The Progressive Corporation (PGR) Earnings Call Transcript & Summary

Welcome to the Annual Meeting of Shareholders of The Progressive Corporation. In light of the public health and travel concerns of our shareholders, employees and directors in the protocols that federal, state and local governments have imposed and may continue to impose in response to the COVID-19 pandemic, we are holding this meeting solely via webcast. Shareholders who provided their 16-digit control number to access the webcast have the same rights as if they attended the annual meeting in person. Shareholders will have an opportunity to vote on proposals if they have not already voted or wish to change their vote, and may submit questions during this meeting in the space provided on the meeting website. Please refer to our rules of conduct, including -- included in the Meeting Materials section on the meeting website for additional details. We have allocated 1 hour for the entire event, including responding to appropriate questions after the meeting. Shareholders or other guests, who logged on to the webcast without providing a 16-digit control number, will be able to listen to the proceedings. However, these guests will not be able to vote, submit questions, or otherwise participate in the annual meeting. At this time, I would like to turn the meeting over to Tricia.

Good morning. I'm Tricia Griffith, and as President of Progressive, I have the honor of presiding over the 2021 annual meeting of shareholders. The meeting will come to order. Dan Mascaro will act as Secretary of the meeting and keep minutes. The Chairperson of our Board, Lawton Fitt, is joining us today and other directors are also listening on the phone. I ask Mr. Mascaro to report on the notice of the meeting, together with the proof of the mailing of the notice.

I have a copy of the notice of the meeting; the proxy statement dated March 29, 2021; the company's 2020 annual report to shareholders; the form of proxy; and a copy of the 2020 annual report of the company in a summarized format. These materials will be filed with the minutes of this meeting. In addition, I have an affidavit from an Officer of Broadridge Financial Services Corporation, confirming the mailing of the notice of meeting and other required documents to each shareholder of record at the close of business on March 12, 2021, the record date for this meeting, and stating that Broadridge commenced the mailing on March 29, 2021. Additionally, a list of shareholders of record at the close of business on March 12, 2021, is available for inspection during the duration of this meeting via the link provided through the meeting website. This concludes the report on the notice of meeting and the proof of mailing of the notice.

I declare that proper notice of this meeting has been given, and I direct the Secretary to cause the affidavit of mailing to be filed and preserved with the record of the company. At this time, I appoint Amy Pavich from Broadridge Financial Services Corporation and Elizabeth Jaron from the company as inspectors of election. I ask Mr. Mascaro to report on whether we have a quorum present for the meeting.

I have been informed by the inspectors of election that more than a majority of the common shares outstanding as of the record date are represented either in person or by proxy at this meeting.

I declare that a quorum is represented at the meeting in person or by proxy and that this meeting is properly convened. All progressive shareholders who logged into the meeting with their 16-digit control number are entitled to vote at this meeting and have the ability to do so during this meeting. If you're a shareholder entitled to vote and have not yet voted or if you want to change a vote previously cast, you can do so by clicking on the voting icon. Please remember that if you've already voted by proxy, it's not necessary to vote again. After voting has been completed on all matters on the agenda, we will close the polls, and the inspectors of election will provide their preliminary report. I now ask Mr. Mascaro to review the matters that have been submitted for shareholder action at this meeting.

As described in our proxy statement dated March 29, 2021, this meeting has been called by the Board of Directors for shareholders to act on 3 matters. First, shareholders will vote on the election of 12 directors, each to serve a term of 1 year. All nominees for Director have been nominated by the Board and our current directors. These nominees are: Philip Bleser, Stuart Bergdoerfer, Pamela Craig, Charles Davis, Roger Farah, Lawton Fitt, Tricia Griffith, Devin Johnson, Jeffrey Kelly, Barbara Snyder, Jan Tighe and Kahina Van Dyke.

I declare the nominations are closed. Mr. Mascaro, please continue to review the other matters that have been submitted for shareholder action at this meeting.

The second matter is an advisory vote often referred to as say-on-pay to approve our executive compensation program as described in our proxy statement. The third matter is to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2021. There were no other items properly submitted to be included as a proposal to be voted on by our shareholders today.

We will now address any shareholder questions concerning the 3 proposals. [Operator Instructions] As a reminder, shareholders who logged into this meeting using their 16-digit control number shown on their proxy card or voting instruction form will be able to submit a question. [Operator Instructions]

First question is directed to our Chairperson of the Board. Would you be better -- would Progressive be better served by an executive compensation plan tailored specifically to the company's particular circumstances and its unique long-term strategic business plan? Lawton, the mic is now open.

Thank you very much. And thank you for that question. Our vision is to provide the consumers and agents #1 choice and destination for auto, home and other insurance. For many years, our goal has been to grow as fast as we can at a 96-or-better combined ratio while continuing to deliver high-quality customer service. We believe that focusing on this goal will increase shareholder value over the long term. We structure our executive compensation programs, specifically to support this goal providing a strong alignment between pay and performance. We generally provide target compensation to our executives below the market median with performance-based compensation providing upside potential when we perform well against our preestablished and objective measures that we believe correlate to shareholder value. In addition, we provide a high percentage of our total compensation to executives in the form of equity awards, and we believe that these awards support a strong pay-for-performance linkage and further align the interests of our executives with those of our shareholders. We believe that our unique compensation programs have contributed to our exceptional and profitable growth in recent years.

There are no additional questions.

Just a reminder, the polls are about to close. If you've not yet voted, please do so. We will pause so votes can be recorded. [Voting]

The time has last for the polls to be open.

I hereby declare the polls are closed. I have been informed that the inspectors of election have delivered their preliminary report to the Secretary. I will now ask Mr. Mascaro to please announce the preliminary results of the election of directors and the other proposals.

Based upon the preliminary report, I have been informed by the inspectors of election that each of the nominees for election as a Director received sufficient affirmative votes to satisfy our majority voting requirement, and therefore, each nominee has been duly elected. I have also been informed by the inspectors of election that each of the proposals included in items 2 and 3 of our proxy statement, has received the required affirmative vote of shareholders and therefore, has been approved.

We will file the final report of the inspectors of election with the records of this meeting and will issue a Form 8-K with the final voting results of this meeting. Representatives from our independent registered public accounting firm, PricewaterhouseCoopers, are present on this webcast and available to respond to any appropriate questions. Are there any questions for PricewaterhouseCoopers? We will pause for a moment for these questions to be submitted. Are there any questions?

There are no questions.

This concludes the formal part of the meeting, and I could declare the 2021 Annual Meeting of Shareholders adjourned. We can now answer any appropriate questions from shareholders regarding the business or operations of the company. Are there any questions?

Yes. This question is also directed to our Chairperson of the Board. Could you discuss the Board's perspective on the concept of stakeholder capitalism? And what principles the Board would use to balance interest of various stakeholders as it develops and implements the company's long-term business strategy? Lawton, your mic is now open.

Thank you very much. We believe that creating a better future for our employees, agents, communities and millions of customers as well as our shareholders is very important to them and is very important to us. So we do seek to take into account the interests of all of these groups as we develop our strategy. Tricia, would you like to comment on some of the ways in which we do this in our strategic decisions?

Absolutely. And this last year gave us a lot of opportunity, especially with our COVID response. And we had a pretty clear blueprint for managing through this really based on our 5 core values, and that's how we managed it. So immediately, for our employees, we got 95% of our employees home in a few weeks to be able to work from home safely. We also knew that many people needed financial assistance. We started a program called our employee relief fund, that you could ask for a certain amount of money that a third party would look at in order to make ends meet. And then we paid a portion of our gains share in advance to most of our people, not our executives or other senior leaders. So the first thing we thought about was our employees, making sure they were safe and taken care of, so they could take care of our customers. And then for our customers because frequency of driving went down deeply. We provided $1.1 billion of relief in the form of credits to our policyholders in both April and May. And then we looked strategically across the country and reduced rates approximately 3% in over 40 states. And that was an annualized savings of about $800 million. We granted payment leniency and we did not cancel policies for nonpayments and also gave options for customers with assistance in paying their premiums. And we believe that they've rewarded us with retention. And then for our agents, we partnered with our agent's association and provided about $2 million in grants for relief. And then for our communities, this is an unprecedented circumstance, and we wanted to make sure that our neighbors and friends and most importantly, the customers that we serve, were taken care of. And we funded more than $21 million of contributions to a variety of charities, mostly focused on hunger, health and homelessness. And we're very proud of what we were able to accomplish during 2020 and even into this year for all constituents. And we believe if we do the right thing for those constituents, then the shareholders also prevail. And it's really all about stakeholders.

There are no additional question. This concludes today's meeting.