~~0000080661 us-gaap:NonredeemablePreferredStockMember us-gaap:EquitySecuritiesMember 2019-06-30~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021



☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-09518

THE PROGRESSIVE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio

34-0963169

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

~~Ohio~~

~~34-0963169~~

~~(State or other jurisdiction of~~

~~incorporation or organization)~~

~~(I.R.S. Employer~~

~~Identification No.)~~

6300 Wilson Mills Road,

Mayfield Village,

Ohio

44143

(Address of principal executive offices)

(Zip Code)

(~~440~~) (440) 461-5000

(Registrant’s telephone number, including area code)

Not Applicable

~~Not Applicable~~

(Former name, former address and former fiscal year, if changed since last report)

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



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, $1.00 Par Value	PGR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Shares, $1.00 par value: ~~585,396,906~~585,153,282 outstanding at ~~June 30, 2020~~

March 31, 2021

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)




Three Months Ended March 31,	2021		2020
(millions — except per share amounts)
Revenues
Net premiums earned	$	10,420.2	$	9,430.7
Investment income	220.2		241.2
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales	143.8		315.2
Net holding period gains (losses) on securities	441.5		(868.8)

Total net realized gains (losses) on securities	585.3		(553.6)
Fees and other revenues	165.7		153.5
Service revenues	53.8		51.6

Total revenues	11,445.2		9,323.4
Expenses
Losses and loss adjustment expenses	7,110.5		6,155.2
Policy acquisition costs	874.4		782.8
Other underwriting expenses	1,481.1		1,409.9

Investment expenses	5.6		5.3
Service expenses	49.3		47.5
Interest expense	56.4		48.0

Total expenses	9,577.3		8,448.7
Net Income
Income before income taxes	1,867.9		874.7
Provision for income taxes	387.9		175.6
Net income	1,480.0		699.1
Net income attributable to noncontrolling interest (NCI)	0		(6.4)
Net income attributable to Progressive	1,480.0		692.7
Other Comprehensive Income (Loss)
Changes in:



Total net unrealized gains (losses) on fixed-maturity securities	(539.6)		62.8
Net unrealized losses on forecasted transactions	0.2		0.2

Other comprehensive income (loss)	(539.4)		63.0
Other comprehensive income attributable to NCI	0		(0.5)
Comprehensive income attributable to Progressive	$	940.6	$	755.2
Computation of Earnings Per Common Share
Net income attributable to Progressive	$	1,480.0	$	692.7
Less: Preferred share dividends	6.7		6.7
Net income available to common shareholders	$	1,473.3	$	686.0
Average common shares outstanding - Basic	584.9		584.7
Net effect of dilutive stock-based compensation	2.0		2.2
Total average equivalent common shares - Diluted	586.9		586.9
Basic: Earnings per common share	$	2.52	$	1.17
Diluted: Earnings per common share	$	2.51	$	1.17

~~(unaudited)~~

Three Months Six Months
Periods Ended June 30, 2020
2019
2020
2019
(millions — except per share amounts)
Revenues
Net premiums earned $ 9,648.6
$ 8,824.7
$ 19,079.3
$ 17,284.5
Investment income 243.8
261.3
485.0
514.2
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales 260.0
67.5
575.2
113.6
Net holding period gains (losses) on securities 630.8
112.4
(238.0 ) 505.1
Net impairment losses recognized in earnings 0
0
0
(24.3 )
Total net realized gains (losses) on securities 890.8
179.9
337.2
594.4
Fees and other revenues 129.5
134.8
283.0
265.0
Service revenues 59.0
50.0
110.6
92.6
Total revenues 10,971.7
9,450.7
20,295.1
18,750.7
Expenses
Losses and loss adjustment expenses 5,321.4
6,138.1
11,476.6
11,897.1
Policy acquisition costs 795.5
738.6
1,578.3
1,449.2
Other underwriting expenses 1,438.9
1,231.5
2,848.8
2,402.7
Policyholder credit expense 1,033.4
0
1,033.4
0
Investment expenses 4.5
6.2
9.8
12.4
Service expenses 52.8
45.3
100.3
83.4
Interest expense 56.4
47.4
104.4
94.8
Total expenses 8,702.9
8,207.1
17,151.6
15,939.6
Net Income
Income before income taxes 2,268.8
1,243.6
3,143.5
2,811.1
Provision for income taxes 478.4
264.6
654.0
749.3
Net income 1,790.4
979.0
2,489.5
2,061.8
Net (income) loss attributable to noncontrolling interest (NCI) 0
0.4
0
(4.0 )
Net income attributable to Progressive 1,790.4

979.4
2,489.5
2,057.8
Other Comprehensive Income (Loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities 567.4
277.4
630.2
578.5
Net unrealized losses on forecasted transactions 0.2
0.2
0.4
0.4
Other comprehensive income (loss) 567.6
277.6
630.6
578.9
Other comprehensive (income) loss attributable to NCI 0
(2.6 ) 0
(4.9 )
Comprehensive income attributable to Progressive $ 2,358.0
$ 1,254.4
$ 3,120.1
$ 2,631.8
Computation of Earnings Per Common Share
Net income attributable to Progressive $ 1,790.4
$ 979.4
$ 2,489.5
$ 2,057.8
Less: Preferred share dividends 6.7
6.7
13.4
13.4
Net income available to common shareholders $ 1,783.7
$ 972.7
$ 2,476.1
$ 2,044.4
Average common shares outstanding - Basic 584.8
583.6
584.8
583.5
Net effect of dilutive stock-based compensation 2.4
3.3
2.3
3.2
Total average equivalent common shares - Diluted 587.2
586.9
587.1
586.7
Basic: Earnings per common share $ 3.05
$ 1.67
$ 4.23
$ 3.50
Diluted: Earnings per common share $ 3.04
$ 1.66
$ 4.22
$ 3.48

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Consolidated Balance Sheets

(unaudited)

June 30, December 31,
(millions — except per share amount) 2020
2019
2019
Assets
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost: $33,467.9, $30,588.2, and $32,643.1) $ 34,726.4
$ 31,188.2
$ 33,110.3
Short-term investments (amortized cost: $4,700.5, $1,360.9, and $1,798.8) 4,700.5
1,360.9
1,798.8
Total available-for-sale securities 39,426.9
32,549.1
34,909.1
Equity securities, at fair value:
Nonredeemable preferred stocks (cost: $1,205.4, $1,060.3, and $971.3) 1,180.6
1,130.0
1,038.9
Common equities (cost: $1,128.8, $1,203.7, and $1,125.5) 3,170.4
3,135.5
3,306.3
Total equity securities 4,351.0
4,265.5
4,345.2
Total investments 43,777.9
36,814.6
39,254.3
Cash and cash equivalents 108.0
91.9
226.2
Restricted cash 1.1
1.0
1.2
Total cash, cash equivalents, and restricted cash 109.1
92.9
227.4
Accrued investment income 190.8
187.5
181.3
Premiums receivable, net of allowance of $437.9, $240.7, and $283.2 7,557.4
7,167.1
7,507.3
Reinsurance recoverables 3,654.3
3,051.5
3,378.9
Prepaid reinsurance premiums 361.3
338.0
626.5
Deferred acquisition costs 1,154.8
1,047.4
1,056.5
Property and equipment, net of accumulated depreciation of $1,241.7, $1,105.6, and $1,138.1 1,189.8
1,174.9
1,213.7
Goodwill 452.7
452.7
452.7
Intangible assets, net of accumulated amortization of $297.8, $283.6, and $314.0 199.7
258.7
228.3
Other assets 758.3
738.9
768.4
Total assets $ 59,406.1
$ 51,324.2
$ 54,895.3
Liabilities
Unearned premiums $ 13,055.6
$ 11,796.7
$ 12,388.8
Loss and loss adjustment expense reserves 18,512.0
16,568.6
18,105.4
Net deferred income taxes 197.1
134.5
132.5
Accounts payable, accrued expenses, and other liabilities 5,576.1
4,867.5
5,962.7
Debt¹
5,394.7
4,406.0
4,407.1
Total liabilities 42,735.5
37,773.3
40,996.5
Redeemable noncontrolling interest (NCI)²
0
220.1
225.6
Shareholders’ Equity

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 797.5, including treasury shares of 212.1, 213.4, and 212.9) 585.4

584.1

584.6
Paid-in capital 1,614.5

1,523.3

1,573.4
Retained earnings 13,001.8

10,276.4

10,679.6
Accumulated other comprehensive income (loss):

Net unrealized gains (losses) on fixed-maturity securities 991.0
472.9
360.8
Net unrealized losses on forecasted transactions (16.0 ) (16.8 ) (16.4 )
Accumulated other comprehensive (income) loss attributable to NCI 0
(3.0 ) (2.7 )
Total accumulated other comprehensive income (loss) attributable to Progressive 975.0
453.1
341.7
Total shareholders’ equity 16,670.6
13,330.8
13,673.2
Total liabilities, redeemable NCI, and shareholders’ equity $ 59,406.1
$ 51,324.2
$ 54,895.3


	March 31,				December 31,
(millions — except per share amount)	2021		2020		2020
Assets
Available-for-sale securities, at fair value:
Fixed maturities (amortized cost: $38,564.0, $33,761.1, and $35,589.1)	$	39,091.8	$	34,276.6	$	36,810.9
Short-term investments (amortized cost: $2,243.1, $2,524.2, and $5,218.5)	2,243.1		2,524.2		5,218.5
Total available-for-sale securities	41,334.9		36,800.8		42,029.4
Equity securities, at fair value:
Nonredeemable preferred stocks (cost: $1,453.9, $1,017.5, and $1,358.7)	1,507.2		933.4		1,447.9
Common equities (cost: $1,204.5, $1,113.2, and $1,187.3)	4,558.5		2,608.1		4,053.0
Total equity securities	6,065.7		3,541.5		5,500.9
Total investments	47,400.6		40,342.3		47,530.3
Cash and cash equivalents	122.9		369.5		76.5
Restricted cash	0.3		0.9		0
Total cash, cash equivalents, and restricted cash	123.2		370.4		76.5
Accrued investment income	166.0		171.6		176.4
Premiums receivable, net of allowance for credit losses of $265.3, $344.7, and $356.2	9,218.8		7,568.3		8,160.1
Reinsurance recoverables	4,143.2		3,639.6		4,019.4
Prepaid reinsurance premiums	667.6		438.2		368.1
Deferred acquisition costs	1,309.1		1,095.8		1,237.2
Property and equipment, net of accumulated depreciation of $1,318.5, $1,191.6, and $1,291.4	1,077.4		1,215.1		1,106.0
Goodwill	452.7		452.7		452.7
Intangible assets, net of accumulated amortization of $340.3, $328.5, and $326.1	157.2		213.8		171.4
Net federal deferred income taxes	0		20.6		0
Other assets	697.5		738.0		800.2
Total assets	$	65,413.3	$	56,266.4	$	64,098.3
Liabilities
Unearned premiums	$	15,045.9	$	12,641.1	$	13,437.5
Loss and loss adjustment expense reserves	21,063.7		18,306.5		20,265.8
Net federal deferred income taxes	241.5		0		310.0
Dividends payable on common shares	58.5		58.5		2,694.5
Accounts payable, accrued expenses, and other liabilities	5,770.4		5,289.2		4,955.8
Debt1	5,396.8		5,394.0		5,396.1
Total liabilities	47,576.8		41,689.3		47,059.7
Redeemable noncontrolling interest (NCI)	0		225.6		0
Shareholders’ Equity
Serial Preferred Shares (authorized 20.0)
Serial Preferred Shares, Series B, 0 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 797.5, including treasury shares of 212.3, 212.2, and 212.3)	585.2		585.3		585.2
Paid-in capital	1,685.5		1,601.9		1,672.9
Retained earnings	14,679.6		11,266.2		13,354.9
Accumulated other comprehensive income (loss):


Net unrealized gains (losses) on fixed-maturity securities	407.7		423.6		947.3
Net unrealized losses on forecasted transactions	(15.4)		(16.2)		(15.6)
Accumulated other comprehensive income attributable to NCI	0		(3.2)		0
Total accumulated other comprehensive income (loss) attributable to Progressive	392.3		404.2		931.7
Total shareholders’ equity	17,836.5		14,351.5		17,038.6
Total liabilities, redeemable NCI, and shareholders’ equity	$	65,413.3	$	56,266.4	$	64,098.3

¹Consists of both short-term and long-term debt. See Note 4 – Debtfor further discussion.

²
~~See~~ ~~Note 12 – Redeemable Noncontrolling Interest~~ ~~for further discussion~~.

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

Three Months Six Months
Periods Ended June 30, 2020
2019
2020
2019
(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
584.0
584.6
583.2
Treasury shares purchased (0.1 ) (0.1 ) (0.4 ) (0.5 )
Net restricted equity awards issued/vested 0.2
0.2
1.2
1.4
Balance, end of period 585.4
584.1
585.4
584.1
Paid-In Capital
Balance, beginning of period 1,601.9
1,496.6
1,573.4
1,479.0
Amortization of equity-based compensation 21.9
26.5
45.2
46.1
Treasury shares purchased 0
0
(1.0 ) (1.1 )
Net restricted equity awards issued/vested (0.2 ) (0.2 ) (1.2 ) (1.4 )
Reinvested dividends on restricted stock units 0.4
0.6
0.7
0.9
Adjustment to carrying amount of redeemable noncontrolling interest (9.5 ) (0.2 ) (2.6 ) (0.2 )
Balance, end of period 1,614.5
1,523.3
1,614.5
1,523.3
Retained Earnings
Balance, beginning of period 11,266.2
9,358.1
10,679.6
8,386.6
Net income attributable to Progressive 1,790.4
979.4
2,489.5
2,057.8
Treasury shares purchased (2.5 ) (2.2 ) (27.7 ) (26.8 )
Cash dividends declared on common shares ($0.10, $0.10, $0.20, and $0.20 per share) (58.4 ) (58.3 ) (116.8 ) (116.6 )
Cash dividends declared on Serial Preferred Shares, Series B ($0, $0, $26.875, and $26.875 per share) 0
0
(13.4 ) (13.4 )
Reinvested dividends on restricted stock units (0.4 ) (0.6 ) (0.7 ) (0.9 )
Other, net 6.5
0
(8.7 ) (10.3 )
Balance, end of period 13,001.8
10,276.4
13,001.8
10,276.4
Accumulated Other Comprehensive Income (Loss) Attributable to Progressive
Balance, beginning of period 404.2
178.1
341.7
(120.9 )
Attributable to noncontrolling interest 3.2
(2.6 ) 2.7
(4.9 )
Other comprehensive income 567.6
277.6
630.6
578.9
Balance, end of period 975.0
453.1
975.0
453.1
Total shareholders’ equity $ 16,670.6
$ 13,330.8
$ 16,670.6
$ 13,330.8



Three Months Ended March 31,	2021		2020
(millions — except per share amounts)
Serial Preferred Shares, NaN Par Value
Balance, beginning of period	$	493.9	$	493.9

Balance, end of period	493.9		493.9
Common Shares, $1.00 Par Value
Balance, beginning of period	585.2		584.6
Treasury shares purchased	(0.9)		(0.3)
Net restricted equity awards issued/vested	0.9		1.0
Balance, end of period	585.2		585.3
Paid-In Capital
Balance, beginning of period	1,672.9		1,573.4
Amortization of equity-based compensation	15.8		23.3
Treasury shares purchased	(2.7)		(1.0)
Net restricted equity awards issued/vested	(0.9)		(1.0)
Reinvested dividends on restricted stock units	0.4		0.3
Adjustment to carrying amount of redeemable noncontrolling interest	0		6.9
Balance, end of period	1,685.5		1,601.9
Retained Earnings
Balance, beginning of period	13,354.9		10,679.6
Net income attributable to Progressive	1,480.0		692.7
Treasury shares purchased	(81.2)		(25.2)
Cash dividends declared on common shares ($0.10 and $0.10 per share)	(58.4)		(58.4)
Cash dividends declared on Serial Preferred Shares, Series B ($0 and $26.875 per share)	0		(13.4)
Reinvested dividends on restricted stock units	(0.4)		(0.3)
Other, net	(15.3)		(8.8)
Balance, end of period	14,679.6		11,266.2
Accumulated Other Comprehensive Income (Loss) Attributable to Progressive
Balance, beginning of period	931.7		341.7
Attributable to noncontrolling interest	0		(0.5)
Other comprehensive income (loss)	(539.4)		63.0
Balance, end of period	392.3		404.2
Total shareholders’ equity	$	17,836.5	$	14,351.5

There are 5.0 million Voting Preference Shares authorized; no0 such shares have been issued.

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)


Six Months Ended June 30,	2020			2019
Three Months Ended March 31,							Three Months Ended March 31,	2021		2020
(millions)							(millions)
Cash Flows From Operating Activities							Cash Flows From Operating Activities
Net income	$	2,489.5		$	2,061.8		Net income	$	1,480.0	$	699.1
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	130.3			114.6			Depreciation	62.9		62.6
Amortization of intangible assets	28.6			35.9			Amortization of intangible assets	14.2		14.5
Net amortization of fixed-income securities	42.5			1.9			Net amortization of fixed-income securities	31.7		18.9
Amortization of equity-based compensation	45.2			46.0			Amortization of equity-based compensation	15.8		23.3
Net realized (gains) losses on securities	(337.2		)	(594.4		)	Net realized (gains) losses on securities	(585.3)		553.6
Net (gains) losses on disposition of property and equipment	1.8			(1.6		)	Net (gains) losses on disposition of property and equipment	(1.1)		0.1

Changes in:							Changes in:
Premiums receivable	(50.1		)	(670.0		)	Premiums receivable	(1,058.7)		(61.0)
Reinsurance recoverables	(275.4		)	(355.4		)	Reinsurance recoverables	(123.8)		(260.7)
Prepaid reinsurance premiums	265.2			(28.3		)	Prepaid reinsurance premiums	(299.5)		188.3
Deferred acquisition costs	(98.3		)	(95.8		)	Deferred acquisition costs	(71.9)		(39.3)
Income taxes	590.6			157.4			Income taxes	283.8		128.7
Unearned premiums	666.8			1,110.2			Unearned premiums	1,608.4		252.3
Loss and loss adjustment expense reserves	406.6			1,167.8			Loss and loss adjustment expense reserves	797.9		201.1
Accounts payable, accrued expenses, and other liabilities	(2.0		)	605.8			Accounts payable, accrued expenses, and other liabilities	380.1		(189.9)
Other, net	(25.5		)	(181.2		)	Other, net	80.0		34.2
Net cash provided by operating activities	3,878.6			3,374.7			Net cash provided by operating activities	2,614.5		1,625.8
Cash Flows From Investing Activities							Cash Flows From Investing Activities
Purchases:							Purchases:
Fixed maturities	(18,193.5		)	(13,008.4		)	Fixed maturities	(10,421.4)		(10,433.0)
Equity securities	(671.3		)	(230.7		)	Equity securities	(196.7)		(366.6)

Sales:							Sales:
Fixed maturities	13,749.2			8,162.1			Fixed maturities	5,590.3		7,415.9
Equity securities	382.1			131.6			Equity securities	63.0		281.0

Maturities, paydowns, calls, and other:							Maturities, paydowns, calls, and other:
Fixed maturities	4,106.4			2,589.0			Fixed maturities	1,948.6		2,161.6
Equity securities	79.0			0			Equity securities	39.7		79.0
Net (purchases) sales of short-term investments	(2,883.1		)	458.3			Net (purchases) sales of short-term investments	2,976.8		(718.9)
Net unsettled security transactions	266.0			297.6			Net unsettled security transactions	267.6		586.1

Purchases of property and equipment	(110.7		)	(203.2		)	Purchases of property and equipment	(50.5)		(62.4)
Sales of property and equipment	4.8			24.6			Sales of property and equipment	7.5		3.5
Net cash used in investing activities	(3,271.1		)	(1,779.1		)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	224.9		(1,053.8)
Cash Flows From Financing Activities							Cash Flows From Financing Activities
Dividends paid to common shareholders	(1,433.9		)	(1,526.3		)	Dividends paid to common shareholders	(2,694.5)		(1,375.4)
Dividends paid to preferred shareholders	(13.4		)	(13.4		)	Dividends paid to preferred shareholders	(13.4)		(13.4)
Acquisition of treasury shares for restricted stock tax liabilities	(29.1		)	(28.4		)	Acquisition of treasury shares for restricted stock tax liabilities	(30.0)		(26.5)
Acquisition of additional shares of ARX Holding Corp.	(243.0		)	(11.2		)
Acquisition of treasury shares acquired in open market							Acquisition of treasury shares acquired in open market	(54.8)		0

Net proceeds from debt issuances	986.3			0			Net proceeds from debt issuances	0		986.3
Proceeds from exercise of equity options	7.3			1.6

Net cash used in financing activities	(725.8		)	(1,577.7		)	Net cash used in financing activities	(2,792.7)		(429.0)
Increase (decrease) in cash, cash equivalents, and restricted cash	(118.3		)	17.9

Increase in cash, cash equivalents, and restricted cash							Increase in cash, cash equivalents, and restricted cash	46.7		143.0
Cash, cash equivalents, and restricted cash – January 1	227.4			75.0			Cash, cash equivalents, and restricted cash – January 1	76.5		227.4
Cash, cash equivalents, and restricted cash – June 30	$	109.1		$	92.9
Cash, cash equivalents, and restricted cash – March 31							Cash, cash equivalents, and restricted cash – March 31	$	123.2	$	370.4

See notes to consolidated financial statements.

The Progressive Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Note 1 Basis of Presentation — The accompanying consolidated financial statements include the accounts of The Progressive Corporation, ~~its~~our wholly owned insurance and non-insurance subsidiaries and affiliates. On April 1, 2020, The Progressive Corporation acquired the remaining outstanding stock of ARX Holding Corp. (ARX), bringing Progressive’s ownership interest of the outstanding capital stock of ARX to 100.0%, compared to 87.1% at June 30, 2019 and December 31, 2019. See ~~Note 12 – Redeemable Noncontrolling Interest~~ ~~for further discussion.~~affiliates in which we have a controlling financial interest.

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 ~~June 30, 2020,~~March 31, 2021, 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, ~~2019~~2020 (“~~2019~~2020 Annual Report to Shareholders”).

We perform analyses to evaluate our ~~premium~~premiums receivables for expected credit ~~losses. As part of these analyses, we determine historical collectability rates and modify those rates~~losses, based on historical and current ~~economic assumptions,~~collections experience using actuarial analysis, to ~~establish estimates on~~determine estimated rates of default. These rates are applied to the stratified subsets of our consumer receivable balances, based on the age of the receivable, to establish an allowance for credit loss. Progressive’s premiums ~~receivable~~receivables are short-term in nature and, generally, premiums are collected prior to providing risk coverage, minimizing our exposure to credit risk. Premiums receivables balances are written off once we have exhausted our collection efforts.

~~At June 30, 2020,~~The following table summarizes changes in our allowance for credit loss exposure on our ~~premium~~premiums receivables ~~was $437.9 million.~~ for the year-to-date periods ending:


(millions)	March 31, 2021		March 31, 2020		December 31, 2020
Allowance for credit loss, beginning of period	$	356.2	$	283.2	$	283.2
Increase in allowance1	60.9		170.3		472.0
Write-offs2	(151.8)		(108.8)		(399.0)
Allowance for credit loss, end of period	$	265.3	$	344.7	$	356.2

1Represents the incremental increase in other underwriting expenses.

2Represents portion of allowance that is reversed when premiums receivables are written off.

During the ~~three and six months ended June 30, 2020, we increased~~first quarter 2021, the increase in our ~~allowance by $196.2 million and $366.5 million, respectively, and reduced it by $103.0 million and $211.8 million. In addition to increasing the~~ allowance for credit ~~loss arising out~~losses was lower than prior periods reflecting greater collections received on outstanding premiums receivable balances, due in part to the government stimulus and tax refund checks distributed during the quarter. In contrast, during the first quarter 2020, the increase in the allowance in part reflects the greater potential for credit losses due to the financial hardships of the normal course of business, we recorded an additional $120.0 million and $191.0 million for the three and six months ended June 30, 2020, respectively, to reflect the estimated impact from moratoriums and billing leniency efforts that we put in place from March through May 2020, to help policyholders ~~who may be experiencing financial hardships~~ as a result of the economic impacts related to the spread of the novel coronavirus, COVID-19, and federal, state, and local social distancing and shelter-in-place restrictions (“COVID-19 restrictions”). This additional increase to the allowance was determined through analyzing our ultimate at-risk exposure of receivables related to policyholders impacted by the moratorium and leniency efforts. Collectability reserving factors were applied to this ultimate exposure based on historical moratorium and leniency specific collections experience, as well as current collections experience. The reductions to the allowance for credit loss represents the premiums receivable written off during the respective periods.COVID-19.

Other assets on the consolidated balance sheets include certain long-lived assets that are considered “held for sale.” The fair value of these held for sale assets, less the estimated ~~sales~~ costs to sell, was ~~$31.1~~$55.1 million at ~~June 30, 2020, $57.2~~March 31, 2021, $31.8 million at ~~June 30, 2019,~~March 31, 2020, and ~~$32.9~~$56.6 million at December 31, ~~2019.~~2020.

Included on our consolidated balance sheets are certain operating leases for office space, computer equipment, and vehicles. The leased assets represent our right to use an underlying asset for the lease term, and the lease liabilities, represent our obligation to make lease payments arising from the leases. At June 30, 2020 and 2019, and December 31, 2019, we had operating lease assets of $170.0 million, $189.1 million, and $188.2 million, respectively, as a component of other assets, and operating lease liabilities of $182.4 million, $204.2 million, and $201.5 million, respectively, as a component of accounts payable, accrued expenses, and other liabilities. See ~~Note 13~~ – ~~Leases~~ ~~in our 2019 Annual Report to Shareholders for further discussion.~~

Note 2 Investments — The following tables present the composition of our investment portfolio by major security type, consistent with our classification of how we manage, monitor, and measure the portfolio. 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, 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 of the securities. The changes in the net holding period gains (losses) between periods for the hybrid securities and equity securities are recorded as a component of net realized gains (losses) on securities in our consolidated statements of comprehensive income. ~~During the second quarter 2020, the portfolio’s valuation significantly recovered from the decline experienced at the end of the first quarter 2020.~~


($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
March 31, 2021
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	16,002.7	$	181.7	$	(111.0)	$	0	$	16,073.4	33.9	%
State and local government obligations	2,574.8		65.3		(16.0)		0		2,624.1		5.6
Corporate debt securities	10,095.2		368.1		(24.0)		(3.1)		10,436.2		22.0
Residential mortgage-backed securities	548.3		5.7		(0.8)		0		553.2		1.2
Commercial mortgage-backed securities	5,868.3		68.8		(45.1)		0		5,892.0		12.4
Other asset-backed securities	3,293.5		30.6		(0.7)		0		3,323.4		7.0
Redeemable preferred stocks	181.2		2.9		(2.0)		7.4		189.5		0.4
Total fixed maturities	38,564.0		723.1		(199.6)		4.3		39,091.8		82.5
Short-term investments	2,243.1		0		0		0		2,243.1		4.7
Total available-for-sale securities	40,807.1		723.1		(199.6)		4.3		41,334.9		87.2
Equity securities:
Nonredeemable preferred stocks	1,453.9		0		0		53.3		1,507.2		3.2
Common equities	1,204.5		0		0		3,354.0		4,558.5		9.6
Total equity securities	2,658.4		0		0		3,407.3		6,065.7		12.8
Total portfolio1	$	43,465.5	$	723.1	$	(199.6)	$	3,411.6	$	47,400.6	100.0	%

($ in millions) Cost

Gross
Unrealized Gains

Gross
Unrealized
Losses

Net
Holding Period Gains
(Losses)

Fair
Value

% of
Total
Fair
Value

June 30, 2020
Available-for-sale securities:
Fixed maturities:
U.S. government obligations $ 8,814.5
$ 463.4
$ (0.1 ) $ 0
$ 9,277.8
21.2 %
State and local government obligations 3,426.0
148.9
(0.6 ) 0
3,574.3
8.2
Corporate debt securities 10,493.2
571.4
(3.4 ) 1.3
11,062.5
25.3
Residential mortgage-backed securities 541.0
5.4
(3.4 ) 0
543.0
1.2
Commercial mortgage-backed securities 5,728.5
89.1
(55.8 ) 0
5,761.8
13.2
Other asset-backed securities 4,313.3
45.3
(3.7 ) 0
4,354.9
9.9
Redeemable preferred stocks 151.4
2.0
(1.4 ) 0.1
152.1
0.3
Total fixed maturities 33,467.9
1,325.5
(68.4 ) 1.4
34,726.4
79.3
Short-term investments 4,700.5
0
0
0
4,700.5
10.8
       Total available-for-sale securities 38,168.4
1,325.5
(68.4 ) 1.4
39,426.9
90.1
Equity securities:
Nonredeemable preferred stocks 1,205.4
0
0
(24.8 ) 1,180.6
2.7
Common equities 1,128.8
0
0
2,041.6
3,170.4
7.2
       Total equity securities 2,334.2
0
0
2,016.8
4,351.0
9.9
  Total portfolio^1,2
$ 40,502.6
$ 1,325.5
$ (68.4 ) $ 2,018.2
$ 43,777.9
100.0 %


($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value		($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
June 30, 2019
March 31, 2020														March 31, 2020
Available-for-sale securities:														Available-for-sale securities:
Fixed maturities:														Fixed maturities:
U.S. government obligations	$	12,121.9	$	259.7	$	(2.2	)	$	0	$	12,379.4	33.6	%	U.S. government obligations	$	10,841.2	$	654.5	$	0	$	0	$	11,495.7	28.5	%
State and local government obligations	1,563.6		27.4		(1.3		)	0		1,589.7		4.3		State and local government obligations	2,243.9		64.8		(4.5)		0		2,304.2		5.7
Corporate debt securities	7,176.7		210.1		(1.8		)	0.7		7,385.7		20.1		Corporate debt securities	9,452.9		160.8		(120.1)		(1.7)		9,491.9		23.5
Residential mortgage-backed securities	660.4		6.2		(1.4		)	0		665.2		1.8		Residential mortgage-backed securities	574.3		1.5		(19.2)		0		556.6		1.4
Commercial mortgage-backed securities	4,361.2		83.3		(2.6		)	0		4,441.9		12.1		Commercial mortgage-backed securities	5,822.4		30.2		(188.3)		0		5,664.3		14.0
Other asset-backed securities	4,478.2		19.9		(1.0		)	0.1		4,497.2		12.2		Other asset-backed securities	4,674.9		4.3		(40.0)		(0.1)		4,639.1		11.5
Redeemable preferred stocks	226.2		3.4		(1.6		)	1.1		229.1		0.6		Redeemable preferred stocks	151.5		0		(5.1)		(21.6)		124.8		0.3
Total fixed maturities	30,588.2		610.0		(11.9		)	1.9		31,188.2		84.7		Total fixed maturities	33,761.1		916.1		(377.2)		(23.4)		34,276.6		84.9
Short-term investments	1,360.9		0		0			0		1,360.9		3.7		Short-term investments	2,524.2		0		0		0		2,524.2		6.3
Total available-for-sale securities	31,949.1		610.0		(11.9		)	1.9		32,549.1		88.4		Total available-for-sale securities	36,285.3		916.1		(377.2)		(23.4)		36,800.8		91.2
Equity securities:														Equity securities:
Nonredeemable preferred stocks	1,060.3		0		0			69.7		1,130.0		3.1		Nonredeemable preferred stocks	1,017.5		0		0		(84.1)		933.4		2.3
Common equities	1,203.7		0		0			1,931.8		3,135.5		8.5		Common equities	1,113.2		0		0		1,494.9		2,608.1		6.5
Total equity securities	2,264.0		0		0			2,001.5		4,265.5		11.6		Total equity securities	2,130.7		0		0		1,410.8		3,541.5		8.8
Total portfolio^1,2	$	34,213.1	$	610.0	$	(11.9	)	$	2,003.4	$	36,814.6	100.0	%
Total portfolio1														Total portfolio1	$	38,416.0	$	916.1	$	(377.2)	$	1,387.4	$	40,342.3	100.0	%

($ in millions) Cost

Gross
Unrealized Gains

Gross
Unrealized
Losses

Net
Holding Period Gains
(Losses)

Fair
Value

% of
Total
Fair
Value

December 31, 2019
Available-for-sale securities:
Fixed maturities:
U.S. government obligations $ 13,100.7
$ 194.1
$ (43.7 ) $ 0
$ 13,251.1
33.7 %
State and local government obligations 1,686.0
30.0
(2.7 ) 0
1,713.3
4.4
Corporate debt securities 6,860.3
206.6
(0.5 ) 1.3
7,067.7
18.0
Residential mortgage-backed securities 625.0
4.5
(2.0 ) 0
627.5
1.6
Commercial mortgage-backed securities 5,020.7
61.5
(6.0 ) 0
5,076.2
12.9
Other asset-backed securities 5,164.7
16.2
(1.4 ) 0
5,179.5
13.2
Redeemable preferred stocks 185.7
4.1
(1.3 ) 6.5
195.0
0.5
Total fixed maturities 32,643.1
517.0
(57.6 ) 7.8
33,110.3
84.3
Short-term investments 1,798.8
0
0
0
1,798.8
4.6
       Total available-for-sale securities 34,441.9
517.0
(57.6 ) 7.8
34,909.1
88.9
Equity securities:
Nonredeemable preferred stocks 971.3
0
0
67.6
1,038.9
2.7
Common equities 1,125.5
0
0
2,180.8
3,306.3
8.4
       Total equity securities 2,096.8
0
0
2,248.4
4,345.2
11.1
  Total portfolio^1,2
$ 36,538.7
$ 517.0
$ (57.6 ) $ 2,256.2
$ 39,254.3
100.0 %


($ in millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Net Holding Period Gains (Losses)		Fair Value		% of Total Fair Value
December 31, 2020
Available-for-sale securities:
Fixed maturities:
U.S. government obligations	$	12,437.9	$	305.8	$	(3.7)	$	0	$	12,740.0	26.8	%
State and local government obligations	3,099.4		123.1		(0.7)		0		3,221.8		6.8
Corporate debt securities	9,579.7		601.7		(0.1)		3.9		10,185.2		21.4
Residential mortgage-backed securities	503.3		7.1		(0.9)		0		509.5		1.1
Commercial mortgage-backed securities	6,042.6		142.5		(10.0)		0		6,175.1		13.0
Other asset-backed securities	3,745.0		40.1		(0.5)		0		3,784.6		7.9
Redeemable preferred stocks	181.2		3.6		(1.4)		11.3		194.7		0.4
Total fixed maturities	35,589.1		1,223.9		(17.3)		15.2		36,810.9		77.4
Short-term investments	5,218.5		0		0		0		5,218.5		11.0
Total available-for-sale securities	40,807.6		1,223.9		(17.3)		15.2		42,029.4		88.4
Equity securities:
Nonredeemable preferred stocks	1,358.7		0		0		89.2		1,447.9		3.1
Common equities	1,187.3		0		0		2,865.7		4,053.0		8.5
Total equity securities	2,546.0		0		0		2,954.9		5,500.9		11.6
Total portfolio1	$	43,353.6	$	1,223.9	$	(17.3)	$	2,970.1	$	47,530.3	100.0	%

¹Our portfolio reflects the effect of net unsettled security transactions; at ~~June 30, 2020,~~March 31, 2021, we had ~~$277.9~~$363.1 million in other liabilities, compared to ~~$303.5~~$598.0 million and ~~$11.9~~$95.5 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2019,~~2020, respectively.

²The total fair value of the portfolio at ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019,~~2020, included ~~$2.3~~$3.7 billion, ~~$1.2~~$2.6 billion, and ~~$3.2~~$6.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of ~~any~~ unsettled security transactions. During the first quarter 2021, we used a portion of these investments to pay our fourth quarter and annual 2020 common share dividends.

At ~~June 30, 2020,~~March 31, 2021, bonds and certificates of deposit in the principal amount of ~~$281.1~~$296.1 million were on deposit to meet state insurance regulatory requirements. We did 0t 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 ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ or December 31, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, we did 0t 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.

~~Although we~~We invested in repurchase and reverse repurchase transactions during ~~the first six months of~~2021 and 2020, ~~and throughout 2019, we~~but did 0t have any open positions at ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ or December 31, ~~2019.~~2020. 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 on 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 ~~Included in our fixed-maturity securities are hybrid securities, which are reported at fair value:~~

June 30,
(millions) 2020
2019
December 31, 2019
Fixed maturities:
State and local government obligations $ 3.4
$ 3.5
$ 3.5
Corporate debt securities 84.3
91.3
91.2
Other asset-backed securities 2.2
3.5
2.6
Redeemable preferred stocks 90.2
86.7
92.1
Total hybrid securities $ 180.1
$ 185.0
$ 189.4

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:


	March 31,
(millions)	2021		2020		December 31, 2020
Fixed Maturities:
State and local government obligations	$	0	$	3.4	$	0
Corporate debt securities	295.0		116.5		188.4
Residential mortgage-backed securities	35.0		0		0
Other asset-backed securities	31.9		2.2		34.8
Redeemable preferred stocks	127.5		68.4		131.4
Total hybrid securities	$	489.4	$	190.5	$	354.6

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 have elected 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 ~~June 30, 2020~~,March 31, 2021, was:

(millions) Cost
Fair Value
Less than one year $ 5,936.5
$ 5,962.1
One to five years 18,030.7
18,599.1
Five to ten years 8,958.7
9,588.6
Ten years or greater 542.0
576.6
Total $ 33,467.9
$ 34,726.4


(millions)	Cost		Fair Value
Less than one year	$	4,918.5	$	4,940.6
One to five years	24,370.8		24,814.6
Five to ten years	9,214.5		9,277.3
Ten years or greater	60.2		59.3
Total	$	38,564.0	$	39,091.8

Asset-backed securities are classified in the maturity distribution table based upon their projected cash flows. All other securities, which do not have a single maturity date, are reported 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, for which no credit related impairment has been recognized, 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
March 31, 2021
U.S. government obligations	36	$	8,612.2	$	(111.0)	35	$	8,598.6	$	(109.7)	1	$	13.6	$	(1.3)
State and local government obligations	92	816.0		(16.0)		92	816.0		(16.0)		0	0		0
Corporate debt securities	79	1,751.4		(24.0)		76	1,698.4		(23.9)		3	53.0		(0.1)
Residential mortgage-backed securities	21	123.4		(0.8)		6	94.4		(0.2)		15	29.0		(0.6)
Commercial mortgage-backed securities	95	2,542.2		(45.1)		77	2,023.9		(41.7)		18	518.3		(3.4)
Other asset-backed securities	43	505.8		(0.7)		36	477.6		(0.5)		7	28.2		(0.2)
Redeemable preferred stocks	1	10.5		(2.0)		0	0		0		1	10.5		(2.0)
Total fixed maturities	367	$	14,361.5	$	(199.6)	322	$	13,708.9	$	(192.0)	45	$	652.6	$	(7.6)

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
June 30, 2020
Fixed maturities:
U.S. government obligations 4
$ 120.6
$ (0.1 ) 4
$ 120.6
$ (0.1 ) 0
$ 0
$ 0
State and local government obligations 17
135.0
(0.6 ) 16
131.2
(0.6 ) 1
3.8
0
Corporate debt securities 21
292.8
(3.4 ) 21
292.8
(3.4 ) 0
0
0
Residential mortgage-backed securities 40
188.2
(3.4 ) 21
93.7
(1.7 ) 19
94.5
(1.7 )
Commercial mortgage-backed securities 113
2,536.6
(55.8 ) 91
2,106.6
(48.3 ) 22
430.0
(7.5 )
Other asset-backed securities 29
331.7
(3.7 ) 21
299.0
(3.4 ) 8
32.7
(0.3 )
Redeemable preferred stocks 1
11.0
(1.4 ) 0
0
0
1
11.0
(1.4 )
Total fixed maturities 225
$ 3,615.9
$ (68.4 ) 174
$ 3,043.9
$ (57.5 ) 51
$ 572.0
$ (10.9 )

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
June 30, 2019
Fixed maturities:
U.S. government obligations 16
$ 572.8
$ (2.2 ) 0
$ 0
$ 0
16
$ 572.8
$ (2.2 )
State and local government obligations 85
398.3
(1.3 ) 11
133.6
(0.1 ) 74
264.7
(1.2 )
Corporate debt securities 68
928.9
(1.8 ) 4
42.3
(0.1 ) 64
886.6
(1.7 )
Residential mortgage-backed securities 43
203.8
(1.4 ) 8
24.5
0
35
179.3
(1.4 )
Commercial mortgage-backed securities 57
963.7
(2.6 ) 26
485.5
(1.1 ) 31
478.2
(1.5 )
Other asset-backed securities 92
674.6
(1.0 ) 23
265.6
(0.2 ) 69
409.0
(0.8 )
Redeemable preferred stocks 2
26.3
(1.6 ) 1
15.0
(0.5 ) 1
11.3
(1.1 )
Total fixed maturities 363
$ 3,768.4
$ (11.9 ) 73
$ 966.5
$ (2.0 ) 290
$ 2,801.9
$ (9.9 )

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, 2019
Fixed maturities:
U.S. government obligations 23
$ 5,152.4
$ (43.7 ) 19
$ 5,057.2
$ (43.6 ) 4
$ 95.2
$ (0.1 )
State and local government obligations 67
314.3
(2.7 ) 52
287.5
(2.6 ) 15
26.8
(0.1 )
Corporate debt securities 16
247.6
(0.5 ) 12
191.4
(0.5 ) 4
56.2
0
Residential mortgage-backed securities 41
292.8
(2.0 ) 12
163.7
(0.9 ) 29
129.1
(1.1 )
Commercial mortgage-backed securities 98
1,742.4
(6.0 ) 79
1,400.0
(5.3 ) 19
342.4
(0.7 )
Other asset-backed securities 61
1,000.6
(1.4 ) 43
938.5
(0.9 ) 18
62.1
(0.5 )
Redeemable preferred stocks 1
11.2
(1.3 ) 0
0
0
1
11.2
(1.3 )
Total fixed maturities 307
$ 8,761.3
$ (57.6 ) 217
$ 8,038.3
$ (53.8 ) 90
$ 723.0
$ (3.8 )


	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
March 31, 2020
U.S. government obligations	1	$	100.3	$	0	1	$	100.3	$	0	0	$	0	$	0
State and local government obligations	89	528.4		(4.5)		78	507.7		(4.4)		11	20.7		(0.1)
Corporate debt securities	233	4,205.6		(120.1)		233	4,205.6		(120.1)		0	0		0
Residential mortgage-backed securities	70	532.5		(19.2)		46	425.0		(11.9)		24	107.5		(7.3)
Commercial mortgage-backed securities	204	4,441.5		(188.3)		187	4,109.2		(173.8)		17	332.3		(14.5)
Other asset-backed securities	216	3,558.1		(40.0)		201	3,514.2		(39.0)		15	43.9		(1.0)
Redeemable preferred stocks	4	56.3		(5.1)		3	45.2		(3.8)		1	11.1		(1.3)
Total fixed maturities	817	$	13,422.7	$	(377.2)	749	$	12,907.2	$	(353.0)	68	$	515.5	$	(24.2)

~~During the second quarter~~


	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, 2020
U.S. government obligations	9	$	1,511.0	$	(3.7)	9	$	1,511.0	$	(3.7)	0	$	0	$	0
State and local government obligations	30	208.7		(0.7)		30	208.7		(0.7)		0	0		0
Corporate debt securities	7	129.4		(0.1)		7	129.4		(0.1)		0	0		0
Residential mortgage-backed securities	21	44.4		(0.9)		0	0		0		21	44.4		(0.9)
Commercial mortgage-backed securities	43	893.3		(10.0)		9	93.6		(0.3)		34	799.7		(9.7)
Other asset-backed securities	22	183.7		(0.5)		9	74.4		(0.1)		13	109.3		(0.4)
Redeemable preferred stocks	1	11.0		(1.4)		0	0		0		1	11.0		(1.4)
Total fixed maturities	133	$	2,981.5	$	(17.3)	64	$	2,017.1	$	(4.9)	69	$	964.4	$	(12.4)

As of ~~2020,~~March 31, 2021, we had 53 securities ~~included~~ in the table above, all in our corporate portfolio, that had their credit ratings downgraded ~~including 3 in our corporate debt portfolio and 2 in our residential mortgage-backed portfolio,~~during the quarter, with a combined fair value of ~~$29.2~~$31.9 million and an unrealized loss of ~~$0.3 million as~~$0.7 million.

A review of ~~June 30, 2020. Additionally, 6~~the securities in the table above had their credit ratings upgraded during the quarter, including 1 corporate debt security, 3 commercial mortgage-backed securities, and 2 other asset-backed securities, with a combined fair value of $58.7 million and an unrealized loss ~~of $0.4 million as of June 30, 2020. A review of all securities in the table above~~position indicated that the issuers were current with respect to their interest obligations and that there was no evidence of ~~significant~~ 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 0t record any allowances for credit losses or any write-offs for amounts deemed to be uncollectible for the first ~~six~~three months of ~~2020~~2021 and did 0t have a credit loss allowance balance as of ~~June 30,~~March 31, 2021 and 2020, or December 31, 2020. 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:~~ this analysis, including:

•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 whether we 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 calculated the net present value (NPV) of the cash flows expected (i.e., expected recovery value) ~~was calculated~~ using the current book yield for each ~~security, and~~security. The NPV was then compared to ~~its~~the security’s current amortized ~~value.~~value to determine if a credit loss existed. In the event that the ~~net present value~~NPV was below the amortized value, and the amount was determined to be material individually, or in aggregate, a credit loss would be deemed to exist, and either an allowance for credit losses would be created, or if ~~a change in the current~~an allowance ~~has occurred,~~currently existed, either a recovery of the previous allowance, or an incremental loss, would be recorded to net realized gains (losses)~~. We also deemed it is not likely that we will be required to sell the securities in an unrealized loss position prior to the recovery of their respective cost bases (which could be maturity).~~ on securities.

As of ~~June 30, 2020,~~March 31, 2021, we believe none of the unrealized losses relate to material credit losses on any specific securities, or in the aggregate, based on our review. We continue to expect all the securities in our portfolio to pay their principal and interest ~~obligations, which is consistent with our expectations at the end of first quarter.~~obligations.

In addition, we reviewed our accrued investment income outstanding on those securities in an unrealized loss position at ~~June 30, 2020,~~March 31, 2021, 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 0t write off any accrued income as uncollectible at ~~June 30, 2020.~~March 31, 2021.

Realized Gains (Losses) The components of net realized gains (losses) for the three ~~and six~~ months ended ~~June 30,~~March 31, were:

Three Months Six Months
(millions) 2020
2019
2020
2019
Gross realized gains on security sales
Available-for-sale securities:
U.S. government obligations $ 224.5
$ 34.9
$ 475.6
$ 71.5
State and local government obligations 13.0
0.6
15.0
2.2
Corporate and other debt securities 34.3
31.1
66.7
47.2
Residential mortgage-backed securities 0
0.2
0
0.2
Commercial mortgage-backed securities 4.3
2.9
10.4
3.6
Other asset-backed securities 0
0.7
0
0.7
Total available-for-sale securities 276.1
70.4
567.7
125.4
Equity securities:
Nonredeemable preferred stocks 0.1
11.7
19.7
16.6
Common equities 9.1
0.2
75.1
4.7
Total equity securities 9.2
11.9
94.8
21.3
   Subtotal gross realized gains on security sales 285.3
82.3
662.5

146.7
Gross realized losses on security sales
Available-for-sale securities:
U.S. government obligations (0.6 ) (5.3 ) (3.3 ) (12.4 )
State and local government obligations 0
(0.1 ) 0
(0.7 )
Corporate and other debt securities (5.5 ) (1.4 ) (6.5 ) (7.5 )
Residential mortgage-backed securities 0
0
0
(2.3 )
Commercial mortgage-backed securities (9.8 ) 0
(9.8 ) (2.1 )
Other asset-backed securities 0
0
0
(0.1 )
Redeemable preferred stocks 0
(0.1 ) 0
(0.1 )
Total available-for-sale securities (15.9 ) (6.9 ) (19.6 ) (25.2 )
Equity securities:
Nonredeemable preferred stocks (3.0 ) 0
(7.4 ) 0
Common equities (6.4 ) (7.9 ) (60.3 ) (7.9 )
Total equity securities (9.4 ) (7.9 ) (67.7 ) (7.9 )
   Subtotal gross realized losses on security sales (25.3 ) (14.8 ) (87.3 ) (33.1 )
Net realized gains (losses) on security sales
Available-for-sale securities:
U.S. government obligations 223.9
29.6
472.3
59.1
State and local government obligations 13.0
0.5
15.0
1.5
Corporate and other debt securities 28.8
29.7
60.2
39.7
Residential mortgage-backed securities 0
0.2
0
(2.1 )
Commercial mortgage-backed securities (5.5 ) 2.9
0.6
1.5
Other asset-backed securities 0
0.7
0
0.6
Redeemable preferred stocks 0
(0.1 ) 0
(0.1 )
Total available-for-sale securities 260.2
63.5
548.1
100.2
Equity securities:
Nonredeemable preferred stocks (2.9 ) 11.7
12.3
16.6
Common equities 2.7
(7.7 ) 14.8
(3.2 )
Total equity securities (0.2 ) 4.0
27.1
13.4
  Subtotal net realized gains (losses) on security sales 260.0
67.5
575.2
113.6
Net holding period gains (losses)
Hybrid securities 24.8
1.4
(6.4 ) 12.1
Equity securities 606.0
111.0
(231.6 ) 493.0
  Subtotal net holding period gains (losses) 630.8
112.4
(238.0 ) 505.1
Impairment losses
Other asset impairment 0
0
0
(24.3 )
  Subtotal impairment losses 0
0
0
(24.3 )
     Total net realized gains (losses) on securities $ 890.8
$ 179.9
$ 337.2
$ 594.4


	Three Months
(millions)		2021		2020
Gross realized gains on security sales
Available-for-sale securities:
U.S. government obligations		$	66.6	$	251.1
State and local government obligations		30.2		2.0
Corporate and other debt securities		20.7		32.4

Commercial mortgage-backed securities		29.8		6.1
Other asset-backed securities		0.7		0


Total available-for-sale securities		148.0		291.6
Equity securities:
Nonredeemable preferred stocks		17.3		19.6
Common equities		1.1		66.0
Total equity securities		18.4		85.6
Subtotal gross realized gains on security sales		166.4		377.2
Gross realized losses on security sales
Available-for-sale securities:
U.S. government obligations		(19.6)		(2.7)
State and local government obligations		(0.2)		0
Corporate and other debt securities		(2.1)		(1.0)

Commercial mortgage-backed securities		(0.6)		0
Other asset-backed securities		(0.1)		0


Total available-for-sale securities		(22.6)		(3.7)
Equity securities:
Nonredeemable preferred stocks		0		(4.4)
Common equities		0		(53.9)
Total equity securities		0		(58.3)
Subtotal gross realized losses on security sales		(22.6)		(62.0)
Net realized gains (losses) on security sales
Available-for-sale securities:
U.S. government obligations		47.0		248.4
State and local government obligations		30.0		2.0
Corporate and other debt securities		18.6		31.4

Commercial mortgage-backed securities		29.2		6.1
Other asset-backed securities		0.6		0


Total available-for-sale securities		125.4		287.9
Equity securities:
Nonredeemable preferred stocks		17.3		15.2
Common equities		1.1		12.1
Total equity securities		18.4		27.3
Subtotal net realized gains (losses) on security sales		143.8		315.2
Net holding period gains (losses)
Hybrid securities		(10.9)		(31.2)
Equity securities		452.4		(837.6)

Subtotal net holding period gains (losses)		441.5		(868.8)








Total net realized gains (losses) on securities		$	585.3	$	(553.6)

Realized gains (losses) on securities sold are computed using the first-in-first-out method. During the second quarter of 2020, our common and nonredeemable preferred stocks’ valuations experienced a significant, although not a complete, recovery from the declines experienced during the first quarter. Net realized gains on security sales were primarily in U.S. Treasury securities, which were sold in order to selectively increase holdings across the remainder of the portfolio, predominantly in our corporate debt portfolio. The sales in our common stock portfolio were the result of rebalancing the indexed equity portfolio. We had net security gains on the sales of our common stocks due to the extensive holding periods of these investments, in some cases more than ten years, which created significant valuation increases that more than offset the decline experienced.

For 2019, the other asset impairment losses related to federal renewable energy tax credit fund investments, which were reported in other assets on the consolidated balance sheets, based on an analysis that our investments in those funds will not generate the cash flows that we anticipated.

The following table reflects our holding period realized gains (losses) on equity securities recognized for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ for equity securities held at the respective quarter end:


	Three Months
(millions)		2021		2020
Total net gains (losses) recognized during the period on equity securities		$	470.8	$	(810.3)
Less: Net gains (losses) recognized on equity securities sold during the period		18.4		27.3
Net holding period gains (losses) recognized during the period on equity securities held at period end		$	452.4	$	(837.6)

Three Months Six Months
(millions) 2020
2019
2020
2019
Total net gains (losses) recognized during the period on equity securities $ 605.8
$ 115.0
$ (204.5 ) $ 506.4
Less: Net gains (losses) recognized on equity securities sold during the period (0.2 ) 4.0
27.1
13.4
Net holding period gains (losses) recognized during the period on equity securities held at period end $ 606.0
$ 111.0
$ (231.6 ) $ 493.0
During the first quarter 2021, as expectations of U.S. economic growth increased, the value of our equity securities also rose. In contrast, during the first quarter 2020, we recognized significant declines in the equity security valuations due to investors reducing exposure to risk in response to the economic impact of COVID-19 restrictions.

Net Investment Income The components of net investment income for the three ~~and six~~ months ended ~~June 30,~~March 31, were:


	Three Months
(millions)		2021		2020
Available-for-sale securities:
Fixed maturities:
U.S. government obligations		$	30.4	$	62.6
State and local government obligations		13.4		9.6
Corporate debt securities		85.2		58.0
Residential mortgage-backed securities		3.4		4.2
Commercial mortgage-backed securities		35.8		34.3
Other asset-backed securities		15.9		29.2
Redeemable preferred stocks		2.5		7.9
Total fixed maturities		186.6		205.8
Short-term investments		1.5		7.0
Total available-for-sale securities		188.1		212.8
Equity securities:
Nonredeemable preferred stocks		17.9		13.8
Common equities		14.2		14.6
Total equity securities		32.1		28.4
Investment income		220.2		241.2
Investment expenses		(5.6)		(5.3)
Net investment income		$	214.6	$	235.9

Three Months Six Months
(millions) 2020
2019
2020
2019
Available-for-sale securities:
   Fixed maturities:
U.S. government obligations $ 35.7
$ 69.2
$ 98.3
$ 122.9
State and local government obligations 16.1
8.9
25.7
18.2
Corporate debt securities 76.6
67.5
134.6
144.7
Residential mortgage-backed securities 3.8
4.6
8.0
11.2
Commercial mortgage-backed securities 42.6
33.4
76.9
65.1
Other asset-backed securities 24.8
28.1
54.0
54.1
Redeemable preferred stocks 2.1
8.5
10.0
12.2
Total fixed maturities 201.7
220.2
407.5
428.4
   Short-term investments 13.7
11.2
20.7
27.2
    Total available-for-sale securities 215.4
231.4
428.2
455.6
Equity securities:
Nonredeemable preferred stocks 14.7
15.9
28.5
31.4
Common equities 13.7
14.0
28.3
27.2
    Total equity securities 28.4
29.9
56.8
58.6
    Investment income 243.8
261.3
485.0
514.2
    Investment expenses (4.5 ) (6.2 ) (9.8 ) (12.4 )
Net investment income $ 239.3
$ 255.1
$ 475.2
$ 501.8

The amount of investment income (interest and dividends) we earn varies based on the average assets held during the year and the book yields of the securities in our portfolio. On a year-over-year basis, investment income decreased ~~7% for the second quarter and 6%~~9% for the first ~~six~~three months of 2021, compared to the same ~~periods~~period last year, due to a decrease in the portfolio yield, which was partially offset by an increase in average assets. The recurring investment book yield decreased about ~~21% in the second quarter 2020 and 16%~~22% for the first ~~six~~three months of ~~2020,~~2021, compared to the same period in ~~2019,~~2020, as a result of investing cash from operations and reinvesting cash from sales, maturities, paydowns, and other redemptions at market yields that were significantly lower than the portfolio’s overall yield. The income reduction from the negative yield change was partially offset by an increase in income earned as a result of ~~an increase in average assets resulting~~investing the $1.0 billion of proceeds from ~~new~~the debt issued during ~~the first quarter~~March 2020, as well as strong premium growth and underwriting profitability, net of payments of our common and preferred stock dividends. The portfolio’s duration at June 30, 2020 was 3.0 years, compared to 2.7 years at June 30, 2019. The decrease in investment expenses for both periods in 2020, compared to 2019, primarily reflects lower expenses incurred due to our decision to no longer maintain an actively managed portfolio, and lower incentive-based compensation recognized.

Note 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.

•: 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 daily, 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 the 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
March 31, 2021
Fixed maturities:
U.S. government obligations	$	16,073.4	$	0	$	0	$	16,073.4	$	16,002.7
State and local government obligations	0		2,624.1		0		2,624.1		2,574.8
Corporate debt securities	0		10,436.2		0		10,436.2		10,095.2
Subtotal	16,073.4		13,060.3		0		29,133.7		28,672.7
Asset-backed securities:
Residential mortgage-backed	0		553.2		0		553.2		548.3
Commercial mortgage-backed	0		5,892.0		0		5,892.0		5,868.3
Other asset-backed	0		3,323.4		0		3,323.4		3,293.5
Subtotal asset-backed securities	0		9,768.6		0		9,768.6		9,710.1
Redeemable preferred stocks:
Financials	0		50.6		0		50.6		51.0
Utilities	0		11.4		0		11.4		10.0
Industrials	10.6		116.9		0		127.5		120.2
Subtotal redeemable preferred stocks	10.6		178.9		0		189.5		181.2
Total fixed maturities	16,084.0		23,007.8		0		39,091.8		38,564.0
Short-term investments	2,227.8		15.3		0		2,243.1		2,243.1
Total available-for-sale securities	18,311.8		23,023.1		0		41,334.9		40,807.1
Equity securities:
Nonredeemable preferred stocks:
Financials	113.8		1,274.7		35.0		1,423.5		1,373.9
Utilities	0		41.9		0		41.9		39.9
Industrials	0		25.2		16.6		41.8		40.1
Subtotal nonredeemable preferred stocks	113.8		1,341.8		51.6		1,507.2		1,453.9
Common equities:
Common stocks	4,555.3		0		0		4,555.3		1,201.3
Other risk investments	0		0		3.2		3.2		3.2
Subtotal common equities	4,555.3		0		3.2		4,558.5		1,204.5
Total equity securities	4,669.1		1,341.8		54.8		6,065.7		2,658.4
Total portfolio	$	22,980.9	$	24,364.9	$	54.8	$	47,400.6	$	43,465.5
Debt	$	0	$	6,195.2	$	0	$	6,195.2	$	5,396.8

Fair Value
(millions) Level 1
Level 2
Level 3
Total
Cost
June 30, 2020
Fixed maturities:
U.S. government obligations $ 9,277.8
$ 0
$ 0
$ 9,277.8
$ 8,814.5
State and local government obligations 0
3,574.3
0
3,574.3
3,426.0
Corporate debt securities 0
11,062.5
0
11,062.5
10,493.2
Subtotal 9,277.8
14,636.8
0
23,914.6
22,733.7
Asset-backed securities:
Residential mortgage-backed 0
543.0
0
543.0
541.0
Commercial mortgage-backed 0
5,761.8
0
5,761.8
5,728.5
Other asset-backed 0
4,354.9
0
4,354.9
4,313.3
Subtotal asset-backed securities 0
10,659.7
0
10,659.7
10,582.8
Redeemable preferred stocks:
Financials 0
51.1
0
51.1
51.3
Utilities 0
10.8
0
10.8
10.0
Industrials 9.7
80.5
0
90.2
90.1
Subtotal redeemable preferred stocks 9.7
142.4
0
152.1
151.4
Total fixed maturities 9,287.5
25,438.9
0
34,726.4
33,467.9
Short-term investments 4,428.0
272.5
0
4,700.5
4,700.5
Total available-for-sale securities 13,715.5
25,711.4
0
39,426.9
38,168.4
Equity securities:
Nonredeemable preferred stocks:
Financials 108.2
958.3
38.1
1,104.6
1,125.3
Utilities 0
38.7
0
38.7
40.0
Industrials 0
22.1
15.2
37.3
40.1
Subtotal nonredeemable preferred stocks 108.2
1,019.1
53.3
1,180.6
1,205.4
Common equities:
Common stocks 3,170.1
0
0
3,170.1
1,128.5
Other risk investments 0
0
0.3
0.3
0.3
Subtotal common equities 3,170.1
0
0.3
3,170.4
1,128.8
Total equity securities 3,278.3
1,019.1
53.6

4,351.0
2,334.2
Total portfolio $ 16,993.8
$ 26,730.5
$ 53.6
$ 43,777.9
$ 40,502.6
Debt $ 0
$ 6,664.3
$ 0
$ 6,664.3
$ 5,394.7


	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
March 31, 2020
Fixed maturities:
U.S. government obligations	$	11,495.7	$	0	$	0	$	11,495.7	$	10,841.2
State and local government obligations	0		2,304.2		0		2,304.2		2,243.9
Corporate debt securities	0		9,491.9		0		9,491.9		9,452.9
Subtotal	11,495.7		11,796.1		0		23,291.8		22,538.0
Asset-backed securities:
Residential mortgage-backed	0		556.6		0		556.6		574.3
Commercial mortgage-backed	0		5,664.3		0		5,664.3		5,822.4
Other asset-backed	0		4,639.1		0		4,639.1		4,674.9
Subtotal asset-backed securities	0		10,860.0		0		10,860.0		11,071.6
Redeemable preferred stocks:
Financials	0		47.2		0		47.2		51.4
Utilities	0		9.2		0		9.2		10.0
Industrials	7.3		61.1		0		68.4		90.1
Subtotal redeemable preferred stocks	7.3		117.5		0		124.8		151.5
Total fixed maturities	11,503.0		22,773.6		0		34,276.6		33,761.1
Short-term investments	2,438.4		85.8		0		2,524.2		2,524.2
Total available-for-sale securities	13,941.4		22,859.4		0		36,800.8		36,285.3
Equity securities:
Nonredeemable preferred stocks:
Financials	105.5		752.3		13.1		870.9		937.4
Utilities	0		32.0		0		32.0		40.0
Industrials	0		15.3		15.2		30.5		40.1
Subtotal nonredeemable preferred stocks	105.5		799.6		28.3		933.4		1,017.5
Common equities:
Common stocks	2,607.8		0		0		2,607.8		1,112.9
Other risk investments	0		0		0.3		0.3		0.3
Subtotal common equities	2,607.8		0		0.3		2,608.1		1,113.2
Total equity securities	2,713.3		799.6		28.6		3,541.5		2,130.7
Total portfolio	$	16,654.7	$	23,659.0	$	28.6	$	40,342.3	$	38,416.0
Debt	$	0	$	6,108.6	$	0	$	6,108.6	$	5,394.0

Fair Value
(millions) Level 1
Level 2
Level 3
Total
Cost
June 30, 2019
Fixed maturities:

U.S. government obligations $ 12,379.4
$ 0
$ 0
$ 12,379.4
$ 12,121.9
State and local government obligations 0
1,589.7
0
1,589.7
1,563.6
Corporate debt securities 0
7,385.7
0
7,385.7
7,176.7
Subtotal 12,379.4
8,975.4
0
21,354.8
20,862.2
Asset-backed securities:
Residential mortgage-backed 0
665.2
0
665.2
660.4
Commercial mortgage-backed 0
4,441.9
0
4,441.9
4,361.2
Other asset-backed 0
4,497.2
0
4,497.2
4,478.2
Subtotal asset-backed securities 0
9,604.3
0
9,604.3
9,499.8
Redeemable preferred stocks:
Financials 0
51.4
0
51.4
51.7
Utilities 0
10.3
0
10.3
10.0
Industrials 10.4
157.0
0
167.4
164.5
Subtotal redeemable preferred stocks 10.4
218.7
0
229.1
226.2
Total fixed maturities 12,389.8
18,798.4
0
31,188.2
30,588.2
Short-term investments 1,287.0
73.9
0
1,360.9
1,360.9
Total available-for-sale securities 13,676.8
18,872.3
0
32,549.1
31,949.1
Equity securities:
Nonredeemable preferred stocks:
Financials 82.2
974.3
27.1
1,083.6
1,015.4
Utilities 0
41.4
0
41.4
39.9
Industrials 0
0
5.0
5.0
5.0
Subtotal nonredeemable preferred stocks 82.2
1,015.7
32.1
1,130.0
1,060.3
Common equities:
Common stocks 3,135.2
0
0
3,135.2
1,203.4
Other risk investments 0
0
0.3
0.3
0.3
Subtotal common equities 3,135.2
0
0.3
3,135.5
1,203.7
Total equity securities 3,217.4
1,015.7

32.4
4,265.5
2,264.0
Total portfolio $ 16,894.2
$ 19,888.0
$ 32.4
$ 36,814.6
$ 34,213.1
Debt $ 0
$ 4,955.2
$ 0
$ 4,955.2
$ 4,406.0

Fair Value
(millions) Level 1
Level 2
Level 3
Total
Cost
December 31, 2019
Fixed maturities:
U.S. government obligations $ 13,251.1
$ 0
$ 0
$ 13,251.1
$ 13,100.7
State and local government obligations 0
1,713.3
0
1,713.3
1,686.0
Corporate debt securities 0
7,067.7
0
7,067.7
6,860.3
Subtotal 13,251.1
8,781.0
0
22,032.1
21,647.0
Asset-backed securities:
Residential mortgage-backed 0
627.5
0
627.5
625.0
Commercial mortgage-backed 0
5,076.2
0
5,076.2
5,020.7
Other asset-backed 0
5,179.5
0
5,179.5
5,164.7
Subtotal asset-backed securities 0
10,883.2
0
10,883.2
10,810.4
Redeemable preferred stocks:
Financials 0
51.7
0
51.7
51.5
Utilities 0
11.1
0
11.1
10.0
Industrials 11.1
121.1
0
132.2
124.2
Subtotal redeemable preferred stocks 11.1
183.9
0
195.0
185.7
Total fixed maturities 13,262.2
19,848.1
0
33,110.3
32,643.1
Short-term investments 1,797.4
1.4
0
1,798.8
1,798.8
Total available-for-sale securities 15,059.6
19,849.5
0
34,909.1
34,441.9
Equity securities:
Nonredeemable preferred stocks:
Financials 77.4
850.7
27.1
955.2
891.3
Utilities 0
42.3
0
42.3
39.9
Industrials 0
25.4
16.0
41.4
40.1
Subtotal nonredeemable preferred stocks 77.4
918.4
43.1
1,038.9
971.3
Common equities:
Common stocks 3,306.0
0
0
3,306.0
1,125.2
Other risk investments 0
0
0.3
0.3
0.3
Subtotal common equities 3,306.0
0
0.3
3,306.3
1,125.5
Total equity securities 3,383.4
918.4
43.4
4,345.2
2,096.8
Total portfolio $ 18,443.0
$ 20,767.9
$ 43.4
$ 39,254.3
$ 36,538.7
Debt $ 0
$ 5,119.6
$ 0
$ 5,119.6
$ 4,407.1


	Fair Value
(millions)	Level 1		Level 2		Level 3		Total		Cost
December 31, 2020
Fixed maturities:
U.S. government obligations	$	12,740.0	$	0	$	0	$	12,740.0	$	12,437.9
State and local government obligations	0		3,221.8		0		3,221.8		3,099.4
Corporate debt securities	0		10,185.2		0		10,185.2		9,579.7
Subtotal	12,740.0		13,407.0		0		26,147.0		25,117.0
Asset-backed securities:
Residential mortgage-backed	0		509.5		0		509.5		503.3
Commercial mortgage-backed	0		6,175.1		0		6,175.1		6,042.6
Other asset-backed	0		3,784.6		0		3,784.6		3,745.0
Subtotal asset-backed securities	0		10,469.2		0		10,469.2		10,290.9
Redeemable preferred stocks:
Financials	0		51.6		0		51.6		51.1
Utilities	0		11.7		0		11.7		10.0
Industrials	10.8		120.6		0		131.4		120.1
Subtotal redeemable preferred stocks	10.8		183.9		0		194.7		181.2
Total fixed maturities	12,750.8		24,060.1		0		36,810.9		35,589.1
Short-term investments	4,704.9		513.6		0		5,218.5		5,218.5
Total available-for-sale securities	17,455.7		24,573.7		0		42,029.4		40,807.6
Equity securities:
Nonredeemable preferred stocks:
Financials	117.7		1,212.3		35.0		1,365.0		1,278.6
Utilities	0		41.9		0		41.9		40.0
Industrials	0		24.3		16.7		41.0		40.1
Subtotal nonredeemable preferred stocks	117.7		1,278.5		51.7		1,447.9		1,358.7
Common equities:
Common stocks	4,049.9		0		0		4,049.9		1,184.2
Other risk investments	0		0		3.1		3.1		3.1
Subtotal common equities	4,049.9		0		3.1		4,053.0		1,187.3
Total equity securities	4,167.6		1,278.5		54.8		5,500.9		2,546.0
Total portfolio	$	21,623.3	$	25,852.2	$	54.8	$	47,530.3	$	43,353.6
Debt	$	0	$	6,793.5	$	0	$	6,793.5	$	5,396.1

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 ~~June 30, 2020~~,March 31, 2021, vendor-quoted prices represented ~~75%~~78% of our Level 1 classifications (excluding short-term investments), compared to ~~80%~~82% and 76% at ~~both June 30, 2019~~March 31, 2020 and December 31, ~~2019,~~2020, respectively. 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.

At ~~June 30,~~March 31, 2021 and December 31, 2020, vendor-quoted prices comprised ~~97%~~99% of our Level 2 classifications (excluding short-term investments), while dealer-quoted prices represented the remaining 3%1%, compared to 98% and 2%, ~~and 99% and 1%,~~ respectively, at ~~June 30, 2019 and December~~March 31, ~~2019.~~2020. 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 at least 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 our structured debt securities, including commercial, residential, and 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 our 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, coupon, and credit quality, 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 our municipal securities (e.g., general obligations, revenue, and housing), we stratify the portfolio to evaluate securities by type, coupon, credit quality, and duration 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.

Lastly, for our 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 explain significant price changes (i.e., greater than 2%) as known events occur in the marketplace and affect a 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.

Except as described below, our Level 3 securities are also 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. Certain private equity investments included in the Level 3 category are valued using external pricing supplemented by internal review and analysis.

After all the valuations are received and our review is complete, if the inputs used by vendors are determined to not contain sufficient observable market information, we will reclassify the affected security valuations to Level 3. At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019,~~2020, we did 0t have any securities in our fixed-maturity portfolio listed as Level 3.

At ~~June 30,~~March 31, 2021 and December 31, 2020, we held 4 private nonredeemable preferred securities that were priced internally or by a pricing firm, ~~compared to 2~~and we held 3 private nonredeemable preferred securities at ~~June 30, 2019 and 3 securities at December~~March 31, ~~2019.~~2020. At ~~June 30, 2020 and 2019,~~March 31, 2021 and December 31, ~~2019,~~2020, we held 2 Level 3 other risk investments that were priced using the cost method, compared to 1 Level 3 other risk investment ~~that was priced using the equity method.~~at March 31, 2020.

To the extent we receive prices from external sources for the Level 3 securities, we would review those prices for reasonableness using internally developed assumptions and then compare our derived prices to the prices we received. During ~~2020~~2021 and ~~2019,~~2020, there were no material assets or liabilities measured at fair value on a nonrecurring basis. During the second quarter 2020, we purchased a new Level 3 security and the fair value at June 30, 2020, reflects the unadjusted purchase price due to the timing of the purchase. The remaining Level 3 securities were priced in-house, using a capitalization-based model of similarly structured public company competitors and a weighted average capitalization formula (i.e., guideline public company method) to calculate a valuation change for our securities. We utilized this methodology at March 31, 2020, rather than having our external pricing source update their valuation models, due to the timing of the market decline, relative to our quarter end. We determined that this pricing methodology was still appropriate at June 30, 2020.

Based on our review, all prices received from external sources for ~~2019~~2021 remained unadjusted. 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 six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Level 3 Fair Value
(millions) Fair Value at March 31, 2020
Calls/
Maturities/
Paydowns

Purchases
Sales
Net Realized
(Gain)/Loss
on Sales

Change in
Valuation

Net
Transfers
In (Out)

Fair Value at June 30, 2020
Equity securities:
Nonredeemable preferred stocks:
Financials $ 13.1
$ 0
$ 25.0
$ 0
$ 0
$ 0
$ 0
$ 38.1
Industrials 15.2
0
0
0
0
0
0
15.2
Common equities:
Other risk investments 0.3
0
0
0
0
0
0
0.3
Total Level 3 securities $ 28.6
$ 0
$ 25.0
$ 0
$ 0
$ 0
$ 0
$ 53.6

Level 3 Fair Value
(millions) Fair Value at March 31, 2019
Calls/
Maturities/
Paydowns

Purchases
Sales
Net Realized
(Gain)/Loss
on Sales

Change in
Valuation

Net
Transfers
In (Out)

Fair Value at June 30, 2019
Equity securities:
Nonredeemable preferred stocks:
Financials $ 25.1
$ 0
$ 2.0
$ 0
$ 0
$ 0
$ 0
$ 27.1
Industrials 5.0
0
0
0
0
0
0
5.0
Common equities:
Other risk investments 0.3
0
0
0
0
0
0
0.3
Total Level 3 securities $ 30.4
$ 0
$ 2.0
$ 0
$ 0
$ 0
$ 0
$ 32.4

Level 3 Fair Value
(millions) Fair Value at December 31, 2019
Calls/
Maturities/
Paydowns

Purchases
Sales
Net Realized
(Gain)/Loss
on Sales

Change in
Valuation

Net
Transfers
In (Out)

Fair Value at June 30, 2020
Equity securities:
Nonredeemable preferred stocks:
Financials $ 27.1
$ 0
$ 25.0
$ 0
$ 0
$ (14.0 ) $ 0
$ 38.1
Industrials 16.0
0
0
0
0
(0.8 ) 0
15.2
Common equities:
Other risk investments 0.3
0
0
0
0
0
0
0.3
Total Level 3 securities $ 43.4
$ 0
$ 25.0
$ 0
$ 0
$ (14.8 ) $ 0
$ 53.6


	Level 3 Fair Value
(millions)	Fair Value at December 31, 2020		Calls/ Maturities/ Paydowns		Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at March 31, 2021




Equity securities:
Nonredeemable preferred stocks:
Financials	$	35.0	$	0	$	0	$	0	$	0	$	0	$	0	$	35.0
Industrials	16.7		0		0		0		0		(0.1)		0		16.6
Common equities:
Other risk investments	3.1		0		0.1		0		0		0		0		3.2
Total Level 3 securities	$	54.8	$	0	$	0.1	$	0	$	0	$	(0.1)	$	0	$	54.8

Level 3 Fair Value
(millions) Fair Value at December 31, 2018
Calls/
Maturities/
Paydowns

Purchases
Sales
Net Realized
(Gain)/Loss
on Sales

Change in
Valuation

Net
Transfers
In (Out)

Fair Value at June 30, 2019
Equity securities:
Nonredeemable preferred stocks:
Financials $ 25.1
$ 0
$ 2.0
$ 0
$ 0
$ 0
$ 0
$ 27.1
Industrials 5.0
0
0
0
0
0
0
5.0
Common equities:
Other risk investments 0.3
0
0
0
0
0
0
0.3
Total Level 3 securities $ 30.4
$ 0
$ 2.0
$ 0
$ 0
$ 0
$ 0
$ 32.4


	Level 3 Fair Value
(millions)	Fair Value at December 31, 2019		Calls/ Maturities/ Paydowns		Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at March 31, 2020




Equity securities:
Nonredeemable preferred stocks:
Financials	$	27.1	$	0	$	0	$	0	$	0	$	(14.0)	$	0	$	13.1
Industrials	16.0		0		0		0		0		$	(0.8)	0		15.2
Common equities:
Other risk investments	0.3		0		0		0		0		0		0		0.3
Total Level 3 securities	$	43.4	$	0	$	0	$	0	$	0	$	(14.8)	$	0	$	28.6

The following tables provide a summary of the quantitative information about Level 3 fair value measurements for our applicable securities at ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019:~~2020:

Quantitative Information about Level 3 Fair Value Measurements

($ in millions)

Fair Value at June 30, 2020

Valuation Technique

Unobservable Input

Unobservable Input Assumption

($ in millions)

Fair Value at March 31, 2021

Valuation Technique

Unobservable Input

Unobservable Input Assumption

Equity securities:

Nonredeemable preferred stocks:

Financials

13.1

Guideline public company method

Weighted average capitalization %

(51.5

)

Financials¹

25.0

Internal price

Unadjusted purchase price per share

3.7

Financials1

25.0

Internal price

Unadjusted purchase price per share

3.7

Financials2

10.0

Internal price

Unadjusted purchase price per share

16.9

Industrials

15.2

Guideline public company method

Weighted average capitalization %

(19.2

)

Industrials

6.9

Pricing firm

Market approach (guideline public company method)

5.4

Industrials

9.7

Pricing firm

Market approach (guideline public company method)

4.8

Subtotal Level 3 securities

53.3

Subtotal Level 3 securities

51.6

Pricing exemption securities

0.3

Pricing exemption securities

3.2

Total Level 3 securities

53.6

Total Level 3 securities

54.8

¹~~The~~This security was purchased in May 2020.

Quantitative Information about Level 3 Fair Value Measurements
($ in millions) Fair Value at June 30, 2019
Valuation Technique Unobservable Input Unobservable Input Assumption
Equity securities:
Nonredeemable preferred stocks:
Financials¹
$ 27.1
Internal price Unadjusted purchase price per share 9.0
Industrials 5.0
Internal price Price-to-sales ratio 5.5
Subtotal Level 3 securities 32.1

Pricing exemption securities 0.3

Total Level 3 securities $ 32.4

¹2 ~~The security was purchased in December 2018.~~

Quantitative Information about Level 3 Fair Value Measurements
($ in millions) Fair Value at December 31, 2019
Valuation Technique Unobservable Input Unobservable Input Assumption
Equity securities:
Nonredeemable preferred stocks:
Financials $ 27.1
Pricing firm Recent transaction price per share 9.0
Industrials 6.0
Pricing firm Performance-based transaction price adjustment per share 4.8
Industrials¹
10.0
Internal price Unadjusted purchase price per share 4.9
Subtotal Level 3 securities 43.1

Pricing exemption securities 0.3

Total Level 3 securities $ 43.4

¹~~The~~This security was purchased in November ~~2019.~~2020.

Quantitative Information about Level 3 Fair Value Measurements

($ in millions)

Fair Value at March 31, 2020

Valuation Technique

Unobservable Input

Unobservable Input Assumption

Equity securities:

Nonredeemable preferred stocks:

Financials

13.1

Internal price

Market approach (guideline public company method)

4.4

Industrials1

7.1

Internal price

Market approach (guideline public company method)

5.6

Industrials1

8.1

Internal price

Market approach (guideline public company method)

4.0

Subtotal Level 3 securities

28.3

Pricing exemption securities

0.3

Total Level 3 securities

28.6

1Modified prior year disclosure to present securities individually to conform to the current year presentation.

Quantitative Information about Level 3 Fair Value Measurements

($ in millions)

Fair Value at December 31, 2020

Valuation Technique

Unobservable Input

Unobservable Input Assumption

Equity securities:

Nonredeemable preferred stocks:

Financials1

25.0

Internal price

Unadjusted purchase price per share

3.7

Financials2

10.0

Internal price

Unadjusted purchase price per share

16.9

Industrials

6.9

Pricing firm

Market approach (guideline public company method)

5.4

Industrials

9.8

Pricing firm

Market approach (guideline public company method)

4.8

Subtotal Level 3 securities

51.7

Pricing exemption securities

3.1

Total Level 3 securities

54.8

1 This security was purchased in May 2020.

2 This security was purchased in November 2020.

Note 4 Debt — Debt at each of the balance sheet periods consisted of:


	March 31, 2021				March 31, 2020				December 31, 2020
(millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
3.75% Senior Notes due 2021 (issued: $500.0, August 2011)	$	499.9	$	506.7	$	499.5	$	510.7	$	499.8	$	510.9
2.45% Senior Notes due 2027 (issued: $500.0, August 2016)	497.4		526.8		497.0		488.2		497.3		541.1
6 5/8% Senior Notes due 2029 (issued: $300.0, March 1999)	297.0		386.1		296.7		395.3		296.9		409.4
4.00% Senior Notes due 2029 (issued: $550.0, October 2018)	545.6		623.7		545.1		605.7		545.5		660.4
3.20% Senior Notes due 2030 (issued: $500.0, March 2020)	496.2		536.7		495.8		543.2		496.1		575.5
6.25% Senior Notes due 2032 (issued: $400.0, November 2002)	396.0		531.4		395.8		539.6		396.0		582.0
4.35% Senior Notes due 2044 (issued: $350.0, April 2014)	346.8		413.9		346.7		391.7		346.7		459.7
3.70% Senior Notes due 2045 (issued: $400.0, January 2015)	395.6		430.2		395.4		406.2		395.5		481.0
4.125% Senior Notes due 2047 (issued: $850.0, April 2017)	841.7		977.1		841.6		991.9		841.7		1,113.1
4.20% Senior Notes due 2048 (issued: $600.0, March 2018)	590.0		698.7		589.9		675.8		590.0		806.7
3.95% Senior Notes due 2050 (issued: $500.0, March 2020)	490.6		563.9		490.5		560.3		490.6		653.7

Total	$	5,396.8	$	6,195.2	$	5,394.0	$	6,108.6	$	5,396.1	$	6,793.5

June 30, 2020 June 30, 2019 December 31, 2019
(millions)
Carrying
Value

Fair
Value

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
3.75% Senior Notes due 2021 $ 499.6
$ 519.0
$ 499.2
$ 516.5
$ 499.4
$ 515.6
2.45% Senior Notes due 2027 497.1
533.7
496.7
494.7
496.9
501.5
6 5/8% Senior Notes due 2029 296.8
420.7
296.5
385.7
296.6
392.5
4.00% Senior Notes due 2029 545.2
654.2
544.8
608.9
545.0
614.3
3.20% Senior Notes due 2030 496.0
567.6
0
0
0
0
6.25% Senior Notes due 2032 395.8
569.6
395.6
531.3
395.7
552.6
4.35% Senior Notes due 2044 346.7
444.9
346.6
392.5
346.7
417.0
3.70% Senior Notes due 2045 395.5
471.4
395.4
411.1
395.4
434.2
4.125% Senior Notes due 2047 841.6
1,080.8
841.5
943.0
841.6
986.1
4.20% Senior Notes due 2048 589.9
773.8
589.7
671.5
589.8
705.8
3.95% Senior Notes due 2050 490.5
628.6
0
0
0
0
Total $ 5,394.7
$ 6,664.3
$ 4,406.0
$ 4,955.2
$ 4,407.1
$ 5,119.6

At March 31, 2021 and December 31, 2020, short-term debt consisted of the $500 million 3.75% Senior Notes that mature in August 2021; there was 0 short-term debt outstanding at March 31, 2020.

The Progressive Corporation issued $500 million of 3.20% Senior Notes due 2030 (the “3.20% Senior Notes”) and $500 million of 3.95% Senior Notes due 2050 (the “3.95% Senior Notes”) in March 2020, in an underwritten public offering. The net proceeds from the issuances, after deducting underwriters’ discounts, commissions, and other issuance costs, were approximately $986.3 million in aggregate. Consistent with the other senior notes issued by Progressive, interest on the 3.20% and 3.95% Senior Notes is payable semiannually, principal is due at maturity, and the notes are redeemable, in whole or in part, at any time, subject tohas a ~~treasury “make whole” provision.~~

~~During the second quarter 2020, The Progressive Corporation renewed the~~ line of credit with PNC Bank, National Association (PNC), in the maximum principal amount of $250 ~~million, that expired in April 2020. Subject~~million. See the 2020 Annual Report to ~~the~~Shareholders for terms ~~and conditions~~ of ~~the~~this line of credit documents, advances under the line of credit (if any) will bear interest at a variable rate equal to the higher of PNC’s Prime Rate or the sum of the Federal Funds Open Rate plus 175 basis points. Each advance must be repaid on the 30th day after the advance or, if earlier, on April 30, 2021, 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 0 borrowings under ~~either~~the line of credit during the periods presented.

Note 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 ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019,~~2020, we determined that we did 0t 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.

For the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, there have been no material changes in our reserve for uncertain tax positions.

The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, was ~~21.1% and~~ 20.8% ~~respectively,~~, compared to ~~21.3% and 26.7%~~20.1% for the same ~~periods~~period last year. ~~For~~

Net state deferred income tax asset and liability amounts as of March 31, 2020, were reclassified on the ~~first six months of 2019, the higher effective rate was due primarily~~consolidated balance sheets into other assets and accounts payable, accrued expenses, and other liabilities, respectively, from net federal deferred income taxes to conform to the reversal of tax credits and other tax benefits previously recognized from certain renewable energy investments, where the sponsor pled guilty to fraud through these investments and the tax credits and other benefits related to those investments were not valid. See ~~Note 5 – Income Taxes~~ ~~in our 2019 Annual Report to Shareholders for further discussion.~~current year presentation.

Note 6 Loss and Loss Adjustment Expense Reserves — Activity in the loss and loss adjustment expense reserves is summarized as follows:


	March 31,
(millions)	2021		2020
Balance at January 1	$	20,265.8	$	18,105.4
Less reinsurance recoverables on unpaid losses	3,798.2		3,212.2
Net balance at January 1	16,467.6		14,893.2


Incurred related to:
Current year	6,986.1		6,011.1
Prior years	124.4		144.1
Total incurred	7,110.5		6,155.2
Paid related to:
Current year	3,029.3		2,916.4
Prior years	3,453.7		3,269.2
Total paid	6,483.0		6,185.6
Net balance at March 31	17,095.1		14,862.8
Plus reinsurance recoverables on unpaid losses	3,968.6		3,443.7
Balance at March 31	$	21,063.7	$	18,306.5

June 30,
(millions) 2020 2019
Balance at January 1 $ 18,105.4
$ 15,400.8
Less reinsurance recoverables on unpaid losses 3,212.2
2,572.7
Net balance at January 1 14,893.2
12,828.1
Incurred related to:

Current year 11,360.5
11,687.1
Prior years 116.1
210.0
Total incurred 11,476.6
11,897.1
Paid related to:

Current year 6,180.4
6,407.5
Prior years 5,180.1
4,664.1
Total paid 11,360.5
11,071.6
Net balance at June 30 15,009.3
13,653.6
Plus reinsurance recoverables on unpaid losses 3,502.7
2,915.0
Balance at June 30 $ 18,512.0
$ 16,568.6

We experienced unfavorable reserve development of ~~$116.1~~$124.4 million and ~~$210.0~~$144.1 million during the first ~~six~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively, which is reflected as “Incurred related to prior years” in the table above.

~~Year-to-date June 30, 2020~~First Quarter 2021

•Approximately ~~68%~~34% of the unfavorable prior year reserve development was attributable to accident year ~~2018, while only 1% was attributable~~2020, 34% to accident year 2019, ~~with~~and the remainder ~~related~~ to ~~2017~~accident years 2018 and prior accident years. During the second quarter 2020, we experienced favorable development on accident year 2019, primarily due to higher than anticipated salvage and subrogation recoveries, which almost fully offset the unfavorable development from accident year 2019 we experienced during the first quarter 2020.prior.

•Our personal auto products incurred about ~~$37~~$92 million of unfavorable loss and loss adjustment expense (LAE) reserve development, with about ~~two thirds~~60% attributable to the Agency business. The unfavorable ~~LAE~~ development was primarily attributable to ~~revised estimates of our per claim settlement costs taken during the first quarter. We also experienced~~a higher than anticipated frequency of reopened personal injury protection (PIP) claims, primarily in Florida, and higher than anticipated late reported losses occurring toward the end ~~2019~~of 2020 but not reported until ~~2020, which was significantly offset by higher than anticipated salvage and subrogation recoveries.~~2021.

•Our Commercial Lines business experienced about ~~$98~~$29 million of unfavorable development, primarily due to ~~increased injury severity and~~ the emergence of large injury claims at rates higher than originally anticipated.

•Our special lines ~~and Property businesses~~business experienced about ~~$15~~$5 million ~~and $4 million, respectively,~~ of favorable ~~development.~~development and our Property business experienced about $8 million of unfavorable development during the first quarter.

~~Year-to-date June 30, 2019~~First Quarter 2020

~~About 50%~~•Approximately 52% of the unfavorable prior year reserve development was attributable to accident year 2019, 36% to accident year 2018, ~~with~~and the remainder ~~split evenly between~~to accident ~~year~~years 2017 and ~~accident years 2016 and~~ prior.

•Our personal auto products incurred about ~~$116~~$104 million of unfavorable loss and LAE reserve development, with the Agency and Direct auto businesses each contributing about half. The unfavorable development was primarily attributable to ~~increased injury severity, a higher than anticipated frequency~~revised estimates of ~~reopened PIP claims, primarily in Florida,~~our per claim settlement costs and late reported losses occurring ~~late 2018~~toward the end of 2019 but not reported until ~~2019.~~2020.

•Our Commercial Lines business experienced about ~~$57~~$54 million of unfavorable development, primarily due to increased injury severity and ~~more~~the emergence of large injury claims ~~than originally anticipated.~~

~~Our Property business experienced about $20 million of unfavorable development, primarily due to~~at rates higher than originally ~~anticipated homeowner and dwelling, and fire liability costs.~~anticipated.

•Our special lines business experienced about ~~$17~~$14 million of ~~unfavorable~~favorable development ~~primarily due to less salvage~~ and ~~subrogation recoveries than originally anticipated.~~

our Property business had minimal development during the first quarter.

Note 7 Supplemental Cash Flow Information — Cash and cash equivalents include bank demand deposits and daily overnight reverse repurchase commitments ~~used to safeguard~~of funds held in ~~those~~ bank demand deposit accounts by certain subsidiaries, and are not considered part of the investment portfolio. The amount of ~~these~~ reverse repurchase commitments held by these subsidiaries at ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019,~~2020, were ~~$96.4~~$154.0 million, ~~$138.2~~$80.6 million, and ~~$46.3~~$93.5 million, respectively.

Restricted cash on our consolidated balance sheets represents cash that is restricted to pay flood claims under the National Flood Insurance Program’s “Write Your Own” program, for which certain subsidiaries ~~of our Property business~~ are administrators.

During the ~~six months ended June 30,~~first quarter 2021 and 2020, non-cash activity ~~includes~~included declared but unpaid common share dividends of $58.5 million (see Note 9 – Dividends for further discussion) for both periods, and ~~changes in~~ operating lease liabilities arising from obtaining right-of-use assets of ~~$23.9 million.~~$6.2 million and $9.7 million, respectively.

We paid the following in the respective periods:

Six Months Ended June 30,
(millions) 2020
2019
Income taxes $ 18.0
$ 592.8
Interest 94.1
90.9
Operating lease liabilities 44.7
37.4


	Three Months Ended March 31,
(millions)	2021		2020
Income taxes	$	0.8	$	0
Interest	74.3		56.4
Operating lease liabilities	24.5		22.7

During the six months ended June 30, 2020, we did not make any estimated federal tax payments as the Internal Revenue Service, in response to the impact of COVID-19 restrictions, postponed the due date of these estimated payments until July 15, 2020.

Our consolidated statement of cash flows for the six months ended June 30, 2019, was revised to correct the classification of our acquisition of additional shares of ARX Holding Corp. from an investing activity to a financing activity; there was no overall impact on the increase in cash, cash equivalents, and restricted cash that was reported for June 30, 2019.

Note 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 primary liability and physical damage insurance, and business-related general liability and property insurance, predominately for small businesses. Our Property segment writes residential property insurance for homeowners, other property owners, and renters. Our service businesses provide insurance-related services, including processing Commercial Automobile Insurance Procedures/Plans (CAIP) business and serving as an agent for homeowners, general liability, and workers’ compensation insurance, among other products, through programs in our ~~programs with unaffiliated insurance companies.~~direct Personal Lines and Commercial Lines businesses. 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 June 30, Six Months Ended June 30,
2020 2019 2020 2019
(millions) Revenues
Pretax
Profit (Loss)
Revenues
Pretax
Profit (Loss)
Revenues Pretax Profit (Loss) Revenues Pretax Profit (Loss)
Personal Lines
Agency $ 3,919.0
$ 550.6
$ 3,639.6
$ 434.7
$ 7,747.7
$ 1,152.2
$ 7,148.1
$ 887.7
Direct 4,167.9
647.2
3,733.4
326.6
8,160.3
1,120.2
7,309.7
648.5
Total Personal Lines¹
8,086.9
1,197.8
7,373.0
761.3
15,908.0
2,272.4
14,457.8
1,536.2
Commercial Lines 1,129.0
179.8
1,070.5
124.4
2,318.0
292.3
2,083.5
291.0
Property²
432.7
(188.7 ) 381.2
(34.4 ) 853.3
(139.5 ) 743.2
(26.7 )
Total underwriting operations 9,648.6
1,188.9
8,824.7
851.3
19,079.3
2,425.2
17,284.5
1,800.5
Fees and other revenues³
129.5
NA
134.8
NA
283.0
NA
265.0
NA
Service businesses 59.0
6.2
50.0
4.7
110.6
10.3
92.6
9.2
Investments⁴
1,134.6
1,130.1
441.2
435.0
822.2
812.4
1,108.6
1,096.2
Interest expense NA
(56.4 ) NA
(47.4 ) NA
(104.4 ) NA
(94.8 )
Consolidated total $ 10,971.7
$ 2,268.8
$ 9,450.7
$ 1,243.6
$ 20,295.1
$ 3,143.5
$ 18,750.7
$ 2,811.1


	Three Months Ended March 31,
		2021	2020
(millions)			Revenues		Pretax Profit (Loss)		Revenues		Pretax Profit (Loss)
Personal Lines
Agency			$	4,098.2	$	547.5	$	3,828.7	$	601.6
Direct			4,431.7		414.6		3,992.4		473.0
Total Personal Lines1			8,529.9		962.1		7,821.1		1,074.6
Commercial Lines			1,417.8		228.5		1,189.0		112.5
Property2			472.5		(70.7)		420.6		49.2

Total underwriting operations			10,420.2		1,119.9		9,430.7		1,236.3
Fees and other revenues3			165.7		NA		153.5		NA
Service businesses			53.8		4.5		51.6		4.1
Investments4			805.5		799.9		(312.4)		(317.7)

Interest expense			NA		(56.4)		NA		(48.0)
Consolidated total			$	11,445.2	$	1,867.9	$	9,323.4	$	874.7

NA = Not applicable

¹Personal auto insurance accounted for 94% of the total Personal Lines segment net premiums earned during the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019;~~2020; insurance for our special lines products (e.g., motorcycles, ATVs, RVs, watercraft, and snowmobiles) accounted for the balance of the Personal Lines net premiums earned.

²For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, pretax profit (loss) includes ~~$14.1~~$14.2 million and ~~$28.6~~$14.5 million, respectively, of amortization expense predominately associated with ~~the acquisition of a controlling interest in ARX and $18.0 million and $35.9 million for the same periods in 2019.~~intangible assets. See Note 1312 – Goodwill and Intangible Assets for further discussion.

³Pretax profit (loss) for fees and other revenues is allocated to operating segments.

⁴Revenues represent recurring investment income and total net realized gains (losses) on securities; pretax profit is net of investment expense.

Our management uses underwriting margin and combined ratio as primary measures of underwriting profitability. Underwriting profitability is calculated by subtracting losses and loss adjustment expenses, policy acquisition costs, other underwriting expenses, and policyholder credits from the total of net premiums earned and fees and other revenues. 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 June 30, Six Months Ended June 30,
2020 2019 2020 2019
Under-writing
Margin
Combined
Ratio
Under-writing
Margin
Combined
Ratio
Under-writing
Margin
Combined
Ratio
Under-writing
Margin
Combined
Ratio
Personal Lines
Agency 14.0 % 86.0 11.9 % 88.1
14.9 % 85.1 12.4 % 87.6
Direct 15.5
84.5 8.7
91.3
13.7
86.3 8.9
91.1
Total Personal Lines 14.8
85.2 10.3
89.7
14.3
85.7 10.6
89.4
Commercial Lines 15.9
84.1 11.6
88.4
12.6
87.4 14.0
86.0
Property¹
(43.6 ) 143.6 (9.0 ) 109.0
(16.3 ) 116.3 (3.6 ) 103.6
Total underwriting operations 12.3
87.7 9.6
90.4
12.7
87.3 10.4
89.6


	Three Months Ended March 31,
		2021	2020
			Underwriting Margin		Combined Ratio	Underwriting Margin		Combined Ratio
Personal Lines
Agency			13.4	%	86.6	15.7	%	84.3
Direct			9.4		90.6	11.9		88.1
Total Personal Lines			11.3		88.7	13.7		86.3
Commercial Lines			16.1		83.9	9.5		90.5
Property1			(15.0)		115.0	11.7		88.3

Total underwriting operations			10.7		89.3	13.1		86.9

¹ Included in the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, is ~~3.3~~3.0 points and 3.4 points, respectively, of amortization expense predominately associated with ~~the acquisition of a controlling interest in ARX and 4.7 points and 4.8 points, respectively, for the three and six months ended June 30, 2019.~~intangible assets.

Note 9 Dividends — Following is a summary of our common and preferred share dividends that were declared and/or paid during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


(millions, except per share amounts)	(millions, except per share amounts)	Amount				(millions, except per share amounts)		Amount
Declared	Payable	Per Share		Accrued¹		Declared	Payable	Per Share		Accrued1
Common - Quarterly Dividends:						Common - Quarterly Dividends:
May 2020	July 2020	$	0.10	$	58.5
March 2021						March 2021	April 2021	$	0.10	$	58.5
December 2020						December 2020	January 2021	0.10		58.6
February 2020	April 2020	0.10		58.5		February 2020	April 2020	0.10		58.5
December 2019	January 2020	0.10		58.5		December 2019	January 2020	0.10		58.5
May 2019	July 2019	0.10		58.4
February 2019	April 2019	0.10		58.4

Common - Annual Variable Dividends:						Common - Annual Variable Dividends:
December 2020						December 2020	January 2021	4.50		2,635.9
December 2019	January 2020	2.25		1,316.9		December 2019	January 2020	2.25		1,316.9
December 2018	February 2019	2.5140		1,467.9

Preferred Dividends:						Preferred Dividends:
December 2020						December 2020	March 2021	26.875		13.4
February 2020	March 2020	26.875		13.4		February 2020	March 2020	26.875		13.4
February 2019	March 2019	26.875		13.4

¹The accrual is based on an estimate of shares outstanding as of the record ~~date and is recorded as a component of~~date. The dividends accrued at March 31, 2020, were reclassified from accounts payable, accrued expenses, and other liabilities into dividends payable on common shares on the consolidated balance ~~sheets.~~sheets, to conform to the current year presentation.

See Note 14 – Dividends in our ~~2019~~2020 Annual Report to Shareholders for a discussion of our common and preferred share dividend policies.

Note 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)																		(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 gains (losses) on forecasted transactions		(Income) loss attributable to NCI
Balance at December 31, 2020																		Balance at December 31, 2020	$	1,187.4	$	(255.7)	$	931.7	$	947.3	$	(15.6)	$	0
Other comprehensive income (loss) before reclassifications:																		Other comprehensive income (loss) before reclassifications:
Investment securities																		Investment securities	(551.4)		115.8		(435.6)		(435.6)		0		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 gains (losses) on forecasted transactions			(Income) loss attributable to NCI
Balance at March 31, 2020	$	514.9		$	(110.7	)	$	404.2		$	423.6	$	(16.2	)	$	(3.2	)
Reclassification of disproportionate amounts¹	4.0			(0.8		)	3.2			0		0			3.2
Adjusted balance at March 31, 2020	518.9			(111.5		)	407.4			423.6		(16.2		)	0
Other comprehensive income (loss) before reclassifications:
Investment securities	966.2			(202.9		)	763.3			763.3		0			0
Loss attributable to noncontrolling interest (NCI)	0			0			0			0		0			0			Loss attributable to noncontrolling interest (NCI)	0		0		0		0		0		0
Total other comprehensive income (loss) before reclassifications	966.2			(202.9		)	763.3			763.3		0			0			Total other comprehensive income (loss) before reclassifications	(551.4)		115.8		(435.6)		(435.6)		0		0
Less: Reclassification adjustment for amounts realized in net income by income statement line item:																		Less: Reclassification adjustment for amounts realized in net income by income statement line item:

Net realized gains (losses) on securities	248.0			(52.1		)	195.9			195.9		0			0			Net realized gains (losses) on securities	131.7		(27.7)		104.0		104.0		0		0
Interest expense	(0.2		)	0			(0.2		)	0		(0.2		)	0			Interest expense	(0.3)		0.1		(0.2)		0		(0.2)		0
Total reclassification adjustment for amounts realized in net income	247.8			(52.1		)	195.7			195.9		(0.2		)	0			Total reclassification adjustment for amounts realized in net income	131.4		(27.6)		103.8		104.0		(0.2)		0
Total other comprehensive income (loss)	718.4			(150.8		)	567.6			567.4		0.2			0			Total other comprehensive income (loss)	(682.8)		143.4		(539.4)		(539.6)		0.2		0
Balance at June 30, 2020	$	1,237.3		$	(262.3	)	$	975.0		$	991.0	$	(16.0	)	$	0
Balance at March 31, 2021																		Balance at March 31, 2021	$	504.6	$	(112.3)	$	392.3	$	407.7	$	(15.4)	$	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
gains
(losses) on
forecasted
transactions

(Income) loss attributable to NCI
Balance at March 31, 2019 $ 225.5
$ (47.4 ) $ 178.1
$ 195.5
$ (17.0 ) $ (0.4 )
Other comprehensive income (loss) before reclassifications:
Investment securities 404.7
(85.0 ) 319.7
319.7
0
0
Loss attributable to noncontrolling interest (NCI) (3.3 ) 0.7
(2.6 ) 0
0
(2.6 )
Total other comprehensive income (loss) before reclassifications

401.4

(84.3 )
317.1

319.7

0

(2.6 )
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities 53.5
(11.2 ) 42.3
42.3
0
0
Interest expense (0.2 ) 0
(0.2 ) 0
(0.2 ) 0
Total reclassification adjustment for amounts realized in net income 53.3
(11.2 ) 42.1
42.3
(0.2 ) 0
Total other comprehensive income (loss) 348.1
(73.1 ) 275.0
277.4
0.2
(2.6 )
Balance at June 30, 2019 $ 573.6
$ (120.5 ) $ 453.1
$ 472.9
$ (16.8 ) $ (3.0 )

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
gains
(losses) on
forecasted
transactions

(Income) loss attributable to NCI
Balance at December 31, 2019 $ 435.7
$ (94.0 ) $ 341.7
$ 360.8
$ (16.4 ) $ (2.7 )
Reclassification of disproportionate amounts¹
3.4
(0.7 ) 2.7
0
0
2.7
Adjusted balance at December 31, 2019 439.1
(94.7 ) 344.4
360.8
(16.4 ) 0
Other comprehensive income (loss) before reclassifications:
Investment securities 1,284.4
(269.7 ) 1,014.7
1,014.7
0
0
Loss attributable to noncontrolling interest (NCI) 0
0
0
0
0
0
Total other comprehensive income (loss) before reclassifications 1,284.4
(269.7 ) 1,014.7
1,014.7
0
0
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities 486.7
(102.2 ) 384.5
384.5
0
0
Interest expense (0.5 ) 0.1
(0.4 ) 0
(0.4 ) 0
Total reclassification adjustment for amounts realized in net income 486.2
(102.1 ) 384.1
384.5
(0.4 ) 0
Total other comprehensive income (loss) 798.2
(167.6 ) 630.6
630.2
0.4
0
Balance at June 30, 2020 $ 1,237.3
$ (262.3 ) $ 975.0
$ 991.0
$ (16.0 ) $ 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
gains
(losses) on
forecasted
transactions
(Income) loss attributable to NCI
Balance at December 31, 2018 $ (153.0 ) $ 32.1
$ (120.9 ) $ (105.6 ) $ (17.2 ) $ 1.9
Other comprehensive income (loss) before reclassifications:
Investment securities 819.2
(172.0 ) 647.2
647.2
0
0
Loss attributable to noncontrolling interest (NCI) (6.2 ) 1.3
(4.9 ) 0
0
(4.9 )
Total other comprehensive income (loss) before reclassifications 813.0
(170.7 ) 642.3
647.2
0
(4.9 )
Less: Reclassification adjustment for amounts realized in net income by income statement line item:
Net realized gains (losses) on securities 86.9
(18.2 ) 68.7
68.7
0
0
Interest expense (0.5 ) 0.1
(0.4 ) 0
(0.4 ) 0
Total reclassification adjustment for amounts realized in net income 86.4
(18.1 ) 68.3
68.7
(0.4 ) 0
Total other comprehensive income (loss) 726.6
(152.6 ) 574.0
578.5
0.4
(4.9 )
Balance at June 30, 2019 $ 573.6

$ (120.5 )
$ 453.1

$ 472.9

$ (16.8 )
$ (3.0 )

¹~~Adjustment to reflect the change in value on (income) loss attributable to NCI in conjunction with the purchase transaction (See~~ ~~Note 12 – Redeemable Noncontrolling Interest~~ ~~for additional information).~~


							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 gains (losses) on forecasted transactions		(Income) loss attributable to NCI
Balance at December 31, 2019	$	435.7	$	(94.0)	$	341.7	$	360.8	$	(16.4)	$	(2.7)
Other comprehensive income (loss) before reclassifications:
Investment securities	318.2		(66.8)		251.4		251.4		0		0



Loss attributable to noncontrolling interest (NCI)	(0.6)		0.1		(0.5)		0		0		(0.5)
Total other comprehensive income (loss) before reclassifications	317.6		(66.7)		250.9		251.4		0		(0.5)
Less: Reclassification adjustment for amounts realized in net income by income statement line item:

Net realized gains (losses) on securities	238.7		(50.1)		188.6		188.6		0		0
Interest expense	(0.3)		0.1		(0.2)		0		(0.2)		0
Total reclassification adjustment for amounts realized in net income	238.4		(50.0)		188.4		188.6		(0.2)		0
Total other comprehensive income (loss)	79.2		(16.7)		62.5		62.8		0.2		(0.5)
Balance at March 31, 2020	$	514.9	$	(110.7)	$	404.2	$	423.6	$	(16.2)	$	(3.2)

In an effort to manage interest rate risk, we ~~entered~~may enter into forecasted transactions on Progressive’s debt ~~issuances prior to 2018.~~issuances. We expect to reclassify ~~$1.1~~$0.7 million (pretax) into interest expense during the next 12 months, related to net unrealized losses on forecasted transactions (see Note 4 – Debt in our ~~2019~~2020 Annual Report to Shareholders for further discussion).

Note 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. Other insurance companies face many of these same issues.

These cases include those alleging damages as a result of, among other things, our subsidiaries’ practices in evaluating or paying medical or injury claims or benefits, including, but not limited to, personal injury protection, medical payments, uninsured motorist/underinsured motorist, and bodily injury ~~benefits; the utilization, content,~~benefits, and for reimbursing medical costs incurred by Medicare/Medicaid beneficiaries; our practices in evaluating or ~~appearance~~paying physical damage claims, including, but not limited to, our payment of ~~policy documents;~~total loss claims and labor rates paid to auto body repair shops; ~~wage and hour issues;~~our insurance product design; employment matters; and cases challenging other aspects of our ~~subsidiaries’~~ claims, marketing, pricing or sales practices or other business operations. Other insurance companies face many of these same issues.

The nature and volume of litigation to which The Progressive Corporation is subject is similar to that which was disclosed in Note 12 – Litigation in our ~~2019~~2020 Annual Report to Shareholders.

We plan to contest the pending lawsuits vigorously, but may pursue settlement negotiations in some cases, as we deem appropriate. The outcomes of pending cases are uncertain at this time. 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 or estimable, or is considered probable but not estimable, we do not establish an accrual. Nevertheless, we continue to evaluate this 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 ~~June 30,~~March 31, 2021 or 2020, ~~or 2019,~~ and there were no material settlements during ~~2019~~2020 or the first ~~six~~three months of ~~2020.~~2021. 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 ~~2019~~2020 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 ~~2019~~2020 Annual Report to Shareholders.

~~Note 12~~ ~~Redeemable Noncontrolling Interest~~ — In connection with the April 2015 acquisition of a controlling interest in ARX, The Progressive Corporation entered into a stockholders’ agreement with the other ARX stockholders. On April 1, 2020, Progressive purchased all remaining outstanding stock of ARX under a separately negotiated purchase agreement. The cost of purchasing the remaining outstanding stock and shares from exercised stock options was $243.0 million in aggregate.

~~The changes in the components of redeemable NCI were:~~

Six Months Ended June 30, Year Ended
(millions) 2020 2019 December 31, 2019
Balance, beginning of period $ 225.6
$ 214.5
$ 214.5
Net income attributable to NCI 0
4.0
9.7
Other comprehensive income (loss) attributable to NCI¹
0
4.9
4.6
Exercise of employee stock options 16.0
7.7
7.7
Purchase/change of ARX minority shares (241.6 ) (11.2 ) (11.2 )
Change in redemption value of NCI 0
0.2
0.3
Balance, end of period $ 0
$ 220.1
$ 225.6

¹Amount represents the other comprehensive income (loss) attributable to NCI, as reflected on the the consolidated statements of comprehensive income; changes in accumulated other comprehensive income (loss) attributable to NCI due to a change in the minority ownership percentage does not impact the amount of redeemable NCI.

Note 1312 Goodwill and Intangible Assets

Goodwill

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, there were 0 changes to the carrying amount of goodwill. NaN accumulated goodwill impairment losses exist.

Intangible Assets

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

(millions) June 30, 2020
June 30, 2019
December 31, 2019
Intangible assets subject to amortization $ 187.3
$ 246.3
$ 215.9
Indefinite-lived intangible assets¹
12.4
12.4
12.4
Total $ 199.7
$ 258.7
$ 228.3


(millions)	March 31, 2021		March 31, 2020		December 31, 2020
Intangible assets subject to amortization	$	144.8	$	201.4	$	159.0
Indefinite-lived intangible assets1	12.4		12.4		12.4
Total	$	157.2	$	213.8	$	171.4

¹Indefinite-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) June 30, 2020 June 30, 2019 December 31, 2019
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
Policies in force $ 256.2
$ 192.2
$ 64.0
$ 256.2
$ 155.6
$ 100.6
$ 256.2
$ 173.9
$ 82.3
Agency relationships 159.2
59.7
99.5
159.2
48.3
110.9
159.2
54.0
105.2
Software rights 69.1
45.3
23.8
79.1
45.4
33.7
79.1
50.7
28.4
Trade name 0
0
0
34.8
33.7
1.1
34.8
34.8
0
Total $ 484.5
$ 297.2
$ 187.3
$ 529.3
$ 283.0
$ 246.3
$ 529.3
$ 313.4
$ 215.9


	March 31, 2021						March 31, 2020						December 31, 2020
(millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Category:
Policies in force	$	256.2	$	219.6	$	36.6	$	256.2	$	183.0	$	73.2	$	256.2	$	210.4	$	45.8
Agency relationships	159.2		68.3		90.9		159.2		56.9		102.3		159.2		65.4		93.8
Software rights	69.1		51.8		17.3		79.1		53.2		25.9		69.1		49.7		19.4
Trade name	0		0		0		34.8		34.8		0		0		0		0
Total	$	484.5	$	339.7	$	144.8	$	529.3	$	327.9	$	201.4	$	484.5	$	325.5	$	159.0

Amortization expense was ~~$14.1~~$14.2 million, ~~and $28.6~~compared to $14.5 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, respectively, compared to $18.0 million and $35.9 million during the same periods last year. During the first quarter 2020, 1 software rights intangible asset, with a gross carrying value of $10.0 million, was fully amortized.respectively.

Note 1413 New Accounting Standards~~— On January 1, 2020, we adopted~~

We did not adopt any new accounting standards during the three months ended March 31, 2021. We assessed the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Update (ASU), on a prospective basis, which provides guidance on the requirements for capitalizing and amortizing implementation costs incurred in a cloud computing arrangement that does not include a software license. For the six months ended June 30, 2020, we capitalized $14.2 million of cloud computing arrangement implementation costs, which is included in other assetsBoard on our consolidated ~~balance sheet.~~

~~On January 1, 2020, we adopted the ASU which amends the disclosure requirements for fair value measurements. The ASU requires companies~~financial statements as well as material updates to ~~disclose the changes in unrealized gains and losses~~previous assessments, if any, from our Annual Report on Form 10-K for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU also removes current disclosure requirements for the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. As permitted by the ASU, we elected to partially early adopt the removal of the then current disclosure requirements in 2018 and adopted the remaining disclosure requirements as of January 1,fiscal year ended December 31, 2020. ~~As this only affects disclosure requirements, there was~~There were no ~~impact on our financial condition, cash flows, or results of operations.~~

On January 1, 2020, we adopted the ASU which eliminates the requirement to determine the implied fair value of goodwill in measuring an impairment loss. The standard requires the measurement of a goodwill impairment to represent the excess of the reporting unit’s carrying value over fair value, limited to the carrying value of goodwill. The adoption of this ASU had no impact on our financial condition, cash flows, or results of operations.

~~On January 1, 2020, we adopted the ASU intended to improve the timing, and enhance the~~new material accounting ~~and disclosure, of credit losses on financial assets. This update modified the existing accounting guidance related to the impairment evaluation for available-for-sale debt securities and resulted~~standards issued in the ~~creation of an allowance for credit losses as a contra asset account.~~three months ended March 31, 2021, that impacted The ASU requires prospective changes to previously recorded impairments. To determine the existence of any credit-related impairment losses on our available-for-sale debt securities, we reviewed all such securities by applying estimates of future cash flows and performance of those securities in a loss position and identifying market-related versus performance-related losses. For our reinsurance recoverables, we assessed the current credit quality and credit outlook for reinsurers with at-risk uncollateralized recoverables. Based on these analyses, we determined that our allowance for credit losses was not material relative to our available-for-sale debt securities and reinsurance recoverables upon adoption of the ASU.

In assessing premium receivables, which are short-term in nature, we assessed customer balances leveraging our current process for analyzing the collectibility of premium receivables. Based on our analysis, no adjustment to the beginning balance of retained earnings was required upon adoption. See ~~Note 1 – Basis of Presentation~~ ~~for changes in the allowance for doubtful accounts related to the premiums receivable balance.~~

Progressive Corporation.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

I. OVERVIEW

The Progressive Corporation’s insurance subsidiaries recognized ~~strong~~ growth in both premiums and policies in force in the ~~second~~first quarter ~~2020,~~2021, compared to the same period last year. During the quarter, we generated ~~$10.1~~$11.7 billion of net premiums written, which is an increase of ~~$1.0~~$1.9 billion, or ~~11%~~19%, compared to the ~~second~~first quarter ~~2019.~~2020. We ~~had 23.8~~reached a significant milestone during the first quarter 2021 when we crossed over 25 million ~~companywide~~ policies in force to end the quarter at ~~June 30, 2020, which is 2.1~~25.7 million ~~more policies than were in force at June 30, 2019.~~companywide policies. Our underwriting profit margin of ~~12.3%~~10.7% for the ~~second~~first quarter ~~2020~~2021 was ~~2.7~~2.4 points ~~better~~lower than the same period last ~~year.~~year, resulting in a 9% decrease in underwriting profit.

On a year-over-year basis, ~~net income attributable to Progressive increased 83% for the second quarter and 21%~~ for the first ~~six months of 2020,~~quarter 2021, net income increased 114% and comprehensive income increased ~~88% and 19%, respectively. Underwriting~~25%. The growth in net income ~~increased 40% for~~primarily reflected net holding period gains in the ~~quarter and 35% for~~current period, compared to net holding period losses in the first ~~six~~quarter last year. During the first three months of 2020, compared to the same periods last year. The increased underwriting profitability reflects a significant decrease in loss and loss adjustment expenses due to lower auto accident frequency, as a result2021, expectations of ~~fewer vehicle miles driven following the restrictions put in place to stop or slow the spread~~U.S. economic growth drove valuations of the novel coronavirus, COVID-19, which began in March 2020 and lasted into mid-second quarter before the restrictions slowly started to be lifted. Partially offsetting the favorable loss experience were higher expenses reflecting credits issued to personal auto policyholders during the second quarter 2020 and additional bad debt expense related to the billing leniencies and moratoriums that were in place through the middle of May 2020. In addition to strong underwriting results, we recognized significant realized and unrealized gains on our equity securities ~~and fixed-maturity securities, respectively,~~higher, while during the ~~second quarter,~~same period last year, equity valuations declined as investors reduced exposure to risk in response to the ~~portfolios’ valuation rebounded following the decline experienced at the end~~economic impact of the ~~first quarter when the COVID-19 restrictions were first put in place.~~

~~During the second quarter 2020, our total capital (debt plus shareholders’ equity) increased $2.4 billion, to $22.1 billion, primarily reflecting comprehensive income earned during the quarter.~~

~~A. COVID-19~~

~~Our results for the first quarter 2020 were significantly impacted by the spread of the COVID-19 and~~ federal, state, and local social distancing and shelter-in-place restrictions (“COVID-19 restrictions”) ~~that were enacted. As~~. Comprehensive income, which includes net unrealized gains (losses) on fixed-maturity securities, grew substantially less than net income due to the ~~COVID-19 restrictions remained~~rise in ~~place~~interest rates during the first ~~part of the second~~ quarter ~~we continued~~2021, compared to experience a decrease in new business volume, which began to rebound as the COVID-19 restrictions started to be lifted in May 2020. In April 2020, on a year-over-year basis for the month, new applications decreased 14% and 26% for our Personal Lines and Commercial Lines businesses, respectively. In total for the second quarter 2020, Personal Lines new applications increased 2% and Commercial Lines decreased 10%. Thean increase in ~~Personal Lines new applications was due~~value of our fixed-maturity portfolio during the same period last year.

During the first quarter 2021, our total capital (debt plus shareholders’ equity) increased $798.6 million, to $23.2 billion, primarily reflecting comprehensive income earned during the quarter, partially offset by common share repurchases and dividends declared during the period.

While we experienced solid results during the first quarter 2021, certain growth ~~in our Direct auto business, as well as 22% new applications growth in our special lines products.~~

~~Our companywide underwriting margin for the second quarter 2020 was strong at 12.3%, which was 2.7 points better than~~and profitability comparisons to the same period last year ~~and only 0.8 points higher than~~were, in part, impacted by the effects COVID-19 restrictions had on our prior year results. During the last three weeks of the first quarter 2020. Vehicle accidents were significantly lower than the prior year as COVID-related restrictions remained in effect, and remained lower even after many of the restrictions were lifted. Our personal auto incurred accident frequency, which continued to moderate as the quarter progressed, was down about 39% for the second quarter 2020, ~~as compared to the prior year.~~

~~On the other hand, our expense ratio was adversely impacted 10.7 points~~we saw growth decrease, due to the ~~$1 billion of credits we issued~~substantial decline in shopping, and profitability increase, due to ~~our personal auto policyholders in response to the expected~~a reduction in auto accident frequency ~~and~~resulting from changes in driving patterns. The impact from the financial hardships imposed by the impact of COVID-19 restrictions throughout the United States. These credits or payments represented 20% of monthly premiums for customers with a policy in force on each of April 30 and May 31, 2020. In addition to the credits, during the second quarter 2020 we recorded a $120.0 million increase in the allowance for doubtful accounts relating to our billing leniency efforts, such as suspending cancellations and non-renewals for non-payment and pausing collection activities that we put in place through May 15, 2020, to help policyholders who were experiencing financial hardships. There still remains state mandated moratoriums in several states.pandemic should be considered when comparing year-over-year changes.

Our non-U.S. Treasury fixed-income and equity investment portfolios valuations rebounded throughout the second quarter 2020. The combination of strong fiscal and monetary stimulus provided a positive backdrop to the financial markets throughout the quarter. Nevertheless, we currently view the market environment as very uncertain and believe the relatively conservative position of our investment portfolio continues to remain appropriate.

From an operations perspective, we continue to institute work-from-home measures, which we believe will be largely in place throughout the remainder of 2020. In this challenging environment, we continue to believe that we are effectively maintaining our insurance and investment operations, our financial reporting systems, and our internal controls over financial reporting. For those employees whose jobs require them to remain in the office, we continue to practice enhanced social distancing, cleaning, and other protocols to promote employee health and safety. To help employees other than senior leaders, we paid a portion of

their annual bonus in April and July. We continue to make investments in our infrastructure and are currently maintaining our staffing levels, as we are returning to more normal insurance markets and economic conditions.

We are continuing to investigate the impact of the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act, and monitor related guidance. Based on current guidance, we do not expect the CARES Act to materially impact us. We are, however, electing to defer the payment of our portion of Social Security payroll taxes, as permitted under the CARES Act. We estimate that we will defer about $130 million of payments in 2020, with half of that amount being paid by the end of each of 2021 and 2022. As of June 30, 2020, we deferred approximately $50 million of payments related to our portion of Social Security payroll taxes.

Even after the current COVID-19 restrictions were lifted, there remains significant uncertainty regarding the potential for and timing of any economic recovery, whether and when driving and insurance shopping patterns will return to historical patterns, and the near-term and longer-term impacts on insurance markets, small businesses, our critical vendors and counterparties, the investment markets, and the regulatory environment, among many other issues and, ultimately, how our businesses and financial results will be impacted during these recovery periods. Although the nature of these impacts may change over time, we cannot predict the likely duration or extent of these impacts.

B.A. Insurance Operations

We evaluate growth in terms of both net premiums written and policy in force growth. All three of our operating segments contributed to our solid premium and policy in force growth during the ~~second~~first quarter on a year-over-year basis. Our companywide net premiums written grew ~~11%~~19%, with Personal Lines growing ~~13%~~14%, Commercial Lines 1%57%, and Property ~~12%~~17%, primarily reflecting an increase in volume. ~~The~~In addition to the increase in our traditional business market targets year-over-year, Commercial Lines premiums growth ~~was negatively impacted as~~reflected a ~~result of reducing our~~significant increase in premiums in the transportation network company ~~business’~~(TNC) business due to a $110.5 million reduction in net premiums ~~$29.0 million and $139.5 million,~~written during the ~~three and six months ended June 30, 2020, respectively, as we continued to revise~~first quarter last year, reflecting a significant decrease in the estimated number of miles ~~to be~~ driven during the remainder of the policy ~~terms. On~~terms due to the COVID-19 restrictions. At March 31, 2021, on a ~~policy-by-policy~~year-over-year basis, ~~we determine the premiums on these~~ policies monthly based on actual miles driven and an estimate of miles to be driven during the remaining policy terms. Due to COVID-19 restrictions, the estimate of miles driven was reduced. Changes in actual and estimated miles driven will continue to impact our net premiums written in future periods. Policies in force grew ~~10%~~12% companywide, with Personal Lines, Commercial Lines, and Property growing ~~10%~~12%, 6%13%, and 13%, respectively.

During the first quarter 2021, new applications (i.e., issued policies) increased 14%, 29%, and 26% in our Personal Lines, Commercial Lines, and Property segments, respectively. During the first quarter, total new personal auto applications ~~(i.e., issued policies) decreased 4%~~increased 11% on a year-over-year basis, with Agency new applications ~~decreasing 13%~~increasing 5% and Direct increasing 4%17%. In light of social distancing requirements, many independent agents are still working to get their operations back to pre-COVID levels, which contributed to the slower pace of recovery in the Agency channel. By the end of the second quarter we saw overall shopping return to pre-COVID levels, contributing to the 6% increase in Direct auto quotes, compared to the same period last year. Total personal auto renewal applications increased 13% over the second quarter last year, in part driven by our billing leniency efforts during the period. New applications for our special lines products were up ~~22%~~35% during the ~~second~~first quarter ~~2020,~~2021, primarily due to ~~overall industry~~continued growth ~~as consumers habits shifted toward focusing on new ways to enjoy the summer~~in RV, boat, and ~~take vacations while maintaining social distance.~~motorcycle demand.

~~For the Commercial Lines business, new applications, which also continued to be impacted by COVID-19 restrictions, decreased 10% on~~On a year-over-year basis ~~during~~for the ~~second~~first quarter ~~2020, with~~2021, our Personal Lines renewal applications ~~increasing 7%~~increased 14%, Commercial Lines increased 14%, and Property increased 12%. The Property business saw new homeowner and condo policy sales decline during April and May, due to the shelter-in-place restrictions, but sales activity recovered in June. Property new applications increased 4% andTotal personal auto renewal applications increased 15% ~~during~~over the ~~second~~first quarter ~~2020.~~last year.

~~We realize the importance of retaining customers to~~To grow policies in force, ~~and this remains~~it is critical that we retain our customers for longer periods. Consequently, increasing retention continues to be one of our most important priorities. ~~We remain focused on increasing~~Our efforts to increase our share of multi-product households remains a key initiative and we will continue to make investments to improve the customer experience to continue to support that goal. ~~We also will continue to monitor policy~~Policy life expectancy, which is our actuarial estimate of the average length of time that a policy will remain in force before cancellation or lapse in coverage, ~~and report it as~~is our primary measure of customer retention in our Personal Lines and Commercial Lines ~~auto business.~~ businesses.

Due to insurance market volatility brought on by the COVID-19 virus, it may be difficult to assess the progress we are making against our retention goals. We evaluate retention using a trailing 12-month total auto policy life expectancy and a trailing 3-month policy life expectancy, which the latter does not address seasonality and can reflect more volatility. On a trailing 3-month basis, our personal auto policy life expectancy was up 12% year over year. As of the end of the ~~second~~first quarter ~~2020,~~2021, our trailing 12-month total personal auto policy life expectancy increased 7%13%, compared to last year, in part attributable to suspending cancellations of policies for nonpayment as a ~~portion~~part of ~~policy cancellations were suppressed by~~ the billing leniency ~~and state moratoriums enacted in March 2020 and remained~~programs that were in place primarily from mid-March through ~~May 15, 2020.~~mid-May 2020, as well as other pandemic measures. Our Agency auto trailing 12-month policy life expectancy was up ~~9%,~~13% and Direct auto was up 5%14%. Our Commercial Lines trailing 12-month policy life expectancy increased 6%7% year over year, ~~and~~ special lines was up 7%5%, and Property decreased 3%.

Our companywide underwriting margin for the first quarter 2021 was strong at 10.7%, compared to 13.1% for the same period last year. Our personal auto incurred accident frequency was down about 3% for the first quarter 2021, as compared to the prior year, while severity was up about 5%. On a year-to-date basis, we incurred 2.0 points of catastrophe losses, compared to 0.9 points for the same period last year. Actuarial development was fairly consistent on a year-over-year basis. We continue to assess miles driven, weather events, and other components of expected loss costs on a state-by-state basis and, where appropriate, adjust rates accordingly. During the first quarter 2021, auto rates were increased less than 1% in both Personal Lines and Commercial Lines. During the last 12 months, we reduced rates on our personal auto products, primarily in response to driving and claims data gathered during the period, resulting in a written premium per policy decrease of 3% during the first quarter 2021.

Our Personal and Commercial Lines operating segments were profitable during the ~~second~~first quarter ~~2020,~~2021, while our Property business generated an underwriting loss, ~~primarily~~ due to significant catastrophe losses incurred during the quarter. Our Personal Lines segment generated an underwriting profit margin of ~~14.8%~~11.3% for the ~~second~~first quarter ~~2020. Although~~2021, which was aided by our special lines ~~products~~

~~generated an underwriting profit during the second quarter,~~business that contributed a favorable 1.5 point impact on our Personal Lines combined ratio, due to the seasonal nature of these ~~products unfavorably impacted our total Personal Lines combined ratio by about 0.5 points.~~products. Our Commercial Lines underwriting profit margin for the ~~second~~first quarter was ~~15.9%~~16.1%. Our Property segment had an underwriting loss margin of ~~43.6%~~15.0% for the ~~second~~ quarter. On a net basis (i.e., after reinsurance), our Property business incurred catastrophe losses, during the ~~second~~first quarter, of ~~$234.8~~$144.6 million, or ~~54.3~~30.6 points on their combined ratio. ~~As of June 30, 2020,~~During the first quarter 2021, we ~~have retained approximately $330 million of catastrophe losses and associated allocated loss adjustment expenses (ALAE) in the Property business, which has not~~ exceeded the ~~$375~~$80 million ~~annual retention~~single storm event threshold under our ~~catastrophe aggregate~~occurrence excess of loss reinsurance program and ~~therefore, we have not~~ recorded a reinsurance recoverable ~~related to these losses and ALAE.~~of $20.0 million.

C.B. Investments

The fair value of our investment portfolio was ~~$43.8~~$47.4 billion at ~~June 30, 2020,~~March 31, 2021, compared to ~~$39.3~~$47.5 billion at December 31, ~~2019.~~2020. The ~~increase~~decrease from year-end ~~2019,~~2020, primarily ~~reflects the $1.0~~reflected cash flows from operations of $2.6 billion, ~~of proceeds from the debt issued during March, comprehensive income of $3.1 billion, and $0.3 billion of unsettled security transactions at the end of the second quarter,~~ offset by ~~$1.6~~$2.7 billion related to the payment of shareholder dividends ~~and the purchase of ARX Holding Corp.~~ during ~~the period.~~2021.

Our asset allocation strategy is to maintain 0%-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in Group II securities (the securities allocated to Group I and II are defined below under Results of Operations – Investments). At ~~June 30, 2020, 11%~~March 31, 2021, 16% of our portfolio was allocated to Group I securities and ~~89%~~84% to Group II securities, compared to ~~12%~~14% and ~~88%~~86%, respectively, at December 31, 2019. The allocation to Group I securities declined slightly year over year as available cash was invested in Group II securities and Group I valuations declined while Group II valuations increased during the period.2020.

Our recurring investment income generated a pretax book yield of ~~2.5%~~2.1% for the ~~second~~first quarter ~~2020,~~2021, compared to ~~3.2%~~2.7% for the same period in ~~2019,~~2020, primarily due to investing new cash at lower interest rates. Our investment portfolio produced a fully taxable equivalent (FTE) total return of ~~4.5%~~0.3% and ~~2.2%~~(0.6)% for the ~~second~~first quarter ~~2020~~2021 and ~~2019,~~2020, respectively. Our fixed-income and common stock portfolios had FTE total returns of ~~3.4%~~(0.9)% and ~~21.5%~~12.5%, respectively, for the ~~second~~first quarter ~~2020,~~2021, compared to ~~2.1%~~1.2% and ~~4.0%~~(20.5)%, respectively, last year. ~~There was a significant narrowing of credit spreads, which resulted~~The year-over-year decrease in ~~a 4.6%~~our fixed-income FTE total return ~~on our fixed-income securities for~~was the ~~first six months~~result of ~~2020.~~an increase in interest rates. Our common stock portfolio’s FTE total return ~~was a (3.4)% for~~declined early in 2020 in response to the economic uncertainty due to the COVID-19 restrictions. The portfolio showed an improvement throughout the rest of the year and continued to improve during the first ~~six~~three months of ~~2020 and, while still negative, is a significant increase from the first quarter 2020.~~2021 as investors moved back into risk assets.

At ~~June 30, 2020,~~March 31, 2021, the fixed-income portfolio had a weighted average credit quality of AA- and a duration of ~~3.0~~3.1 years, compared to AA- and ~~2.7~~3.0 years and AAAA- and ~~3.0~~2.9 years at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2019,~~2020, respectively. ~~During the quarter, with valuations improving in several market sectors, we were able to add some attractive investments to our portfolio.~~ While we have slightly lengthened our portfolio duration over the previous twelve months, it remains ~~slightly~~ below the midpoint of our ~~1.5 year~~1.5-year to ~~5 year~~5-year range, which we believe provides some protection against ana further increase in interest rates.

II. FINANCIAL CONDITION

A. Liquidity and Capital Resources

Progressive’s insurance operations create liquidity by collecting and investing premiums from new and renewal business in advance of paying claims. Operations generated positive cash flows of ~~$3.9~~$2.6 billion and ~~$3.4~~$1.6 billion for the ~~first six~~three months ended March 31, 2021 and 2020, respectively, in part due to collecting premiums at a faster rate than losses are being paid.

Based upon our capital planning and forecasting efforts, we believe we have sufficient capital resources and cash flows from operations to support our current business, scheduled principal and interest payments on our debt, anticipated dividends on our common shares and Series B Preferred Shares, our contractual obligations, and other expected capital requirements for the foreseeable future, including the $500 million of ~~2020~~3.75% Senior Notes maturing in August of 2021. In addition, in February 2021, Progressive entered into a definitive agreement to acquire all of the outstanding common shares of Protective Insurance Corporation for $23.30 per share, or approximately $338 million in aggregate. This transaction is expected to close prior to the end of the third quarter 2021, subject to certain required regulatory approvals and ~~2019, respectively.~~

other customary closing conditions. We expect to fund this transaction with cash from operations or securities we currently hold. We did not experience a significant change in our liquidity needs during the ~~second~~first quarter ~~2020. When COVID-19 restrictions remained in place during~~2021. During the first ~~half~~three months of 2021 and at all times during 2020, our total capital exceeded the ~~second quarter, we saw a continued decrease in new applications, which, along with the suspending collections and cancellations for non-payments, reduced the amount~~sum of ~~cash we would have collected from customers. However, we also saw a significant decrease in accident claim frequency and,~~our regulatory capital layer plus our self-constructed extreme contingency layer, as ~~a result, the amount of cash required to pay claims also decreased. We continue to believe that we have sufficient liquidity from our current operations and~~described in our ~~investment portfolio to meet all of our near-term operating cash needs.~~2020 Annual Report.

Our total capital (debt plus shareholders’ equity) was ~~$22.1~~$23.2 billion, at book value, at ~~June 30, 2020,~~March 31, 2021, compared to ~~$17.7~~$19.7 billion at ~~June 30, 2019,~~March 31, 2020, and ~~$18.1~~$22.4 billion at December 31, ~~2019.~~2020. The increase since year end ~~reflects the increase in~~primarily reflected comprehensive income, ~~during that period as well as the issuance of $500 million of 3.20% Senior Notes due 2030~~in part offset by common share repurchases and ~~$500 million of 3.95% Senior Notes due 2050, in underwritten public offerings~~dividends declared during the ~~first quarter 2020.~~period.

Our debt-to-total capital ratio remained below 30% during all reported periods, consistent with our financial policy. This ratio, which reflects debt as a percent of debt plus shareholders’ equity, was 23.2% at March 31, 2021, 27.3% at March 31, 2020, and ~~excludes redeemable noncontrolling interest, if any, was 24.4% at June 30, 2020, 24.8% at June 30, 2019, and 24.4%~~24.1% at December 31, ~~2019.~~2020. None of our outstanding senior notes have restrictive financial covenants or credit rating triggers.

We seek to deploy capital in a prudent manner and use multiple data sources and modeling tools to estimate the frequency, severity, and correlation of identified exposures, including, but not limited to, catastrophic and other insured losses, natural disasters, and other significant business interruptions, to estimate our potential capital needs.

During the first ~~six~~three months of ~~2020,~~2021, we returned capital to shareholders primarily through ~~dividends. Our~~dividends and common share repurchases. During the quarter, the Board of Directors declared a $0.10 per common share dividend, ~~in both the first and second quarters 2020. These dividends, which were each~~or $58.5 million in the aggregate, ~~were~~which was paid in April ~~2020 and July 2020, respectively.~~2021. In addition to the common share dividends, in ~~February 2020, the Board also declared a~~March 2021, we paid Series B Preferred Share ~~dividend of $13.4 million, which was paid March 2020. In January 2020, we also paid the $2.25 and $0.10 common share~~ dividends ~~declared in December 2019,~~ in the aggregate amount of ~~$1.4~~$13.4 million. In January 2021, we also paid common share dividends in the aggregate amount of $2.7 billion, or $4.60 per share (see Note 9 – Dividends for further discussion). ~~During~~In accordance with our financial policies, during the ~~year,~~first quarter 2021, we ~~also~~ repurchased ~~0.4~~0.9 million common shares, at a total cost of ~~$29.1~~$84.8 million, either in the open market or to satisfy tax withholding obligations as permitted under our equity compensation plans. We will continue to make decisions on returning capital to shareholders based on the strength of our capital position and the potential capital needs to expand our business operations.

In April 2020, The Progressive Corporation acquired the remaining outstanding stock of ARX Holding Corp., for an aggregate cost of $243.0 million, which included the acquisition of vested stock options, making ARX a wholly owned subsidiary of Progressive. While this acquisition was originally expected to occur in April 2021, ~~we believe that completing it a year earlier will benefit our continued efforts to expand our reach and grow our bundled home and auto customers.~~

During the first six months of 2020 and at all times during 2019, our total capital exceeded the sum of our regulatory capital layer plus our self-constructed extreme contingency layer, as described in our Annual Report on Form 10-K for the year ended December 31, 2019. Based upon our capital planning and forecasting efforts, we believe that we have sufficient capital resources and cash flows from operations to support our current business, scheduled principal and interest payments on our debt, dividends on common shares and Series B Preferred Shares, our contractual obligations, and other expected capital requirements for the foreseeable future.

~~In April 2020,~~ we renewed the unsecured discretionary line of credit (the “Line of Credit”) with PNC Bank, National Association, in the maximum principal amount of $250 million, that expired in April 2020. 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 higher of PNC’s Prime Rate or the sum of the Federal Funds Open Rate plus 175 basis points. Each advance must be repaid on the 30th day after the advance or, if earlier, on April 30, 2021, the expiration date of the line of credit.million. We did not engage in short-term borrowings, including any borrowings under our discretionary Line of Credit, to fund our operations or for liquidity purposes during the reported periods.

B. Commitments and Contingencies

Contractual Obligations

During the first ~~six~~three months of ~~2020,~~2021, our contractual obligations have not changed materially from those discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2019. We are not aware of any significant changes to our contractual obligations that are likely to occur as a result of COVID-19.~~2020.

Off-Balance-Sheet Arrangements

Our off-balance-sheet leverage includes purchase obligations and catastrophe excess of loss reinsurance contracts. There have not been any material changes in off-balance-sheet items from those discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

III. RESULTS OF OPERATIONS – UNDERWRITING

A. Segment Overview

We report our underwriting operations in three segments: Personal Lines, Commercial Lines, and Property. As a component of our Personal Lines segment, we report our Agency and Direct business results to provide further understanding of our products by distribution channel.

The following table shows the composition of our companywide net premiums written, by segment, for the respective periods:


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
	2020		2019		2020		2019				2021		2020
Personal Lines									Personal Lines
Agency	40	%	41	%	41	%	41	%	Agency		38	%	41	%
Direct	43		41		43		42		Direct		43		43
Total Personal Lines¹	83		82		84		83		Total Personal Lines1		81		84
Commercial Lines	12		13		12		13		Commercial Lines		15		12
Property	5		5		4		4		Property		4		4
Total underwriting operations	100	%	100	%	100	%	100	%	Total underwriting operations		100	%	100	%

¹Personal auto insurance accounted for ~~91%~~95% of the total Personal Lines segment net premiums written during the three months ended March 31, 2021 and ~~93% during the six months ended June 30, 2020 and 2019;~~2020; insurance for our special lines products accounted for the balance.

Our Personal Lines business writes insurance for personal autos and special lines products (e.g., motorcycles, watercraft, and RVs). We currently write our Personal Lines products in all 50 states. We also offer our personal auto ~~products~~product (not special lines products) in the District of Columbia. ~~Our~~Within Personal Lines we often refer to our four consumer segments, which include:

•Sam - inconsistently insured;

•Diane - consistently insured and maybe a renter;

•Wrights - homeowners who do not bundle auto and home; and

•Robinsons - homeowners who bundle auto and home.

While our personal auto policies are primarily written for 6-month terms, ~~although~~ we do write 12-month ~~personal~~ auto policies ~~mainly through~~in our Platinum ~~agents who are focused on selling~~agencies to promote bundled auto and home ~~policies.~~growth. At ~~June 30, 2020, 11%~~March 31, 2021, 12% of our Agency auto policies in force were 12-month policies, compared to 9%10% a year earlier. Our special lines products are written for 12-month terms.

Our Commercial Lines business writes auto-related primary liability and physical damage insurance, and ~~other~~business-related general liability and property insurance, predominately for small businesses. The majority of our Commercial Lines business is written through the independent agency channel. The amount of commercial auto business written through the direct channel, excluding our TNC business, represented 8%10% of premiums written for the ~~second~~first quarter ~~2020, excluding our transportation network company business,~~2021, compared to 7%8% for the same period last year. We write Commercial Lines business in all 50 states and ~~our~~about 90% of these policies are ~~primarily~~ written for 12-month terms. To serve our direct channel customers, we continued to expand our product offerings, including the addition of our business owners policy in states where available, through our in-house agency and BusinessQuote Explorer®, our digital platform for small business consumers.

Our Property business writes residential property insurance for single family homes, condominium unit owners, renters, etc. We write the majority of our Property business through the independent agency channel; however, we continue to expand the distribution of our Property product offerings in the direct channel, which represented about ~~17%~~21% of premiums written for the ~~second~~first quarter ~~of 2020,~~2021, compared to ~~15%~~16% for the same period last year. Property policies are written for 12-month terms. ~~During the second quarter 2020, we began writing residential property and renters insurance in New Hampshire, bringing the total number of states where we~~We write residential property in 47 states, renters in 48 states, and flood insurance ~~to 45 states and renters insurance to~~in 46 states; we also write all of these products in the District of Columbia. Our flood insurance is written primarily through the National Flood Insurance Program and is 100% reinsured.

B. Profitability

Profitability for our underwriting operations is defined by pretax underwriting profit, which is calculated as net premiums earned plus fees and other revenues less losses and loss adjustment expenses, policy acquisition costs, and other underwriting ~~expenses, and policy holder credits.~~expenses. We also use underwriting margin, which is underwriting profit or loss expressed as a percentage of net premiums earned, to analyze our results. For the respective periods, our underwriting profitability results were as follows:


	Three Months Ended June 30,										Six Months Ended June 30,											Three Months Ended March 31,
	2020					2019					2020					2019							2021	2020
	Underwriting Profit (Loss)					Underwriting Profit (Loss)					Underwriting Profit (Loss)					Underwriting Profit (Loss)							Underwriting Profit (Loss)	Underwriting Profit (Loss)
($ in millions)	$			Margin		$			Margin		$			Margin		$			Margin		($ in millions)			$		Margin		$		Margin
Personal Lines																					Personal Lines
Agency	$	550.6		14.0	%	$	434.7		11.9	%	$	1,152.2		14.9	%	$	887.7		12.4	%	Agency			$	547.5	13.4	%	$	601.6	15.7	%
Direct	647.2			15.5		326.6			8.7		1,120.2			13.7		648.5			8.9		Direct			414.6		9.4		473.0		11.9
Total Personal Lines	1,197.8			14.8		761.3			10.3		2,272.4			14.3		1,536.2			10.6		Total Personal Lines			962.1		11.3		1,074.6		13.7
Commercial Lines	179.8			15.9		124.4			11.6		292.3			12.6		291.0			14.0		Commercial Lines			228.5		16.1		112.5		9.5
Property¹	(188.7		)	(43.6	)	(34.4		)	(9.0	)	(139.5		)	(16.3	)	(26.7		)	(3.6	)	Property1			(70.7)		(15.0)		49.2		11.7

Total underwriting operations	$	1,188.9		12.3	%	$	851.3		9.6	%	$	2,425.2		12.7	%	$	1,800.5		10.4	%	Total underwriting operations			$	1,119.9	10.7	%	$	1,236.3	13.1	%

¹For the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, pretax profit (loss) includes ~~$14.1~~$14.2 million and ~~$28.6~~$14.5 million, respectively, of amortization expense predominately associated with intangible assets.

During the ~~acquisition~~first quarter 2021, we incurred 2.0 points of ~~a controlling interest in ARX, and $18.0 million and $35.9 million~~companywide catastrophe losses, compared to 0.9 points for the ~~respective periods~~same period last ~~year;~~year. The majority of the ~~decrease in amortization expense reflects intangible assets that were fully amortized subsequent to second quarter 2019.~~

~~The increases in~~catastrophe losses affected the ~~companywide underwriting profit margins during three and six months ended June 30, 2020, compared~~Property business, primarily due to the ~~same periods last year, were driven primarily by lower~~winter storms in Texas and Oregon, and tornados in Texas and Alabama. Personal auto frequency was down 3% on a year-over-year basis, while severity was up 5%. In the first quarter 2020, we saw a significant decline in auto accident frequency ~~experienced~~as the COVID-19 restrictions were imposed and vehicle miles driven decreased significantly as a ~~result of COVID-19 restrictions, partially offset by~~result. On a year-over-year basis, we increased our advertising spend 25% as we continue to generate sales at a cost below the ~~policyholder credits issued~~maximum amount we are willing to ~~personal auto customers and additional bad debt expense recognized as part of the billing leniency and moratoriums in the second quarter of 2020.~~spend to acquire new customers.

Further underwriting results for our Personal Lines business, including results by distribution channel, the Commercial Lines business, the Property business, and our underwriting operations in total, were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
Underwriting Performance¹	2020	2019	Change		2020	2019	Change		Underwriting Performance1		2021	2020	Change
Personal Lines—Agency									Personal Lines—Agency
Loss & loss adjustment expense ratio	53.2	68.9	(15.7	)	58.8	68.3	(9.5	)	Loss & loss adjustment expense ratio		67.8	64.7	3.1
Underwriting expense ratio	32.8	19.2	13.6		26.3	19.3	7.0		Underwriting expense ratio		18.8	19.6	(0.8)
Combined ratio	86.0	88.1	(2.1	)	85.1	87.6	(2.5	)	Combined ratio		86.6	84.3	2.3
Personal Lines—Direct									Personal Lines—Direct
Loss & loss adjustment expense ratio	50.3	70.1	(19.8	)	57.9	70.0	(12.1	)	Loss & loss adjustment expense ratio		68.4	65.7	2.7
Underwriting expense ratio	34.2	21.2	13.0		28.4	21.1	7.3		Underwriting expense ratio		22.2	22.4	(0.2)
Combined ratio	84.5	91.3	(6.8	)	86.3	91.1	(4.8	)	Combined ratio		90.6	88.1	2.5
Total Personal Lines									Total Personal Lines
Loss & loss adjustment expense ratio	51.7	69.5	(17.8	)	58.3	69.2	(10.9	)	Loss & loss adjustment expense ratio		68.1	65.2	2.9
Underwriting expense ratio	33.5	20.2	13.3		27.4	20.2	7.2		Underwriting expense ratio		20.6	21.1	(0.5)
Combined ratio	85.2	89.7	(4.5	)	85.7	89.4	(3.7	)	Combined ratio		88.7	86.3	2.4
Commercial Lines									Commercial Lines
Loss & loss adjustment expense ratio	57.3	67.3	(10.0	)	62.9	65.0	(2.1	)	Loss & loss adjustment expense ratio		63.5	68.1	(4.6)
Underwriting expense ratio	26.8	21.1	5.7		24.5	21.0	3.5		Underwriting expense ratio		20.4	22.4	(2.0)
Combined ratio	84.1	88.4	(4.3	)	87.4	86.0	1.4		Combined ratio		83.9	90.5	(6.6)
Property									Property
Loss & loss adjustment expense ratio	114.0	77.7	36.3		86.5	73.0	13.5		Loss & loss adjustment expense ratio		84.9	58.2	26.7
Underwriting expense ratio²	29.6	31.3	(1.7	)	29.8	30.6	(0.8	)	Underwriting expense ratio2		30.1	30.1	0
Combined ratio²	143.6	109.0	34.6		116.3	103.6	12.7		Combined ratio2		115.0	88.3	26.7
Total Underwriting Operations									Total Underwriting Operations
Loss & loss adjustment expense ratio	55.2	69.6	(14.4	)	60.2	68.8	(8.6	)	Loss & loss adjustment expense ratio		68.3	65.3	3.0
Underwriting expense ratio	32.5	20.8	11.7		27.1	20.8	6.3		Underwriting expense ratio		21.0	21.6	(0.6)
Combined ratio	87.7	90.4	(2.7	)	87.3	89.6	(2.3	)	Combined ratio		89.3	86.9	2.4
Accident year — Loss & loss adjustment expense ratio³	55.5	68.8	(13.3	)	59.6	67.6	(8.0	)	Accident year — Loss & loss adjustment expense ratio3		67.1	63.8	3.3

¹Ratios are expressed as a percentage of net premiums earned; fees and other revenues are netted with underwriting expenses in the ratio calculations.

²Included in the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, are ~~3.3~~3.0 points and 3.4 points, respectively, of amortization expense predominately associated with ~~our acquisition of a controlling interest in ARX, and 4.7 points and 4.8 points for the respective periods last year.~~intangible assets. Excluding these additional expenses, for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Property business would have reported expense ratios of ~~26.3~~27.1 and 26.6, respectively, and a combined ratio of 140.3 and 104.3. For the six months ended June 30, 2020 and 2019, excluding these additional expenses, the Property business would have reported expense ratios of 26.4 and 25.8, respectively,26.7 and combined ratios of ~~112.9~~112.0 and ~~98.8.~~84.9, respectively.

³The accident year ratios include only the losses that occurred during the period noted. As a result, accident period results will change over time, either favorably or unfavorably, as we revise our estimates of loss costs when payments are made or reserves for that accident period are reviewed.

Losses and Loss Adjustment Expenses (LAE)


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
(millions)	2020		2019		2020		2019		(millions)		2021		2020
Increase (decrease) in net loss and LAE reserves	$	146.5	$	485.4	$	116.1	$	825.5	Increase (decrease) in net loss and LAE reserves		$	627.5	$	(30.4)
Paid losses and LAE	5,174.9		5,652.7		11,360.5		11,071.6		Paid losses and LAE		6,483.0		6,185.6
Total incurred losses and LAE	$	5,321.4	$	6,138.1	$	11,476.6	$	11,897.1	Total incurred losses and LAE		$	7,110.5	$	6,155.2

Claims costs, our most significant expense, represent payments made and estimated future payments to be made, to or on behalf of our policyholders, including expenses ~~related~~needed to ~~the adjustment~~adjust or ~~settlement of~~settle claims. Claims costs are a function of loss severity and frequency and, for our vehicle businesses, are influenced by inflation and driving patterns, among other factors, some of which are discussed below. In our Property business, severity is primarily a function of construction costs and the age of the structure. Accordingly, anticipated changes in these factors are taken into account when we establish premium rates and loss reserves. Loss reserves are estimates of future costs and our reserves are adjusted as underlying assumptions change and information develops.

Our total loss and LAE ratio ~~decreased 14.4~~increased 3.0 points for the ~~second~~first quarter ~~2020,~~2021, compared to the same period last year, ~~and 8.6 points on a year-to-date basis,~~ primarily due to higher accident severity, catastrophe losses, and lower average personal auto ~~frequency, partially offset by higher severity as discussed below.~~premiums.

The following table shows our consolidated catastrophe losses, excluding loss adjustment expenses, incurred during the periods:

Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2020 2019 2020 2019
Personal Lines $ 164.7
$ 125.0
$ 201.9
$ 169.8
Commercial Lines 6.3
4.8
7.6
6.3
Property
Property business, net of reinsurance (excluding ASL) 247.9
131.4
289.7
193.0
Reinsurance recoverable on ASL¹
(13.1 ) (49.5 ) (13.0 ) (85.5 )
Property business, net 234.8
81.9
276.7
107.5
Total net catastrophe losses incurred $ 405.8
$ 211.7
$ 486.2
$ 283.6
Combined ratio effect 4.2 pts. 2.4 pts. 2.5 pts. 1.6 pts.

¹~~Represents the reinsurance recoverable recorded on the losses from prior accident years under our aggregate stop-loss agreements (ASL); see table below for further information.~~


	Three Months Ended March 31,
($ in millions)		2021			2020
Personal Lines		$	65.1		$	37.2
Commercial Lines		1.8			1.3
Property		144.6			41.9
Total net catastrophe losses incurred		$	211.5		$	80.4
Combined ratio effect		2.0		pts.	0.9		pts.

During the ~~second~~first quarter ~~2020,~~2021, the majority of catastrophe losses were due to ~~wind, hail,~~winter storms in Texas and ~~tornadoes throughout the United States.~~Oregon, and tornados in Texas and Alabama. We have responded, and plan to continue to respond, promptly to catastrophic events when they occur in order to provide ~~high-quality~~exemplary claims service to our customers.

We do not have catastrophe-specific reinsurance for our Personal Lines or Commercial Lines businesses, but we reinsure portions of our Property business against various ~~risks, including, but not limited to, catastrophic losses through~~risks. The Property business reinsurance programs include: multi-year catastrophe excess of loss, ~~reinsurance.~~

We have aggregate stop-loss reinsurance agreements (ASL) in place, which are in effect for accident years 2019, 2018, and 2017. We did not renew our ASL program for accident year 2020. Instead, we entered into a property catastrophe aggregate excess of loss, ~~program in January 2020. Both the ASL and the aggregate excess of loss (XOL) programs cover accident year Property catastrophe losses~~ and a ~~portion of LAE, known as allocated loss adjustment expenses (ALAE).~~catastrophe bond. See Item 1 – Description of Business-Reinsurance in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020, for ~~further discussion. Through June 30, 2020,~~a discussion of our various reinsurance programs.

Under our various Property catastrophe-specific reinsurance, we ~~have retained approximately $330 million of catastrophe~~ceded the following losses and ~~ALAE for~~allocated loss adjustment expenses (ALAE), including development on prior year storms, during the ~~current accident~~periods:


	Three Months Ended March 31,
(in millions)	2021		2020
Aggregate excess of loss:
Current accident year	$	0	$	0
Prior accident years	0.8		NA
Per occurrence excess of loss:
Current accident year	20.0		0
Prior accident years1	119.6		40.0

Total	140.4		40.0

NA = Not applicable; this reinsurance coverage was entered into on January 1, 2020.

1Primarily represents prior year ~~under the aggregate XOL program, which has not exceeded~~development on Hurricane Irma. In 2017, we reached our excess of loss retention threshold ~~of $375 million.~~for Irma and, as a result, all prior year development is fully ceded.

~~The following table shows the total reinsurance recoverables activity under the aggregate stop-loss agreements by accident year, for the respective periods:~~

Three Months Ended June 30, Six Months Ended June 30,
($ in millions) 2020 2019 2020 2019
Reinsurance recoverable on ASL, beginning of period $ 69.7
$ 52.2
$ 69.7
$ 12.5
Reinsurance recoverables recognized on losses
Accident year:
2019 11.8
37.1
10.9
$ 73.4
2018 0
0
0
0
2017 1.3
12.4
2.1
12.1
  Total 13.1
49.5
13.0
85.5
Reinsurance recoverables recognized on ALAE

Accident year:
2019 1.3
4.9
1.4
8.1
2018 0
0
0
0
2017 0.2
(0.7 ) 0.2
(0.2 )
  Total 1.5
4.2
1.6
7.9
Total reinsurance recoverables recognized
Accident year:
2019 13.1
42.0
12.3
81.5
2018 0
0
0
0
2017 1.5
11.7
2.3
11.9
  Total 14.6
53.7
14.6
93.4
Reinsurance recoverable on ASL, end of period $ 84.3
$ 105.9
$ 84.3
$ 105.9

In ~~addition to the aggregate XOL program, during~~late April 2021, severe hailstorms hit Texas and Oklahoma, which will impact both our vehicle and Property results in the second ~~quarter 2020, our~~quarter. Our estimate of losses is still developing. Our Property ~~business renewed its multi-year catastrophe~~excess of loss reinsurance ~~contracts.The renewed insurance policies carry~~program has an $80 million retention ~~thresholds for losses and ALAE~~threshold from a single catastrophic event of $80 million, an increase from the retention threshold on the prior contracts of $60 million, as well as $200 million of additional coverage, due to the growth of the Property business (see storm.

~~Item 1 – Description of Business-Reinsurance~~ in our Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion). We have not had a catastrophe event during the first six months of 2020 that exceeded our retention threshold.

During the first quarter 2020, relative to our Property business, we closed a $200 million catastrophe bond transaction. This bond replaces a similar $200 million bond that expired on December 31, 2019. The bond will provide reinsurance coverage in the unlikely event that a single catastrophe event exceeds the $1.6 billion in coverage provided by our traditional catastrophe reinsurance program.

The following discussion of our severity and frequency trends in our personal auto businesses excludes comprehensive coverage because of its inherent volatility, as it is typically linked to catastrophic losses generally resulting from adverse weather. For our commercial auto products, the reported frequency and severity trends include comprehensive coverage. Comprehensive coverage insures against damage to a customer’s vehicle due to various causes other than collision, such as windstorm, hail, theft, falling objects, and glass breakage.

Total personal auto incurred severity (i.e., average cost per claim, including both paid losses and the change in case reserves) on a calendar-year basis increased about ~~8% and 10%~~5% for the ~~three and six months ended June 30, 2020, respectively,~~first quarter 2021, compared to the same ~~periods~~period last year. These increases partly reflect ~~a reduction in incoming new claims, which led to an older aged mix of inventory, which increases incurred losses. In addition, we have seen an increase~~shifts in the ~~number~~type of ~~claims that were reopened,~~loss experienced and ~~required an additional payment,~~the impact from COVID-19 restrictions implemented during the ~~second~~last three weeks of the first quarter ~~2020, compared to a year ago. These supplemental payments are related to prior accident periods and were not impacted by COVID-19 restrictions.~~2020.

Following are the changes we experienced in severity in our auto coverages on a year-over-year basis:

~~Primarily due to an older aged mix of claims inventory and an increase in the number of claims reopened during the first six months of 2020 personal~~•Bodily injury ~~protection (PIP) increased about 30% and 20% for the second quarter and first six months of 2020, respectively, bodily injury increased about 11% and 10%, and auto property damage~~ increased about 13% and ~~14%.~~collision increased about 7% for the first quarter 2021, due in part to a shift in the mix to more severe accidents and rising repair costs compared to last year.

~~Collision~~•Personal injury protection (PIP) decreased about ~~8% during the second quarter and was flat~~4% during the first ~~six months of 2020,~~quarter 2021, due in part ~~due~~ to a ~~mix~~high volume of reopened claims, primarily in Florida, in the ~~timing of salvage and subrogation collections.~~first quarter 2020.

•Auto property damage was flat.

It is a challenge to estimate future severity, especially for bodily injury and PIP claims, but we continue to monitor changes in the underlying costs, such as medical costs, health care reform, court decisions, and jury verdicts, along with regulatory changes and other factors that may affect severity.

Our personal auto incurred frequency, on a calendar-year basis, decreased about ~~39% and 29%~~3% for the ~~three and six months ended June 30, 2020, respectively,~~first quarter 2021, compared to the same ~~periods~~period last year. Following are the frequency changes we experienced by coverage on a year-over-year ~~basis:~~basis, and primarily resulted from changes in driving patterns from those historically experienced:

•Auto property damage and bodily injury both decreased about 13%.

•PIP decreased about ~~45% and 33%~~17% for the ~~second quarter and first six months of 2020, respectively.~~quarter.

~~Auto property damage decreased~~•Collision increased about ~~42%~~11% for the ~~quarter and 30% for the first six months.~~

~~Bodily injury decreased about 42% for the quarter and 28% for the first six months.~~

~~Collision decreased about 36% for the quarter and 30% for the first six months.~~quarter.

We closely monitor the changes in frequency, but the degree or direction of near-term frequency change is not something that we are able to predict with any ~~certainty,~~degree of confidence, given the uncertainty of the current environment. We saw the number of vehicle miles driven decrease dramatically when the COVID-19 restrictions were first put in ~~place. Once the restrictions began to be lifted~~place, especially during the ~~quarter, we did see~~early months of the ~~vehicle miles traveled increase, however, they were still lower than during the second quarter last year.~~pandemic. We ~~will continue to~~ analyze trends to distinguish changes in our experience from other external factors, such as changes in the number of vehicles per household, miles driven, gasoline prices, advances in vehicle safety, and unemployment rates, versus those resulting from shifts in the mix of our business or changes in driving patterns, to allow us to reserve more accurately for our loss exposures.

The changes we are disclosing in the paragraph below for our commercial auto products severity and frequency ~~uses~~use a trailing 12-month period and ~~excludes~~exclude our ~~transportation network company (TNC)~~TNC business. Using a trailing 12-month period addresses inherent seasonality trends in the commercial auto products and ~~mitigates~~lessens the effects of month-to-month variability, ~~which includes~~including the impact of COVID-19 restrictions. Since the loss patterns in the TNC business are not indicative of our other commercial auto products, disclosing severity and frequency trends ~~without~~excluding that business is more indicative of our overall experience for the majority of our commercial auto products.

On a year-over-year basis, ~~our commercial auto products~~ incurred severity ~~increased 21% and frequency decreased 12%. In addition to general trends in the marketplace, the increase~~ in our commercial auto products increased 7% and frequency decreased 13%. The increase in severity ~~reflects~~is in part due to increased medical costs and actuarially determined reserves due to accelerating paid loss trends and shifts in the mix of business to for-hire ~~trucking,~~transportation, which has higher average severity than the business auto and contractor business market ~~tiers.~~targets. The frequency decrease was in part due to COVID-19 restrictions and continued product segmentation and underwriting, which created a mix shift toward more preferred, lower-frequency, business.

The table below presents the actuarial adjustments implemented and the loss reserve development experienced in the following periods on a companywide basis:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
($ in millions)	2020			2019			2020			2019			($ in millions)		2021			2020
ACTUARIAL ADJUSTMENTS													ACTUARIAL ADJUSTMENTS
Reserve decrease (increase)													Reserve decrease (increase)
Prior accident years	$	(2.7	)	$	(45.8	)	$	(12.2	)	$	(62.5	)	Prior accident years		$	(22.1)		$	(9.5)
Current accident year	28.6			(16.3		)	30.2			(3.0		)	Current accident year		2.9			1.6
Calendar year actuarial adjustment	$	25.9		$	(62.1	)	$	18.0		$	(65.5	)	Calendar year actuarial adjustment		$	(19.2)		$	(7.9)
PRIOR ACCIDENT YEARS DEVELOPMENT													PRIOR ACCIDENT YEARS DEVELOPMENT
Favorable (unfavorable)													Favorable (unfavorable)
Actuarial adjustment	$	(2.7	)	$	(45.8	)	$	(12.2	)	$	(62.5	)	Actuarial adjustment		$	(22.1)		$	(9.5)
All other development	30.7			(21.6		)	(103.9		)	(147.5		)	All other development		(102.3)			(134.6)
Total development	$	28.0		$	(67.4	)	$	(116.1	)	$	(210.0	)	Total development		$	(124.4)		$	(144.1)
(Increase) decrease to calendar year combined ratio	0.3		pts.	(0.8		) pts.	(0.6		) pts.	(1.2		) pts.	(Increase) decrease to calendar year combined ratio		(1.2)		pts.	(1.5)		pts.

Total development consists of both actuarial adjustments and “all other ~~development.”~~development” on prior accident years. The actuarial adjustments represent the net changes made by our actuarial staff to both current and prior accident year reserves based on regularly scheduled reviews. Through these reviews, our actuaries identify and measure variances in the projected frequency and severity trends, which allow them to adjust the reserves to reflect the current cost trends. For our Property business, 100% of catastrophe losses are reviewed monthly, and any development on catastrophe reserves are included as part of the actuarial adjustments. For the Personal Lines and Commercial Lines businesses, development for catastrophe losses for the vehicle businesses would be

reflected in “all other development,” discussed below, to the extent they relate to prior year reserves. We report these actuarial adjustments separately for the current and prior accident years to reflect these adjustments as part of the total prior accident years development.

“All other development” represents claims settling for more or less than reserved, emergence of unrecorded claims at rates different than anticipated in our incurred but not recorded (IBNR) reserves, and changes in reserve estimates on specific claims. Although we believe the development from both the actuarial adjustments and “all other development” generally results from the same factors, excluding the impact from COVID-19 restrictions, we are unable to quantify the portion of the reserve development that might be applicable to any one or more of those underlying factors.

Our objective is to establish case and IBNR reserves that are adequate to cover all loss costs, while incurring minimal variation from the date the reserves are initially established until losses are fully developed. Our ability to meet this objective is impacted by many factors. Changes in case law, particularly in PIP environments, can make it difficult to estimate reserves timely and with minimal variation. See Note 6 – Loss and Loss Adjustment Expense Reserves, for a more detailed discussion of our prior accident years development. We continue to focus on our loss reserve analysis, attempting to enhance accuracy and to further our understanding of our loss costs.

Underwriting Expenses

The companywide underwriting expense ratio (i.e., policy acquisition costs and other underwriting expenses, net of fees and other revenues, expressed as a percentage of net premiums earned) decreased 0.6 points for the first quarter 2021, compared to the same period last year. In the first quarter 2020, we increased our allowance for uncollectible accounts about 0.8 points due to billing leniencies that were put in place following the COVID-19 restrictions. The year-over-year increase in net premiums earned exceeded the increase in other underwriting expenses.

Progressive’s other underwriting expenses, ~~which excludes the policyholder credits,~~net of fees and other revenues, increased ~~17% for the second quarter and 19%~~5% for the first ~~six months of 2020,~~quarter 2021, compared to the same ~~periods~~period last year, primarily reflecting ~~the increase of $120.0 million and $191.0 million, respectively, in our allowance for uncollectable accounts, due to the billing leniencies that we put in place following COVID-19 restrictions, and~~ increased advertising ~~spend in both periods.~~spend. During the ~~second~~first quarter ~~and first six months of 2020,~~2021, our advertising expenditures increased ~~12% and 15%~~25%, ~~respectively,~~ compared to the same ~~periods~~period last year. We will continue to invest in advertising as long as we generate sales at a cost below the maximum amount we are willing to spend to acquire a new customer.

The companywide underwriting expense ratio (i.e., policy acquisition costs, other underwriting expenses and policyholder credits, net of fees and other revenues, expressed as a percentage of net premiums earned) increased 11.7 points and 6.3 points for the three and six months ended June 30, 2020, compared to the same periods last year, primarily reflecting 10.7 points and 5.4 points, respectively, of policyholder credits issued to personal auto customers in the second quarter 2020. In addition to the credits issued to personal auto customers, our Commercial Lines business worked directly with their policyholders and agents to provide premium and billing credits during the quarter, which, along with bad debt exposure, contributed to a 4.0 point and 2.1 point increase in the Commercial Lines expense ratio for the three and six months end June 30, 2020, respectively.

C. Growth

For our underwriting operations, we analyze growth in terms of both premiums and policies. Net premiums written represent the premiums from policies written during the period, less any premiums ceded to reinsurers. Net premiums earned, which are a function of the premiums written in the current and prior periods, are earned as revenue over the life of the policy using a daily earnings convention. Policies in force, our preferred measure of growth since it removes the variability due to rate changes or mix shifts, represents all policies under which coverage was in effect as of the end of the period specified.


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
($ in millions)	2020		2019		% Growth		2020		2019		% Growth		($ in millions)		2021		2020		% Growth
NET PREMIUMS WRITTEN													NET PREMIUMS WRITTEN
Personal Lines													Personal Lines
Agency	$	4,104.7	$	3,775.5	9	%	$	8,131.2	$	7,541.9	8	%	Agency		$	4,458.7	$	4,026.5	11	%
Direct	4,326.8		3,709.8		17		8,624.2		7,665.9		13		Direct		5,002.7		4,297.4		16
Total Personal Lines	8,431.5		7,485.3		13		16,755.4		15,207.8		10		Total Personal Lines		9,461.4		8,323.9		14
Commercial Lines	1,195.1		1,182.7		1		2,339.2		2,347.9		0		Commercial Lines		1,794.1		1,144.1		57
Property	513.4		458.5		12		916.7		810.7		13		Property		473.6		403.3		17
Total underwriting operations	$	10,140.0	$	9,126.5	11	%	$	20,011.3	$	18,366.4	9	%	Total underwriting operations		$	11,729.1	$	9,871.3	19	%
NET PREMIUMS EARNED													NET PREMIUMS EARNED
Personal Lines													Personal Lines
Agency	$	3,919.0	$	3,639.6	8	%	$	7,747.7	$	7,148.1	8	%	Agency		$	4,098.2	$	3,828.7	7	%
Direct	4,167.9		3,733.4		12		8,160.3		7,309.7		12		Direct		4,431.7		3,992.4		11
Total Personal Lines	8,086.9		7,373.0		10		15,908.0		14,457.8		10		Total Personal Lines		8,529.9		7,821.1		9
Commercial Lines	1,129.0		1,070.5		5		2,318.0		2,083.5		11		Commercial Lines		1,417.8		1,189.0		19
Property	432.7		381.2		14		853.3		743.2		15		Property		472.5		420.6		12
Total underwriting operations	$	9,648.6	$	8,824.7	9	%	$	19,079.3	$	17,284.5	10	%	Total underwriting operations		$	10,420.2	$	9,430.7	10	%

							June 30,								March 31,
(thousands)							2020		2019		% Growth		(thousands)		2021		2020		% Growth
POLICIES IN FORCE													POLICIES IN FORCE
Agency auto							7,362.5		6,783.7		9	%	Agency auto		7,863.5		7,164.6		10%
Direct auto							8,507.6		7,528.4		13		Direct auto		9,338.8		8,126.3		15
Total auto							15,870.1		14,312.1		11		Total auto		17,202.3		15,290.9		13
Special lines¹							4,790.5		4,510.2		6		Special lines1		5,026.7		4,574.5		10
Personal Lines — total							20,660.6		18,822.3		10		Personal Lines — total		22,229.0		19,865.4		12
Commercial Lines							775.8		734.2		6		Commercial Lines		858.9		759.7		13
Property							2,336.1		2,071.6		13		Property		2,566.3		2,264.1		13
Companywide total							23,772.5		21,628.1		10	%	Companywide total		25,654.2		22,889.2		12%

¹Includes insurance for motorcycles, watercraft, RVs, and similar items.

Although new policies are necessary to maintain a growing book of business, we recognize the importance of retaining our current customers as a critical component of our continued growth. As shown in the tables below, we measure retention by policy life expectancy. We review our customer retention for our personal auto products using both a trailing 3-month and a trailing 12-month period. Although using a trailing 3-month measure does not address seasonality and can reflect more volatility, this measure is more responsive to current experience and generally can be an indicator of how our retention rates are ~~moving.~~ moving, especially given the impact of events that occurred during 2020.

As of ~~June 30, 2020, however,~~March 31, 2021, we believe the growth in our auto trailing ~~3-month~~12-month policy life expectancy isremains artificially high due to suspending cancellations of policies for ~~non-payment,~~nonpayment, which impacted renewal activity during ~~the second quarter~~ 2020. ~~Due to these unusual circumstances, we have chosen not to disclose the year-over-year increase in the trailing 3-month measure in the tables below, as we do not believe the growth is meaningful.~~ We continue to disclose our changes in policy life expectancy using both a trailing 3-month and 12-month ~~period. We~~period; however, we believe that the trailing 12-month measure ~~is indicative of recent experience, mitigates the effects of month-to-month variability, and addresses seasonality. While this measure was also~~will be positively impacted by the ~~inclusion of the items~~factor discussed above ~~it was to a much lesser extent.~~through mid-2021.

To analyze growth, we review new policies, rate levels, and the retention characteristics of our segments.

D. Personal Lines

The following table shows our year-over-year changes for our Personal Lines business:


										Growth Over Prior Year Quarter
	Growth Over Prior Year
	Quarter				Year-to-date
	2020		2019		2020		2019			2021		2020
Applications									Applications
New	2	%	5	%	2	%	6	%	New	14	%	2	%
Renewal	12		11		11		11		Renewal	14		10
Written premium per policy - Auto	0		2		0		3		Written premium per policy - Auto	(3)		1
Policy life expectancy - Auto									Policy life expectancy - Auto
Trailing 3-months	NM		1						Trailing 3-months	12		(1)
Trailing 12-months	7		(2	)					Trailing 12-months	13		0

NM = Not meaningful

In our Personal Lines business, the increase in both new and renewal applications during 2021 resulted from increases in both ~~periods in 2020 was driven by high demand in~~ our personal auto and special lines ~~products, due~~products. As discussed previously, the year-over-year comparisons will be impacted by the depressed growth in the first quarter 2020, resulting from the impact of COVID-19 restrictions that were put in place toward the end of the first quarter 2020.

During the three months ended March 31, 2021, our personal auto new application growth was 11%, compared to ~~overall industry growth, as consumers placed higher focus on engaging in recreational activities that promote maintaining social distance.~~the same period last year. Our special lines products saw new applications increase ~~22% and 18%~~35% year over year, reflecting the continued high demand during the first quarter 2021, due to the overall growth in the RV, boat, and ~~year-to-date period, respectively.~~motorcycle industries. During the three and six months ended June 30, 2020, our personal auto new application growth was down 4% and 1%, respectively, primarily driven by a decrease in auto quote volume and conversion in our Agency auto business. During both periods,quarter, we continued to see strong renewal personal auto application growth, ~~which may have been aided,~~ in part aided by ~~our~~rate decreases taken throughout 2020, in addition to the impact from the moratoriums and billing leniency efforts ~~and~~throughout 2020.

At the ~~moratoriums that were put in place during~~end of the first quarter ~~2020, which suspended cancellations~~2021, we saw our Robinsons continue to enjoy year-over-year growth in personal auto policies in force that outpaced our other consumer segments (Sams, Dianes, and Wrights). New application growth across all four consumer segments was solid for the quarter. We experienced continued robust growth in Robinson quote volume; however, conversion in this consumer segment for the quarter was below last year. The other consumer segments have experienced increased year-over-year growth in both conversion and quoting and thus increases in the rate of ~~policies for non-payment. The moratoriums were lifted~~growth in ~~May~~new business applications. Some of ~~2020~~this growth can be attributed to the disproportionate drop in ~~all but eleven states and~~volume these consumer segments experienced March last year with the ~~District~~start of ~~Columbia, and by June 30, 2020, moratoriums remained in eight states and~~ the ~~District of Columbia.~~pandemic.

We report our Agency and Direct business results separately as components of our Personal Lines segment to provide further understanding of our products by distribution channel. The channel discussions below are focused on personal auto insurance since this product accounted for 95% of the Personal Lines segment net premiums written during the quarter.

The Agency Business


										Growth Over Prior Year Quarter
	Growth Over Prior Year
	Quarter				Year-to-date
	2020		2019		2020		2019			2021		2020
Applications - Auto									Applications - Auto
New	(13	)%	6	%	(8	)%	7	%	New	5	%	(3)	%
Renewal	11		11		10		11		Renewal	12		9
Written premium per policy - Auto	1		3		1		3		Written premium per policy - Auto	(2)		1
Policy life expectancy - Auto									Policy life expectancy - Auto
Trailing 3-months	NM		4						Trailing 3-months	12		2
Trailing 12-months	9		0						Trailing 12-months	13		4

NM = Not meaningful

The Agency business includes business written by more than ~~35,000~~40,000 independent insurance agencies that represent Progressive, as well as brokerages in New York and California. During the ~~second~~first quarter ~~and the first six months of 2020,~~2021, the Agency auto business experienced ~~a decline~~an increase in new ~~application growth and an increase renewal~~ application growth. During the ~~year,~~quarter, we generated new auto application growth in ~~only twelve~~31 states, including ~~only one~~six of our top 10 largest Agency states. ~~While~~Each of our consumer segments experienced positive new application and policy in force growth with the largest new application growth ~~during the quarter in the renewal business was in part driven by~~coming from our ~~billing leniency efforts, new applications growth decreased significantly as it is taking longer for agents to get their operations back to pre-COVID levels.~~Sam consumer segment.

During ~~both~~ the ~~second~~first quarter ~~and six months ended June 30, 2020,~~2021, we ~~continued to experience a decrease~~experienced an increase in Agency auto quote volume of ~~4% and 2%~~5%, ~~respectively,~~ with the rate of conversion (i.e., converting a quote to a sale) ~~decreasing 9% and 6%,~~unchanged, compared to the same ~~periods~~period last year.

~~We analyze~~ Each consumer segment saw increases in quote volume, except for the Wrights where growth in each of our four consumers segments (e.g., inconsistently insured, consistently insured and maybe a renter, homeowners who do not bundle auto and home, and homeowners who bundle auto and home). Duringwas flat, with Robinsons having the second quarter, while each of our segments experienced negative new application growth, our inconsistently insured (i.e., Sams) and consistently insured non-homeowners segments (i.e., Diane) experienced a double digit decline; however, all consumer segments experienced year-over-year policy in force growth, with double digit increases from both our non-bundled homeowner (i.e., Wrights) and bundled auto and home consumer segments (i.e., Robinsons), albeitlargest increase on a ~~smaller base.~~year-over-year basis.

~~During the trailing 12-month period, we~~

We experienced an increase in the percentage of bundled Agency auto policies written for 12-month terms, which have about twice the amount of net premiums written compared to 6-month policies. At the end of the ~~second~~first quarter ~~2020, 11%~~2021, 12% of our Agency auto policies in force were 12-month policies, compared to about 9%10% a year earlier. Due to the rate decreases taken throughout 2020, written premium per policy on new Agency auto business was down 1% and renewal was down 2%, compared to the first quarter last year. During the last 12 months, we reduced rates primarily in response to driving and claims data gathered during the year.

The Direct Business


										Growth Over Prior Year Quarter
	Growth Over Prior Year
	Quarter				Year-to-date
	2020		2019		2020		2019			2021		2020
Applications - Auto									Applications - Auto
New	4	%	6	%	5	%	7	%	New	17	%	5	%
Renewal	15		15		13		16		Renewal	18		11
Written premium per policy - Auto	0		2		0		2		Written premium per policy - Auto	(4)		0
Policy life expectancy - Auto									Policy life expectancy - Auto
Trailing 3-months	NM		(2	)					Trailing 3-months	13		(4)
Trailing 12-months	5		(4	)					Trailing 12-months	14		(3)

NM = Not meaningful

The Direct business includes business written directly by Progressive on the Internet, through mobile devices, and over the phone. The Direct business experienced solid new and renewal application growth during the ~~second~~first quarter 2021, reflecting our increase in advertising spend and a depressed first quarter 2020, due to the ~~first six months~~impact of ~~2020.~~COVID-19 restrictions. During the ~~year,~~quarter, we generated new auto application growth in 3149 states and the District of Columbia, including ~~six~~nine of our top 10 largest Direct states. ByConsistent with the ~~end~~Agency auto business, during the quarter, we grew our new Direct auto applications and policies in force across all consumer segments, with the largest percentage of new application growth generated from our Sam consumer segment.

During the ~~second~~first quarter ~~2020,~~2021, we ~~continued to see overall shopping volume return to pre-COVID levels. During both the second quarter and six months ended June 30, 2020, we continued to experience~~experienced an increase in Direct auto quote volume of 6%7% and ~~5%, respectively, with~~our rate of conversion ~~decreasing 2% and 1%,~~increased 9% compared to the same ~~periods~~period last year.

~~During the second quarter, our Diane and Wrights~~ All consumer segments ~~experienced negative~~saw an increase in quotes with the Robinsons showing the largest increase on a year-over-year basis.

Written premium per policy for new ~~application growth, with Sams~~Direct auto business decreased 5% and ~~Robinsons experiencing double digit new application growth, while all consumer segments experienced strong year-over-year policy in force growth.~~renewal business decreased 3%, reflecting rate decreases taken during the last 12 months.

E. Commercial Lines


										Growth Over Prior Year Quarter
	Growth Over Prior Year
	Quarter				Year-to-date
	2020		2019		2020		2019			2021		2020
Applications - Auto									Applications - Auto
New	(10	)%	11	%	(3	)%	11	%	New	28	%	5	%
Renewal	7		7		8		8		Renewal	13		8
Written premium per policy - Auto	(1	)	10		2		12
Policy life expectancy - Auto - trailing 12-months	6		(7	)
Written premium per policy									Written premium per policy	12		4
Policy life expectancy - Trailing 12-months									Policy life expectancy - Trailing 12-months	7		1

Note: Table excludes our transportation network company business.
Note: Table excludes our TNC and BOP products.									Note: Table excludes our TNC and BOP products.

Our Commercial Lines business operates in five traditional business markets, which include business auto, for-hire transportation, contractor, for-hire specialty, and tow markets, ~~and is~~ primarily written through the agency channel. We also write transportation network company (TNC) business and business owners policy (BOP) insurance.

Similar to our experience in our ~~Personal Lines Agency business, the quarterly results of~~personal auto businesses, our Commercial Lines business results for the first quarter 2020 were negatively impacted by COVID-19 restrictions, ~~that were in place during the first half of the second quarter 2020,~~ which influenced the demands and general consumer habits for goods and services provided by our Commercial Lines customers and required that certain businesses undergo temporary closure.

Commercial Lines experienced solid new application growth in the first quarter 2021, reflecting continued improvement in the economy and our competitiveness in the marketplace. The new application growth during the first quarter was primarily driven by growth in our for-hire transportation business market target, due to greater demand for shipping services in light of the pandemic.

~~While our renewal business was not significantly impacted,~~During the first quarter 2021, we ~~continued to experience a significant decline~~experienced improvement in new consumer shopping, ~~during the second quarter 2020,~~ reflecting a ~~13% and 8%~~19% increase in quote volume ~~decrease during the three and six month period ended June 30, 2020, respectively,~~ and a ~~3% and 5%~~7% rate of conversion increase, compared to the same ~~periods~~period last year.

During the first quarter 2021, volume in our TNC business increased significantly compared to when COVID-19 restrictions were first put into place. In the first quarter 2021, our net premiums written continued to reflect the increase in rideshare usage we started to experience during the second half of 2020. In contrast, during the first quarter last year, we decreased TNC business net premiums written by $110.5 million, which reflected the decrease in actual miles driven during the period and revised estimates of the miles to be driven during the remainder of the policy terms as a result of the COVID-19 restrictions.

F. Property


	Growth Over Prior Year									Growth Over Prior Year Quarter
	Quarter				Year-to-date
	2020		2019		2020		2019			2021		2020
Applications									Applications
New	4	%	(6	)%	5	%	(2	)%	New	26	%	7	%
Renewal	15		23		16		24		Renewal	12		17
Written premium per policy	0		3		0		2		Written premium per policy	1		1
Policy life expectancy - Trailing 12-months									Policy life expectancy - Trailing 12-months	(3)		(5)

Our Property business writes residential property insurance for homeowners, other property owners, and renters, in the agency and direct channels. During the ~~second~~first quarter ~~2020,~~2021, our Property business experienced ana solid increase in new applications, primarily driven by growth in our direct channel and our Robinsons consumer segment, ~~as discussed above,~~ and a continued rebound toin the housing market for new home ~~sales~~sales. Our Property segment was not significantly impacted by COVID-19 restrictions during 2020.

During the first quarter 2021, our Property business experienced an increase in ~~June 2020. During 2020, our~~ written premium per policy ~~increased for our homeowners’ policies,~~ on a year-over-year basis, ~~but was~~due to rate increases taken during the last 12 months, in part offset by a shift in the mix of business to a larger share of renters policies, which have lower written premiums per policy.

While COVID-19 restrictions had a negative impact our Personal Lines and Commercial Lines segments, our Property segment was not as significantly impacted during the second quarter or six months ended June 30, 2020.

G. Income Taxes

A deferred tax asset or liability is a tax benefit or expense that is expected to be realized in a future period. At ~~June 30, 2020 and 2019,~~March 31, 2021 and December 31, ~~2019,~~2020, we reported net federal deferred tax ~~liabilities.~~liabilities, and a net federal deferred tax asset at March 31, 2020. At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019,~~2020, we had net current income taxes payable of ~~$889.0~~$372.4 million, ~~$150.3~~$508.0 million, and ~~$195.5~~$163.5 million, respectively, which were reported as part of other liabilities. During the six months ended June 30, 2020, we deferred making estimated federal tax payments. In response to the impact on businesses caused by COVID-19 restrictions, the Internal Revenue Service postponed the due date of federal income tax payments that would have otherwise been due between April 1, 2020, and July 15, 2020. On July 15, 2020, we paid $700.0 million of estimated federal taxes that would have otherwise been paid in the first half of 2020.

Our effective tax rate was 20.8% for the ~~three and six months ended June 30, 2020, were 21.1% and 20.8%, respectively,~~first quarter 2021, compared to ~~21.3% and 26.7%~~20.1% for the same ~~periods~~period last year. The higher effective rate for the first six months of 2019 was due primarily to the reversal of tax credits and other tax benefits previously recognized from certain renewable energy investments, where the sponsor pled guilty to fraud through these investments and the tax credits and other benefits related to those investments were not valid. See ~~Note 5 – Income Taxes~~ ~~in our 2019 Annual Report to Shareholders for a further discussion.~~

IV. RESULTS OF OPERATIONS – INVESTMENTS

A. Investment Results

Our management philosophy governing the portfolio is to evaluate investment results on a total return basis. The fully taxable equivalent (FTE) total return includes recurring investment income, adjusted to a fully taxable amount for certain securities that receive preferential tax treatment (e.g., municipal securities), and total net realized, and changes in total net unrealized, gains (losses) on securities.

The following table summarizes investment results for the periods ended ~~June 30:~~

March 31:


	Three Months				Six Months					Three Months
	2020		2019		2020		2019				2021		2020
Pretax recurring investment book yield (annualized)	2.5	%	3.2	%	2.6	%	3.1	%	Pretax recurring investment book yield (annualized)		2.1	%	2.7	%
Weighted average FTE book yield (annualized)	2.6		3.2		2.6		3.2		Weighted average FTE book yield (annualized)		2.1		2.7
FTE total return:									FTE total return:
Fixed-income securities	3.4		2.1		4.6		4.4		Fixed-income securities		(0.9)		1.2
Common stocks	21.5		4.0		(3.4	)	17.9		Common stocks		12.5		(20.5)
Total portfolio	4.5		2.2		3.9		5.5		Total portfolio		0.3		(0.6)

~~A combination of strong fiscal~~The decrease in the book yield compared to last year reflects investing new cash from operations and ~~monetary stimulus efforts provided a positive backdrop to~~portfolio turnover during the ~~financial market improvements throughout~~past twelve months in lower interest rate securities. The decrease in our fixed-income total return reflects the second quarter 2020. Our fixed-income portfolio duration was 3.0 years and 2.7 years at June 30, 2020 and 2019, respectively. The fixed-income portfolio generated a positive return for the year based on decliningincrease in interest rates ~~and narrowing credit spreads~~ during the ~~second quarter. Our indexed portfolio generated a positive return for the~~first quarter ~~as the equity market recovered from the initial effects of COVID-19, and investors moved back towards instruments that contained credit risk.~~2021.

A further break-down of our FTE total returns for our fixed-income portfolio for the periods ended ~~June 30,~~March 31, follows:


	Three Months
		2021		2020
Fixed-income securities:
U.S. Treasury Notes		(1.1)	%	6.3	%
Municipal bonds		(1.1)		2.7
Corporate bonds		(1.5)		(0.7)
Residential mortgage-backed securities		0.4		(2.8)
Commercial mortgage-backed securities		(0.8)		(2.8)
Other asset-backed securities		0.2		(0.5)
Preferred stocks		(0.1)		(12.2)
Short-term investments		0		0.4

Three Months Six Months
2020
2019
2020
2019
Fixed-income securities:
U.S. Treasury Notes 0.7 % 2.3 % 7.0 % 3.9 %
Municipal bonds 3.8
1.8
6.6
3.7
Corporate bonds 6.3
2.6
5.5
6.3
Residential mortgage-backed securities 4.3
1.1
1.4
2.0
Commercial mortgage-backed securities 4.0
2.2
1.0
4.7
Other asset-backed securities 2.3
1.1
1.8
2.1
Preferred stocks 9.2
2.1
(4.1 ) 8.5
Short-term investments 0.4
0.6
0.8
1.3
Common stocks:
Indexed 21.5
4.0
(3.4 ) 17.9
Actively managed NA
5.0
NA
17.6

~~NA= Not applicable since we no longer maintain an actively managed portfolio.~~

B. Portfolio Allocation

The composition of the investment portfolio was:


($ in millions)	Fair Value		% of Total Portfolio		Duration (years)	Rating¹	($ in millions)	Fair Value		% of Total Portfolio		Duration (years)	Rating1
June 30, 2020
March 31, 2021							March 31, 2021
U.S. government obligations	$	9,277.8	21.2	%	3.8	AAA	U.S. government obligations	$	16,073.4	33.9	%	3.3	AAA
State and local government obligations	3,574.3		8.2		4.5	AA+	State and local government obligations	2,624.1		5.6		4.2	AA
Corporate debt securities	11,062.5		25.3		4.0	BBB+	Corporate debt securities	10,436.2		22.0		3.7	BBB
Residential mortgage-backed securities	543.0		1.2		0.8	AA	Residential mortgage-backed securities	553.2		1.2		1.0	AA
Commercial mortgage-backed securities	5,761.8		13.2		2.7	AA	Commercial mortgage-backed securities	5,892.0		12.4		3.2	AA-
Other asset-backed securities	4,354.9		9.9		1.0	AAA-	Other asset-backed securities	3,323.4		7.0		1.0	AA+
Preferred stocks	1,332.7		3.0		3.2	BBB-	Preferred stocks	1,696.7		3.6		3.7	BBB-
Short-term investments	4,700.5		10.8		0.1	BBB+	Short-term investments	2,243.1		4.7		0.1	A
Total fixed-income securities	40,607.5		92.8		3.0	AA-	Total fixed-income securities	42,842.1		90.4		3.1	AA-
Common equities	3,170.4		7.2		na	na	Common equities	4,558.5		9.6		na	na
Total portfolio^2,3	$	43,777.9	100.0	%	3.0	AA-
June 30, 2019
Total portfolio2							Total portfolio2	$	47,400.6	100.0	%	3.1	AA-
March 31, 2020							March 31, 2020
U.S. government obligations	$	12,379.4	33.6	%	3.7	AAA	U.S. government obligations	$	11,495.7	28.5	%	4.2	AAA
State and local government obligations	1,589.7		4.3		2.9	AA+	State and local government obligations	2,304.2		5.7		3.9	AA+
Corporate debt securities	7,385.7		20.1		3.0	BBB	Corporate debt securities	9,491.9		23.5		3.6	BBB+
Residential mortgage-backed securities	665.2		1.8		1.1	AA-	Residential mortgage-backed securities	556.6		1.4		0.8	AA
Commercial mortgage-backed securities	4,441.9		12.1		2.5	AA-	Commercial mortgage-backed securities	5,664.3		14.0		2.4	AA
Other asset-backed securities	4,497.2		12.2		0.9	AAA-	Other asset-backed securities	4,639.1		11.5		0.9	AAA-
Preferred stocks	1,359.1		3.7		2.5	BBB-	Preferred stocks	1,058.2		2.6		2.5	BBB-
Short-term investments	1,360.9		3.7		0.1	AA-	Short-term investments	2,524.2		6.3		<0.1	A
Total fixed-income securities	33,679.1		91.5		2.7	AA-	Total fixed-income securities	37,734.2		93.5		3.0	AA-
Common equities	3,135.5		8.5		na	na	Common equities	2,608.1		6.5		na	na
Total portfolio^2,3	$	36,814.6	100.0	%	2.7	AA-
December 31, 2019
Total portfolio2							Total portfolio2	$	40,342.3	100.0	%	3.0	AA-
December 31, 2020							December 31, 2020
U.S. government obligations	$	13,251.1	33.7	%	4.9	AAA	U.S. government obligations	$	12,740.0	26.8	%	3.3	AAA
State and local government obligations	1,713.3		4.4		3.1	AA+	State and local government obligations	3,221.8		6.8		4.4	AA
Corporate debt securities	7,067.7		18.0		2.7	BBB	Corporate debt securities	10,185.2		21.4		3.8	BBB
Residential mortgage-backed securities	627.5		1.6		0.9	AA	Residential mortgage-backed securities	509.5		1.1		1.0	AA
Commercial mortgage-backed securities	5,076.2		12.9		2.0	AA	Commercial mortgage-backed securities	6,175.1		13.0		3.2	AA-
Other asset-backed securities	5,179.5		13.2		0.8	AAA-	Other asset-backed securities	3,784.6		7.9		1.0	AA+
Preferred stocks	1,233.9		3.2		2.6	BBB-	Preferred stocks	1,642.6		3.5		3.6	BBB-
Short-term investments	1,798.8		4.6		0.1	AA-	Short-term investments	5,218.5		11.0		<0.1	AA
Total fixed-income securities	35,948.0		91.6		3.0	AA	Total fixed-income securities	43,477.3		91.5		2.9	AA-
Common equities	3,306.3		8.4		na	na	Common equities	4,053.0		8.5		na	na
Total portfolio^2,3	$	39,254.3	100.0	%	3.0	AA
Total portfolio2							Total portfolio2	$	47,530.3	100.0	%	2.9	AA-
na = not applicable							na = not applicable

¹Represents ratings at period end. Credit quality ratings are assigned by nationally recognized statistical rating organizations. To calculate the weighted average credit quality ratings, we weight individual securities based on fair value and assign a numeric score of 0-5, with non-investment-grade and non-rated securities assigned a score of 0-1. To the extent the weighted average of the ratings falls between AAA and AA+, we assign an internal rating of AAA-.

²Our portfolio reflects the effect of net unsettled security transactions; at ~~June 30, 2020,~~March 31, 2021, we had ~~$277.9~~$363.1 million in other liabilities, compared to ~~$303.5~~$598.0 million and ~~$11.9~~$95.5 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2019,~~2020, respectively.

³The total fair value of the portfolio at ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ and December 31, ~~2019,~~2020, included ~~$2.3~~$3.7 billion, ~~$1.2~~$2.6 billion, and ~~$3.2~~$6.2 billion, respectively, of securities held in a consolidated, non-insurance subsidiary of the holding company, net of any unsettled security transactions. During the first quarter 2021, we used a portion of these investments to pay our fourth quarter and annual 2020 common share dividends.

Our asset allocation strategy is to maintain 0%-25% of our portfolio in Group I securities, with the balance (75%-100%) of our portfolio in Group II securities.

We define Group I securities to include:

•common equities,

•nonredeemable preferred stocks,

•redeemable preferred stocks, except for 50% of investment-grade redeemable preferred stocks with cumulative dividends, which are included in Group II, and

•all other non-investment-grade fixed-maturity securities.

Group II securities include:

•short-term securities, and

•all other fixed-maturity securities, including 50% of the investment-grade redeemable preferred stocks with cumulative dividends.

We believe this asset allocation strategy allows us to appropriately assess the risks associated with these securities for capital purposes and is in line with the treatment by our regulators.

The following table shows the composition of our Group I and Group II securities:


	March 31, 2021				March 31, 2020				December 31, 2020
($ in millions)	Fair Value		% of Total Portfolio		Fair Value		% of Total Portfolio		Fair Value		% of Total Portfolio
Group I securities:
Non-investment-grade fixed maturities	$	1,254.6	2.6	%	$	357.4	0.9	%	$	1,006.4	2.1	%
Redeemable preferred stocks1	94.8		0.2		62.4		0.1		97.3		0.2
Nonredeemable preferred stocks	1,507.2		3.2		933.4		2.3		1,447.9		3.1
Common equities	4,558.5		9.6		2,608.1		6.5		4,053.0		8.5
Total Group I securities	7,415.1		15.6		3,961.3		9.8		6,604.6		13.9
Group II securities:
Other fixed maturities	37,742.4		79.7		33,856.8		83.9		35,707.2		75.1
Short-term investments	2,243.1		4.7		2,524.2		6.3		5,218.5		11.0
Total Group II securities	39,985.5		84.4		36,381.0		90.2		40,925.7		86.1
Total portfolio	$	47,400.6	100.0	%	$	40,342.3	100.0	%	$	47,530.3	100.0	%

June 30, 2020 June 30, 2019 December 31, 2019
($ in millions)
Fair
Value

% of Total
Portfolio

Fair
Value
% of Total
Portfolio
Fair
Value
% of Total
Portfolio
Group I securities:
Non-investment-grade fixed maturities $ 368.6
0.8 % $ 489.5
1.3 % $ 327.2
0.8 %
Redeemable preferred stocks¹
76.0
0.2
133.7
0.4
117.6
0.3
Nonredeemable preferred stocks 1,180.6
2.7
1,130.0
3.1
1,038.9
2.7
Common equities 3,170.4
7.2
3,135.5
8.5
3,306.3
8.4
Total Group I securities 4,795.6
10.9
4,888.7
13.3
4,790.0
12.2
Group II securities:
Other fixed maturities 34,281.8
78.3
30,565.0
83.0
32,665.5
83.2
Short-term investments 4,700.5
10.8
1,360.9
3.7
1,798.8
4.6
Total Group II securities 38,982.3
89.1
31,925.9
86.7
34,464.3
87.8
Total portfolio $ 43,777.9
100.0 % $ 36,814.6
100.0 % $ 39,254.3
100.0 %

¹~~Includes non-investment-grade redeemable preferred stocks of $38.3 million and $40.2 million at June 30, 2019 and December 31, 2019, respectively; we held no~~We did not hold any non-investment-grade redeemable preferred stocks at ~~June 30,~~March 31, 2021 and 2020, or December 31, 2020.

To determine the allocation between Group I and Group II, we use the credit ratings from models provided by the National Association of Insurance Commissioners (NAIC) for classifying our residential and commercial mortgage-backed securities, excluding interest-only securities, and the credit ratings from nationally recognized statistical rating organizations (NRSRO) for all other debt securities. NAIC ratings are based on a model that considers the book price of our securities when assessing the probability of future losses in assigning a credit rating. As a result, NAIC ratings can vary from credit ratings issued by NRSROs. Management believes NAIC ratings more accurately reflect our risk profile when determining the asset allocation between Group I and Group II securities.

Unrealized Gains and Losses

As of ~~June 30, 2020,~~March 31, 2021, our fixed-maturity portfolio had pretax net unrealized gains, recorded as part of accumulated other comprehensive income, of ~~$1,257.1~~$523.5 million, compared to ~~$598.1~~$538.9 million and ~~$459.4~~$1,206.6 million at ~~June 30, 2019~~March 31, 2020 and December 31, ~~2019,~~2020, respectively. The ~~changes~~decrease from ~~both June and~~March 31, 2020, reflects sales of securities with unrealized gains in 2020 as well as increasing interest rates during the first quarter 2021. The decrease from December ~~2019, reflect decreasing~~31, 2020, was primarily due to increasing interest rates, which resulted in valuation ~~increases~~decreases in all fixed-maturity ~~sectors.~~sectors, most prominently in the U.S. Government and corporate portfolios.

See Note 2 – Investments for a further break-out of our gross unrealized gains and losses.

Holding Period Gains and Losses

The following table provides the gross and net holding period gain (loss) balance and activity during the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:


(millions)	Gross Holding Period Gains		Gross Holding Period Losses		Net Holding Period Gains (Losses)
Balance at December 31, 2020
Hybrid fixed-maturity securities	$	15.2	$	0	$	15.2
Equity securities	2,961.5		(6.6)		2,954.9
Total holding period securities	2,976.7		(6.6)		2,970.1
Current year change in holding period securities
Hybrid fixed-maturity securities	(6.0)		(4.9)		(10.9)
Equity securities	452.7		(0.3)		452.4
Total changes in holding period securities	446.7		(5.2)		441.5
Balance at March 31, 2021
Hybrid fixed-maturity securities	9.2		(4.9)		4.3
Equity securities	3,414.2		(6.9)		3,407.3
Total holding period securities	$	3,423.4	$	(11.8)	$	3,411.6

(millions) Gross Holding Period Gains
Gross Holding Period Losses
Net Holding Period Gains (Losses)
Beginning of period
Hybrid fixed-maturity securities $ 7.8
$ 0
$ 7.8
Equity securities 2,263.9
(15.5 ) 2,248.4
Balance at December 31, 2019 2,271.7
(15.5 ) 2,256.2
Year-to-date change in fair value

Hybrid fixed-maturity securities (4.6 ) (1.8 ) (6.4 )
Equity securities (186.5 ) (45.1 ) (231.6 )
Total holding period gains (losses) during the period (191.1 ) (46.9 ) (238.0 )
End of period

Hybrid fixed-maturity securities 3.2
(1.8 ) 1.4
Equity securities 2,077.4
(60.6 ) 2,016.8
Balance at June 30, 2020 $ 2,080.6
$ (62.4 ) $ 2,018.2

Changes in holding period gains (losses), similar to unrealized gains (losses) in our fixed-maturity portfolio, are the result of changes in market performance as well as sales of securities based on various portfolio management decisions.

~~Credit Allowance and Uncollectible Losses~~

Valuations in all fixed-maturity sectors have improved following the heightened volatility at the end of the first quarter. At the end of the second quarter, we continued to expect that all securities in our portfolio will pay their principal and interest obligations. In determining not to record any allowance or write-off, we considered our expectation as well as how the market has improved during the quarter. See ~~Critical Accounting Policies~~ ~~for additional discussion.~~

Fixed-Income Securities

The fixed-income portfolio is managed internally and includes fixed-maturity securities, short-term investments, and nonredeemable preferred stocks.

Following are the primary exposures for our fixed-income portfolio. Details of our policies related to these exposures can be found in the Management’s Discussion and Analysis included in our ~~2019~~2020 Annual Report to Shareholders.

•Interest rate risk - our duration of ~~3.0~~3.1 years at ~~June 30, 2020,~~March 31, 2021, fell within our acceptable ~~range.~~range of 1.5 to 5 years. The duration distribution of our fixed-income portfolio, excluding short-term investments, represented by the interest rate sensitivity of the comparable benchmark U.S. Treasury Notes, was:


◦	~~The duration distribution of our fixed-income portfolio, excluding short-term investments, represented by the interest rate sensitivity of the comparable benchmark U.S. Treasury Notes, was:~~


Duration Distribution	March 31, 2021		March 31, 2020		December 31, 2020
1 year	20.2	%	24.6	%	19.5	%
2 years	17.9		13.6		18.7
3 years	25.7		22.8		24.9
5 years	18.1		21.3		18.5
7 years	11.7		11.2		10.9
10 years	6.4		6.5		7.5


Total fixed-income portfolio	100.0	%	100.0	%	100.0	%

Duration Distribution June 30, 2020
June 30, 2019
December 31, 2019
1 year 25.5 % 24.1 % 23.9 %
2 years 14.1
20.6
11.8
3 years 21.3
20.1
20.6
5 years 20.1
19.8
23.1
7 years 10.4
12.3
15.1
10 years 8.6
3.1
5.5
Total fixed-income portfolio 100.0 % 100.0 % 100.0 %

•Credit risk - our credit quality rating of AA- was above our minimum threshold during the ~~second~~first quarter ~~2020.~~


◦	~~The credit quality distribution of the fixed-income portfolio was:~~

2021. The credit quality distribution of the fixed-income portfolio was:


Rating	June 30, 2020		June 30, 2019		December 31, 2019		Rating	March 31, 2021		March 31, 2020		December 31, 2020
AAA	45.6	%	58.0	%	60.8	%	AAA	52.6	%	54.4	%	53.3	%
AA	8.9		10.4		9.9		AA	8.1		8.7		9.8
A	14.5		8.4		7.9		A	10.6		12.5		11.1
BBB	29.4		20.4		19.5		BBB	24.7		22.7		22.9
Non-investment grade/non-rated¹							Non-investment grade/non-rated1
BB	1.2		1.9		1.4		BB	3.4		1.3		2.4
B	0.2		0.6		0.3		B	0.3		0.2		0.2
CCC and lower	0		0.1		0		CCC and lower	0.1		0		0.1
Non-rated	0.2		0.2		0.2		Non-rated	0.2		0.2		0.2
Total fixed-income portfolio	100.0	%	100.0	%	100.0	%	Total fixed-income portfolio	100.0	%	100.0	%	100.0	%

¹The ratings in the table above are assigned by NRSROs. The non-investment-grade fixed-income securities based upon our Group I classification represented ~~1.5%~~3.8% of the total fixed-income portfolio at ~~June 30, 2020,~~March 31, 2021, compared to ~~2.5%~~1.5% at ~~June 30, 2019~~March 31, 2020 and ~~1.7%~~2.9% at December 31, ~~2019.~~2020.

•Concentration risk - we did not have any investments in a single issuer, either overall or in the context of individual assets classes and sectors, that exceeded our thresholds during the ~~second~~first quarter ~~2020.~~2021.

•Prepayment and extension risk - we did not experience significant adverse prepayment or extension of principal relative to our cash flow expectations in the portfolio during the ~~second~~first quarter ~~2020.~~2021.

•Liquidity risk - our overall portfolio remains very liquid and we believe that it is sufficient to meet expected near-term liquidity requirements.


◦	◦The short-to-intermediate duration of our portfolio provides a source of liquidity, as we expect approximately $3.1 billion, or 11.5%, of principal repayment from our fixed-income portfolio, excluding U.S. Treasury Notes and short-term investments, during the remainder of 2020. Cash from interest and dividend payments provides an additional source of recurring liquidity.


◦	~~The duration of our U.S. government obligations, which are included in the fixed-income portfolio, was comprised of the following at June 30, 2020:~~

($ in millions)
Fair
Value

Duration
(years)

U.S. Treasury Notes
Less than one year $ 442.3
0.8
One to two years 1,350.0
1.6
Two to three years 2,424.1
2.6
Three to five years 2,461.0
4.1
Five to seven years 1,940.7
5.7
Seven to ten years 659.7
8.3
Total U.S. Treasury Notes $ 9,277.8
3.8

~~We currently view the market environment as very uncertain and believe the relatively conservative position~~ of our ~~investment~~ portfolio ~~continued to be appropriate.~~provides a source of liquidity, as we expect approximately $3.4 billion, or 13.8%, of principal repayment from our fixed-income portfolio, excluding U.S. Treasury Notes and short-term investments, during the remainder of 2021. Cash from interest and dividend payments provides an additional source of recurring liquidity.

◦The duration of our U.S. government obligations, which are included in the fixed-income portfolio, was comprised of the following at March 31, 2021:


($ in millions)	Fair Value		Duration (years)
U.S. Treasury Notes
Less than one year	$	1,068.8	0.6
One to two years	4,018.0		1.6
Two to three years	4,673.8		2.6
Three to five years	4,143.6		4.3
Five to seven years	1,274.4		6.7
Seven to ten years	894.8		8.6
Total U.S. Treasury Notes	$	16,073.4	3.3

ASSET-BACKED SECURITIES

Included in the fixed-income portfolio are asset-backed securities (ABS), which were comprised of the following at the balance sheet dates listed:


($ in millions)	Fair Value		Net Unrealized Gains (Losses)		% of Asset- Backed Securities		Duration (years)	Rating (at period end)¹	($ in millions)	Fair Value		Net Unrealized Gains (Losses)		% of Asset- Backed Securities		Duration (years)	Rating (at period end)1
June 30, 2020
March 31, 2021									March 31, 2021
Residential mortgage-backed securities	$	543.0	$	2.0	5.1	%	0.8	AA	Residential mortgage-backed securities	$	553.2	$	4.9	5.7	%	1.0	AA
Commercial mortgage-backed securities	5,761.8		33.3		54.0		2.7	AA	Commercial mortgage-backed securities	5,892.0		23.7		60.3		3.2	AA-
Other asset-backed securities	4,354.9		41.6		40.9		1.0	AAA-	Other asset-backed securities	3,323.4		29.9		34.0		1.0	AA+
Total asset-backed securities	$	10,659.7	$	76.9	100.0	%	1.9	AA+	Total asset-backed securities	$	9,768.6	$	58.5	100.0	%	2.4	AA-
June 30, 2019
March 31, 2020									March 31, 2020
Residential mortgage-backed securities	$	665.2	$	4.8	6.9	%	1.1	AA-	Residential mortgage-backed securities	$	556.6	$	(17.7)	5.1	%	0.8	AA
Commercial mortgage-backed securities	4,441.9		80.7		46.3		2.5	AA-	Commercial mortgage-backed securities	5,664.3		(158.1)		52.2		2.4	AA
Other asset-backed securities	4,497.2		18.9		46.8		0.9	AAA-	Other asset-backed securities	4,639.1		(35.7)		42.7		0.9	AAA-
Total asset-backed securities	$	9,604.3	$	104.4	100.0	%	1.6	AA	Total asset-backed securities	$	10,860.0	$	(211.5)	100.0	%	1.7	AA+
December 31, 2019
December 31, 2020									December 31, 2020
Residential mortgage-backed securities	$	627.5	$	2.5	5.8	%	0.9	AA	Residential mortgage-backed securities	$	509.5	$	6.2	4.9	%	1.0	AA
Commercial mortgage-backed securities	5,076.2		55.5		46.6		2.0	AA	Commercial mortgage-backed securities	6,175.1		132.5		59.0		3.2	AA-
Other asset-backed securities	5,179.5		14.8		47.6		0.8	AAA-	Other asset-backed securities	3,784.6		39.6		36.1		1.0	AA+
Total asset-backed securities	$	10,883.2	$	72.8	100.0	%	1.4	AA+	Total asset-backed securities	$	10,469.2	$	178.3	100.0	%	2.3	AA

¹ The credit quality ratings in the table above are assigned by NRSROs.

Residential Mortgage-Backed Securities (RMBS) The following table details the credit quality rating and fair value of our ~~RMBSs,~~RMBS, along with the loan classification and a comparison of the fair value at ~~June 30, 2020,~~March 31, 2021, to our original investment value (adjusted for returns of principal, amortization, and write-downs):


Residential Mortgage-Backed Securities (at June 30, 2020)
Residential Mortgage-Backed Securities (at March 31, 2021)												Residential Mortgage-Backed Securities (at March 31, 2021)
($ in millions) Rating¹	Non-Agency			Government/GSE²			Total			% of Total		($ in millions) Rating1	Non-Agency			Government/GSE2			Total			% of Total
AAA	$	378.2		$	2.0		$	380.2		70.0	%	AAA	$	333.7		$	1.8		$	335.5		60.6	%
AA	65.8			0.6			66.4			12.2		AA	87.4			0.5			87.9			15.9
A	24.0			0			24.0			4.4		A	26.8			0			26.8			4.8
BBB	12.3			0			12.3			2.3		BBB	30.0			0			30.0			5.4
Non-investment grade/non-rated:												Non-investment grade/non-rated:
BB	0.5			0			0.5			0.1		BB	35.7			0			35.7			6.5
B	16.4			0			16.4			3.0		B	8.1			0			8.1			1.5
CCC and lower	11.9			0			11.9			2.2		CCC and lower	8.7			0			8.7			1.6
Non-rated	31.3			0			31.3			5.8		Non-rated	20.5			0			20.5			3.7
Total fair value	$	540.4		$	2.6		$	543.0		100.0	%	Total fair value	$	550.9		$	2.3		$	553.2		100.0	%
Increase (decrease) in value	0.3		%	8.0		%	0.4		%			Increase (decrease) in value	0.9		%	7.9		%	0.9		%

¹The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings for our ~~RMBSs, $52.7~~RMBS, $33.3 million of our non-investment-grade securities are rated investment-grade and classified as Group II, and ~~$7.4~~$39.7 million, or ~~1.4%~~7.2% of our total ~~RMBSs,~~RMBS, are not rated by the NAIC and are classified as Group I.

²The securities in this category are insured by a Government Sponsored Entity (GSE) and/or collateralized by mortgage loans insured by the Federal Housing Administration (FHA) or the U.S. Department of Veteran Affairs (VA).

In the residential mortgage-backed sector, our portfolio consists of deals that are backed by ~~high credit~~high-credit quality borrowers or have strong structural protections through underlying loan collateralization. In our view, the risk/reward potential ~~is currently~~during the first three months of 2021 was lower in this portfolio relative to other comparable investments. ~~We made some relatively small additions in the residential mortgage-backed sector in the second quarter of 2020.~~

Commercial Mortgage-Backed Securities (CMBS) The following table details the credit quality rating and fair value of our ~~CMBSs,~~CMBS, along with a comparison of the fair value at ~~June 30, 2020,~~March 31, 2021, to our original investment value (adjusted for returns of principal, amortization, and write-downs):


Commercial Mortgage-Backed Securities (at June 30, 2020)
Commercial Mortgage-Backed Securities (at March 31, 2021)												Commercial Mortgage-Backed Securities (at March 31, 2021)
($ in millions) Rating¹	Multi-Borrower			Single-Borrower			Total			% of Total		($ in millions) Rating1	Multi-Borrower			Single-Borrower			Total			% of Total
AAA	$	312.4		$	2,789.7		$	3,102.1		53.9	%	AAA	$	336.3		$	1,775.5		$	2,111.8		35.8	%
AA	3.4			1,366.9			1,370.3			23.8		AA	0			1,631.0			1,631.0			27.7
A	0			783.4			783.4			13.6		A	0			1,117.0			1,117.0			19.0
BBB	33.2			447.7			480.9			8.3		BBB	0			840.6			840.6			14.3
Non-investment grade/non-rated:												Non-investment grade/non-rated:
BB	0			24.6			24.6			0.4		BB	0			191.3			191.3			3.2
B	0.5			0			0.5			0		B	0.3			0			0.3			0

Total fair value	$	349.5		$	5,412.3		$	5,761.8		100.0	%	Total fair value	$	336.6		$	5,555.4		$	5,892.0		100.0	%
Increase (decrease) in value	1.3		%	0.5		%	0.6		%			Increase (decrease) in value	3.2		%	0.2		%	0.4		%

¹The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings for our ~~CMBSs, $8.2~~CMBS, $0.8 million of our non-investment-grade securities are rated investment-grade and classified as Group II, and ~~$16.9~~$190.8 million, or ~~0.3%~~3.2% of our total ~~CMBSs~~CMBS, are not rated ~~non-investment-grade~~by the NAIC and are classified as Group I.

During the first quarter 2021, we ~~focused our purchases exclusively on~~were active in purchasing single-asset/single-borrower securities in both new issue and secondary acquisitions of single asset, single borrower securities because primary markets were virtually shut down. In April, we purchased primarily long-duration, fixed-rate, AAA-rated securities given the relative attractiveness of spreads. As spreads narrowed in May and June, we continued to add attractive single asset, single borrower securities, and we also focused on reducing securities with higher levels of unique credit risk, primarily in our conduit and Freddie Mac Class K multi-family holdings. As ofmarkets. The strong market tone from the end of the year continued into the first quarter, with new issues being received well and credit spreads narrowing. We also focused on adding to some existing positions in the high-quality office and life sciences sectors.

During the first quarter 2021, we ~~had substantially disposed~~sold some of our ~~remaining conduit securities.~~AAA-rated securities, in both the fixed-rate and floating-rate sectors. We also continued scaling back on positions that had performed well or were no longer core to our strategy.

Other Asset-Backed Securities (OABS) The following table details the credit quality rating and fair value of our ~~OABSs,~~OABS, along with a comparison of the fair value at ~~June 30, 2020,~~March 31, 2021, to our original investment value (adjusted for returns of principal, amortization, and write-downs):


Other Asset-Backed Securities (at March 31, 2021)
($ in millions) Rating	Automobile			Credit Card			Student Loan			Whole Business Securitizations			Equipment			Other			Total			% of Total
AAA	$	1,023.4		$	101.8		$	145.0		$	0		$	547.0		$	449.9		$	2,267.1		68.2	%
AA	204.6			0			18.2			0			133.3			39.1			395.2			11.9
A	34.0			0			10.2			0			118.1			61.5			223.8			6.7
BBB	7.2			0			0			430.1			0			0			437.3			13.2





Total fair value	$	1,269.2		$	101.8		$	173.4		$	430.1		$	798.4		$	550.5		$	3,323.4		100.0	%
Increase (decrease) in value	0.4		%	1.3		%	1.7		%	1.5		%	1.3		%	0.6		%	0.9		%

Other Asset-Backed Securities (at June 30, 2020)
($ in millions)
Rating
Automobile
Credit Card
Student Loan
Whole Business Securitizations
Equipment
Other
Total
% of
Total

AAA $ 1,745.0
$ 400.7
$ 284.6
$ 0
$ 1,100.2
$ 134.0
$ 3,664.5
84.2 %
AA 64.4
0
36.3
0
77.6
10.0
188.3
4.3
A 32.2
0
10.3
0
113.0
37.0
192.5
4.4
BBB 0
0
0
309.6
0
0
309.6
7.1
Total fair value $ 1,841.6
$ 400.7
$ 331.2
$ 309.6
$ 1,290.8
$ 181.0
$ 4,354.9
100.0 %
Increase (decrease) in value 0.9 % 0.9 % 1.0 % 2.1 % 1.1 % (0.8 )% 1.0 %

As we believed valuations across other asset classes were more attractive induring the ~~second~~ quarter, ~~of 2020, asset-backed securities~~our OABS portfolio offered less relative value. We selectively added to our automobile, equipment, and student loan OABS sectors mostly through new issuances. Due to amortization and scheduled ~~paydowns,~~returns of principal, our ~~ABS~~OABS portfolio decreased ~~throughout~~during the ~~quarter. We selectively added across the spectrum to our other asset-backed securities portfolio, but we primarily focused on auto, equipment, student loans, and credit card backed loans.~~

first quarter 2021.

MUNICIPAL SECURITIES

The following table details the credit quality rating of our municipal securities at ~~June 30, 2020,~~March 31, 2021, without the benefit of credit or bond insurance:


Municipal Securities (at March 31, 2021)
(millions) Rating	General Obligations		Revenue Bonds		Total
AAA	$	578.6	$	255.5	$	834.1
AA	467.1		762.8		1,229.9
A	0		559.1		559.1
BBB	0		1.0		1.0

Total	$	1,045.7	$	1,578.4	$	2,624.1

Municipal Securities (at June 30, 2020)
(millions)
Rating
General
Obligations

Revenue
Bonds

Total
AAA $ 775.0
$ 690.9
$ 1,465.9
AA 559.1
1,169.7
1,728.8
A 0
375.1
375.1
BBB 2.9
1.6
4.5
Total $ 1,337.0
$ 2,237.3
$ 3,574.3

Included in revenue bonds were ~~$605.7~~$513.6 million of single-family housing revenue bonds issued by state housing finance agencies, of which ~~$431.8~~$364.8 million were supported by individual mortgages held by the state housing finance agencies and ~~$173.9~~$148.8 million were supported by mortgage-backed securities.

Of the programs supported by mortgage-backed securities, approximately 25% were collateralized by Fannie Mae and Freddie Mac mortgages; the remaining 75% were collateralized by Ginnie Mae mortgages, which are fully guaranteed by the U.S. government. Of the programs supported by individual mortgages held by the state housing finance agencies, the overall credit quality rating was AA+. Most of these mortgages were supported by ~~FHA, VA,~~the Federal Housing Administration, the U.S. Department of Veterans Affairs, or private mortgage insurance providers.

~~During~~As spreads tightened during the ~~second~~ quarter, we continued to ~~add high credit quality rated state general obligations, water and sewer, airport, and higher education~~reduce our allocation to the municipal sector. Our sales were primarily in revenue ~~bonds. Our focus was on longer duration securities, which we believe will have a~~bonds purchased in 2020 at more attractive ~~return profile than comparable shorter duration securities. We also increased our focus on~~levels. As mutual funds continued receiving strong inflows, the ~~taxable~~municipal sector has performed relatively well. At current valuations, a smaller portion of the municipal market ~~based on our view that this sector also would provide~~is attractive ~~returns~~ to us on a relative value basis.

CORPORATE SECURITIES

The following table details the credit quality rating of our corporate securities at ~~June 30, 2020:~~March 31, 2021:


Corporate Securities (at March 31, 2021)
(millions) Rating	Consumer		Industrial		Communication		Financial Services		Technology		Basic Materials		Energy		Total
AAA	$	0	$	0	$	0	$	30.1	$	0	$	0	$	0	$	30.1
AA	98.9		0		0		135.9		26.0		0		8.0		268.8
A	500.0		221.8		201.0		1,087.6		194.4		124.3		103.7		2,432.8
BBB	2,406.7		1,558.2		213.8		1,243.9		552.1		43.1		627.5		6,645.3
Non-investment grade/non-rated:
BB	296.1		126.9		130.6		109.9		139.5		36.1		42.8		881.9
B	121.9		5.2		0		0		0		0		0		127.1
CCC and lower	50.2		0		0		0		0		0		0		50.2
Total fair value	$	3,473.8	$	1,912.1	$	545.4	$	2,607.4	$	912.0	$	203.5	$	782.0	$	10,436.2

Corporate Securities (at June 30, 2020)
(millions)
Rating
Consumer
Industrial
Communication
Financial Services
Technology
Basic Materials
Energy
Total
AAA $ 0
$ 0
$ 0
$ 30.1
$ 0
$ 0
$ 0
$ 30.1
AA 159.1
0
0
278.2
61.0
0
11.5
509.8
A 1,000.3
179.0
317.6
1,125.6
319.3
107.3
93.5
3,142.6
BBB 2,885.3
1,486.0
149.6
1,345.6
410.7
43.9
714.6
7,035.7
Non-investment grade/non-rated:

BB 45.1
98.9
65.0
11.8
46.3
0
27.5
294.6
B 49.7
0
0
0
0
0
0
49.7
Total fair value $ 4,139.5
$ 1,763.9
$ 532.2
$ 2,791.3
$ 837.3
$ 151.2
$ 847.1
$ 11,062.5

During the ~~second~~first quarter ~~2020,~~2021, we took advantage of attractive credit spreads ~~remained attractive~~prevailing in the market and increased the size of our corporate bond portfolio. As credit spreads narrowed later in the quarter, we ~~continued to selectively increase our allocation to corporate bonds. We focused on adding investment-grade securities that are less vulnerable to~~sold some positions since we believed the ~~current economic environment, while our allocation to high yield securities remained small.~~risk/reward for holding the positions was no longer justified.

Overall, our corporate securities are a larger percentage of the fixed-income portfolio, ~~when~~ compared to the end of ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, the portfolio was approximately ~~27%~~24.4% of our fixed-income portfolio, compared to approximately ~~20%~~23.4% at December 31, ~~2019.~~2020. We increased the size of this portfolio based on our expectation that supportive fiscal and monetary policy would create an environment that would be conducive to further compression in credit spreads. In addition, we ~~lengthened~~shortened our duration during ~~2020, and ended~~ the ~~second~~ quarter to 3.7 years at ~~4.0 years,~~March 31, 2021, compared to ~~2.7~~3.8 years at ~~the end of 2019. This extension is primarily the result of our assessment that more attractive opportunities and wider spread levels existed in the corporate sector.~~

December 31, 2020.

PREFERRED STOCKS – REDEEMABLE AND NONREDEEMABLE

The table below shows the exposure break-down by sector and rating at ~~June 30, 2020:~~

March 31, 2021:


Preferred Stocks (at June 30, 2020)
Preferred Stocks (at March 31, 2021)															Preferred Stocks (at March 31, 2021)
	Financial Services															Financial Services
(millions) Rating	U.S. Banks		Foreign Banks		Insurance		Other		Industrials		Utilities		Total		(millions) Rating	U.S. Banks		Foreign Banks		Insurance		Other		Industrials		Utilities		Total
A	$	47.5	$	0	$	0	$	8.9	$	0	$	0	$	56.4	A	$	50.0	$	0	$	0	$	9.8	$	0	$	0	$	59.8
BBB	825.4		0		98.2		24.9		90.2		10.8		1,049.5		BBB	937.1		0		145.4		45.5		127.5		11.4		1,266.9
Non-investment grade/non-rated:															Non-investment grade/non-rated:
BB	20.3		87.5		0		0		22.1		38.7		168.6		BB	144.6		106.7		0		0		25.2		41.9		318.4
B	0		0		0		4.9		0		0		4.9

Non-rated	0		0		0		38.1		15.2		0		53.3		Non-rated	0		0		0		35.0		16.6		0		51.6
Total fair value	$	893.2	$	87.5	$	98.2	$	76.8	$	127.5	$	49.5	$	1,332.7	Total fair value	$	1,131.7	$	106.7	$	145.4	$	90.3	$	169.3	$	53.3	$	1,696.7

The majority of our preferred securities have fixed-rate dividends until a call date and then, if not called, generally convert to floating-rate dividends. The interest rate duration of our preferred securities is calculated to reflect the call, floor, and floating-rate features. Although a preferred security will remain outstanding if not called, its interest rate duration will reflect the variable nature of the dividend. Our non-investment-grade preferred stocks were ~~primarily~~all with issuers that maintain investment-grade senior debt ratings.

We also face the risk that dividend payments on our preferred stock holdings could be deferred for one or more periods or skipped entirely. As of ~~June 30, 2020,~~March 31, 2021, all of our preferred securities continued to pay their dividends in full and on time. Approximately ~~80%~~81% of our preferred stock securities pay dividends that have tax preferential characteristics, while the balance pay dividends that are fully taxable.

~~The value of~~During the first quarter 2021, our preferred stock portfolio ~~increased during second quarter 2020,~~had a slight negative return as ~~equities increased and credit spreads tightened.~~their high level of income was not able to offset declines in price due to higher rates.

Common Equities

Common equities, as reported on the balance sheets, were comprised of the following:


($ in millions)	March 31, 2021				March 31, 2020				December 31, 2020
Common stocks	$	4,555.3	99.9	%	$	2,607.8	100.0	%	$	4,049.9	99.9	%
Other risk investments	3.2		0.1		0.3		0		3.1		0.1
Total common equities	$	4,558.5	100.0	%	$	2,608.1	100.0	%	$	4,053.0	100.0	%

($ in millions) June 30, 2020 June 30, 2019 December 31, 2019
Indexed common stocks $ 3,170.1
100.0 % $ 2,958.4
94.4 % $ 3,306.0
100.0 %
Managed common stocks 0
0
176.8
5.6
0
0
Total common stocks 3,170.1
100.0
3,135.2
100.0
3,306.0
100.0
Other risk investments 0.3
0
0.3
0
0.3
0
Total common equities $ 3,170.4
100.0 % $ 3,135.5
100.0 % $ 3,306.3
100.0 %

InThe majority of our ~~indexed~~ common stock portfolio ~~our~~is an indexed portfolio, which consists of individual holdings ~~are~~ selected based on their contribution to the correlation with the Russell 1000 Index. We held ~~928~~859 out of ~~1,004,~~1,023, or ~~92%~~84%, of the common stocks comprising the index at ~~June 30, 2020,~~March 31, 2021, which made up 96% of the total market capitalization of the index. At ~~June 30,~~March 31, 2021 and 2020, and December 31, 2020, the year-to-date total return, based on GAAP income, was ~~not~~ within our targeted tracking error, which is +/- 50 basis points. ~~The~~In addition to the indexed portfolio, ~~was rebalanced during the second quarter 2020, in an effort to reduce the expected tracking error.~~

~~The common equity markets continued to be volatile during the second quarter, and~~ our common stock portfolio ~~reflected~~includes other common stocks we may hold, including one of our preferred stock holdings that ~~market volatility.~~went public as a common stock toward the end of 2020 and recognized a significant increase in value following the public offering.

The other risk investments consist of limited partnership interests. During the ~~second~~first quarter ~~stock valuations increased~~2021, we funded $0.1 million on a partnership investment and ~~we ended the quarter with a FTE total return on our common equity portfolio~~have an open funding commitment of ~~(3.4%), which was an improvement from the (20.5)% return~~$7.1 million at March 31, ~~2020.~~

~~V. CRITICAL ACCOUNTING POLICIES~~

Progressive is required to make certain estimates and assumptions when preparing its financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates in a variety of areas. The two areas we view as most critical with respect to the application of estimates and assumptions is the establishment of our loss reserves and the methods for measuring expected credit losses on financial instruments. Below is a discussion of the expected credit losses on financial instruments. See ~~Management’s Discussion and Analysis; Critical Accounting Policies~~ ~~in our 2019 Annual Report to Shareholders for further information on the estimates and assumptions related to the establishment of our loss reserves.~~

~~A. Credit Losses on Financial Instruments~~

An allowance for credit losses is established when the ultimate realization of a financial instrument is determined to be impaired due to a credit event. Measurement of expected credit losses is based on judgment when considering relevant information about past events, including historical loss experience, current conditions, and forecasts of the collectability of the reported financial instrument. The allowance for expected credit losses is measured and recorded at the point ultimate recoverability of the financial instrument is expected to be impaired, including upon the initial recognition of the financial instrument, where warranted. We evaluate financial instrument credit losses related to our available-for-sale securities, reinsurance recoverables, and premiums receivables.

~~Available-For-Sale Securities~~

We routinely monitor our fixed-maturity portfolio for pricing changes that might indicate potential losses exist and perform detailed reviews of securities with unrealized losses to determine if an allowance for credit losses, a change to an existing allowance (recovery or additional loss), or a write-off for an amount deemed uncollectible needs to be recorded. In such cases, changes in fair value are evaluated to determine the extent to which such changes are attributable to: (i) credit related losses, which are specific to the issuer (e.g., financial conditions, business prospects) where the present value of cash flows expected to be collected is lower than the amortized cost basis of the security or (ii) market related factors, such as interest rates or credit spreads.

If we do not expect to hold the security to allow for a potential recovery of those expected losses, we will write-off the security to fair value and recognize a realized loss in the comprehensive income statements.

For securities whose losses are credit related losses, and for which we do not intend to sell in the near term, we will review the non-market components to determine if a potential future credit loss exists, based on existing financial data available related to the fixed-maturity securities. If we anticipate that a credit loss exists, we will record an allowance for the credit loss and recognize a realized loss in the comprehensive income statement. For all securities for which an allowance for credit losses has been established, we will re-evaluate the securities, at least quarterly, to determine if further deterioration has occurred or if we project a subsequent recovery in the expected losses, which would require an adjustment to the allowance for credit losses. If subsequent to establishing an allowance for credit losses we determine that the security is likely to be sold prior to the recovery of the credit loss or if the loss is deemed uncollectible, we will reverse the allowance for credit losses and write-off the security to its fair value.

For an unrealized loss that is determined to be related to current market conditions, we will not record an allowance for credit losses or a write-off of the fair value. We will continue to monitor these securities to determine if underlying factors other than the current market conditions are contributing to the loss in value.

Based on an analysis of our fixed-maturity portfolio, we have determined our allowance for credit losses related to available-for-sale securities was not material to our financial condition or results of operations for the period ending June 30, 2020.

~~Reinsurance Recoverables~~

We routinely monitor changes in the credit quality and concentration risks of the reinsurers who are counter parties to our reinsurance recoverables. At June 30, 2020, approximately 80% of our reinsurance recoverables were held in several mandatory state pools, including the Michigan Catastrophic Claims Association, Florida Hurricane Catastrophe Fund, and North Carolina Reinsurance Facility, and in plans where we act as a servicing agent to state-mandated involuntary plans for commercial vehicles (Commercial Automobile Insurance Procedures/Plans) and as a participant in the “Write Your Own” program for federally regulated plans for flood (National Flood Insurance Program). All of these programs are governed by insurance regulations. The remaining balance of our recoverables are composed of voluntary external contractual arrangements that primarily relate to the Property business and to our transportation network company (TNC) business written by our Commercial Lines business. For these privately placed reinsurance arrangements, we regularly monitor reinsurer credit strength and analyze our reinsurance recoverable balances for expected credit losses at least quarterly, or more frequently if indicators of reinsurer credit deterioration, either individually or in aggregate, exists. For at-risk uncollateralized recoverable balances, we evaluate a number of reinsurer specific factors, including reinsurer credit quality rating, credit rating outlook, historical experience, reinsurer surplus, recoverable duration, and collateralization composition in respect to our net exposure (i.e., the

~~reinsurance recoverable amount less premiums payable to the reinsurer, where the right to offset exists). Based~~2021 on this ~~assessment, reinsurers with credit risks will be individually subject to a credit default model, and an allowance for credit loss will be established, where warranted.~~investment.

Based on the analysis of reinsurers, we have determined our allowance for credit losses related to our reinsurance recoverables was not material to our financial condition or results of operations for the period ending June 30, 2020.

~~Premium Receivables~~

~~We routinely monitor historical premium collections data for our premiums receivable balances, through actuarial analyses, to project the future recoverability of currently recorded receivables. See~~
~~Note 1 – Basis of Presentation~~ ~~for a description of our process and a rollforward in the allowance account during the three and six months ended June 30, 2020.~~

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that certain statements in this report not based upon historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements often use words such as “estimate,” “expect,” “intend,” “plan,” “believe,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Forward-looking statements are based on current expectations and projections about future events, and are subject to certain risks, assumptions and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to:

•our ability to underwrite and price risks accurately and to charge adequate rates to policyholders;

•our ability to establish accurate loss reserves;

•the impact of severe weather, other catastrophe events and climate change;

•the effectiveness of our reinsurance programs;

•the highly competitive nature of property-casualty insurance markets;

•whether we innovate effectively and respond to our competitors’ initiatives;

•whether we effectively manage complexity as we develop and deliver products and customer experiences;

•how intellectual property rights could affect our competitiveness and our business operations;

•whether we adjust claims accurately;

•our ability to maintain a recognized and trusted brand;

•our ability to attract, develop and retain talent and maintain appropriate staffing levels;

•compliance with complex laws and regulations;

•litigation challenging our business practices, and those of our competitors and other companies;

•the impacts of a security breach or other attack involving our computer systems or the systems of one or more of our vendors;

•the secure and uninterrupted operation of the facilities, systems, and business functions that are critical to our business;

•the success of our efforts to develop new products or enter into new areas of business and navigate related risks;

•our continued ability to send and accept electronic payments;

•the possible impairment of our goodwill or intangible assets;

•the performance of our fixed-income and equity investment portfolios;

•the potential elimination of, or change in, the London Interbank Offered Rate;

•our continued ability to access our cash accounts and/or convert securities into cash on favorable terms;

•the impact if one or more parties with which we enter into significant contracts or transact business fail to perform;

•legal restrictions on our insurance subsidiaries’ ability to pay dividends to The Progressive Corporation;

•limitations on our ability to pay dividends on our common shares under the terms of our outstanding preferred shares;

•our ability to obtain capital when necessary to support our business and potential growth;

•evaluations by credit rating and other rating agencies;

•the variable nature of our common share dividend policy;

•whether our investments in certain tax-advantaged projects generate the anticipated returns;

•the impact from not managing to short-term earnings expectations in light of our goal to maximize the long-term value of the enterprise;

•impacts from the outbreak of the novel coronavirus, or COVID-19, and the restrictions put in place to help slow and/or stop the spread of the virus; and

•other matters described from time to time in our releases and publications, and in our periodic reports and other documents filed with the United States Securities and Exchange Commission, including, without limitation, the Risk Factors section of our Annual Report on Form 10-K for the year ending December 31, ~~2019, and our Quarterly Report on Form 10-Q for the period ending March 31,~~ 2020.

In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when we establish reserves for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The duration of the financial instruments held in our portfolio that are subject to interest rate risk was 3.1 years at March 31, 2021, 3.0 years at ~~both~~ ~~June 30,~~March 31, 2020, and 2.9 years at December 31, ~~2019, and 2.7 years at June 30, 2019.~~2020. The weighted average beta of the equity portfolio was ~~1.02~~1.12 at ~~June 30,~~March 31, 2021, 1.00 at March 31, 2020, ~~1.00~~and 1.09 at December 31, ~~2019, and 1.01 at June 30, 2019.~~2020. We have not experienced a material impact when compared to the tabular presentations of our interest rate and market risk sensitive instruments in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 4. Controls and Procedures.

We, under the direction of our Chief Executive Officer and our Chief Financial Officer, have established disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our Chief Executive Officer and our Chief Financial Officer reviewed and evaluated our disclosure controls and procedures as of the end of the period covered by this report, including consideration of the impact of COVID-19 restrictions and the company’s current work-from-home environment on the execution of our disclosure controls and procedures and our internal controls over financial reporting.report. Based on that review and evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effectively serving the stated purposes as of the end of the period covered by this report.

There have not been any changes in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1A. Risk Factors.

There have been no material changes in the risk factors from those discussed in Item 1A, Risk Factors included in ~~both~~ our Annual Report on Form 10-K for the year ended December 31, ~~2019, and our Quarterly Report on Form 10-Q for the period ending March 31,~~ 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.


ISSUER PURCHASES OF EQUITY SECURITIES
2021 Calendar Month	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
January	337,475	$	95.55	2,424,999	22,575,001
February	595,906	87.74		3,020,905	21,979,095
March	3,109	87.30		3,024,014	21,975,986
Total	936,490	$	90.55

ISSUER PURCHASES OF EQUITY SECURITIES
2020
Calendar
Month
Total
Number of
Shares
Purchased

Average
Price
Paid
Per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs

Maximum Number of
Shares That May Yet be
Purchased Under the
Plans or Programs

April 1,153
$ 71.91
1,140,410
23,859,590
May 28,197
76.34
1,168,607
23,831,393
June 4,412
77.96
1,173,019
23,826,981
Total 33,762
$ 76.40

In May 2019, the Board of Directors approved an authorization for the Company to repurchase up to 25 million of its common shares. This authorization does not have an expiration date. Share repurchases under this authorization may be accomplished through open market purchases, through privately negotiated transactions, pursuant to our equity ~~compensation~~incentive awards, or otherwise, and may include trading plans entered into with one or more brokerage firms in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934. During the ~~second~~first quarter ~~2020,~~2021, all repurchases were accomplished in conjunction with our equity incentive ~~compensation~~ awards or through the open market at the then-current market ~~prices; there were no open market purchases during the quarter.~~prices. Progressive’s financial policies state that we will repurchase shares to neutralize dilution from equity-based compensation in the year of issuance and as an option to effectively use underleveraged capital.

Item 5. Other Information.

President and CEO Susan Patricia Griffith’s quarterly letter to shareholders is included as Exhibit 99 to this Quarterly Report on Form 10-Q. The letter is also posted on Progressive’s website at progressive.com/annualreport.

Item 6. Exhibits.

See exhibit index beginning on page ~~61.~~

55.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE PROGRESSIVE CORPORATION

(Registrant)

Date:

May 4, 2021

By: /s/ John P. Sauerland

John P. Sauerland

Vice President and Chief Financial Officer

~~THE PROGRESSIVE CORPORATION~~

~~(Registrant)~~

~~Date:~~

~~August 4, 2020~~

~~By: /s/ John P. Sauerland~~

~~John P. Sauerland~~

~~Vice President and Chief Financial Officer~~

EXHIBIT INDEX

Exhibit No.
Under
Reg. S-K,
Item 601

Form 10-Q
Exhibit
Number

Description of Exhibit

If Incorporated by Reference,
Documents with Which Exhibit was
Previously Filed with SEC

10.1

Form of Restricted Stock Unit Award Agreement for 2021 Time-Based Awards under The Progressive Corporation 2015 Equity Incentive Plan (for 2021)

Current Report on Form 8-K (filed March 25, 2021; Exhibit 10.1 therein)

10.2

Form of Restricted Stock Unit Award Agreement for 2021 Performance-Based Awards (Performance Versus Market) under The Progressive Corporation 2015 Equity Incentive Plan (for 2021)

Current Report on Form 8-K (filed March 25, 2021; Exhibit 10.2 therein)

10.3

Form of Restricted Stock Unit Award Agreement for 2021 Performance-Based Awards (Investment Results) under The Progressive Corporation 2015 Equity Incentive Plan (for 2021)

Current Report on Form 8-K (filed March 25, 2021; Exhibit 10.3 therein)

10.4

The Progressive Corporation Executive Separation Allowance Plan (2021 Amendment and Restatement)

Filed herewith

31.1

Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer, Susan Patricia Griffith

Filed herewith

31.2

Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer, John P. Sauerland

Filed herewith

32.1

Section 1350 Certification of the Principal Executive Officer, Susan Patricia Griffith

Furnished herewith

32.2

Section 1350 Certification of the Principal Financial Officer, John P. Sauerland

Furnished herewith

Letter to Shareholders from Susan Patricia Griffith, President and Chief Executive Officer (Regulation FD Disclosure)

Furnished herewith

101

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Filed herewith

101

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

Cover Page Interactive Data File (the cover page tags are embedded within the Inline XBRL document)

Filed herewith

EXHIBIT INDEX

Exhibit No.
Under
Reg. S-K,
Item 601

Form 10-Q
Exhibit
Number
Description of Exhibit
If Incorporated by Reference,
Documents with Which Exhibit was
Previously Filed with SEC

5 5.1
Amendment to Discretionary Line Documents - Discretionary Line of Credit from PNC Bank, National Association, to The Progressive Corporation
Filed herewith

10 10.1
Form of Restricted Stock Award Agreement under The Progressive Corporation 2017 Directors Equity Incentive Plan (for 2020)
Filed herewith

31 31.1
Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer, Susan Patricia Griffith
Filed herewith

31 31.2
Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer, John P. Sauerland
Filed herewith

32 32.1
Section 1350 Certification of the Principal Executive Officer, Susan Patricia Griffith
Furnished herewith

32 32.2
Section 1350 Certification of the Principal Financial Officer, John P. Sauerland
Furnished herewith

99 99
Letter to Shareholders from Susan Patricia Griffith, President and Chief Executive Officer (Regulation FD Disclosure)
Furnished herewith

101 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith

101 101.SCH Inline XBRL Taxonomy Extension Schema Document Filed herewith

101 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith

101 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document Filed herewith

101 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document Filed herewith

101 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith

104 104 Cover Page Interactive Data File (the cover page tags are embedded within the Inline XBRL document). Filed herewith

6155



	Three Months					Six Months
Periods Ended June 30,	2020		2019			2020			2019
(millions — except per share amounts)
Revenues
Net premiums earned	$	9,648.6	$	8,824.7		$	19,079.3		$	17,284.5
Investment income	243.8		261.3			485.0			514.2
Net realized gains (losses) on securities:
Net realized gains (losses) on security sales	260.0		67.5			575.2			113.6
Net holding period gains (losses) on securities	630.8		112.4			(238.0		)	505.1
Net impairment losses recognized in earnings	0		0			0			(24.3		)
Total net realized gains (losses) on securities	890.8		179.9			337.2			594.4
Fees and other revenues	129.5		134.8			283.0			265.0
Service revenues	59.0		50.0			110.6			92.6
Total revenues	10,971.7		9,450.7			20,295.1			18,750.7
Expenses
Losses and loss adjustment expenses	5,321.4		6,138.1			11,476.6			11,897.1
Policy acquisition costs	795.5		738.6			1,578.3			1,449.2
Other underwriting expenses	1,438.9		1,231.5			2,848.8			2,402.7
Policyholder credit expense	1,033.4		0			1,033.4			0
Investment expenses	4.5		6.2			9.8			12.4
Service expenses	52.8		45.3			100.3			83.4
Interest expense	56.4		47.4			104.4			94.8
Total expenses	8,702.9		8,207.1			17,151.6			15,939.6
Net Income
Income before income taxes	2,268.8		1,243.6			3,143.5			2,811.1
Provision for income taxes	478.4		264.6			654.0			749.3
Net income	1,790.4		979.0			2,489.5			2,061.8
Net (income) loss attributable to noncontrolling interest (NCI)	0		0.4			0			(4.0		)
Net income attributable to Progressive	1,790.4		979.4			2,489.5			2,057.8
Other Comprehensive Income (Loss)
Changes in:
Total net unrealized gains (losses) on fixed-maturity securities	567.4		277.4			630.2			578.5
Net unrealized losses on forecasted transactions	0.2		0.2			0.4			0.4
Other comprehensive income (loss)	567.6		277.6			630.6			578.9
Other comprehensive (income) loss attributable to NCI	0		(2.6		)	0			(4.9		)
Comprehensive income attributable to Progressive	$	2,358.0	$	1,254.4		$	3,120.1		$	2,631.8
Computation of Earnings Per Common Share
Net income attributable to Progressive	$	1,790.4	$	979.4		$	2,489.5		$	2,057.8
Less: Preferred share dividends	6.7		6.7			13.4			13.4
Net income available to common shareholders	$	1,783.7	$	972.7		$	2,476.1		$	2,044.4
Average common shares outstanding - Basic	584.8		583.6			584.8			583.5
Net effect of dilutive stock-based compensation	2.4		3.3			2.3			3.2
Total average equivalent common shares - Diluted	587.2		586.9			587.1			586.7
Basic: Earnings per common share	$	3.05	$	1.67		$	4.23		$	3.50
Diluted: Earnings per common share	$	3.04	$	1.66		$	4.22		$	3.48



	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			Less than 12 Months						12 Months or Greater
($ in millions)	Total No. of Sec.	Total Fair Value		Gross Unrealized Losses			No. of Sec.	Fair Value		Unrealized Losses			No. of Sec.	Fair Value		Unrealized Losses
June 30, 2020
Fixed maturities:
U.S. government obligations	4	$	120.6	$	(0.1	)	4	$	120.6	$	(0.1	)	0	$	0	$	0
State and local government obligations	17	135.0		(0.6		)	16	131.2		(0.6		)	1	3.8		0
Corporate debt securities	21	292.8		(3.4		)	21	292.8		(3.4		)	0	0		0
Residential mortgage-backed securities	40	188.2		(3.4		)	21	93.7		(1.7		)	19	94.5		(1.7		)
Commercial mortgage-backed securities	113	2,536.6		(55.8		)	91	2,106.6		(48.3		)	22	430.0		(7.5		)
Other asset-backed securities	29	331.7		(3.7		)	21	299.0		(3.4		)	8	32.7		(0.3		)
Redeemable preferred stocks	1	11.0		(1.4		)	0	0		0			1	11.0		(1.4		)
Total fixed maturities	225	$	3,615.9	$	(68.4	)	174	$	3,043.9	$	(57.5	)	51	$	572.0	$	(10.9	)



	Level 3 Fair Value
(millions)	Fair Value at March 31, 2019		Calls/ Maturities/ Paydowns		Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at June 30, 2019
Equity securities:
Nonredeemable preferred stocks:
Financials	$	25.1	$	0	$	2.0	$	0	$	0	$	0	$	0	$	27.1
Industrials	5.0		0		0		0		0		0		0		5.0
Common equities:
Other risk investments	0.3		0		0		0		0		0		0		0.3
Total Level 3 securities	$	30.4	$	0	$	2.0	$	0	$	0	$	0	$	0	$	32.4



	Level 3 Fair Value
(millions)	Fair Value at December 31, 2018		Calls/ Maturities/ Paydowns		Purchases		Sales		Net Realized (Gain)/Loss on Sales		Change in Valuation		Net Transfers In (Out)		Fair Value at June 30, 2019
Equity securities:
Nonredeemable preferred stocks:
Financials	$	25.1	$	0	$	2.0	$	0	$	0	$	0	$	0	$	27.1
Industrials	5.0		0		0		0		0		0		0		5.0
Common equities:
Other risk investments	0.3		0		0		0		0		0		0		0.3
Total Level 3 securities	$	30.4	$	0	$	2.0	$	0	$	0	$	0	$	0	$	32.4



	Six Months Ended June 30,						Year Ended
(millions)	2020			2019			December 31, 2019
Balance, beginning of period	$	225.6		$	214.5		$	214.5
Net income attributable to NCI	0			4.0			9.7
Other comprehensive income (loss) attributable to NCI¹	0			4.9			4.6
Exercise of employee stock options	16.0			7.7			7.7
Purchase/change of ARX minority shares	(241.6		)	(11.2		)	(11.2		)
Change in redemption value of NCI	0			0.2			0.3
Balance, end of period	$	0		$	220.1		$	225.6



(millions)	Gross Holding Period Gains			Gross Holding Period Losses			Net Holding Period Gains (Losses)
Beginning of period
Hybrid fixed-maturity securities	$	7.8		$	0		$	7.8
Equity securities	2,263.9			(15.5		)	2,248.4
Balance at December 31, 2019	2,271.7			(15.5		)	2,256.2
Year-to-date change in fair value
Hybrid fixed-maturity securities	(4.6		)	(1.8		)	(6.4		)
Equity securities	(186.5		)	(45.1		)	(231.6		)
Total holding period gains (losses) during the period	(191.1		)	(46.9		)	(238.0		)
End of period
Hybrid fixed-maturity securities	3.2			(1.8		)	1.4
Equity securities	2,077.4			(60.6		)	2,016.8
Balance at June 30, 2020	$	2,080.6		$	(62.4	)	$	2,018.2



Municipal Securities (at June 30, 2020)
(millions) Rating	General Obligations		Revenue Bonds		Total
AAA	$	775.0	$	690.9	$	1,465.9
AA	559.1		1,169.7		1,728.8
A	0		375.1		375.1
BBB	2.9		1.6		4.5
Total	$	1,337.0	$	2,237.3	$	3,574.3



Corporate Securities (at June 30, 2020)
(millions) Rating	Consumer		Industrial		Communication		Financial Services		Technology		Basic Materials		Energy		Total
AAA	$	0	$	0	$	0	$	30.1	$	0	$	0	$	0	$	30.1
AA	159.1		0		0		278.2		61.0		0		11.5		509.8
A	1,000.3		179.0		317.6		1,125.6		319.3		107.3		93.5		3,142.6
BBB	2,885.3		1,486.0		149.6		1,345.6		410.7		43.9		714.6		7,035.7
Non-investment grade/non-rated:
BB	45.1		98.9		65.0		11.8		46.3		0		27.5		294.6
B	49.7		0		0		0		0		0		0		49.7
Total fair value	$	4,139.5	$	1,763.9	$	532.2	$	2,791.3	$	837.3	$	151.2	$	847.1	$	11,062.5



ISSUER PURCHASES OF EQUITY SECURITIES
2020 Calendar Month	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
April	1,153	$	71.91	1,140,410	23,859,590
May	28,197	76.34		1,168,607	23,831,393
June	4,412	77.96		1,173,019	23,826,981
Total	33,762	$	76.40