securities, we have considered the debt-like features of these securities in predicting longer-term recovery. See Note 5 – Income
Taxes for further discussion. During 2006 we held no hybrid preferred securities.
App.-A-12
Gross Unrealized Losses The components of gross unrealized losses at December 31 were:
Total Unre alized Los s e s

Fair Les s than 12 m onths
(m illions) Value Total 12 m onths or gre ater 1
2008
Fixed maturities $4,030.5 $(544.5) $ (219.9) $ (324.6)
Nonredeemable preferred stocks 437.6 (17.3) (13.2) (4.1)
Common equities 123.2 (29.3) (26.5) (2.8)
Total $4,591.3 $(591.1) $ (259.6) $ (331.5)
2007
Fixed maturities $2,509.3 $ (87.8) $ (51.4) $ (36.4)
Nonredeemable preferred stocks 1,975.3 (306.4) (245.3) (61.1)
Common equities 160.5 (20.3) (18.3) (2.0)
Total $4,645.1 $(414.5) $ (315.0) $ (99.5)
1 The fair value for securities in an unrealized loss position for 12 months or greater w as $2,149.5 million at December 31, 2008 and $2,038.9 million at
December 31, 2007.
We have the intent and ability to hold the fixed-maturity securities and nonredeemable preferred stocks, and will do so, as long as
the securities continue to remain consistent with our investment strategy. Of the $591.1 million of gross unrealized losses at
December 31, 2008, approximately 90% are within our fixed-maturities portfolio and 70% of that is within the asset-backed
securities sector. The significant decline in value occurred during the fourth quarter 2008 as credit spreads in residential and
commercial mortgage-backed products widened considerably.
Within our asset-backed portfolio are residential loan-backed securities and commercial mortgage-backed securities. The
residential loan-backed securities are comprised primarily of seasoned loans with an average duration of 1.5 years and an average
AAA- credit rating. We continue to collect our periodic principal and interest on these securities.
Our commercial mortgage-backed portfolio has an average duration of 2.2 years and an overall average credit rating of AA+.
Approximately 88% of the portfolio is rated A or higher and were predominantly originated prior to 2005, which is when financing
requirements were more conservative. Our largest exposure to non-investment-grade quality commercial mortgage-backed
securities is within those securities that originated in 2006/2007 that are invested in a single borrower exposure that we believe is of
stronger underlying credit than other non-investment-grade instruments marketed during those years. Our commercial mortgage-
backed securities continue to receive periodic interest and principal streams.
Lastly, our commercial mortgage-backed interest-only securities are predominantly (91%) planned amortization based, a class
structured with prepayment risk protection and a primary payment schedule within the deal, as long as designated prepayment
expectations remain intact. These securities are AAA rated, with the exception of one security, and have an average duration of 1.5
years, and we continue to receive our periodic income streams.
We may retain the common stocks to maintain correlation to the Russell 1000 Index as long as the portfolio and index correlation
remain similar. If our strategy was to change and these securities were determined to be other-than-temporarily impaired, we would
recognize a write-down in accordance with our stated policy.
Trading Securities At December 31, 2008 and 2007, we did not hold any trading securities. We did not have any net realized
gains (losses) on trading securities for the years ended December 31, 2008, 2007, and 2006.
Derivative Instruments We invest in the following derivative exposures at various times: interest rate swaps; asset-backed credit
default swaps; U.S. corporate debt and corporate debt indexed credit default swaps; and forecasted hedges.
Pursuant to FASB Staff Position (“FSP”) FIN 39-1, “Amendment of FASB Interpretation No. 39,” a reporting entity that is a party to
a master netting agreement is permitted to offset fair value amounts recognized for the right to reclaim cash collateral or the
obligation to return cash collateral against fair value amounts recognized for derivative instruments that have been offset under the
same master netting agreement. We have elected to not offset fair value amounts that arise from derivative positions with the same
counterparty under a master netting arrangement as permitted by this standard.
App.-A-13
For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be
exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as a
component of the available-for-sale portfolio, the inception-to-date realized gain on the derivative position at period end would have to
exceed any upfront cash received (net derivative asset). On the other hand, a net derivative liability would include any inception-to-
date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a
component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to the
immaterial effect on our financial condition, cash flows, and results of operations.
For 2008, we early adopted SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities,” which required additional
disclosures regarding the derivative instruments held at December 31, 2008, classified by whether the instrument affected the
balance sheet or income statement and the primary risk exposure the entity intends to manage with the derivative instrument;
comparable data for prior years was not required upon adoption. The following table shows the status of our derivative instruments
at, and for the year ended, December 31, 2008, as applicable.
Balance She e t Incom e State m e nt

Net Re alized
(m illions) Gains (Los s e s )
Derivative s des ignate d as : Purpos e Clas s ification Fair Value on Se curities
Hedging instruments
Foreign currency cash flow hedge Accumulated other
($8.0 million notional value) Forecasted transaction comprehensive income $ .2 $ —
Non-hedging instruments
Assets:
Interest rate swaps Investments - fixed
($1.8 billion notional value) Manage interest rate risk maturities 96.3 104.3
Liabilities:
Corporate credit default swaps
($25 million notional value) Manage credit risk Other liabilities (.5) (.7)
Closed:
Interest rate swaps Manage interest rate risk — — 57.1
Corporate credit default swaps Manage credit risk — — 20.8
Asset-backed credit default
swaps General portfolio investing — — (19.7)
Total $ 96.0 $ 161.8
FORECASTED HEDGES
During the fourth quarter 2008, we entered into a cash flow hedge of forecasted foreign currency transactions. The hedge was
designated as, and qualified for, cash flow hedge accounting treatment. We will defer the pretax gain or loss on this hedge and
report the amount in accumulated other comprehensive income. The gain or loss on the contract will be amortized over the period
during which foreign denominated expenses occur, which is expected to begin in the second half of 2009.
During the second quarter 2007, we entered into a forecasted debt issuance hedge against a possible rise in interest rates in
anticipation of issuing $1 billion of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”).
The hedge was designated as, and qualified for, cash flow hedge accounting treatment. Upon issuance of the Debentures, the
hedge was closed, and we recognized a pretax gain of $34.4 million, which is recorded as part of accumulated other comprehensive
income. The $34.4 million gain is deferred and is being recognized as an adjustment to interest expense over the 10-year fixed
interest rate term of the Debentures. During 2008 and 2007, we recognized $2.6 million and $1.3 million, respectively, as an
adjustment to interest expense.
INTEREST RATE SWAPS

During the year ended December 31, 2008, we invested in interest rate swap positions primarily to manage the fixed-income
portfolio duration; all of the open positions were entered into during 2008. As of December 31, 2008 and 2007, we had received
$79.6 million and $44.4 million, respectively, in cash collateral from the counterparty on our then open interest rate swap positions,
which was invested in short-term securities. At December 31, 2007, our net realized gains on interest rate swaps were $53.1
million. We had no interest rate swaps in 2006.
CORPORATE CREDIT DEFAULT SWAPS

During 2008, we opened positions on ten different corporate issuers within the financial services sector where we bought credit
default protection in the form of credit default swaps for 3-year and 5-year time horizons. We purchased protection to reduce our
App.-A-14
overall financial service sector exposure given the heightened risk in the financial markets and our exposure to preferred stocks
within the financial sector. By the end of 2008, we closed positions on nine of the ten different corporate issuers due to the
government funding of these issuers.
During the year ended December 31, 2007, we opened and closed positions where we bought credit default protection in the form of
credit default swaps on a corporate non-investment-grade index, and we closed positions where we bought credit default swaps on
an investment-grade index, which we also held in 2006. During the year ended December 31, 2006, we closed positions where we
sold credit default protection in the form of credit default swaps on the debt issuances of several issuers. These positions were
matched with Treasury Notes that had equivalent principal and maturities to replicate cash bond positions. For each of the years
ended December 31, 2007 and 2006, our net realized gains were $10.0 million.
ASSET-BACKED CREDIT DEFAULT SWAPS

During the years ended December 31, 2008 and 2007, we held a position for which we sold credit protection in the form of a credit
default swap comprised of a basket of 20 asset-backed bonds supported by sub-prime mortgage loans. We covered the credit
default swap’s notional exposure by acquiring U.S. Treasury Notes of equal maturity and principal amount and reducing our overall
exposure with any upfront cash received. At the end of 2006, we had minimal sub-prime mortgage exposure. As prices of mortgage-
backed securities fell in 2007, we decided to increase our exposure by selling protection on this index. In 2008, the price of the
index declined. During the fourth quarter 2008, we closed our entire asset-backed credit default swap position. As a result, we did
not have any collateral deliveries related to this position outstanding at December 31, 2008, compared to $44.8 million of delivered
collateral ($34.1 million of U.S. Treasury Notes and $10.7 million of cash) at December 31, 2007. At December 31, 2007, our
realized loss, net of gains on the Treasury Notes for all asset-backed credit default swaps, was $43.4 million. We held no asset-
backed credit default swap position during 2006.
Fixed Maturities The composition of fixed maturities by maturity at December 31, 2008, was:
Fair
(m illions) Cost Value
Less than one year $ 831.9 $ 785.2
One to five years 7,539.1 7,301.3
Five to ten years 1,765.4 1,716.7
Ten years or greater 62.6 47.2
Total $10,199.0 $9,850.4
The table above excludes $96.3 million of gains on open interest rate swap positions.
Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities
which do not have a single maturity date are reported at expected average maturity. Contractual maturities may differ from expected
maturities because the issuers of the securities may have the right to call or prepay obligations.
3. FAIR VALUE
In the first quarter 2008, we adopted SFAS 157, “Fair Value Measurements,” which became effective on January 1, 2008. SFAS
157, which applies to financial assets and liabilities, establishes a framework for measuring fair value, establishes a fair value
hierarchy based on inputs used to measure fair value, and expands disclosure about fair value measurements. Adopting this
statement has not had an effect on our financial condition, cash flows, or results of operations.
In accordance with SFAS 157, we have categorized our financial instruments, based on the degree of subjectivity inherent in the
valuation technique, into a fair value hierarchy of three levels, as follows:
• Level 1: Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g.,
U.S. Government securities and active exchange-traded equity securities).
• Level 2: Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or
indirectly (e.g., certain corporate and municipal bonds and certain preferred stocks). This includes: (i) quoted prices for
similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active,
(iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from
or corroborated by observable market data by correlation or other means.
App.-A-15
• Level 3: Inputs that are unobservable. Unobservable inputs reflect the reporting entity’s subjective evaluation about the
assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and
privately held investments).
The composition of the investment portfolio as of December 31 was:
2008
Leve l 1 Leve l 2 Leve l 3 Total
Fair Fair Fair Fair
(m illions) Value Value Value Value Cost
Fixed maturities $3,705.7 $6,131.4 $109.6 $ 9,946.7 $10,295.3
Nonredeemable preferred stocks 477.2 560.5 112.3 1,150.0 1,131.3
Common equities 714.3 — 13.5 727.8 553.6
$4,897.2 $6,691.9 $235.4 11,824.5 11,980.2
Other short-term investments2 1,153.6 1,153.6
Total portfolio $12,978.1 $13,133.8
Debt3 $ 1,581.6 $ 2,175.5
20071
Total
Fair
Value Cost
Fixed maturities $ 9,184.9 $ 9,135.6
Nonredeemable preferred stocks 2,270.3 2,578.1
Common equities 2,327.5 1,361.0
13,782.7 13,074.7
Other short-term investments2 382.4 382.4
Total portfolio $14,165.1 $13,457.1
Debt3 $ 2,176.6 $ 2,173.9
1SFAS 157 w as not effective until 2008; therefore, 2007 fair value w as not required to be broken out by hierarchy level.
2 These securities are not subject to fair value measurement since they mature w ithin six months; therefore, w e report these securities at cost, w hich
approximates fair value.
3 Debt is not subject to measurement at fair value in the consolidated Balance Sheets; therefore, it is not broken out by hierarchy level. Fair values are
obtained from publicly quoted sources.
Our portfolio valuations classified as either Level 1 or Level 2 in the above table are priced exclusively by external sources,
including: pricing vendors, dealers/market makers, and exchange quoted prices. With limited exceptions, our Level 3 securities are
also priced externally; however, due to several factors (e.g., nature of the securities, level of activity, lack of similar securities
trading to obtain observable market level inputs), we feel these valuations are more subjective in nature. Certain private equity
investments and fixed-income investments included in the Level 3 securities may be valued using external pricing supplemented by
internal review and analysis. At December 31, 2008, one private equity security with an aggregate value of $10.2 million was priced
internally.
Vendor quoted prices represent approximately 74% of our Level 1 classifications and almost 97% of our Level 2 classifications. The
balance of our Level 1 pricing comes from quotes obtained directly from trades made on an active exchange. We reviewed
independent documentation detailing the pricing techniques, models, and methodologies used by these pricing vendors and believe
that their policies adequately consider market activity, either based on specific transactions for the issue valued or based on
modeling of securities with similar credit quality, duration, yield, and structure that were recently transacted. We continue to
monitor any changes or modifications to their process due to the recent market events. During 2008, and more specifically, in the
fourth quarter, we reviewed each sector for transaction volumes to determine if sufficient liquidity and activity existed. We
determined that, while overall activity or liquidity is below historical averages, sufficient activity and liquidity existed to provide a
source for market level valuations.
Broker quoted prices represent the remaining 3% of the Level 2 classification. We typically use broker/dealers because the security
issue we hold is not widely held or frequently traded and thus is not serviced by the pricing vendors. We reviewed independent
documentation detailing the pricing techniques, models, and methodologies used by broker/dealers and determined that they used
the same pricing techniques as the external vendor pricing sources discussed above. The broker/dealers contain back office pricing
desks, separate from the day-to-day traders that buy and sell the securities. This process creates uniformity in pricing when they
quote externally to their various customers. The broker/dealer valuations are quoted in terms of spreads to various indices and the
spreads are based off recent transactions adjusted for movements since the last trade or based off similar
App.-A-16
characteristic securities currently trading in the market. These quotes are not considered binding offers to transact. We will, from
time to time, obtain more than one broker quote for a security, when we feel it is necessary. In addition, from time to time, we will
receive a broker/dealer quote for those securities priced by vendors as further evaluation of market price. We believe this additional
step ensures we are reporting the most representative price.
When we feel it is necessary to challenge a quote from either a pricing vendor or broker/dealer by using additional estimates to
augment those external prices, we review these assumptions and to the extent those estimates are determined to not contain
sufficient observable market information, we will reclassify the affected security valuations to Level 3.
During each valuation period, we create internal estimations of portfolio valuation (performance returns), based on current market-
related activity (i.e., interest rate and credit spread movements and other credit-related factors) within each major sector of our
portfolio. We compare our internally generated portfolio results with those generated based on quotes we received externally and
research material valuation differences.
Based on the criteria described above, we believe that the current level classifications are appropriate based on the valuation
techniques used and that our fair values accurately reflect current market assumptions in the aggregate.
The following table provides a summary of changes in fair value associated with Level 3 assets for the year ended December 31,
2008:
Leve l 3 Fair Value

Nonredee m able
Fixed Preferred Com m on
(m illions) M aturitie s Stock s Equitie s Total
Fair value at December 31, 2007 $ 119.4 $ 115.6 $ 13.7 $248.7
Calls/maturities/paydowns (7.1) — (.9) (8.0)
Sales (14.3) — — (14.3)
Realized (gains) losses .5 — — .5
Change in valuation (35.2) (3.3) .7 (37.8)
Transfers in (out)1 46.3 — — 46.3
Fair value at December 31, 2008 $ 109.6 $ 112.3 $ 13.5 $235.4
1 Represents movement betw een the fair value hierarchy levels during 2008, reflecting changes in the inputs used to measure fair value during the period.
There were no purchases associated with the Level 3 securities during 2008.
Additional information about specific valuation techniques and related fair value detail is provided in Note 1 – Reporting and
Accounting Policies, Note 2 – Investments, and Note 4 – Debt.
4. DEBT
Debt at December 31 consisted of:
2008 2007
Carrying Fair Carrying Fair
(m illions) Value Value Value Value
6.375% Senior Notes due 2012 (issued: $350.0, December 2001) $ 348.9 $ 355.3 $ 348.6 $ 367.8
7% Notes due 2013 (issued: $150.0, October 1993) 149.3 154.3 149.2 162.9
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999) 294.6 272.0 294.4 311.8
6.25% Senior Notes due 2032 (issued: $400.0, November 2002) 394.0 350.0 393.9 397.6
6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (issued:
$1,000.0, June 2007) 988.7 450.0 987.8 936.5
Total $2,175.5 $1,581.6 $2,173.9 $2,176.6
All of the outstanding debt is held by The Progressive Corporation. Debt includes amounts we have borrowed and contributed to the
capital of our insurance subsidiaries or used for other business purposes. Fair values are obtained from publicly quoted sources.
There are no restrictive financial covenants or credit rating triggers on our debt.
Interest on all debt is payable semiannually at the stated rates. However, the 6.70% Fixed-to-Floating Rate Junior Subordinated
Debentures due 2067 (the “Debentures”) will only bear interest at this fixed annual rate through, but excluding, June 15, 2017.
App.-A-17
Thereafter, the Debentures will bear interest at a rate equal to the three-month LIBOR plus 2.0175%, and the interest will be
payable quarterly. In addition, subject to certain conditions, we have the right to defer the payment of interest on the Debentures for
one or more periods not exceeding ten consecutive years each. During any such deferral period, among other conditions, interest
would continue to accrue, including interest on the deferred interest, and we generally would not be able to declare or pay any
dividends on, or repurchase any of, our common shares.
Except for the Debentures, all principal is due at the maturity stated in the table above. The Debentures will become due on
June 15, 2037, the scheduled maturity date, but only to the extent that we have received sufficient net proceeds from the sale of
certain qualifying capital securities. We must use our commercially reasonable efforts, subject to certain market disruption events,
to sell enough qualifying capital securities to permit repayment of the Debentures in full on the scheduled maturity date or, if
sufficient proceeds are not realized from the sale of such qualifying capital securities by such date, on each interest payment date
thereafter. Any remaining outstanding principal will be due on June 15, 2067, the final maturity date.
The 7% Notes are noncallable. The 6.375% Senior Notes, the 6 5/8% Senior Notes, and the 6.25% Senior Notes (collectively,
“Senior Notes”) may be redeemed in whole or in part at any time, at our option, subject to a “make-whole” provision. Subject to the
Replacement Capital Covenant discussed below, the Debentures may be redeemed, in whole or in part, at any time: (a) prior to
June 15, 2017, at a redemption price equal to the greater of (i) 100% of the principal amount of the Debentures being redeemed, or
(ii) a “make-whole” amount, in each case plus any accrued and unpaid interest; or (b) on or after June 15, 2017, at a redemption
price equal to 100% of the principal amount of the Debentures being redeemed, plus any accrued and unpaid interest. In connection
with the issuance of the Debentures, we entered into a Replacement Capital Covenant in which we agreed, for the benefit of the
holders of a senior debt security, that we will not repay, redeem, defease, or purchase all or part of the Debentures before June 15,
2047, unless, subject to certain limitations, we have received proceeds from the sale of certain replacement capital securities, as
defined in the Replacement Capital Covenant.
Prior to issuance of the Senior Notes and Debentures, we entered into forecasted debt issuance hedges against possible rises in
interest rates. Upon issuance of the applicable debt securities, the hedges were closed. At that time, we recognized, as part of
accumulated other comprehensive income, unrealized gains (losses) of $18.4 million, $(4.2) million, $5.1 million, and $34.4 million
associated with the 6.375% Senior Notes, the 6 5/8% Senior Notes, the 6.25% Senior Notes, and the Debentures, respectively.
The gains (losses) on these hedges are deferred and are being recognized as adjustments to interest expense over the life of the
related debt issuances for the Senior Notes, and over the 10-year fixed interest rate term for the Debentures.
On December 31, 2008, we entered into a 364-Day Secured Liquidity Credit Facility Agreement with National City Bank (NCB).
Under this agreement, we may borrow up to $125 million, which may be increased to $150 million at our request but subject to
NCB’s discretion. The purpose of the credit facility is to provide liquidity in the event of disruptions in our cash management
operations, such as disruptions in the financial markets, that affect our ability to transfer or receive funds. We may borrow funds, on
a revolving basis, either in the form of Eurodollar Loans or Base Rate Loans. Eurodollar Loans will bear interest at one-, two-, three-,
or six-month LIBOR (as selected by us) plus 25 basis points for the selected period. Base Rate Loans will bear daily interest at the
greater of (a) NCB’s prime rate for such day, (b) the federal funds effective rate for such day plus 1/2% per annum, and (c) one-
month LIBOR plus 2% per annum. Any borrowings under this agreement will be secured by a lien on certain marketable securities
held in our investment portfolio. A one-time facility fee of $12,500 was paid as consideration for this revolving agreement. In addition,
we deposited $125 million into an FDIC-insured deposit account at NCB in January 2009, to provide us with additional cash
availability in the event of such a disruption to our cash management operations. Our access to these funds is unrestricted.
However, if we withdraw funds from this account for any reason other than in connection with such a disruption in our cash
management operations, the availability of borrowings under the NCB credit facility will be reduced on a dollar-for-dollar basis until
such time as we replenish the funds to the deposit account. There are no rating triggers under the credit agreement. The credit
facility will expire on December 31, 2009, unless earlier terminated according to its terms. We had no borrowings under this
arrangement in 2008.
The revolving credit facility agreement discussed above replaced an uncommitted line of credit with NCB in the principal amount of
$125 million. Under this terminated agreement, no commitment fees were required to be paid and there were no rating triggers.
Interest on amounts borrowed would have generally accrued at the one-month LIBOR plus .375%. We had no borrowings under this
arrangement during 2008, 2007, or 2006.
Aggregate principal payments on debt outstanding at December 31, 2008, are $0 for 2009, 2010, and 2011, $350.0 million for 2012,
$150.0 million for 2013, and $1.7 billion thereafter.
App.-A-18
5. INCOME TAXES
The components of our income tax provision (benefit) were as follows:
(m illions) 2008 2007 2006

Current tax provision $ 255.4 $503.7 $798.6
Deferred tax expense (benefit) (407.7) 6.8 (12.9)
Total income tax provision (benefit) $(152.3) $510.5 $785.7
The provision (benefit) for income taxes in the accompanying consolidated statements of income differed from the statutory rate as
follows:
($ in m illions) 2008 2007 2006

Income (loss) before income taxes $(222.3) $1,693.0 $2,433.2
Tax at statutory rate $ (77.8) 35% $ 592.6 35% $ 851.6 35%
Tax effect of:
Exempt interest income (38.7) 17 (40.3) (3) (35.9) (2)
Dividends received deduction (35.0) 16 (35.4) (2) (27.2) (1)
Other items, net (.8) — (6.4) — (2.8) —
Total income tax provision (benefit) $(152.3) 68% $ 510.5 30% $ 785.7 32%
Deferred income taxes reflect the effect for financial statement reporting purposes of temporary differences between the financial
statement carrying amounts and the tax bases of assets and liabilities. At December 31, 2008 and 2007, the components of the
net deferred tax assets were as follows:
(m illions) 2008 2007

Deferred tax assets:
Unearned premiums reserve $ 291.4 $ 293.2
Non-deductible accruals 150.0 149.7
Loss reserves 117.9 121.7
Write-downs on securities 478.4 12.7
Net unrealized losses on securities 41.4 —
Derivative instruments — .4
Other 10.0 5.3
Deferred tax liabilities:
Deferred acquisition costs (144.9) (149.2)
Net unrealized gains on securities — (250.4)
Hedges on forecasted transactions (13.4) (15.0)
Depreciable assets (96.1) (63.7)
Derivative instruments (23.8) —
Other (17.6) (12.5)
Net deferred tax assets 793.3 92.2
Net income taxes recoverable 28.3 13.8
Income taxes $ 821.6 $ 106.0
Progressive generated a capital loss carryforward of $24.4 million in 2008 that will expire on December 31, 2013.
The increase in our net deferred tax asset during the year is primarily due to write-downs on securities during the year that have not
yet been recognized for tax purposes, as well as net unrealized losses. Although realization of the deferred tax asset is not
assured, management believes that in holding these securities to substantial recovery it is more likely than not that the deferred tax
asset will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for
tax purposes.
We have not recorded any unrecognized tax benefits, or any related interest and penalties, as of December 31, 2008 or
December 31, 2007. We recognize interest and penalties, if any, related to unrecognized tax benefits as a component of income
tax expense.
App.-A-19
The statute of limitations remains open with respect to our federal income tax returns for tax years 2004 and later. For tax years
2004-2006, all audit fieldwork has been completed and all adjustments agreed to. There was one issue raised during the audit
which we could not reach agreement on, so this issue was taken to the Office of Appeals. We received an Appeals settlement,
which includes the 2007 tax year, on this issue, but are awaiting the approval of the Joint Committee on Taxation.
For 2007 and 2008, we have entered into the Compliance Assurance Program (CAP). Under CAP, the IRS begins its examination
process for the tax year before the tax return is filed, by examining significant transactions and events as they occur. The goal of
the CAP program is to expedite the exam process and to reduce the level of uncertainty regarding a taxpayer’s tax filing positions.
The 2007 CAP audit has been completed and our tax return has been accepted as filed, pending the Joint Committee’s approval of
our Appeals settlement, discussed above.
Fieldwork on the 2008 CAP audit began during the fourth quarter 2008. No issues have been raised to date.
6. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
Activity in the loss and loss adjustment expense reserves is summarized as follows:
(m illions) 2008 2007 2006

Balance at January 1 $ 5,942.7 $5,725.0 $5,660.3
Less reinsurance recoverables on unpaid losses 287.5 361.4 347.2
Net balance at January 1 5,655.2 5,363.6 5,313.1
Incurred related to:
Current year 9,981.8 9,845.9 9,641.8
Prior years 33.2 80.3 (246.9)
Total incurred 10,015.0 9,926.2 9,394.9
Paid related to:
Current year 6,700.4 6,737.2 6,682.3
Prior years 3,036.9 2,897.4 2,662.1
Total paid 9,737.3 9,634.6 9,344.4
Net balance at December 31 5,932.9 5,655.2 5,363.6
Plus reinsurance recoverables on unpaid losses 244.5 287.5 361.4
Balance at December 31 $ 6,177.4 $5,942.7 $5,725.0
Our objective is to establish case and IBNR reserves that are adequate to cover all loss costs, while sustaining minimal variation
from the date that the reserves are initially established until losses are fully developed. Our reserves developed unfavorably in both
2008 and 2007, compared to favorable development in 2006. Total development consists of net changes made by our actuarial
department on prior accident year reserves, based on regularly scheduled reviews, claims settling for more or less than reserved,
emergence of unrecorded claims at rates different than reserved, and changes in reserve estimates by claim representatives. In
2008, an increase in the number of late reported Commercial Auto claims, and an increase in the estimated severity on these
claims, was a primary contributor to the unfavorable development. The unfavorable development in 2007 was due to the settlement
of some large outstanding litigation, the number of large losses emerging from prior accident years being more than anticipated,
plus the result of reviews of large bodily injury and uninsured motorist claims. The favorable development in 2006 reflected the
recognition of lower severity for prior accident years than had been previously estimated.
Because we are primarily an insurer of motor vehicles, we have limited exposure to environmental, asbestos, and general liability
claims. We have established reserves for such exposures, in amounts that we believe to be adequate based on information
currently known. These claims are not expected to have a material effect on our liquidity, financial condition, cash flows, or results
of operations.
We write personal and commercial auto insurance in the coastal states, which could be exposed to hurricanes or other natural
catastrophes. Although the occurrence of a major catastrophe could have a significant effect on our monthly or quarterly results, we
believe that, based on historical performance, such an event would not be so material as to disrupt the overall normal operations of
Progressive. We are unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.
App.-A-20
7. REINSURANCE
The effect of reinsurance on premiums written and earned for the years ended December 31 was as follows:
2008 2007 2006

(m illions) Written Earned Written Earned Written Earned
Direct premiums $13,775.6 $13,810.1 $13,982.4 $14,107.0 $14,386.2 $14,386.3
Ceded (171.3) (178.7) (209.9) (229.6) (254.2) (268.4)
Net premiums $13,604.3 $13,631.4 $13,772.5 $13,877.4 $14,132.0 $14,117.9
Our ceded premiums are attributable to premiums written under state-mandated involuntary Commercial Auto Insurance
Procedures/Plans (CAIP), premiums ceded to state-provided reinsurance facilities, for which we retain no loss indemnity risk, and
premiums ceded related to our non-auto programs.
Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations could
result in losses to Progressive. We evaluate the financial condition of our reinsurers and monitor concentrations of credit risk to
minimize our exposure to significant losses from reinsurer insolvencies. We also require unauthorized reinsurers to secure
reinsurance through collateral, such as lines of credit or trust accounts.
At December 31, 2008, approximately 30% of the “prepaid reinsurance premiums” were comprised of CAIP, compared to about
40% at December 31, 2007. As of both December 31, 2008 and 2007, approximately 40% of the “reinsurance recoverables” were
attributable to CAIP. The remainder of the “prepaid reinsurance premiums” and “reinsurance recoverables” was primarily related to
state-mandated and non-auto programs.
Losses and loss adjustment expenses were net of reinsurance ceded of $109.2 million in 2008, $109.6 million in 2007, and $196.3
million in 2006.
8. STATUTORY FINANCIAL INFORMATION
At December 31, 2008, $469.8 million of consolidated statutory policyholders’ surplus represented net admitted assets of our
insurance subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of
domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum statutory
surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable insurance laws
and regulations, are available for transfer to the parent company cannot include the net admitted assets required to meet the
minimum statutory surplus requirements of the states where the companies are licensed.
During 2008, the insurance subsidiaries paid aggregate cash dividends of $280.8 million to the parent company. Based on the
dividend laws currently in effect, the insurance subsidiaries may pay aggregate dividends of $505.5 million in 2009 without prior
approval from regulatory authorities, provided the dividend payments are not within 12 months of previous dividends paid by the
applicable subsidiary.
Consolidated statutory policyholders’ surplus was $4,470.6 million and $4,587.3 million at December 31, 2008 and 2007,
respectively. Statutory net income was $368.4 million, $1,105.2 million, and $1,612.4 million for the years ended December 31,
2008, 2007, and 2006, respectively.
9. EMPLOYEE BENEFIT PLANS

Retirement Plans As of December 31, 2008, Progressive had a two-tiered Retirement Security Program. The first tier was a
defined contribution pension plan covering all employees who met requirements as to age and length of service. Company
contributions varied from 1% to 5% of annual eligible compensation up to the Social Security wage base, based on years of eligible
service and could be invested by a participant in any of the investment funds available under the plan. Company contributions were
$25.5 million in 2008, $22.5 million in 2007, and $21.9 million in 2006.
The second tier was a long-term savings plan under which Progressive matched, up to a maximum of 3% of the employee’s eligible
compensation, amounts contributed to the plan by an employee. Company matching contributions could be invested by a
participant in any of the investment funds available under the plan. Company matching contributions were $30.9 million in 2008,
$29.3 million in 2007, and $29.6 million in 2006.
App.-A-21
Postemployment Benefits Progressive provides various postemployment benefits to former or inactive employees who meet
eligibility requirements, their beneficiaries, and covered dependents. Postemployment benefits include salary continuation and
disability-related benefits, including workers’ compensation, and, if elected, continuation of health-care benefits for specified limited
periods. The liability for these benefits was $25.9 million at December 31, 2008, compared to $24.8 million in 2007.
Postretirement Benefits We provide postretirement health and life insurance benefits to all employees who met requirements as to
age and length of service at December 31, 1988. There are approximately 100 people in this group of employees. Our funding policy
for the benefits is to contribute annually the maximum amount that can be deducted for federal income tax purposes.
Incentive Compensation Plans—Employees Our incentive compensation includes both non-equity incentive plans (cash) and
equity incentive plans (stock-based). The cash incentive compensation includes a cash bonus program for a limited number of
senior executives and Gainsharing programs for other employees; the bases of these programs are similar in nature. The stock-
based incentive compensation plans provide for the granting of restricted stock awards to key members of management. Prior to
2003, we granted non-qualified stock options as stock-based incentive compensation (see below). The amounts charged to income
for the incentive compensation plans for the years ended December 31 were:
(m illions) 2008 2007 2006

Cash $140.3 $126.2 $197.7
Stock-based 34.5 26.5 27.6
Our 2003 Incentive Plan, which provides for the granting of stock-based awards, including restricted stock awards, to key
employees of Progressive, has 18.8 million shares currently authorized, net of restricted stock awards cancelled; 8.4 million shares
remain available for future restricted stock grants. Our 1995 Incentive Plan has expired; however, awards made under that plan prior
to its expiration are still in effect.
In 2003, we began issuing restricted stock awards in lieu of stock options. The restricted stock awards are issued as either time-
based or performance-based awards. The vesting period (i.e., requisite service period) must be a minimum of six months and one
day. The time-based awards vest in equal installments upon the lapse of specified periods of time, typically three, four, and five
years. The performance-based awards vest upon the achievement of predetermined performance goals. The performance-based
awards are granted to approximately 40 executives and senior managers, in addition to their time-based awards, to provide
additional compensation for achieving pre-established profitability and growth targets. Generally, the restricted stock awards are
expensed pro rata over their respective vesting periods based on the market value of the awards at the time of grant. However,
restricted stock awards granted in 2003 and 2004, that were deferred pursuant to our deferred compensation plan, are accounted for
as liability awards, since distributions from the deferred compensation plan for these awards will be made in cash; accordingly, we
record expense on a pro rata basis based on the current market value of common shares at the end of the reporting period.
Prior to 2003, we granted nonqualified stock options. These options became exercisable at various dates not earlier than six
months after the date of grant, and remain exercisable for up to ten years from the date of the award. All remaining options vested
on January 1, 2007. All options granted had an exercise price equal to the market value of the common shares on the date of grant
and, under the then applicable accounting guidance, no compensation expense was recorded prior to 2006. Pursuant to the
adoption of SFAS 123(R), on January 1, 2006, we began expensing the remaining unvested stock option awards (see Note 1 –
Reporting and Accounting Policies, “Stock -Based Compensation,” for further discussion). All option exercises are settled in
Progressive common shares from either existing treasury shares or newly issued shares.
A summary of all employee restricted stock activity during the years ended December 31 follows:
2008 2007 2006

Weighte d Weighte d Weighte d
Ave rage Ave rage Ave rage
Num ber of Grant Date Num ber of Grant Date Num ber of Grant Date
Res tricte d Share s Share s Fair Value Share s Fair Value Share s Fair Value
Beginning of year 6,868,850 $ 22.33 6,232,522 $ 22.27 5,442,988 $ 20.21
Add (deduct):
Granted 3,038,793 15.98 2,318,637 21.01 1,828,198 26.50
Vested (1,281,560) 19.98 (1,005,680) 18.80 (567,824) 16.60
Forfeited (365,387) 21.61 (676,629) 22.44 (470,840) 21.74
End of year 8,260,696 $ 20.39 6,868,850 $ 22.33 6,232,522 $ 22.27
Available, end of year 1 8,424,255 11,287,225 13,448,514
1 Represents shares available under the 2003 Incentive Plan. The 1995 Incentive Plan expired in February 2005, and the remaining shares thereunder are no
longer available for future issuance.
App.-A-22
Of the 1,281,560 restricted stock awards that vested during the year ended December 31, 2008, 1,023,456 shares were not
deferred under our deferred compensation plans and 258,104 were deferred (see discussion of deferred compensation plans below).
The aggregate fair value of the non-deferred awards, based on the respective grant date stock prices, was $20.5 million. Two types
of deferred shares vested. First were 179,464 deferred liability awards. There was no intrinsic value attributed to these shares which
were deferred, since, as previously discussed, these awards were granted in 2003 or 2004 and, therefore, were expensed based on
the current market value at the end of each reporting period. In addition, 78,640 deferred equity awards vested which were granted in
2005. The aggregate fair value of these deferred awards, based on the grant date stock price, was $1.8 million.
During the year ended December 31, 2008, we recognized $34.5 million, or $22.4 million after taxes, of compensation expense
related to our outstanding unvested restricted stock. During the year ended December 31, 2007, we recognized $26.5 million, or
$17.8 million after taxes, of compensation expense related to our outstanding unvested restricted stock. During the year ended
December 31, 2006, we recognized $27.6 million, or $17.9 million after taxes, of compensation expense related to our outstanding
unvested restricted stock and stock option awards. At December 31, 2008, the total unrecognized compensation cost related to
unvested restricted stock awards was $83.2 million. This compensation expense will be recognized into the income statement over
the weighted average vesting period of 2.67 years.
A summary of all employee stock option activity during the years ended December 31 follows:
2007 2006
Weighte d Weighte d
Ave rage Ave rage
Num ber of Grant Date Num ber of Grant Date
Nonve s ted stock options outs tanding Share s Fair Value Share s Fair Value
Beginning of year 1,087,866 $ 5.82 4,232,220 $ 4.76
Deduct:
Vested1 (1,087,866) 5.82 (3,053,352) 4.36
Forfeited — — (91,002) 5.81
End of year — $ — 1,087,866 $ 5.82
1 All remaining stock option aw ards vested on January 1, 2007.
In September 2007, we paid a $2.00 per common share special dividend to shareholders of record at the close of business on
August 31, 2007. Since the holders of the outstanding stock option awards were not entitled to receive the cash dividend, we were
required to increase the number of shares and reduce the exercise price of any of our then outstanding stock option awards in
accordance with the antidilution provisions of our incentive plans; prior year information was not adjusted. This adjustment is
reflected in the appropriate tables below.
2008 2007 2006

Num ber of Exe rcis e Num ber of Exe rcis e Num ber of Exe rcis e
Options Outs tanding Share s Price Share s Price Share s Price
Beginning of year 11,738,502 $ 7.75 13,747,221 $ 8.75 19,621,476 $ 8.44
Add:
Antidilution adjustment — — 1,201,984 NM — —
Deduct:
Exercised (3,235,229) 7.86 (3,208,873) 9.10 (5,649,193) 7.55
Forfeited — — (1,830) 11.78 (225,062) 12.09
End of year 8,503,273 $ 7.71 11,738,502 $ 7.75 13,747,221 $ 8.75
Exercisable, end of year 8,503,273 $ 7.71 11,738,502 $ 7.75 12,659,355 $ 8.38
NM=not meaningful
The total pretax intrinsic value of options exercised during the year ended December 31, 2008, was $30.5 million, based on the
actual stock price at time of exercise.
The following employee stock options were outstanding and exercisable as of December 31, 2008:
Weighte d Weighte d Ave rage

Ave rage Aggre gate Rem aining
Num ber of Shares Exe rcis e Price Intrins ic Value Contractual Life
8,503,273 $7.71 $60.4 million 1.99 years
App.-A-23
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the difference between our
closing stock price of $14.81 on December 31, 2008, and the exercise price of the options, which is the amount that would have
been received by the option holders, before taxes, had all option holders exercised their options as of that date. All of the
exercisable options at December 31, 2008, were “in-the-money.”
Incentive Compensation Plans—Directors Our 2003 Directors Equity Incentive Plan, which provides for the granting of stock-
based awards, including restricted stock awards to non-employee directors of Progressive, has 1.4 million shares currently
authorized, net of restricted stock awards cancelled; 1.0 million shares remain available for future restricted stock grants. Our 1998
Directors’ Stock Option Plan expired on April 24, 2008; however, awards made under this plan prior to its expiration are still in
effect.
In 2003, we began issuing restricted stock awards to non-employee directors as the equity component of their compensation. The
restricted stock awards are issued as time-based awards. The vesting period (i.e., requisite service period) must be a minimum of
six months and one day. The time-based awards granted to date have included vesting periods of eleven months from the date of
each grant. The restricted stock awards are expensed pro rata over their respective vesting periods based on the market value of
the awards at the time of grant.
Prior to 2003, we granted nonqualified stock options as the equity component of the directors compensation. These options were
granted for periods up to ten years, became exercisable at various dates not earlier than six months after the date of grant, and
remain exercisable for specified periods thereafter. All options granted had an exercise price equal to the market value of the
common shares on the date of grant and, under the then applicable accounting guidance, no compensation expense was recorded.
All option exercises are settled in Progressive common shares from either existing treasury shares or newly issued shares.
In April 2006, we began granting restricted stock awards to non-employee directors as their sole compensation as a member of the
Board of Directors. From April 2003 through April 2006, we issued restricted stock awards in addition to other retainer and meeting
fees.
A summary of all directors restricted stock activity during the years ended December 31 follows:
2008 2007 2006

Ave rage Ave rage Num ber Ave rage
Num ber of Grant Date Num ber of Grant Date of Grant Date
Res tricte d Share s Share s Fair Value Share s Fair Value Share s Fair Value
Beginning of year 68,595 $ 23.52 66,031 $ 26.64 50,244 $ 21.91
Add (deduct):
Granted 105,420 17.96 76,074 23.52 66,031 26.64
Vested (68,595) 23.52 (66,031) 26.64 (50,244) 21.91
Forfeited — — (7,479) 23.52 — —
End of year 105,420 $ 17.96 68,595 $ 23.52 66,031 $ 26.64
Available, end of year 1 988,855 1,094,275 1,170,349
1 Represents shares available under the 2003 Directors Equity Incentive Plan.
A summary of all stock option activity for both current and former directors during the years ended December 31 follows:
2008 2007 2006

Num ber of Exe rcis e Num ber of Exe rcis e Num ber of Exe rcis e
Options Outs tanding Share s Price Share s Price Share s Price
Beginning of year 628,813 $ 7.97 772,664 $ 8.59 873,108 $ 8.20
Add:
Antidilution adjustment — — 55,851 NM — —
Deduct:
Exercised (227,456) 6.86 (199,702) 8.16 (100,444) 5.18
End of year 401,357 $ 8.60 628,813 $ 7.97 772,664 $ 8.59
Exercisable, end of year1 401,357 $ 8.60 628,813 $ 7.97 772,664 $ 8.59
NM = not meaningful
1The 1998 Directors’ Stock Option Plan has expired.
App.-A-24
Deferred Compensation We maintain The Progressive Corporation Executive Deferred Compensation Plan (“Deferral Plan”) that
permits eligible executives to defer receipt of some or all of their annual bonuses or all of their annual restricted stock awards.
Deferred cash compensation is deemed invested in one or more investment funds, including common shares of Progressive, offered
under the Deferral Plan and elected by the participant. All distributions from the Deferral Plan pursuant to deferred cash
compensation will be paid in cash.
For all restricted stock awards granted on or after March 17, 2005, and deferred pursuant to the Deferral Plan, the deferred amounts
are deemed invested in common shares and are ineligible for transfer to other investment funds in the Deferral Plan; all distributions
will be made in common shares. For all awards granted prior to March 17, 2005, the deferred amounts are eligible to be transferred
to any of the funds in the Deferral Plan; distributions of these deferred awards will be made in cash.
We reserved 3.6 million common shares for issuance under the Deferral Plan. An irrevocable grantor trust has been established to
provide a source of funds to assist us in meeting our liabilities under the Deferral Plan. At December 31, 2008 and 2007, the trust
held assets of $66.7 million and $93.3 million, respectively, of which $13.5 million and $15.0 million were held in Progressive’s
common shares; these shares will be distributed in cash. In addition, at December 31, 2008, the trust held .1 million common
shares to be distributed in-kind.
10. SEGMENT INFORMATION
We write personal automobile and other specialty property-casualty insurance and provide related services throughout the United
States. Our Personal Lines segment writes insurance for private passenger automobiles and recreational vehicles. The Personal
Lines segment is comprised of both the Agency and Direct businesses. The Agency business includes business written by our
network of more than 30,000 independent insurance agencies, including brokerages in New York and California, and strategic
alliance business relationships (other insurance companies, financial institutions, and national agencies). The Direct business
includes business written online and by phone.
Our Commercial Auto segment writes primary liability and physical damage insurance for automobiles and trucks owned by small
businesses in the specialty truck and business auto markets. This segment is distributed through both the independent agency
and direct channels.
Our other indemnity businesses primarily include writing professional liability insurance for community banks and managing a small
amount of run-off businesses.
Our service businesses include providing insurance-related services, primarily processing CAIP business.
All segment revenues are generated from external customers and we do not have a reliance on any major customer.
We evaluate segment profitability based on pretax underwriting profit (loss) for the Personal Lines and Commercial Auto
businesses. In addition, we use underwriting profit (loss) for the other indemnity businesses and pretax profit (loss) for the service
businesses. Pretax underwriting profit (loss) is calculated as follows:
Net premiums earned

Less: Losses and loss adjustment expenses
Policy acquisition costs
Other underwriting expenses
Pretax underwriting profit (loss)
Service business profit (loss) is the difference between service business revenues and service business expenses.
Expense allocations are based on certain assumptions and estimates primarily related to revenue and volume; stated segment
operating results would change if different methods were applied. We do not allocate assets or income taxes to operating
segments. In addition, we do not separately identify depreciation and amortization expense by segment and such disclosure would
be impractical. Companywide depreciation expense was $99.1 million in 2008, $106.9 million in 2007, and $103.4 million in 2006.
The accounting policies of the operating segments are the same as those described in Note 1 – Reporting and Accounting Policies.
App.-A-25
Following are the operating results for the years ended December 31:
2008 2007 2006

Pretax Pretax Pretax
Profit Profit Profit
(m illions) Reve nue s (Loss ) Reve nue s (Loss ) Reve nue s (Loss )
Personal Lines
Agency $ 7,362.0 $ 360.7 $ 7,636.4 $ 500.2 $ 7,903.6 $ 936.7
Direct 4,485.8 274.8 4,372.6 339.9 4,337.4 568.6
Total Personal Lines1 11,847.8 635.5 12,009.0 840.1 12,241.0 1,505.3
Commercial Auto 1,762.2 94.1 1,846.9 185.7 1,851.9 366.5
Other indemnity 21.4 5.3 21.5 (.7) 25.0 6.5
Total underwriting operations 13,631.4 734.9 13,877.4 1,025.1 14,117.9 1,878.3
Service businesses 16.1 (4.3) 22.3 1.8 30.4 6.0
Investments2 (807.4) (816.2) 787.1 774.7 638.1 626.2
Interest expense — (136.7) — (108.6) — (77.3)
Consolidated Total $12,840.1 $(222.3) $14,686.8 $1,693.0 $14,786.4 $2,433.2
1 Private passenger automobile insurance accounted for 90% of the total Personal Lines segment net premiums earned in 2008 and 91% in both 2007 and
2006; our special lines products accounted for the balance of the Personal Lines net premiums earned.
2 Revenues represent recurring investment income and net realized gains (losses) on securities; pretax profit is net of investment expenses.
Progressive’s management uses underwriting margin and combined ratio as primary measures of underwriting profitability. The
underwriting margin is the pretax underwriting profit (loss) expressed as a percentage of net premiums earned (i.e., revenues from
insurance operations). Combined ratio is the complement of the underwriting margin. Following are the underwriting
margins/combined ratios for our underwriting operations for the years ended December 31:
2008 2007 2006

Unde rw riting Com bine d Unde rw riting Com bine d Unde rw riting Com bine d
M argin Ratio M argin Ratio M argin Ratio
Personal Lines
Agency 4.9% 95.1 6.5% 93.5 11.9% 88.1
Direct 6.1 93.9 7.8 92.2 13.1 86.9
Total Personal Lines 5.4 94.6 7.0 93.0 12.3 87.7
Commercial Auto 5.3 94.7 10.1 89.9 19.8 80.2
Other indemnity1 NM NM NM NM NM NM
Total underwriting operations 5.4 94.6 7.4 92.6 13.3 86.7
1 Underw riting margins/combined ratios are not meaningful (NM) for our other indemnity businesses due to the low level of premiums earned by, and the
variability of losses in, such businesses.
11. OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended December 31 were as follows:
2008 2007 2006

Tax Tax Tax
(Provis ion) Afte r (Provis ion) Afte r (Provis ion) Afte r
(m illions) Pretax Benefit Tax Pretax Benefit Tax Pretax Benefit Tax
Unrealized gains (losses) arising
during period:
Fixed maturities $(407.6) $ 142.7 $(264.9) $ 52.1 $ (18.2) $ 33.9 $ 10.7 $ (3.7) $ 7.0
Equity securities (238.6) 83.5 (155.1) (189.2) 66.2 (123.0) 292.3 (102.3) 190.0
Reclassification adjustment for
(gains) losses realized in net
income:
Fixed maturities 9.7 (3.4) 6.3 (2.3) .8 (1.5) 27.5 (9.7) 17.8
Equity securities (197.1) 69.0 (128.1) (63.4) 22.2 (41.2) (12.4) 4.3 (8.1)
Change in unrealized gains
(losses) (833.6) 291.8 (541.8) (202.8) 71.0 (131.8) 318.1 (111.4) 206.7
Net unrealized gains on
forecasted transactions1 (4.4) 1.5 (2.9) 31.2 (10.9) 20.3 (1.8) .7 (1.1)
Other comprehensive income
(loss) $(838.0) $ 293.3 $(544.7) $(171.6) $ 60.1 $(111.5) $316.3 $ (110.7) $ 205.6
1 Entered into for the purpose of managing interest rate risk associated w ith our debt issuances (see Note 4 – Debt for further discussion), and managing
foreign currency risk associated w ith our forecasted foreign currency transaction (see Note 2 – Investments for further discussion). We expect to
reclassify $4.9 million into income w ithin the next 12 months.
App.-A-26
12. LITIGATION
The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims
made under insurance policies in the ordinary course of our business. All legal actions relating to such insurance claims are
considered by us in establishing our loss and loss adjustment expense reserves.
In addition, The Progressive Corporation and/or its insurance subsidiaries are named as defendants in a number of class action or
individual lawsuits arising out of the operation of the insurance subsidiaries. Other insurance companies face many of these same
issues. The lawsuits discussed below are in various stages of development. We plan to contest these suits vigorously, but may
pursue settlement negotiations in some cases, if appropriate. The outcomes of these cases are uncertain at this time.
In accordance with GAAP, we establish loss reserves for a lawsuit when it is probable that a loss has been incurred and we can
reasonably estimate its potential exposure (referred to as a loss that is both “probable and estimable” in the discussion below).
Certain of the cases for which we have established reserves under this standard are mentioned in the discussion below. Based on
currently available information, we believe that our reserves for these lawsuits are reasonable and that the amounts reserved did not
have a material effect on our consolidated financial condition or results of operations. However, if any one or more of these cases
results in a judgment against, or settlement by, our insurance subsidiaries for an amount that is significantly greater than the
amount so reserved, the resulting liability could have a material effect on our consolidated financial condition, cash flows, and
results of operations.
As to lawsuits that do not satisfy both parts of this GAAP standard (i.e., the loss is not both probable and estimable), we have not
established reserves at this time. In the event that any one or more of these cases results in a substantial judgment against, or
settlement by, Progressive, the resulting liability could also have a material effect on our consolidated financial condition, cash
flows, and results of operations.
Following is a discussion of potentially significant pending cases at December 31, 2008 and certain cases resolved during 2008,
2007, and 2006.
There are four putative class action lawsuits and one that was a certified class action lawsuit challenging our insurance
subsidiaries’ use of certain automated database vendors or software to assist in the adjustment of bodily injury claims. A fifth
putative class action lawsuit was voluntarily dismissed by the plaintiff in 2007. In each of these lawsuits, the plaintiffs allege that
these databases or software systematically undervalue the claims. With respect to the four pending putative class action lawsuits,
we do not consider a loss from these cases to be probable and estimable, and are unable to estimate a range of loss, if any, at this
time. With respect to the one certified class action lawsuit, we engaged in extensive settlement negotiations and reached a
settlement on a nationwide basis, and a reserve was established accordingly. The settlement received preliminary approval from the
court in November 2007, at which time the court certified the class action for settlement purposes only. All payments have now
been made and the file is closed. The amount of the settlement was not material to our consolidated financial condition, cash flows,
or results of operations.
There are eight class action lawsuits challenging certain aspects of our insurance subsidiaries use of credit information and
compliance with notice requirements under the federal Fair Credit Reporting Act. During 2004, we entered into a settlement
agreement to resolve these cases, had received preliminary court approval of the settlement, and had established a reserve
accordingly. In 2005, the court denied final approval of the proposed settlement. In 2006, an amended settlement received trial court
approval, and the loss reserve was adjusted accordingly. The adjustment was not material to our financial condition, cash flows,
and results of operations in 2006. After objecting class members filed an appeal, the Court of Appeals affirmed the trial court’s
decision to approve the settlement. We are now in the process of administering the settlement. Once the administration is
completed, all of the eight class action lawsuits will be resolved. There has been no further action on any of the six individual cases
that were stayed pending the outcome of the class actions. None of these cases pose a material threat to our consolidated
financial condition, cash flows, and results of operations.
There was one putative class action lawsuit challenging the installment fee program used by our insurance subsidiaries, which was
settled in May 2008. The amount of the settlement was not material to our consolidated financial condition, cash flows, and results
of operations. We had successfully defended similar cases in the past, including one case that was dismissed in 2007 and another
that was dismissed in 2005.
There is one certified class action lawsuit and one putative class action lawsuit alleging that the insurance subsidiaries’ rating
practices at renewal are improper. We prevailed in a similar putative class action in December 2004. With respect to the
App.-A-27
putative class action lawsuit, we do not consider a loss to be probable and estimable, and are unable to estimate a range of loss, if
any, at this time. With respect to the certified class action lawsuit, we engaged in extensive settlement negotiations and reached a
settlement on a statewide basis. The settlement received trial court approval in December 2007. All payments have now been made
and the case is closed. The amount of the settlement was not material to our consolidated financial condition, cash flows, and
There are three certified class action lawsuits and three putative class action lawsuits pending against our insurance subsidiaries,
alleging that we failed to adjust MRI bills to a consumer price index in violation of a statute. With respect to the three certified class
action lawsuits, we engaged in extensive settlement negotiations and reached a settlement on a statewide basis. The settlement
received trial court approval and was paid during 2007. The amount of the settlement was not material to our consolidated financial
condition, cash flows, and results of operations. With respect to the three putative class action lawsuits, two were dismissed and
the other was settled for a nominal amount.
Progressive’s insurance subsidiaries are defending two putative class actions alleging that we violate the “make-whole” and
“common-fund” doctrines. Specifically, it is alleged that we may obtain reimbursement of medical payments made on behalf of an
insured only when the insured has been made whole by a third-party tortfeasor and that we further must deduct from the
reimbursement amount a proportionate share of the insured’s legal fees for pursuing the third-party tortfeasor. We do not consider a
loss from these cases to be probable and estimable, and are unable to estimate a range of loss, if any, at this time.
There is one certified nationwide class action lawsuit challenging our insurance subsidiaries’ practice of taking betterment on boat
repairs. While we consider a loss from this case to be probable, it is not currently estimable. As a result, we are unable to estimate
a range of loss, if any, at this time.
There are three putative class action lawsuits challenging the labor rates our insurance subsidiaries pay to auto body repair shops.
One action was brought on behalf of insureds, while the other two were brought on behalf of repair facilities. We do not consider a
loss from these cases to be probable and estimable, and are unable to estimate a range of loss, if any, at this time.
There are four putative class action lawsuits challenging Progressive’s insurance subsidiaries’ practice in Florida of paying personal
injury protection (PIP) and first-party medical payments at 200% of the amount allowed by Medicare. We do not consider a loss
from these cases to be probable and estimable, and are unable to estimate a range of loss, if any, at this time.
There is one putative class action lawsuit alleging that Progressive’s insurance subsidiaries used non-conforming underinsured
motorist rejection forms. We have engaged in extensive settlement negotiations and reached a settlement on a statewide basis.
The settlement has been approved by the court. The amount of the settlement was not material to our consolidated financial
condition, cash flows, and results of operations.
In July 2005, we settled a state class action lawsuit alleging that Progressive’s insurance subsidiaries used non-conforming
uninsured/underinsured (UM/UIM) motorist rejection forms. The settlement received trial court approval in October 2005, and was
paid during 2006. The amount of the settlement was not material to our consolidated financial condition, cash flows, and results of
operations.
There is one certified class action lawsuit seeking refunds of all UIM premiums and certain UM premiums on grounds that the
coverages were illusory. We have engaged in extensive settlement negotiations and reached a settlement on a statewide basis.
The settlement received preliminary approval from the court in December 2007. All payments have been made. The amount of the
settlement was not material to our consolidated financial condition, cash flows, and results of operations.
There is one certified class action lawsuit alleging that Progressive’s insurance subsidiaries failed to offer certain enhanced PIP
benefits. We do not consider a loss from this case to be probable and estimable, and are unable to estimate a range of loss, if any,
at this time.
There is one certified class action lawsuit seeking interest on PIP payments that allegedly were late. We understand that there are
a number of similar class actions against others in the insurance industry. We do not consider a loss from this case to be probable
and estimable, and are unable to estimate a range of loss, if any, at this time.
In 2006, we settled two state class action lawsuits pending against Progressive’s insurance subsidiaries in Florida, challenging the
legality of our payment of preferred provider rates on PIP claims. The settlement received trial court approval
App.-A-28
in August 2006 and was paid in 2006. The amount of the settlement was not material to our consolidated financial condition, cash
flows, and results of operations.
In 2006, we settled a nationwide class action lawsuit challenging our insurance subsidiaries’ use of certain automated database
vendors to assist in the evaluation of total loss claims. The settlement received trial court approval and was paid during 2006. The
amount of the settlement was not material to our consolidated financial condition, cash flows, and results of operations.
Progressive’s subsidiaries are also named as a defendant in individual lawsuits related to employment issues. The outcomes of
these cases are uncertain, but we do not believe that they will have a material impact on our financial condition, cash flows, and
In 2008, we reached agreement in principle on one class action lawsuit challenging our classification of certain job titles under the
Fair Labor Standards Act. We are awaiting approval by the court. The amount of the settlement was not material to our
consolidated financial condition, cash flows, and results of operations.
13. COMMITMENTS AND CONTINGENCIES
We have certain noncancelable operating lease commitments with lease terms greater than one year for property and computer
equipment. The minimum commitments under these agreements at December 31, 2008, were as follows:
(m illions)
Year Com m itm e nt
2009 $ 86.7
2010 64.3
2011 40.2
2012 26.8
2013 11.3
Thereafter 20.0
Total $ 249.3
Some of the leases have options to renew at the end of the lease periods. The expense we incurred for the leases disclosed above,
as well as other operating leases that may be cancelable or have terms less than one year, was:
(m illions)
Year Expe nse
2008 $ 124.8
2007 139.5
2006 138.8
As of December 31, 2008, we had open investment funding commitments of $.2 million; we had no uncollateralized lines or letters
of credit as of December 31, 2008 or 2007.
App.-A-29
Management’s Report on Internal Control over Financial Reporting

Progressive’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control structure was designed under the
supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect our transactions and dispositions of assets; provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our
management and our directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on our evaluation under the framework in Internal Control—Integrated Framework , management concluded that our
internal control over financial reporting was effective as of December 31, 2008.
During the fourth quarter 2008, there were no changes in our internal control over financial reporting identified in the internal control
review process that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PricewaterhouseCoopers LLP, an independent registered public accounting firm that audited the financial statements included in
this Annual Report, has audited, and issued an attestation report on the effectiveness of, our internal control over financial reporting
as of December 31, 2008; such report appears herein.
CEO and CFO Certifications

Glenn M. Renwick, President and Chief Executive Officer of The Progressive Corporation, and Brian C. Domeck, Vice President and
Chief Financial Officer of The Progressive Corporation, have issued the certifications required by Sections 302 and 906 of The
Sarbanes-Oxley Act of 2002 and applicable SEC regulations with respect to Progressive’s 2008 Annual Report on Form 10-K,
including the financial statements provided in this Report. Among other matters required to be included in those certifications,
Mr. Renwick and Mr. Domeck have each certified that, to the best of his knowledge, the financial statements, and other financial
information included in the Annual Report on Form 10-K, fairly present in all material respects the financial condition, results of
operations, and cash flows of Progressive as of, and for, the periods presented. See Exhibits 31 and 32 to Progressive’s Annual
Report on Form 10-K for the complete Section 302 and 906 certifications, respectively.
In addition, Mr. Renwick submitted his annual certification to the New York Stock Exchange (NYSE) on May 16, 2008, stating that
he was not aware of any violation by Progressive of the NYSE corporate governance listing standards, as required by
Section 303A.12(a) of the NYSE Listed Company Manual.
App.-A-30
Report of Independent Registered Public Accounting Firm
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, changes in
shareholders’ equity and cash flows present fairly, in all material respects, the financial position of The Progressive Corporation and
its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial
statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial
reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Cleveland, Ohio
February 25, 2009
App.-A-31

Management’s Discussion and Analysis of Financial Condition and Results of Operations
The consolidated financial statements and the related notes, together with the supplemental information, should be read in
conjunction with the following discussion and analysis of the consolidated financial condition and results of operations.
I. OVERVIEW
The Progressive Corporation is a holding company that does not have any revenue producing operations, physical property, or
employees of its own. The Progressive Group of Insurance Companies, together with our non-insurance subsidiaries, comprise what
we refer to as Progressive. Progressive has been in business since 1937 and is estimated to be the country’s fourth largest private
passenger auto insurer based on net premiums written during 2008. Through our insurance companies, we offer personal
automobile insurance and other specialty property-casualty insurance and related services throughout the United States. Our
Personal Lines segment writes insurance for private passenger automobiles and recreational vehicles through more than 30,000
independent insurance agencies and directly to consumers online and over the phone. Our Commercial Auto segment, which writes
through both the independent agency and direct channels, offers insurance for cars and trucks (e.g., pick-up or panel trucks) owned
by small businesses and is estimated to be in the top four in its industry. These underwriting operations, combined with our service
and investment operations, make up the consolidated group.
The Progressive Corporation receives cash through subsidiary dividends, borrowings, security sales, and other transactions, and
uses these funds to contribute to its subsidiaries (e.g., to support growth), to make payments to shareholders and debt holders
(e.g., dividends and interest, respectively), to repurchase its common shares, and for other business purposes that might arise. In
2008, the holding company received $30.4 million of dividends from its subsidiaries, net of capital contributions. In January 2008, we
paid $98.3 million of dividends to shareholders under our annual variable dividend policy for 2007; no dividend was declared for 2008
as discussed below. During the year, we also used $179.4 million to repurchase 9.9 million Progressive common shares, at an
average cost of $18.09 per share. We had no debt that matured in 2008. The holding company also has access to funds held in a
non-insurance subsidiary; at year-end 2008, $1.0 billion of marketable securities were available in this company. On a consolidated
basis, we generated positive operating cash flows of $1.5 billion in 2008.
For 2008, Progressive generated a net loss of $70.0 million, or $.10 per share, driven by $1.4 billion of net realized losses in our
investment portfolio. This was our first net loss in 26 years. Our insurance operations had a solid year with underwriting profitability
of $734.9 million. Although written and earned premiums did not increase during the year, reflecting the prolonged period of rate
declines that ran until late 2007, we achieved an increase in the number of policies that were in force at the end of 2008, compared
to year-end 2007. Several initiatives are underway to help spur our personal auto growth. Our Commercial Auto business continues
to feel the effect of the weakening economy and competitive pressures on its ability to generate both premium and policy growth.
During 2008, our investment portfolio recognized nearly $1.9 billion of write-downs on securities determined to have other-than-
temporary declines in market value, with 90% of the write-downs relating to our preferred stock holdings. We ended 2008 with $6.4
billion of total capital (debt and equity), $718.6 million less than at the start of the year after investment losses and share
repurchases. We continue to manage our investing and financing activities in order to maintain sufficient capital to support all the
insurance we can profitably underwrite and service.
A. Operations
In 2008, our insurance subsidiaries generated underwriting profitability of 5.4%, which exceeded our targeted profitability objective of
4%. Companywide policies in force increased 3% over year-end 2007. Nevertheless, net premiums written and earned decreased
1% and 2%, respectively, reflecting the effect of previous rate reductions and shifts in the mix of business written. Changes in net
premiums written are a function of new business applications (i.e., issued policies), premium per policy, and retention.
During 2008, we saw a decrease in total new applications, primarily driven by decreases in our Agency auto and Commercial Auto
businesses. New application growth in both businesses continues to be a challenge. On the other hand, the Direct auto and special
lines businesses saw new applications increase during the year. We evaluate new business application growth on a state-by-state
basis. For 2008, 18 of our states experienced growth in new personal auto applications. In late 2007 and into 2008, we partially
restricted some classes of our Agency auto new business in New York and California, hindering our overall Agency auto growth.
We have received rate relief in New York and have lifted the restrictions for 2009, and we continue to improve underwriting
processes in California.
App.-A-32
In an effort to spur personal auto growth, we have several initiatives underway aimed at providing distinctive new business options,
including the expansion of our usage-based insurance product, referred to as MyRatesm; the introduction of Name Your Price®, a
program that provides customers the opportunity to select the price they would like to pay for auto insurance; and the roll-out of a
new product in our Agency auto business, which is designed to help improve competitiveness through further price segmentation. In
addition, during 2008, we entered Massachusetts with our personal auto and boat products available primarily via the Internet; we
may expand the distribution method to include independent agents and direct via the phone over time. With this addition,
Progressive now offers personal auto insurance in all 50 states and the District of Columbia.
Beginning in mid-2006 through late 2007, we were reducing rates to reflect the declining frequency trends that we were experiencing
and to reflect our stated goal of growing as fast as possible at a 96 combined ratio. Toward the end of 2007 and in 2008, we started
to raise rates. On a year-over-year basis for 2008, our average written premium per policy increased slightly in our Agency auto new
business, but was still down in Direct auto, special lines, and Commercial Auto. Total personal auto premium per policy, both new
and renewal, decreased about 2% during 2008. The lower average premium per policy relative to the rate increases reflects a shift in
the mix of business toward more preferred customers.
Earned premium per earned car year, another measure of rate change, lags the written premium measure. For 2008, as compared
to 2007, earned premium per earned car year decreased about 4% and 8% in our personal and commercial auto products,
respectively. Adjusting rates is a continuous process and we will continue to evaluate future rate needs and react quickly as we
recognize changing trends.
Companywide policies in force have increased 3% on a year-over-year basis since December 31, 2007. This equates to about
350,000 additional policies in force. The growth is in our Direct auto business where policies in force grew 9%. Special lines saw an
increase of about 7%, although it is uncertain that this part of the business will see significant gains going forward in these
uncertain economic times. In light of the tough economy, we were pleased that our Commercial Auto business was able to end
2008 with about the same number of policies as it had at the start of the year. Agency auto, on the other hand, saw a decrease in
policies in force of 2%.
To continue to grow policies in force, it is critical that we retain our customers for longer periods, which is why increasing retention
continues to be one of our most important priorities. In 2008, we continued to see an increase in customer retention with both our
Agency and Direct auto policy life expectancy increasing 11% on a year-over-year basis, while our special lines business saw a
1% increase. Our Commercial Auto customer measures were down about 2% from the prior year.
As stated above, our 5.4% companywide underwriting profit margin for 2008 exceeded our target of a 4% underwriting margin,
including 1.2 points of weather-related catastrophe losses, primarily related to hurricanes Ike and Gustav, and hail storms and
floods in the Midwest and Great Plains. In addition, we experienced .2 points of unfavorable prior accident year development,
primarily in our Commercial Auto business. During 2008, we experienced declining auto frequency trends, while severity increased
slightly, reflecting increases in bodily injury and personal injury protection severity, offset by a decrease for the property coverages
in total.
B. Investments and Capital Management

The fair value of our investment portfolio was $13.0 billion at December 31, 2008, including $.4 billion of redeemable and $1.1 billion
of nonredeemable preferred stocks. Within our investment portfolio, we maintained our asset allocation strategy of investing
between 75-100% of our total portfolio in fixed-income securities and 0-25% in common equities. During the year, we took
significant steps to restructure the portfolio to a lower risk profile. At the end of 2008, our portfolio was allocated 94% to fixed-
income securities and 6% to common equities.
Our investment portfolio produced a fully taxable equivalent (FTE) total return of (10.4)% for 2008. We experienced losses in both
asset classes, with FTE total returns of (36.5)% and (7.1)% in the common stock and fixed-income portfolios, respectively. We
continue to maintain our fixed-income portfolio strategy of investing in high-quality, shorter-duration securities given the current
investment environment. We decreased the duration of our fixed-income portfolio modestly during the year to end 2008 at 3.2 years,
compared to 3.5 years at the end of 2007. The weighted average credit rating of our fixed-income portfolio ranged from AA- early in
2008 to AA+ at the end of the year. Our common equity investment strategy remains an index replication approach using the
Russell 1000 Index as the benchmark.
During the year, financial markets continued to suffer from the turbulence that began at the end of 2007, the effects of which
transformed the global financial system. The rapid deterioration in asset values, sharp retrenchment of credit providers, and loss of
market confidence pushed highly leveraged financial institutions to near failure, with the collapse and rescue of several major
financial firms around the world. Capital markets witnessed unprecedented volatility and periods of illiquidity in both the primary and
secondary markets. Credit spreads on risk assets across virtually all asset classes increased sharply over the course of the
App.-A-33
year. The economy began the year growing modestly, but dysfunction in the global capital markets, combined with a debt-
constrained consumer and further deterioration in the housing market, pushed the economy into contraction by year end. The
Federal Reserve responded to the economic weakness by cutting the overnight funds rate sharply, finishing the year with a target
range of 0-0.25%. The Federal Reserve also used its balance sheet and nontraditional lending facilities in order to provide additional
liquidity to the economy and capital markets. At year end, two-year U.S. Treasury Notes and ten-year U.S. Treasury Notes were
yielding .74% and 2.21%, respectively, compared to 3.06% and 4.03% at the end of 2007.
In light of these market conditions, during 2008, we performed a detailed review of our portfolio, paying particular attention to the
credit profile of the issuers of our redeemable and nonredeemable preferred stocks, as well as our asset-backed securities, to
identify the extent to which our asset values may have been affected by their exposure to the sub-prime mortgage loan disruption,
as well as broader credit market events.
Approximately 75% of our preferred stock holdings are obligations of financial sector issuers. During 2008, we recorded $1.7 billion
of other-than-temporary impairment losses on our redeemable and nonredeemable preferred stocks. The write-downs were due to a
combination of issuer fundamentals and severe market declines where we were unable to objectively determine that the securities
would substantially recover in the near term.
At year-end 2008, we held approximately $213.4 million of sub-prime mortgage bonds, classified as home-equity bonds. In addition,
we held $30.7 million of non-prime collateralized mortgage obligations (Alt-A securities). Together, these securities had unrealized
losses of $62.0 million for 2008. During 2008, we realized $31.1 million of losses related to other-than-temporarily impaired home-
equity securities; we did not have any write-downs in our Alt-A securities. In addition, we closed a credit default swap derivative on
an investment-grade asset-backed index, comprised of 20 bonds in the sub-prime mortgage sector; for 2008, this derivative position
generated a net loss of $19.7 million.
The investment results and market valuations clearly eroded our capital position. We ended 2008 with $6.4 billion of total capital,
debt plus equity. We continue to manage our investing and financing activities in order to maintain sufficient capital to support all
the insurance we can profitably underwrite and service.
II. FINANCIAL CONDITION

A. Holding Company
In 2008, The Progressive Corporation, the holding company, received $30.4 million of dividends from its subsidiaries, net of capital
contributions made to subsidiaries. For the three-year period ended December 31, 2008, The Progressive Corporation received $3.0
billion of dividends from its subsidiaries, net of capital contributions. Regulatory restrictions on subsidiary dividends are described in
Note 8 – Statutory Financial Information.
Progressive’s debt-to-total capital (debt plus equity) ratios at December 31, 2008 and 2007 were 34.0% and 30.6%, respectively.
During the last three years, The Progressive Corporation retired $100 million principal amount of debt securities. In June 2007, we
announced a plan to restructure our capital position, which included issuing $1 billion of 6.70% Fixed-to-Floating Rate Junior
Subordinated Debentures due 2067. See Note 4 – Debt for further discussion of our current outstanding debt. The plan also
consisted of returning capital to shareholders through share repurchases and a special dividend of $2.00 per common share. The
2007 recapitalization plan is discussed in further detail in the Liquidity and Capital Resources section below.
During 2008, we repurchased 9,918,818 of our common shares. The total cost to repurchase these shares was $179.4 million, with
an average cost of $18.09 per share. During the three-year period ended December 31, 2008, we repurchased 121,874,776 of our
common shares at a total cost of $2.9 billion (average cost of $22.39 per share, on a split-adjusted basis), including shares
repurchased as part of our 2007 recapitalization plan.
Progressive maintains a policy of paying an annual variable dividend that, if declared, would be payable shortly after the close of
each year. Prior to 2007, we had paid a quarterly dividend. The annual variable dividend is based on a target percentage of after-tax
underwriting income multiplied by a companywide performance factor (“Gainshare factor”), subject to the limitations discussed
below. The target percentage is determined by our Board of Directors on an annual basis and announced to shareholders and the
public. For 2007, 2008, and 2009, the Board determined the target percentage to be 20% of annual after-tax underwriting income.
The Gainshare factor can range from zero to two and is determined by comparing our operating performance for the year to certain
predetermined profitability and growth objectives approved by the Board. This dividend program is consistent with the variable cash
incentive program currently in place for our employees (referred to as our “Gainsharing program”). Although recalibrated every year,
the structure of the Gainsharing program generally remains the same. For 2008, the Gainshare factor was .80.
App.-A-34
Our annual variable dividend program is subject to certain limitations. If the Gainshare factor is zero or if our after-tax comprehensive
income (which includes net investment income, as well as both realized gains and losses on securities and the change in
unrealized gains and losses during the period) is less than after-tax underwriting income, no dividend will be paid. For the year
ended December 31, 2008, our after-tax comprehensive loss was $614.7 million, which is lower than the $477.7 million of after-tax
underwriting income for the same period; therefore, the Board did not declare a dividend for 2008.
During the last three years, we paid $1.5 billion in shareholder dividends. In January 2008, we paid shareholder dividends of $98.3
million, or $.145 per common share, pursuant to a December 2007 declaration by our Board of Directors under our annual variable
dividend policy. In 2007, we returned $1.4 billion to shareholders via an extraordinary cash dividend of $2.00 per share as part of a
recapitalization plan that took place during the year. Lastly, we paid dividends of $25.0 million, or $.0325 per share, in 2006 under
our previous quarterly dividend plan.
B. Liquidity and Capital Resources

Progressive’s insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance
of paying claims. As an auto insurer, our claims liabilities are generally short in duration. Approximately 50% of our outstanding
reserves are paid within one year and less than 15% are still outstanding after three years. See Claims Payment Patterns, a
supplemental disclosure provided in this Annual Report, for further discussion on the timing of claims payments.
As of December 31, 2008, our consolidated statutory policyholders’ surplus was $4.5 billion, compared to $4.6 billion at December
31, 2007. Our net premiums written-to-surplus ratio was 3.0 to 1 at year-end 2008, compared to 3.0 and 2.8 at year-end 2007 and
2006, respectively. We also have access to $1.0 billion in a non-insurance subsidiary, portions of which could be contributed to the
capital of our insurance subsidiaries to support growth as needed. In addition, our risk-based capital ratios, which are a series of
dynamic surplus-related formulas that contain a variety of factors that are applied to financial balances based on the degree of
certain risks (e.g., asset, credit, and underwriting), are well in excess of minimum requirements. See Note 8 – Statutory Financial
Information for any regulatory restrictions on subsidiary dividends.
For the three years ended December 31, 2008, operations generated positive cash flow of $5.4 billion, and cash flows are expected
to remain positive in both the short-term and reasonably foreseeable future. As of December 31, 2008, 94% of our portfolio was
invested in fixed-income securities with a weighted average credit quality of AA+ and duration of 3.2 years. At year end we held
$4.8 billion in cash and U.S. Treasury securities. The balance of our fixed-income portfolio consists substantially of readily
marketable fixed-income securities. We believe that we have sufficient readily marketable securities to cover our claims payments
without having a negative effect on our cash flows from operations.
We believe that we have sufficient capital resources, cash flows from operations, and borrowing capacity to support our current and
anticipated business, scheduled principal and interest payments on our debt, and expected capital requirements. The covenants on
our existing debt securities do not include any rating or credit triggers that would require an adjustment of the interest rate or an
acceleration of principal payments in the event our securities are downgraded. We have no scheduled debt maturities until January
2012.
Continuing volatility in the capital markets presents challenges to us as we seek to manage our portfolio and our capital position.
See Item 1A, “Risk Factors,” in our Form 10-K filed with the SEC for a discussion of certain matters that may affect our portfolio
and capital position.
Progressive seeks to deploy capital in a prudent manner and uses multiple data sources and modeling tools to estimate the
frequency, severity, and correlation of identified exposures, including, but not limited to, catastrophic losses and the business
interruptions discussed below, to estimate our potential capital needs.
Management views our capital structure as consisting of three levels, each with a specific size and purpose. The first layer of
capital, which we refer to as “regulatory capital,” is the amount of capital we need to satisfy regulatory requirements and support our
objective of writing all the business we can write and service, consistent with our underwriting discipline of achieving a 96 combined
ratio. This capital is held largely within our various insurance entities.
The second layer of capital we call “extreme contingency.” While our regulatory capital is, by definition, a cushion for absorbing
financial consequences of adverse events such as loss reserve development, litigation, weather catastrophes, or investment market
corrections, we view that as a base and hold additional capital for even more extreme conditions. The modeling used to quantify
capital needs for these conditions is quite extensive, including tens of thousands of simulations, representing our best estimates of
such contingencies based on historical experience. This capital is held at the holding company and, at times, in our insurance
entities potentially eligible for a dividend to the holding company.
The third layer of capital is capital in excess of the sum of the first two layers and provides maximum flexibility to repurchase stock,
consider acquisitions, and pay dividends to shareholders, among other purposes. This capital is largely held at the holding
company.
App.-A-35
At all times during 2008, our total capital exceeded the sum of our regulatory capital layer plus our self-constructed extreme
contingency load. However, due to the recent significant declines in the valuation of our investment portfolio, the third layer has
been diminished, along with the flexibility provided by that level of capital.
The speed by which the market valuations changed, and may continue to change, is of great concern and a basis for our ongoing
review of portfolio risk. To help manage these risks and preserve our capital base, as of December 31, 2008, we held approximately
$4.8 billion in cash and U.S. Treasury securities, three times the amount that we held at the start of the year, as we have sought to
reduce overall risk and volatility in the portfolio.
In order to provide liquidity in the event of disruptions in our cash management operations, such as disruptions in the financial
markets, that could affect our ability to transfer or receive funds, on December 31, 2008, we entered into a 364-Day Secured
Liquidity Credit Facility Agreement with National City Bank (NCB). Under this agreement, we may borrow up to $125 million, which
may be increased to $150 million at our request but subject to NCB’s discretion. Any borrowings under this agreement will be
secured by a lien on certain marketable securities held in our investment portfolio. In addition, we deposited $125 million into an
FDIC-insured deposit account at NCB in January 2009, to provide us with additional cash availability in the event of such a
disruption to our cash management operations. Our access to these funds is unrestricted. However, if we withdraw funds from this
account for any reason other than in connection with such a disruption in our cash management operations, the availability of
borrowings under the NCB credit facility will be reduced on a dollar-for-dollar basis until such time as we replenish the funds to the
deposit account. See Note 4 – Debt for further discussion of this credit facility. We have not borrowed under this agreement to date.
This revolving credit facility agreement replaced an uncommitted line of credit with NCB in the principal amount of $125 million;
there were no borrowings under this agreement during the last three years.
In June 2007, we announced a recapitalization plan in an effort to restructure our capital position, which included the following
components:
• The payment of an extraordinary cash dividend of $2.00 per common share. This extraordinary cash dividend, which
aggregated to $1.4 billion, was declared by the Board on June 13, 2007, and was paid on September 14, 2007, to
shareholders of record at the close of business on August 31, 2007.
• A new Board authorization for us to repurchase up to 100 million of our common shares over the course of 24 months,
expiring June 30, 2009. This authorization was in addition to the approximately 4 million shares that remained available
for repurchase at the end of the second quarter 2007 under the Board’s April 2006 share repurchase authorization. At
December 31, 2008, approximately 48.5 million shares remain available for repurchase under the 2007 authorization.
• The issuance of $1 billion of 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”)
on June 18, 2007. The proceeds of the offering were $987.3 million, before $1.5 million of expenses related to the
issuance. In addition, upon issuance of the Debentures, we closed a forecasted debt issuance hedge, which was entered
into to hedge against a possible rise in interest rates, and recognized a $34.4 million pretax gain as part of shareholders’
equity; this gain is being recognized as an adjustment to interest expense and amortized over 10 years, which
represents the fixed interest rate period of the Debentures. See Note 4 – Debt for further discussion of the terms of the
Debentures.
In connection with the issuance of the Debentures, we also entered into a Replacement Capital Covenant for the benefit of the
holders of our 6.25% Senior Notes due 2032 (the “Covered Debt”). Under the Replacement Capital Covenant, we may not repay,
redeem, or repurchase any of the Debentures prior to June 15, 2047 (or, if earlier, prior to the occurrence of certain events specified
in the Replacement Capital Covenant), except to the extent that (subject to certain limitations) the amount to be repaid, redeemed,
or purchased does not exceed a specified percentage of net cash proceeds from the sale to third parties of certain replacement
capital securities (as defined in the Replacement Capital Covenant) plus the proceeds from the sale or issuance of common shares
or certain qualifying warrants. The identity of the Covered Debt may be changed from time to time by the company upon the
occurrence of certain events specified in, and in accordance with the requirements of, the provisions of the Replacement Capital
Covenant. See our Current Report on Form 8-K, filed on June 22, 2007, for additional information and a copy of the Replacement
Capital Covenant.
C. Commitments and Contingencies

We currently have a total of 54 centers that are available to provide concierge level claims service. The service centers are located
in 41 metropolitan areas across the United States and serve as our primary approach to damage assessment and coordination of
vehicle repairs at authorized auto repair facilities in these markets. We completed construction of two new claims service centers in
2008, four in 2007, and 29 in 2006. Several of these newly constructed centers replaced previously leased service center locations,
including both centers opened in 2008, three out of four opened in 2007, and two of the centers built in 2006. In addition, we have
opened one new center in 2009 that also replaced a previously leased location; no additional centers
App.-A-36
are currently under construction. The cost of these facilities, excluding land, is estimated to average $4 to $7 million per center,
depending on a number of variables, including the size and location of the center.
During 2006, we constructed a data center, printing center, and related facilities in Colorado Springs, Colorado, at a total cost of
$64.2 million, and acquired additional land for possible future development in Colorado Springs, Colorado and Mayfield Village, Ohio
for a total cost of $16.2 million; both properties are near our current corporate facilities.
All such construction projects and property acquisitions have been funded internally through operating cash flows.
We maintain insurance on our real property and other physical assets, including coverage for losses due to business interruptions
caused by covered property damage. However, the insurance will not compensate us for losses that may occur due to disruptions
in service as a result of a computer, data processing, or telecommunications systems failure that is unrelated to covered property
damage, nor will the insurance necessarily compensate us for all losses resulting from covered events. To help maintain
functionality and reduce the risk of significant interruptions of our operations, we maintain back-up systems or facilities for certain of
our principal systems and services. We still may be exposed, however, should these measures prove to be unsuccessful or
inadequate against severe, multiple, or prolonged service interruptions or against interruptions of systems where no back-up
currently exists. In addition, we have established emergency management teams, which are responsible for responding to business
disruptions and other risk events. The teams’ ability to respond successfully may be limited depending on the nature of the event,
the completeness and effectiveness of our plans to maintain business continuity upon the occurrence of such an event, and other
factors beyond our control.
In the second half of 2008, on two separate occasions, we discovered errors in our comparative rating process which affected the
accuracy of the comparative rates we provided to a number of Massachusetts consumers. We corrected the problems and notified
the Massachusetts Division of Insurance and Attorney General in both instances. The Massachusetts Attorney General has issued
a Civil Investigative Demand seeking information concerning these errors to which we are in the process of responding fully. We
have stopped providing comparative rates in Massachusetts and will not resume providing this service in that Commonwealth until
we and the appropriate regulators have determined that these issues are resolved.
Off-Balance-Sheet Arrangements
Our off-balance-sheet leverage includes derivative positions and open investment funding commitments (as disclosed in Note 2 –
Investments, Note 13 – Commitments and Contingencies and the Derivative Instruments section of this Management’s Discussion
and Analysis). It also includes operating leases and purchase obligations (disclosed in the table below).
Contractual Obligations
A summary of our noncancelable contractual obligations as of December 31, 2008, follows:
Paym e nts due by period

Les s than 1-3 3-5 M ore than
(m illions) Total 1 year ye ars ye ars 5 years
Debt $ 2,200.0 $ — $ — $ 500.0 $ 1,700.0
Interest payments on debt 1,707.5 144.7 289.4 255.9 1,017.5
Operating leases 249.3 86.7 104.5 38.1 20.0
Purchase obligations 120.5 66.6 39.7 4.9 9.3
Loss and loss adjustment expense reserves 6,177.4 3,271.7 2,247.6 511.4 146.7
Total $10,454.7 $ 3,569.7 $2,681.2 $1,310.3 $ 2,893.5
Purchase obligations represent our noncancelable commitments for goods and services. Unlike many other forms of contractual
obligations, loss and loss adjustment expense (LAE) reserves do not have definitive due dates and the ultimate payment dates are
subject to a number of variables and uncertainties. As a result, the total loss and LAE reserve payments to be made by period, as
shown above, are estimates based on our recent payment patterns. To further understand our claims payments, see Claims
Payment Patterns, a supplemental disclosure provided in this Annual Report. In addition, we annually publish a comprehensive
Report on Loss Reserving Practices, which was most recently filed with the SEC on a Form 8-K on June 30, 2008, that further
discusses our claims payment development patterns.
We entered into two contracts to expand our brand building efforts during 2008. In January 2008, we entered into a 16-year contract
for the ballpark naming rights and a sponsorship deal with the Cleveland Indians Major League Baseball team. Over the contract
term, Progressive will pay an average of approximately $3.6 million per year. In addition, in March 2008, we announced our title
sponsorship of the Progressive Insurance Automotive X PRIZE competition. The Automotive X PRIZE is a two and one half year
international competition designed to inspire a new generation of safe, low emissions vehicles capable of achieving the equivalent of
at least 100 miles per gallon in fuel efficiency. The total cost of the sponsorship is expected to be approximately
App.-A-37
$12.5 million, which includes the prize for the winning team as well as the funding of some operational expenses over the course of
the competition. These expenditures are a reallocation of a small percentage of our annual media spend and are intended to
generate greater exposure for our brand. Portions of these contracts are cancelable; only the noncancelable portions are reflected
in the contractual obligations table above.
As discussed in the Liquidity and Capital Resources section above, we believe that we have sufficient borrowing capacity, cash
flows, and other capital resources to satisfy these contractual obligations.
III. RESULTS OF OPERATIONS—UNDERWRITING

A. Growth
(m illions) 2008 2007 2006

NET PREMIUMS WRITTEN
Personal Lines
Agency $ 7,322.3 $ 7,549.4 $ 7,854.3
Direct 4,556.5 4,371.8 4,354.5
Total Personal Lines 11,878.8 11,921.2 12,208.8
Commercial Auto 1,704.8 1,828.9 1,898.0
Other indemnity 20.7 22.4 25.2
Total underwriting operations $13,604.3 $13,772.5 $14,132.0
Growth over prior years (1)% (3)% 1%
NET PREMIUMS EARNED
Personal Lines
Agency $ 7,362.0 $ 7,636.4 $ 7,903.6
Direct 4,485.8 4,372.6 4,337.4
Commercial Auto 1,762.2 1,846.9 1,851.9
Other indemnity 21.4 21.5 25.0
Total underwriting operations $13,631.4 $13,877.4 $14,117.9
Growth over prior years (2)% (2)% 3%
Net premiums written represent the premiums generated from policies written during the period less any premiums ceded to
reinsurers. Net premiums earned, which are a function of the premiums written in the current and prior periods, are earned as
revenue over the life of the policy using a daily earnings convention. Progressive experienced a decline in total written and earned
premiums during 2008 and 2007, as compared to the positive growth rates achieved in 2006. During the latter half of 2008, we
began to see an increase in our written premiums, primarily in our Direct auto business, reflecting the increase in new applications
and our efforts to increase retention, as well as other initiatives we have underway to help provide distinctive new auto business
options (discussed below). We also attribute some of the Direct auto growth to our increase in advertising spend and what we
believe to be better creative content.
Policies in force, our preferred measure of growth, represents all policies under which coverage is in effect as of the end of the
period specified. As of December 31, our policies in force were:
(thous ands) 2008 2007 2006

POLICIES IN FORCE
Personal Lines
Agency auto 4,288.6 4,396.8 4,433.1
Direct auto 2,824.0 2,598.5 2,428.5
Total auto 7,112.6 6,995.3 6,861.6
Special lines1 3,352.3 3,120.3 2,879.5
Growth over prior year 3% 4% 3%
Commercial Auto 539.4 539.2 503.2
Growth over prior year —% 7% 7%
1 Includes insurance for motorcycles, recreational vehicles (RV), mobile homes, w atercraft, snow mobiles, and similar items, as w ell as a personal umbrella
product.
App.-A-38
To analyze growth, we review new policies, rate levels, and the retention characteristics of our books of business. During the last
three years, we experienced the following growth in new and renewal applications:
Grow th Over Prior Ye ar

2008 2007 2006
Personal Lines
New applications (5)% 2% (7)%
Renewal applications 4% 3% 7%
Commercial Lines
New applications (8)% 3% 1%
Returning to positive growth in new business remains a significant challenge, particularly in our Agency auto business. New
application growth in Direct auto was up 2% year-over-year. We have several initiatives underway aimed at providing distinctive new
auto business options. During 2008, we expanded MyRatesm, our Pay As You Drive® usage-based insurance product, into six
additional states. As of year-end 2008, we offered this product to our Direct auto customers in nine states and our Agency auto
customers in four of the nine states; continued expansion into approximately 12 to 15 additional states is planned during 2009. In
addition, during 2008, we introduced a program called Name Your Price® that allows consumers to select a price they would like to
pay for their auto insurance; we then will tell them the level of coverage that price provides. As of the end of February 2009, Name
Your Price is available to consumers in 19 states. We plan to expand this program to the rest of the country during 2009. In the
second quarter 2008, we entered Massachusetts with our personal auto and boat products distributed primarily via the Internet.
Over time, we may expand the distribution method to include independent agents and direct phone sales in this $4 billion market.
We also introduced a new product model in 2008 in our Agency auto business in 13 states, which is designed to help improve
competitiveness through further price segmentation; about two dozen additional states are expected to be rolled out in 2009.
We began increasing rates during the latter part of 2007 and continued into the first half of 2008 in order to meet our loss cost
inflation expectations, whereas in mid-2006 and into 2007, we reduced rates. These rate changes, offset by shifts in the mix of
business, resulted in a 2% decrease in total auto written premium per policy in 2008, compared to declines of 5% in 2007 and 2%
in 2006. For 2008, on a year-over-year basis, we saw a slight increase in our Agency auto new premium per policy, while both our
Direct auto and special lines new premium per policy were still down about 6%. Our current pricing levels are closely aligned with
our profitability targets, but we remain ready to react quickly, and as often as necessary, should trends change.
Another important element affecting growth is customer retention. One measure of retention is policy life expectancy, which is our
actuarial estimate of the average length of time that a policy will remain in force before cancellation or lapse in coverage. Efforts at
increasing growth from customer retention produced positive outcomes in both 2008 and 2007. Our policy life expectancy measures
for our Agency and Direct private passenger auto products are now both approximately 11% higher than the same measures a year
ago. The retention measures for both these channels also increased in 2007, compared to 2006. We are continuing to monitor our
renewal acceptance rates in light of the rate increases we took in late 2007 and early 2008, as well as the overall economic
conditions. Our policy life expectancy in our Commercial Auto business was down 2%, compared to year-end 2007, and was
relatively flat for 2007, compared to 2006. Realizing the importance that retention has on our ability to continue to grow profitably,
we continue to emphasize competitive pricing, quality service, and other retention initiatives for our current customers.
App.-A-39
B. Profitability
Profitability for our underwriting operations is defined by pretax underwriting profit, which is calculated as net premiums earned less
losses and loss adjustment expenses, policy acquisition costs, and other underwriting expenses. We also use underwriting profit
margin, which is underwriting profit expressed as a percentage of net premiums earned, to analyze our results. For the three years
ended December 31, our underwriting profitability measures were as follows:
2008 2007 2006

Unde rw riting Unde rw riting Unde rw riting
Profit (Los s ) Profit (Los s ) Profit (Los s )
($ in m illions) $ M argin $ M argin $ M argin
Personal Lines
Agency $360.7 4.9% $ 500.2 6.5% $ 936.7 11.9%
Direct 274.8 6.1 339.9 7.8 568.6 13.1
Total Personal Lines 635.5 5.4 840.1 7.0 1,505.3 12.3
Commercial Auto 94.1 5.3 185.7 10.1 366.5 19.8
Other indemnity1 5.3 NM (.7) NM 6.5 NM
Total underwriting operations $734.9 5.4% $1,025.1 7.4% $1,878.3 13.3%
1Underw ritingmargins for our other indemnity businesses are not meaningful (NM) due to the low level of premiums earned by, and the variability of losses in,
such businesses.
Underwriting margins in 2008 include the catastrophe losses we incurred from hurricanes Ike and Gustav, and hail storms and
floods in the Midwest and Great Plains. The decline in underwriting margins in 2007, and to a lesser extent in 2008, also reflects
the rate reductions we took from mid-2006 to late 2007.
Further underwriting results for our Personal Lines business, including its channel components, the Commercial Auto business,
and other indemnity businesses, as defined in Note 10 – Segment Information, were as follows:
Unde rw riting Perform ance 1 2008 2007 2006

Personal Lines – Agency
Loss & loss adjustment expense ratio 73.7 72.1 67.8
Underwriting expense ratio 21.4 21.4 20.3
Combined ratio 95.1 93.5 88.1
Personal Lines—Direct
Total Personal Lines
Commercial Auto
Total Underwriting Operations2
Accident year—Loss & loss adjustment expense ratio3 73.3 70.9 68.2
1 Ratios are expressed as a percentage of net premiums earned.
2 Combined ratios for the other indemnity businesses are not presented separately due to the low level of premiums earned by, and the variability of losses
in, such businesses. For the years ended December 31, 2008, 2007, and 2006, these businesses generated an underw riting profit (loss) of $5.3 million,
$(.7) million, and $6.5 million, respectively.
3 The accident year ratio includes only the losses that occurred during the year noted. As a result, accident period results w ill change over time as our
estimates of loss costs improve or deteriorate w hen payments are made or reserves for that accident period are review ed.
App.-A-40
Losses and Loss Adjustment Expenses (LAE)
(m illions) 2008 2007 2006

Change in net loss and LAE reserves $ 277.7 $ 291.6 $ 50.5
Paid losses and LAE 9,737.3 9,634.6 9,344.4
Total incurred losses and LAE $10,015.0 $9,926.2 $9,394.9
Claims costs, our most significant expense, represent payments made, and estimated future payments to be made, to or on behalf
of our policyholders, including expenses needed to adjust or settle claims. These costs include an estimate for costs related to
assignments, based on current business, under state-mandated automobile insurance programs. Claims costs are defined by loss
severity and frequency and are influenced by inflation and driving patterns, among other factors. Accordingly, anticipated changes in
these factors are taken into account when we establish premium rates and loss reserves. Our reserves would differ if the underlying
assumptions were changed. See the Critical Accounting Policies for a discussion of the effect of changing estimates.
During 2008, our loss and LAE ratio increased 2.0 points over last year, reflecting greater catastrophe losses in 2008. Catastrophe
losses from 2008 storms contributed 1.2 points to our loss/LAE ratio, compared to .3 points in 2007, and .5 points in 2006. The
large amount of catastrophe losses in 2008 primarily related to hurricanes Ike and Gustav, and hail storms and floods in the
Midwest and Great Plains.
During 2008, we experienced a slight increase in total personal auto paid severity (i.e., average cost per claim) of about 1%,
compared to increases of about 3.5% in 2007 and 5% in 2006, over the prior year periods. The increase in each of the three years
was primarily from increases in both bodily injury and personal injury protection (PIP) coverages; 2008 and 2007 severity was
partially offset by a decrease for the property coverages in total.
We experienced a decline in year-over-prior year auto accident frequency in each of the past three years, although the rate of
decline was more significant in 2008 than in 2007 or 2006. We cannot predict with any certainty the degree or direction of frequency
change that we will experience in the future. We continue to analyze trends to distinguish changes in our experience from external
factors, such as changes in the number of vehicles per household, greater vehicle safety, and unemployment rates, versus those
resulting from shifts in the mix of our business.
The table below presents the actuarial adjustments implemented and the loss reserve development experienced in the years ended
December 31:
($ in m illions) 2008 2007 2006

Actuarial Adjustments
Favorable/(Unfavorable)
Prior accident years $(56.1) $ 37.3 $158.3
Current accident year 3.6 (37.1) 57.8
Calendar year actuarial adjustment $(52.5) $ .2 $216.1
Prior Accident Years Development
Favorable/(Unfavorable)
Actuarial adjustment $(56.1) $ 37.3 $158.3
All other development 22.9 (117.6) 88.6
Total development $(33.2) $ (80.3) $246.9
(Increase) decrease to calendar year combined ratio (.2) pts. (.6) pts. 1.7 pts.
Total development consists both of actuarial adjustments and “all other development.” The actuarial adjustments represent the net
changes made by our actuarial department to both current and prior accident year reserves based on regularly scheduled reviews.
“All other development” represents claims settling for more or less than reserved, emergence of unrecorded claims at rates different
than reserved, and changes in reserve estimates on specific claims. Although we believe that the development from both the
actuarial adjustments and “all other development” generally results from the same factors, as discussed below, we are unable to
quantify the portion of the reserve adjustments that might be applicable to any one or more of those underlying factors.
As reflected in the table above, we experienced unfavorable total development in 2008 and 2007, compared to favorable development
in 2006. For 2008, the unfavorable development is heavily weighted towards claims from the 2006 accident year
App.-A-41
with favorable development for periods older than that. The prior year loss reserve development for 2007 primarily also reflected
unfavorable development from accident years greater than one year old (i.e., accident year 2005 and prior). For 2006, slightly more
than half of the development related to the immediately preceding accident year, with the remainder primarily affecting the preceding
two accident years at a declining rate.
The total prior year loss reserve development in 2008 and 2007, which increased the reported combined ratio by .2 points and .6
points, respectively, principally arose in our Commercial Auto business for both years, while our Personal Lines business, in the
aggregate, experienced little or no development for these years. An increase in the number of late reported Commercial Auto claims
in both 2008 and 2007 contributed to the unfavorable reserve development and, in 2008, we experienced an increase in the
estimated bodily injury severity on these late reported claims in both the business auto and specialty truck markets.
For 2006, the favorable total prior year loss reserve development was generally consistent across our business (e.g., product,
distribution channel, and state). These changes in estimates were made based on our actual loss experience involving the payment
of claims, along with our evaluation of the needed reserves during these periods, as compared with the prior reserve levels for those
claims.
Changes in our estimate of severity from what we originally expected when establishing the reserves is the principal cause of prior
year accident development in addition to more features being reported late for the Commercial Auto business, as discussed above.
These changes in estimate are the result of what we are observing in the underlying data as it develops. During 2008 and 2007, we
experienced unfavorable reserve development after several years of recognizing favorable development. The majority of the
development in 2008 was driven by severity on the late reported Commercial Auto claims and personal auto PIP losses, with
primarily two states experiencing the majority of the unfavorable PIP development for the year. The development in 2007 was driven
by the unfavorable settlement of several outstanding lawsuits and the emergence of more than expected large losses from prior
years, along with the reviews of larger bodily injury and uninsured motorist claims. In 2006, we saw severity estimates develop more
favorably than what was originally expected, and although we were unable to quantify the contribution of each factor to the overall
favorable reserve development, we believe that the favorable changes in these estimates were related to factors as diverse as
improved vehicle safety, more conservative jury awards, better fraud control, and tenure of our claims personnel.
We continue to focus on our loss reserve analysis, attempting to enhance accuracy and to further our understanding of our loss
costs. A detailed discussion of our loss reserving practices can be found in our Report on Loss Reserving Practices, which was
filed in a Form 8-K on June 30, 2008.
Because we are primarily an insurer of motor vehicles, our exposure as an insurer of environmental, asbestos, and general liability
claims is limited. We have established reserves for these exposures in amounts that we believe to be adequate based on
information currently known. These exposures do not have a material effect on our liquidity, financial condition, cash flows, or
Underwriting Expenses
Progressive’s other underwriting expenses and policy acquisition costs as a percentage of premiums earned remained flat for 2008
and increased about one point in 2007, compared to the prior year. On a year-over-year basis, we saw an increase in our
advertising expenditures in both 2008 and 2007. However, average costs per auto policy decreased in 2008, reflecting improved
customer retention, as well as a focus on process improvements to help reduce expenses. One example is our 2008 effort to
decrease costs and improve customer experience by moving customers to a paperless environment; over one million customers
have signed up for this program. In addition to the increase in advertising spend, the increase in the 2007 expense ratio also reflects
lower average earned premium per policy due to rate reductions. In accordance with GAAP, policy acquisition costs are amortized
over the policy period in which the related premiums are earned (see Note 1 – Reporting and Accounting Policies). We do not defer
any direct-response advertising costs.
C. Personal Lines

2008 2007 2006
Net premiums written —% (2)% —%
Net premiums earned (1)% (2)% 1%
Policies in force 3% 4% 3%
App.-A-42
Progressive’s Personal Lines business writes insurance for private passenger automobiles and recreational vehicles, and
represented approximately 87% of our total net premiums written for each of the last three years. We currently write our Personal
Lines products in all 50 states and our personal auto product in the District of Columbia. In mid-2008, we began offering our
personal auto product and boat insurance to Direct Internet customers in Massachusetts. Additional options, such as shopping by
phone and through independent insurance agents and the ability to buy other insurance products, such as motorcycle and RV
policies, are expected to be phased in over time in the state.
Private passenger auto represented about 90% of our total Personal Lines net premiums written in each of the past three years and
policies are primarily written for 6-month terms. The remaining Personal Lines business is comprised of special lines products (e.g.,
motorcycles, watercraft, and RVs), which are written for 12-month terms. Private passenger auto policies in force increased 2% for
both 2008 and 2007, and increased 1% in 2006; policies in force for the special lines products increased 7% in 2008 and 8% in
both 2007 and 2006. Net premiums written for private passenger auto declined 1% and 3% in 2008 and 2007, respectively, and
were flat in 2006; special lines net written premiums grew 4%, 5%, and 7%, respectively, in each of the last three years.
Our total Personal Lines business generated combined ratios of 94.6, 93.0, and 87.7 in 2008, 2007, and 2006, respectively. In
2008, 42 states, including the District of Columbia, were profitable, including 8 of our 10 largest auto business states. The special
lines products had a favorable effect on the total Personal Lines combined ratio of approximately .5 points in 2008, compared to
about one point in both 2007 and 2006.
In 2007, we brought our Agency and Direct businesses together under one Personal Lines organization. Nevertheless, we will
continue to report our Agency and Direct business results separately as components of our Personal Lines segment to provide
further understanding of our products by channel.
The Agency Business
Grow th Over Prior

Year
2008 2007 2006
Net premiums written (3)% (4)% (2)%
Net premiums earned (4)% (3)% (1)%
Auto: policies in force (2)% (1)% (1)%
new applications (13)% (1)% (10)%
renewal applications —% —% 4%
The Agency business includes business written by the more than 30,000 independent insurance agencies that represent
Progressive, as well as brokerages in New York and California. During 2008, we saw new Agency auto application growth in 17
states, including two of our largest volume states, Florida and Texas. However, some of our other big states did not see this growth
during the year. In particular, beginning in the latter part of 2007 and into 2008, we restricted writing some classes of new business
in New York and California, thus hindering our overall Agency auto growth. In New York, we achieved rate relief and the approval of a
new product in the fourth quarter 2008 and were able to lift remaining restrictions in January 2009. In California, we continue to
enhance our underwriting process to ensure adherence to our guidelines and meet our profitability targets; we also took steps to
improve segmentation and rate levels in 2008 and anticipate implementing a new program in the second half of 2009.
On a year-over-year basis, written premium per policy on total Agency auto business was down about 2% in 2008, 4% in 2007, and
3% in 2006, driven by a decrease in written premium per policy in renewal auto business and reflecting rate reductions taken in
2006 and 2007. For 2008, we saw a slight increase, on a year-over-year basis, in our Agency auto written premium per policy on
new business.
The rate of conversion (i.e., converting a quote to a sale) was down in each of the past three years, on an increase each year in the
number of Agency auto quotes. Within the Agency business, we are continuing to see a shift from traditional agent quoting to
quotes generated through comparative rating systems, where our rates are quoted more often, but the conversion rate is
significantly lower. Nevertheless, agents are placing more preferred customers with us.
The underwriting expense ratio on a year-over-year basis was flat in 2008 and up about one point in 2007. Improved customer
retention and cost saving efforts helped keep expenses in line in 2008.
App.-A-43
The Direct Business

2008 2007 2006
Net premiums written 4% —% 4%
Net premiums earned 3% 1% 6%
Auto: policies in force 9% 7% 4%
new applications 2% 5% (4)%
renewal applications 9% 7% 9%
The Direct business includes business written directly by Progressive online and over the phone. In 2008, we experienced an
increase in Direct auto new applications in 27 states, primarily in our mid-size states. Internet sales continued to be the most
significant source of new business that is initiated in the Direct channel.
Written premium per policy for total Direct auto was down 4% during 2008, although the rate of decrease was lower in the second
half of the year than the first half; a shift in the mix of our business to more preferred customers offset the rate increases taken
during the year. In 2007 and 2006, written premium per policy decreased 6% and 1%, respectively, reflecting rate decreases during
those time periods. In each of the last three years, the decreases were driven by declines in written premium per policy for both
new and renewal business.
The number of total quotes in the Direct business increased in 2008 and decreased in both 2007 and 2006, as compared to the
prior year. Our entry into Massachusetts in May 2008 with an auto product distributed primarily via the Internet contributed to our
increase in quoting activity. Phone quotes remained flat in 2008 and were down in both 2007 and 2006, compared to the prior year.
The rate of conversion for Internet-initiated business increased during 2008, but to a lesser extent than the increases experienced in
2007 and 2006, while the conversion rate for phone-initiated business decreased for 2008, and increased during both 2007 and
2006, compared to the prior year. We are continuing to see the Internet becoming a greater portion of our Direct business mix,
which historically has had a lower conversion rate than phone.
For 2008, 2007, and 2006, we saw our total advertising expenditures increase on a year-over-year basis. In 2008, we launched a
new advertising campaign, which provides a consistent identity and serves as a foundation for delivery of our many messages.
During 2008, we also hired a Chief Marketing Officer as one of many steps that we have taken to achieve our key objective of having
our efforts in marketing and other brand-building activities match our competency in other technical skills, such as pricing and
claims handling.
D. Commercial Auto

2008 2007 2006
Net premiums written (7)% (4)% 5%
Net premiums earned (5)% —% 11%
Policies in force —% 7% 7%
New applications (8)% 3% 1%
Progressive’s Commercial Auto business writes primary liability and physical damage insurance for automobiles and trucks owned
by small businesses, with the majority of our customers insuring three or fewer vehicles. Our Commercial Auto business
represented about 13% of our total net premiums written for each of the last three years. This business is primarily distributed
through independent agents and operates in the specialty truck and business auto markets. The specialty truck commercial auto
market, which accounts for slightly more than half of the total Commercial Auto premiums and approximately 40% of the vehicles
we insure in this business, includes dump trucks, logging trucks, tow trucks, local cartage, and other short-haul commercial
vehicles. The remainder is in the business auto market, which includes autos, vans, and pick-up trucks used by artisans, such as
contractors, landscapers, and plumbers, and a variety of other small businesses. Both of these markets have been significantly
affected by the downturn in the economy, as well as increased competition in the commercial auto business.
We currently write our Commercial Auto business in 49 states; we do not write Commercial Auto in Hawaii or the District of
Columbia. We entered Massachusetts early in 2007 and West Virginia in early 2006. The majority of our policies are written for 12-
month terms.
App.-A-44
As compared to the prior year, total written premium per policy decreased about 4% in 2008, compared to a decrease of 6% in
2007 and an increase of 5% in 2006. The unprecedented economic times during 2008 also had a significant effect on our
Commercial Auto business growth. In light of these circumstances, we were pleased that the number of Commercial Auto policies
in force remained relatively unchanged in 2008, as compared to 2007.
Commercial Auto’s expense ratio increased 1.3 points during 2008, primarily reflecting lower earned premium during 2008. In 2007,
the expense ratio increased one point resulting from significant investments in agency distribution and direct marketing capability,
as well as reduced premiums.
Although Commercial Auto differs from Personal Lines auto in its customer base and products written, both businesses require the
same fundamental skills, including disciplined underwriting and pricing, as well as excellent claims service. Since the Commercial
Auto policies have higher limits (up to $1 million) than Personal Lines auto, we analyze the large loss trends and reserving in more
detail to allow us to react quickly to changes in this exposure.
E. Other Indemnity
Progressive’s other indemnity businesses, which represented less than 1% of our net premiums written, primarily include writing
professional liability insurance for community banks and a small amount of run-off business. The underwriting profit (loss) in these
businesses may fluctuate widely due to the low premium volume, variability in losses, and the run-off nature of some of these
products. The effect of these businesses on our overall operations is minimal.
Our community bank program has produced an underwriting profit for each of the last three years. We continue to review this
program in light of the significant turbulence that has impacted the financial markets during the year. We believe that we do not
have any significant exposure to claims arising from this financial crisis. From a strategic perspective, community banks tend not to
be exposed to the same issues as the larger, highly leveraged financial institutions. In spite of these market conditions, our claim
activity has remained fairly consistent.
F. Service Businesses
Our service businesses provide insurance-related services and represented less than 1% of our total revenues for each of the last
three years and do not have a material effect on our overall operations. Our principal service business is providing policy issuance
and claims adjusting services for the Commercial Auto Insurance Procedures/Plans (CAIP), which are state-supervised plans
serving the involuntary markets in 36 states. We have previously competed with two other major carriers for the CAIP business.
However, one of these carriers ceased writing new business in the second quarter 2008 and the remaining carrier announced that it
will cease writing business in early 2009. This will leave us as the largest CAIP provider countrywide. Although our market share will
be increasing, we may not realize an immediate increase in revenues as the cyclical downturn in the CAIP market continues.
As a service provider, we collect fee revenue that is earned on a pro rata basis over the term of the related policies. We cede 100%
of the premiums and losses to the plans. Reimbursements to us from the CAIP plans are required by state laws and regulations.
Material violations of contractual service standards can result in ceding restrictions for the affected business. We have maintained,
and plan to continue to maintain, compliance with these standards. Any changes in our participation as a CAIP service provider
would not materially affect our financial condition, results of operations, or cash flows.
Service business revenues have decreased in each of the last three years. The decrease reflects the continuing cyclical downturn in
the involuntary commercial auto market. Total service expenses, however, did not decrease at the same rate, primarily due to the
fixed costs associated with our total loss replacement program, which was another one of our service businesses through which we
would help policyholders and claimants find and purchase a replacement vehicle when their automobile is declared to be a total
loss. We evaluated the benefits of maintaining this service in-house and concluded that contracting with third-party providers to
deliver this service will continue to meet our customers’ needs and reduce our costs; this transition was completed in the second
quarter 2008.
G. Litigation
The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims
made under insurance policies in the ordinary course of our business. All legal actions relating to such insurance claims are
considered by us in establishing our loss and loss adjustment expense reserves.
In addition, various Progressive entities are named as defendants in a number of class action or individual lawsuits arising out of the
operations of the insurance subsidiaries. These cases include those alleging damages as a result of our use of credit in
underwriting and related requirements under the federal Fair Credit Reporting Act; practices in evaluating or paying medical or
App.-A-45
injury claims or benefits, including, but not limited to, personal injury protection, medical payments, uninsured
motorist/underinsured motorist (UM/UIM), and bodily injury benefits; rating practices at policy renewal; the utilization, content, or
appearance of UM/UIM rejection forms; the practice of taking betterment on boat repairs; labor rates paid to auto body repair shops;
and cases challenging other aspects of our claims or marketing practices or other business operations. Other insurance companies
face many of these same issues. During 2008, we settled one putative class action challenging our installment payment program
for an amount that was not material to our financial condition, results of operations, or cash flows. During 2007, we settled a
nationwide class action challenging our use of software to assist in the adjustment of bodily injury claims; a state class action
challenging payments of certain medical benefits; and a state class action challenging the amount charged for UIM premiums.
During 2006, we settled nationwide claims challenging our use of credit information and notice requirements under the federal Fair
Credit Reporting Act; statewide class action lawsuits that challenged our payment of preferred provider rates on personal injury
protection claims; and certain statewide class action lawsuits challenging our payments of MRI bills under personal injury
protection coverage. These settlements did not have a material effect on our financial condition, cash flows, or results of operations.
See Note 12 – Litigation for a more detailed discussion.
H. Income Taxes
As reported in the balance sheets, income taxes are comprised of net current income taxes recoverable and net deferred tax
assets and liabilities. A deferred tax asset/liability is a tax benefit/expense that is expected to be realized in a future tax return. At
both December 31, 2008 and 2007, our income taxes were in a net asset position.
Our net deferred tax asset was $793.3 million at December 31, 2008, compared to $92.2 million at December 31, 2007, primarily
reflecting the write-downs on securities during the year that have not been recognized for tax purposes, as well as net unrealized
losses. Although realization of the deferred tax asset is not assured, management believes it is more likely than not that the
deferred tax asset will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately
recognized for tax purposes. For a complete discussion of our deferred tax assets, see the Critical Accounting Policies-Deferred
Tax Assets section.
There have been no material changes in our uncertain tax positions during 2008.
See Note 5 – Income Taxes for further information.

App.-A-46
IV. RESULTS OF OPERATIONS—INVESTMENTS

A. Portfolio Allocation
At year-end 2008, the fair value of our investment portfolio was $13.0 billion, 8% less than at year-end 2007, reflecting significant
declines in the value of our common and preferred stock holdings, our common share repurchases over the last twelve months, and
the payment of a dividend in January 2008. Our recurring investment income (e.g., interest and dividends) decreased 6% in 2008,
as compared to 2007, reflecting a decrease in average assets, as well as lower yields during the year. In 2008, we also recognized
$1.4 billion in net realized losses, primarily the result of write-downs of securities determined to have had other-than-temporary
declines in market value. These write-downs were principally in our preferred stock portfolio, which continued to feel the effects of
the market-related issues associated with the disruption in the mortgage and other credit markets, as well as deterioration in
fundamentals relating to certain financial industry issuers.
Progressive’s investment strategy targets a range of between 75% and 100% in fixed-income securities with the balance in
common equities. This strategy is based on our need to maintain capital adequate to support our insurance operations, recognizing
that our outstanding claim obligations are short in duration. Investments in our portfolio have varying degrees of risk. We evaluate
the risk/reward trade-offs of investment opportunities, measuring their effects on stability, diversity, overall quality and liquidity, and
the potential return of the investment portfolio. We also monitor the value at risk of the portfolio to evaluate the maximum potential
loss (see the Quantitative Mark et Risk Disclosures, a supplemental schedule provided in this Annual Report, for further
information). The composition of the investment portfolio at December 31 was:
Net
Gross Gross Realized % of
Unre alized Unre alized Gains Fair Total Duration
($ in m illions) Cost Gains Los s e s (Loss e s ) 1 Value Portfolio (years ) Rating2
2008
Fixed maturities $10,295.3 $ 195.9 $ (544.5) $ — $ 9,946.7 76.6% 3.7 AA+
Nonredeemable preferred stocks 1,131.3 73.5 (17.3) (37.5) 1,150.0 8.9 2.0 BBB+
Other short-term investments 1,153.6 — — — 1,153.6 8.9 <1 AA+
Total fixed income 12,580.2 269.4 (561.8) (37.5) 12,250.3 94.4 3.2 AA+
Common equities 553.6 203.5 (29.3) — 727.8 5.6 na na
Total portfolio3,4 $13,133.8 $ 472.9 $ (591.1) $ (37.5) $12,978.1 100.0% 3.2 AA+
2007
Fixed maturities5 $ 9,135.6 $ 137.1 $ (87.8) $ — $ 9,184.9 64.8% 4.0 AA
Nonredeemable preferred stocks 2,578.1 6.0 (306.4) (7.4) 2,270.3 16.0 1.9 A-
Other short-term investments 382.4 — — — 382.4 2.7 <1 AA+
Total fixed income 12,096.1 143.1 (394.2) (7.4) 11,837.6 83.5 3.5 AA
Common equities 1,361.0 986.8 (20.3) — 2,327.5 16.5 na na
Total portfolio3,4 $13,457.1 $ 1,129.9 $ (414.5) $ (7.4) $14,165.1 100.0% 3.5 AA
na = not applicable
1 Represents net holding period gains (losses) on certain hybrid securities.
2 Credit quality ratings are assigned by nationally recognized securities rating organizations. To calculate the w eighted average credit quality ratings, w e
w eight individual securities based on fair value and assign a numeric score of 0-5, w ith non-investment-grade and non-rated securities assigned a score of
0-1. To the extent the w eighted average of the ratings falls betw een a AAA and AA+, w e assigned an internal rating of AAA-.
3 At December 31, 2008 and 2007, w e had $254.2 million and $77.0 million of unsettled security transactions (offset in other liabilities), respectively.
4 December 31, 2008 and 2007 totals include $1.0 billion and $2.1 billion, respectively, of securities in the portfolio of a consolidated, non-insurance subsidiary
of the holding company, net of any unsettled security transactions.
5 Balance at December 31, 2007 includes $34.1 million of collateral in the form of Treasury Notes delivered to a counterparty on an open derivative position;
the position w as closed during 2008. See the Derivative Instruments section in Note 2 – Investments for further discussion.
During the year, we shortened our duration in the fixed-maturity portfolio slightly, primarily as a result of the historically low market
interest rates. We also increased our overall credit quality from AA to AA+, mainly due to the increase in holdings of U.S. Treasury
and short-term investments, in order to reduce overall market and credit-related risk in the portfolio. Additionally, we reduced our
exposure to common stocks from approximately 15% during the year to 6% by year end, as an additional reduction to future capital
risk during this volatile market period. Our portfolio allocation still remains within our target of 0%-25% exposure to common stocks.
Our nonredeemable preferred stock portfolio’s credit quality deteriorated during 2008 from A- at the beginning
App.-A-47
of the year to BBB+ by year-end 2008. The cause of the decline was credit downgrades that occurred during the latter part of 2008
on five financial sector firms, which represented 13% of our nonredeemable preferred stock portfolio at year end. We continue to
receive our periodic dividend payments on all such securities, other than our immaterial remaining holding in Fannie Mae. Our
holdings in the financial sector predominantly represent the largest bank holding companies to which the Federal Government has
committed capital, reflecting the systemic importance of these companies to the overall United States economy. See our detailed
Preferred Stocks – Redeemable and Nonredeemable discussion below.
Unrealized Gains and Losses

As of December 31, 2008, our portfolio had $118.2 million of pretax net unrealized losses, recorded as part of accumulated other
comprehensive income, compared to $715.4 million of net unrealized gains at December 31, 2007. The net unrealized gains in the
common stock portfolio decreased $792.3 million, reflecting both the gains and losses generated from the sales of securities, as
well as the negative return of the broad equity markets. During the year, the fair value of our fixed-income securities declined
reflecting widening credit spreads, partially offset by a reduction in interest rates. The net unrealized loss position at December 31,
2008, includes the effect of realizing through the income statement $1,858.8 million of write-downs on securities determined to be
other-than-temporarily impaired during 2008; the write-downs were primarily in our preferred stock portfolio. See Note 2 –
Investments for a further break-out of our gross unrealized gains and losses.
Fixed-Income Securities
The fixed-income portfolio is managed internally and includes fixed-maturity securities, short-term investments, and nonredeemable
preferred stocks. The fixed-maturity securities, including redeemable preferred stocks, and short-term securities, as reported on the
balance sheets at December 31, were comprised of the following:
($ in m illions) 2008 2007

Investment-grade fixed maturities:1
Short/intermediate term $10,836.0 97.6% $9,084.2 95.0%
Long term 45.7 .4 147.0 1.5
Non-investment-grade fixed maturities2 218.6 2.0 336.1 3.5
Total $11,100.3 100.0% $9,567.3 100.0%
1 Long term includes securities w ith expected liquidation dates of 10 years or greater. Asset-backed securities are reported at their w eighted average
maturity based upon their projected cash flow s. All other securities that do not have a single expected maturity date are reported at average maturity. See
Note 2 – Investments for further discussion.
2 Non-investment-grade fixed-maturity securities are non-rated or have a quality rating of an equivalent BB+ or low er, classified by the low est rating from a
nationally recognized rating agency.
A primary exposure for the fixed-income portfolio is interest rate risk, which is managed by maintaining the portfolio’s duration
between 1.8 to 5 years. Interest rate risk includes the change in value resulting from movements in the underlying market rates of
debt securities held. The fixed-income portfolio had a duration of 3.2 years at December 31, 2008, compared to 3.5 years at
December 31, 2007. The distribution of duration and convexity (i.e., a measure of the speed at which the duration of a security is
expected to change based on a rise or fall in interest rates) are monitored on a regular basis.
As of December 31, the duration distribution of our fixed-income portfolio was:
Duration Dis tribution 2008 2007

1 year 19.6% 12.5%
2 years 19.9 18.2
3 years 17.6 24.6
5 years 32.1 27.4
10 years 10.8 17.3
Total fixed-income portfolio 100.0% 100.0%
The shift in duration during 2008 resulted from our decision to reduce the overall portfolio valuation risk exposure.
Another primary exposure related to the fixed-income portfolio is credit risk. This risk is managed by maintaining a minimum
average portfolio credit quality rating of A+, as defined by nationally recognized rating agencies, and limiting non-investment-grade
securities to a maximum of 5% of the fixed-income portfolio. Pursuant to guidelines in effect in 2008 established by our Board of
Directors, investment in a single issuer’s bonds and preferred stocks is limited to no more than 6% of our shareholders’ equity,
except for U.S. Treasury and agency bonds; any state’s general obligation bonds are limited to 12% of shareholders’ equity.
App.-A-48
The credit quality distribution of the fixed-income portfolio at December 31 was:
Rating 2008 2007

AAA 59.0% 49.4%
AA 16.3 20.6
A 13.6 16.2
BBB 9.0 10.6
Non-rated/other 2.1 3.2
Total 100.0% 100.0%
During 2008, the AAA rating category increased while the remaining ratings categories decreased, due to our decision to reduce
our exposure to the highly volatile market sectors, including common equities (discussed below), and adding to our holdings of U.S.
Treasury securities and short-term instruments.
Our portfolio is also exposed to concentration risk. Our credit risk limits single issuer exposure; however, economic sector
allocation is a key concentration risk. During 2008, the concentration risk in our portfolio was evidenced by an overweighting in
preferred stocks, predominantly invested in the financial services sector. This concentration risk, coupled with the credit crisis
(credit risk), led to the significant decline in valuation of our total portfolio. We consider concentration risk more broadly to asset
classes, including but not limited to common equities, residential and commercial mortgage securities, municipal bonds, and high-
yield bonds. During 2009, we will adjust our concentration exposure guidelines to reduce certain sector concentrations, as well as
our single issuer guidelines, to reduce credit risk exposure, referred to above.
Prepayment and extension risk, especially in our structured product and preferred stock portfolios, is another risk that we monitor
in the portfolio. Prepayment risk includes the risk of early redemption of security principal that may need to be reinvested at less
attractive rates. Extension risk includes the risk that a security will not be redeemed when anticipated, and that a security we hold
has a lower yield than a security we might be able to obtain by reinvesting the expected redemption principal. The different types of
structured debt and preferred securities that we hold help minimize this risk. During 2008, we did not experience significant
prepayment or extension of principal relative to our expectations in the portfolio.
However, part of the decline in the value of our preferred stock portfolio during the year was due to anticipated extension risk. The
preferred stocks were being priced under the assumption that issuers would not call their outstanding issues at the first call date
and might even choose to leave these securities outstanding as long as possible. This assumption was based on the fact that the
current dividend rates on the outstanding securities were lower than those available on new issues, as well as the fact that the
preferred stock market for new issues was largely not available during the latter part of 2008. The drop in price by assuming
extension, particularly for perpetual securities with no mandatory redemption date, was significant.
In addition, we face the risk that our preferred stock dividend payments could be deferred for one or more periods. As of
December 31, 2008, all of our preferred securities, with the exception of Fannie Mae, continue to pay fully and timely dividends.
Liquidity risk is another risk factor we monitor. Based on the volatility of the markets in general and the widening of credit spreads,
we elected to reduce portfolio valuation risk and direct new investments primarily to U.S. Treasury and short-term securities in order
to preserve capital and maintain our desired liquidity position. As of December 2008, we had $4.8 billion in U.S. Treasury and short-
term securities, approximately three times as much as we had at the same time last year. Another facet of liquidity risk involves
the inability to sell securities due to a lack of buyers. Our overall portfolio remains very liquid and sufficient to meet capital
requirements; however, beyond U.S. Treasury obligations, market liquidity remains highly variable and generally constrained. There
continue to be instances within the portfolio where less liquidity exists. The short to intermediate duration of our portfolio provides
an additional source of liquidity as we expect approximately 15% of our non-U.S. Treasury and short-term, fixed-income portfolio to
repay principal over the course of 2009. In addition, cash from principal and dividend payments provides a recurring source of
liquidity.
App.-A-49
Included in the fixed-income portfolio are U.S. government obligations, which include U.S. Treasury Notes and interest rate swaps.
Although the interest rate swaps are not obligations of the U.S. government, they are recorded in this portfolio as the change in fair
value is correlated to movements in the U.S. Treasury market. The duration of these securities was comprised of the following at
December 31, 2008:
Fair Duration
($ in m illions) Value (years )
U.S. Treasury Notes
Less than two years $ 390.3 1.9
Two to five years 2,315.4 4.4
Five to nine years 891.6 7.9
Total U.S. Treasury Notes 3,597.3 5.0
Interest Rate Swaps
Less than two years ($1,250 notional value) 41.8 1.4
Two to five years ($550 notional value) 54.5 3.9
Total interest rate swaps ($1,800 notional value) 96.3 2.2
Total U.S. government obligations $3,693.6 6.0
The total duration of 6 years exceeds the duration of the components due to the leverage effect of derivative instruments on the
overall duration. This is the case because, in determining duration, we add the interest rate sensitivity of our interest rate swap
positions to that of our Treasury holdings, but do not add the notional value of the swaps to our Treasury holdings in order to
calculate an unlevered duration for the portfolio.
ASSET-BACKED SECURITIES
Included in the fixed-income portfolio are asset-backed securities, which were comprised of the following at December 31:
Net % of Ass e t-
Fair Unre alized Back e d Duration
($ in m illions) Value Gain (Los s ) Securities (years ) Rating
2008
Collateralized mortgage obligations1 $ 409.7 $ (89.0) 18.6% 1.5 AAA-
Commercial mortgage-backed securities 956.7 (203.2) 43.4 2.2 AA+
Commercial mortgage-backed securities: interest only 493.2 (39.5) 22.4 1.5 AAA-
Subtotal commercial mortgage-backed securities 1,449.9 (242.7) 65.8 2.0 AA+
Other asset-backed securities:
Automobile 70.0 (6.2) 3.2 2.0 AAA
Home equity (sub-prime bonds) 213.4 (46.7) 9.7 .1 AA
Other2 59.1 (3.9) 2.7 .7 AA
Subtotal other asset-backed securities 342.5 (56.8) 15.6 .6 AA+
Total asset-backed securities $2,202.1 $ (388.5) 100.0% 1.7 AA+
2007
Collateralized mortgage obligations1 $ 611.4 $ (1.8) 24.3% 1.2 AAA-
Commercial mortgage-backed securities 914.7 23.4 36.5 2.7 AA
Commercial mortgage-backed securities: interest only 759.1 (.2) 30.2 1.9 AAA-
Subtotal commercial mortgage-backed securities 1,673.8 23.2 66.7 2.3 AA+
Other asset-backed securities:
Home equity (sub-prime bonds) 148.7 (12.2) 5.9 .1 AA
Other2 77.7 (1.2) 3.1 1.1 A
Subtotal other asset-backed securities 226.4 (13.4) 9.0 .4 AA-
Total asset-backed securities $2,511.6 $ 8.0 100.0% 1.9 AA+
1 Includes $30.7 million of Alt-A, non-prime bonds (low document/no document or non-conforming prime loans) w ith a net unrealized loss of $15.3 million and
a credit quality of AA as of December 31, 2008; includes $52.3 million of Alt-A bonds that had a net unrealized loss of $.1 million and a credit quality of AAA
as of December 31, 2007. The remainder for both periods represents seasoned prime loans.
2 Includes equipment leases, manufactured housing, and other types of structured debt.
App.-A-50
At December 31, 2008, our asset-backed securities had a net unrealized loss of $388.5 million, compared to a net unrealized gain
of $8.0 million at December 31, 2007. Substantially all of the asset-backed securities have available market quotes, although the
spreads between the bid and offer prices are wider than in recent years given the current market conditions reflecting a general drop
in liquidity. As of December 31, 2008, approximately 11% of our asset-backed securities are exposed to non-prime mortgage loans
(home equity and Alt-A). We reviewed all of our asset-backed securities for other-than-temporary impairment and yield or asset
valuation adjustments under current accounting guidance, and we realized $38.8 million in write-downs on these securities during
the year ended December 31, 2008, compared to $1.9 million during the year ended December 31, 2007. During 2008 and 2007, we
realized $31.1 million and $1.7 million, respectively, of losses related to other-than-temporarily impaired home-equity securities. We
did not have any write-downs in our Alt-A securities during 2008 or 2007.
Collateralized Mortgage Obligations At December 31, 2008, 18.6% of our asset-backed securities were collateralized mortgage
obligations (CMO). During the year ended December 31, 2008, we recorded $7.1 million of write-downs on our CMO portfolio. The
following table shows the collateralized mortgage obligations by deal origination year, along with the loan classification.
Collateralized M ortgage Obligations

% of
Deal Origination Year
Collateralized
($ in m illions) Pre- M ortgage
Category 2007 2006 2005 2004 2004 Total Obligations
Non-agency prime:
With mandatory redemption1 $ — $ — $ 38.8 $ 58.0 $ — $ 96.8 23.6%
Increase (decrease) in value —% —% (2.7)% (3.2)% —% (3.0)%
No mandatory redemption2 $ 38.9 $ 29.9 $ 99.4 $ 28.3 $ 48.2 $244.7 59.7%

Increase (decrease) in value (13.3)% (21.9)% (27.7)% (24.2)% (16.7)% (22.5)%
Alt-A $ — $ — $ 16.6 $ 7.9 $ 6.2 $ 30.7 7.5%

Increase (decrease) in value —% —% (43.2)% (12.5)% (19.8)% (33.3)%
Government/GSE3 $ 17.2 $ — $ — $ — $ 20.3 $ 37.5 9.2%

Increase (decrease) in value 8.3% —% —% —% (3.4)% 1.6%
Total $ 56.1 $ 29.9 $154.8 $ 94.2 $ 74.7 $409.7 100.0%
Increase (decrease) in value (7.6)% (21.9)% (25.1)% (11.4)% (13.8)% (17.8)%
1 These securities are required to be retired at par value by May 2009.
2 These securities do not have a mandatory redemption date; hence, the securities w ill retire at the earlier of contractual maturity or projected cash flow
expiration. All 2006 and 2007 securities in this category are collateralized primarily (greater than 90%) by mortgages originated in or prior to 2005.
3 The securities in this category are insured by a Government Sponsored Entity (GSE) and/or collateralized by mortgage loans insured by the Federal Housing
Administration (FHA) or the U.S. Department of Veteran Affairs (VA).
Commercial Mortgage-Backed Securities At December 31, 2008, 43.4% of our asset-backed securities were commercial
mortgage-backed securities (CMBS).
The following table details the credit quality rating and fair value of our CMBS portfolio by year of deal origination.
Com m e rcial M ortgage-Backe d Se curities

Rating
Non-
($ in m illions) Inve s tm e nt Fair % of Total
Deal Origination Year AAA AA A BBB Grade Value Exposure
Pre-2000 $ — $ 2.9 $ — $29.3 $ 8.4 $ 40.6 4.2%
2000 46.3 18.0 — — — 64.3 6.7
2001 118.0 22.8 4.6 9.6 — 155.0 16.2
2002 94.0 — 9.2 — — 103.2 10.8
2003 145.0 6.6 1.8 — — 153.4 16.1
2004 127.9 11.6 1.6 6.6 6.4 154.1 16.1
2005 102.6 — — 2.8 — 105.4 11.0
2006 121.3 — — 6.6 28.0 155.9 16.3
2007 — — 5.9 2.0 16.9 24.8 2.6
Total fair value $755.1 $61.9 $23.1 $56.9 $ 59.7 $956.7 100.0%
% of Total fair value 78.9% 6.5% 2.4% 6.0% 6.2% 100.0%
App.-A-51
The CMBS portfolio contains 12.2% of securities that are rated BBB or lower, with a net unrealized loss of $62.7 million at
December 31, 2008, and an average duration of 1.6 years, compared to 2.2 years for the entire CMBS portfolio.
As with many other asset-backed classes, the CMBS market saw more aggressive underwriting from 2005–2007. These more
aggressive underwriting guidelines have led to a higher level of investor concern for deals originated in this timeframe.
Our 2005 and 2006 deal origination (vintage) year AAA exposure is heavily weighted to securities with the most senior levels (over
20%) of credit support. While we expect CMBS delinquencies to continue to rise in 2009, we feel that we have an adequate level of
credit support to protect these investments. The following table displays the amount of senior and junior AAA bonds that we have in
each vintage. The average credit support and delinquencies are shown in order to indicate the cushion that is available in these
tranches to sustain losses.
Junior Ave rage Ave rage Ave rage

($ in m illions) Senior AAA Life Cre dit Ave rage Yield to
Deal Origination Year AAA1 (AJ) 2 (years ) Support 3 Delinque ncie s 4 M aturity5
2005 $ 92.6 $ 10.0 3.4 27.5% .9% 10.4%
2006 $121.3 $ — 2.3 29.6% 1.4% 12.0%
1 Above 20% credit support.
2 Above 13% credit support.
3 This amount represents the amount of cushion available to absorb realized losses.
4 This represents the percentage of loans that are 30 days or more past due.
5 The yield to maturity equals the return, inclusive of interest and principal payments that w e w ould expect to receive assuming the bond matures at its
expected maturity date.
The entire 2005-2006 non-AAA segment is composed of cell phone tower securitizations. All of these bonds have a single borrower
and are backed by a cross collateralized pool of cellular phone towers throughout the United States. As can be seen from the table
below, these bonds have short average lives and have significant net cash flow relative to their interest payments.
Deal Origination Year Ave rage Life Yield to M aturity Debt Se rvice Cove rage Ratio
2005 1.4 years 19.8% 3.5x
2006 2.7 years 33.2% 2.9x
Our entire 2007 exposure is made up of two different types of investments. One is a $5 million exposure to a B/B2 rated cell tower
transaction similar to the exposure in previous vintages. The average life on this bond is 3.3 years and it has a 30.7% yield to
maturity. The second 2007 exposure is a $20 million position that consists of three different bonds with a single borrower rated A+,
BBB-, and unrated, and is secured by a cross collateralized portfolio of office properties. The average life on this position is 3.1
years, assuming the borrower exercises its option to extend the final maturity.
Commercial Mortgage-Backed Securities: Interest Only We also held CMBS interest only (IO) securities at December 31, 2008.
The IO portfolio had an average credit quality of AAA- and a duration of 1.5 years. During the year ended December 31, 2008, we
recorded $.6 million of write-downs on our IO portfolio, compared to $.2 million during the year ended December 31, 2007. The
following table shows the fair value of the IO securities by deal origination year.
Com m e rcial M ortgage-Backe d Se curities : Intere s t Only

($ in m illions) % of Total
Deal Origination Year Fair Value Exposure
Pre-2000 $ 4.6 .9%
2000 21.1 4.3
2001 16.4 3.3
2002 15.0 3.0
2003 68.4 13.9
2004 75.8 15.4
2005 132.3 26.8
2006 159.6 32.4
Total fair value $ 493.2 100.0%
Planned amortization class IOs comprised 91% of our IO portfolio. This is a class that is structured to provide bondholders with
greater protection against loan prepayment, default, or extension risk. The bonds are at the top of the payment order for interest
distributions and benefit from increased structural support over time as they repay. Since 2004, 100% of the IO securities that we
have purchased were made up of this more protected class.
App.-A-52
Home-Equity Securities The following table shows the credit quality rating of our home-equity securities by deal origination year,
along with a comparison of the fair value at December 31, 2008, to our original investment value (adjusted for returns of principal and
amortization).
Hom e -Equity Se curities

Deal Origination Year
($ in m illions) % of Hom e
Rating (date acquire d) 2007 2006 2005 2004 Total Equity Loans
AAA (December 2007-May 2008) $— $ 60.9 $ 47.5 $ — $108.4 50.8%
Decrease in value —% (10.9)% (12.4)% —% (11.6)%
AA (September 2007-May 2008) $— $ 5.9 $ 50.3 $ 9.1 $ 65.3 30.6%
Decrease in value —% (20.9)% (25.1)% (36.8)% (26.6)%
A (August 2007-April 2008) $— $ — $ 8.8 $ 5.0 $ 13.8 6.5%
Decrease in value —% —% (15.2)% —% (10.2)%
BBB (March 2007-December 2007) $— $ 13.4 $ 10.5 $ 1.1 $ 25.0 11.7%
Non-investment grade (August 2007) $ .4 $ — $ .5 $ — $ .9 .4%
Decrease in value —% —% —% —% —%
Total $ .4 $ 80.2 $117.6 $ 15.2 $213.4 100.0%
MUNICIPAL SECURITIES
Included in the fixed-income portfolio at December 31, 2008, were $3,004.4 million of state and local government obligations with an
overall credit quality of AA. These securities had a net unrealized loss of $37.0 million at December 31, 2008, compared to a net
unrealized gain of $38.8 million at December 31, 2007. The following table details the credit quality rating of our municipal securities
at December 31, 2008, without the benefit of credit or bond insurance as discussed below.
M unicipal Securities Rating

(m illions) Ge neral Reve nue
Rating Obligations Bonds Total
AAA $ 357.7 $ 397.5 $ 755.2
AA 652.2 1,258.1 1,910.3
A 154.1 143.9 298.0
BBB 1.4 29.6 31.0
Other — 9.9 9.9
Total $ 1,165.4 $1,839.0 $3,004.4
Included in revenue bonds are $1.0 billion of single family housing revenue bonds issued by state housing finance agencies of which
$.7 billion are supported by individual mortgages held by the state housing finance agencies and $.3 billion are supported by
mortgage-backed securities. Of the programs supported by mortgage-backed securities, approximately 40% are collateralized by
Fannie Mae mortgages; the remaining 60% are collateralized by Ginnie Mae loans, which are fully guaranteed by the U.S.
Government. Of the programs supported by individual mortgages held by the state housing finance agencies, the overall credit
quality rating is AA. Most of these mortgages are supported by FHA, VA, or private mortgage insurance providers.
App.-A-53
Approximately 31%, or $931.9 million, of our total municipal securities were insured general obligation or revenue bonds, which in
the aggregate had a decline in credit quality from AAA at December 31, 2007 to AA- as of December 31, 2008. The credit quality
decline was primarily due to rating downgrades of FGIC, AMBAC, and MBIA monoline bond insurers. The following table shows the
composition and credit quality rating of these municipal obligations by monoline insurer at December 31, 2008. The credit quality
rating represents the rating of the underlying security, excluding credit insurance, based on ratings by nationally recognized rating
agencies.
Insurance Enhance d M unicipal Securities

(m illions) Ge neral Reve nue
M onoline Ins urer/ Rating Obligations Bonds Total
FGIC
AA $ 72.1 $ 45.9 $118.0
AMBAC
AA $ 103.4 $ 69.0 $172.4
A 38.3 — 38.3
BBB — 1.0 1.0
Non-rated — 5.1 5.1
$ 141.7 $ 75.1 $216.8
MBIA
AA $ 120.3 $ 155.1 $275.4
A 102.9 50.4 153.3
BBB — 5.1 5.1
$ 223.2 $ 215.4 $438.6
FSA
AA $ 47.2 $ 67.7 $114.9
A — 22.8 22.8
BBB — 20.8 20.8
$ 47.2 $ 111.3 $158.5
TOTAL
AA $ 343.0 $ 337.7 $680.7
A 141.2 73.2 214.4
BBB — 26.9 26.9
$ 484.2 $ 447.7 $931.9
As of December 31, 2008 and 2007, the insurance-enhanced general obligation and revenue bonds had combined net unrealized
gains of $12.9 million and $12.5 million, respectively. We buy and hold these securities based on our evaluation of the underlying
credit without reliance on the monoline insurance. Our policy does not require us to liquidate securities should the insurance
provided by the monoline insurers cease to exist.
CORPORATE SECURITIES
Included in our fixed-income securities at December 31, 2008, were $642.3 million of fixed-rate corporate securities which had a
duration of 3.9 years and an overall credit quality rating of BBB+. These securities had a net unrealized loss of $51.9 million at
December 31, 2008, compared to a net unrealized gain of $3.4 million at December 31, 2007. During the year ended December 31,
2008, we recorded $69.0 million of other-than-temporary impairment losses on our corporate debt portfolio. The table below shows
the exposure break-down by rating and sector.
Corporate Securities Rating by Sector

Sector AAA AA A BBB % of Portfolio
Financial Services
U.S. banks —% —% 4.4% —% 4.4%
Insurance — 10.4 9.2 — 19.6
Other financial 3.2 — 4.6 7.7 15.5
Total Financial Services 3.2 10.4 18.2 7.7 39.5
Agency — — — — —
Industrial — — 3.2 57.3 60.5
Utility — — — — —
Total 3.2% 10.4% 21.4% 65.0% 100.0%
App.-A-54
PREFERRED STOCKS – REDEEMABLE AND NONREDEEMABLE

We hold both redeemable (e.g., mandatory redemption dates) and nonredeemable (e.g., perpetual preferred stocks with call dates)
preferred stocks. Nonredeemable preferred stocks also include securities that have call features with fixed-rate coupons (i.e., hybrid
securities), whereby the change in value of the call features is a component of the overall change in value of the preferred stocks.
The following table lists our preferred stocks, including both redeemable ($387.9 million) and nonredeemable ($1,150.0 million), as
of December 31, 2008, for individual issuers as to which we recorded other-than-temporary impairments during 2008 that had a cost
exceeding 2% of total shareholders’ equity as of June 30, 2008, which was prior to the significant valuation declines that occurred
during the second half of 2008. We made no additional investments in preferred stocks during the second half of 2008.
Fair Value at
($ in m illions) Dece m ber 31, % of Total
Is s uers 2008 Portfolio
Bank of America (includes Merrill Lynch) $ 155.6
Wells Fargo (formerly Wachovia) 105.8
U.S. Bancorp 83.0
MetLife Inc. 71.8
HSBC USA Inc. 63.8
Goldman Sachs 57.1
Morgan Stanley 44.8
J.P. Morgan 34.2
Fannie Mae 1.0
Subtotal 617.1 4.8%
Other preferred stocks1 867.8 6.7%
Hybrid preferred stocks2 53.0 .4%
Total preferred stocks $ 1,537.9 11.9%
1 Includes Citigroup w ith a fair value of $42.9 million, w hich, w hen combined w ith its hybrid preferred issue disclosed in footnote 2 of this table, exceeded 2%
of total shareholders’ equity as of June 30, 2008.
Thereare a total of 34 issuers in the follow ing sectors: Financial: 56%; Industrial: 34%; and Utility: 10%.
2 Includes Citigroup: $39.5 million and MetLife Inc.: $5.1 million.
Our preferred stock portfolio had a net unrealized gain of $56.9 million at December 31, 2008, compared to a net unrealized loss of
$342.0 million at December 31, 2007. During the year ended December 31, 2008, we wrote down our preferred stock portfolio by
$1,676.7 million due to a combination of issuer fundamentals and severe market declines where we had the inability to determine
objectively whether the securities would recover substantially in the near term (see the Other-Than-Temporary Impairment section
below for further discussion).
Our preferred stocks had an overall credit quality rating of BBB+ at December 31, 2008. The table below shows the exposure break-
down by rating and sector.
Preferred Stocks Rating by Sector

Non-
Inve s tm e nt % of Pre ferred
Sector A BBB Grade Stock Portfolio
Financial Services
U.S. banks 43.9% 13.2% —% 57.1%
Foreign banks 1.7 .5 — 2.2
Insurance 1.9 7.4 3.7 13.0
Other financial 1.0 .7 .8 2.5
Total Financial Services 48.5 21.8 4.5 74.8
Agency — — .1 .1
Industrial — 12.2 7.0 19.2
Utility 1.5 4.4 — 5.9
Total 50.0% 38.4% 11.6% 100.0%
Approximately 60% of our preferred stock securities pay dividends that have tax preferential characteristics, while the balance pay
dividends that are fully taxable. In addition, all of our non-investment-grade preferred stocks were with issuers that maintain
investment-grade senior debt ratings.
App.-A-55
Approximately 70% of our preferred stock securities are fixed-rate securities and 30% are floating-rate securities. All of our
preferred securities have call or mandatory redemption features. Most of the securities are structured to provide some protection
against extension risk in the event the issuer elects not to call such securities at their initial call date by either paying a higher
dividend amount or by paying floating-rate coupons. Of our fixed-rate securities, approximately 90% will convert to floating-rate
dividend payments if not called at their initial call date.
Common Equities
Common equities, as reported in the balance sheets at December 31, were comprised of the following:
($ in m illions) 2008 2007

Common stocks $714.3 98.1% $2,313.8 99.4%
Other risk investments 13.5 1.9 13.7 .6
Total common equities $727.8 100.0% $2,327.5 100.0%
Our common equity allocation is intended to enhance the return of and provide diversification for the total portfolio and may range
from 0% to 25% of the investment portfolio. At December 31, 2008, 5.6% of the portfolio was in common equities, compared to
16.5% at the same time last year. The decrease reflects our decision to reduce our exposure to equity securities, which we began
toward the end of the third quarter 2008. In addition, the common equities experienced a significant market decline over the last 12
months, which contributed to the reduction in fair value.
Common stocks are managed externally to track the Russell 1000 Index with an anticipated annual tracking error of +/-50 basis
points (bps). Our individual holdings are selected based on their contribution to the correlation with the index. In order to maintain
correlation to the index, we use a market capitalization of the portfolio’s holdings compared to the total capitalization of the Russell
1000 Index. For 2008 our GAAP basis total return, when compared to the Russell 1000 Index, resulted in a tracking error of
approximately +12 bps outside of the anticipated range, or +62 bps. As a result of reducing our ongoing exposure to the volatile
common stock market at the end of the third quarter, with the declines in the market occurring while we were trading, our portfolio’s
tracking error to the index moved outside the desired +/-50 bps to as high as +/-95 bps on an annualized basis, and created the
+12 bps spread referred to above. During the fourth quarter, we closed the tracking error variance down to a current +/-75 bps in
order to reduce the overall variance on the portfolio going forward. The current high level of market volatility is the reason our
predicted tracking error increased rather than a change in portfolio composition. We held 535 out of 985, or 54%, of the common
stocks comprising the Russell 1000 Index at December 31, 2008 and approximately 86% of the total market capitalization of the
index.
Other risk investments include private equity investments and limited partnership interests in private equity and mezzanine
investment funds which have no off-balance-sheet exposure or contingent obligations, except for $.2 million of open funding
commitments.
Trading Securities
Trading securities may be entered into from time to time for the purpose of near-term profit generation. We have not entered into
any trading securities in the last three years.
Derivative Instruments
We invest in the following derivative exposures at various times: interest rate swaps; asset-backed credit default swaps; U.S.
corporate debt and corporate debt indexed credit default swaps; and forecasted hedges. See Note 2 – Investments for further
discussion of our derivative positions.
For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that may be
exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be reported as a
component of the available-for-sale portfolio, the inception-to-date realized gain on the derivative position at period end would have to
exceed any upfront cash received (net derivative asset). On the other hand, a net derivative liability would include any inception-to-
date realized loss plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a
component of other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to the
immaterial effect on our financial condition, cash flows, and results of operations.
App.-A-56
INTEREST RATE SWAPS

We invest in interest rate swaps primarily to manage the fixed-income portfolio duration. The following table summarizes our
interest rate swap activity classified by the status (open vs. closed) of the swap position as of December 31, 2008. All of the open
positions were entered into during 2008; we held no interest rate swaps in 2006.
Gains (Los s e s )
Years e nde d
Notional Exposure Dece m ber 31,
(m illions) Coupon 2008 2007 2008 2007
Open Positions
2-year exposure Receive fixed $ 1,250 $ — $ 44.6 $ —
5-year exposure Receive fixed 550 — 59.7 —
Total open positions1 $ 1,800 $ — $104.3 $ —
Closed Positions
5-year exposure Receive variable $ 225 $ — $ 6.9 $ —
5-year exposure Receive fixed 1,175 1,175 46.5 46.6
10-year exposure Receive fixed 150 150 3.7 6.5
Total closed positions2 $ 1,550 $ 1,325 $ 57.1 $53.1
Total interest rate swaps $161.4 $53.1
1 Includes $8.0 million of net interest income.
2 Includes net interest income (expense) of $.4 million and $(.7) million for 2008 and 2007, respectively.
ASSET-BACKED CREDIT DEFAULT SWAPS

The following table summarizes our holding period gains (losses) on the asset-backed credit default swaps classified by the status
of the swap position as of December 31, 2008. We held no asset-backed credit default swaps in 2006.
Gains (Los s e s )
Bought or Years e nde d
Sold Notional Exposure Dece m ber 31,
(m illions) Protection 2008 2007 2008 2007
Closed Positions
BBB-credit exposure Sold $ 140 $ 190 $(26.1) $(51.3)
Treasury Note 140 190 6.4 7.9
Total asset-backed swaps1 $(19.7) $(43.4)
1Includesnet interest income of $3.2 million and $1.5 million for 2008 and 2007, respectively.
CORPORATE CREDIT DEFAULT SWAPS

The following table summarizes our corporate credit default swap activity classified by the status of the swap position as of
December 31, 2008. The open position was entered into during 2008.
Gains (Los s e s )
Years e nde d
Bought or Sold Notional Exposure Dece m ber 31,
(m illions) Protection 2008 2007 2006 2008 2007 2006
Open Positions
5-year exposure Bought $ 25 $ — $ — $ (.7) $ — $ —
Total open corporate1 $ (.7) $ — $ —
Closed Positions
3-year exposure Bought $260 $ — $ — $ (1.4) $ — $ —
5-year exposure Bought 285 — — 22.2 — —
Non-investment-grade index Bought — 210 — — 6.4 —
Investment-grade index Bought — 40 40 — 3.6 .1
Corporate swap exposure Sold — — 130 — — 9.9
Treasury Note — — 130 — — —
Total closed corporate2 $20.8 $10.0 $10.0
Total corporate swaps $20.1 $10.0 $10.0
1 Includes $.2 million of net interest expense.
2 Includes net interest income (expense) of $(3.4) million, $(1.3) million, and $0 for 2008, 2007, and 2006, respectively.
App.-A-57
FORECASTED HEDGES
During the fourth quarter 2008, we entered into a cash flow hedge of forecasted foreign currency transactions. The hedge was
designated as, and qualified for, cash flow hedge accounting treatment. We will defer the pretax gain or loss on this hedge and
report the amount in accumulated other comprehensive income. The gain or loss on the contract will be amortized over the period in
which foreign denominated expenses occur beginning the second half of 2009.
During the second quarter 2007, we entered into a forecasted debt issuance hedge against a possible rise in interest rates in
anticipation of issuing $1 billion of our 6.70% Fixed-to-Floating Rate Junior Subordinated Debentures due 2067 (the “Debentures”).
The hedge was designated as, and qualified for, cash flow hedge accounting treatment. Upon issuance of the Debentures, the
hedge was closed, and we recognized a pretax gain of $34.4 million, which is recorded as part of accumulated other comprehensive
income. The $34.4 million gain is deferred and is being recognized as an adjustment to interest expense over the 10-year fixed
interest rate term of the Debentures. During 2008 and 2007, we recognized $2.6 million and $1.3 million, respectively, as an
adjustment to interest expense.
B. Investment Results
Recurring investment income (interest and dividends, before investment and interest expenses) decreased 6% in 2008 and
increased 5% in 2007 and 21% in 2006. The decrease in 2008 was the result of reallocating our portfolio, and investing new cash to
the portfolio predominantly in U.S. Treasury and short-term securities, both of which have lower yields than the current mix of credit-
related products in the portfolio. Additionally, the general reduction in the market level interest rates affected the amount of income
collected on our variable-rate securities. The increase in 2007 was primarily the result of a decision to add certain higher-yielding,
though lower-rated, assets. These lower-rated assets provided additional income over our previous investments. The increase in
investment income during 2006 was primarily the result of an increase in investment yields, with a small growth in average assets
providing the balance of the increase.
We report total return to reflect more accurately the management philosophy governing the portfolio and our evaluation of investment
results. The fully taxable equivalent (FTE) total return includes recurring investment income, net realized gains (losses) on
securities, and changes in unrealized gains (losses) on investments.
We reported the following investment results for the years ended December 31:
2008 2007 2006

Pretax recurring investment book yield 4.7% 4.8% 4.6%
Weighted average FTE book yield 5.5% 5.6% 5.3%
FTE total return:
Fixed-income securities (7.1)% 4.4% 5.9%
Common stocks (36.5)% 6.2% 16.3%
Total portfolio (10.4)% 4.7% 7.4%
A further break-down of our total returns for our fixed-income securities for the years ended December 31 follows:
2008 2007 2006

Fixed-income securities:
U.S. Treasury Notes1 30.5% 14.8% 3.5%
Municipal bonds 4.1% 7.1% 5.8%
Corporate bonds1 (7.1)% 7.7% 7.4%
Commercial mortgage-backed securities (9.5)% 6.2% 6.2%
Collateralized mortgage obligations (14.0)% 6.0% 4.9%
Asset-backed securities1 (15.1)% (14.7)% 6.0%
Preferred stocks (40.5)% (5.7)% 8.2%
1 Includes the net gains (losses) on the credit default and interest rate sw aps.
Investment expenses were $8.8 million in 2008, compared to $12.4 million in 2007 and $11.9 million in 2006. For 2007, the
investment expenses included the costs associated with the June 2007 issuance of our Debentures, as well as an accrual for 2007
bonuses under our incentive compensation plan that was reversed early in 2008 upon final determination of the relative performance
of our fixed-income portfolio; no bonus was accrued for 2008.
Interest expense in 2008 was $136.7 million, compared to $108.6 million in 2007 and $77.3 million in 2006. The increase in 2008
and 2007 reflects the June 2007 issuance of our Debentures.
App.-A-58
Other-Than-Temporary Impairment
Realized losses may include write-downs of securities determined to have had an other-than-temporary decline in fair value. We
routinely monitor our portfolio for pricing changes that might indicate potential impairments, and perform detailed reviews of
securities with unrealized losses based on predetermined guidelines. In such cases, changes in fair value are evaluated to
determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial
conditions, business prospects, or other factors, or (ii) market-related factors, such as interest rates or equity market declines
(e.g., negative return at either a sector index level or at the broader market level).
Fixed-income securities and common equities with declines attributable to issuer-specific fundamentals are reviewed to identify all
available evidence, circumstances, and influences to estimate the potential for, and timing of, recovery of the investment’s
impairment. An other-than-temporary impairment loss is deemed to have occurred when the potential for recovery does not satisfy
the criteria set forth in the current accounting guidance.
For fixed-maturity investments with unrealized losses due to market- or sector-related declines, the losses are not deemed to
qualify as other-than-temporary where we have the intent and ability to hold the investment for the periods of time that we anticipate
to be necessary to recover a substantial portion of the investment’s impairment and collect the interest and dividend obligations. In
general, our policy for equity securities with market- or sector-related declines is to recognize impairment losses on individual
securities with losses we can not reasonably assert will recover in the near term under historical conditions by the earlier of (i) when
we are able to objectively determine that the loss is other-than-temporary, or (ii) when the security has been in such a loss position
for three consecutive quarters.
When a security in our investment portfolio has an unrealized loss in fair value that is deemed to be other-than-temporary, we
reduce the book value of such security to its current fair value, recognizing the decline as a realized loss in the income statement.
All other unrealized gains or losses are reflected in shareholders’ equity. The write-down activity for the years ended December 31
was as follows:
Write -dow ns
Total Write -dow ns on Se curities
Write - on Se curities Held at
(m illions) dow ns Sold Period End
2008
Preferred stocks $1,676.7 $ 434.4 $ 1,242.3
Corporate securities 69.0 — 69.0
Asset-backed securities 38.8 — 38.8
Total fixed income 1,784.5 434.4 1,350.1
Total portfolio $1,858.8 $ 465.7 $ 1,393.1
2007
Preferred stocks $ 17.4 $ — $ 17.4
Total fixed income 19.3 — 19.3
Common equities 2.4 2.1 .3
Total portfolio $ 21.7 $ 2.1 $ 19.6
2006
Corporate securities $ .3 $ .3 $ —
Total fixed income 1.8 .3 1.5
Common equities 2.4 2.0 .4
Total portfolio $ 4.2 $ 2.3 $ 1.9
App.-A-59
The following is a summary of the 2008 redeemable and nonredeemable preferred stock write-downs by sector:
Am ount of
Write - Rem aining Gros s
(m illions) dow n Unre alized Los s at
Sector in 2008 Dece m ber 31, 2008
Financial Services
Large issuers (see Preferred Stocks – Redeemable and Nonredeemable above):
Bank of America (includes Merrill Lynch) $ 209.5 $ 5.3
Wells Fargo (formerly Wachovia) 104.1 —
J.P. Morgan (includes Washington Mutual – entire position sold) 71.1 .1
U.S. Bancorp 67.4 1.3
MetLife Inc. 65.0 —
Morgan Stanley 58.0 —
HSBC USA Inc. 56.4 1.9
Goldman Sachs 51.4 —
Other financial 447.9 9.9
Total Financial Services 1,130.8 18.5
Agency (Fannie Mae—$1.0 fair value remaining; Freddie Mac—entire position sold) 382.6 —
Industrial 115.6 5.9
Utility 47.7 .9
Total preferred stocks $ 1,676.7 $ 25.3
The following is a summary of the 2008 common equity security write-downs by sector (both market-related and issuer specific):
Am ount
of Rus s e ll 1000
Write - Equity Portfolio Rus s e ll 1000 Sector Rem aining Gros s
($ in m illions) dow n Allocation at Allocation at Return Unre alized Los s at
Sector in 2008 Dece m ber 31, 2008 Dece m ber 31, 2008 in 2008 Dece m ber 31, 2008
Auto and Transportation $ 1.0 2.8% 2.5% (32.0)% $ .2
Consumer Discretionary 2.8 12.2 12.8 (35.0) 4.8
Consumer Staples — 9.0 8.8 (17.8) .4
Financial Services 43.7 15.2 15.7 (51.1) 4.0
Health Care 5.0 14.6 14.8 (22.5) 4.7
Integrated Oil — 9.0 7.8 (21.7) —
Materials and
Processing .5 4.1 4.5 (47.2) 1.5
Other Energy 1.3 3.8 4.2 (53.5) 1.5
Producer Durables .6 5.5 4.9 (40.9) .6
Technology 6.7 12.8 13.5 (42.3) 8.8
Utilities — 7.8 7.5 (28.8) .7
Other Equities 12.7 3.2 3.0 (51.3) 2.0
Total Common Stocks 74.3 100.0% 100.0% (37.6)% 29.2
Other Risk Assets — .1
Total Common
Equities $ 74.3 $ 29.3
See Critical Accounting Policies, Other-Than-Temporary Impairment for further discussion.
C. Repurchase Transactions
During each of the last three years, we entered into repurchase commitment transactions, whereby we loaned U.S. Treasury or
U.S. Government agency securities to accredited brokerage firms in exchange for cash equal to the fair value of the securities.
These internally managed transactions were typically overnight arrangements. The cash proceeds were invested in Eurodollar,
reverse repurchase transactions, and unsecured commercial paper obligations issued by large, high-quality institutions with yields
that exceeded our interest obligation on the borrowed cash. We were able to borrow the cash at low rates since the securities
loaned are in either short supply or high demand. Our interest rate exposure does not increase or decrease since the borrowing and
investing periods match. However, these transactions can carry the risk that the counterparty in the arrangement could default, in
which event we would be unable to recover our collateral in a timely manner. To help mitigate this risk, we hold our counterparty’s
cash for the full value of the securities we lend and revalue the securities on a regular basis to ensure that we hold sufficient cash to
cover the market value of the securities. Nevertheless, in the event of a counterparty default, we may be unable to obtain additional
cash if our securities on loan appreciate in value prior to their return.
App.-A-60
During September 2008, we suspended our repurchase activity due to increased counterparty risk and high market volatility. For the
period in 2008 during which we invested in the transactions, our largest single outstanding balance of repurchase commitments was
$1.1 billion, which was open for one day; the average daily balance of repurchase commitments was $.4 billion. During 2007, our
largest single outstanding balance of repurchase commitments was $2.4 billion, which was open for four consecutive days; the
average daily balance of repurchase commitments was $.7 billion for 2007. We had no open repurchase commitments at
December 31, 2008 or 2007. We earned income of $1.7 million during 2008 and $3.7 million during both 2007 and 2006 on
repurchase commitments.
Additionally, beginning with the second quarter 2008, we entered into reverse repurchase commitment transactions, whereby we
loaned cash to accredited brokerage firms and received U.S. Treasury Notes pledged as general collateral against the cash
borrowed. Our exposure to credit risk was limited, as these internally managed transactions were overnight arrangements. The
income generated on these transactions was calculated at the then applicable general collateral rates on the value of U.S. Treasury
securities received.
For the period in 2008 during which we invested in the transactions, our largest single outstanding balance of reverse repurchase
commitments was $600.0 million, which was open for one day; the average daily balance of reverse repurchase commitments was
$206.5 million. We had no open reverse repurchase commitments at December 31, 2008. We earned income of $1.6 million on
reverse repurchase agreements for the year ended December 31, 2008. No reverse repurchase transactions were entered into
during 2007 or 2006.
V. CRITICAL ACCOUNTING POLICIES
Progressive is required to make certain estimates and assumptions when preparing its financial statements and accompanying
notes in conformity with GAAP. Actual results could differ from those estimates in a variety of areas. The three areas that we view
as most critical with respect to the application of estimates and assumptions are the establishment of our loss reserves, the
method of determining impairments in our investment portfolio, and the valuation of our deferred tax assets.
A. Loss and LAE Reserves

Loss and loss adjustment expense (LAE) reserves represent our best estimate of our ultimate liability for losses and LAE relating
to events that occurred prior to the end of any given accounting period but have not yet been paid. At December 31, 2008, we had
$5.9 billion of net loss and LAE reserves, which included $4.6 billion of case reserves and $1.3 billion of incurred but not recorded
(IBNR) reserves.
Progressive’s actuarial staff reviews over 350 subsets of the business data, which are at a combined state, product, and line
coverage level (the “products”), to calculate the needed loss and LAE reserves. We begin our review of a set of data by producing
multiple estimates of needed reserves, using both paid and incurred data, to determine if a reserve change is required. In the event
of a wide variation among results generated by the different projections, our actuarial group will further analyze the data using
additional techniques. Each review develops a point estimate for a relatively small subset of the business, which allows us to
establish meaningful reserve levels for that subset. In addition, the actuarial staff completes separate projections of needed case
and IBNR reserves.
We review a large majority of our reserves by product/state combination on a quarterly time frame, with the remaining reserves
generally reviewed on a semiannual basis. A change in our scheduled reviews of a particular subset of the business depends on the
size of the subset or emerging issues relating to the product or state. By reviewing the reserves at such a detailed level, we have
the ability to identify and measure variances in the trends by state, product, and line coverage that otherwise would not be seen on
a consolidated basis. Our intricate process of reviewing the aforementioned subsets makes compiling a companywide roll up to
generate a range of needed loss reserves not meaningful. We do not review loss reserves on a macro level and, therefore, do not
derive a companywide range of reserves to compare to a standard deviation.
In analyzing the ultimate accident year loss experience, our actuarial staff reviews in detail, at the subset level, frequency (number
of losses per earned car year), severity (dollars of loss per each claim), and average premium (dollars of premium per earned car
year). The loss ratio, a primary measure of loss experience, is equal to the product of frequency times severity divided by the
average premium. The average premium for personal and commercial auto businesses is known and, therefore, is not estimated.
The projection of frequency for these lines of business is usually stable in the short term, because a large majority of the parties
involved in an accident report their claims within a short time period after the occurrence. The actual frequency experienced will vary
depending on the change in mix of class of drivers insured by Progressive, but the accuracy of the projected level is considered to
be reliable. The severity experienced by Progressive, which is much more difficult to estimate, especially for injury claims, is
affected by changes in underlying costs, such as medical costs, jury verdicts, and regulatory changes. In addition, severity will vary
relative to the change in our mix of business by limit.
App.-A-61
Assumptions regarding needed reserve levels made by the actuarial staff take into consideration influences on available historical
data that reduce the predictiveness of our projected future loss costs. Internal considerations that are process-related, which
generally result from changes in our claims organization’s activities, include claim closure rates, the number of claims that are
closed without payment, and the level of the claims representatives’ estimates of the needed case reserve for each claim. We study
these changes and their effect on the historical data at the state level versus on a larger, less indicative, countrywide basis.
External items considered include the litigation atmosphere, state-by-state changes in medical costs, and the availability of
services to resolve claims. These also are better understood at the state level versus at a more macro countrywide level.
The manner in which we consider and analyze the multitude of influences on the historical data, as well as how loss reserves affect
our financial results, is discussed in more detail in our Report on Loss Reserving Practices, which was filed on June 30, 2008 via
Form 8-K.
At December 31, 2008, Progressive’s carried net reserve balance of $5.9 billion implicitly assumes that the loss and LAE severity
will increase for accident year 2008 over accident year 2007 by 1.5% and 2.6% for personal auto liability and commercial auto
liability, respectively. Personal auto liability and commercial auto liability reserves represent approximately 97% of our total carried
reserves. As discussed above, the severity estimates are influenced by many variables that are difficult to quantify and which
influence the final amount of claims settlement. That, coupled with changes in internal claims practices, the legal environment, and
state regulatory requirements, requires significant judgment in the estimate of the needed reserves to be carried.
The following table highlights what the effect would be to our carried loss and LAE reserves, on a net basis, as of December 31,
2008, if during 2009 we were to experience the indicated change in our estimate of severity for the 2008 accident year (i.e., claims
that occurred in 2008):
Es tim ated Change s in Seve rity for Accide nt Ye ar 2008

(m illions) -2% -1% As Reported +1% +2%
Personal Auto Liability $4,289.4 $4,341.4 $ 4,393.4 $4,445.4 $4,497.4
Commercial Auto Liability 1,356.8 1,366.2 1,375.6 1,385.0 1,394.4
Other1 163.9 163.9 163.9 163.9 163.9
Total $5,810.1 $5,871.5 $ 5,932.9 $5,994.3 $6,055.7
1 Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is presented due to
the immaterial level of these reserves.
Note: Every percentage point change in our estimate of severity for the 2008 accident year w ould affect our personal auto liability reserves by $52.0 million
and our commercial auto liability reserves by $9.4 million.
Our 2008 year-end loss and LAE reserve balance also includes claims from prior years. Claims that occurred in 2008, 2007, and
2006, in the aggregate, accounted for approximately 91% of our reserve balance. If during 2009 we were to experience the indicated
change in our estimate of severity for the total of the prior three accident years (i.e., 2008, 2007, and 2006), the effect to our year-
end 2008 reserve balances would be as follows:
Es tim ated Change s in Seve rity for Accide nt Ye ars 2008, 2007, and 2006
(m illions) -2% -1% As Reported +1% +2%
Personal Auto Liability $4,082.4 $4,237.9 $4,393.4 $4,548.9 $4,704.4
Commercial Auto Liability 1,320.6 1,348.1 1,375.6 1,403.1 1,430.6
Other1 163.9 163.9 163.9 163.9 163.9
Total $5,566.9 $5,749.9 $5,932.9 $6,115.9 $6,298.9
1 Includes reserves for personal and commercial auto physical damage claims and our non-auto lines of business; no change in estimates is presented due to
the immaterial level of these reserves.
Note: Every percentage point change in our estimate of severity for the total of accident years 2008, 2007, and 2006 w ould affect our personal auto liability
reserves by $155.5 million and our commercial auto liability reserves by $27.5 million.
Our best estimate of the appropriate amount for our reserves as of year-end 2008 is included in our financial statements for the
year. Our goal is to ensure that total reserves are adequate to cover all loss costs, while sustaining minimal variation from the time
reserves are initially established until losses are fully developed. At the point in time when reserves are set, we have no way
App.-A-62
of knowing whether our reserve estimates will prove to be high or low (and, thus, whether future reserve development will be
favorable or unfavorable), or whether one of the alternative scenarios discussed above is “reasonably likely” to occur. During 2008,
our estimate of the needed reserves at the end of 2007 increased .6%. The following table shows how we have performed against
this goal over the last ten years.
($ in m illions)
For the ye ars e nde d
Dece m ber 31, 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Loss and LAE Reserves1 $1,945.8 $2,200.2 $2,785.3 $3,069.7 $3,632.1 $4,346.4 $4,948.5 $5,313.1 $5,363.6 $5,655.2 $ 5,932.9
Re-estimated reserves
as of:
One year later 1,916.0 2,276.0 2,686.3 3,073.2 3,576.0 4,237.3 4,592.6 5,066.2 5,443.9 5,688.4
Two years later 1,910.6 2,285.4 2,708.3 3,024.2 3,520.7 4,103.3 4,485.2 5,130.5 5,469.8 —
Four years later 1,908.2 2,272.3 2,666.9 2,982.7 3,457.8 4,070.0 4,471.0 — — —
Five years later 1,919.0 2,277.5 2,678.5 2,993.7 3,475.4 4,073.7 — — — —
Six years later 1,917.6 2,284.9 2,683.7 3,002.5 3,472.5 — — — — —
Nine years later 1,928.5 2,290.8 — — — — — — — —
Ten years later 1,927.2 — — — — — — — — —
Cumulative Development:
Favorable/(unfavorable) $ 18.6 $ (90.6) $ 96.7 $ 69.1 $ 159.6 $ 272.7 $ 477.5 $ 219.5 $ (106.2) $ (33.2)
Percentage2 1.0 (4.1) 3.5 2.3 4.4 6.3 9.6 4.1 (2.0) (.6)
1 Represents loss and LAE reserves net of reinsurance recoverables on net unpaid losses at the balance sheet date.
2 Cumulative development ÷ loss and LAE reserves.
Note: The chart above represents the development of the property-casualty loss and LAE reserves for 1998 through 2007. The last line in the triangle for
each year represents the follow ing:
Re-estimated reserves = Total amount paid to-date + Total remaining case reserves on unsettled claims.
Changes in the estimated severity and the actual number of late reported claims are the cause of the change in our re-estimated reserves from year to year.
The cumulative development represents the aggregate change in our estimates over all years.
From 1998 through 2001, while we experienced an increase in bodily injury severity, our developed reserves were within $100 million
each year, or 4%, of our original estimates. The bodily injury severity change was much lower than we expected between 2002 and
2005; thus, the reserve run-off for these years was very favorable following the end of each year, or about 4% to 10% of our original
carried amounts. During 2007 and 2008, the 2006 and 2007 year-end reserves experienced unfavorable development as higher than
anticipated severity estimates were realized. In 2008, the estimated severity for the two most recent prior accident years (2007 and
2006) both increased less than 1.0% for personal auto and increased 3.9% and 1.0%, respectively, for Commercial Auto. For older
accident years, the changes in estimated severity were generally downward.
Because Progressive is primarily an insurer of motor vehicles, we have minimal exposure as an insurer of environmental, asbestos,
and general liability claims.
B. Other-Than-Temporary Impairment
Companies are required to perform periodic reviews of individual securities in their investment portfolios to determine whether a
decline in the value of a security is other-than-temporary. A review for other-than-temporary impairment (OTI) requires companies to
make certain judgments regarding the materiality of the decline; its effect on the financial statements; the probability, extent, and
timing of a valuation recovery; and the company’s ability and intent to hold the security. The scope of this review is broad and
requires a forward-looking assessment of the fundamental characteristics of a security, as well as market-related prospects of the
issuer and its industry.
Realized losses may include write-downs of securities determined to have had an other-than-temporary decline in fair value. We
routinely monitor our portfolio for pricing changes that might indicate potential impairments, and perform detailed reviews of
securities with unrealized losses based on predetermined guidelines. In such cases, changes in fair value are evaluated to
determine the extent to which such changes are attributable to (i) fundamental factors specific to the issuer, such as financial
conditions, business prospects, or other factors, or (ii) market-related factors, such as interest rates or equity market declines
(e.g., negative return at either a sector index level or at the broader market level).
App.-A-63
Fixed-income securities and common equities with declines attributable to issuer-specific fundamentals are reviewed to identify all
available evidence, circumstances, and influences to estimate the potential for, and timing of, recovery of the investment’s
impairment. An other-than-temporary impairment loss is deemed to have occurred when the potential for recovery does not satisfy
the criteria set forth in the current accounting guidance.
For fixed-maturity investments with unrealized losses due to market- or sector-related declines, the losses are not deemed to
qualify as other-than-temporary where we have the intent and ability to hold the investment for the periods of time that we anticipate
to be necessary to recover a substantial portion of the investment’s impairment and collect the interest and dividend obligations. In
general, our policy for equity securities with market- or sector-related declines is to recognize impairment losses on individual
securities with losses that are not reasonably expected to be recovered in the near term under historical conditions by the earlier of
(i) when we are able to objectively determine that the loss is other-than-temporary, or (ii) when the security has been in such a loss
position for three consecutive quarters.
When persuasive evidence exists that causes us to evaluate a decline in fair value to be other-than-temporary, we reduce the book
value of such security to its current fair value, recognizing the decline as a realized loss in the income statement. All other
unrealized gains (losses) are reflected in shareholders’ equity.
The following table stratifies the gross unrealized losses in our fixed-income and common equity portfolios at December 31, 2008,
by duration in a loss position and magnitude of the loss as a percentage of the cost of the security.
Total Gross Decline of Inve s tm e nt Value

Fair Unre alized
(m illions) Value Los s e s >15% >25% >35% >45%
Fixed Income:
Unrealized loss for 1 quarter $ 759.1 $ 36.7 $ 8.1 $ 7.7 $ 6.4 $ 6.4
Unrealized loss for 2 quarters 694.4 71.5 23.1 16.5 12.9 8.6
Unrealized loss for 1 year or longer 2,136.8 328.7 198.2 128.2 88.1 48.2
Total $4,468.1 $ 561.8 $300.2 $207.7 $138.8 $88.5
Common Equity:
Unrealized loss for 1 quarter $ 67.7 $ 13.6 $ 11.2 $ 6.5 $ 4.0 $ 1.2
Unrealized loss for 3 quarters 14.9 6.8 6.7 6.6 1.1 .3
Unrealized loss for 1 year or longer 12.7 2.8 1.9 1.9 1.4 —
Total $ 123.2 $ 29.3 $ 24.5 $ 18.5 $ 8.1 $ 3.0
We completed a thorough review of the existing securities in these loss categories and determined that, applying the procedures
and guidelines discussed above, these securities were not other-than-temporarily impaired. We continue to have the intent and
ability to hold these fixed-income investments for the periods of time that we anticipate to be necessary to recover a substantial
portion of the investments’ impairment and collect the interest and dividend obligations, and will do so, as long as the securities
continue to be consistent with our investment and financial strategies. We will continue to diligently monitor market conditions and
issuer-specific fundamental characteristics and, to the extent that there are any significant changes, will re-evaluate our position
and, if necessary, take the appropriate write-downs.
We will retain the common stocks necessary to maintain correlation to the Russell 1000 Index. We will continue to closely monitor
these securities, and analyze developments and conditions relating to the issuers and the overall market, to determine if any
impairment write-downs are necessary.
Since total unrealized losses are already a component of our shareholders’ equity, any recognition of these losses as additional
OTI losses would have no effect on our comprehensive income, book value, or reported investment total return.
App.-A-64
C. Deferred Tax Assets

The income tax provision is calculated under the balance sheet approach. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and liabilities at the enacted tax rates. We regularly review
our deferred tax assets for recoverability. As of December 31, 2008, we did not record a valuation allowance against the gross
deferred tax asset.
Our net deferred tax asset was $793.3 million at December 31, 2008. This amount includes $478.4 million of temporary differences
related to other-than-temporary impairment write-downs and $41.4 million associated with net unrealized losses on securities in our
portfolio. Due to the nature of these items, they have not yet been recognized for tax purposes. To the extent these OTI losses or
net unrealized losses are ultimately recognized, they would generate net capital losses for tax purposes.
Realization of the deferred tax asset ultimately depends on the existence of sufficient taxable income available of the same
character, which may include future reversals of existing temporary differences, future taxable income exclusive of reversing
differences, taxable income in prior carryback years, and tax planning strategies.
The losses creating the deferred tax assets have resulted primarily from widening credit spreads on our fixed-income securities,
with the majority in our preferred stock portfolio. As discussed in Note 2 – Investments, we elected to use an equity model for
assessing OTI related to our preferred stocks and, upon determining that they were unlikely to substantially recover in value in the
near term, they were written down. From a tax planning standpoint, we classified these securities into two groups. The first group
consists of preferred stocks that we believe are fundamentally impaired or that we are likely to sell in the near future (e.g., Fannie
Mae). At December 31, 2008, we had sufficient unrealized gains in our portfolio to offset the unrealized tax losses on these
securities. The second group is preferred securities that we have the intent and ability to hold until substantial recovery,
understanding that this may be a longer term proposition, yet still within an acceptable realized period under SFAS 109,
“Accounting for Income Taxes.” We believe that the issuers of this second group of securities are financially sound companies with
adequate capital. Moreover, we have received payment of interest and dividends on these securities on a current basis. In addition,
our strong positive cash flow from underwriting operations, as evidenced by 100 consecutive quarters of positive operating cash
flows, limits our need to liquidate securities with large unrealized tax losses to generate cash. Although realization of the deferred
tax asset is not assured, management believes it is more likely than not that the deferred tax asset will be realized based on our
expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes.
Our ability to recognize these deferred tax assets could be affected by further market value declines as well as if our expectations
change about either the ability of the securities to recover in value or our intent or ability to hold the securities until recovery. Such
changes may require us to establish a valuation allowance against the deferred tax asset, which could have a material effect on our
financial condition and results of operations.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Statements in this report that are not
historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and
results to differ materially from those discussed herein. These risk s and uncertainties include, without limitation, uncertainties
related to estimates, assumptions, and projections generally; inflation and changes in economic conditions (including changes in
interest rates and financial markets); the financial condition of, and other issues relating to the strength of and liquidity available to,
issuers of securities held in our investment portfolios and other companies with which we have ongoing business relationships,
including counterparties to certain financial transactions; the accuracy and adequacy of our pricing and loss reserving
methodologies; the competitiveness of our pricing and the effectiveness of our initiatives to retain more customers; initiatives by
competitors and the effectiveness of our response; our ability to obtain regulatory approval for requested rate changes and the
timing thereof; the effectiveness of our brand strategy and advertising campaigns relative to those of competitors; legislative and
regulatory developments; disputes relating to intellectual property rights; the outcome of litigation pending or that may be filed
against us; weather conditions (including the severity and frequency of storms, hurricanes, snowfalls, hail, and winter conditions);
changes in driving patterns and loss trends; acts of war and terrorist activities; our ability to maintain the uninterrupted operation of
our facilities, systems (including information technology systems), and business functions; court decisions and trends in litigation
and health care and auto repair costs; and other matters described from time to time in our releases and publications, and in our
periodic reports and other documents filed with the United States Securities and Exchange Commission. In addition, investors
should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including
litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is
established for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as
additional information regarding pending loss and loss adjustment expense reserves becomes known. Reported results, therefore,
may be volatile in certain accounting periods.
App.-A-65

Ten Year Summary—Financial Highlights
(unaudited)
(millions—except ratios, per share amounts, and number of people employed)
2008 2007 2006 2005 2004

Insurance Companies Selected Financial Information and
Operating Statistics—Statutory Basis
Net premiums written $13,604.3 $13,772.5 $14,132.0 $14,007.6 $13,378.1
Growth (1)% (3)% 1% 5% 12%
Policyholders’ surplus $ 4,470.6 $ 4,587.3 $ 4,963.7 $ 4,674.1 $ 4,671.0
Net premiums written to policyholders’ surplus
ratio 3.0 3.0 2.8 3.0 2.9
Loss and loss adjustment expense ratio 73.5 71.6 66.6 68.1 65.0
Underwriting expense ratio 21.1 21.1 19.9 19.3 19.6
Statutory combined ratio 94.6 92.7 86.5 87.4 84.6
Selected Consolidated Financial Information—GAAP Basis

Total assets $18,250.5 $18,843.1 $19,482.1 $18,898.6 $17,184.3
Total shareholders’ equity 4,215.3 4,935.5 6,846.6 6,107.5 5,155.4
Common shares outstanding 676.5 680.2 748.0 789.3 801.6
Common share price:
High $ 21.31 $ 25.16 $ 30.09 $ 31.23 $ 24.32
Low 10.29 17.26 22.18 20.35 18.28
Close (at December 31) 14.81 19.16 24.22 29.20 21.21
Market capitalization $10,019.0 $13,032.6 $18,116.6 $23,040.7 $17,001.9
Book value per common share 6.23 7.26 9.15 7.74 6.43
Return on average common shareholders’ equity (1.5)% 19.5% 25.3% 25.0% 30.0%
Debt outstanding $ 2,175.5 $ 2,173.9 $ 1,185.5 $ 1,284.9 $ 1,284.3
Ratios:
Debt to total capital 34.0% 30.6% 14.8% 17.4% 19.9%
Price to earnings1 N/A 11.6 11.5 16.7 11.1
Price to book 2.4 2.6 2.6 3.8 3.3
Earnings to fixed charges1 N/A 13.5x 24.7x 21.3x 27.1x
Net premiums earned $13,631.4 $13,877.4 $14,117.9 $13,764.4 $13,169.9
Total revenues 12,840.1 14,686.8 14,786.4 14,303.4 13,782.1
Underwriting margins:2
Personal Lines 5.4% 7.0% 12.3% 11.0% 14.1%
Commercial Auto 5.3% 10.1% 19.8% 17.9% 21.1%
Other indemnity3 NM NM NM NM NM
Total underwriting operations 5.4% 7.4% 13.3% 11.9% 14.9%
Net income (loss) $ (70.0) $ 1,182.5 $ 1,647.5 $ 1,393.9 $ 1,648.7
Per share4 (.10) 1.65 2.10 1.74 1.91
Comprehensive income (loss) (614.7) 1,071.0 1,853.1 1,347.8 1,668.5
Average equivalent shares4 668.0 718.5 783.8 799.3 864.8
Dividends declared per share5 — 2.1450 .0325 .0300 .0275
Number of people employed 25,929 26,851 27,778 28,336 27,085
All share and per share amounts w ere adjusted for the May 18, 2006, 4-for-1 stock split and the April 22, 2002, 3-for-1 stock split.
1 Ratios are not applicable (N/A) for 2008 since w e reported a net loss for the year.
2 Underw riting margins are calculated as pretax underw riting profit (loss), as defined in Note 10 - Segment Information, as a percentage of net premiums
earned.
3 In 2003, w e ceased w riting business for our lender’s collateral protection program. As a result, underw riting margin is not meaningful (NM) for our other
indemnity businesses due to the low level of premiums earned by, and the variability of losses in, such businesses after that date.
App.-A-66

Ten Year Summary—Financial Highlights (cont’d)
(unaudited)
(millions—except ratios, per share amounts, and number of people employed)
2003 2002 2001 2000 1999

Insurance Companies Selected Financial Information and
Operating Statistics—Statutory Basis
Net premiums written $11,913.4 $ 9,452.0 $ 7,260.1 $ 6,196.1 $6,124.7
Growth 26% 30% 17% 1% 16%
Policyholders’ surplus $ 4,538.3 $ 3,370.2 $ 2,647.7 $ 2,177.0 $2,258.9
Net premiums written to policyholders’ surplus ratio 2.6 2.8 2.7 2.8 2.7
Loss and loss adjustment expense ratio 67.4 70.9 73.6 83.2 75.0
Underwriting expense ratio 18.8 20.4 21.1 21.0 22.1
Statutory combined ratio 86.2 91.3 94.7 104.2 97.1
Selected Consolidated Financial Information—GAAP Basis

Total assets $16,281.5 $13,564.4 $11,122.4 $10,051.6 $9,704.7
Total shareholders’ equity 5,030.6 3,768.0 3,250.7 2,869.8 2,752.8
Common shares outstanding 865.8 871.8 881.2 882.2 877.1
Common share price:
High $ 21.17 $ 15.12 $ 12.65 $ 9.25 $ 14.52
Low 11.56 11.19 6.84 3.75 5.71
Close (at December 31) 20.90 12.41 12.44 8.64 6.09
Market capitalization $18,088.9 $10,819.3 $10,958.6 $ 7,616.8 $5,345.4
Book value per common share 5.81 4.32 3.69 3.25 3.14
Return on average common shareholders’ equity 29.1% 19.3% 13.5% 1.7% 10.9%
Debt outstanding $ 1,489.8 $ 1,489.0 $ 1,095.7 $ 748.8 $1,048.6
Ratios:
Debt to total capital 22.8% 28.3% 25.2% 20.7% 27.6%
Price to earnings1 14.7 16.6 27.2 164.5 18.5
Price to book 3.6 2.9 3.4 2.7 1.9
Earnings to fixed charges1 18.8x 13.2x 10.7x 1.3x 5.7x
Net premiums earned $11,341.0 $ 8,883.5 $ 7,161.8 $ 6,348.4 $5,683.6
Total revenues 11,892.0 9,294.4 7,488.2 6,771.0 6,124.2
Underwriting margins:2
Personal Lines 12.1% 7.5% 4.5% (5.2)% 1.2%
Commercial Auto 17.5% 9.1% 8.3% 3.3% 8.4%
Other indemnity3 NM 7.2% 7.0% 13.6% 10.8%
Total underwriting operations 12.7% 7.6% 4.8% (4.4)% 1.7%
Net income (loss) $ 1,255.4 $ 667.3 $ 411.4 $ 46.1 $ 295.2
Per share4 1.42 .75 .46 .05 .33
Comprehensive income (loss) 1,511.1 710.7 472.6 123.2 179.1
Average equivalent shares4 882.1 892.8 900.7 891.8 895.6
Dividends declared per share5 .0250 .0240 .0233 .0225 .0218
Number of people employed 25,834 22,974 20,442 19,490 18,753
4 Amounts reflect basic earnings per share for 2008 since w e reported a net loss; all other periods are presented on a diluted basis.
5 Progressive transitioned to an annual variable dividend policy beginning in 2007. In accordance w ith this policy, no dividend w as declared in 2008 since our
comprehensive income w as less than after-tax underw riting income. In addition, in June 2007, Progressive’s Board declared an extraordinary cash dividend
of $2.00 per common share that w as paid September 14, 2007 to shareholders of record at the close of business on August 31, 2007. Progressive paid
quarterly dividends prior to 2007.
App.-A-67

Quantitative Market Risk Disclosures
(unaudited)
Quantitative market risk disclosures are only presented for market risk categories when risk is considered material. Materiality is
determined based on the fair value of the financial instruments at December 31, 2008, and the potential for near-term losses from
reasonably possible near-term changes in market rates or prices. We had no trading financial instruments at December 31, 2008.
OTHER-THAN-TRADING FINANCIAL INSTRUMENTS
Financial instruments subject to interest rate risk were:
Fair Value
-200 bps -100 bps +100 bps +200 bps
(m illions) Change 1 Change 1 Actual Change Change
U.S. government obligations $ 4,045.1 $ 3,914.6 $ 3,693.6 $ 3,475.6 $ 3,270.6
State and local government obligations 3,090.1 3,065.7 3,004.4 2,939.5 2,877.6
Asset-backed securities 2,238.3 2,232.7 2,202.1 2,160.4 2,119.6
Corporate securities 684.2 666.8 642.3 618.1 595.2
Nonredeemable preferred stocks 1,177.8 1,167.6 1,150.0 1,131.9 1,114.7
Other debt securities2 449.9 427.1 404.3 383.0 363.2
Short-term investments 1,153.6 1,153.6 1,153.6 1,153.6 1,153.6
Balance as of December 31, 2008 $12,839.0 $12,628.1 $12,250.3 $11,862.1 $11,494.5
Balance as of December 31, 2007 $12,749.9 $12,283.3 $11,837.6 $11,428.0 $11,041.1
1 Due to low absolute interest rates, w here the yields w ould have been negative, w e used an interest rate of 1 basis point.
2 Includes $387.9 million in redeemable preferred stocks.
Exposure to risk is represented in terms of changes in fair value due to selected hypothetical movements in market rates. Bonds
and preferred stocks are individually priced to yield to the worst case scenario, which includes any issuer-specific features, such as
a call option. Asset-backed securities, including state and local government housing securities, are priced assuming deal-specific
prepayment scenarios, considering the deal structure, prepayment penalties, yield maintenance agreements, and the underlying
collateral.
Financial instruments subject to equity market risk were:
Fair Value
(m illions) -10% Actual +10%
Common equities as of December 31, 2008 $ 655.0 $ 727.8 $ 800.6
Common equities as of December 31, 2007 $2,094.8 $2,327.5 $2,560.3
The model represents the estimated value of our common equity portfolio given a +/-10% change in the market, based on the
common stock portfolio’s weighted average beta of 1.0. The beta is derived from recent historical experience, using the S&P 500 as
the market surrogate. The historical relationship of the common stock portfolio’s beta to the S&P 500 is not necessarily indicative
of future correlation, as individual company or industry factors may affect price movement. Betas are not available for all securities.
In such cases, the change in fair value reflects a direct +/-10% change; the number of securities without betas is approximately
2%, and the remaining 98% of the equity portfolio is indexed to the Russell 1000.
As an additional supplement to the sensitivity analysis, we present results from a value-at-risk (VaR) analysis to estimate and
quantify the investment portfolio’s exposure to short-term volatility and as a component of our longer-term contingency capital
planning. The VaR model projects probable outcomes based on historical volatility of results and quantifies the potential reductions
in total investment returns on a GAAP basis, which includes recurring investment income, realized gains (losses), and changes in
unrealized gains (losses) on investments.
App.-A-68
The VaR estimates below represents the expected loss at 99% confidence within a 66-day trading period (e.g., quarterly period)
based on recent market volatility. Total portfolio VaR is less than the sum of the two components (fixed income and equity) due to
the benefit of diversification.
($ in m illions) Dece m ber 31, Septe m ber 30, June 30, M arch 31, Dece m ber 31,
66-day VaR 2008 2008 2008 2008 2007
Fixed-income portfolio $ (519.5) $ (478.8) $ (381.1) $ (302.2) $ (358.5)
% of portfolio (4.2)% (4.2)% (3.2)% (2.6)% (3.0)%
% of shareholders’ equity (12.3)% (11.2)% (7.9)% (6.4)% (7.3)%
Common equity portfolio $ (333.3) $ (479.6) $ (383.2) $ (483.9) $ (449.5)
% of portfolio (45.8)% (36.3)% (18.8)% (23.0)% (19.3)%
Total portfolio $ (605.2) $ (370.9) $ (398.4) $ (394.7) $ (387.8)
% of portfolio (4.7)% (2.9)% (2.9)% (2.8)% (2.7)%
The increase in the 66-day VaR from December 31, 2007 to December 31, 2008, primarily results from volatility in the market in
2008. The valuation of our financial sector preferred stocks moved in tandem with the related common equities and such an
increase in correlation was not anticipated by the modeled results. Therefore, our portfolio loss was larger than the loss
contemplated by the VaR model at the 99% confidence level for the third quarter 2008.
App.-A-69

Claims Payment Patterns
(unaudited)
The Progressive Group of Insurance Companies is primarily an insurer of automobiles and recreational vehicles owned by
individuals, and trucks owned by small businesses. As such, our claims liabilities are generally short in duration. Since our incurred
losses consist of both payments and changes in the reserve estimates, it is important to understand our paid development
patterns. The charts below show our claims payment patterns, reflecting both dollars and claims counts paid, for personal auto
physical damage and bodily injury claims, as well as on a total personal auto basis. Since physical damage claims pay out so
quickly, the chart is calibrated on a monthly basis, as compared to a quarterly basis for the bodily injury and total auto payments.
LOGO
LOGO
App.-A-70
LOGO
Note: The above graphs are presented for our personal auto products on an accident period basis and are based on three years of
actual experience for physical damage and nine years for bodily injury and total auto.
App.-A-71

Quarterly Financial and Common Share Data
(unaudited)
(millions – except per share amounts)
Net Incom e (Los s ) Stock Price 1 Dividends

Total Per Rate of Declared
Quarte r Reve nue s Total Share 2 High Low Close Return 3 Per Share 4
2008
1 $ 3,585.9 $ 239.4 $ .35 $19.84 $15.00 $16.07 $ —
2 3,536.6 215.5 .32 21.31 16.11 18.72 —
3 2,210.1 (684.2) (1.03) 20.71 15.70 17.40 —
4 3,507.5 159.3 .24 17.59 10.29 14.81 —
$12,840.1 $ (70.0) $ (.10) $21.31 $10.29 $14.81 (21.9)% $ —
2007
1 $ 3,686.8 $ 363.5 $ .49 $24.75 $20.91 $21.82 $ —
2 3,675.9 283.7 .39 25.16 21.55 23.93 2.0000
3 3,709.6 299.2 .42 24.10 18.88 19.41 —
4 3,614.5 236.1 .34 20.50 17.26 19.16 .1450
$14,686.8 $1,182.5 $ 1.65 $25.16 $17.26 $19.16 (12.6)% $ 2.1450
2006
1 $ 3,660.9 $ 436.6 $ .55 $30.09 $25.25 $26.07 $ .00750
2 3,707.9 400.4 .51 27.86 25.25 25.71 .00750
3 3,723.8 409.6 .53 25.84 22.18 24.54 .00875
4 3,693.8 400.9 .53 25.54 22.19 24.22 .00875
$14,786.4 $1,647.5 $ 2.10 $30.09 $22.18 $24.22 (17.0)% $ .03250
All per share amounts and stock prices w ere adjusted for the May 18, 2006, 4-for-1 stock split.
1 Prices as reported on the consolidated transaction reporting system. Progressive’s common shares are listed on the New York Stock Exchange under the
symbol PGR.
2 Since w e reported a net loss for both the third quarter and full year 2008, the calculated diluted earnings per share w as antidilutive; therefore, basic
earnings per share is disclosed. For all other periods, diluted earnings per share is disclosed. The sum may not equal the total because the average
equivalent shares differ in the quarterly and annual periods, and because of the net loss in 2008.
3 Represents annual rate of return, assuming dividend reinvestment, including the $2.00 per share extraordinary cash dividend paid in September 2007.
4 Progressive transitioned to an annual variable dividend policy beginning in 2007. In accordance w ith this policy, no dividend w as declared in 2008 since our
comprehensive income w as less than after-tax underw riting income. The 2007 annual dividend w as declared by the Board of Directors in December 2007
and paid early in 2008. In addition, in June 2007, Progressive’s Board declared an extraordinary cash dividend of $2.00 per common share that w as paid
September 14, 2007 to shareholders of record at the close of business on August 31, 2007. Progressive paid quarterly dividends prior to 2007.
App.-A-72

Performance Graph
(unaudited)
The following performance graph compares the performance of Progressive’s Common Shares (“PGR”) to the Standard & Poor’s
Index (“S&P Index”) and the Value Line Property/Casualty Industry Group (“P/C Group”) for the last five years.
Cumulative Five-Year Total Return*

PGR, S&P Index, P/C Group (Performance Results through 12/31/08)
LOGO
Cumulative Total Return as of December 31 of each year

(assumes $100 was invested at the close of trading on December 31, 2003)
2004 2005 2006 2007 2008

PGR $101.64 $140.07 $116.35 $101.65 $ 79.40
S&P Index 110.88 116.33 134.69 142.09 90.27
P/C Group 111.75 123.96 141.89 172.78 123.15
* Assumes reinvestment of dividends.
Source: Value Line, Inc.
App.-A-73

Net Premiums Written by State
(unaudited)
($ in m illions) 2008 2007 2006 2005 2004

Florida $ 1,631.0 12.0% $ 1,656.9 12.0% $ 1,811.5 12.8% $ 1,774.2 12.7% $ 1,522.6 11.4%
Texas 1,151.3 8.5 1,072.0 7.8 1,096.0 7.8 1,126.8 8.0 1,181.1 8.8
California 1,016.3 7.5 1,106.4 8.0 1,085.1 7.7 982.8 7.0 892.7 6.7
New York 738.8 5.4 847.9 6.2 930.6 6.6 968.8 6.9 935.7 7.0
Georgia 699.7 5.1 748.9 5.4 751.0 5.3 749.5 5.4 733.2 5.5
Ohio 632.4 4.7 655.9 4.8 693.7 4.9 736.0 5.3 754.2 5.6
Pennsylvania 563.7 4.1 610.5 4.4 642.1 4.5 659.1 4.7 634.4 4.7
Michigan 461.8 3.4 443.5 3.2 432.2 3.1 438.8 3.1 413.3 3.1
All other 6,709.3 49.3 6,630.5 48.2 6,689.8 47.3 6,571.6 46.9 6,310.9 47.2
Total $13,604.3 100.0% $13,772.5 100.0% $14,132.0 100.0% $14,007.6 100.0% $13,378.1 100.0%
App.-A-74
Directors
Charles A. Davis4,5,6 Peter B. Lewis2,4,6,7 1Audit

Committee member
Chief Executive Officer, Chairman of the Board 2Executive
Committee member
Stone Point Capital LLC 3Compensation Committee member
(private equity investing) Norman S. Matthews3,5,6 4Investment and Capital Committee member
Consultant, 5Nominating and Governance Committee
Roger N. Farah3,6 former President, member
President and Chief Operating Federated Department Stores,
Officer, Inc. 6Independent director
Polo Ralph Lauren Corporation (retailing) 7Non-executive chairman
(lifestyle products)
Patrick H. Nettles, Ph.D.1,6
Stephen R. Hardis 1,2,5,6 Executive Chairman,
Non-Executive Chairman of the
Board, Ciena Corporation
Marsh & McLennan Companies,
Inc. (telecommunications)
(financial services)
Glenn M. Renwick2
Bernadine P. Healy, M.D. 1,6 President and Chief Executive
Officer
Health Editor and Medical
Columnist,
U.S. News & World Report Donald B. Shackelford4,6
(publishing) Retired, former Chairman,
Fifth Third Bank, Central Ohio
Jeffrey D. Kelly2,4,6 (commercial banking)
Former Chief Financial Officer,
National City Corporation Bradley T. Sheares, Ph.D.3,6
(commercial banking) Former Chief Executive Officer,
Reliant Pharmaceuticals, Inc.
Abby F. Kohnstamm1,6 (pharmaceuticals)
President and Chief Executive
Officer,
Abby F. Kohnstamm & Associates,
Inc.
(marketing consulting)
Corporate Officers Other Executive Officers
Glenn M. Renwick John A. Barbagallo

President and Chief Executive Commercial Lines Group
Officer President
Brian C. Domeck Lawrence W. Bloomenkranz

Vice President and Chief Financial
Officer Chief Marketing Officer
Charles E. Jarrett William M. Cody

Vice President, Secretary, Chief Investment Officer
and Chief Legal Officer
Susan Patricia Griffith
Thomas A. King Claims Group President
Vice President and Treasurer
Valerie Krasowski
Jeffrey W. Basch Chief Human Resource Officer
Vice President and Chief
Accounting Officer
John P. Sauerland
Mariann Wojtkun Marshall Personal Lines Group President
Assistant Secretary
Raymond M. Voelker
Peter B. Lewis Chief Information Officer
Chairman of the Board
(non-executive)
App.-A-75
Principal Office
The Progressive Corporation
6300 Wilson Mills Road
Mayfield Village, Ohio 44143
440-461-5000
progressive.com
24-Hour Insurance Quotes, Claims Reporting, and Customer Service
Private pas s e nge r autos , m otorcycles , and

re cre ational ve hicle s Com m e rcial autos/truck s
To receive a quote 1-800-PROGRESSIVE (1-800-776-4737) 1-888-806-9598

progressive.com progressivecommercial.com
To report a claim 1-800-274-4499 1-800-274-4499
progressive.com1
For customer service:
If you bought your policy through an 1-800-925-2886
independent agent or broker (1-800-300-3693 in California) 1-800-444-4487
progressiveagent.com progressivecommercial.com
If you bought your policy directly
through Progressive online or by 1-800-PROGRESSIVE (1-800-776-4737) 1-800-895-2886
phone progressive.com progressivecommercial.com
If you have a complaint or concern 1-800-274-4641
regarding any claim handling or other 1-800-274-4641 e-mail:
claims-related issue2 e-mail: claims@email.progressive.com claims@email.progressive.com
1 Claims reporting via the Web site is currently only available for private passenger auto policies.
2 Any policyholder, claimant, or other interested party w ho has any complaint or concern regarding any claim handling or other claims-related issue may
report such claim using the contact information above. The complaint or concern w ill be promptly forw arded to the appropriate management personnel in our
claims organization for review and response.
Shareholder/Investor Relations Progressive does not maintain a mailing list for distribution of shareholders’ reports. To view
Progressive’s publicly filed documents, shareholders can access our Web site: progressive.com/sec. To view our earnings and
other releases, access progressive.com/investors.
To request copies of Progressive’s publicly filed documents free of charge, write to: The Progressive Corporation, Investor Relations,
6300 Wilson Mills Road, Box W33, Mayfield Village, Ohio 44143, e-mail: investor_relations@progressive.com or call: 440-395-
2258.
For financial-related information, call: 440-395-2222 or e-mail: investor_relations@progressive.com.
For all other Company information, call: 440-461-5000 or e-mail: webmaster@progressive.com.
Transfer Agent and Registrar

Registered Shareholders: If your Progressive shares are registered in your name, contact National City Bank regarding questions
or changes to your account: National City Bank, Shareholder Services Operations Dept. 5352, P.O. Box 92301, Cleveland, Ohio
44193-0900. Phone: 1-800-622-6757 or e-mail: shareholder.inquiries@nationalcity.com.
Beneficial Shareholders: If your Progressive shares are held in a brokerage or other financial institution account, contact your
broker or financial institution directly regarding questions or changes to your account.
Contact Non-Management Directors Interested parties have the ability to contact the non-management directors as a group by
sending a written communication clearly addressed to the non-management directors and sent to any of the following:
Peter B. Lewis, Chairman of the Board, The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 or e-
mail: peter_lewis@progressive.com.
Charles E. Jarrett, Corporate Secretary, The Progressive Corporation, 6300 Wilson Mills Road, Mayfield Village, Ohio 44143 or e-
mail: chuck_jarrett@progressive.com.
The recipient will forward communications so received to the non-management directors.

App.-A-76
Accounting Complaint Procedure Any employee or other interested party with a complaint or concern regarding accounting,
internal accounting controls, or auditing matters relating to Progressive may report such complaint or concern directly to the
Chairman of the Audit Committee, as follows: Stephen R. Hardis, Chairman of the Audit Committee,
stephen_hardis@progressive.com.
Any such complaint or concern also may be reported anonymously over the following toll-free Alert Line: 1-800-683-3604 or online
at www.progressivealertline.com. Progressive will not retaliate against any individual by reason of his or her having made such a
complaint or reported such a concern in good faith. View the complete procedures at progressive.com/governance.
Whistleblower Protections Progressive will not retaliate against any officer or employee of Progressive because of any lawful act
done by the employee to provide information or otherwise assist in investigations regarding conduct that the employee reasonably
believes to be a violation of Federal Securities Laws or of any rule or regulation of the Securities and Exchange Commission or
Federal Securities Laws relating to fraud against shareholders. View the complete Whistleblower Protections at
progressive.com/governance.
Corporate Governance Progressive’s Corporate Governance Guidelines and Board Committee Charters are available at:
progressive.com/governance, or may be requested in print by writing to: The Progressive Corporation, Investor Relations, 6300
Wilson Mills Road, Box W33, Mayfield Village, Ohio 44143.
Annual Meeting The Annual Meeting of Shareholders will be held at the offices of The Progressive Corporation, 6671 Beta Drive,
Mayfield Village, Ohio 44143 on April 24, 2009, at 10 a.m. eastern time. There were 3,847 shareholders of record on December 31,
2008.
Common Shares The Progressive Corporation’s common shares (symbol PGR) are traded on the New York Stock Exchange.
Progressive currently has an annual variable dividend policy. We expect the Board to declare the next annual variable dividend,
subject to policy limitations, in December 2009, with a record date in January 2010 and payment shortly thereafter. A complete
description of our annual variable dividend policy can be found at: progressive.com/dividend.
Counsel Baker & Hostetler LLP, Cleveland, Ohio
Charitable Contributions Progressive contributes annually to The Progressive Insurance Foundation, which provides: (i) financial
support to the Insurance Institute for Highway Safety to further its work in reducing the human trauma and economic costs of auto
accidents, and (ii) matching funds to eligible 501(c)(3) charitable organizations to which Progressive employees contribute.
Online Annual Report and Proxy Statement Our 2008 Annual Report to Shareholders, in an interactive format, can be found at:
progressive.com/annualreport.
We have also posted copies of our 2009 Proxy Statement and 2008 Annual Report to Shareholders, in a “PDF” format, at:
progressiveproxy.com.
© 2009 The Progressive Corporation
App.-A-77
Exhibit 21
SUBSIDIARIES OF THE PROGRESSIVE CORPORATION

Ju risdiction
Nam e of S u bsidiary of In corporation
Drive Insurance Holdings, Inc. Delaware
Drive New Jersey Insurance Company New Jersey
Progressive American Insurance Company Florida
Progressive Bayside Insurance Company Florida
Progressive Casualty Insurance Company Ohio
PC Investment Company Delaware
Progressive Gulf Insurance Company Ohio
Progressive Specialty Insurance Company Ohio
Trussville/Cahaba, AL, LLC Ohio
Progressive Classic Insurance Company Wisconsin
Progressive DLP Corp. Ohio
Progressive Hawaii Insurance Corp. Ohio
Progressive Michigan Insurance Company Michigan
Progressive Mountain Insurance Company Ohio
Progressive Northeastern Insurance Company New York
Progressive Northern Insurance Company Wisconsin
Progressive Northwestern Insurance Company Ohio
Progressive Preferred Insurance Company Ohio
Progressive Security Insurance Company Louisiana
Progressive Southeastern Insurance Company Indiana
Progressive West Insurance Company Ohio
Garden Sun Insurance Services, Inc. Hawaii
Pacific Motor Club California
Progny Agency, Inc. New York
Progressive Adjusting Company, Inc. Ohio
Progressive Capital Management Corp. New York
Progressive Commercial Holdings, Inc. Delaware
Artisan and Truckers Casualty Company Wisconsin
National Continental Insurance Company New York
Progressive Express Insurance Company Florida
United Financial Casualty Company Ohio
Progressive Commercial Casualty Company Ohio
Ju risdiction
Nam e of S u bsidiary (con’t) of In corporation
Progressive Direct Holdings, Inc. Delaware
Midland Financial Group, Inc. Ohio
Midland Risk Services, Inc. Tennessee
Progressive Advanced Insurance Company Ohio
Mountain Laurel Assurance Company Ohio
Progressive Auto Pro Insurance Agency, Inc. Florida
Progressive Choice Insurance Company Ohio
Progressive Direct Insurance Company Ohio
Gadsden, AL, LLC Ohio
Progressive Freedom Insurance Company New Jersey
Progressive Garden State Insurance Company New Jersey
Progressive Marathon Insurance Company Michigan
Progressive Max Insurance Company Ohio
Progressive Motor Insurance Company Ohio
Progressive Paloverde Insurance Company Indiana
Progressive Premier Insurance Company of Illinois Ohio
Progressive Select Insurance Company Florida
Progressive Specialty Insurance Agency, Inc. Ohio
Progressive Universal Insurance Company Wisconsin
Progressive Investment Company, Inc. Delaware
Progressive Premium Budget, Inc. Ohio
Progressive RSC, Inc. Ohio
Progressive Vehicle Service Company Ohio
Silver Key Insurance Agency, Inc. Nevada
Village Transport Corp. Delaware
Wilson Mills Land Co. Ohio
Each subsidiary is wholly owned by its parent.

Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I hereby constitute and appoint Charles E. Jarrett, Dane A. Shrallow and David M. Coffey,
and each of them, my true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for me and in my name,
place and stead, in any and all capacities, to sign and file with the Securities and Exchange Commission the Annual Report on Form 10-K of
The Progressive Corporation for the year 2008, and any and all amendments relating thereto and other documents in connection therewith,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing
necessary and requisite to be done in connection with the foregoing, as fully to all intents and purposes as I might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their respective substitutes, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto subscribed my name in the capacity(ies) set forth below this 13th day of February, 2009.
S ignature Position(s) with Th e Progre ssive C orporation
/s/ Peter B. Lewis Director and Chairman of the Board

Peter B. Lewis
POWER OF ATTORNEY
/s/ Glenn M. Renwick Director, President and Chief Executive Officer

Glenn M. Renwick
POWER OF ATTORNEY
/s/ Brian C. Domeck Vice President and Chief Financial Officer

Brian C. Domeck
POWER OF ATTORNEY
/s/ Jeffrey W. Basch Vice President and Chief Accounting Officer

Jeffrey W. Basch
POWER OF ATTORNEY
/s/ Charles A. Davis Director

Charles A. Davis
POWER OF ATTORNEY
/s/ Roger N. Farah Director

Roger N. Farah
POWER OF ATTORNEY
/s/ Stephen R. Hardis Director

Stephen R. Hardis
POWER OF ATTORNEY
/s/ Bernadine P. Healy, M.D. Director

Bernadine P. Healy, M.D.
POWER OF ATTORNEY
/s/ Jeffrey D. Kelly Director

Jeffrey D. Kelly
POWER OF ATTORNEY
/s/ Abby F. Kohnstamm Director

Abby F. Kohnstamm
POWER OF ATTORNEY
/s/ Norman S. Matthews Director

Norman S. Matthews
POWER OF ATTORNEY
/s/ Patrick H. Nettles, Ph.D. Director

Patrick H. Nettles, Ph.D.
POWER OF ATTORNEY
/s/ Donald B. Shackelford Director

Donald B. Shackelford
POWER OF ATTORNEY
/s/ Bradley T. Sheares, Ph. D. Director

Bradley T. Sheares, Ph. D.
Exhibit 31.1
CERTIFICATION
I, Glenn M. Renwick, certify that:

1. I have reviewed this annual report on Form 10-K of The Progressive Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 25, 2009 /s/ Glenn M. Renwick

Glenn M. Renwick
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Brian C. Domeck, certify that:

1. I have reviewed this annual report on Form 10-K of The Progressive Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: February 25, 2009
/s/ Brian C. Domeck

Brian C. Domeck
Vice President and Chief Financial Officer
Exhibit 32.1
SECTION 1350 CERTIFICATION
I, Glenn M. Renwick, President and Chief Executive Officer of The Progressive Corporation (the “Company”), certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2008 (the “Report”), which this certification
accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ Glenn M. Renwick

Glenn M. Renwick
February 25, 2009
Exhibit 32.2
SECTION 1350 CERTIFICATION
I, Brian C. Domeck, Vice President and Chief Financial Officer of The Progressive Corporation (the “Company”), certify, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1) the Annual Report on Form 10-K of the Company for the period ended December 31, 2008 (the “Report”), which this certification
accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ Brian C. Domeck

Brian C. Domeck
Vice President and Chief Financial Officer
February 25, 2009
Exhibit 99
LETTER TO SHAREHOLDERS
Wow! Followed by the claim, “I say it louder,” was an effective interjection in the debut television commercial of our revamped 2008
advertising efforts, but might equally be used with a less positive tone as a descriptor for the business year in the U.S.
2008 for Progressive had plenty of Wow!, some very positive and encouraging, and some just flat out disappointing.
Reporting a net loss, the first in 26 years, is unquestionably a tough pill to swallow and calls for a clear, open, and objective diagnostic. My
tendency is to focus on the actions we most directly control and as such I’ll lead off with a high level review of operating results and
environment before getting to our investment and capital story which, this year, takes on unprecedented importance.
Writing this time last year, I summarized a prospective view of the auto insurance rate environment as becoming more “normal.” A view formed
after observing, and participating in, the prior year and a half of widespread rate reductions and the emergence of an increasing rate need to
match inflation in claims cost.
The year started off essentially true to that script. By June the nation was focused on many issues, gas prices being high on the list for most.
The implication for our business was a sudden and dramatic reduction in claims frequency. While the change in consumer behavior, which led
to fewer miles driven, fewer exposures, and fewer accidents, was a societal positive, it added a level of complexity to those who must price for
future conditions, with little precedent for guidance.
LOGO
Falling frequency and explanatory theories have been a topic in these pages and for many industry commentators throughout the current
decade, but the sudden turn in 2008 was an entirely different event. The graph makes the point better than my words.
By later in the year, gas prices were less than half their peaks and one might assume with perfect elasticity of demand all would be as it once
was. But, the country was now in an economic tailspin and, at a minimum, consumer uncertainty prevailed. Consumer behavior did not show
perfect elasticity and the return to frequency levels of even the first quarter was dampened.
Modeling certain response variables important to us against external data, such as unemployment rates, is critical, but challenging statistically.
Rates of uninsured drivers, changes in valuation of vehicles and parts, fleet aging dynamics, bad debt propensity, medical treatment patterns,
and the like are all subject to change in the current environment. Our models, while interesting, will never substitute for our ability to observe
and respond quickly. Our internal response is to assume change is at an all-time high, be nimble in responding, reduce the time to implement
rate change, and assume that with any change we may need to iterate quickly to match the environment.
PROFIT
Our 94.6 combined ratio for the year is testament to our responsiveness and respect for the conditions. The result is well in-line with our target
of a 96, and needs no qualifying statements regarding prior year development or storm adjustments. 42 of our established 50 states, which
includes the District of Columbia, were profitable for the year as were 8 of our largest 10 states, including New York auto, which was a definite
concern in 2007. Duplicating this profit margin next year will be very pleasing, but will take incredible vigilance. In my view, that’s Progressive
at its best.
I distinguish established states to make special mention of our entry into Massachusetts, which occurred on May 1st. Progressive is now
available in every state of the nation. Additional commentary on Massachusetts is included in the Operations Summary.
GROWTH
Growth, by our standards, has been stalled for some time. Measured by premiums written that statement is undeniable; our 1, 3, and 5 year
written premium growth has been (1)%, (1)%, and 3%, respectively. Corresponding industry growth has been less than 1% for the three year
period, 1% for five, and an estimated .5% for the past year. As noted earlier a prolonged period of negative price adjustments is part of the
explanation. In 2008 we saw our average auto premiums on our new Agency business applications increase slightly over the prior year for the
first time in 2 years, while the similar measure in our Direct business still lags the prior year by 6%.
1
A healthier measure and our preferred one is the number of customers served. Unfortunately there is no consistently reliable comparative
measure for the industry. Our results here are considerably more encouraging with continuous increases in numbers of policies in force. We
ended the year up 3%, which translates to 350,000 additional policies spread across our product offerings. A closer look will show these
additions have come in our Direct auto offering, which has been and continues to be a referendum on changing consumer shopping behavior.
Our 9% growth in policies, and 4% increase in written premiums, coupled with attractive improvements in expected customer tenure, are top
echelon results in this environment and forecast to me even better days ahead.
Our industry leading special lines group, serving motorcyclists, motor home and small boat owners, also gained a disproportionate share of
our new customers in 2008. Some of these products represent more discretionary consumer spending and, in the near term, we may struggle to
see significant market growth in units.
Similarly our Commercial Auto business group turned in a very respectable year, but ended the year with about the same number of policies as
it started the year. The more recent trends in growth and retention reflect the depressed outlook for contractors and tradesmen.
Our biggest challenge continues to be growing our agent business. While increasing our acceptance for agents more preferred and commercial
customers, we have lost some momentum in our traditional strength niche for agents—nonstandard auto. Agents are critical to our success
and our focus is, as it should be, on providing products that continuously allow them to “win” with Progressive. The Operations Summary in
this report will provide more details on specifics of new product and service developments for agents. Our goal is a constant and always worth
reinforcing—To grow as quickly as possible, constrained only by our profitability objective and ability to provide high-quality customer
service. That said, we must aggressively meet all competitive challenges through increased segmentation and innovation.
INVESTMENT AND CAPITAL

A pretax underwriting income of some $735 million was, with the above qualifications, an acceptable result and highlights the quality of
earnings we are capable of even in times when more draconian changes may be inflicted on other parts of the economy. This very premise is
the basis for our long-standing investment and capital management policy to maintain a liquid, diversified, and high-quality investment
portfolio. In short, our primary investment goal is to ensure we never constrain our ability to write as much insurance as we can. 2008 has
exposed us to market conditions that require us to do some additional soul searching on our investment philosophy. Our intent remains
unchanged. However our accepted views of liquidity, quality, and diversification have all been severely challenged.
The accounting for invested assets in 2008 was, for me, an academic version of water torture. Assessments of impairment done in one quarter
may require further impairment in the next. Reliable market pricing, in times of high volatility, added a new level of challenge and diligence. We
have handled our accounting obligations with the openness and transparency we believe characterizes Progressive. Many years ago a
colleague said, “Embarrassment is just a timing difference,” an expression for which I and others maintain great affinity, and believe reflects in
all our disclosures.
Our monthly reporting made our capital position consistently available, however balance sheet versus income statement presentation
depended on the timing of impairment assessments. Experience gives rise to knowledge and in this case we believe we can provide additional
benefit to readers by adding comprehensive income and derived comprehensive income per share to our monthly disclosure. Without
reducing the importance of net income, it should provide our owners an additional, and at times more consistent, “all-in” economic data point.
During the year we recognized net realized losses, including other-than-temporary impairment losses on the portfolio, of some $1.4 billion (I
had trouble typing that), or about 10% of invested assets, all culminating in a net loss of $70 million for the year.
So, what do we know now? And, what can we take away from this experience? This may well be an unrepeated event, but the lessons for many
should be invaluable and the tuition has been paid.
We have codified lessons learned based on what we thought were our intents and expected outcomes versus what we now know was actually
possible. For example I reported last year that our direct exposure to sub-prime related instruments was small. However we also had exposure
to the largest banks and financial institutions that had such risk. It is clearer to us now that our indirect risk was far greater than the direct risk
we avoided, and yet we fell short in anticipating the impact in the same way we normally expect of ourselves.
2
Similarly, we allowed our concentration guidelines to permit us to favor Government Sponsored Entities, such as Fannie Mae and Freddie Mac,
operating under failed expectations of just what Government Sponsorship would mean. Detailing the specifics is perhaps less important than
the recognition that, regardless of the environment, there are opportunities to improve what we do. The extremes of outcomes that were far
beyond those seen or imagined in the economy forced us to adopt a mantra of “Imagine the Unimaginable.” Only then could we break with
thinking constrained by norms that no longer applied. Breaking with thinking that defines the norm is, in large part, what characterizes
Progressive and has been the spirit that has given rise to innovations such as concierge claims service, comparative rating, pet injury
coverage, and usage-based insurance. So, for our 2008 report, it seemed apropos for the art to reflect the notion of “Imagine the
Unimaginable.”
The investment results and market valuations clearly eroded our capital position, raising reasonable questions about the need for replacement
capital. I used the third quarter letter accompanying the 10-Q to provide insight into how we think about capital and, in effect, constructed our
capital position using a regulatory required layer, extreme contingency reserve layer, and an excess layer. While the construct was for
illustrative purposes, it is in fact an excellent model of our capital husbandry.
While the loss of capital was clear, for some it was less clear that the loss was contained at the excess layer, a layer largely held at the holding
company and outside the insurance subsidiaries. Dividends are made out of and, as necessary, into the insurance subsidiaries to ensure they
meet appropriate capital requirements. We ended the year in a similar position to my summary comments in the third quarter letter—several
hundred million dollars above the sum of the regulatory and extreme contingency layer. While some return in investment valuations would be
welcome, we are not depending on any in the short term. We have taken significant steps to restructure the portfolio and, more specifically,
the deployment of any new money to considerably lower risk investments for now. While yields will match the risk, our ability to generate
operating income is the protected asset and drives our prioritization. The prioritization is accentuated when one considers that our operating
cash flow has now been positive for 100 consecutive quarters.
AN UPDATE
I said in my opening that there were some positive and encouraging Wows! And if you’re ready for a change of pace I would like to share a
few.
In closing this letter last year I said, “Our opportunities are clear and exciting and include…” and listed five bullet points. I repeat them here as
my sub-headings along with some illustrative examples of meaningful progress made during the year. A broad-based agenda such as this is
never done, but I think you will see we had some very real progress.
Building a stronger brand and communicating it well

We let “Flo” loose on consumers in 2008 as part of our television advertising, in a campaign that by all accounts has trumped our prior efforts.
I report that much less based upon feelings and anecdotes and more from the measurement analytics that support all our actions.
I reported last year that we challenged ourselves to produce advertising that has thematic continuity, makes a real breakthrough in interest,
and has a strong call to action. The consumer-familiar setting of a “superstore” provides a constancy of identity and foundation for delivery of
our many messages. While auto insurance doesn’t come in a box or service in a can, building on the store-based metaphor provides tangibility
over mystery, enhances approachability, and invites trial for many consumers. Less analytical assessments can be derived by consumer
requests for their policy to in fact be delivered in a box – a request we were initially not well equipped to handle.
A key objective is to have our efforts in marketing and brand-building match our assessed competency in other technical skills – and sooner is
always better. Adding the experience that Larry Bloomenkranz brings as our Chief Marketing Officer during the year is just one step of many
that we have taken to make this happen.
Advertising, however, is but a part of our marketing and branding efforts. Our mid-year Investor Relations meeting used multiple consumer
profiles to highlight internal marketing constructs that segment consumer behaviors. Simply stated, “Know your Target – Act with Purpose,”
while not a breakthrough in marketing thought process, it is a very powerful notion when implemented well in our product and service
organizations.
3
Early in 2008 we announced we would be the title sponsor for the Automotive X PRIZE, now known as the Progressive Automotive X PRIZE.
This worldwide competition, with a prize purse of $10 million, is designed to inspire a new generation of viable, super fuel-efficient vehicles
that are affordable and meet market needs for capability, safety, and performance.
Following in the footsteps of the British Government’s Longitude prize in 1714 and the Orteig prize won by Charles Lindbergh in 1927, the X
PRIZE Foundation has already changed the world’s views of what is possible in space flight, and has active plans to do similar things in
genetics. There can be little question that our fossil fuel dependence is an issue that needs meaningful leadership. Employees and I are proud
to associate the Progressive brand, with a relevant and bold effort to help move innovations forward even faster on this challenge – we think it
fits perfectly.
We measure effectiveness of all such actions in economic terms as best we can and we will have little to report until 2010, the year the
contestants will offer their solutions. If media interest and consumer response to date are indicative, these will be dollars well spent on
something that also feels very right. For updates on this effort and worldwide entries see progressiveautoxprize.org.
Building on our retention gains and providing continuity of coverage throughout a customer’s lifetime
Retention of customers has been a significant focus for some years now, and at times the slow speed of change in certain measures has posed
doubt in our belief that we could effect more dramatic change. 2008 confirmed our confidence in the magnitude of change that is possible.
In a moderately increasing rate climate, we continued to see an increase in customer retention with both our Agency and Direct auto policy life
expectancy measures increasing 11%. Improvement in our special lines products was numerically less at around 1% but, as a group, they
remain our longest-tenured customers. Commercial customer measures ended the year slightly lower than where they started, after some initial
gains, reflecting the somewhat shocking numbers of trucks being taken out of service and the general economic pull back.
Good luck or hard work? Either way when the sensitivity of one month of policy life extension is easily valued at over one billion dollars of
lifetime premium, the result is bankable. The answer, without doubt, is in fact hard work over a prolonged period of time.
We have used this report and other forums to highlight our intensity into what we have called friendly fire incidents, or rough product edges,
along with our actions to address them. We have continuously embraced the concepts and analytics of total quality management, and of more
recent times adopted, and now have become somewhat recognized for, the depth of application of the Net Promoter® Score. What has really
happened is that we have matured from tactically addressing just retention measures or customer experience improvements on multiple fronts
into a more deliberate customer care culture that is embraced, managed, and advanced at every level of the organization by those who
correctly see themselves as brand ambassadors and disciples.
My words likely don’t do justice to the degree of change this represents and, while not an objective, it is of some note to see favorable
positioning or improvement in external measures of customer satisfaction. To be fair, our self assessment is that we still have many
opportunities to further improve customer experiences and permanently eliminate all too frequent lapses in quality. I suggest with some
satisfaction and confidence that our momentum here is contagious and our objective of making Progressive what we call a “destination” auto
insurer is very real.
Maintaining a focus on operating at a lower cost than competitors, while providing remarkable service
Creating expense advantages that are sustainable generally require doing things differently, not just better. In 2008, our Claims and IT
organizations made substantial progress on redesigning how they do what they do while operating at lower costs.
For many years we have been able to report each year as “our best ever” in claims quality. This year is no different. The preservation of claims
quality is a must, along with the equally encouraging progress on customer satisfaction. However, skills and tasks can be rearranged to
optimize even a well-performing process and, while our guiding principles remain unchanged, we see opportunities. Our concierge centers
have provided invaluable insights and surfaced opportunities to apply those insights more broadly, and as such are central to the redesigned
process architecture. Proof will be in our future loss adjustment expenses.
4
Reduced claims frequency, while at first a welcome sign, poses significant challenges in maintaining the balance between appropriately sizing
the claims organization, and preserving the talent and experience required to support growth and any return to prior frequency levels. Claims
management has met that challenge with creative solutions that are economically satisfactory, consistent with our workplace culture
objectives, and advance the redesign process even faster. The supply and demand of claims and claims response will likely remain a
significant management challenge throughout 2009.
Our dependence on, and self-assessed strength in, technology has been reported on frequently by me and remains true. The challenge
imposed and actively accepted in 2008 within our technology organization is the age-old desire to do more with current resource levels, while
doing the right things well: “Smart choices, well executed.”
In a vibrant business culture, demand for technology resources may well outstrip supply. In 2008 our business and technology groups have
reassessed just about every aspect of what we do and how we do it – to make the “smart choices, well executed” by line more operationally
reflect business priority and intensity. I have every expectation these efforts will result in increased leverage of technology costs and greater
accountability to market priorities.
Creating more responsive product and service offerings for the consumers we currently do not reach
Progressive Home Advantage, our offering which combines a Progressive auto policy with a homeowner’s or renter’s policy underwritten by
Homesite Insurance, expanded consistent with our expectations in 2008 and now serves a growing number of our customers, many of whom
have added the offering to their existing auto policy. We provide this important option to customers in 46 states for Direct buyers and in 33
states for Agency customers. The objective is simple: reach new customers who we might not have been reaching and retain them and existing
customers longer. So far, so good, and in 2009 we will make it available through additional agents.
We have placed additional emphasis on understanding the needs of our multi-policy households, especially those with special lines products
in addition to their auto. We clearly have more opportunity and have set challenging internal goals for multi-policy penetration in 2009 based
on achieved results to date.
Our usage-based insurance offering, now called MyRatesm , expanded within and across states in 2008. Notwithstanding the continuous
challenges posed by such a new concept, the opportunity to reach a set of customers that have significantly different usage patterns than
traditionally underwritten products would recognize is clear, and welcomed. Consumer acceptance is good. For us MyRate is slowly moving
from feeling like a new and different product to becoming a very viable consumer option that speaks to a specific consumer segment.
Continuing to be innovative in all we do

The depth of this notion is not easily captured by a single example, but one may serve well to amplify the thought and share a recent product
introduction.
Price is a clear factor in a consumer’s purchasing decision and many efforts, including our own, have focused on providing consumers with
increased access to price comparisons between providers. This year we introduced a new concept we call Name Your Price®, which invites the
consumer to participate in the quoting process by telling us just how much they would like to spend on car insurance.
We start the quoting “conversation” in a place determined by the customer. Then we use combinations of coverages, limits, and deductibles
to meet or approximate their needs. Involving the consumer in this way is both respectful of their preferences and involves them more actively
in the process.
Early results are very encouraging, but even more important is the opportunity to use technology to engage the consumer in a meaningful and
different way ensuring they get what they want, at a price they can manage.
5
LOOKING FORWARD
We remain continuously motivated by our aspiration of becoming Consumers’ #1 Choice for Auto Insurance and, while our numerical
progress in 2008 did not match our aspirations, some of our actions set an interesting stage for the future.
Nothing we have achieved has been without the efforts of so many and, our single most important initiative especially in current times, is
ensuring Progressive is a Great Place to Work. Creating an environment where our people enjoy working hard, are motivated to do their best,
can grow constantly, and that others want to join is a never-ending challenge. Our people and culture are what makes us special.
Equally important is our appreciation for the customers we are privileged to serve, the agents and brokers who choose to represent us, and
shareholders who support what we are doing.
/s/ Glenn M. Renwick

Glenn M. Renwick

PROGRESSIVE CORP/OH/ 10-K (Annual Reports) 2009-02-25

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Commission file number 1-9518

THE PROGRESSIVE CORPORATION

6300 Wilson Mills Road, Mayfield Village, Ohio 44143

Securities registered pursuant to Section 12(b) of the Act:

Title of e ach class Nam e of e ach e xch an ge on wh ich re giste re d

Securities registered pursuant to Section 12(g) of the Act:

DOCUMENTS INCORPORATED BY REFERENCE

(b) Financial Information About Segments

(c) Narrative Description of Business

Other Indemnity Businesses

State Insurance Licenses

Statutory Accounting Principles

C ate gory GAAP Accou n tin g S AP Accoun tin g

Liability for Property-Casualty Losses and Loss Adjustment Expenses

RECONCILIATION OF NET RESERVES FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

(m illion s) 2008 2007 2006

ANALYSIS OF LOSS AND LOSS ADJUSTMENT EXPENSES DEVELOPMENT

LIABILITY FOR UNPAID LOSSES

RE-ESTIMATED LIABILITY FOR

(d) Financial Information About Geographic Areas.

(e) Available Information.

ITEM 1A. RISK FACTORS

II. Investing Risks

III. Financing Risks

ITEM 1B. UNRESOLVED STAFF COMMENTS

ITEM 3. LEGAL PROCEEDINGS

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

EXECUTIVE OFFICERS OF THE REGISTRANT

(d) Securities Authorized for Issuance Under Equity Compensation Plans

EQUITY COMPENSATION PLAN INFORMATION

W e ighte d C u m u lative Nu m be r of S e cu ritie s

(e) Performance Graph

(f) Recent Sales of Unregistered Securities

(g) Share Repurchases

ISSUER PURCHASES OF EQUITY SECURITIES

Total Num be r of S h are s

ITEM 6. SELECTED FINANCIAL DATA

For th e ye ars e n de d De ce m be r 31,

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9A. CONTROLS AND PROCEDURES

ITEM 9B. OTHER INFORMATION

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Nam e Age O ffice s He ld an d Last Five Ye ars’ Busin e ss Expe rie n ce

ITEM 11. EXECUTIVE COMPENSATION

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(2) Listing of Financial Statement Schedules

(a)(3) Listing of Exhibits

(c) Financial Statement Schedules

SCHEDULE I — SUMMARY OF INVESTMENTS – OTHER THAN INVESTMENTS IN RELATED PARTIES

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT

See notes to condensed financial statements.

SCHEDULE II – CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

See notes to condensed financial statements.

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

CASH FLOWS FROM INVESTING ACTIVITIES:

CASH FLOWS FROM FINANCING ACTIVITIES:

See notes to condensed financial statements.

SCHEDULE II — CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

(m illion s) 2008 2007 2006

SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION

Assum e d Pe rce n tage