43 slides from Progressive Corporation (the)'s earnings presentation, Aug 6, 2024
Slide 1: Investor Relations Q2 2024: Direct Acquisition
Investor 202 4 Q2 Relations Direct Acquisition
Slide 2: Information Relevant to this Presentation: Safe Harbor
Information Relevant to this Presentation Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 Investors are cautioned that certain statements in this presentation and related comments by management during the earnings call not based upon historical fact are forward-looki
Slide 3: Information Relevant to this Presentation: Regulation FD
Information Relevant to this Presentation Regulation FD Disclosure Outlets Progressive disseminates information to the public about Progressive, its products, services and other matters through various outlets in order to achieve broad, non-exclusionary distribution of information to the public. The
Slide 4: Pat Callahan, Personal Lines President
Pat Callahan Personal Lines President I N VE S T O R R E L A T I O N S Q 2 4
Slide 5: Our Vision: Become #1 destination for insurance and financial needs
OUR VISION Become consumers’, agents’, and business owners’ #1 destination for insurance and other financial needs 5
Slide 6: Market Share
I N VE S T O R R E L A T I O N S Q 2 Progressive is increasing share in the two fastest growing channels PERSONAL AUTO DIRECT WRITTEN PREMIUM (DWP) CHANNEL MARKET SHARE PROGRESSIVE PERSONAL AUTO INDUSTRY MARKET SHARE BY CHANNEL 45% 16% 14% 40% 12% 35% Market Share 10% 30% 8% 25% 6% 2016 2017 2018 20
Slide 7: Direct customer acquisition virtuous cycle
I N VE S T O R R E L A T I O N S Q 2 Direct customer acquisition Virtuous cycle Efficient growth drives more "at bats" MEDIA for more optimization 1,000,000,000s Billions of impressions PROGRESSIVE.COM Hundreds of millions of digital touches 100,000,000s DIGITAL QUOTES Tens of millions of digital qu
Slide 8: Agenda: Media / Direct Acquisition Experience
I N VE S T O R R E L A T I O N S Q 2 Agenda 01 / Media 02 / Direct Acquisition Jay VanAntwerp David Krew Direct Media Acquisition Experience Business Leader Business Leader 8
Slide 9: Media
I N VE S T O R R E L A T I O N S Q 2 Media 9
Slide 10: Progressive buys virtually all of our media using an in-house team
M E D I A A T P R O GR E S S I VE Progressive buys virtually all We buy in media channels Our current capabilities of our media using an including mass media, are the result of in-house team. programmatic display, paid social evolution over almost three media, direct mail, and generic decades. searc
Slide 11: Buying all media ourselves gives us some distinct advantages
M E D I A A T P R O GR E S S I VE Buying all media ourselves gives us some distinct advantages • Focus • Analytics • Product knowledge • Custom modeling • Flexibility • Nimbleness • Aligned incentives • Lower overhead • Relationships 11
Slide 12: Insurance industry ad spending
M E D I A A T P R O GR E S S I VE Insurance industry ad spending PROPERTY & CASUALTY INSURANCE ADVERTISING SPEND PER YEAR 12 10 15% CAGR 8 2003 – 2011 $ Billions 6 10% CAGR 4 1996 – 2003 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 13: Insurance industry ad spending
M E D I A A T P R O GR E S S I VE Insurance industry ad spending PROPERTY & CASUALTY INSURANCE ADVERTISING SPEND PER YEAR 12 10 2% CAGR 15% CAGR 2011 – 2017 8 2003 – 2011 $ Billions 6 10% CAGR 4 1996 – 2003 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Slide 14: Insurance industry ad spending
M E D I A A T P R O GR E S S I VE Insurance industry ad spending PROPERTY & CASUALTY INSURANCE ADVERTISING SPEND PER YEAR 10% 12 CAGR 2017 – 2021 10 2% CAGR 15% CAGR 2011 – 2017 8 2003 – 2011 $ Billions 6 10% CAGR 4 1996 – 2003 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200
Slide 15: Insurance industry ad spending
M E D I A A T P R O GR E S S I VE Insurance industry ad spending PROPERTY & CASUALTY INSURANCE ADVERTISING SPEND PER YEAR 10% 12 CAGR 2017 – 2021 -20% CAGR 10 2% 2021 – 2023 CAGR 15% CAGR 2011 – 2017 8 2003 – 2011 $ Billions 6 10% CAGR 4 1996 – 2003 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2
Slide 16: Prior to 2017, under $700M in spend, around 10% of industry
M E D I A A T P R O GR E S S I VE Prior to 2017, we had under $700M in spend, consistently around 10% of industry spend 2.5 $2.5B 23% 21% 2.0 $2.0B 19% 17% 1.5 $1.5B 15% 13% 1.0 $1.0B 11% 9% $0.5B 0.5 7% 0.0 $0.0 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Progressive Me
Slide 17: Tripled the budget in four years due to more efficient media buying
M E D I A A T P R O GR E S S I VE Tripled the budget in four years in large part due to more efficient media buying 2.5 $2.5B 23% 20% 21% 2.0 $2.0B 19% 17% 1.5 $1.5B 15% 13% 1.0 $1.0B 11% 11% 9% $0.5B 0.5 7% 0.0 $0.0 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Progressiv
Slide 18: Media budget cut significantly to help hit a 96 combined ratio
M E D I A A T P R O GR E S S I VE Media budget cut significantly to help Progressive hit a 96 combined ratio 2.5 $2.5B 23% 20% 21% 2.0 $2.0B 19% 19% 17% 1.5 $1.5B 15% 13% 1.0 $1.0B 11% 9% $0.5B 0.5 7% 0.0 $0.0 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Progressive Media
Slide 19: Controls on our spending
M E D I A A T P R O GR E S S I VE Controls on our spending Cost per sale Target acquisition cost (CPS) (TAC) 19
Slide 20: Controls on our spending
M E D I A A T P R O GR E S S I VE Controls on our spending Cost per sale Target acquisition cost (CPS) (TAC) TOTAL ACQUISITION COSTS How much we charge customers for acquisition expenses over DIRECT AUTO SALES their policy lives plus margin adequacy 20
Slide 21: Controls on our spending
M E D I A A T P R O GR E S S I VE Controls on our spending Cost per sale Target acquisition cost (CPS) (TAC) SUBJECT TO: • Direct auto lifetime combined ratio at or below a 96% • Ability to service our customers well • Aggregate companywide calendar year CR at or below a 96% • Efficient incremental
Slide 22: Even with the increase in spend, CPS is well below TAC
M E D I A A T P R O GR E S S I VE Even with the increase in spend, CPS is well below TAC COST PER SALE VS. TARGET ACQUISITION COST 15% 5% -5% -15% -25% -35% -45% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Source: Internal data 22
Slide 23: 2023 is an outlier given the size of the cuts
M E D I A A T P R O GR E S S I VE 2023 is an outlier given the size of the cuts COST PER SALE VS. TARGET ACQUISITION COST 15% 5% -5% -15% -25% -35% -45% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Source: Internal data 23
Slide 24: 2024 YTD CPS is well below TAC
M E D I A A T P R O GR E S S I VE 2024 YTD CPS is well below TAC even with the resumption of spend COST PER SALE VS. TARGET ACQUISITION COST 15% 5% -5% -15% -25% -35% -45% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Source: Internal data 24
Slide 25: Acquisition expenses as a percentage of expected lifetime earned premium
M E D I A A T P R O GR E S S I VE Another view … acquisition expenses as a percentage of expected lifetime earned premium ACQUISITION EXPENSE/DIRECT AUTO EXPECTED LIFETIME EARNED PREMIUM 9.5% 8.5% 7.5% 6.5% 5.5% 4.5% 3.5% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Sour
Slide 26: 2024 is below historic levels even with the resumption of spend
M E D I A A T P R O GR E S S I VE 2024 is below historic levels even with the resumption of spend ACQUISITION EXPENSE/DIRECT AUTO EXPECTED LIFETIME EARNED PREMIUM 9.5% 8.5% 7.5% 6.5% 5.5% 4.5% 3.5% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Source: Internal data 26
Slide 27: Not at the point of diminishing returns
M E D I A A T P R O GR E S S I VE Even with the increase in spend, we’re not at the point of diminishing returns PROGRESSIVE SALES VS. MEDIA (2015 = 1.0) 2.5 2022 2.0 2020 Direct Auto Sales Index 2018 2021 2019 1.5 2017 2016 1.0 2015 0.5 0.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Auto Media Spend Index Source:
Slide 28: 2023 is an outlier given the size of the cuts
M E D I A A T P R O GR E S S I VE 2023 is an outlier given the size of the cuts PROGRESSIVE SALES VS. MEDIA (2015 = 1.0) 2.5 2023 2022 2.0 2020 Direct Auto Sales Index 2018 2021 2019 1.5 2017 2016 1.0 2015 0.5 0.0 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Auto Media Spend Index Source: Internal data 28
Slide 29: Budget cuts reduced the expense ratio in 2023
M E D I A A T P R O GR E S S I VE Budget cuts reduced the expense ratio significantly in 2023 in pursuit of the 96 CR ACQUISITION EXPENSE/EARNED PREMIUM 14% 13% 12% 11% 10% 9% 8% 7% 6% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Source: Internal data 29
Slide 30: Expense ratios are up with the spend increase
M E D I A A T P R O GR E S S I VE Expense ratios are up with the spend increase ACQUISITION EXPENSE/EARNED PREMIUM 14% 13% 12% 11% 10% 9% 8% 7% 6% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 YTD Source: Internal data 30
Slide 31: Progressive is spending significantly more than competition
M E D I A A T P R O GR E S S I VE Progressive is spending significantly more than competition COMPETITOR SPEND RELATIVE TO PROGRESSIVE (2024 YTD THROUGH Q2) 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Progressive Carrier A Carrier B Carrier C Carrier D TV Index Digital Index Source: iSpot and Sensor Tower 31
Slide 32: H1 2024 is deploying record spend and delivering record sales
M E D I A A T P R O GR E S S I VE H1 2024 is deploying record spend and delivering record sales H1 SALES VS. MEDIA SPEND 3.5 2024 3.0 Direct Auto Sales Index 2023 2.5 2021 2.0 2018 2020 1.5 2019 2022 2016 2017 2015 1.0 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Auto Media Spend Index Source: Internal data 32
Slide 33: Conclusion
M E D I A A T P R O GR E S S I VE Conclusion Progressive’s in-house media team is a unique In the last decade, the media team has been competitive advantage that has driven significant instrumental in increasing spend to grab market share value for Progressive since the inception of the and cutting
Slide 34: Direct Acquisition Experience
I N VE S T O R R E L A T I O N S Q 2 Direct Acquisition Experience 34
Slide 35: Acquisition Experience
D I R E CT A C Q UI S I T I O N Acquisition Experience We deliver and optimize Our goal is to deliver We have critical Diverse skill sets are required We’ve also been at Progressive’s direct to better experiences that partnerships with to do what we do: this for three consumer digital sales drive mo
Slide 36: Progressive's digital sales funnel: Origin
D I R E CT A C Q UI S I T I O N Progressive’s digital sales funnel: Origin An insurtech 15 years prior to the coining of the term. Progressive.com circa 1995 “Internet Process Plan” from late-90s … In Progressive fashion, tracked results to learn … 36
Slide 37: Progressive's digital sales funnel: Timeline
D I R E CT A C Q UI S I T I O N Progressive’s digital sales funnel: Timeline S T AR TU P E R A U SER E X P ERI EN CE ERA P ER S O NA L IZ A TI ON + ER A T OD AY 1995 1996 1997 1998 1999 2004 2008 2010 2011 2017 2018 2018 2018 Now Website Comparison 1st Buy Planning for Recreational Coverage Name Mob
Slide 38: Progressive's digital sales funnel: Today's scale
D I R E CT A C Q UI S I T I O N Progressive’s digital sales funnel: Today’s scale One percent optimization wins drive tens of millions of profit dollars. PROGRESSIVE.COM Hundreds of millions of digital touches 100,000,000s DIGITAL QUOTES Tens of millions of digital quotes 10,000,000s SALES 1,000,000
Slide 39: Insure + tech
D I R E CT A C Q UI S I T I O N • We view the digital quote as the front end of the product • We have decades of experience at the nexus of insurance and technology Insure + tech • Part of the Progressive fabric, not a new thing to label PRODUCT LAYER Increasing frequency of revisions and segmentati
Slide 40: Personalization in the digital funnel
D I R E CT A C Q UI S I T I O N Personalization in the digital Growing and evolving set of personalization points in our digital funnel funnel • Delivering the right content to the right consumer in the right context drives substantial value (aka personalization) • Our Direct business has applied ad
Slide 41: Evolving capability set
D I R E CT A C Q UI S I T I O N Evolving capability set CONTEXT DATA CONTENT We continue to expand and evolve 1 2 Delivering optimal messaging, images, and the data we can access in real time transactional elements to the right consumer to drive decisions. in the right context is the ongoing objecti
Slide 42: Acquisition Experience conclusion
D I R E CT A C Q UI S I T I O N Acquisition Experience conclusion We’ve been online We have substantial scale Tight coupling with We continue to Insure + tech is not a for a long time to test, learn, and the product is a advance our new thing to label; it optimize critical success technology enabled
Slide 43: Thank you
Thank you I N V E S T OR RE L AT I ON S Q 2