Q2 2025 Earnings Call Transcript

Good morning and thank you for joining us today for Progressive's Second Quarter Investor Event. I am Doug Constantine, Director of Investor Relations and I will be moderator for today's event. The company will not make detailed comments related to its results in addition to those provided in its annual report on Form 10-K, quarterly reports on Form 10-Q and the letter to shareholders, which have been posted to the company's website. This quarter includes a presentation on a specific portion of our business, followed by a question-and-answer session with members of our leadership team.

Introductory comments in the presentation were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 90 minutes scheduled for this event for live questions and answers with leaders featured in our recorded remarks as well as other members of our management team. As always, discussions in this event may include forward-looking statements. These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today's event.

Additional information concerning those risks and uncertainties is available in our annual report on Form 10-K for the year ended December 31, 2024, as supplemented by our 10-Q reports for the first and second quarters of 2025, where you will find discussions of the risk factors affecting our businesses, safe harbor statements related to forward-looking statements and other discussions of the challenges we face. These documents can be found via the Investor Relations section of our website at investors.progressive.com. To begin today, I'm pleased to introduce our Personal Lines President, Pat Callahan, who will kick us off with some introductory comments.

Pat?

Good morning and thank you for joining us today. Through the second quarter, 2025 continues to be one of our best years on record by all objective measures. We delivered strong profitability while simultaneously growing at an incredible pace, adding over $5 billion in premiums written and nearly 2.4 million additional PIFs during the first half of 2025 compared to the first half of last year. We've previously said it's easy to grow an insurance company if you're not focused on underwriting profit and conversely, relatively easy to generate profit in insurance if you're not looking to grow.

But simultaneously doing both, while operating in the highly competitive U.S. P&C marketplace requires the rare combination of strategic focus and relentless execution that we consider key sources of Progressive's competitive advantage. Full statutory industry results released in June show that Progressive gained more than 1.5 points in personal auto market share in 2024 while outperforming the industry combined ratio by more than 7 points. Our 2024 market share increase was the largest share gain of any carrier in the past 15 years.

This rare combination of profitable market share growth isn't an isolated event for Progressive. Over the past 15 years, we've increased our auto premium almost fivefold, while simultaneously running close to 9-point wider underwriting profit margins. Our performance is the direct result of executing against our 4 strategic pillars. People and culture, product breadth, brand and competitive prices.

Today, we'll focus on competitive prices and provide you with some insights into how our ability to predict and price to future loss costs and to rapidly deploy products and pricing to match our premiums to our costs remain key ingredients of our continued success. The compounded effect of doing this with each successive product model has enabled us to continue to make great progress towards achieving our vision of becoming the #1 destination for consumers, agents and business owners for insurance and other financial needs. Building on our exceptional underwriting profit performance, we continue to invest to drive continued growth.

Despite seeing greater competition now than we did at the beginning of the year, through the second quarter, we continued to see strong demand for our personal auto products across both of our distribution channels. The independent agent channel is a great barometer for the competitive environment, where available coverage options across carriers are presented via comparative raters, which provide agents and their client's real-time comparisons of how our products compare to those offered by other carriers. Every indication is that our auto products have continued to outperform on a relative basis as evidenced by strong year-to-date double-digit growth in new applications, premiums written and policies in force.

On the direct side, our marketing engine remains highly effective, generating high-quality prospects at near-record levels and our conversion rates indicate that despite the increasing marketing spend, our prices are still highly competitive and provide consumers a good value relative to other in-market options. Year-to-date, we have spent $2.5 billion on marketing, an increase of about $900 million compared to this time last year. And as our volume denominator grows, achieving year-over-year new application growth becomes more challenging. But so far, we have continued to leverage our scale in identifying new opportunities to refine where and how we invest our marketing spend to drive profitable growth.

Similar to Personal Lines, we continue to rapidly grow market share in our Commercial Lines business while consistently beating industry combined ratios by 8, 10 and as much as 20 points over the last 20 years. This consistent profitability is particularly impressive when looking at how U.S. commercial auto continues to struggle with profitability, producing its 14th consecutive unprofitable calendar year in 2024. Our success can be attributed in part to the intense focus on commercial auto as a core line of business in our Commercial Lines offering. This auto focus, in conjunction with introducing the segmentation of commercial auto into business market targets more than 10 years ago, has enabled us to capitalize on meaningful and actionable differences between resulting vehicle types and usage that we can operationalize across all aspects of the business.

This granular focus has allowed us to quickly develop segment-level insights and execute proactive rate and underwriting actions at the BMT level to deliver strong division level performance, as we did late last year when we adjusted rates and underwriting across BMTs to drive written premium growth across all our BMTs other than for-hire transportation. We're now extending those capabilities to our expansion product lines like the business owner policy product. To support long-term positive contributions from these newer businesses, we leverage established pricing and product delivery capabilities to ensure we have the necessary monitoring and insights in addition to leading capacity and the delivery agility to bring rapid rate and underwriting adjustments to market.

Leveraging these proven capabilities should help our expansion commercial businesses deliver the profitable growth we expect from all of our underwriting businesses. A significant contributor to delivering our continued profitable growth is the ability to quickly and decisively respond to changes in loss costs to ensure we can remain open for business when inflationary pressures create hard markets and elevated shopping levels. This is no small feat, especially given the lack of historical precedent for some of the drivers of recent loss cost increases. Fast forward to today and we're similarly working to model first, second and third order effects of global tariffs and potential supply chain disruptions to determine the appropriate future rate levels for these emerging macroeconomic events.

Our pricing teams are responsible for translating highly complex and dynamic internal and external data into timely rate level recommendations. Each of our product teams are supported by a group of these talented individuals who leverage complex actuarial methods to understand and trend our future costs towards our goal of collecting the right premium to cover both the costs we'll incur and our target profit margin. Today, we'll be diving into the details of our personal and commercial lines pricing theory and practices. To guide us through this, we have 2 senior pricing leaders with us.

First, Brad Granger, who has been our national auto pricing leader for the past 17 years and who will be celebrating his 25th Progressive anniversary later this month, will discuss some of the technical theories behind our pricing methodology. Following Brad, Jen Kubit, who has been with Progressive for 21 years and recently took on the leadership of our Commercial Lines pricing organization, will explain how these theories are applied in practice at Progressive. Once again, thank you for joining us today. I'll now turn it over to Brad.

Brad?

Thanks, Pat and thank you, everyone, for joining this morning. What is our product? A property and casualty insurance companies such as Progressive doesn't actually manufacture a physical product. Our product is not tangible.

Instead, it is a transfer of risk from insured to insurer, exchanging the small probability of an adverse financial event in exchange for the payment of a premium. That transfer of risk is outlined in our policy contract. And that transfer of risk is both dependent on when accidents occur or the accident date and time bound within our short-term contract lengths of 6 or 12 months. Car accidents are not corn flakes as opposed to a tangible product like corn flakes, where costs are largely known before the product is priced and sold, Progressive doesn't know for sure what our costs are until long after our product is priced and sold.

That is precisely the transfer of risk from insured to insurer I just described only now from the perspective of the insurer, that risk is now ours. And as we will discuss in a few minutes, we do many things to mitigate that risk within both our pricing science and our operationalization of getting the right rate to market quickly. Pricing to expected cost. First, when we talk about pricing for costs, we were referring to all parts of our premium dollar, losses, loss adjustment expenses, or LAE, general expenses and profit.

According to the Casualty Actuarial Society statement of principles on ratemaking, " a rate is reasonable and not excessive, inadequate or unfairly discriminatory. If it is an actuarially sound estimate of the expected value of all future costs associated with an individual risk transfer." A few things to highlight there. First, it references expected value of future costs where actual outcomes could be lower or higher. Second, it is always forward-looking or prospective as it is an estimate of future costs.

Third, today's presentation will focus primarily on not excessive and not inadequate as opposed to not unfairly discriminatory, which is largely in the domain of our product development departments. This is analogous to the field of economics and the distinction between macroeconomics and the focus on changes in whole economies and aggregate variables and microeconomics and the focus on changes in individual firms and consumers. We will focus today on macro level pricing as opposed to the individual relative risk rating and segmentation of micro level pricing. And in addition to our approach being aligned with actuarial principles, it is also well aligned with state regulation as nearly all states legally require that rates are not excessive, not inadequate and not unfairly discriminatory.

And it also fits quite well within Progressive's vision to be consumers' #1 choice via competitive rates. But to do so by growing profitably and adhering to our core value of profit. The fundamental pricing questions. There are two questions that completely underlie our approach. #1, if we don't do anything to current rates, what loss plus LAE ratio should we expect in the upcoming rate revision for the policies we are about to write.

And #2, what do we need to do to current rates in order to hit our combined ratio target in the upcoming rate revision for policies we are about to write. We refer to these as the fundamental pricing questions. And in the coming slides, we will build the fundamental pricing equation to answer these questions. Actuaries develop predictions that minimize bias and variance.

An enormous competitive advantage that Progressive has is the quality, granularity and quick availability of data. Our growth and scale have only deepened that advantage. But if you don't think you have a blind spot, then you have a blind spot. And with all of this quality data, if we are not careful, we could slice the cake and slice the cake and slice the cake until all we have are crumbs.

This is where we, in our pricing organizations, come in. Actuaries are experts in matching rate to risk, balancing responsiveness and stability and maximizing accuracy and precision. And as we will see in the coming slides, as we try to price this accident year promise, our data is trying to fool us. There is no single perfect piece of data.

Our work centers around correcting for bias or for accuracy and spread and variance or precision and finding signal through noise. And bias, as used here refers to statistical bias. From Wikipedia, "in the field of statistics, bias is a systematic tendency in which the methods used to gather data and estimate a sample statistic present an inaccurate, skewed or distorted biased depiction of reality". Every month, Progressive releases financial information publicly describing our underwriting performance by line of business.

To align with generally accepted accounting principles, this is predominantly a calendar year or month view that includes incurred activity on all losses and LAE regardless of date of occurrence. For the purposes of ratemaking, however, we are attempting to price for the accident year, that is ensuring that we have the correct rates at the time the accidents occur which I'll explain further in the next few slides. Calendar year incurred losses are a combination of paid losses and change in reserves. They can also be subdivided to show contribution to that calendar year of current accident year versus all prior accident years.

We will now use a historical example derived from a Progressive personal auto state comprehensive coverage to demonstrate how we can effectively answer the fundamental pricing questions. All amounts are in thousands of dollars. The first piece of data we readily have is trailing 12 calendar year incurred losses of $43.24 million. As we just stated, calendar year incurred losses can also be subdivided to show contribution of current accident year versus all prior accident years, as can be seen here as we see the same paid loss plus change in reserves pattern for both the current accident year and all prior accident years.

We will now use our simple example to fill in values for each element of the formulas. And in this example, when we isolate the contribution of this accident year, to the current calendar year incurred losses of $43.24 million, we see that the current accident year incurred losses are $43.56 million. The other element of calendar year incurred losses is the contribution of prior accident years, also known as prior accident year runoff, which in this case, is negative $327,000. The $43.56 million current accident year losses is what we need to start to answer the fundamental pricing questions. Unbiased ultimate accident year losses equal accident year incurred losses times loss development factor.

Loss reservings' goal is to set financial reserves to be adequate with minimal variation from date of loss until final settlement. We examine the development over time of historical accident year losses as claims are reported and settled across the columns of the loss development triangle, as can be seen in the upper right. That is known as a loss development factor. In this case, the reserves set by claims and loss reserving have historically been accurate.

In our example, that loss development factor is then slightly less than 1, at 0.99. At this point, we can also bring in another piece of data that we readily have, trailing 12 calendar year earned premium of $61.14 million. Loss adjustment expenses are correlated with losses. Loss adjustment expenses can be divided into Defense and Cost Containment or DCC, which is defense, litigation and medical cost containment expenses, whether internal costs or external fees and Adjusting and Other or A&O, which is adjusting and other overhead expenses, whether internal costs or external fees. Both can change in the short term and long term depending on a number of factors, including attorney representation rate, statutory and regulatory changes, changes in efficiency in our claims organization among other possible causes but in general, tend to move with losses.

In this example, we have selected LAE to be 12% of losses. A portion of our costs are mean reverting. Forecasting elements of the fundamental pricing equation deals with 2 distinct forms of time series. First, time series with stationarity, the graph on the left.

This series tends to revert to a historical mean and requires a longer experience period to provide an effective future forecast. Weather is a prime example of where this approach is warranted. Care must be taken to decide whether such historical mean needs to be slightly adjusted going forward due to environmental changes in our future pricing period. Time series without stationarity, the graph on the right.

That series does not revert to a historical mean. It is dominated by trend and seasonality. We will discuss this further when we examine frequency trend, severity trend and premium trend. In this example, the last year contained $14 million of wind, flood, hail losses, well above our long-term expected average.

Therefore, restating the long-term expectation implies a weather factor of 0.926. For Commercial Lines, an additional area where we must consider this paradigm of reversion to the mean is in treatment of large losses. As with weather, care must be taken to decide whether such historical mean needs to be slightly adjusted going forward due to environmental changes in our future pricing period. Frequency and severity of losses change over time. What changes each over time?

Essentially, this is time as a segmentation variable. It helps to separate the multiplicative components of losses as the drivers of each can be different. Frequency is the probability of having a claim, severity is the dollar amount of the claim itself. Factors that can affect frequency include vehicle technology, safety laws, product mix, for example deductibles or tier, statements, new business growth, retention, weather, seasonality, underwriting and billing.

Apart from the magnitude of the trend itself, the number of months that we need to trend is important, too. That is a function of time to price, file, get approval and elevate, policy term and rate revision length. Remember the bull's-eye slide from earlier? The precision of our estimates declines, meaning we have a greater spread, the further into the future we have to estimate.

That is a particular importance in commercial auto as they have a preponderance of annual policies which increases the number of months into the future we must trend. In our example, we have estimated frequency trend to be plus 1% annually. That needs to be applied for approximately 16 months from the midpoint of the historic period to the future average accident date of our prospective pricing period. The faster we can analyze our data, the shorter we can make our policy terms and the more frequently we can elevate rate revisions, the fewer months we need to trend and the more we can reduce spread of outcomes and increase precision in our forecasts.

The process is similar for severity. Factors that can affect severity include vehicle technology, safety laws, product mix, for example, limits, state mix, medical inflation, used car values, car part inflation, body shop labor rates, weather, seasonality, claims staffing. In our example, we have estimated severity trend to be plus 7% annually. As with frequency trend, that needs to be applied for approximately 16 months from the midpoint of the historic period to the future average accident date of our prospective pricing period.

The further into the future, we have to estimate the wider the spread of future possible outcomes. Progressive changes rates frequently. Remember, the fundamental pricing equation is working towards answering the fundamental pricing question of determining what we need to do to current rates. Progressive changes rates a lot.

Consequently, any recent historical period of earned premium will include premium written at varying rate levels. This phenomenon is further exacerbated by the presence of varying policy terms, 6 months and 12 months. So we need to adjust this historical premium entirely to today's current rate level. In our example, we have elevated 2 rate decreases in the last year.

That means our current rate level factor is 0.958. Controlling for the effect of product mix shifts on loss trend. A frequency or severity trend that is caused by a product mix shift will not necessarily mean our rate adequacy position, as seen by our fundamental pricing equation will shift. For example, Progressive has been shifting to Robinsons for several years. In isolation, what would we expect to happen to frequency and severity of losses?

Frequency would decrease significantly due to more lower-risk drivers in our book. Severity would increase for liability coverages due to higher purchased limits of liability. Overall, losses per exposure would decrease as the frequency decline would overwhelm the severity increase. But we would also be collecting less premium per exposure as we charge less for Robinsons per exposure.

We control for the effect of product mix shifts on our frequency and severity via premium trend which measures changes in average earned premium at current rate level over time. We must put all premium at a common rate level as only looking at changes in average earned premium over time would be confounded by Progressive's frequent rate changes. The graphs of bodily injury earned premium on this slide illustrate this. While Progressive's average earned premium per exposure has increased due to our rate increases in recent years, the average earned premium per exposure when controlling for that, i.e., at current rate level has declined.

The net effect of the rate increases and product mix shift is still to have increasing bodily injury average earned premium per exposure. And therefore, a product mix shift will not necessarily mean our rate adequacy position would shift. It would only change if we are shifting into a part of our book that has a different relative level of profitability. If we are shifting into a part of our book that is less profitable, the rate need, as indicated by the fundamental pricing equation would go up as frequency/severity would rise more than premium, and we would need more rate.

If we are shifting into a part of our book that is more profitable, the rate need, as indicated by the fundamental pricing equation would go down as frequency/severity would rise less than premium and we would need less rate. In our example here, in contrast to the graphs of Progressive bodily injury, annual premium trend is actually positive at plus 5%. And like frequency and severity trend, that needs to be applied for approximately 16 months from the midpoint of the historic period to the future average accident date of our prospective pricing period. What target loss plus LAE ratio would meet our underwriting profit target?

First, we determine a forward-looking estimate of expense ratio. Second, we work backwards to determine our target loss ratio, which is equal to 1, minus the expense ratio minus profit. In our example, expense ratio is 17.7% of premium, together with our profit target of 4%, our budgetary loss plus LAE ratio is 78.3%. Some elements are correlated.

While we have detailed the elements of the fundamental pricing equation individually, we do not assume the correlations do not exist between elements. Some examples are losses and LAE, premium trend or product mix and frequency trend, premium trend or product mix and severity trend, LAE and severity trend, loss development factors and severity trend, premium trend or product mix and expenses via the budgetary loss and loss adjustment expense ratio. Understanding these patterns can inform our predictions of each element and improve accuracy and precision of the fundamental pricing equation. Balancing responsiveness with stability.

Remember the bull's-eye diagram from earlier, we always seek truth but observe data which is truth plus random noise. Credibility, also known as the crown jewel of casualty actuarial science helps us ultimately deliver the best minimum variance unbiased estimate or as close to the bull's-eye pattern in the lower right-hand corner as possible and allows us to slice the cake optimally to balance responsiveness and stability and achieve forecasts that minimize both bias and variance. We want to emphasize recent data such that random noise is kept to an acceptable level. And we want to emphasize that recent data because it is closest to what we can expect in our future pricing period in terms of our book of business and the external environment.

But there can be a trade-off there as that data can be thinner and noisier and we need to make adjustments to account for that noise. Credibility is a number between and including 0 and 1 that we use to weigh our data. The higher credibility is the more weight we attach to our data in the fundamental pricing equation. A sample of experience reaches full credibility, so credibility equals 1. If we have enough claims that 90% of the time our experience is within plus or minus 5% of the true value.

That standard for full credibility for each coverage is determined through complex actuarial formulas and increases as the variability of experience increases. In our example, the standard for full credibility is 4,559 claims. We have over 27,000 claims in our experience period. So we have full credibility and credibility equals 1 or 100%.

Our growth and scale has significantly enhanced our credibility and our ability to best react to changes in our environment. And in general, for personal auto, we have achieved that full credibility with 1 year of data in the overwhelming majority of our state channel coverage combinations. We now have developed the fundamental pricing equation where we can answer the first fundamental pricing question. If we don't do anything to current rates, what loss plus LAE ratio should we expect in the upcoming rate revision for the policies we are about to write.

So that's our experience loss plus LAE ratio. We can also answer the second fundamental pricing question, what do we need to do to current rates in order to hit our combined ratio target in the upcoming rate revision for policies we are about to write. That's our experienced loss plus LAE ratio divided by our budgetary loss plus LAE ratio. And one final step is to weight our estimate with a complement via credibility.

So the experienced loss plus LAE ratio divided by the budgetary loss plus LAE ratio times credibility plus a complement of credibility times 1 minus credibility. The complement is an alternate estimate of rate need apart from the fundamental pricing equation that augments the fundamental pricing equation with an estimate of future net trend. In our example, we used a complement of credibility of plus 2.4%. The final product is what we refer to as a credibility weighted rate level indication.

Here that is plus 1.3%. This concludes the theory of pricing. As you can see, it's complex with many variables and considerations and thus many ways to go astray. This is really, really hard to do successfully.

We have been at this for decades, and combined with the availability, quality, scope and size of our data, it is really, really hard to replicate this at our scale. And to be as accurate and precise as possible when we apply this theory in practice, we have many additional considerations, which Jen Kubit will discuss in the next section. Jen?

Thank you, Brad, for explaining the theory behind the calculations to the 2 fundamental pricing questions. If we don't do anything to current rates, what loss plus LAE ratio should we expect in the upcoming rate revision for the policies we are about to write? And what do we need to do to current rates in order to hit our combined ratio target in the upcoming rate revision for policies we are about to write? So now let's discuss how we answer these questions at Progressive and how the answers influence customers' rates and future profitability.

This ratemaking process at Progressive slide was last shown in the 2021 Fourth Quarter Investor Relations call with John Curtiss and Kanik Varma. This process is utilized in all our lines of business at Progressive. The product R&D, pricing and product management teams collaborate to determine the rate need to support our operational goal, grow as fast as you can at or below a 96 combined ratio. Additional teams join these 3 to deploy the final rate changes to the marketplace.

Once deployed, a consumer's quoted premium reflects the revised rates. Let's focus in on the 3 teams that collaborate to determine our rate need. There are 2 broad areas of rate need, segment level and aggregate rate. In this presentation, Brad went in depth into the best actuarial science we use in pricing to evaluate the aggregate rate need in the future revision to hit the target of budgetary loss and LAE ratio.

Product R&D calculates the segment rate need for the relative rate need across variables used in the product design and product managers leverage these aggregate and segment level rate needs, along with their knowledge of the local market dynamics to set the pricing strategy for their respective states. They decide if the segmentation, aggregate rate level or both need to be revised. A product manager strategy ensures that we seek to not only hit rate revision targets but also our calendar year goal to grow as fast as we can at or below a 96 combined ratio. At Progressive, we believe that our ratemaking process is effective because of the knowledge at the local level combined with the advanced and accurate view of segment level and aggregate rate need.

And we strive to maximize its effectiveness by analyzing the rate need often and bringing revised rates to market quickly. In personal auto pricing, we frequently evaluate the expected loss and LAE ratio in the future revision. We complete rate level indication analyses on 51 states with each agency and direct distribution channel done individually. Also, there are 12 to 15 coverages analyzed separately.

For example, the bodily injury liability and comprehensive physical damage coverages each have their own indicated aggregate rate need because the data patterns are different, such as frequency and severity trends. These analyses are completed 3 or 4 times per year and discussed with the product manager of the specific state and channel along with their team. The numbers on this slide show that we're calculating the fundamental pricing equation roughly 4,000 times in a year. And each of those includes all the complex actuarial methodologies, analyses and selections that Brad discussed.

So that's 4,000 times our pricing teams are analyzing how losses will develop to ultimate costs. And 4,000 times we're discussing with product managers how losses will trend into the future rate revision period. In commercial auto pricing, our dataset is smaller. However, we're still analyzing the aggregate rate need quarterly and discussing with the product management teams.

We aggregate most states together to improve the credibility of our Progressive data. The largest 4 states are analyzed individually. Rate revision and calendar year combined ratio results for smaller states are monitored. Rates are revised at the state level because of insurance regulation.

And for rate revisions, we complete a rate level indication that uses state- specific data. We evaluate our aggregate rate needs separately for our 5 business market targets. Differences by BMT and how losses present and how they develop and frequency and severity trends over time, affect the estimated loss ratio in the future revision. And finally, there are 9 coverages analyzed separately in commercial auto rate level indications.

Overall, we're analyzing and discussing at least 900 fundamental pricing equations in a year. The regular cadence of these complex analyses in both personal lines and commercial lines auto is so important in understanding the aggregate rate need and being responsive to changes in the data. But it's not enough to analyze the rate need often. To truly respond to the changing data, we need to deploy rate changes to the market quickly.

This chart shows the number of rate revisions that are deployed each year over the past 5 years in our Personal Lines Auto and Commercial Lines auto products. We deploy many rate changes to market to adjust either the segment level, or aggregate rates, or both. And we have the capabilities at Progressive to increase the number of revisions deployed. For example, in 2023, both the personal lines and commercial lines auto rate revision teams responded quickly and often to increasing loss costs and loss development in our underlying data.

These rate revision capabilities are very important to our success at Progressive. Moving quickly is important because of the time needed for some states' regulatory approval of rate changes and because of the premium earnings cadence a policy written today at the new rate level will have earned premium in each month that it's in force or for the next 6 or 12 months depending on the policy term. So it takes many months for the earned premium in the denominator of our calendar year combined ratio to fully reflect the new rate level. We are confident in our pricing teams aggregate rate level recommendations using our robust data sets and we have an efficient process to deploy rate changes to the insurance market.

However, there are times we must respond to changes and intervene in our fundamental pricing equation because historical data may not be informative. Recall that car accidents are not corn flakes. We are selling a promise to pay for claims in the future policy term. For example, changes in tariffs on imports may impact the payments on claims or loss payments in the future.

Our role in the pricing teams is to answer the 2 fundamental pricing questions for the policies we are about to write in the upcoming rate revision. But we have no previous loss payment experience with the changes to tariffs. Consistent with the Casualty Actuarial Society's statement of principles on ratemaking, we answer these 2 questions with an actuarially sound estimate of the expected value of all future costs, including changes in tariffs. Calculating the expected value of the future loss payments from changes to tariffs is not straightforward because auto claims are not all the same.

Broadly speaking, we split the loss payments into claims for damaged vehicles versus injuries. And these 2 categories can be further split into similar types of costs. Starting with damaged vehicles. If it is repairable, the loss payment includes the cost of labor and parts and materials.

If the repair is more costly than the value of the vehicle less anticipated salvage recoveries, then it is declared a total loss, and the claimant has paid the value. The expected value of the future loss payments from changes to tariffs is calculated at this more granular level of data. For example, the labor parts and materials, the value of a vehicle and salvage recoveries. This is because the cost in this granular level of data are more similar.

Also, we consider the insurance coverage to the calculation of the expected value of the future loss payments from changes to tariffs. Collision and comprehensive coverage for our customer's damaged vehicle usually has a deductible for the first $500 or $1,000 but the maximum payment is unlimited. Compare this to property damage liability coverage for a claimant's damaged vehicle, it has a limit to the maximum payment. For example, $25,000 on a personal lines auto policy.

For injuries to claimants or our customers, the loss payment includes the cost of medical treatment. The loss payment may also include general damages, such as pain and suffering. Again, we analyze how the changes to tariffs may affect these 2 different types of costs included in injury loss payments and we consider the insurance coverage. Insurance coverage for injuries usually has a limit to the maximum payment per claim.

For example, $50,000 per injured person and $100,000 for all injured claimants on a personal lines auto policies bodily injury liability coverage. A commercial auto policy often carries significantly higher bodily injury and property damage liability coverage. For example, $1 million combined single limit. But the pricing team is not working alone.

We believe our analyses are improved by collaborating across functions at Progressive. We leverage subject matter expertise to calculate the expected value of the future loss payments from changes to tariffs. The economics team within Progressive's capital management function provides interpretation on the federal government's actions and timing for implementation. They also share insights and external economic indices related to tariffs and imports.

Members of the claims functions, process and control teams provide subject matter expertise on the categories of loss payments described in the previous slide to evaluate if they are impacted by tariffs. They provide the necessary granular data. The pricing team aggregates this information from the economics and claims teams to calculate the expected value of future loss payments, including changes to tariffs. We then incorporate this expected value of loss payments within the fundamental pricing equation to calculate the expected loss and LAE ratio in the upcoming revision for the policies we will write.

Progressive has multiple pricing teams within the personal lines and commercial lines functions. Personal Lines is also split by auto, home and special lines. In addition to collaborating with economics and claims, we also collaborate among the pricing groups to share and debate methodologies and assumptions. Despite all the best actuarial methods for evaluating the aggregate rate need, communicating with product managers and deploying quickly to market, predicting the future is impossible.

So our initial expected value of future loss payments, including changes in tariffs will be wrong. The fundamental pricing equation requires us to estimate future loss payments and other costs. All our future predictions are wrong to some degree and the probability of being wrong increases with changes that have minimal historic precedents, such as inflationary impacts when an economy emerges from a pandemic or the frequently changing impacts of tariffs. Pricing, claims and economics teams are working together to monitor the actual change in loss payments from implemented changes to tariffs.

The scale and quality of our data at Progressive allows us to quickly identify the change in the actual loss payments and compare it to our expected value. This leads to refining our calculations. Our robust dataset at Progressive and the expertise of multiple teams contributes to our speed through this iterative cycle of estimate, monitor and refine. We are moving quickly to the center of the bull's-eye from Brad's slides, where our expected value of future loss payments from changes in tariffs are accurate and precise.

Producing the rate-level indications often provides the updated aggregate rate level advice to product managers so they can recognize the differences in the refined expected value of the future loss payments. And we have the capability to deploy necessary rate changes quickly. The speed of estimating, monitoring and refining our rate level indications and deploying the right rate change is important to deliver on our profit targets. And we want to write more business when we have accurate rates relative to the expected costs.

Changes in tariffs are not our first intervention to the fundamental pricing equation. Our combined ratio results show that we have moved quicker than the industry to recognize increasing costs, raise rates and deliver on our operational goal of at or below a 96 combined ratio. In Personal Auto, the standard deviation of our annual combined ratios in this 11 years from 2014 through 2024 is half of the average standard deviation from the other top 10 carriers. So we are responding quicker and making smart interventions.

Pricing's collaboration with subject matter experts in other Progressive functions along with the infrastructure to analyze rate need often and deploy rate changes quickly, has proven effective in responsiveness and stability of our combined ratio and is a major contributor to our outperformance of the industry.

This concludes the previously recorded portion of today's event. We now have members of our management team available live to answer questions, including presenters, Brad Granger and Jen Kubit, who are available to answer questions about the presentation. [Operator Instructions]

Our first question comes from the line of Rob Cox of Goldman Sachs.

Yes. Just first question on quote volume growth. I was just looking at quote volume growth and it looks like direct quote volume increases have really taken off while agency quote volume has not seen exactly the same acceleration. So I'm curious if the actions you're taking in the property book are limiting agency quote volume?

And would you expect to see a tailwind in agency quote volume as you wind down those actions in the property book?

Yes. Thanks, Rob. One, our direct volume reflects our increase in advertisement. But also when you're thinking about property quote, yes, there's a difference in agency.

So you're going through an agency, you have one offering with Progressive and that's Progressive home. When you go through direct, we have many unaffiliated partners so we can write with them. So if it doesn't fit our appetite need, it can fit an appetite need of one of our unaffiliated partners. So we feel like with where -- what we've done in the past couple of years, there will be some nice tailwinds in both the agency and direct channel because we're in such a better position in our property book as far as less volatile areas and clearly, our combined ratio.

That's helpful. And then I just wanted to follow up on Florida. Can you help us think through the potential size of the Florida refund related to the excess profitability? And how are you thinking about pricing moving forward in Florida given where the profits are?

I'll take the last part of the question first. So we've reduced rates in Florida twice in the last year, 8% in December, another 6% in June. We care deeply about Florida. We're the #1 writer.

And when the insurance reform passed in 2023, House Bill 837, we were really hopeful that, that would -- it would reduce loss cost and it has done just that. So I do want to take -- I don't know that I have said this before but these reforms and our hope is that they continue, have really made a difference for Floridians. And hats off to commissioner Yaworsky and Governor DeSantis for writing that and sticking to it because it really has been incredible. Florida does have an excess profits statute that is a rolling 3-year basis, so think of '23, '24 and '25. So without having half of '25, I couldn't give you a guesstimate with any accuracy, especially as we head into hurricane season.

But if our profits from those periods exceed the statutory limit, we will absolutely be able to comply with the provisions and give that money back to policyholders at that time. So we're watching that closely. We have an internal estimate but it could change dramatically given hurricane season.

Our next question comes from the line of Bob Jian Huang of Morgan Stanley.

Looking at your 10-Q, you talked about policy life expectancy for personal auto declined 5% due to -- due in part to business mix shift. Is this the same business mix you talked about in the other parts of the 10-Q where you're shifting towards the Robinsons and the Wrights? Intuitively, I thought those should have higher policy life expectancy. Can you help us think about that?

Yes. The mix shift has changed dramatically because of what happened with inflation in 2023. And so we closed down our underwriting appetite and brought in a lot more preferred business mix. Since we've opened up, as you can see, especially in the -- actually both channels, we have -- we're writing a lot more Sams, which is lower PLE. We expect that.

We know that. We have a history of that as long as we make our profit target margins on those Sams, it is great. So a couple of different things on auto PLE that I would talk about. This is probably a little bit redundant from last quarter but there's a lot of shopping going on.

So in a hard market, that's going to happen. Is that necessarily bad? No, because if the price isn't right in our book and people shopping can get a lower price, we believe, as you just heard from both Brad and Jen that we price pretty darn accurately and we have a rate revision machine. So it could be [ adverse ] selection.

It could be going to someone who hasn't got the right price on the street. And secondly, the mix shift that you're seeing in the PLEs is with Sams. So it's compared to the base of the preferred business we've put on the books a few years ago. And then lastly, when people do shop, we talked about this last quarter, we will look at their policy, do a policy review, look at build plans and different things that could cause us to rewrite with us starting the clock ticking over.

So although we keep that customer, you'll see the decline in PLE. I have reasons to believe that, that will start to turn around. But again, that we'll see as the data comes out. I would point you to and we're not going to actually share this all the time but we have an internal measure of household life expectancy, which gives a 30-day ability to rewrite and our household life expectancy is up.

So that's kind of my reason to believe that PLE could follow. Again, a lot of PLE has to do with mix, how long the hard market continues or the shopping behavior of consumers, which could maybe dramatically change in this last 2 or 3 years based on all the inflationary measures. So a lot of data going into that but hopefully, that gives you a little bit more color.

Great. Second question is on tariff. Again, this is something that I think the right way to think about it is it introduces uncertainty. But maybe on the personal auto side, if we remove the tariff as a headwind, is it fair to say that you should be able to grow much more aggressively or reduce your pricing significantly?

Is that essentially the only thing that kind of keeps you away from reducing pricing further?

Well, we wanted to be conservative because of the uncertainty around tariffs. We -- every day that passes, we get more certainty around that. Here's how we look at it. We look at every state, new and renewal, every product, look at the margin, look at our ability to grow and we'll always try to grow as fast as we can at a 96. So we've -- where states where we need a little rate, we'll go up a little bit, where states that we believe we can grow like a Florida, will reduce rates.

And we're back to where we want to be and that's taking small bites of the apple on either end. And that allows us to keep rates stable and competitive for our customers, which we talk about as one of our key strategic pillars. So if we feel like we can grow and we have the margin, and we have more certainty, we'll absolutely do what whatever it needs -- whatever we need to grow and grow profitably.

Our next question comes from the line of Elyse Greenspan of Wells Fargo.

My first question on -- is just continuing on personal auto, right? I mean we see new business is up, PLE is down, which I think you addressed a little bit earlier. But as you think about going forward, how do you expect, I guess, policies in force growth to trend given these trends, combined with the fact, right, you guys called out, right, you took around less than 1% rate decline in the quarter in personal auto and you're still increasing ad spend. So I'm just trying to get a forward view on PIF growth with all these things to consider.

Yes. I mean it's hard to compare 2025, which was -- has been incredible already to 2024, which was the best year in the history of Progressive. But the fact is we grew over 5 million PIFs year-over-year and 1 million in PL just in this quarter. So we believe there's an opportunity to continue to grow.

We believe we're in a really great position. And I think where we feel like we're in even a better position is to now grow that Robinson book. So we feel like we're in a different position in our property and have a lot of plans to continue to work out the blueprint and ultimately open up a bit. . And because we have all those auto policies, we have those future Robinsons or Robinsons that have an auto and home but not home with us.

So I think the opportunity really lends itself to grow more preferred. We have -- I think we have a lot of opportunity in that area and that will be our focus. Again, we'll be strategic. We're not going to swing the pendulum the other way.

We've certainly learned a lot about the property book and the volatility across the country in the last 5 to 10 years. But we're really well positioned. And the fact that we have all that auto business on the book, I think, is really important. There's a lot of market share for us to capture.

So I remain bullish. Comparisons are more difficult when you're comparing to the best year in the history of Progressive.

And then my second question, Tricia, in your letter, you mentioned -- there were some comments on capital and just obviously holding capital as a detriment to your return. If you could just expand on that? And I guess if you guys are thinking about incremental capital return, I know there's a balance with using capital for growth. Is that a reference just to -- you guys normally have a special dividend later on in the year?

Or would you consider incremental repurchases? I'm just hoping to flesh out that comment a little bit.

Yes. We'll continue -- we needed a lot of capital and have needed a lot of capital to grow. So we have our regulatory base and then our contingency layer and extreme contingency. So we continue to model that out.

And then we have 3 ways to return capital. The first -- and our preferred way is to grow the business. So we've been doing that and we'll continue to do that. And then we buy back shares of stock to reduce the dilution from our stock-based compensation and we've done that.

We will buy more stock back if it's under our intrinsic value. So we look at that model constantly. And then yes, usually, typically in December, is when the Board of Directors name, if we have one, a variable dividend. And so we've started modeling out that now when I say we, Jon Bauer, John Sauerland and I start, thinking about how to present that to the Board.

Ultimately, it will be their decision. And again, we have a lot of year left with storm seasons coming up, but that would be another opportunity should the Board decide to give capital back in the form of a variable dividend.

Our next question comes from the line of Josh Shanker of Bank of America.

Following up on -- a lot of talk around PLE and taking out a lot of Sams. I'm just wondering if you did nothing particular to improve the PLE of the company but just let the excess Sams who came on board bake off on their own regular time line. Would retention just improve naturally at the company by the passage of time? And if so, when might we see that inflection take place given all the business you added in 2024?

I hope I understood your question. I mean I do want to say -- so Sams have always had a lower PLE and we actually further segment different Sams and I won't go into all the details. If Sams ran off because they were shopping and leaving, yes, our retention would go up. But again, we like to have as many -- our Sams are sort of our upbringing.

So we love having Sams on the book as long as we make our calendar year and our lifetime profit targets on that. Did I understand your question, Josh?

Yes, I'm just wondering, in 2024, maybe you capture a greater percentage of the Sams market that you normally would and your -- and the mix of business is -- was more Sam directed. So as such, our retention is down. But if you fast forward to your normal mix of Sams and Dianes and Robinsons, that means that, I guess, PLE would just go naturally up because you're new customer acquisition wasn't decidedly Sam oriented. Is that a correct way to think about that?

Yes, that's a good way of thinking about it. I think a lot could happen though. I started -- I talked little bit, I think, during Elyse's question, I believe, or Bob's about us wanting to grow Robinson. So it depends on other segments we bring on.

It depends on competitors' rates and what our customers do. And again, there is some noise, I think, in our data for sure and I believe others with people shopping but shopping with their current company because they don't necessarily want to leave and even though that starts the time clock over, that customer didn't leave, we just did a policy review. So there's a little bit of noise in there. But I think the way -- if all things were stable, the way you're saying that would play out, I just don't think all things would be stable.

And then, look, obviously, you're fantastically profitable right now. You're also spending a lot on ads. If those ads are procuring a lot of Sams, is the ad spend for low duration or low policy [indiscernible] expecting customers justified? Or are you expecting that you will only have those policies for 6 months or 12 months and it's working out exactly as planned?

Yes. We look at -- we won't try to bring on any customer in any of our segments on the book if we don't believe it to be to reach our target profit margins. As long as our cost per sale is under attack, which it is, we'll continue to spend and grow in every segment that we can. Because, again, some of those Sams are going to be future Robinsons at some point.

They'll turn into Dianes and they'll get a renter's policy. As you know, we're growing a lot in renters policy. They'll eventually buy a home and the likelihood of them sticking with Progressive for a home as high. So again, we want to bring everybody in but we look at that totally from targeted the acquisition cost of each segment.

I'd love to hear more about Sams turning into Robinsons in the future. So we'll stay tuned.

I'll do that at some point, Josh. I did something called Imagine Diane, I want to say like in 2014 or -- I'm aging myself, we started thinking about that. And that's one of the reasons why we really started looking at the construct of the 3 horizons of different products that our customers need. John Sauerland, I remember, vividly did an IR presentation on we want people to come in if they say, do you have that product, do you have x product, life insurance, jewelry insurance, we can say, yes, we have that.

Maybe not all of it will be on our paper but to be able to have that type of portfolio of products for every customer as their insurable need changes. And we could redo that because I'm sure some things change, we sort of would put them through like Diane is renter, then she gets engaged and she needs her ring insured and go on and on and we can tell you the likelihood of the PLE with that. But I'll put that on the list of a deep dive topic for our future, for sure. Thanks, Josh.

Our next question comes from the line of Gregory Peters of Raymond James.

I guess I'd like to go back to the pricing theory portion of the presentation. And during the -- and I understand it was a theory discussion, but you used a factor of 12% for LAE. And I don't -- I'm going to pick that LAE number as just sort of if you can give us some perspective of how LAE has trended for your business the last couple of years. And I guess more importantly, I'm sure you're using some technology to improve those costs relative to earned premium.

Can you talk about what kind of leverage you have for further improvement in LAE as we look out the next 24 to 36 months?

I'll start that -- I'll start the answer. And then Brad, if you want to just talk about -- I think it was just used as a -- just as an example. But our LAE has reduced in the last 10 or 15 years consistently. As you saw this quarter, our NAER, which is our expense ratio outside of our acquisition costs, went down by about 0.3%.

We will continue to push down costs across the board, not necessarily acquisition costs because we'll spend as much as we can to grow. But my team and I consistently talk about technology changes, process changes, people changes, that we can do to continue to lower both our expense ratio actually across the board. That's really important to our customers to maintain those competitive prices. So I've been very happy with our reduction across the board, not just in LAE but in our expense ratio, overall NAER, I should say, in the last 10 years and we'll continue to focus on that.

And we believe we have a lot of opportunity, especially with technology. And I think the 12% Brad used was an example but I'll let you elaborate on that, Brad.

Yes. Thanks, Tricia. Yes, the 12% was an example. It's actually considerably lower when you measure the cost of LAE in relation to premium.

But to add to what Tricia said, we also are very careful to both look at his recent historic LAE performance but also to take a future forward-looking view of it to ensure that we are ahead of the curve for any changes, any efficiencies that the business creates.

Okay. I guess the other question I had, just as I was listening to the presentation and your comments about the rate cuts in Florida brought up a concept, and I'm not sure it's valid, so I thought I'd ask you for your opinion. Normally, when you get to price increases because of inflation and other factors, that can be disruptive to your retention ratios. And I'm curious if price decreases can also be disruptive to retention, triggering shopping.

I'm curious about your perspectives on that.

I think the shopping in the last's several years have been just so volatile because of changes, because of the extraordinary inflation that happened in 2023 and actually before then. Typically, when you have a price decrease, it wouldn't necessarily increase shopping, although it has a lot -- there's a lot of external things, too, in terms of advertising and other things that happen. So I wouldn't necessarily say that. I think there's a lot of different variables depending on also the speed of what's happened in the industry, which is what I think Jen talked about was, just responding quickly to get accurate rates is what we want to do.

We spur on with -- with decreases, you're really typically adding on new business growth. And that's depending on if people are shopping their carrier or like I said, with ours, or people looking at a policy review to see if they can make changes in their policy to decrease their rates, if that makes sense.

Our next question comes from the line of Jimmy Bhullar of JPMorgan.

So just first had a question on how the -- you view the competitive environment to be in personal auto. And it seems like everybody's margins have improved. And in most cases, at the sort of upper end of their historical ranges. And more and more companies are talking about wanting to grow as opposed to improve margins.

And just wondering if you've seen that in the competitive behavior overall and how that affects your view of margins and growth prospectively for Progressive?

Yes. We definitely have seen the environment become more and more competitive. And we were thankful to get out ahead of the rates. And so we've been able to put on the amount of growth we put on in terms of policies in force.

Like I said, comparisons will be difficult because you were comparing on incredible numbers in 2024. And frankly, incredible numbers, in the first half of 2025. That said, that's our sweet spot. We love that. We love the competitiveness. It's great for consumers.

It's great just making all of us better. So our goal will remain to grow as fast as we can and make our target profit margin. We are doing great on both right now. I think I started in my letter talking about that in net premium written as our trifecta and we'll continue to do that.

It's going to get more competitive. But again, that's what makes this business fun.

Okay. And on an unrelated topic, what's your view on how -- like it's a gradual process but more and more cars becoming autonomous and just generally more technology-intensive with more sensors, cameras and stuff. How does that affect the TAM and the overall market opportunity for personal, auto companies over the next -- if you were to look forward, over the next 5 to 10 years or so?

Yes. We're actually doing that exercise right now. We've been doing that exercise for the last 10 or 15 years. I think the first time we talked about it in an Investor Relations call was 2013 and then again in 2017. So we're always looking out sort of this cone of uncertainty or certainty and we look at conservative, pessimistic, middle of the route.

I will say we have -- even our most pessimistic view, we were way under. So we did not believe the addressable market would grow at the rate it has grown. So we continue to look at that. We're revising what we call runway right now to look at our addressable market.

Of course, vehicle safety comes into play. And if you think about the ADAS systems that have come into play in the last 10 or 15, 20 years, yes, it reduces frequency. As you've seen, the frequency decline in the past 50 or 60 years continues but it's typically offset by severity. It takes a while for the severity to -- the cost to be actually acceptable by consumers.

So it takes a while. In addition to that, when you think about technology and cars and the life span of cars, it's now up to about 13 years. So when you think about the addressable market, even as cars get safer, it does take a while for the fleet to grow into that system. And so we believe that, one, we think safer cars is great for society, and we want that to happen.

It's really important. And so we're very -- we want that to happen. That said, it does take a while to -- for the severity trends to offset the frequency trends. So I guess what I'm trying to say is we think there's a lot addressable market to be had in the next 5 to 10 years.

And especially as we diversified across all 3 horizons. And I had talked about before the opportunity around bundling more of that business, that auto, home bundle, we call our Robinsons.

Our next question comes from the line of David Motemaden of Evercore ISI.

Tricia, I'm just hoping to unpack a little bit just on the PLEs and their retention. Just how much is the mix dynamic versus how much is more just competition. So I was hoping maybe you could just talk about how retention looked by customer segment to kind of isolate -- take the mix dynamic out of it?

We don't typically share that. I think it's -- I think shopping is a lot. Our customers shopping with us is more than it's ever been. It's -- I think it's slowing a little bit because I think things are getting more competitive.

And then the mix is always going to influence it. I mean at some point, we could index it and show you a little bit of the difference. And maybe I think Josh had asked to talk about the Sams and future Robinsons, we could probably weave that into there because that's part of the formula. But we don't typically unpack all of that because even underneath every one of our segments, there's multiple ways we look at those segments depending on channel.

Are they -- is it auto, home with an unaffiliated partner versus us? So it's -- there's a lot of detail in that.

Got it. No. Okay. That's helpful.

And then maybe if I could just follow up. Just on the frequency. So that continues to come in pretty favorable. It's been almost 2 years now that we've been in negative territory.

Could you just talk about if you're seeing any dynamic? It looks like first-party collision claims are down by more than property damage. Are you seeing any impact just from customers that might not be filing claims and sort of with the deductible, just sort of eating the claims? And I guess, I'm trying to just isolate how much is maybe that dynamic versus just greater penetration of ADAS and some of these collision avoidance systems that might also be putting downward pressure on frequency.

Yes. I think -- I mean, it's hard -- collision and PD are always hard because there's the timing and subrogation and the different amounts that we pay, it depends -- and Jen had gone over that a little bit. Most of this has been our difference in mix and the continued vehicle miles traveled. And so we're watching that closely.

We're seeing -- we continue to see that. So that's really where the majority of our frequency decline has been in.

Our next question comes from the line of Katie Sakys of Autonomous Research.

First, I wanted to ask on the 16-month trend time that you guys used when thinking about the various factors and the pricing adequacy model. How has that time frame shifted coming out of the pandemic? Are you guys assuming slightly more months? Was it potentially higher in the past than it is now? And how might you expect that to trend going forward?

Yes. I'll let Brad and/or Jen comment on that. But we do try to -- we try to be flexible depending on what's happening and what's needed in the current environment. And so if you guys want to add anything on that?

Yes. Thanks, Tricia. I don't think it's changed that much. It's a function of as we talked about how far back you're looking in your data period.

So our growth helps there. if we only have to look back 1 year instead of 2 years, you don't have to trend as far in the history to today. Also, as we pointed out, too, it's also a factor of how quickly you can do rate revisions, get them priced, get them filed, get them approved but also how many you can do. So the fact that we are able to increase our rate revision capacity quickly if we need to, helps to also reduce the number of months we have to trend into the future.

That's helpful. And then perhaps as a follow-up, I know we spoke about Florida earlier in Q&A but are there any other states where you may potentially have profits that are exceeding statutory limits and might have to consider issuing a refund to policyholders?

No, I don't think there's any other excess profit statutes other than Florida.

Our next question comes from the line of Mike Zaremski of BMO.

In the letter, Tricia, you mentioned that the 8.9 product model and about 50% of your premiums is demonstrating favorable conversion results and elasticity. Any willingness to kind of unpack that a bit? I don't feel like we're seeing it in some of the 10-Q KPIs, although some of them do have tough comps. That's my first question.

Yes. I mean, I think every product model we look at, we have is very specific segmentation schematic in that and to grow and especially in the preferred business. Pat, if you want to comment on 8.9 in particular, because we're already on 9.0 [indiscernible] thinking about 9.0 and our other ones. And it takes some while to, I think, build into it.

Yes. The only thing that I would add is there's a lot of moving parts as we elevate product models into states and we are taking rates either up or down when we simultaneously elevate the segmentation. So while we look in aggregate at what the contribution happens pre/post any model change, there's a lot of moving parts in market as well. But as Tricia mentioned, we recently elevated 9.0 in our first state and continue to bring new segmentation that we think better matches rate to risk to market and creates that adverse selection and more competitive prices for more consumers.

Yes.

Generally, I would add, as we bring on new product models, we're getting more and more competitive on the more preferred end of the spectrum and that is where our market share is lowest. So that creates greater runway for us in terms of growing share across the board, across those consumer marketing tiers.

Yes. Well -- and lastly, we have our 5.0 property product model in about 75% of our net written premium in about 29 states. So that, along with the continued segmentation on the auto side, really gives us the ability to get those bundled customers. And I would say, with our current market share and our base of auto PIFs, we're just getting started.

That's helpful. And my last follow-up is just kind of seeing the [indiscernible] on shopping levels. I think there were different comments made during this call previously. I just want to understand, are shopping levels still materially above kind of what you -- what Progressive would consider the normal long-term trend line?

Or have they already kind of come down to closer to normal or maybe below given the softish kind of pricing environment?

I would say shopping levels are still high. Ambient shopping is still up and we would still consider this a hard market because people are still shopping. And that's -- we talked a little bit about that with our PLE. But yes, for now, shopping remains high.

And just would shopping normalize just as long as incomes keep increasing and auto rates don't go back up to high singles? Is that how we should think about it, like it takes a couple of years to normalize?

Typically, it has in the past. I don't know. It's easy to shop. So I don't know if the pandemic and subsequent events has forever changed shopping behavior. That will unfold as this next couple of years unfolds but that has been how it typically has worked in markets in the past.

That appears to have been our final question. So that concludes our event. [indiscernible], I'll hand the call back over to you for the closing scripts.

That concludes the Progressive Corporation's Second Quarter Investor Event. Information about a replay of the event will be available on the Investor Relations section of Progressive's website for next year. You may now disconnect.