80661--2/25/2009--PROGRESSIVE

related topics

{loss, insurance, financial}

{capital, credit, financial}

{acquisition, growth, future}

{regulation, change, law}

{debt, indebtedness, cash}

{personnel, key, retain}

{competitive, industry, competition}

{system, service, information}

{financial, litigation, operation}

{operation, natural, condition}

{tax, income, asset}

{loan, real, estate}

We compete in the automobile insurance and other property-casualty markets, which are highly competitive. Our ability to attract, develop and retain talented employees, managers and executives, and to maintain appropriate staffing levels, is critical to our success. The Progressive Corporation and its insurance subsidiaries are subject to a variety of complex federal and state laws and regulations. Lawsuits challenging our business practices, and those of our competitors and other companies, are pending and more may be filed in the future. Our success depends on our ability to underwrite risks accurately and to charge adequate rates to policyholders. Our success depends on our ability to establish accurate loss reserves and to adjust claims accurately. Our financial performance may be materially adversely affected by severe weather conditions or other catastrophic losses. Our business depends on the uninterrupted operation of our facilities, systems and business functions, including our information technology and other business systems. The performance of our fixed-income and equity investment portfolios is subject to a variety of investment risks. Our insurance subsidiaries may be limited in the amount of dividends that they can pay to the holding company, which in turn may limit the holding company s ability to pay dividends to shareholders, repay indebtedness or make capital contributions to its other subsidiaries or affiliate. The Progressive Corporation s annual dividend policy will result in a variable payment to shareholders each year, or no payment in some years, and the dividend program ultimately may be changed. Our financial condition may be adversely affected if one or more parties with which we enter into significant contracts becomes insolvent, experiences other financial hardship or defaults in the performance of contractual obligations. If we fail to maintain sufficient capital to support our business, our financial condition and our ability to grow could be adversely affected. Our access to capital markets, our ability to enter into new financing arrangements, obligations to post collateral under certain derivative contracts, and our business operations are dependent on favorable evaluations and ratings by credit and other rating agencies. We do not manage to short-term earnings expectations; our goal is to maximize the long-term value of the enterprise, which at times may adversely affect short-term results.

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80661--2/25/2009--PROGRESSIVE_CORP/OH/