<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
---------------------------------------------
or
[ ] 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 1-9518
---------------------------------------------
THE PROGRESSIVE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-0963169
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6300 Wilson Mills Road, Mayfield Village, Ohio 44143
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(216) 461-5000
------------------------------------------------------
(Registrant's telephone number, including area code)
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 [X] 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: 72,243,975 outstanding at March 31, 1996
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
The Progressive Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 1996 1995 % Change
- ------------------------------------------------------------------------------------------------------------
(millions - except per share amounts)
<S> <C> <C> <C>
NET PREMIUMS WRITTEN $810.2 $ 686.9 18
===============================
REVENUES
Premiums earned $732.0 $ 624.3 17
Investment income 52.7 44.8 18
Net realized gains on security sales 4.9 15.4 (68)
Service revenues 9.4 9.3 1
------------------------------
Total revenues 799.0 693.8 15
------------------------------
EXPENSES
Losses and loss adjustment expenses 525.4 436.9 20
Policy acquisition costs 120.1 106.6 13
Other underwriting expenses 41.0 44.0 (7)
Investment expenses 1.8 2.1 (14)
Service expenses 9.3 8.4 11
Interest expense 14.3 14.3 --
------------------------------
Total expenses 711.9 612.3 16
------------------------------
NET INCOME
Income before income taxes 87.1 81.5 7
Provision for income taxes 23.8 20.8 14
------------------------------
Net income $ 63.3 $ 60.7 4
==============================
PER SHARE
Primary $ .82 $ .79 4
Fully diluted .82 .79 4
WEIGHTED NUMBER AVERAGE EQUIVALENT SHARES
Primary 74.6 74.0 1
Fully diluted 74.6 74.1 1
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
The Progressive Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
---------------------------------------------
1996 1995 1995
- -----------------------------------------------------------------------------------------------------------------
(millions)
ASSETS
Investments:
Held-to-maturity:
<S> <C> <C> <C>
Fixed maturities, at amortized cost (market: $329.0) $ -- $ 321.0 $ --
Available-for-sale:
Fixed maturities, at market (amortized cost:
$3,112.1, $2,219.0 and $2,729.5) 3,120.4 2,201.8 2,772.9
Equity securities, at market
Preferred stocks (cost: $327.9, $286.0 and $379.4) 329.9 282.5 382.3
Common stocks (cost: $337.8, $148.4 and $277.6) 368.6 156.9 310.0
Short-term investments, at amortized cost
(market: $248.5, $298.5 and $302.8) 248.5 298.5 302.8
---------------------------------------------
Total investments 4,067.4 3,260.7 3,768.0
Cash 13.9 15.2 16.2
Accrued investment income 41.3 36.5 39.8
Premiums receivable, net of allowance
for doubtful accounts of $19.0, $16.4 and $19.2 721.9 574.4 649.9
Reinsurance recoverables 333.7 387.7 338.1
Prepaid reinsurance premiums 78.5 77.0 70.5
Deferred acquisition costs 186.2 170.9 181.9
Income taxes 54.1 88.4 58.3
Property and equipment, net of accumulated
depreciation of $133.6, $121.4 and $128.7 165.1 149.2 159.2
Other assets 24.6 90.9 70.6
---------------------------------------------
Total assets $5,686.7 $4,850.9 $5,352.5
=============================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Unearned premiums $1,295.8 $1,093.1 $1,209.6
Loss and loss adjustment expense reserves 1,653.8 1,486.0 1,610.5
Policy cancellation reserve 37.5 43.3 40.8
Accounts payable and accrued expenses 517.1 310.9 339.9
Funded debt 675.9 675.7 675.9
---------------------------------------------
Total liabilities 4,180.1 3,609.0 3,876.7
---------------------------------------------
Shareholders' equity:
9 3/8% Serial Preferred Shares, Series A (issued
and outstanding, 3.2, 3.5 and 3.4) 78.4 85.8 83.6
Common Shares, $1.00 par value (treasury shares of
10.9, 11.2 and 11.0) 72.2 71.8 72.1
Paid-in capital 380.0 368.9 374.8
Net unrealized appreciation (depreciation) on
investment securities 26.6 (7.9) 51.1
Retained earnings 949.4 723.3 894.2
---------------------------------------------
Total shareholders' equity 1,506.6 1,241.9 1,475.8
---------------------------------------------
Total liabilities and shareholders' equity $5,686.7 $4,850.9 $5,352.5
=============================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
The Progressive Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------
(millions)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $63.3 $ 60.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 5.2 4.8
Net realized gains on security sales (4.9) (15.4)
Changes in:
Unearned premiums 86.2 56.4
Loss and loss adjustment expense reserves 43.3 51.6
Accounts payable and accrued expenses 29.7 (12.5)
Policy cancellation reserve (3.3) (4.0)
Prepaid reinsurance premiums (8.0) 6.2
Reinsurance recoverables 4.4 (8.0)
Premiums receivable (72.0) (32.0)
Deferred acquisition costs (4.3) (9.3)
Income taxes 17.3 2.4
Other, net 2.2 8.8
-----------------------------
Net cash provided by operating activities 159.1 109.7
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases:
Available-for-sale: fixed maturities (1,663.8) (752.9)
equity securities (178.8) (249.8)
Sales:
Available-for-sale: fixed maturities 1,174.5 510.8
equity securities 161.2 288.1
Maturities, paydowns, calls and other:
Held-to-maturity: fixed maturities -- 16.0
Available-for-sale: fixed maturities 98.8 164.4
equity securities 17.9 9.1
Net (purchases) sales of short-term investments 54.3 (19.4)
(Receivable) payable on securities 193.7 (68.9)
Purchase of property and equipment (11.1) (11.6)
------------------------------
Net cash used in investing activities (153.3) (114.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 3.3 6.3
Tax benefit from exercise of stock options 2.4 6.1
Payments on funded debt (.1) (.1)
Dividends paid to shareholders (5.9) (6.0)
Acquisition of treasury shares (7.8) --
------------------------------
Net cash provided by (used in) financing activities (8.1) 6.3
------------------------------
Increase (decrease) in cash (2.3) 1.8
Cash, January 1 16.2 13.4
------------------------------
Cash, March 31 $13.9 $ 15.2
==============================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
The Progressive Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 Supplemental Cash Flow Information -- The Company paid income
taxes of $0 and $6.5 million for the periods ended March 31, 1996 and 1995,
respectively. Total interest paid was $6.6 million for both periods which ended
March 31, 1996 and 1995, respectively.
NOTE 2 Funded debt at March 31 consisted of:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- --------------------------------
Market Market
Cost Value Cost Value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
6.60% Notes $198.7 $195.3 $198.6 $182.5
7% Notes 148.3 142.5 148.2 130.8
8 3/4% Notes 29.3 32.0 29.1 31.2
10% Notes 149.5 170.5 149.4 165.3
10 1/8% Subordinated Notes 149.4 171.1 149.3 165.7
Other Funded debt .7 .7 1.1 1.1
----------- ---------- ----------- -----------
$675.9 $712.1 $675.7 $676.6
=========== ========== =========== ===========
</TABLE>
NOTE 3 On March 31, 1996, the Company paid a quarterly dividend
of $.055 per Common Share and a regular quarterly dividend of
approximately $.59 per share on the 9 3/8% Serial Preferred Shares,
Series A, to shareholders of record as of the close of business on March
8, 1996. Both dividends were declared by the Board of Directors on
February 9, 1996.
On April 16, 1996, the Company called for redemption, on May 31, 1996,
all of its outstanding 9 3/8% Serial Preferred Shares, Series A. SEE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS for further discussion.
On April 26, 1996, the Board of Directors declared a quarterly dividend
of $.055 per Common Share, payable June 30, 1996, to shareholders of
record as of the close of business on June 14, 1996.
NOTE 4 Certain amounts in the consolidated financial statements
for prior periods were reclassified to conform with the 1996 presentation.
NOTE 5 The consolidated financial statements reflect all normal
recurring adjustments which were, in the opinion of management, necessary to
present a fair statement of the results for the interim periods. The results
of operations for the period ended March 31, 1996, are not necessarily
indicative of the results expected for the full year.
5
<PAGE> 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
For the first quarter 1996, operating income, which excludes net
realized gains and losses on security sales, was $60.2 million, or $.78
per share, compared to $50.7 million, or $.66 per share, last year. The
combined ratio was 93.8, compared to 94.1 for the first quarter 1995.
Net premiums written increased 18% over the first quarter 1995,
primarily reflecting an increase in unit sales. Premiums earned, which
are a function of the amount of premiums written in the current and
prior periods, increased 17% for the quarter. Service revenue increased
1% to $9.4 million for the quarter.
Claim costs, which represent actual and estimated future payments to or
for our policyholders, as well as loss estimates for future assignments
and assessments under state-mandated assigned risk programs, increased
as a percentage of premiums earned to 72% for the quarter, compared to
70% in 1995. Policy acquisition costs and other underwriting expenses
as a percentage of premiums earned decreased to 22% for the first
quarter, compared to 24% in 1995. Service expenses increased 11% for
the quarter, primarily reflecting an increase in loss adjustment
expense reserves.
Recurring investment income (interest and dividends) increased 18% for the
quarter, primarily reflecting an increase in the average investment
portfolio. The Company had net realized gains on security sales of $4.9
million for the quarter, compared to $15.4 million in the first quarter
of 1995. At March 31, 1996, the Company's portfolio had $41.1 million in
total unrealized gains, compared to $78.7 million at December 31, 1995,
primarily reflecting an increase in interest rates as evidenced by the
3-year treasury note yield increasing from 5.2% to 5.9% during the
quarter.
The Company continues to invest in fixed maturity, equity and short-term
securities. The majority of the portfolio was in short-term and
intermediate-term, investment-grade fixed-income securities ($3,276.4
million, or 80.6%, at March 31, 1996 and $2,617.0 million, or 80.3%, at
March 31, 1995). Long-term investment-grade fixed-income securities
represented $86.1 million, or 2.1%, and $53.7, or 1.6%, of the total
investment portfolio at March 31, 1996 and 1995, respectively. The
duration of the fixed-income portfolio was 2.8 years at March 31, 1996,
compared to 1.9 years at March 31, 1995.
Equity investments are comprised of preferred stocks ($329.9 million, or
8.1%, in 1996 and $282.5 million, or 8.7%, in 1995), and common stocks
($368.6 million, or 9.1%, in 1996 and $156.9 million, or 4.8%, in 1995).
The increase in common stocks reflects the Company's objective to
increase its position in common stock investments to 15% of the entire
portfolio and to optimize value and further diversify the portfolio
through foreign equity investments. As of March 31, 1996 and 1995, the
non-investment-grade fixed-income securities of the Company were $6.4
million, or .1%, and $150.6 million, or 4.6%, respectively, of the total
investment portfolio.
6
<PAGE> 7
The Company's financial instruments with off-balance-sheet risk had a net
market value of $2.6 million as of March 31, 1996, compared to a $.6 million
loss as of March 31, 1995.
The weighted average annualized fully taxable equivalent book yield of
the portfolio was 6.7% and 6.8% for the quarters ended March 31, 1996
and 1995, respectively.
FINANCIAL CONDITION
Progressive's insurance operations create liquidity by collecting and
investing premiums written from new and renewal business in advance of
paying claims. For the three months ended March 31, 1996, operations
generated a positive cash flow of $159.1 million. During the first
quarter, 51,960 Common Shares were repurchased in conjunction with
various employee benefit plans at an average cost of $44.95 per share
and 216,000 9 3/8% Serial Preferred Shares, Series A, were repurchased
in the open market at an average cost of $25.64 per share.
On April 16, 1996, the Company called for redemption, on May 31, 1996,
all of its outstanding 9 3/8% Serial Preferred Shares, Series A. The
redemption will be made at the redemption price of $25.00 per share plus
accrued but unpaid dividends through the redemption date. From and after
the redemption date, dividends will cease to accrue on the Preferred
Shares. The Company may fund the redemption through operating cash flows
or by issuing notes or other debt securities in a partial take-down
under its $200 million shelf registration, which became effective March
29, 1996.
On April 26, 1996, the Board of Directors reset, at 6 million, the
Company's authorization to repurchase Common Shares from time to time in
the open market or otherwise when opportunities exist to buy at
attractive prices or for purposes which are otherwise in the best
interest of the Company. The acquired shares may be used in connection
with employee stock benefit plans, held for other purposes or retired.
RECENT DEVELOPMENTS
During the first quarter, the Company finalized its plans to
reorganize its operating structure to bring the Company closer to its
customers and deliver better, faster service. The new structure is
organized around five processes (product, brand, buying, ownership and
claims), each led by a process leader, and is designed to enhance the
Company's distribution channels, enable quicker implementation of
product and process improvements, and continue the Company's efforts to
reduce operating expenses through streamlined work flow. As part of the
reorganization, the Company created a ten person Policy Team, which will
be the focal point for setting companywide policy, strategy and
priorities. The Policy Team consists of -- Alan Bauer (Buying), Chuck
Chokel (Chief Financial Officer), Allan Ditchfield (Chief Information
Officer), Tom Forrester (Ownership), Willy Graves (Claims), Daniel Lewis
(South Florida Community Manager), Peter Lewis (Chief Executive
Officer), Bob McMillan (Product), Glenn Renwick (Brand) and Tiona
Thompson (Chief Human Resources Officer). All Policy Team members will
report to Peter Lewis.
7
<PAGE> 8
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
At the April 26, 1996 Annual Meeting of the Shareholders of the
Company, 69,630,628 Common Shares were represented in person or
by proxy.
At the meeting, the shareholders elected the eight directors
named below, each to serve for a term of one year. The
votes cast for each director were as follows:
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
Milton N. Allen 69,415,955 214,673
B. Charles Ames 69,430,635 199,993
Stephen R. Hardis 69,438,985 191,643
Janet Hill 69,441,156 189,472
Peter B. Lewis 69,404,053 226,575
Norman S. Matthews 69,434,943 195,685
Donald B. Shackelford 69,412,867 217,761
Paul B. Sigler 69,434,017 196,611
</TABLE>
ITEM 5. Other Information.
The form of Non-Qualified Stock Option Agreement (single award) and form
of Non-Qualified Stock Option Agreement (multiple awards) under The
Progressive Corporation 1989 Incentive Plan (collectively "NQSO
Agreement Forms") are filed as Exhibits 10(B) and 10(C), respectively,
to this Form 10-Q in order to supplement and amend the Company's Form
S-8 Registration Statement No. 33-33240, filed with the Securities and
Exchange Commission (the "Commission") on January 31, 1990, and Form S-8
Registration Statement No. 33-64210, filed with the Commission on June
10, 1993 (collectively, the "Registration Statements"). The Registration
Statements incorporate by reference this Form 10-Q and, upon the filing
of this Form 10-Q with the Commission, the NQSO Agreement Forms shall be
incorporated into said Registration Statements as Exhibits 4(b)(2) and
4(b)(3) thereto, respectively.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
See exhibit index on page 10.
(b) Reports on Form 8-K during the quarter ended March 31, 1996:
None
8
<PAGE> 9
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 1, 1996 BY: /s/ DAVID M. SCHNEIDER
--------------------- ----------------------
David M. Schneider
Secretary
Date: May 1, 1996 BY: /s/ CHARLES B. CHOKEL
--------------------- ---------------------
Charles B. Chokel
Treasurer and Chief Financial Officer
9
<PAGE> 10
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit No. Form 1O-Q
Under Reg. Exhibit
S-K, Item 601 No. Description of Exhibit
------------- --------- ----------------------
<S> <C> <C>
(10) 10(A) The Progressive Corporation 1996 Process
Management Bonus Plan
(10) 10(B) Form of Non-Qualified Stock Option
Agreement under The Progressive Corporation
1989 Incentive Plan (single award)
(10) 10(C) Form of Non-Qualified Stock Option
Agreement under The Progressive Corporation
1989 Incentive Plan (multiple awards)
(11) 11 Computation of Earnings Per Share
(12) 12(A) Computation of Ratio of Earnings to Fixed
Charges
(12) 12(B) Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Share Dividend
Requirements
(27) 27 Financial Data Schedule
</TABLE>
10
<PAGE> 1
EXHIBIT NO. 10(A)
-----------------
THE PROGRESSIVE CORPORATION
1996 PROCESS
MANAGEMENT BONUS PLAN
<PAGE> 2
THE PROGRESSIVE CORPORATION
1996 PROCESS MANAGEMENT BONUS PLAN
1. The Progressive Corporation and its subsidiaries
("Progressive") have created the 1996 Process Management Bonus
Plan (the "Plan") to provide Process Leaders with incentives to
foster teamwork, and provide strong leadership and performance,
in the pursuit of Progressive's process improvement objectives.
2. The Plan will be administered by or under the direction of the
Executive Compensation Committee (the "Committee") of the Board
of Directors. Progressive's Process Leaders are eligible to be
selected for participation in the Plan. Progressive's Chief
Executive Officer ("CEO") will select the individuals who will
participate in the Plan with respect to each Plan year
("participants"). Plan years shall coincide with Progressive's
fiscal years. The individuals who have been selected to
participate in the Plan for 1996 are identified on Exhibit A
hereto.
3. Subject to the following sentence, the amount of the process
management bonus earned by any participant under the Plan for
any Plan year ("Process Management Bonus") will be determined
by application of the following formula:
Process Management Bonus = Paid Salary x Target Percentage x
Performance Factor
The Process Management Bonus payable to any participant with
respect to any Plan year may not exceed $300,000.00.
4. The salary rate of each Plan participant for any Plan year
shall be as established or approved by the Committee (or by the
CEO with respect to any participants who are not executive
officers) no later than ninety (90) days after commencement of
such Plan year. For purposes of the Plan, "salary" and "Paid
Salary" shall include (a) regular, vacation, sick, holiday and
funeral pay received by the participant during the Plan year
for work or services performed by the participant as an officer
or employee of Progressive; (b) merit cash awards based on
performance that "exceeds" expectations that are paid during
the Plan year and (c) retroactive payments of any of the
foregoing items paid during the same Plan year.
For purposes of the Plan, "salary" and "Paid Salary" shall not
include any (a) short-term or long-term disability payments,
(b) discretionary bonus payments or (c) the earnings
replacement component of any worker's compensation award.
Notwithstanding the foregoing, if the sum of the regular, vacation,
sick, holiday and funeral pay received by a participant during
a Plan year exceeds his/her salary range maximum for that Plan
year, then his/her Paid Salary for that Plan year shall equal
his/her salary range maximum, plus any merit cash awards
received by such participant during that Plan year.
5. The Target Percentage for all participants in the Plan shall be
forty percent (40%) for the 1996 Plan year and for each Plan year
thereafter until otherwise determined by the Committee.
<PAGE> 3
6. The Performance Factor
----------------------
A. General
-------
The Performance Factor, which measures process
management performance, shall be determined annually for
each participant by evaluating (a) the contribution made
by such participant, in terms of leadership, performance
and teamwork, as a member of his/her assigned Process
Team and Progressive's Policy Team, and (b) the
performance of such participant's Process Team (or other
function assigned for purposes of this Plan) in meeting
its assigned objectives for the Plan year, as approved
by the Policy Team.
B. Basis of Evaluation
-------------------
For purposes of the Plan, and in accordance with the
Process Management Bonus Matrix set forth below, process
management performance for a given Plan year will be
evaluated as follows:
(1) The Policy Team will evaluate the results
of each Process Team for that Plan year
against criteria and by a process
mutually developed and agreed to by all
Policy Team members.
(2) The Policy Team, through a peer review
process, will evaluate the process
management contribution of each Process
Leader, as well as his/her overall
contributions to the Policy Team.
Process Leaders are expected to demonstrate leadership,
teamwork and innovation within their respective process
areas and with respect to specific areas of cost
reduction and/or service improvement and as a member of
the Policy Team. A participant that demonstrates the
expected level of leadership, teamwork, innovation and
achievement of assigned process performance objectives
will earn a Performance Management Bonus Matrix score of
1.0. Such score can vary from 0 to 2.0, depending on
performance.
<PAGE> 4
C. Process Management Bonus Matrix
-------------------------------
Process management performance results will be measured by the following
Bonus Matrix:
<TABLE>
Process Team
Performance:
- ------------
<S> <C> <C> <C> <C> <C>
Exceeds 0 .75 1.25 1.50 2.0
Meet/Exceeds 0 .675 1.125 1.25 1.75
Meets 0 .50 1.00 1.125 1.50
Meets/DNM 0 .25 .50 .675 1.0
Does Not Meet 0 0 0 0 0
No Some Sustained Extraordinary World Class
Significant Significant Significant Process/Team Profit/Volume
Individual Process/Team Process/Team Process/Team Leadership & producing break-
Contribution: Contribution Contributions Contributions Innovation throughs
- -------------
</TABLE>
Process Team performance is expected to at least "meet" objectives,
while individual participants are expected to make at least "sustained
significant contributions" to their assigned Process Teams.
The Process Management Bonus Matrix may be changed or adjusted from year
to year by the CEO, subject to Paragraph 3 hereof.
7. The Process Management Bonus earned for any Plan year shall be
paid to participants as soon as practicable after the results
for the Plan year have been determined, but no later than March
1 of the immediately following year. The provisions of this
Paragraph shall be subject to Paragraph 8 hereof.
Process Management Bonuses payable under this Plan may not be
deferred under The Progressive Corporation Executive Deferred
Compensation Plan.
8. Unless otherwise determined by the Committee, in order to be
entitled to receive a Process Management Bonus for any Plan
year, the participant must be employed by Progressive on the
date designated for payment thereof. Process Management Bonus
payments made to participants will be net of any legally
required deductions for federal, state and local taxes and
other items.
9. The right to any Process Management Bonus hereunder shall not be
transferred, assigned or encumbered by any participant. Nothing
herein shall prevent any participant's interest hereunder from
being subject to involuntary attachment, levy or other legal
process.
10. The Plan shall be administered by or under the direction of the
Committee. The Committee shall have the authority to adopt,
alter and repeal such rules, guidelines, procedures and
practices governing the Plan as it shall, from time to time, in
its sole discretion deem advisable.
<PAGE> 5
The Committee shall have full authority to determine the
manner in which the Plan will operate. Subject to the
foregoing, the CEO shall have full authority to interpret the
provisions of the Plan and to make all determinations
thereunder. All such interpretations and determinations shall
be final and binding on Progressive, all Plan participants and
all other parties. No such interpretation or determination
shall be relied on as a precedent for any similar action or
decision.
11. The Plan may be terminated, amended or revised, in whole or in
part, at any time and from time to time by the Committee, in
its sole discretion.
12. The Plan will be unfunded and all payments due under the Plan
shall be made from Progressive's general assets.
13. Nothing in the Plan shall be construed as conferring upon any
person the right to become or remain a participant in the Plan
or to remain employed by Progressive, nor shall the Plan limit
Progressive's right to discipline or discharge any of its
officers or employees or change their job duties or
compensation.
14. Progressive shall have the unrestricted right to set off
against or recover out of any bonuses or other sums owed to any
participant under the Plan any amounts owed by such participant
to Progressive.
15. This Plan shall be effective for 1996 and for each year
thereafter, unless and until terminated by or with the approval
of the Committee.
16. This Plan shall be interpreted and construed in accordance with
the laws of the State of Ohio.
<PAGE> 6
1996 Process Management Bonus Plan Participants
-----------------------------------------------
Process Leaders
---------------
Alan Bauer
Tom Forrester
Willy Graves
Bob McMillan
Glenn Renwick
EXHIBIT A
<PAGE> 1
EXHIBIT NO. 10(B)
-----------------
FORM OF NON-QUALIFIED STOCK OPTION
AGREEMENT UNDER THE PROGRESSIVE
CORPORATION 1989 INCENTIVE PLAN
(SINGLE AWARD)
<PAGE> 2
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
This Agreement (the "Agreement") is made as of the _____ day of
_______________, 19_____, between The Progressive Corporation, an Ohio
corporation (the "Company"), and [NAME] (the "Optionee"). The Company
hereby grants Optionee an option (the "Option") to purchase
<TOTAL_SHARES> Common Shares, $1.00 par value, (the "Common Shares") of
the Company for a per share purchase price of $_________ (the "Option
Price"). The Option has been granted pursuant to The Progressive
Corporation 1989 Incentive Plan (as amended and restated) (the "Plan")
and shall include and be subject to all provisions of the Plan, which
are hereby incorporated herein by reference, and shall be subject to the
following provisions of this Agreement:
1. TERM. The Option shall become exercisable on
_______________ (the "Vesting Date") and may be
exercised, in whole or in part, at any time thereafter
until _______________ (the "Expiration Date"), on
which date the Option shall expire and no longer be
exercisable.
2. METHOD OF EXERCISE. Subject to Section 1 above, the
Option shall be exercisable from time to time by
written notice (in form approved or furnished by the
Company) to the Committee which shall:
(a) state that the Option is thereby being
exercised, the number of Common Shares with
respect to which the Option is being
exercised, each person in whose name any
certificates for the Common Shares should be
registered and his or her address and social
security number;
(b) be signed by the person or persons entitled
to exercise the Option and, if the Option is
being exercised by anyone other than the
Optionee, be accompanied by proof
satisfactory to counsel for the Company of
the right of such person or persons to
exercise the Option under the Plan and all
applicable laws and regulations; and
(c) be accompanied by such representations,
warranties and agreements, in form and
substance satisfactory to counsel for the
Company, with respect to the investment
intent of such person or persons exercising
the Option as the Company may request.
3. PAYMENT OF PRICE. Upon exercise of the Option, the
Company shall deliver a certificate or certificates
for the Common Shares purchased thereunder to the
specified person or persons at the specified time upon
receipt of the full purchase price for such Common
Shares: (a) by certified or bank cashier's check, or
(b) by any other method of payment or combination
thereof authorized by the Plan.
<PAGE> 3
4. TRANSFERABILITY. The Option shall not be transferable
by the Optionee other than by will or by the laws of
descent and distribution. Subject to the following
sentence, during the lifetime of the Optionee, the
Option shall be exercisable (subject to any other
applicable restrictions on exercise) only by the
Optionee for his or her own account. Upon the death or
disability of the Optionee, the Option shall be
exercisable (subject to any other applicable
restrictions on exercise) only by the Optionee's
estate (acting through its fiduciary) or by the
Optionee's duly authorized legal representative,
during the period and to the extent authorized in the
Plan.
5. TERMINATION OF EMPLOYMENT. If the employment of the
Optionee by the Company (or any of its Subsidiaries or
Affiliates) terminates:
(a) due to involuntary termination without cause
or due to retirement (with the employer's
approval, but subject to Section 5(e) below),
the Option may be exercised to the extent
exercisable at the date of such termination,
during the lesser of (i) two months after
such date , or (ii) the balance of the
Option's term;
(b) due to death or disability, the provisions of
Section 5(b)(6) or 5(b)(7) of the Plan, as
applicable, shall apply;
(c) due to resignation by the Optionee (other
than by reason of a Qualified Retirement, as
provided at Section 5(e) below), the Optionee
may exercise the Option, to the extent of the
lesser of (A) the number of Common Shares as
to which the Option is exercisable on the
date the Optionee ceases to be an employee or
(B) the number of Common Shares as to which
the Option was exercisable ninety days prior
to such date, reduced by any Common Shares
acquired by exercise of the Option within
such ninety day period, at any time within
two (2) months after the date that the
Optionee ceases to be an employee (but in no
event after expiration of the original term
of the Option) and the Option shall not be or
become exercisable as to any additional
Common Shares after the date that the
Optionee ceases to be an employee;
(d) due to termination for cause, the Option and
all rights to purchase Common Shares
thereunder shall immediately terminate; and
(e) due to a Qualified Retirement (as defined
below), the following provisions shall apply
(subject in all cases to Section 5(e)(v)
hereof):
(i) if the Option has vested and is
exercisable as of the Qualified
Retirement Date (as defined below),
the Option shall not terminate upon
the retirement of the Optionee, and,
to the extent that it has not been
previously exercised, may be
exercised by the Optionee, in whole
or in part, at any time between the
Qualified Retirement Date and the
Expiration Date;
<PAGE> 4
(ii) subject to Section 5(e)(iii) hereof,
if the Option is not vested and
exercisable as of the Qualified
Retirement Date, the Option shall
not terminate in its entirety upon
the retirement of the Optionee;
instead, the Option (A) shall remain
in effect with respect to fifty
percent (50%) of the Common Shares
which are subject to the Option as
of the Qualified Retirement Date
and, as to such Common Shares, shall
vest and become exercisable on the
Vesting Date and may be exercised by
the Optionee, in whole or in part,
at any time between the Vesting Date
and the Expiration Date, and (B)
shall terminate, effective as of the
Qualified Retirement Date, with
respect to the remaining fifty
percent (50%) of the Common Shares
that are subject to the Option as of
the Qualified Retirement Date;
(iii) notwithstanding Section 5(e)(ii)
above, if the Option is not vested
and exercisable as of the Qualified
Retirement Date, but has a Vesting
Date which is no later than four (4)
months after the Qualified
Retirement Date, then,
notwithstanding the Optionee's
retirement, the full Option (or, if
the Option is subject to installment
vesting, that portion thereof which
is scheduled to vest on such Vesting
Date) shall remain in effect, shall
vest on such Vesting Date and may be
exercised by the Optionee, in whole
or in part, at any time between such
Vesting Date and the Expiration
Date;
(iv) if the Optionee dies after the date
of his or her retirement and has not
exercised the Option, in whole or in
part, prior to his or her death, the
Optionee's estate shall have the
right to exercise the Option as to
(A) all Common Shares, if any, as to
which the Option has vested and is
exercisable as of the date of the
Optionee's death, plus (B) the
additional Common Shares, if any, as
to which the Option would have
become exercisable within one (1)
year from the date of the Optionee's
death pursuant to Section 5(e)(ii)
and/or (iii) hereof, as applicable,
but for the death of the Optionee,
at any time during the one (1) year
period beginning on the date of the
Optionee's death (or such other
period as the Committee may
specify), and the balance of the
Option shall terminate as of the
date of the Optionee's death;
(v) if the Committee determines that the
Optionee is or has engaged in any
Disqualifying Activity (as defined
below), then (1) to the extent that
the Option has vested and is
exercisable as of the
Disqualification Date (as defined
below), the Optionee shall have the
right to exercise the Option during
the lesser of two months from the
Disqualification Date or the balance
of the Option's term and (2) to the
extent that the Option is not vested
and exercisable as of the
Disqualification Date, the Option
shall terminate as of such date. Any
determination by the Committee,
which may act upon the
recommendation of the Chief
Executive Officer or other senior
officer of the Company, that the
Optionee is or has engaged in any
Disqualifying Activity, and as to
the Disqualification Date, shall be
final and conclusive.
<PAGE> 5
(vi) As used in this Section 5(e), the
following terms are defined as
follows:
(A) QUALIFIED RETIREMENT - any
termination of the
Optionee's employment with
the Company or its
Subsidiaries for any reason
(other than death,
Disability or an involuntary
termination for Cause) if,
at or immediately prior to
the date of such
termination, the Optionee
satisfies both of the
following conditions:
(1) the Optionee shall
be 55 years of age
or older; and
(2) the sum of the
Optionee's age and
completed years of
service as an
employee of the
Company or its
Subsidiaries
(disregarding
fractions, in both
cases) shall total
70 or more.
(B) QUALIFIED RETIREMENT DATE -
the date as of which the
Optionee's employment with
the Company or its
Subsidiaries shall terminate
pursuant to a Qualified
Retirement.
(C) DISQUALIFYING ACTIVITY -
means and includes each of
the following acts or
activities:
(1) directly or
indirectly serving
as a principal,
shareholder,
partner, director,
officer, employee
or agent of, or as
a consultant,
advisor or in any
other capacity to,
any business or
entity which
competes with the
Company or its
Subsidiaries in any
business or
activity then
conducted by the
Company or its
Subsidiaries to an
extent deemed
material by the
Committee; or
(2) any disclosure by
the Optionee, or
any use by the
Optionee for his or
her own benefit or
for the benefit of
any other person or
entity (other than
the Company or its
Subsidiaries), of
any confidential
information or
trade secret of the
Company or its
Subsidiaries to an
extent deemed
material by the
Committee; or
(3) any material
violation of any of
the provisions of
the Company's Code
of Conduct or any
agreement between
the Optionee and
the Company; or
(4) making any other
disclosure or
taking any other
action which is
determined by the
Committee to be
materially
detrimental to the
business, prospects
or reputation of
the Company or its
Subsidiaries.
<PAGE> 6
The ownership of
less than 2% of the
outstanding voting
shares of a
publicly traded
corporation which
competes with the
Company or its
Subsidiaries shall
not constitute a
Disqualifying
Activity.
(D) DISQUALIFICATION
DATE - the date of
any determination
by the Committee
that the Optionee
is or has engaged
in any
Disqualifying
Activity.
6. RESTRICTIONS ON EXERCISE. The Option is subject to all
restrictions set forth in this Agreement or in the
Plan. As a condition to any exercise of the Option,
the Company may require the Optionee or his successor
to make any representation and warranty to comply with
any applicable law or regulation or to confirm any
factual matters requested by counsel for the Company.
7. TAXES. The Optionee hereby agrees that he or she shall
pay to the Company, in cash, any federal, state and
local taxes of any kind required by law to be withheld
with respect to the Option granted to him or her
hereunder or the exercise thereof. If the Optionee
does not make such payment to the Company, the Company
shall have the right to deduct from any payment of any
kind otherwise due to the Optionee from the Company
(or from any Subsidiary or Affiliate of the Company),
any federal, state and local taxes of any kind
required by law to be withheld with respect to the
Option, the exercise thereof or the Common Shares to
be purchased by the Optionee under this Agreement. The
Option shall not be treated as an incentive stock
option under Section 422 or any successor Section
thereto of the Internal Revenue Code of 1986, as
amended.
8. DEFINITIONS. Unless otherwise defined in this
Agreement, capitalized terms will have the same
meanings given them in the Plan.
THE PROGRESSIVE CORPORATION
DATE OF GRANT: _________, 19____ BY:
_____________________________________
TITLE:
_____________________________________
<PAGE> 7
ACCEPTANCE OF AGREEMENT
-----------------------
The Optionee hereby: (a) acknowledges receiving a copy of the
Plan Description dated _______________ (the "Plan Description") relating
to the Plan, and represents that he or she is familiar with all of the
material provisions of the Plan, as set forth in the Plan Description;
(b) accepts this Agreement and the Option granted to him or her under
this Agreement subject to all provisions of the Plan and this Agreement;
and (c) agrees to accept as binding, conclusive and final all decisions
or interpretations of the Committee relating to the Plan, this Agreement
or the Option granted hereunder.
Optionee:
_________________________________________
Date: _______________________________, 19____
<PAGE> 1
EXHIBIT NO. 10(C)
-----------------
FORM OF NON-QUALIFIED STOCK OPTION
AGREEMENT UNDER THE PROGRESSIVE
CORPORATION 1989 INCENTIVE PLAN
(MULTIPLE AWARDS)
<PAGE> 2
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
This Agreement (the "Agreement") is made as of the _______ day
of __________________, 19_____, between The Progressive Corporation, an
Ohio corporation (the "Company"), and [NAME] (the "Optionee"). The
Company hereby grants Optionee an option (the "Option") to purchase
<TOTAL_SHARES> Common Shares, $1.00 par value, (the "Common Shares") of
the Company for a per share purchase price of $____________ (the "Option
Price"). The Option has been granted pursuant to The Progressive
Corporation 1989 Incentive Plan (as amended and restated) (the "Plan")
and shall include and be subject to all provisions of the Plan, which
are hereby incorporated herein by reference, and shall be subject to the
following provisions of this Agreement:
1. TERM. The Option shall become exercisable as follows:
___________ Common Shares may be purchased on or
after _______________ and until _______________,
at which date the right to purchase such Common
Shares shall expire.
___________ Common Shares may be purchased on or
after _______________ and until _______________,
at which date the right to purchase such Common
Shares shall expire.
___________ Common Shares may be purchased on or
after _______________ and until _______________,
at which date the right to purchase such Common
Shares shall expire.
The dates set forth above on or after which the Option,
or any part thereof, may be exercised and specified
numbers of Common Shares may be purchased hereunder are
referred to herein as "Vesting Dates" and the dates set
forth above as of which such stock purchase rights
expire are referred to herein as "Expiration Dates."
2. Method of Exercise. Subject to Section 1 above, the
Option shall be exercisable from time to time by written
notice (in form approved or furnished by the Company) to
the Committee which shall:
(a) state that the Option is thereby being
exercised, the number of Common Shares with
respect to which the Option is being exercised,
each person in whose name any certificates for
the Common Shares should be registered and his
or her address and social security number;
(b) be signed by the person or persons entitled to
exercise the Option and, if the Option is being
exercised by anyone other than the Optionee, be
accompanied by proof satisfactory to counsel
for the Company of the right of such person or
persons to exercise the Option under the Plan
and all applicable laws and regulations; and
<PAGE> 3
(c) be accompanied by such representations,
warranties and agreements, in form and
substance satisfactory to counsel for the
Company, with respect to the investment intent
of such person or persons exercising the Option
as the Company may request.
3. PAYMENT OF PRICE. Upon exercise of the Option, the
Company shall deliver a certificate or certificates for
the Common Shares purchased thereunder to the specified
person or persons at the specified time upon receipt of
the full purchase price for such Common Shares: (a) by
certified or bank cashier's check, or (b) by any other
method of payment or combination thereof authorized by
the Plan.
4. TRANSFERABILITY. The Option shall not be transferable by
the Optionee other than by will or by the laws of
descent and distribution. Subject to the following
sentence, during the lifetime of the Optionee, the
Option shall be exercisable (subject to any other
applicable restrictions on exercise) only by the
Optionee for his or her own account. Upon the death or
disability of the Optionee, the Option shall be
exercisable (subject to any other applicable
restrictions on exercise) only by the Optionee's estate
(acting through its fiduciary) or by the Optionee's duly
authorized legal representative, during the period and
to the extent authorized in the Plan.
5. TERMINATION OF EMPLOYMENT. If the employment of the
Optionee by the Company (or any of its Subsidiaries or
Affiliates) terminates:
(a) due to involuntary termination without cause or
due to retirement (with the employer's approval,
but subject to Section 5(e) below), the Option
may be exercised to the extent exercisable at
the date of such termination, during the lesser
of (i) two months after such date , or (ii) the
balance of the Option's term;
(b) due to death or disability, the provisions of
Section 5(b)(6) or 5(b)(7) of the Plan, as
applicable, shall apply;
(c) due to resignation by the Optionee (other than
by reason of a Qualified Retirement, as provided
at Section 5(e) below), the Optionee may
exercise the Option, to the extent of the lesser
of (A) the number of Common Shares as to which
the Option is exercisable on the date the
Optionee ceases to be an employee or (B) the
number of Common Shares as to which the Option
was exercisable ninety days prior to such date,
reduced by any Common Shares acquired by
exercise of the Option within such ninety day
period, at any time within two (2) months after
the date that the Optionee ceases to be an
employee (but in no event after expiration of
the original term of the Option) and the Option
shall not be or become exercisable as to any
additional Common Shares after the date that the
Optionee ceases to be an employee;
(d) due to termination for cause, the Option and all
rights to purchase Common Shares thereunder
shall immediately terminate; and
(e) due to a Qualified Retirement (as defined
below), the following provisions shall apply
(subject in all cases to Section 5(e)(v)
hereof):
<PAGE> 4
(i) if and to the extent that any Option
Installment (as defined below) has
vested and is exercisable as of the
Qualified Retirement Date (as defined
below), such Option Installment shall
not terminate upon the retirement of
the Optionee, but may be exercised by
the Optionee, in whole or in part, at
any time between the Qualified
Retirement Date and the Expiration Date
applicable thereto;
(ii) subject to Section 5(e)(iii) hereof, if
and to the extent that any Option
Installment is not vested and
exercisable as of the Qualified
Retirement Date, such Option
Installment (A) shall remain in effect
with respect to fifty percent (50%) of
the Common Shares covered thereby and,
as to such Common Shares, shall vest
and become exercisable on the Vesting
Date applicable thereto and may be
exercised by the Optionee, in whole or
in part, at any time between the
Vesting Date and Expiration Date
applicable thereto, and (B) shall
terminate, effective as of the
Qualified Retirement Date, with respect
to the remaining fifty percent (50%) of
the Common Shares covered by such
Option Installment;
(iii) notwithstanding Section 5(e)(ii) above,
if and to the extent that any Option
Installment is not vested and
exercisable as of the Qualified
Retirement Date, but has a Vesting Date
which is no later than four (4) months
after the Qualified Retirement Date,
then, notwithstanding the Optionee's
retirement, the Option Installment
which is scheduled to vest on such
Vesting Date shall remain in effect,
shall vest on such Vesting Date and may
be exercised by the Optionee, in whole
or in part, at any time between such
Vesting Date and the applicable
Expiration Date;
(iv) if the Optionee dies after the date of
his or her retirement and has not
exercised the Option, in whole or in
part, prior to his or her death, the
Optionee's estate shall have the right
to exercise the Option as to (A) all
Common Shares, if any, as to which the
Option has vested and is exercisable as
of the date of the Optionee's death,
plus (B) the additional Common Shares,
if any, as to which the Option would
have become exercisable within one (1)
year from the date of the Optionee's
death pursuant to Sections 5 (e)(ii)
and/or (iii) hereof, as applicable, but
for the death of the Optionee, at any
time during the one (1) year period
beginning on the date of the Optionee's
death (or such other period as the
Committee may specify), and the balance
of the Option shall terminate as of the
date of the Optionee's death;
<PAGE> 5
(v) if the Committee determines that the
Optionee is or has engaged in any
Disqualifying Activity (as defined
below), then (1) to the extent that the
Option has vested and is exercisable as
of the Disqualification Date (as
defined below), the Optionee shall have
the right to exercise the Option during
the lesser of two months from the
Disqualification Date or the balance of
the Option's term and (2) to the extent
that the Option is not vested and
exercisable as of the Disqualification
Date, the Option shall terminate as of
such date. Any determination by the
Committee, which may act upon the
recommendation of the Chief Executive
Officer or other senior officer of the
Company, that the Optionee is or has
engaged in any Disqualifying Activity,
and as to the Disqualification Date,
shall be final and conclusive.
(vi) As used in this Section 5(e), the
following terms are defined as follows:
(A) QUALIFIED RETIREMENT - any termination
of the Optionee's employment with the
Company or its Subsidiaries for any
reason (other than death, Disability or
an involuntary termination for Cause)
if, at or immediately prior to the date
of such termination, the Optionee
satisfies both of the following
conditions:
(1) the Optionee shall be 55 years
of age or older; and
(2) the sum of the Optionee's age
and completed years of service
as an employee of the Company
or its Subsidiaries
(disregarding fractions, in
both cases) shall total 70 or
more.
(B) QUALIFIED RETIREMENT DATE - the date as
of which the Optionee's employment with
the Company or its Subsidiaries shall
terminate pursuant to a Qualified
Retirement.
(C) DISQUALIFYING ACTIVITY - means and
includes each of the following acts or
activities:
(1) directly or indirectly serving
as a principal, shareholder,
partner, director, officer,
employee or agent of, or as a
consultant, advisor or in any
other capacity to, any
business or entity which
competes with the Company or
its Subsidiaries in any
business or activity then
conducted by the Company or
its Subsidiaries to an extent
deemed material by the
Committee; or
<PAGE> 6
(2) any disclosure by the
Optionee, or any use by the
Optionee for his or her own
benefit or for the benefit of
any other person or entity
(other than the Company or its
Subsidiaries), of any
confidential information or
trade secret of the Company or
its Subsidiaries to an extent
deemed material by the
Committee; or
(3) any material violation of any of the
provisions of the Company's Code of
Conduct or any agreement between the
Optionee and the Company; or
(4) making any other disclosure or
taking any other action which
is determined by the Committee
to be materially detrimental
to the business, prospects or
reputation of the Company or
its Subsidiaries.
The ownership of less than 2% of the
outstanding voting shares of a publicly
traded corporation which competes with
the Company or its Subsidiaries shall
not constitute a Disqualifying
Activity.
(D) DISQUALIFICATION DATE - the date of any
determination by the Committee that the
Optionee is or has engaged in any
Disqualifying Activity.
(E) OPTION INSTALLMENT - if the Option
consists of multiple awards, each with
a separate Vesting Date and Expiration
Date, any one of such awards.
6. RESTRICTIONS ON EXERCISE. The Option is subject to all
restrictions set forth in this Agreement or in the
Plan. As a condition to any exercise of the Option,
the Company may require the Optionee or his successor
to make any representation and warranty to comply with
any applicable law or regulation or to confirm any
factual matters requested by counsel for the Company.
7. TAXES. The Optionee hereby agrees that he or
she shall pay to the Company, in cash, any federal,
state and local taxes of any kind required by law to
be withheld with respect to the Option granted to him
or her hereunder or the exercise thereof. If the
Optionee does not make such payment to the Company,
the Company shall have the right to deduct from any
payment of any kind otherwise due to the Optionee from
the Company (or from any Subsidiary or Affiliate of
the Company), any federal, state and local taxes of
any kind required by law to be t withheld with respect
to the Option, the exercise thereof or the Common
Shares to be purchased by the Optionee under this
Agreement. The Option shall not be treated as an
incentive stock option under Section 422 or any
successor Section thereto of the Internal Revenue Code
of 1986, as amended.
<PAGE> 7
8. DEFINITIONS. Unless otherwise defined in this
Agreement, capitalized terms will have the same
meanings given them in the Plan.
THE PROGRESSIVE CORPORATION
DATE OF GRANT: _________, 19____ BY:
_______________________________________
TITLE:
_______________________________________
<PAGE> 8
ACCEPTANCE OF AGREEMENT
-----------------------
The Optionee hereby: (a) acknowledges receiving a copy of the
Plan Description dated _______________ (the "Plan Description") relating
to the Plan, and represents that he or she is familiar with all of the
material provisions of the Plan, as set forth in the Plan Description;
(b) accepts this Agreement and the Option granted to him or her under
this Agreement subject to all provisions of the Plan and this Agreement;
and (c) agrees to accept as binding, conclusive and final all decisions
or interpretations of the Committee relating to the Plan, this Agreement
or the Option granted hereunder.
Optionee:
_________________________________________
Date: ______________________________, 19____
<PAGE> 1
EXHIBIT NO. 11
--------------
COMPUTATION OF
EARNINGS PER SHARE
<PAGE> 2
EXHIBIT 11
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(millions - except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------
1996 1995
-------------------------- -------------------------------
Per Per
Amount Share Amount Share
------------ ------ -------------- ----------
PRIMARY:
<S> <C> <C> <C> <C>
Net income $63.3 $60.7
Less: Preferred stock dividends (2.2) (2.1)
----------- --------------
Income available to common
shareholders $61.1 $.82 $58.6 $.79
=========== ======= ============== ==========
Average shares outstanding 72.2 71.5
Net effect of dilutive stock options 2.4 2.5
----------- --------------
Total 74.6 74.0
=========== ==============
FULLY DILUTED:
Net income $63.3 $60.7
Less: Preferred stock dividends (2.2) (2.1)
=========== ==============
Income available to common
shareholders $61.1 $.82 $58.6 $.79
=========== ======= ============== ==========
Average shares outstanding 72.2 71.5
Net effect of dilutive stock options 2.4 2.6
----------- --------------
Total 74.6 74.1
=========== ==============
</TABLE>
<PAGE> 1
EXHIBIT NO. 12(A)
-----------------
COMPUTATION OF
RATIO OF EARNINGS TO
FIXED CHARGES
<PAGE> 2
EXHIBIT 12(A)
THE PROGRESSIVE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------
1996 1995
------------ -----------
<S> <C> <C>
Income before income taxes $ 87.1 $81.5
------------ -----------
Fixed Charges:
Interest and amortization on indebtedness 14.3 14.3
Portion of rents representative of the interest factor 1.1 .9
------------ -----------
Total fixed charges 15.4 15.2
------------ -----------
Total income available for fixed charges $102.5 $96.7
============ ===========
Ratio of earnings to fixed charges 6.7 6.4
============ ===========
</TABLE>
<PAGE> 1
EXHIBIT NO. 12(B)
-----------------
COMPUTATION OF
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED SHARE
DIVIDEND REQUIREMENTS
<PAGE> 2
EXHIBIT 12(B)
THE PROGRESSIVE CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDEND REQUIREMENTS
(millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------
1996 1995
----------- ------------
<S> <C> <C>
Income before income taxes $ 87.1 $81.5
----------- ------------
Fixed Charges:
Interest and amortization on indebtedness 14.3 14.3
Portion of rents representative of the interest factor 1.1 .9
----------- ------------
Total fixed charges 15.4 15.2
----------- ------------
Preferred share dividend requirements 2.6 2.8
----------- ------------
Total fixed charges and preferred share dividend requirements 18.0 18.0
----------- ------------
Total income available for fixed charges and preferred share
dividend requirements $102.5 $96.7
=========== ============
Ratio of earnings to combined fixed charges and preferred
share dividend requirements 5.7 5.4
=========== ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of income and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<DEBT-HELD-FOR-SALE> 3,120,400
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 698,500
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 4,067,400
<CASH> 13,900
<RECOVER-REINSURE> 333,700
<DEFERRED-ACQUISITION> 186,200
<TOTAL-ASSETS> 5,686,700
<POLICY-LOSSES> 1,653,800
<UNEARNED-PREMIUMS> 1,295,800
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 675,900
<COMMON> 72,200
0
78,400
<OTHER-SE> 1,356,000
<TOTAL-LIABILITY-AND-EQUITY> 5,686,700
732,000
<INVESTMENT-INCOME> 50,900
<INVESTMENT-GAINS> 4,900
<OTHER-INCOME> 9,400
<BENEFITS> 525,400
<UNDERWRITING-AMORTIZATION> 120,100
<UNDERWRITING-OTHER> 41,000
<INCOME-PRETAX> 87,100
<INCOME-TAX> 23,800
<INCOME-CONTINUING> 63,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,300
<EPS-PRIMARY> .82
<EPS-DILUTED> .82
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
