Progressive Corporation PGR
Q4 2012 Earnings Call Transcript

Operator: Mike Zaremski, Credit Suisse.

Michael Zaremski - Credit Suisse: So, the combined ratio over the past three months, in particular, January has been running well below 96%, which Glenn you seem to have reiterated in the letter to shareholders as an important target level. So, I'm curious then whether the forces which have caused the combined ratio to run well below 96% to more temporary in nature. I guess, for example, perhaps those are elements of 'corrective actions' following the combined being above 96% in the first half. I know you guys have talked about expenses as well? Thanks and I have one follow-up.

Glenn M. Renwick - President and CEO: Fair question. Our rates clearly – I'd try to outline that fairly extensively in some of the communications, but we've clearly corrected our rates in mid-year, some of that is earning through and earning through at levels that look like will be well-suited to meet our 96% or below. I wouldn't personally read too much into like a January number. There were – winter months interesting at best. And in some cases, we had some winter weather that was a little more typical, and some that was quite atypical. We even had events that probably took out, A, for a large part of the population almost a weekends worth of driving. So, we don't know we ever be able to sort of get to the point of being able to say that was a half a point or a quarter of a point or even a couple of points, (obviously). We think we're priced at about the right level for going forward. As the nature of rate revisions you tend to be a little bit spiky, you take a rate revision. And by definition you are taking those rates up to a level that is slightly higher than you might want to if you could bleed the rate level in over time. So, I don't want to get too technical here, but we priced to a midpoint of the rate revision. And so in the early phases of a rate change, we are likely to see a little bit more of an earned premium -- as the earned premium comes in we're likely to see losses perhaps reflect a slightly better combined ratio, but over the length of that rate revision we would expect to meet our 96 or below target. So, I'd tell you we're right on track. But think of the maturing of a rate change so we take it up a little bit, it matures through and we're now coming into and I don't want to overplay this because the results will be the results but we're starting to come in to a little bit more of a mature place in our rate revision. I'd add a couple of points to that. So, it means that people who are about to renew are now going to be renewing into the rate revision they were last on, and that's an important point because they don't see the quantum jump in rates which they see the first time after we have taken rate changes. First of all what I mean by the maturing of the rate level, we also would expect to see from the time we have taken our rates competitive actions, that start to make the competitive nature of the rate change a little more favorable to conversion. Did that get at your question?

Michael Zaremski - Credit Suisse: Yeah, that's very helpful. Then lastly I noticed that policyholder life expectancy levels for the full year of 2012 were well below the levels for the first three months of 2012. So I think that implies there was a sharp drop off in 4Q. If that is correct, what were the drivers and what are the implications for the coming quarter I guess for example does that translate into perhaps the sharper PIF decline?