Item 1. Financial Statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

			Three Months												Nine Months
Periods Ended September 30,			2023						2022						2023						2022
(millions — except per share amounts)
Revenues
Net premiums earned			$	14,894.3					$	12,398.9					$	42,891.8					$	36,349.7
Investment income			510.2						333.6						1,384.3						868.2
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales			(66.2)						(62.1)						38.6						430.0
Net holding period gains (losses) on securities			(80.5)						(152.1)						17.9						(2,262.9)
Net impairment losses recognized in earnings			(2.3)						(2.2)						(6.8)						(6.5)
Total net realized gains (losses) on securities			(149.0)						(216.4)						49.7						(1,839.4)
Fees and other revenues			223.7						181.4						656.6						531.9
Service revenues			81.4						82.7						234.9						230.5
Total revenues			15,560.6						12,780.2						45,217.3						36,140.9
Expenses
Losses and loss adjustment expenses			11,387.9						10,018.7						34,182.0						28,298.2
Policy acquisition costs			1,173.2						970.9						3,442.6						2,867.9
Other underwriting expenses			1,420.7						1,496.4						4,710.3						4,433.9
Investment expenses			7.2						5.8						18.8						17.4
Service expenses			91.7						82.8						264.6						221.5
Interest expense			69.7						63.1						198.7						180.4
Goodwill impairment			0						0						0						224.8
Total expenses			14,150.4						12,637.7						42,817.0						36,244.1
Net Income (Loss)
Income (loss) before income taxes			1,410.2						142.5						2,400.3						(103.2)
Provision for income taxes			288.9						18.4						485.7						1.7
Net income (loss)			1,121.3						124.1						1,914.6						(104.9)
Other Comprehensive Income (Loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities			(388.6)						(920.3)						(241.0)						(3,170.0)
Net unrealized losses on forecasted transactions			0.2						0.1						0.4						0.3
Foreign currency translation adjustment			0						(0.7)						0.2						(0.9)
Other comprehensive income (loss)			(388.4)						(920.9)						(240.4)						(3,170.6)
Comprehensive income (loss)			$	732.9					$	(796.8)					$	1,674.2					$	(3,275.5)
Computation of Earnings Per Common Share
Net income (loss)			$	1,121.3					$	124.1					$	1,914.6					$	(104.9)
Less: Preferred share dividends1			10.4						6.7						27.2						20.1
Net income (loss) available to common shareholders			$	1,110.9					$	117.4					$	1,887.4					$	(125.0)
Average common shares outstanding - Basic			584.8						584.5						584.9						584.4
Net effect of dilutive stock-based compensation			2.7						2.6						2.6						2.7
Total average equivalent common shares - Diluted			587.5						587.1						587.5						587.1
Basic: Earnings per common share			$	1.90					$	0.20					$	3.23					$	(0.21)
Diluted: Earnings per common share			$	1.89					$	0.20					$	3.21					$	(0.21)

1 Changed to a floating dividend rate in March 2023. See Note 1 – Basis of Reporting and Accounting for further discussion.

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Consolidated Balance Sheets

(unaudited)

			September 30,												December 31,
(millions — except per share amounts)			2023						2022						2022
Assets
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost: $60,490.6, $48,205.7, and $50,264.0)			$	56,591.9					$	44,173.1					$	46,651.9
Short-term investments (amortized cost: $1,795.2, $4,237.6, and $2,861.7)			1,795.2						4,237.6						2,861.7
Total available-for-sale securities			58,387.1						48,410.7						49,513.6
Equity securities, at fair value:
Nonredeemable preferred stocks (cost: $976.9, $1,417.6, and $1,364.2)			868.9						1,254.4						1,213.2
Common equities (cost: $662.6, $803.7, and $826.1)			2,614.5						2,665.3						2,821.5
Total equity securities			3,483.4						3,919.7						4,034.7
Total investments			61,870.5						52,330.4						53,548.3
Cash and cash equivalents			123.5						350.9						203.5
Restricted cash and cash equivalents			14.9						14.4						17.4
Total cash, cash equivalents, restricted cash, and restricted cash equivalents			138.4						365.3						220.9
Accrued investment income			378.1						217.4						282.5
Premiums receivable, net of allowance for credit losses of $361.2, $295.0, and $343.3			12,408.0						10,867.7						10,416.9
Reinsurance recoverables			5,331.2						6,306.8						5,832.1
Prepaid reinsurance premiums			235.0						367.5						295.5
Deferred acquisition costs			1,732.1						1,585.2						1,544.4
Property and equipment, net of accumulated depreciation of $1,596.9, $1,499.0, and $1,551.1			919.8						1,067.1						1,034.0
Goodwill			227.9						227.9						227.9
Intangible assets, net of accumulated amortization of $170.0, $153.1, and $158.6			74.9						91.8						86.3
Net federal deferred income taxes			1,357.1						1,269.5						1,131.5
Other assets			979.6						827.6						844.7
Total assets			$	85,652.6					$	75,524.2					$	75,465.0
Liabilities and Shareholders’ Equity
Unearned premiums			$	20,761.7					$	17,796.9					$	17,293.6
Loss and loss adjustment expense reserves			33,577.3						30,631.8						30,359.3
Accounts payable, accrued expenses, and other liabilities			7,030.7						5,931.9						5,532.8
Debt1			6,887.6						6,387.4						6,388.3
Total liabilities			68,257.3						60,748.0						59,574.0
Serial Preferred Shares (authorized 20.0)
Serial Preferred Shares, Series B, no par value (cumulative, liquidation preference $1,000 per share) (authorized, issued, and outstanding 0.5)			493.9						493.9						493.9
Common shares, $1.00 par value (authorized 900.0; issued 797.6, including treasury shares of 212.6, 212.5, and 212.7)			585.0						585.1						584.9
Paid-in capital			1,977.9						1,839.6						1,893.0
Retained earnings			17,380.9						14,987.5						15,721.2
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on fixed-maturity securities			(3,027.3)						(3,113.8)						(2,786.3)
Net unrealized losses on forecasted transactions			(14.1)						(14.6)						(14.5)
Foreign currency translation adjustment			(1.0)						(1.5)						(1.2)
Total accumulated other comprehensive income (loss)			(3,042.4)						(3,129.9)						(2,802.0)
Total shareholders’ equity			17,395.3						14,776.2						15,891.0
Total liabilities and shareholders’ equity			$	85,652.6					$	75,524.2					$	75,465.0

1 Consists of long-term debt. See Note 4 – Debt for further discussion.

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

			Three Months												Nine Months
Periods Ended September 30,			2023						2022						2023						2022
(millions — except per share amounts)
Serial Preferred Shares, No Par Value
Balance, beginning of period			$	493.9					$	493.9					$	493.9					$	493.9
Balance, end of period			493.9						493.9						493.9						493.9
Common Shares, $1.00 Par Value
Balance, beginning of period			585.3						584.9						584.9						584.4
Treasury shares purchased			(0.3)						(0.4)						(0.6)						(0.7)
Net restricted equity awards issued/vested			0						0.6						0.7						1.4
Balance, end of period			585.0						585.1						585.0						585.1
Paid-In Capital
Balance, beginning of period			1,935.7						1,815.2						1,893.0						1,772.9
Amortization of equity-based compensation			42.9						26.0						86.7						69.7
Treasury shares purchased			(1.1)						(1.3)						(2.1)						(2.2)
Net restricted equity awards issued/vested			0						(0.6)						(0.7)						(1.4)
Reinvested dividends on restricted stock units			0.4						0.3						1.0						0.6
Balance, end of period			1,977.9						1,839.6						1,977.9						1,839.6
Retained Earnings
Balance, beginning of period			16,350.4						14,967.7						15,721.2						15,339.7
Net income (loss)			1,121.3						124.1						1,914.6						(104.9)
Treasury shares purchased			(38.3)						(47.4)						(77.1)						(75.7)
Cash dividends declared on common shares ($0.10, $0.10, $0.30, and $0.30 per share)			(58.5)						(58.4)						(175.4)						(175.2)
Cash dividends declared on Serial Preferred Shares, Series B ($20.67700, $26.875, $39.60163, and $26.875 per share)			(10.3)						(13.4)						(19.8)						(13.4)
Reinvested dividends on restricted stock units			(0.4)						(0.3)						(1.0)						(0.6)
Other, net			16.7						15.2						18.4						17.6
Balance, end of period			17,380.9						14,987.5						17,380.9						14,987.5
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period			(2,654.0)						(2,209.0)						(2,802.0)						40.7
Other comprehensive income (loss)			(388.4)						(920.9)						(240.4)						(3,170.6)
Balance, end of period			(3,042.4)						(3,129.9)						(3,042.4)						(3,129.9)
Total shareholders’ equity			$	17,395.3					$	14,776.2					$	17,395.3					$	14,776.2

There are 5.0 million Voting Preference Shares authorized; no such shares have been issued.

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

Nine Months Ended September 30,			2023						2022
(millions)
Cash Flows From Operating Activities
Net income (loss)			$	1,914.6					$	(104.9)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			212.0						227.5
Amortization of intangible assets			11.4						25.5
Net amortization (accretion) of fixed-income securities			(7.6)						1.6
Amortization of equity-based compensation			86.7						69.7
Net realized (gains) losses on securities			(49.7)						1,839.4
Net (gains) losses on disposition of property and equipment			23.0						5.3
Goodwill impairment			0						224.8
Changes in:
Premiums receivable			(1,991.1)						(1,468.2)
Reinsurance recoverables			500.9						(1,326.3)
Prepaid reinsurance premiums			60.5						90.1
Deferred acquisition costs			(187.7)						(229.6)
Income taxes			73.6						(591.6)
Unearned premiums			3,468.1						2,181.1
Loss and loss adjustment expense reserves			3,218.0						4,467.7
Accounts payable, accrued expenses, and other liabilities			1,089.1						546.5
Other, net			(215.8)						(39.4)
Net cash provided by operating activities			8,206.0						5,919.2
Cash Flows From Investing Activities
Purchases:
Fixed maturities			(18,956.2)						(18,672.7)
Equity securities			(23.2)						(126.5)
Sales:
Fixed maturities			4,780.3						9,737.6
Equity securities			745.5						1,467.0
Maturities, paydowns, calls, and other:
Fixed maturities			3,693.2						4,158.5
Equity securities			65.3						39.3
Net (purchases) sales of short-term investments			1,132.0						(3,266.6)
Net change in unsettled security transactions			201.7						(68.7)
Purchases of property and equipment			(169.9)						(245.0)
Sales of property and equipment			35.0						16.0
Net cash used in investing activities			(8,496.3)						(6,961.1)
Cash Flows From Financing Activities
Dividends paid to common shareholders			(175.5)						(175.5)
Dividends paid to preferred shareholders			(33.2)						(26.8)
Acquisition of treasury shares for restricted stock tax liabilities			(52.3)						(76.2)
Acquisition of treasury shares acquired in open market			(27.5)						(2.4)
Net proceeds from debt issuances			496.3						1,486.0
Net cash provided by financing activities			207.8						1,205.1
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents			(82.5)						163.2
Cash, cash equivalents, restricted cash, and restricted cash equivalents – January 1			220.9						202.1
Cash, cash equivalents, restricted cash, and restricted cash equivalents – September 30			$	138.4					$	365.3

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1. BASIS OF REPORTING AND ACCOUNTING

The accompanying consolidated financial statements include the accounts of The Progressive Corporation, our wholly owned insurance subsidiaries and non-insurance subsidiaries and affiliates in which we have a controlling financial interest (Progressive).

The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, were necessary for a fair statement of the results for the interim periods presented. The results of operations for the period ended September 30, 2023, are not necessarily indicative of the results expected for the full year. These consolidated financial statements and the notes thereto should be read in conjunction with Progressive’s audited financial statements and accompanying notes included in Exhibit 13 to our Annual Report on Form 10-K for the year ended December 31, 2022 (2022 Annual Report to Shareholders).

Insurance Premiums and Receivables

We perform analyses to evaluate our premiums receivable for expected credit losses. See our 2022 Annual Report to Shareholders for a discussion on our premiums receivable allowance for credit loss policy. The following table summarizes changes in our allowance for credit loss exposure on our premiums receivable:

			Three Months Ended September 30,									Nine Months Ended September 30,
(millions)			2023			2022						2023			2022
Allowance for credit losses, beginning of period			$	343.9		$	265.8					$	343.3		$	280.4
Increase in allowance1			157.5			130.9						399.7			320.6
Write-offs2			(140.2)			(101.7)						(381.8)			(306.0)
Allowance for credit losses, end of period			$	361.2		$	295.0					$	361.2		$	295.0

1 Represents the incremental increase in other underwriting expenses.

2 Represents the portion of the allowance that is reversed when premiums receivable are written off. Premiums receivable balances are written off once we have exhausted our collection efforts.

Property and Equipment

Included in other assets in our consolidated balance sheets are “held for sale” property. When property is transferred to held for sale, the property is written down to its fair value less estimated costs to sell the property. At September 30, 2023 and 2022, and December 31, 2022, we had held for sale property of $81.6 million, $47.4 million, and $48.7 million, respectively.

Earnings Per Share

Net income is reduced by preferred share dividends to determine net income available to common shareholders and is used in our calculation of the per common share amounts. Beginning March 15, 2023, the annual dividend rate for our Series B Preferred Shares switched to a floating rate. The floating nature of the dividend rate will impact the amount of the adjustment required to calculate net income available to common shareholders. See Note 9 – Dividends for further discussion.

For periods when a net loss is reported, earnings per common share are calculated using basic average equivalent shares since diluted earnings per share would be antidilutive.

New Accounting Standards

During the first quarter 2023, the Financial Accounting Standards Board issued an Accounting Standards Update (ASU), which permits an election to amortize the cost of tax equity investments to the provision for income taxes if certain conditions are met. Currently, these investments are accounted for under the equity method of accounting. This ASU will be effective for fiscal years (including interim periods within those fiscal years) beginning after December 15, 2023 (2024 for calendar-year companies). If elected, this standard must be applied on either a modified retrospective or a retrospective basis. We intend to adopt the new standard under the modified retrospective basis, however, we do not expect this standard to have a material impact on our financial condition or results of operations.

2. INVESTMENTS

The following tables present the composition of our investment portfolio by major security type. Our securities are reported in our consolidated balance sheets at fair value. The changes in fair value for our fixed-maturity securities (other than hybrid securities) are reported as a component of accumulated other comprehensive income (loss), net of deferred income taxes, in our consolidated

balance sheets. The net holding period gains (losses) reported below represent the inception-to-date changes in fair value for the hybrid and equity securities. The changes in the net holding period gains (losses) between periods are recorded as a component of net realized gains (losses) on securities in our consolidated statements of comprehensive income.

($ in millions)			Cost						Gross Unrealized Gains						Gross Unrealized Losses						Net Holding Period Gains (Losses)						Fair Value						% of Total Fair Value
September 30, 2023
Available-for-sale securities:
Fixed maturities:
U.S. government obligations			$	36,392.2					$	0					$	(2,098.4)					$	0					$	34,293.8					55.4		%
State and local government obligations			2,257.6						0						(203.3)						0						2,054.3						3.3
Foreign government obligations			16.9						0						(1.5)						0						15.4						0.1
Corporate debt securities			10,880.8						1.3						(591.8)						(36.1)						10,254.2						16.6
Residential mortgage-backed securities			530.4						0.2						(13.0)						(1.8)						515.8						0.8
Commercial mortgage-backed securities			4,699.5						2.1						(723.9)						0						3,977.7						6.4
Other asset-backed securities			5,524.2						0.1						(210.1)						(0.6)						5,313.6						8.6
Redeemable preferred stocks			189.0						0						(4.3)						(17.6)						167.1						0.3
Total fixed maturities			60,490.6						3.7						(3,846.3)						(56.1)						56,591.9						91.5
Short-term investments			1,795.2						0						0						0						1,795.2						2.9
Total available-for-sale securities			62,285.8						3.7						(3,846.3)						(56.1)						58,387.1						94.4
Equity securities:
Nonredeemable preferred stocks			976.9						0						0						(108.0)						868.9						1.4
Common equities			662.6						0						0						1,951.9						2,614.5						4.2
Total equity securities			1,639.5						0						0						1,843.9						3,483.4						5.6
Total portfolio1			$	63,925.3					$	3.7					$	(3,846.3)					$	1,787.8					$	61,870.5					100.0		%

($ in millions)			Cost						Gross Unrealized Gains						Gross Unrealized Losses						Net Holding Period Gains (Losses)						Fair Value						% of Total Fair Value
September 30, 2022
Available-for-sale securities:
Fixed maturities:
U.S. government obligations			$	24,260.9					$	0					$	(1,855.4)					$	0					$	22,405.5					42.8		%
State and local government obligations			2,140.9						0						(215.4)						0						1,925.5						3.7
Foreign government obligations			16.7						0						(1.4)						0						15.3						0.1
Corporate debt securities			10,119.8						0						(832.5)						(58.9)						9,228.4						17.6
Residential mortgage-backed securities			754.2						0.4						(16.5)						(15.1)						723.0						1.4
Commercial mortgage-backed securities			5,833.9						1.4						(747.4)						0						5,087.9						9.7
Other asset-backed securities			4,876.7						0						(268.9)						(1.9)						4,605.9						8.8
Redeemable preferred stocks			202.6						0						(5.6)						(15.4)						181.6						0.3
Total fixed maturities			48,205.7						1.8						(3,943.1)						(91.3)						44,173.1						84.4
Short-term investments			4,237.6						0						0						0						4,237.6						8.1
Total available-for-sale securities			52,443.3						1.8						(3,943.1)						(91.3)						48,410.7						92.5
Equity securities:
Nonredeemable preferred stocks			1,417.6						0						0						(163.2)						1,254.4						2.4
Common equities			803.7						0						0						1,861.6						2,665.3						5.1
Total equity securities			2,221.3						0						0						1,698.4						3,919.7						7.5
Total portfolio1			$	54,664.6					$	1.8					$	(3,943.1)					$	1,607.1					$	52,330.4					100.0		%

($ in millions)			Cost						Gross Unrealized Gains						Gross Unrealized Losses						Net Holding Period Gains (Losses)						Fair Value						% of Total Fair Value
December 31, 2022
Available-for-sale securities:
Fixed maturities:
U.S. government obligations			$	26,770.7					$	1.4					$	(1,604.7)					$	0					$	25,167.4					47.0		%
State and local government obligations			2,180.0						0						(202.9)						0						1,977.1						3.7
Foreign government obligations			16.8						0						(1.3)						0						15.5						0.1
Corporate debt securities			10,125.8						9.8						(676.1)						(46.8)						9,412.7						17.6
Residential mortgage-backed securities			696.1						0.3						(17.5)						(12.1)						666.8						1.2
Commercial mortgage-backed securities			5,446.0						1.5						(784.0)						0						4,663.5						8.7
Other asset-backed securities			4,826.0						0.9						(260.5)						(1.8)						4,564.6						8.5
Redeemable preferred stocks			202.6						0						(4.5)						(13.8)						184.3						0.3
Total fixed maturities			50,264.0						13.9						(3,551.5)						(74.5)						46,651.9						87.1
Short-term investments			2,861.7						0						0						0						2,861.7						5.4
Total available-for-sale securities			53,125.7						13.9						(3,551.5)						(74.5)						49,513.6						92.5
Equity securities:
Nonredeemable preferred stocks			1,364.2						0						0						(151.0)						1,213.2						2.3
Common equities			826.1						0						0						1,995.4						2,821.5						5.2
Total equity securities			2,190.3						0						0						1,844.4						4,034.7						7.5
Total portfolio1			$	55,316.0					$	13.9					$	(3,551.5)					$	1,769.9					$	53,548.3					100.0		%

1 At September 30, 2023 and 2022, we had $167.3 million and $74.7 million, respectively, of net unsettled security purchase transactions included in other liabilities, compared to $34.4 million included in other assets at December 31, 2022.

The total fair value of the portfolio at September 30, 2023 and 2022, and December 31, 2022, included $4.1 billion, $4.2 billion, and $4.4 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of unsettled security transactions.

At September 30, 2023, bonds and certificates of deposit in the principal amount of $612.4 million were on deposit to meet state insurance regulatory requirements. We did not hold any securities of any one issuer, excluding U.S. government obligations, with an aggregate cost or fair value exceeding 10% of total shareholders’ equity at September 30, 2023 or 2022, or December 31, 2022. At September 30, 2023, we did not hold any debt securities that were non-income producing during the preceding 12 months.

Short-Term Investments Our short-term investments may include commercial paper and other investments that are expected to mature or are redeemable within one year.

We did not have any open repurchase or reverse repurchase transactions positions at September 30, 2023 and 2022, or December 31, 2022, and did not enter into any such transactions during the first nine months of 2023. During 2022, however, we did invest in repurchase transactions that had an immaterial impact on our results of operations and cash flows. To the extent we enter into repurchase or reverse repurchase transactions, consistent with past practice, we would elect not to offset these transactions and would report them on a gross basis in our consolidated balance sheets, despite the option to elect to offset these transactions as long as they were with the same counterparty and subject to an enforceable master netting arrangement.

Hybrid Securities Certain securities in our fixed-maturity portfolio are accounted for as hybrid securities because they contain embedded derivatives that are not deemed to be clearly and closely related to the host investments. These securities are reported at fair value:

			September 30,
(millions)			2023						2022						Dec. 31, 2022
Fixed Maturities:
Corporate debt securities			$	511.1					$	500.4					$	535.4
Residential mortgage-backed securities			410.8						550.8						509.6
Other asset-backed securities			19.4						51.4						42.0
Redeemable preferred stocks			136.4						133.0						134.7
Total hybrid securities			$	1,077.7					$	1,235.6					$	1,221.7

Since the embedded derivatives (e.g., change-in-control put option, debt-to-equity conversion, or any other feature unrelated to the credit quality or risk of default of the issuer that could impact the amount or timing of our expected future cash flows) do not have observable intrinsic values, we use the fair value option to record the changes in fair value of these securities through income as a component of net realized gains or losses.

Fixed Maturities The composition of fixed maturities by maturity at September 30, 2023, was:

(millions)			Cost						Fair Value
Less than one year			$	9,639.9					$	9,387.8
One to five years			37,572.4						35,419.0
Five to ten years			13,197.7						11,710.3
Ten years or greater			80.6						74.8
Total			$	60,490.6					$	56,591.9

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities that do not have a single maturity date are reported based upon 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.

Gross Unrealized Losses The following tables show the composition of gross unrealized losses by major security type and by the length of time that individual securities have been in a continuous unrealized loss position:

			Total No. of Sec.			Total Fair Value			Gross Unrealized Losses			Less than 12 Months															12 Months or Greater
($ in millions)			No. of Sec.			Fair Value			Unrealized Losses									No. of Sec.			Fair Value			Unrealized Losses
September 30, 2023
U.S. government obligations			173			$	34,293.8		$	(2,098.4)		37			$	16,686.2		$	(557.6)								136			$	17,607.6		$	(1,540.8)
State and local government obligations			356			2,033.9			(203.3)			46			359.6			(7.6)									310			1,674.3			(195.7)
Foreign government obligations			1			15.4			(1.5)			0			0			0									1			15.4			(1.5)
Corporate debt securities			467			9,490.0			(591.8)			164			3,380.4			(94.1)									303			6,109.6			(497.7)
Residential mortgage-backed securities			40			99.9			(13.0)			2			0.4			0									38			99.5			(13.0)
Commercial mortgage-backed securities			196			3,960.8			(723.9)			0			0			0									196			3,960.8			(723.9)
Other asset-backed securities			295			5,001.8			(210.1)			104			2,056.9			(8.8)									191			2,944.9			(201.3)
Redeemable preferred stocks			3			30.6			(4.3)			0			0			0									3			30.6			(4.3)
Total fixed maturities			1,531			$	54,926.2		$	(3,846.3)		353			$	22,483.5		$	(668.1)								1,178			$	32,442.7		$	(3,178.2)

			Total No. of Sec.			Total Fair Value			Gross Unrealized Losses			Less than 12 Months												12 Months or Greater
($ in millions)			No. of Sec.			Fair Value			Unrealized Losses						No. of Sec.			Fair Value			Unrealized Losses
September 30, 2022
U.S. government obligations			157			$	22,385.4		$	(1,855.4)		103			$	16,085.8		$	(1,095.6)					54			$	6,299.6		$	(759.8)
State and local government obligations			353			1,911.0			(215.4)			292			1,363.1			(129.8)						61			547.9			(85.6)
Foreign government obligations			1			15.3			(1.4)			1			15.3			(1.4)						0			0			0
Corporate debt securities			452			8,885.6			(832.5)			391			7,875.5			(699.0)						61			1,010.1			(133.5)
Residential mortgage-backed securities			44			165.1			(16.5)			34			126.0			(11.8)						10			39.1			(4.7)
Commercial mortgage-backed securities			234			5,074.3			(747.4)			182			3,856.0			(425.4)						52			1,218.3			(322.0)
Other asset-backed securities			277			4,544.8			(268.9)			217			3,597.1			(183.4)						60			947.7			(85.5)
Redeemable preferred stocks			4			48.6			(5.6)			3			37.7			(4.0)						1			10.9			(1.6)
Total fixed maturities			1,522			$	43,030.1		$	(3,943.1)		1,223			$	32,956.5		$	(2,550.4)					299			$	10,073.6		$	(1,392.7)

			Total No. of Sec.			Total Fair Value			Gross Unrealized Losses			Less than 12 Months												12 Months or Greater
($ in millions)			No. of Sec.			Fair Value			Unrealized Losses						No. of Sec.			Fair Value			Unrealized Losses
December 31, 2022
U.S. government obligations			160			$	24,802.5		$	(1,604.7)		90			$	17,327.2		$	(699.2)					70			$	7,475.3		$	(905.5)
State and local government obligations			348			1,948.8			(202.9)			239			1,124.2			(76.8)						109			824.6			(126.1)
Foreign government obligations			1			15.5			(1.3)			0			0			0						1			15.5			(1.3)
Corporate debt securities			422			8,449.6			(676.1)			285			5,717.6			(426.1)						137			2,732.0			(250.0)
Residential mortgage-backed securities			45			151.0			(17.5)			27			65.1			(6.8)						18			85.9			(10.7)
Commercial mortgage-backed securities			226			4,651.1			(784.0)			99			1,702.0			(192.1)						127			2,949.1			(591.9)
Other asset-backed securities			262			4,247.8			(260.5)			130			2,144.8			(100.9)						132			2,103.0			(159.6)
Redeemable preferred stocks			4			49.6			(4.5)			3			38.5			(3.1)						1			11.1			(1.4)
Total fixed maturities			1,468			$	44,315.9		$	(3,551.5)		873			$	28,119.4		$	(1,505.0)					595			$	16,196.5		$	(2,046.5)

During the third quarter 2023, the credit ratings of our U.S. government obligations went down due to two major credit rating agencies rating U.S. government debt at AA+ instead of AAA. Additionally, we had 14 securities in other fixed-maturity sectors that had their credit ratings downgraded, with a combined fair value of $144.2 million and an unrealized loss of $7.1 million as of September 30, 2023.

A review of the securities in an unrealized loss position indicated that the issuers were current with respect to their interest obligations and that there was no evidence of deterioration of the current cash flow projections that would indicate we would not receive the remaining principal at maturity.

Allowance For Credit and Uncollectible Losses We are required to measure the amount of potential credit losses for all fixed-maturity securities in an unrealized loss position. We did not record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible during the first nine months of 2023 or 2022, and did not have a material credit loss allowance balance as of September 30, 2023 and 2022, or December 31, 2022. We considered several factors and inputs related to the individual securities as part of our analysis. The methodology and significant inputs used to measure the amount of credit losses in our portfolio included:

• current performance indicators on the business model or underlying assets (e.g., delinquency rates, foreclosure rates, and default rates);

• credit support (via current levels of subordination);

• historical credit ratings; and

• updated cash flow expectations based upon these performance indicators.

In order to determine the amount of credit loss, if any, we initially reviewed securities in a loss position to determine whether it was likely that we would be required, or intended, to sell any of the securities prior to the recovery of their respective cost bases (which could be maturity). If we were likely to, or intended to, sell prior to a potential recovery, we would write off the unrealized loss. For those securities that we determined we were not likely to, or did not intend to, sell prior to a potential recovery, we

performed additional analysis to determine if the loss was credit related. For securities subject to credit related loss, we calculated the net present value (NPV) of the cash flows expected (i.e., expected recovery value) using the current book yield for each security. The NPV was then compared to the security’s current amortized value to determine if a credit loss existed. In the event that the NPV was below the amortized value, and the amount was determined to be material individually, or in the aggregate, a credit loss would be deemed to exist, and either an allowance for credit losses would be created, or if an allowance currently existed, either a recovery of the previous allowance, or an incremental loss, would be recorded to net realized gains (losses) on securities.

As of September 30, 2023 and 2022, and December 31, 2022, we believe none of the unrealized losses were related to material credit losses on any individual security, or in the aggregate. We continue to expect all the securities in our portfolio to pay their principal and interest obligations.

In addition, we reviewed our accrued investment income outstanding on those securities in an unrealized loss position at September 30, 2023 and 2022, and December 31, 2022, to determine if the accrued interest amounts were determined to be uncollectible. Based on our analysis, we believe the issuers have sufficient liquidity and capital reserves to meet their current interest, and future principal, obligations and, therefore, did not write off any accrued income as uncollectible at September 30, 2023 and 2022, or December 31, 2022.

Realized Gains (Losses) The components of net realized gains (losses) for the three and nine months ended September 30, were:

			Three Months												Nine Months
(millions)			2023						2022						2023						2022
Gross realized gains on security sales
Available-for-sale securities:
U.S. government obligations			$	0.2					$	0					$	4.2					$	4.6
Corporate debt securities			0.7						0.3						0.8						6.8
Residential mortgage-backed securities			0						0						0						0.7
Other asset-backed securities			0						0						0						0.1
Total available-for-sale securities			0.9						0.3						5.0						12.2
Equity securities:
Nonredeemable preferred stocks			0						0.1						0.3						17.6
Common equities			0.3						1.4						354.2						832.5
Total equity securities			0.3						1.5						354.5						850.1
Subtotal gross realized gains on security sales			1.2						1.8						359.5						862.3
Gross realized losses on security sales
Available-for-sale securities:
U.S. government obligations			(14.6)						0						(27.2)						(233.5)
State and local government obligations			0						0						0						(1.0)
Corporate debt securities			(19.1)						(14.0)						(69.3)						(51.8)
Commercial mortgage-backed securities			(20.6)						(44.8)						(100.6)						(58.6)
Other asset-backed securities			(5.2)						0						(5.6)						(2.1)
Short-term investments			0						0						(0.4)						(0.3)
Total available-for-sale securities			(59.5)						(58.8)						(203.1)						(347.3)
Equity securities:
Nonredeemable preferred stocks			(7.4)						(5.1)						(117.6)						(7.0)
Common equities			(8.9)						0						(21.8)						(78.0)
Total equity securities			(16.3)						(5.1)						(139.4)						(85.0)
Subtotal gross realized losses on security sales			(75.8)						(63.9)						(342.5)						(432.3)
Net realized gains (losses) on security sales
Available-for-sale securities:
U.S. government obligations			(14.4)						0						(23.0)						(228.9)
State and local government obligations			0						0						0						(1.0)
Corporate debt securities			(18.4)						(13.7)						(68.5)						(45.0)
Residential mortgage-backed securities			0						0						0						0.7
Commercial mortgage-backed securities			(20.6)						(44.8)						(100.6)						(58.6)
Other asset-backed securities			(5.2)						0						(5.6)						(2.0)
Short-term investments			0						0						(0.4)						(0.3)
Total available-for-sale securities			(58.6)						(58.5)						(198.1)						(335.1)
Equity securities:
Nonredeemable preferred stocks			(7.4)						(5.0)						(117.3)						10.6
Common equities			(8.6)						1.4						332.4						754.5
Total equity securities			(16.0)						(3.6)						215.1						765.1
Subtotal net realized gains (losses) on security sales			(74.6)						(62.1)						17.0						430.0
Other assets
Gain			8.4						0						21.6						0
Impairment			(2.3)						(2.2)						(6.8)						(6.5)
Subtotal net realized gains (losses) on other assets			6.1						(2.2)						14.8						(6.5)
Net holding period gains (losses)
Hybrid securities			(0.3)						(11.4)						18.4						(98.8)
Equity securities			(80.2)						(140.7)						(0.5)						(2,164.1)
Subtotal net holding period gains (losses)			(80.5)						(152.1)						17.9						(2,262.9)
Total net realized gains (losses) on securities			$	(149.0)					$	(216.4)					$	49.7					$	(1,839.4)

Realized gains (losses) on securities sold are computed using the first-in-first-out method. For the first nine months of both 2023 and 2022, the gross gains in common equities reflected sales of securities, as part of our plan to incrementally reduce risk in the portfolio in response to our view of the potential of a more difficult economic environment in both years. The gross loss from the fixed-maturity sales reflected the continued rise in interest rates throughout 2022, which resulted in valuation declines for most of our available-for-sale securities. In addition, during 2023, we selectively sold securities, which were primarily corporate debt securities and commercial mortgage-backed

securities. The gross loss incurred in our nonredeemable preferred stocks was primarily related to the sale of certain holdings in U.S. bank preferred stocks. The other asset gain for 2023, related to proceeds received as the result of litigation in conjunction with three renewable energy investments we made from 2016 through 2018 (the original investments were previously written down in full). The other asset impairment loss was recorded as a result of our investment in a federal new markets tax credit fund, which was entered into during the second quarter 2021, and is reported in other assets in our consolidated balance sheets.

The following table reflects our holding period realized gains (losses) recognized on equity securities held at the respective periods ended September 30:

			Three Months									Nine Months
(millions)			2023			2022						2023			2022
Total net gains (losses) recognized during the period on equity securities			$	(96.2)		$	(144.3)					$	214.6		$	(1,399.0)
Less: Net gains (losses) recognized on equity securities sold during the period			(16.0)			(3.6)						215.1			765.1
Net holding period gains (losses) recognized during the period on equity securities held at period end			$	(80.2)		$	(140.7)					$	(0.5)		$	(2,164.1)

Net Investment Income The components of net investment income for the three and nine months ended September 30, were:

			Three Months									Nine Months
(millions)			2023			2022						2023			2022
Available-for-sale securities:
Fixed maturities:
U.S. government obligations			$	237.0		$	86.1					$	591.7		$	205.4
State and local government obligations			12.3			9.8						34.5			29.3
Foreign government obligations			0.1			0.1						0.2			0.2
Corporate debt securities			94.8			71.8						261.9			215.4
Residential mortgage-backed securities			7.6			8.8						22.6			23.2
Commercial mortgage-backed securities			48.7			48.3						147.9			138.1
Other asset-backed securities			62.9			52.1						173.0			116.5
Redeemable preferred stocks			2.6			3.0						8.2			8.5
Total fixed maturities			466.0			280.0						1,240.0			736.6
Short-term investments			21.6			24.8						71.1			29.6
Total available-for-sale securities			487.6			304.8						1,311.1			766.2
Equity securities:
Nonredeemable preferred stocks			11.9			17.3						40.3			53.6
Common equities			10.7			11.5						32.9			48.4
Total equity securities			22.6			28.8						73.2			102.0
Investment income			510.2			333.6						1,384.3			868.2
Investment expenses			(7.2)			(5.8)						(18.8)			(17.4)
Net investment income			$	503.0		$	327.8					$	1,365.5		$	850.8

On a year-over-year basis, investment income (interest and dividends) increased 53% and 59% for the three and nine months ended September 30, 2023, respectively, and the recurring investment book yield increased 32% and 39% for the three and nine months ended September 30, 2023, respectively, compared to the same periods last year. The increases are primarily due to an increase in interest rates on floating-rate securities in our portfolio, an increase in average assets resulting from premium growth, and investing new cash and cash from maturities in higher interest rate securities given the rising interest rate environment.

3. FAIR VALUE

We have categorized our financial instruments, based on the degree of subjectivity inherent in the method by which they are valued, 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 obligations, which are continually priced on a daily basis, active exchange-traded equity securities, and certain short-term 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.

• Level 3: Inputs that are unobservable. Unobservable inputs reflect our subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

Determining the fair value of the investment portfolio is the responsibility of management. As part of that responsibility, we evaluate whether a market is distressed or inactive in determining the fair value for our portfolio. We review certain market level inputs to evaluate whether sufficient activity, volume, and new issuances exist to create an active market. Based on this evaluation, we concluded that there was sufficient activity related to the sectors and securities for which we obtained valuations.

The composition of the investment portfolio by major security type and our outstanding debt was:

			Fair Value
(millions)			Level 1						Level 2						Level 3						Total						Cost
September 30, 2023
Fixed maturities:
U.S. government obligations			$	34,293.8					$	0					$	0					$	34,293.8					$	36,392.2
State and local government obligations			0						2,054.3						0						2,054.3						2,257.6
Foreign government obligations			0						15.4						0						15.4						16.9
Corporate debt securities			0						10,254.2						0						10,254.2						10,880.8
Subtotal			34,293.8						12,323.9						0						46,617.7						49,547.5
Asset-backed securities:
Residential mortgage-backed			0						515.8						0						515.8						530.4
Commercial mortgage-backed			0						3,977.7						0						3,977.7						4,699.5
Other asset-backed			0						5,313.6						0						5,313.6						5,524.2
Subtotal asset-backed securities			0						9,807.1						0						9,807.1						10,754.1
Redeemable preferred stocks:
Financials			0						21.3						0						21.3						24.5
Utilities			0						9.3						0						9.3						10.4
Industrials			0						136.5						0						136.5						154.1
Subtotal redeemable preferred stocks			0						167.1						0						167.1						189.0
Total fixed maturities			34,293.8						22,298.1						0						56,591.9						60,490.6
Short-term investments			1,763.2						32.0						0						1,795.2						1,795.2
Total available-for-sale securities			36,057.0						22,330.1						0						58,387.1						62,285.8
Equity securities:
Nonredeemable preferred stocks:
Financials			0						770.7						47.9						818.6						921.9
Utilities			0						34.5						0						34.5						40.0
Industrials			0						0						15.8						15.8						15.0
Subtotal nonredeemable preferred stocks			0						805.2						63.7						868.9						976.9
Common equities:
Common stocks			2,573.6						0						18.3						2,591.9						640.0
Other risk investments			0						0						22.6						22.6						22.6
Subtotal common equities			2,573.6						0						40.9						2,614.5						662.6
Total equity securities			2,573.6						805.2						104.6						3,483.4						1,639.5
Total portfolio			$	38,630.6					$	23,135.3					$	104.6					$	61,870.5					$	63,925.3
Debt			$	0					$	5,932.1					$	0					$	5,932.1					$	6,887.6

			Fair Value
(millions)			Level 1						Level 2						Level 3						Total						Cost
September 30, 2022
Fixed maturities:
U.S. government obligations			$	22,405.5					$	0					$	0					$	22,405.5					$	24,260.9
State and local government obligations			0						1,925.5						0						1,925.5						2,140.9
Foreign government obligations			0						15.3						0						15.3						16.7
Corporate debt securities			0						9,228.4						0						9,228.4						10,119.8
Subtotal			22,405.5						11,169.2						0						33,574.7						36,538.3
Asset-backed securities:
Residential mortgage-backed			0						723.0						0						723.0						754.2
Commercial mortgage-backed			0						5,087.9						0						5,087.9						5,833.9
Other asset-backed			0						4,605.9						0						4,605.9						4,876.7
Subtotal asset-backed securities			0						10,416.8						0						10,416.8						11,464.8
Redeemable preferred stocks:
Financials			0						39.8						0						39.8						43.6
Utilities			0						8.8						0						8.8						10.5
Industrials			8.9						124.1						0						133.0						148.5
Subtotal redeemable preferred stocks			8.9						172.7						0						181.6						202.6
Total fixed maturities			22,414.4						21,758.7						0						44,173.1						48,205.7
Short-term investments			4,219.6						18.0						0						4,237.6						4,237.6
Total available-for-sale securities			26,634.0						21,776.7						0						48,410.7						52,443.3
Equity securities:
Nonredeemable preferred stocks:
Financials			60.9						1,015.6						64.9						1,141.4						1,297.6
Utilities			0						71.3						0						71.3						79.9
Industrials			0						24.7						17.0						41.7						40.1
Subtotal nonredeemable preferred stocks			60.9						1,111.6						81.9						1,254.4						1,417.6
Common equities:
Common stocks			2,597.3						49.3						0						2,646.6						785.0
Other risk investments			0						0						18.7						18.7						18.7
Subtotal common equities			2,597.3						49.3						18.7						2,665.3						803.7
Total equity securities			2,658.2						1,160.9						100.6						3,919.7						2,221.3
Total portfolio			$	29,292.2					$	22,937.6					$	100.6					$	52,330.4					$	54,664.6
Debt			$	0					$	5,634.7					$	0					$	5,634.7					$	6,387.4

			Fair Value
(millions)			Level 1						Level 2						Level 3						Total						Cost
December 31, 2022
Fixed maturities:
U.S. government obligations			$	25,167.4					$	0					$	0					$	25,167.4					$	26,770.7
State and local government obligations			0						1,977.1						0						1,977.1						2,180.0
Foreign government obligations			0						15.5						0						15.5						16.8
Corporate debt securities			0						9,412.7						0						9,412.7						10,125.8
Subtotal			25,167.4						11,405.3						0						36,572.7						39,093.3
Asset-backed securities:
Residential mortgage-backed			0						666.8						0						666.8						696.1
Commercial mortgage-backed			0						4,663.5						0						4,663.5						5,446.0
Other asset-backed			0						4,564.6						0						4,564.6						4,826.0
Subtotal asset-backed securities			0						9,894.9						0						9,894.9						10,968.1
Redeemable preferred stocks:
Financials			0						40.5						0						40.5						43.6
Utilities			0						9.1						0						9.1						10.5
Industrials			9.2						125.5						0						134.7						148.5
Subtotal redeemable preferred stocks			9.2						175.1						0						184.3						202.6
Total fixed maturities			25,176.6						21,475.3						0						46,651.9						50,264.0
Short-term investments			2,800.7						61.0						0						2,861.7						2,861.7
Total available-for-sale securities			27,977.3						21,536.3						0						49,513.6						53,125.7
Equity securities:
Nonredeemable preferred stocks:
Financials			39.0						994.4						67.4						1,100.8						1,244.2
Utilities			0						71.2						0						71.2						79.9
Industrials			0						24.8						16.4						41.2						40.1
Subtotal nonredeemable preferred stocks			39.0						1,090.4						83.8						1,213.2						1,364.2
Common equities:
Common stocks			2,783.4						0						18.3						2,801.7						806.3
Other risk investments			0						0						19.8						19.8						19.8
Subtotal common equities			2,783.4						0						38.1						2,821.5						826.1
Total equity securities			2,822.4						1,090.4						121.9						4,034.7						2,190.3
Total portfolio			$	30,799.7					$	22,626.7					$	121.9					$	53,548.3					$	55,316.0
Debt			$	0					$	5,717.9					$	0					$	5,717.9					$	6,388.3

Our portfolio valuations, excluding short-term investments, classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources, including pricing vendors, dealers/market makers, and exchange-quoted prices.

Our short-term investments classified as Level 1 are highly liquid, actively marketed, and have a very short duration, primarily 90 days or less to redemption. These securities are held at their original cost, adjusted for any accretion of discount, since that value very closely approximates what an active market participant would be willing to pay for such securities. The remainder of our short-term investments are classified as Level 2 and are not priced externally since these securities continually trade at par value. These securities are classified as Level 2 since they are primarily longer-dated securities issued by municipalities that contain either liquidity facilities or mandatory put features within one year.

At September 30, 2023, vendor-quoted prices represented 93% of our Level 1 classifications (excluding short-term investments), compared to 90% at both September 30, 2022 and December 31, 2022. The securities quoted by vendors in Level 1 primarily represent our holdings in U.S. Treasury Notes, which are frequently traded, and the quotes are considered similar to exchange-traded quotes. The balance of our Level 1 pricing comes from quotes obtained directly from trades made on active exchanges. All Level 1 preferred stocks with active exchange quotes were sold as of September 30, 2023.

At September 30, 2023, vendor-quoted prices comprised 99% of our Level 2 classifications (excluding short-term investments and common stock), while dealer-quoted prices represented the remaining 1%, compared to 98% and 2%, respectively, at both September 30, 2022 and December 31, 2022. In our process for selecting a source (e.g., dealer or pricing service) to provide pricing for securities in our portfolio, we reviewed documentation

from the sources that detailed the pricing techniques and methodologies used by these sources and determined if their policies adequately considered market activity, either based on specific transactions for the particular security type or based on modeling of securities with similar credit quality, duration, yield, and structure that were recently transacted. Once a source is chosen, we continue to monitor any changes or modifications to their processes by reviewing their documentation on internal controls for pricing and market reviews. We review quality control measures of our sources as they become available to determine if any significant changes have occurred from period to period that might indicate issues or concerns regarding their evaluation or market coverage.

As part of our pricing procedures, we obtain quotes from more than one source to help us fully evaluate the market price of securities. However, our internal pricing policy is to use a consistent source for individual securities in order to maintain the integrity of our valuation process. Quotes obtained from the sources are not considered binding offers to transact. Under our policy, when a review of the valuation received from our selected source appears to be outside of what is considered market level activity (which is defined as trading at spreads or yields significantly different than those of comparable securities or outside the general sector level movement without a reasonable explanation), we may use an alternate source’s price. To the extent we determine that it may be prudent to substitute one source’s price for another, we will contact the initial source to obtain an understanding of the factors that may be contributing to the significant price variance.

To allow us to determine if our initial source is providing a price that is outside of a reasonable range, we review our portfolio pricing on a weekly basis. When necessary, we challenge prices from our sources when a price provided does not match our expectations based on our evaluation of market trends and activity. Initially, we perform a review of our portfolio by sector to identify securities whose prices appear outside of a reasonable range. We then perform a more detailed review of fair values for securities disclosed as Level 2. We review dealer bids and quotes for these and/or similar securities to determine the market level context for our valuations. We then evaluate inputs relevant for each class of securities disclosed in the preceding hierarchy tables.

For structured debt securities, including commercial, residential, and other asset-backed securities, we evaluate available market-related data for these and similar securities related to collateral, delinquencies, and defaults for historical trends and reasonably estimable projections, as well as historical prepayment rates and current prepayment assumptions and cash flow estimates. We further stratify each class of our structured debt securities into more finite sectors (e.g., planned amortization class, first pay, second pay, senior, subordinated, etc.) and use

duration, credit quality, and coupon to determine if the fair value is appropriate.

For corporate debt and preferred stock (redeemable and nonredeemable) portfolios, as well as the notes issued by The Progressive Corporation (see Note 4 – Debt), we review securities by duration, credit quality, and coupon, as well as changes in interest rate and credit spread movements within that stratification. The review also includes recent trades, including: volume traded at various levels that establish a market; issuer specific fundamentals; and industry-specific economic news as it comes to light.

For municipal securities (e.g., general obligations, revenue, and housing), we stratify the portfolio to evaluate securities by type, duration, credit quality, and coupon to review price changes relative to credit spread and interest rate changes. Additionally, we look to economic data as it relates to geographic location as an indication of price-to-call or maturity predictors. For municipal housing securities, we look to changes in cash flow projections, both historical and reasonably estimable projections, to understand yield changes and their effect on valuation.

For short-term securities, we look at acquisition price relative to the coupon or yield. Since our short-term securities are typically 90 days or less to maturity, with the majority listed in Level 2 being 30 days or less to redemption, we believe that acquisition price is the best estimate of fair value.

We also review data assumptions as supplied by our sources to determine if that data is relevant to current market conditions. In addition, we independently review each sector for transaction volumes, new issuances, and changes in spreads, as well as the overall movement of interest rates along the yield curve to determine if sufficient activity and liquidity exists to provide a credible source for our market valuations.

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 receive externally and research material valuation differences. We compare our results to index returns for each major sector adjusting for duration and credit quality differences to better understand our portfolio’s results. Additionally, we review on a monthly basis our external sales transactions and compare the actual final market sales prices to previous market valuation prices. This review provides us further validation that our pricing sources are providing market level prices, since we are able to explain significant price changes (i.e., greater than 2%) as known events occur in the marketplace and affect a particular security’s price at sale.

This analysis provides us with additional comfort regarding the source’s process, the quality of its review, and its willingness to improve its analysis based on feedback from clients. We believe this effort helps ensure that we are reporting the most representative fair values for our securities.

After all the valuations are received and our review of Level 2 securities is complete, if the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected securities to Level 3.

Except as described below, our Level 3 securities are priced externally; however, due to several factors (e.g., nature of the securities, level of activity, and lack of similar securities trading to obtain observable market level inputs), these valuations are more subjective in nature.

To the extent we receive prices from external sources (e.g., broker, valuation firm) for the Level 3 securities, we review those prices for reasonableness using internally developed assumptions and then compare our derived prices to the prices received from the external sources. Based on our review, all prices received from external sources remained unadjusted.

If we do not receive prices from an external source, we perform an internal fair value comparison, which includes a review and analysis of market-comparable securities, to determine if fair value changes are needed. Based on this analysis, certain private equity investments included in the Level 3 category remain valued at cost or were priced using a recent transaction as the basis for fair value. At least annually, these private equity investments are priced by an external source.

Our Level 3 other risk investments include securities accounted for under the equity method of accounting and, therefore, are not subject to fair value reporting. Since these securities represent less than 0.1% of our total portfolio, we will continue to include them in our Level 3 disclosures and report the activity from these investments as “other” changes in the summary of changes in fair value table and categorize these securities as “pricing exemption securities” in the quantitative information table.

One of our Level 3 financial nonredeemable preferred stocks was exchanged into common equity during third quarter 2023 and the security was sold prior to September 30, 2023. The Level 2 common stock held at September 30, 2022, was transferred to Level 3 at December 31, 2022. At September 30, 2023 and 2022, and December 31, 2022, we did not have any securities in our fixed-maturity portfolio listed as Level 3.

During the first nine months of 2023 and 2022, there were no material assets or liabilities measured at fair value on a nonrecurring basis, other than goodwill. See Note 12 – Goodwill and Intangible Assets for further discussion.

Due to the relative size of the Level 3 securities’ fair values compared to the total portfolio’s fair value, any changes in pricing methodology would not have a significant change in valuation that would materially impact net or comprehensive income.

The following tables provide a summary of changes in fair value associated with Level 3 assets for the three and nine months ended September 30, 2023 and 2022:

			Level 3 Fair Value
(millions)			Fair Value at June 30, 2023			Calls/ Maturities/ Paydowns/Other			Purchases			Sales			Net Realized (Gain)/Loss on Sales			Change in Valuation			Net Transfers In (Out)			Fair Value at September 30, 2023
Equity securities:
Nonredeemable preferred stocks:
Financials			$	56.0		$	(8.1)		$	0		$	0		$	0		$	0		$	0		$	47.9
Industrials			15.8			0			0			0			0			0			0			15.8
Common equities:
Common stocks			18.3			8.1			0			(10.0)			8.9			(7.0)			0			18.3
Other risk investments			21.9			0.7			0			0			0			0			0			22.6
Total Level 3 securities			$	112.0		$	0.7		$	0		$	(10.0)		$	8.9		$	(7.0)		$	0		$	104.6
			Level 3 Fair Value
(millions)			Fair Value at June 30, 2022			Calls/ Maturities/ Paydowns/Other			Purchases			Sales			Net Realized (Gain)/Loss on Sales			Change in Valuation			Net Transfers In (Out)			Fair Value at September 30, 2022
Equity securities:
Nonredeemable preferred stocks:
Financials			$	64.9		$	0		$	0		$	0		$	0		$	0		$	0		$	64.9
Industrials			17.0			0			0			0			0			0			0			17.0
Common equities:
Common stocks			0			0			0			0			0			0			0			0
Other risk investments			18.5			0.2			0			0			0			0			0			18.7
Total Level 3 securities			$	100.4		$	0.2		$	0		$	0		$	0		$	0		$	0		$	100.6
			Level 3 Fair Value
(millions)			Fair Value at December 31, 2022			Calls/ Maturities/ Paydowns/Other			Purchases			Sales			Net Realized (Gain)/Loss on Sales			Change in Valuation			Net Transfers In (Out)			Fair Value at September 30, 2023
Equity securities:
Nonredeemable preferred stocks:
Financials			$	67.4		$	(8.1)		$	0		$	0		$	0		$	(11.4)		$	0		$	47.9
Industrials			16.4			0			0			0			0			(0.6)			0			15.8
Common equities:
Common stocks			18.3			8.1			0			(10.0)			8.9			(7.0)			0			18.3
Other risk investments			19.8			2.8			0			0			0			0			0			22.6
Total Level 3 securities			$	121.9		$	2.8		$	0		$	(10.0)		$	8.9		$	(19.0)		$	0		$	104.6

			Level 3 Fair Value
(millions)			Fair Value at December 31, 2021			Calls/ Maturities/ Paydowns/Other			Purchases			Sales			Net Realized (Gain)/Loss on Sales			Change in Valuation			Net Transfers In (Out)			Fair Value at September 30, 2022
Equity securities:
Nonredeemable preferred stocks:
Financials			$	76.4		$	0		$	0		$	(15.0)		$	(17.2)		$	20.7		$	0		$	64.9
Industrials			34.4			(0.5)			0			0			0			(16.9)			0			17.0
Common equities:
Other risk investments			16.9			1.8			0			0			0			0			0			18.7
Total Level 3 securities			$	127.7		$	1.3		$	0		$	(15.0)		$	(17.2)		$	3.8		$	0		$	100.6

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at September 30, 2023 and 2022, and December 31, 2022:

			Quantitative Information about Level 3 Fair Value Measurements
($ in millions)			Fair Value at September 30, 2023			Valuation Technique			Unobservable Input			Range of Input Values Increase (Decrease)			Weighted Average Increase (Decrease)
Equity securities:
Nonredeemable preferred stocks			$	63.7		Market comparables			Weighted average market capitalization price change %			(10.8)% to 4.5%			1.7		%
Common stocks			18.3			Market comparables			Weighted average market capitalization price change %			(37.4)% to 130.2%			(7.9)		%
Subtotal Level 3 securities			82.0
Pricing exemption securities			22.6
Total Level 3 securities			$	104.6

			Quantitative Information about Level 3 Fair Value Measurements
($ in millions)			Fair Value at September 30, 2022			Valuation Technique			Unobservable Input			Range of Input Values Increase (Decrease)			Weighted Average Increase (Decrease)
Equity securities:
Nonredeemable preferred stocks			$	81.9		Market comparables			Weighted average market capitalization price change %			(20.7)% to (1.1)%			(6.6)		%
Subtotal Level 3 securities			81.9
Pricing exemption securities			18.7
Total Level 3 securities			$	100.6

			Quantitative Information about Level 3 Fair Value Measurements
($ in millions)			Fair Value at December 31, 2022			Valuation Technique			Unobservable Input			Range of Input Values Increase (Decrease)			Weighted Average Increase (Decrease)
Equity securities:
Nonredeemable preferred stocks			$	83.8		Market comparables			Weighted average market capitalization price change %			(0.6)% to 19.9%			10.5%
Common stocks			18.3			Market comparables			Weighted average market capitalization price change %			(42.5)% to 59.1%			0.3%
Subtotal Level 3 securities			102.1
Pricing exemption securities			19.8
Total Level 3 securities			$	121.9

4. DEBT

Debt at each of the balance sheet periods consisted of:

			September 30, 2023									September 30, 2022									December 31, 2022
(millions)			Carrying Value						Fair Value						Carrying Value						Fair Value						Carrying Value						Fair Value
2.45% Senior Notes due 2027 (issued: $500.0, August 2016)			$	498.5					$	455.8					$	498.1					$	459.7					$	498.2					$	457.7
2.50% Senior Notes due 2027 (issued: $500.0, March 2022)			497.9						454.0						497.4						451.6						497.5						460.3
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)			297.7						320.8						297.4						322.1						297.5						326.8
4.00% Senior Notes due 2029 (issued: $550.0, October 2018)			546.8						518.9						546.3						519.5						546.4						527.8
3.20% Senior Notes due 2030 (issued: $500.0, March 2020)			497.2						435.1						496.8						439.3						496.9						448.6
3.00% Senior Notes due 2032 (issued: $500.0, March 2022)			496.2						420.5						495.8						418.8						495.9						438.1
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)			396.6						414.3						396.4						426.0						396.4						435.4
4.95% Senior Notes due 2033 (issued: $500.0, May 2023)			496.4						474.7						0						0						0						0
4.35% Senior Notes due 2044 (issued: $350.0, April 2014)			347.0						280.9						346.9						298.5						346.9						298.4
3.70% Senior Notes due 2045 (issued: $400.0, January 2015)			395.8						288.2						395.7						305.7						395.7						310.2
4.125% Senior Notes due 2047 (issued: $850.0, April 2017)			842.2						666.3						842.0						710.3						842.1						716.2
4.20% Senior Notes due 2048 (issued: $600.0, March 2018)			590.6						473.3						590.3						505.9						590.4						507.0
3.95% Senior Notes due 2050 (issued: $500.0, March 2020)			491.1						373.5						490.9						396.6						490.9						404.9
3.70% Senior Notes due 2052 (issued: $500.0, March 2022)			493.6						355.8						493.4						380.7						493.5						386.5
Total			$	6,887.6					$	5,932.1					$	6,387.4					$	5,634.7					$	6,388.3					$	5,717.9

The Progressive Corporation issued $500.0 million of 4.95% Senior Notes due 2033 in May 2023 in an underwritten public offering. The net proceeds from the issuance, after deducting underwriters’ discounts, commissions, and other issuance costs, was approximately $496.3 million. Consistent with the other senior notes issued by Progressive, interest on this note is payable semiannually, principal is due at maturity, and the note is redeemable, in whole or in part, at any time, subject to a treasury “make whole” provision.

There was no short-term debt outstanding at September 30, 2023 and 2022, and December 31, 2022.

During the second quarter 2023, The Progressive Corporation amended its line of credit with PNC Bank, National Association (PNC), to increase the maximum principal amount to $300 million from the previous amount of $250 million and extend the expiration date to April 30, 2024. Subject to the terms and conditions of the line of credit documents, advances under the line of credit (if any) will bear interest at a variable rate equal to the 1-month term Secured Overnight Financing Rate (SOFR) plus 1.10%. Each advance must be repaid on the 30th day after the date of the advance or, if earlier, April 30, 2024, the expiration date of the line of credit. Prepayments are permitted without penalty. The line of credit is uncommitted and, as such, all advances are subject to PNC’s discretion. We had no borrowings under the line of credit during the periods presented.

5. INCOME TAXES

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 review our deferred tax assets regularly for recoverability. At September 30, 2023 and 2022, and December 31, 2022, we determined that we did not need a valuation allowance on our gross deferred tax assets. Although realization of the deferred tax assets is not assured, management believes that it is more likely than not the deferred tax assets will be realized based on our expectation that we will be able to fully utilize the deductions that are ultimately recognized for tax purposes. At September 30, 2023 and 2022, and December 31, 2022, the net deferred tax asset includes a gross deferred tax asset of $807.0 million, $827.7 million, and $742.9 million, respectively, related to unrealized losses on fixed-maturity securities. We believe this deferred tax asset will be realized based on the existence of

prior year capital gains, current temporary differences related to unrealized gains in our equity portfolio, and other tax planning strategies.

At September 30, 2023 and 2022, and December 31, 2022, we had no reserves for uncertain tax positions.

The effective tax rate for the three and nine months ended September 30, 2023, was 20.5% and 20.2%, respectively, compared to 12.9% and (1.6)% for the same periods last year. The lower effective tax rates for the three and nine months ended September 30, 2022, were due in part to the low amount of income (loss) before taxes during those periods, resulting in permanent tax differences having a greater impact on the effective rate. The low effective tax rate for the nine months ended September 30, 2022, was also due to a goodwill impairment charge (see Note 12 – Goodwill and Intangible Assets for further discussion).

6. LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES

Activity in the loss and loss adjustment expense reserves is summarized as follows:

			September 30,
(millions)			2023						2022
Balance at January 1			$	30,359.3					$	26,164.1
Less reinsurance recoverables on unpaid losses			5,559.2						4,733.6
Net balance at January 1			24,800.1						21,430.5
Incurred related to:
Current year			33,035.0						28,245.4
Prior years			1,147.0						52.8
Total incurred			34,182.0						28,298.2
Paid related to:
Current year			18,581.3						15,712.4
Prior years			11,764.7						9,418.5
Total paid			30,346.0						25,130.9
Net balance at September 30			28,636.1						24,597.8
Plus reinsurance recoverables on unpaid losses			4,941.2						6,034.0
Balance at September 30			$	33,577.3					$	30,631.8

We experienced unfavorable reserve development of $1,147.0 million and $52.8 million during the first nine months of 2023 and 2022, respectively, which is reflected as “incurred related to prior years” in the table above.

Year-to-date September 30, 2023

• The unfavorable prior year reserve development included approximately $929 million attributable to accident year 2022, $108 million to accident year 2021, and the remainder to accident years 2020 and prior.

• Our personal auto products incurred about $866 million of unfavorable loss and loss adjustment expense (LAE) reserve development, with the Agency and Direct auto businesses each contributing about half. Over half of the unfavorable development was attributable to higher than anticipated severity in auto property and physical damage coverages, while the remaining unfavorable development was primarily due to increased loss costs in Florida injury and medical coverages and, to a lesser extent, higher than anticipated late reported injury claims; partially offset by lower than expected loss adjustment expenses.

• Our Commercial Lines business experienced about $277 million of unfavorable development, primarily driven by higher than anticipated severity and frequency of late reported injury claims, with about half of the unfavorable development attributable to our transportation network company (TNC) business.

Year-to-date September 30, 2022

• Approximately $45 million of the unfavorable prior year reserve development was attributable to accident year 2021 and $29 million to 2019 and prior accident years, partially offset by $21 million of favorable development attributable to accident year 2020.

• Our personal auto products incurred about $28 million of favorable loss and LAE reserve development, with about $25 million attributable to the Direct business. The favorable development was primarily attributable to more subrogation and salvage recoveries and lower LAE than originally anticipated, partially offset by higher than anticipated severity and frequency of auto property damage payments on previously closed claims and late reported injury claims.

• Our Commercial Lines business experienced about $77 million of unfavorable development, primarily due to higher than anticipated severity of injury case reserves and higher than anticipated severity and frequency of late reported claims in our TNC business.

7. SUPPLEMENTAL CASH FLOW INFORMATION

Cash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments of funds held in bank demand deposit accounts by certain subsidiaries. The amount of reverse repurchase commitments, which are not considered part of the investment portfolio, held by these subsidiaries at September 30, 2023 and 2022, and December 31, 2022, were $79.7 million, $123.0 million, and $125.9 million, respectively. Restricted cash and cash equivalents include collateral held against unpaid deductibles and cash that is restricted to pay flood claims under the National Flood Insurance Program’s “Write Your Own” program, for which certain subsidiaries are participants.

Non-cash activity included the following in the respective periods:

			Nine Months Ended September 30,
(millions)			2023						2022
Common share dividends1			$	58.5					$	58.5
Operating lease liabilities2			45.6						29.7

1 Declared but unpaid. See Note 9 – Dividends for further discussion.

2 From obtaining right-of-use assets.

In the respective periods, we paid the following:

			Nine Months Ended September 30,
(millions)			2023						2022
Income taxes			$	413.0					$	595.9
Interest			213.5						191.3
Operating lease liabilities			57.2						62.5

8. SEGMENT INFORMATION

Our Personal Lines segment writes insurance for personal autos and recreational vehicles (our special lines products). Our Commercial Lines segment writes auto-related liability and physical damage insurance, business-related general liability and property insurance predominately for small businesses, and workers’ compensation insurance primarily for the transportation industry. Our Property segment writes residential property insurance for homeowners, other property owners, and renters. Our service businesses provide insurance-related services, including serving as an agent for homeowners, general liability, and workers’ compensation insurance, among

other products, through programs in our direct Personal Lines and Commercial Lines businesses. As previously disclosed in our 2022 Annual Report to Shareholders, during 2022, our contract to act as a servicing agent for processing Commercial Automobile Insurance Procedures/Plans (CAIP) business expired during the third quarter 2022 and we did not renew the contract. This non-renewal did not materially affect our financial condition, results of operations, or cash flows. All segment revenues are generated from external customers; all intercompany transactions are eliminated in consolidation.

Following are the operating results for the respective periods:

			Three Months Ended September 30,																								Nine Months Ended September 30,
			2023												2022												2023									2022
(millions)			Revenues						Pretax Profit (Loss)						Revenues						Pretax Profit (Loss)						Revenues						Pretax Profit (Loss)						Revenues						Pretax Profit (Loss)
Personal Lines
Agency			$	5,414.0					$	335.7					$	4,441.9					$	(41.3)					$	15,481.4					$	427.1					$	13,131.7					$	507.6
Direct			6,361.8						706.2						5,077.4						40.6						18,259.9						810.6						14,776.9						389.4
Total Personal Lines1			11,775.8						1,041.9						9,519.3						(0.7)						33,741.3						1,237.7						27,908.6						897.0
Commercial Lines			2,486.6						23.0						2,317.9						238.1						7,296.8						147.4						6,749.5						683.5
Property2			631.8						74.6						561.0						(141.0)						1,852.8						(164.9)						1,689.6						(289.6)
Other indemnity3			0.1						(3.3)						0.7						(2.1)						0.9						(6.7)						2.0						(9.3)
Total underwriting operations			14,894.3						1,136.2						12,398.9						94.3						42,891.8						1,213.5						36,349.7						1,281.6
Fees and other revenues4			223.7						NA						181.4						NA						656.6						NA						531.9						NA
Service businesses			81.4						(10.3)						82.7						(0.1)						234.9						(29.7)						230.5						9.0
Investments5			361.2						354.0						117.2						111.4						1,434.0						1,415.2						(971.2)						(988.6)
Interest expense			NA						(69.7)						NA						(63.1)						NA						(198.7)						NA						(180.4)
Property - Goodwill impairment2			NA						0						NA						0						NA						0						NA						(224.8)
Consolidated total			$	15,560.6					$	1,410.2					$	12,780.2					$	142.5					$	45,217.3					$	2,400.3					$	36,140.9					$	(103.2)

NA = Not applicable

1 Personal auto insurance accounted for 94% of the total Personal Lines segment net premiums earned during the three and nine months ended September 30, 2023 and 2022; insurance for our special lines products (e.g., motorcycles, RVs, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

2 For the three and nine months ended September 30, 2023, pretax profit (loss) included $2.9 million and $10.7 million, respectively, of amortization expense associated with intangible assets attributable to our Property segment, and $5.0 million and $24.1 million for the same periods in 2022. For the nine months ended September 30, 2022, the total pretax loss, including goodwill impairment, for the Property segment was $514.4 million. See Note 12 – Goodwill and Intangible Assets for further discussion.

3 Includes other underwriting business and run-off operations.

4 Pretax profit (loss) for fees and other revenues is allocated to operating segments based on revenue.

5 Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit (loss) is net of investment expenses.

Our 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 underwriting operations). Pretax underwriting profit (loss) is calculated as net premiums earned plus fees and other revenues, less: (i) losses and loss adjustment expenses; (ii) policy acquisition costs; and (iii) other underwriting expenses. Combined ratio is the complement of the underwriting margin. Following are the underwriting margins and combined ratios for our underwriting operations for the respective periods:

			Three Months Ended September 30,																								Nine Months Ended September 30,
			2023												2022												2023									2022
			Under-writing Margin						Combined Ratio						Under-writing Margin						Combined Ratio						Under-writing Margin						Combined Ratio						Under-writing Margin						Combined Ratio
Personal Lines
Agency			6.2		%				93.8						(0.9)		%				100.9						2.8		%				97.2						3.9		%				96.1
Direct			11.1						88.9						0.8						99.2						4.4						95.6						2.6						97.4
Total Personal Lines			8.8						91.2						0						100.0						3.7						96.3						3.2						96.8
Commercial Lines			0.9						99.1						10.3						89.7						2.0						98.0						10.1						89.9
Property1			11.8						88.2						(25.1)						125.1						(8.9)						108.9						(17.1)						117.1
Total underwriting operations			7.6						92.4						0.8						99.2						2.8						97.2						3.5						96.5

1 Included in the three and nine months ended September 30, 2023, is 0.5 points and 0.6 points, respectively, of amortization expense associated with intangible assets and 0.9 points and 1.4 points, respectively, for the three and nine months ended September 30, 2022.

9. DIVIDENDS

Following is a summary of our common and preferred share dividends that were declared and/or paid during the nine months ended September 30, 2023 and 2022:

(millions, except per share amounts)						Amount
Declared			Payable			Per Share			Accrued/Paid****1
Common – Quarterly Dividends:
August 2023			October 2023			$	0.10		$	58.5
May 2023			July 2023			0.10			58.5
March 2023			April 2023			0.10			58.5
December 2022			January 2023			0.10			58.5
August 2022			October 2022			0.10			58.5
May 2022			July 2022			0.10			58.5
March 2022			April 2022			0.10			58.5
December 2021			January 2022			0.10			58.5
Preferred Dividends:
August 2023			September 2023			20.67700			10.3
May 2023			June 2023			18.92463			9.5
December 2022			March 2023			26.875			13.4
August 2022			September 2022			26.875			13.4
December 2021			March 2022			26.875			13.4

1 The accrual is based on an estimate of shares outstanding as of the record date and recorded as a component of accounts payable, accrued expenses, and other liabilities on our consolidated balance sheets until paid.

Beginning March 15, 2023, the annual dividend rate for our Series B Preferred Shares switched to a floating rate equal to the three-month London Interbank Offered Rate (LIBOR) plus a spread of 2.539% applied to the stated amount per share.

We, as calculation agent under our Series B Preferred Shares, determined that the reference rate for the Series B Preferred Shares, for any determination date after June 30, 2023, shall be the sum of (i) 3-Month CME Term SOFR plus (ii) a tenor spread adjustment of 0.26161%, and (iii) a spread of 2.539%. The new reference rate became effective for the dividend period determination date commencing September 15, 2023. The reference rate was determined in

accordance with the successor base rate provisions of the Series B Preferred Shares and the Adjustable Interest Rate (LIBOR) Act and the regulation issued by the Board of Governors of the Federal Reserve System on December 16, 2022, implementing the LIBOR Act.

During the floating rate period, dividends on the Series B Preferred Shares will be payable quarterly, if and when declared by the Board of Directors.

See Note 14 – Dividends in our 2022 Annual Report to Shareholders for a discussion of our quarterly and annual common share dividends and our preferred share dividend policies.

10. OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss), including reclassification adjustments by income statement line item, were as follows:

																					Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)			Pretax total accumulated other comprehensive income (loss)						Total tax (provision) benefit						After tax total accumulated other comprehensive income (loss)						Total net unrealized gains (losses) on securities						Net unrealized losses on forecasted transactions						Foreign currency translation adjustment
Balance at June 30, 2023			$	(3,369.6)					$	715.6					$	(2,654.0)					$	(2,638.7)					$	(14.3)					$	(1.0)
Other comprehensive income (loss) before reclassifications:
Investment securities			(547.4)						114.9						(432.5)						(432.5)						0						0
Foreign currency translation adjustment			0						0						0						0						0						0
Total other comprehensive income (loss) before reclassifications			(547.4)						114.9						(432.5)						(432.5)						0						0
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities			(55.6)						11.7						(43.9)						(43.9)						0						0
Interest expense			(0.2)						0						(0.2)						0						(0.2)						0
Total reclassification adjustment for amounts realized in net income			(55.8)						11.7						(44.1)						(43.9)						(0.2)						0
Total other comprehensive income (loss)			(491.6)						103.2						(388.4)						(388.6)						0.2						0
Balance at September 30, 2023			$	(3,861.2)					$	818.8					$	(3,042.4)					$	(3,027.3)					$	(14.1)					$	(1.0)
																					Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)			Pretax total accumulated other comprehensive income (loss)						Total tax (provision) benefit						After tax total accumulated other comprehensive income (loss)						Total net unrealized gains (losses) on securities						Net unrealized losses on forecasted transactions						Foreign currency translation adjustment
Balance at June 30, 2022			$	(2,795.5)					$	586.5					$	(2,209.0)					$	(2,193.5)					$	(14.7)					$	(0.8)
Other comprehensive income (loss) before reclassifications:
Investment securities			(1,223.3)						256.9						(966.4)						(966.4)						0						0
Foreign currency translation adjustment			(0.9)						0.2						(0.7)						0						0						(0.7)
Total other comprehensive income (loss) before reclassifications			(1,224.2)						257.1						(967.1)						(966.4)						0						(0.7)
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities			(58.4)						12.3						(46.1)						(46.1)						0						0
Interest expense			(0.2)						0.1						(0.1)						0						(0.1)						0
Total reclassification adjustment for amounts realized in net income			(58.6)						12.4						(46.2)						(46.1)						(0.1)						0
Total other comprehensive income (loss)			(1,165.6)						244.7						(920.9)						(920.3)						0.1						(0.7)
Balance at September 30, 2022			$	(3,961.1)					$	831.2					$	(3,129.9)					$	(3,113.8)					$	(14.6)					$	(1.5)

																					Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)			Pretax total accumulated other comprehensive income (loss)						Total tax (provision) benefit						After tax total accumulated other comprehensive income (loss)						Total net unrealized gains (losses) on securities						Net unrealized losses on forecasted transactions						Foreign currency translation adjustment
Balance at December 31, 2022			$	(3,556.9)					$	754.9					$	(2,802.0)					$	(2,786.3)					$	(14.5)					$	(1.2)
Other comprehensive income (loss) before reclassifications:
Investment securities			(493.3)						103.5						(389.8)						(389.8)						0						0
Foreign currency translation adjustment			0.3						(0.1)						0.2						0						0						0.2
Total other comprehensive income (loss) before reclassifications			(493.0)						103.4						(389.6)						(389.8)						0						0.2
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities			(188.3)						39.5						(148.8)						(148.8)						0						0
Interest expense			(0.4)						0						(0.4)						0						(0.4)						0
Total reclassification adjustment for amounts realized in net income			(188.7)						39.5						(149.2)						(148.8)						(0.4)						0
Total other comprehensive income (loss)			(304.3)						63.9						(240.4)						(241.0)						0.4						0.2
Balance at September 30, 2023			$	(3,861.2)					$	818.8					$	(3,042.4)					$	(3,027.3)					$	(14.1)					$	(1.0)
																					Components of Changes in Accumulated Other Comprehensive Income (after tax)
(millions)			Pretax total accumulated other comprehensive income (loss)						Total tax (provision) benefit						After tax total accumulated other comprehensive income (loss)						Total net unrealized gains (losses) on securities						Net unrealized losses on forecasted transactions						Foreign currency translation adjustment
Balance at December 31, 2021			$	52.3					$	(11.6)					$	40.7					$	56.2					$	(14.9)					$	(0.6)
Other comprehensive income (loss) before reclassifications:
Investment securities			(4,321.7)						907.6						(3,414.1)						(3,414.1)						0						0
Foreign currency translation adjustment			(1.1)						0.2						(0.9)						0						0						(0.9)
Total other comprehensive income (loss) before reclassifications			(4,322.8)						907.8						(3,415.0)						(3,414.1)						0						(0.9)
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities			(309.0)						64.9						(244.1)						(244.1)						0						0
Interest expense			(0.4)						0.1						(0.3)						0						(0.3)						0
Total reclassification adjustment for amounts realized in net income			(309.4)						65.0						(244.4)						(244.1)						(0.3)						0
Total other comprehensive income (loss)			(4,013.4)						842.8						(3,170.6)						(3,170.0)						0.3						(0.9)
Balance at September 30, 2022			$	(3,961.1)					$	831.2					$	(3,129.9)					$	(3,113.8)					$	(14.6)					$	(1.5)

In an effort to manage interest rate risk, we entered into forecasted transactions on certain of Progressive’s debt issuances. We expect to reclassify $0.6 million (pretax) into interest expense during the next 12 months, related to net unrealized losses on these forecasted transactions (see Note 4 – Debt in our 2022 Annual Report to Shareholders for further discussion).

11. LITIGATION

The Progressive Corporation and/or its insurance subsidiaries are named as defendants in various lawsuits arising out of claims made under insurance policies written by our insurance subsidiaries in the ordinary course of business. We consider all legal actions relating to such claims in establishing our loss and loss adjustment expense reserves.

In addition, The Progressive Corporation and/or its subsidiaries are named as defendants in a number of class action or individual lawsuits that challenge certain of the operations of the subsidiaries. These cases include and/or typically have included those alleging damages as a result of, among other things: our subsidiaries’ methods used for evaluating and paying medical or injury claims or benefits, including, but not limited to, certain bodily injury, personal injury protection (PIP), uninsured motorist/underinsured motorist (UM/UIM), and medical payment claims and for reimbursing medical costs incurred by Medicare/Medicaid beneficiaries; other claims handling procedures, including, but not limited to, challenges relating to our network of repair facilities, our methods used for estimating physical damage to vehicles for repair purposes and for evaluating the actual cash value of total loss vehicles, the application of a negotiation adjustment in calculating total loss valuations, our payment of fees and taxes, our subrogation practices, our salvage practices, and our handling of diminution of value claims; homeowner claims handling practices and procedures; interpretations of the provisions of our insurance policies; our insurance product design; certain of our premium actions, including those in response to the COVID-19 pandemic; rating practices; certain marketing, sales, services, implementation and renewal practices and procedures, including with respect to accessibility and privacy; our usage-based insurance program; certain relationships with independent insurance agents; patent matters; alleged violation of the Telephone Consumer Protection Act; vendor data security; commercial disputes, including breach of contract; a small business grant program; and certain employment practices, including claims relating to pay practices and fair employment practices, among other matters. As of September 30, 2023, lawsuits have been certified or conditionally certified as class/collective actions in cases alleging: we improperly reduce or deny UIM benefits in New Mexico; we improperly value total loss claims in Florida, Georgia, New York, Pennsylvania, and Washington; we improperly fail to pay fees and taxes associated with total losses in Florida,

Michigan, and New York; we improperly adjust medical bills in Washington; we improperly calculate basic economic loss as it relates to wage loss coverage in New York; we improperly fail to timely process and pay PIP claims in Texas; we improperly reduce or deny first-party medical benefits in Arkansas; and that certain of our compensation practices and overtime payment practices are improper, including our classification of certain employees as exempt from overtime pay requirements. Other insurance companies face many of these same issues.

The nature and volume of litigation pending against The Progressive Corporation and/or its insurance subsidiaries is similar to that which was disclosed in Note 12 – Litigation in our 2022 Annual Report to Shareholders.

We plan to contest the pending lawsuits vigorously, but may pursue settlement negotiations in some cases, as we deem appropriate. Although outcomes of pending cases are uncertain until final disposition, we establish accruals for these lawsuits when it is probable that a loss has been or will be incurred and we can reasonably estimate potential loss exposure, which may include a range of loss. As to lawsuits for which the loss is considered neither probable nor estimable, or is considered probable but not estimable, we do not establish an accrual. Nevertheless, we continue to evaluate pending litigation to determine if any losses not deemed probable and estimable become so, at which point we would establish an accrual at our best estimate of the loss or range of loss.

With respect to our pending lawsuits that are not related to claims under insurance policies, the accruals that we have established, if any, were not material at September 30, 2023 and 2022, or December 31, 2022, and there were no material settlements during 2022 or the first nine months of 2023. For most of these lawsuits, we do not consider any losses to be both probable and estimable, and we are unable to estimate a meaningful range of loss, if any, at this time, due to the factors discussed in Note 12 – Litigation in our 2022 Annual Report to Shareholders. In the event that any one or more of these lawsuits results in a substantial judgment against us, or settlement by us, or if our accruals (if any) prove to be inadequate by a significant amount, the resulting liability could have a material adverse effect on our consolidated financial condition, cash flows, and/or results of operations. For a further discussion on our pending litigation and related reserving policies, see Note 12 – Litigation in our 2022 Annual Report to Shareholders.

12. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The majority of the goodwill recorded as of September 30, 2023 and 2022, and December 31, 2022, related to the April 1, 2015, acquisition of a controlling interest in ARX Holding Corp. (ARX). During the nine months ended September 30, 2023, there were no changes to the carrying amount of goodwill.

In the second quarter 2022, we performed an interim impairment test of our goodwill allocated to the ARX

reporting unit and recorded an impairment loss of $224.8 million. The impairment loss was fully allocated to our Property operating segment. There were no previously recorded goodwill impairment losses on any of the outstanding goodwill. See Note 15 – Goodwill and Intangible Assets in our 2022 Annual Report to Shareholders for a discussion of our goodwill impairment evaluation.

Intangible Assets

The following table is a summary of the net carrying amount of other intangible assets:

(millions)			September 30, 2023						September 30, 2022						December 31, 2022
Intangible assets subject to amortization			$	62.5					$	79.4					$	73.9
Indefinite-lived intangible assets1			12.4						12.4						12.4
Total			$	74.9					$	91.8					$	86.3

1 Indefinite-lived intangible assets are comprised of state insurance and agent licenses. State insurance licenses were previously subject to amortization under superseded accounting guidance and have $0.6 million of accumulated amortization for all periods presented.

Intangible assets subject to amortization consisted of the following:

(millions)			September 30, 2023												September 30, 2022												December 31, 2022
Category			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount						Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount						Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
Agency relationships			$	159.2		$	96.7		$	62.5					$	159.2		$	85.3		$	73.9					$	159.2		$	88.1		$	71.1
Software rights			69.1			69.1			0						69.1			64.8			4.3						69.1			67.0			2.1
Trade name			3.6			3.6			0						3.6			2.4			1.2						3.6			2.9			0.7
Total			$	231.9		$	169.4		$	62.5					$	231.9		$	152.5		$	79.4					$	231.9		$	158.0		$	73.9

Amortization expense was $2.9 million and $11.4 million for the three and nine months ended September 30, 2023, respectively, compared to $5.4 million and $25.5 million during the same periods last year.