<PAGE> 1
File Pursuant To Rule 424(b)(5)
Registration No. 333-48935
SUBJECT TO COMPLETION, DATED FEBRUARY 18, 1999
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PROSPECTUS SUPPLEMENT
February , 1999
(To Prospectus -- April 7, 1998)
THE PROGRESSIVE CORPORATION
$300,000,000
% Senior Notes due 2029
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THE COMPANY:
The Progressive Corporation
6300 Wilson Mills Road
Mayfield Village, Ohio 44143
(440) 461-5000
THE NOTES AND THE OFFERING:
- - Maturity: March 1, 2029
- - Interest Rate: %
- - Interest payments: semi-annually on March 1 and September 1, commencing on
September 1, 1999
- - Closing: March , 1999
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<TABLE>
<CAPTION>
PER NOTE TOTAL
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<S> <C> <C>
Public offering price:.................... % $
Underwriting fees:........................
Net proceeds to Company:..................
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</TABLE>
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED ANY OF THE SECURITIES OFFERED BY THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ATTACHED PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We expect that the Notes will be ready for delivery in book-entry form through
The Depository Trust Company, on or about March , 1999.
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DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS ARE PART OF A
REGISTRATION STATEMENT THAT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND DECLARED "EFFECTIVE". THIS PROSPECTUS SUPPLEMENT AND THE
ATTACHED PROSPECTUS ARE NOT OFFERS TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
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TABLE OF CONTENTS
<TABLE>
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PAGE
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PROSPECTUS SUPPLEMENT
Where You Can Find More Information; Incorporation By
Reference................................................. S-3
The Progressive Corporation................................. S-4
Use Of Proceeds............................................. S-5
Capitalization.............................................. S-6
Ratio Of Earnings To Fixed Charges.......................... S-6
Selected Consolidated Financial Information................. S-7
Description Of Notes........................................ S-9
Underwriting................................................ S-14
PROSPECTUS
Available Information....................................... 2
Incorporation Of Certain Documents By Reference............. 2
The Company................................................. 3
Use Of Proceeds............................................. 3
Ratio Of Earnings To Fixed Charges.......................... 3
Description Of Debt Securities.............................. 4
Plan Of Distribution........................................ 8
Legal Matters............................................... 9
Experts..................................................... 9
</TABLE>
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WHERE YOU CAN FIND MORE INFORMATION;
INCORPORATION BY REFERENCE
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC") pursuant to the
Securities and Exchange Act of 1934. You may read and copy (upon the payment of
fees prescribed by the SEC) any document that we file with the SEC at its public
reference rooms in Washington, D.C. (450 Fifth Street, N.W., Washington, D.C.
20549), New York, New York (7 World Trade Center, Suite 1300, New York, New York
10048), and Chicago, Illinois (500 West Madison Street, Suite 1400, Chicago,
Illinois 60661). You may call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our filings are also available to the public on
the internet, through the SEC's EDGAR database. You may access the EDGAR
database at the SEC's web site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" into this prospectus
supplement the information we file with it. This means that we can disclose
important business, financial and other information in our filings by referring
you to the documents containing this information. All information incorporated
by reference is part of this prospectus supplement, unless and until that
information is updated or superseded by the information contained in this
prospectus supplement or any information incorporated later. Any information
that we subsequently file with the SEC that is incorporated by reference will
automatically update and supersede any previous information that is part of this
prospectus supplement. We incorporate into this prospectus supplement by
reference the following documents and any future filings we make with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934:
- - Our Annual Report on Form 10-K, as amended, for the fiscal year ended December
31, 1997;
- - Our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30,
and September 30, 1998;
- - Our Current Report on Form 8-K filed with the SEC on January 5, 1999;
- - Our Current Report on Form 8-K filed with the SEC on February 18, 1999; and
- - The information contained in our Proxy Statement for our 1998 annual meeting
of shareholders held on April 24, 1998 that has been incorporated by reference
in our Form 10-K for the year ended December 31, 1997.
This prospectus supplement supplements the attached prospectus dated April
7, 1998, which is part of a registration statement on Form S-3 (file no.
333-48935) that we filed with the SEC. As permitted by SEC rules, neither this
prospectus supplement nor the prospectus which it updates contains all the
information contained in that registration statement and its accompanying
exhibits and schedules which we also filed with the SEC. You may refer to the
registration statement, the exhibits and schedules for more information about
our company. The registration statement, exhibits and schedules are available at
the SEC's public reference rooms or through its EDGAR database on the internet.
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You may obtain a copy of these filings, at no cost, by writing or
telephoning us at the following address:
The Progressive Corporation
6300 Wilson Mills Road
Mayfield Village, Ohio 44143
(440) 446-2851
Jeffrey W. Basch
Chief Accounting Officer
To ensure timely delivery of these materials, you should make any request
no later than five business days prior to the date on which you intend to invest
in the Notes offered under this prospectus supplement. We will mail the
materials to you by first class mail, or another equally prompt means, within
one business day after we receive your request.
THE PROGRESSIVE CORPORATION
The Progressive Corporation ("PROGRESSIVE") is an insurance holding company
which has 82 operating subsidiaries and one mutual insurance company affiliate.
Progressive Casualty Insurance Company is the principal operating subsidiary.
Progressive's insurance subsidiaries and affiliate provide personal automobile
insurance and other specialty property/casualty insurance and related services
throughout the United States and Canada. Of the approximately 250 United States
insurance company groups writing private passenger auto insurance, the
Progressive insurance group ranked 5th in size based on 1997 direct premiums
written, as reported by A.M. Best Company Inc. in their 1997 report for all
private passenger auto insurance writers.
Progressive's Personal Lines business, which accounted for 93% of
Progressive's total net premiums written in 1998, writes insurance for private
passenger automobiles, motorcycles and recreational vehicles. Progressive offers
auto insurance to every licensed driver, with between 30% and 35% of its
Personal Lines volume derived from standard and preferred risks.
Progressive's other lines of businesses, which accounted for 7% of total
net premiums written in 1998, include:
- - writing insurance for small fleets of commercial vehicles,
- - providing collateral protection coverage and loan tracking for automobile
lenders and financial institutions,
- - providing directors' and officers' liability and fidelity coverage for
American Bankers Association members, community banks and independent credit
unions, and
- - providing claims, underwriting and system services.
Progressive maintains geographic diversity in its insurance underwriting
businesses, writing personal auto policies in 47 states. Progressive also
maintains diversity in its customer base, where no customer comprises more than
1% of Progressive's net
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premiums written. While Progressive operates on a national scale, it focuses its
marketing and claims expertise on a state/community level.
Additional information about Progressive and its subsidiaries is included
in the Progressive documents filed with the SEC, which are incorporated herein
by reference. See "Where You Can Find More Information; Incorporation by
Reference."
Progressive's principal executive office is located at 6300 Wilson Mills
Road, Mayfield Village, Ohio 44143, and its telephone number is (440) 461-5000.
USE OF PROCEEDS
The net proceeds from the offering to be received by Progressive are
intended to be used, together with other available funds, to retire certain of
Progressive's outstanding debt upon that debt's maturity, including $30 million
of 8 3/4% Notes, which are due June 1, 1999, and $150 million each of 10% Notes
and 10 1/8% Subordinated Notes, both of which are due December 15, 2000. Any
portion of the net proceeds not applied to retire debt will be used for general
corporate purposes. Until the proceeds are used for these purposes, Progressive
will add the net proceeds to its investment portfolios or those of its
subsidiaries, which will be invested in securities of approximately the same
quality and maturities as those currently held in the portfolios. A discussion
of the nature of such securities, and their related risks, is set forth in the
"Investments" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in Progressive's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
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CAPITALIZATION
The table below shows the capitalization of Progressive on a consolidated
basis as of December 31, 1998. The table also shows adjustments to Progressive's
capitalization to reflect this offering. You should refer to the financial
statements of Progressive in its Current Report on Form 8-K, filed on February
18, 1999 with the SEC, which is incorporated by reference into this prospectus
supplement. See "Where You Can Find More Information; Incorporation by
Reference."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
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ACTUAL AS ADJUSTED
(IN MILLIONS)
<S> <C> <C>
Debt:
% Notes due 2029................................... $ -- $ 300.0
7.30% Notes due 2006................................... 99.7 99.7
6.60% Notes due 2004................................... 199.1 199.1
7% Notes due 2013...................................... 148.4 148.4
8 3/4% Notes due 1999.................................. 29.9 29.9
10% Notes due 2000..................................... 149.8 149.8
10 1/8% Subordinated Notes due 2000.................... 149.7 149.7
-------- --------
Total debt..................................... 776.6 1,076.6
-------- --------
Shareholders' equity:
Common Shares, $1.00 par value, issued 83.1 including
treasury shares of 10.6............................. 72.5 72.5
Paid-in-capital........................................ 448.3 448.3
Accumulated other comprehensive income:
Net unrealized appreciation on investment
securities........................................ 113.3 113.3
Other............................................... (9.6) (9.6)
Retained earnings(1)................................... 1,932.6 1,932.5
-------- --------
Total shareholders' equity..................... 2,557.1 2,557.0
-------- --------
Total debt and shareholders' equity............ $3,333.7 $3,633.6
======== ========
</TABLE>
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(1) Adjusted to reflect the estimated expenses of this offering.
RATIO OF EARNINGS TO FIXED CHARGES
The following table represents Progressive's ratio of earnings to fixed
charges for the periods shown:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
<S> <C> <C> <C> <C>
10.2x 9.2x 7.7x 6.6x 7.3x
</TABLE>
Earnings consist of income before income taxes and before fixed charges.
Fixed charges consist of interest and amortization on indebtedness and the
portion of rents representative of the interest factor.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables set forth selected consolidated financial information
concerning Progressive and its subsidiaries for the five years ended December
31, 1998. You should refer to the financial statements of Progressive in its
Current Report on Form 8-K, filed on February 18, 1999 with the SEC, which is
incorporated by reference into this prospectus supplement. See "Where You Can
Find More Information; Incorporation by Reference."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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1998 1997 1996 1995 1994
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
Premiums earned................... $4,948.0 $4,189.5 $3,199.3 $2,727.2 $2,191.1
Investment income(1).............. 294.8 274.9 225.8 199.1 158.5
Net realized gains on security
sales(2)........................ 11.4 98.5 7.1 46.7 23.8
Service revenues.................. 38.2 45.3 46.2 38.9 41.9
-------- -------- -------- -------- --------
Total revenues...................... 5,292.4 4,608.2 3,478.4 3,011.9 2,415.3
-------- -------- -------- -------- --------
Expenses:
Losses and loss adjustment
expenses(3)..................... 3,376.3 2,967.5 2,236.1 1,943.8 1,397.3
Policy acquisition costs.......... 659.9 607.8 482.6 459.6 391.5
Other underwriting expenses....... 495.8 336.0 208.5 167.2 150.8
Investment expenses............... 7.4 9.9 6.1 8.1 8.7
Service expenses.................. 30.8 43.9 41.9 30.2 31.9
Interest expense.................. 61.1 64.6 61.5 57.1 55.3
-------- -------- -------- -------- --------
Total expenses...................... 4,631.3 4,029.7 3,036.7 2,666.0 2,035.5
-------- -------- -------- -------- --------
Income before income taxes.......... 661.1 578.5 441.7 345.9 379.8
Provision for income taxes.......... 204.4 178.5 128.0 95.4 105.5
-------- -------- -------- -------- --------
Net income.......................... $ 456.7 $ 400.0 $ 313.7 $ 250.5 $ 274.3
======== ======== ======== ======== ========
Per Common Share(3)(4):
Basic............................. $ 6.30 $ 5.56 $ 4.29 $ 3.37 $ 3.71
Diluted........................... 6.11 5.31 4.14 3.26 3.59
OTHER OPERATING DATA:
Direct premiums written:
Personal lines.................... $4,987.1 $4,355.9 $3,165.4 $2,644.6 $2,181.7
All other lines................... 464.2 469.3 473.0 424.3 463.4
-------- -------- -------- -------- --------
Total direct premiums written....... $5,451.3 $4,825.2 $3,638.4 $3,068.9 $2,645.1
======== ======== ======== ======== ========
Net premiums written(5)............. $5,299.7 $4,665.1 $3,441.7 $2,912.8 $2,457.2
======== ======== ======== ======== ========
GAAP operating ratios:
Loss and loss adjustment expense
ratio(3)........................ 68.2% 70.9% 69.9% 71.3% 63.8%
Underwriting expense ratio........ 23.4% 22.5% 21.6% 23.0% 24.7%
-------- -------- -------- -------- --------
Combined ratio(3)................. 91.6% 93.4% 91.5% 94.3% 88.5%
======== ======== ======== ======== ========
Statutory operating ratios:
Loss and loss adjustment expense
ratio(3)........................ 68.5% 71.1% 70.2% 71.6% 64.2%
Underwriting expense ratio........ 22.4% 20.7% 19.8% 21.4% 22.4%
-------- -------- -------- -------- --------
Combined ratio(3)(6).............. 90.9% 91.8% 90.0% 93.0% 86.6%
======== ======== ======== ======== ========
</TABLE>
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<TABLE>
<CAPTION>
AS OF DECEMBER 31,
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1998 1997 1996 1995 1994
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets(7)..................... $8,463.1 $7,559.6 $6,183.9 $5,352.5 $4,675.1
Debt................................ 776.6 775.9 775.7 675.9 675.6
Shareholders' equity(3)(7).......... 2,557.1 2,135.9 1,676.9 1,475.8 1,151.9
</TABLE>
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(1) Investment income includes dividend and interest income on invested assets.
(2) During 1998, Progressive recognized $32.2 million of net realized losses due
to write downs in securities considered to have other than temporary
declines in market value, including $20.8 million in two securities in
emerging markets driven by changing economic conditions, and a $9.2 million
loss on a hedge related to the debt offering made by this prospectus
supplement. During 1997, Progressive sold $178.4 million (proceeds of $200.8
million) of its non-investment grade commercial mortgage-backed securities,
recognizing $22.4 million of net realized gains on security sales. A
bankruptcy remote subsidiary of Progressive acquired $22.8 million of the
resecuritized debt, which was subsequently sold in 1998 for a net gain of
$3.5 million.
(3) In 1994, Progressive eliminated its "supplemental reserve," resulting in a
one-time decrease to loss and loss adjustment expenses of $71.0 million, or
$.62 per share, decreasing the combined ratio 3.2 points and increasing
shareholders' equity $46.2 million.
(4) For the year ended December 31, 1997, Progressive adopted Statement of
Financial Accounting Standards (SFAS) 128. "Earnings Per Share," which
requires disclosure of basic and diluted earnings per share, replacing
primary and fully diluted earnings per share as previously reported, and the
restatement of all prior period information. Prior to May 31, 1996 (the
redemption date of the 9 3/8% Serial Preferred Shares, Series A), net income
was reduced by Preferred Share dividends earned during the period and the
excess of the fair value over the carrying amount of Preferred Shares
repurchased for both the basic and diluted earnings per share calculations.
Basic earnings per share are computed using the weighted average number of
Common Shares outstanding and diluted earnings per share includes common
stock equivalents, including stock options, assumed outstanding during the
period.
(5) Total direct premiums written net of reinsurance.
(6) Industry combined ratios for the personal auto insurance market, presented
on a statutory basis and obtained from A.M. Best Company Inc.'s Best's
Review - P/C Insurance Edition dated January 1999, are set forth below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -------------------------------------
<S> <C> <C> <C> <C>
1998 (EST.) 1997 1996 1995 1994
99.7% 99.5% 101.0% 101.3% 101.3%
</TABLE>
(7) In November 1995, the Financial Accounting Standards Board issued a special
report entitled "A Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities." Concurrent with the
initial adoption of this implementation guidance, Progressive was able to
reassess the appropriateness of the classifications of all securities held
at that time. As a result, on December 1, 1995, Progressive reclassified its
entire held-to-maturity portfolio of $248.4 million to available-for-sale,
recognizing $10.4 million in gross unrealized gains.
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered by
this prospectus supplement supplements the description of the general terms and
provisions of the Notes set forth in the accompanying prospectus (the Notes are
referred to in that prospectus as the "Debt Securities"). You should carefully
read the entire prospectus and prospectus supplement to understand fully the
terms of the Notes. All of the information set forth below is qualified in its
entirety by the more detailed explanation set forth in the accompanying
prospectus.
GENERAL
The Notes are a single series of senior debt securities issued by
Progressive under the indenture dated September 15, 1993, as supplemented, which
is more fully described in the prospectus. The Notes are unsecured and will rank
equally with all of Progressive's other senior and unsubordinated debt. As of
December 31, 1998, Progressive had $626.9 million of senior unsubordinated debt
outstanding. See "Capitalization." The indenture does not limit the amount of
Notes that Progressive may issue or the amount of debt that Progressive may
incur in the future.
The maximum principal amount of the Notes that Progressive will issue
initially is $300 million. The Notes will mature on March 1, 2029. Progressive
has the option to redeem the Notes prior to their stated maturity on the terms
described below; holders of the Notes do not have any similar option to require
Progressive to redeem the Notes before their stated maturity. The Notes will not
be entitled to the benefit of any sinking fund.
Progressive will periodically pay interest on the Notes at a rate of %
from the date of issuance. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. Interest will be payable semiannually on each
March 1 and September 1, beginning September 1, 1999, to the persons in whose
names the Notes are registered at the close of business on the preceding
February 15 or August 15, respectively, except that any interest payable upon
maturity or earlier redemption of the Notes will be payable to the person to
whom the principal of the Note is payable.
OPTIONAL REDEMPTION
Progressive, at its option, may redeem all or part of the Notes at any
time. The redemption price will equal the greater of (1) 100% of the principal
amount of the Notes to be redeemed or (2) a "make whole" amount, which will be
calculated as described below. At the time of any redemption, Progressive will
also pay all interest that has accrued to the redemption date on the redeemed
Notes.
CALCULATION OF MAKE WHOLE AMOUNT
The "make whole" amount will equal the sum of the present values of the
Remaining Scheduled Payments (as defined below) discounted, on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months), at a rate
equal to the Treasury Rate (as defined below) plus basis points.
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"REMAINING SCHEDULED PAYMENTS" means the remaining scheduled payments of
the principal and interest that would be due after the redemption date of a Note
if such Note were not redeemed. However, if the redemption date is not a
scheduled interest payment date, the amount of the next succeeding scheduled
interest payment on such Note will be reduced by the amount of interest accrued
on such Note to such redemption date.
"TREASURY RATE" means an annual rate equal to the semiannual equivalent
yield to maturity of the Comparable Treasury Issue (as defined below), assuming
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for the redemption
date. The semiannual equivalent yield to maturity will be computed as of the
third business day immediately preceding the redemption date.
"COMPARABLE TREASURY ISSUE" means the United States Treasury security
selected by Donaldson, Lufkin & Jenrette Securities Corporation or an affiliate
as having a maturity comparable to the remaining term of the Notes that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Notes.
"COMPARABLE TREASURY PRICE" means the average of three Reference Treasury
Dealer Quotations (as defined below) obtained by the Trustee for the redemption
date.
"REFERENCE TREASURY DEALERS" means Donaldson, Lufkin & Jenrette (so long as
it continues to be a primary U.S. Government securities dealer) and any two
other primary U.S. Government securities dealers chosen by Progressive. If
Donaldson, Lufkin & Jenrette ceases to be a primary U.S. Government securities
dealer, Progressive will appoint in its place another nationally recognized
investment banking firm that is a primary U.S. Government securities dealer.
"REFERENCE TREASURY DEALER QUOTATION" means the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by a Reference Treasury Dealer at 3:30 p.m., New York
City time on the third business day preceding the redemption date.
REDEMPTION PROCEDURES
Progressive will give you at least 30 days (but not more than 60 days)
prior notice of any redemption. If less than all of the Notes are redeemed, the
Trustee will select the Notes to be redeemed by a method determined by the
Trustee to be fair and appropriate.
On or before the redemption date, Progressive will deposit with a paying
agent (or the Trustee) money sufficient to pay the redemption price and accrued
interest on the Notes to be redeemed on such date. On and after the redemption
date, interest will cease to accrue on any Notes that have been called for
redemption (unless Progressive defaults in the payment of the Redemption Price
and accrued interest).
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<PAGE> 11
If any redemption date is not a business day, then the redemption price and
all accrued and unpaid interest to the date of redemption will be payable on the
next business day (and without any interest or other payment in respect of any
such delay). However, if the business day is in the next calendar year, the
redemption amount will be payable on the preceding business day.
SUPPLEMENTAL INDENTURE
In connection with the offering of the Notes pursuant to this prospectus
supplement, the indenture will be amended by a supplemental indenture to add
certain restrictions for the benefit of the holders of the Notes offered by this
prospectus supplement. These additional restrictions will only apply to
Progressive with respect to the Notes offered by this prospectus supplement.
DEFINITIONS APPLICABLE TO THE ADDITIONAL RESTRICTIONS
For purposes of these additional restrictions, these terms have the
following meanings:
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, at any date, the total assets
appearing on the consolidated balance sheet of Progressive and its consolidated
subsidiaries as of the end of the then most recent fiscal quarter of
Progressive, prepared in accordance with generally accepted accounting
principles, less (a) the total liabilities appearing on such balance sheet and
(b) intangible assets. "Intangible assets" means the value, as shown on or
reflected in such balance sheet, of (i) all trade names, trademarks, licenses,
patents, copyrights and goodwill, (ii) organizational costs and (iii)
unamortized debt discount and expense, less unamortized premium.
"DESIGNATED SUBSIDIARY" shall mean (i) Progressive Casualty Insurance
Company, so long as it remains a subsidiary of Progressive, (ii) any other
consolidated subsidiary of Progressive the assets of which constitute 10% or
more of the Total Assets and (iii) any subsidiary which is a successor to all or
substantially all of the business or properties of such subsidiaries.
"TOTAL ASSETS" shall mean, at any date, the total assets appearing on the
consolidated balance sheet of Progressive and its consolidated subsidiaries as
of the end of the then most recent fiscal quarter of Progressive, prepared in
accordance with generally accepted accounting principles.
ADDITIONAL RESTRICTIONS
The indenture, as supplemented, will impose the following additional
restrictive covenants on Progressive for the benefit of the holders of the Notes
offered by this prospectus supplement. You should refer to the prospectus for a
description of the other covenants and provisions contained in the indenture.
Limitation on Liens. The indenture will provide that Progressive will not,
nor will it permit any Designated Subsidiary to, incur, issue, assume or
guarantee any indebtedness for money borrowed if (i) that indebtedness is
secured by a pledge,
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<PAGE> 12
mortgage, deed of trust or other lien on any shares of stock or indebtedness of
any Designated Subsidiary (a "LIEN") and (ii) the aggregate amount of the
indebtedness so secured exceeds an amount equal to 15% of Progressive's
Consolidated Tangible Net Worth, unless the Notes are also secured equally and
ratably with the other indebtedness. For purposes of this restriction, a "lien"
will not include the pledge to, or deposit with, any state or provincial
insurance regulatory authorities of any investment securities by Progressive or
any of its subsidiaries.
This restriction will not apply to indebtedness secured by:
(a) Liens on any shares of stock or indebtedness of or acquired from a
corporation merged or consolidated with or into, or otherwise acquired
by, Progressive or a Designated Subsidiary;
(b) Liens to secure indebtedness of a Designated Subsidiary to Progressive
or another Designated Subsidiary but only as long as the indebtedness
is owned or held by Progressive or a Designated Subsidiary; and
(c) Any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any lien referred to
in (a) and (b) above.
Consolidation, Merger, Sale, Conveyance and Lease. The indenture will
permit Progressive to consolidate or merge with or into any other entity or
entities, or to sell, convey or lease all or substantially all of its property
to any other entity, only if:
(a) the entity formed by such consolidation, or into which Progressive is
merged or which acquires or leases all or substantially all of the
property of Progressive, is a corporation or other entity organized
under the laws of the United States, any state thereof or the District
of Columbia, and the entity expressly assumes Progressive's obligations
under the Notes and the indenture; and
(b) immediately after the transaction, no "event of default" (as defined in
the indenture) exists.
This restriction shall not apply if Progressive is the entity that survives
any of these transactions.
BOOK-ENTRY DELIVERY AND FORM
The Notes will be issued as global debt securities in "book-entry" form in
multiples of $1,000. See "Description of Debt Securities - Global Securities" in
the accompanying prospectus. Depository Trust Company ("DTC") will be the
depository with respect to the Notes. The Notes will be issued as
fully-registered securities in the name of Cede & Co., DTC's partnership
nominee, and will be deposited with DTC.
DTC has advised Progressive that it is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants deposit with
DTC and facilitates the settlement among participants of securities transactions
in deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating
S-12
<PAGE> 13
the need for physical movement of securities certificates. Participants include
securities brokers and dealers (including the underwriters), banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to DTC's book-entry system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a participant, either directly
or indirectly. The rules applicable to DTC and its participants are on file with
the Commission.
DTC management is aware that some computer applications and systems for
processing data that are dependent upon calendar dates, including dates before,
on and after January 1, 2000, may encounter "Year 2000 problems." DTC has
informed its participants and other members of the financial community that it
has developed and is implementing a program so that its systems, as the same
relate to the timely payment of distributions (including principal and income
payments) to securityholders, book-entry deliveries and settlement of trades
within DTC, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third-party vendors from whom DTC licenses software and hardware, and
third-party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the industry that it is contacting (and will
continue to contact) third-party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the underwriters in immediately
available funds. All payments of principal and interest on the Notes will be
made by Progressive in immediately available funds. The Notes will trade in
DTC's same-day funds settlement system until maturity, and secondary market
trading activity in the Notes therefore will be required by DTC to settle in
immediately available funds.
S-13
<PAGE> 14
UNDERWRITING
The underwriters named below have severally agreed, subject to the terms
and conditions of the underwriting agreement with Progressive, to purchase the
principal amount of Notes set forth below opposite their respective names. The
underwriters are committed to purchase all of such Notes if any are purchased.
Under certain circumstances, the commitments of non-defaulting underwriters may
be increased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS: OF NOTES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.... $
Salomon Smith Barney Inc...............................
Goldman, Sachs & Co....................................
J.P. Morgan Securities Inc.............................
------------
Total............................................. $300,000,000
============
</TABLE>
The underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
prospectus supplement and in part to certain securities dealers at such price
less a concession of 0. % of the principal amount of the Notes. The
underwriters may allow, and such dealers may reallow, a concession not to exceed
0. % of the principal amount of the Notes to certain brokers and dealers.
After the Notes are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the underwriters.
In connection with the offering of the Notes, the underwriters may engage
in overallotment, stabilizing transactions and short covering transactions in
accordance with Regulation M under the Securities Exchange Act of 1934.
Overallotment involves sales in excess of the offering size, which creates a
short position for the underwriters. Stabilizing transactions involve bids to
purchase the Notes in the open market for the purpose of pegging, fixing or
maintaining the price of the Notes. Short covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. These stabilizing transactions and
short covering transactions may cause the price of the Notes to be higher than
it would otherwise be in the absence of such transactions. Such activities, if
commenced, may be discontinued at any time.
All secondary trading in the Notes will settle in immediately available
funds. See "Description of Notes - Same-Day Settlement and Payment."
Progressive does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the underwriters that the
underwriters intend to make a market in the Notes. The underwriters are not
obligated, however, to make a market in the Notes and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the Notes.
Progressive has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
S-14
<PAGE> 15
In the ordinary course of their respective businesses, the underwriters and
certain of their affiliates have engaged and may in the future engage in
investment banking and commercial banking transactions with Progressive.
Progressive estimates that it will spend approximately $150,000 for
printing, rating agency, trustee, accounting and legal fees and other expenses
relating to the offering.
S-15
<PAGE> 16
PROSPECTUS
THE PROGRESSIVE CORPORATION
DEBT SECURITIES
------------------------
The Progressive Corporation (the "Company") may offer, from time to time in
one or more transactions, its notes, debentures or other unsecured evidences of
indebtedness (the "Debt Securities") with an aggregate initial public offering
price of up to $300,000,000. The Debt Securities will rank equally with all
other current and future unsecured and unsubordinated indebtedness of the
Company and prior to subordinated indebtedness, if any.
The terms of the Debt Securities of each series will be specified in a
supplement to this Prospectus (a "Prospectus Supplement"). Among other items,
such terms may include the following:
- title of the series
- aggregate principal amount
- purchase price
- maturity date
- interest rate and interest payment dates
- any optional or mandatory redemption terms
- any sinking fund provisions
- listing on a securities exchange
- name of each dealer, underwriter or agent involved in the offering
- any compensation payable to any such dealer, underwriter or agent
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR THE NORTH CAROLINA
INSURANCE COMMISSIONER NOR HAS THE SECURITIES AND EXCHANGE COMMISSION,
ANY STATE SECURITIES COMMISSION OR SUCH COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is April 7, 1998
<PAGE> 17
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION MAY NOT BE LEGALLY MADE. THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street N.W., Room 1024, Washington, D.C. 20549, and at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10048, and The Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission, 450 Fifth Street N.W.,
Washington, D.C. 20549. The Company files such material with the Commission
electronically. The Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of such Web site is
http://www.sec.gov. Reports, proxy statements and other information concerning
the Company may also be inspected at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. These
documents may be inspected without charge at the office of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C. 20549 or at the
Commission's Web site, and copies may be obtained at fees and charges prescribed
by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997, filed by the Company with the Commission on March 27, 1998, as amended by
the Company's Form 10-K/A-No. 1 filed with the Commission on March 30, 1998,
pursuant to the Exchange Act, is incorporated herein by reference.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering are hereby incorporated by
reference into this Prospectus and shall be deemed a part hereof from the
respective dates of filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated herein by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference in this Prospectus modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom a Prospectus
is delivered, upon written or oral request, a copy of any or all of the
foregoing documents incorporated herein by reference (other than certain
exhibits). Requests for such documents should be directed to Jeffrey W. Basch,
Chief Accounting Officer, The Progressive Corporation, at 6300 Wilson Mills
Road, Mayfield Village, Ohio 44143 or by telephone at (440) 446-2851.
2
<PAGE> 18
THE COMPANY
The Company is an insurance holding company which has 88 operating
subsidiaries and one mutual insurance company affiliate. Progressive Casualty
Insurance Company is the principal operating subsidiary. The Company's insurance
subsidiaries and affiliate provide personal automobile insurance and other
specialty property/casualty insurance and related services throughout the United
States and in Canada. Of the approximately 250 United States insurance company
groups writing private passenger auto insurance, the Progressive insurance group
ranked 6th in size based on 1996 direct premiums written, as reported by A.M.
Best Company Inc. in their 1996 A(2) report for all private passenger auto
insurance writers.
The Company's core business, which accounted for 96% of the Company's total
net premiums written in 1997, writes insurance for private passenger
automobiles, recreational vehicles and small fleets of commercial vehicles. The
Progressive insurance group is a major participant in the nonstandard automobile
segment of the property/casualty insurance industry. The Company also writes
standard and preferred auto risks.
The Company's diversified businesses, which accounted for 4% of total net
premiums written in 1997, offer collateral protection coverage and loan tracking
for automobile lenders and financial institutions, directors and officers
liability and fidelity coverage for American Bankers Association member
community banks, nonstandard auto insurance and underwriting and claim servicing
for state involuntary residual market commercial and personal auto programs.
The Company's principal executive office is located at 6300 Wilson Mills
Road, Mayfield Village, Ohio 44143, and its telephone number is (440) 461-5000.
USE OF PROCEEDS
Except as otherwise provided in an applicable Prospectus Supplement, the
net proceeds will be used by the Company for general corporate purposes. Unless
and until otherwise applied, the net proceeds will be added to the investment
portfolios of the Company or its subsidiaries and may be used, in whole or in
part, to support premium growth. Such proceeds will be invested in securities of
approximately the same quality and maturities as those currently held in such
investment portfolios. A discussion of the nature of such securities, and the
risks relating thereto, is set forth in the "Investments" section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's 1997 Annual Report on Form 10-K.
RATIO OF EARNINGS TO FIXED CHARGES
The following table represents the Company's ratio of earnings to fixed
charges for the periods shown:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
9.2x 7.7x 6.6x 7.3x 9.2x
</TABLE>
Earnings consist of income before income taxes and before fixed charges.
Fixed charges consist of interest and amortization on indebtedness and the
portion of rents representative of the interest factor.
3
<PAGE> 19
DESCRIPTION OF DEBT SECURITIES
The Company may offer under this Prospectus and one or more Prospectus
Supplements Debt Securities not exceeding $300,000,000 in aggregate initial
public offering price. The following description of the terms of the Debt
Securities sets forth certain general terms and provisions of the Debt
Securities which may be offered under a Prospectus Supplement. The particular
terms and provisions of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Debt Securities offered hereby will represent unsecured general
obligations of the Company and will rank on a parity with all other existing and
future unsecured and unsubordinated indebtedness of the Company and prior to
subordinated indebtedness, if any. The Debt Securities are to be issued under an
Indenture dated as of September 15, 1993 (which, as supplemented and amended, is
referred to herein as the "Indenture") between the Company and State Street Bank
and Trust Company, as Trustee (the "Trustee"). Debt Securities may be issued in
one or more series under the Indenture. The Indenture does not limit the amount
of Debt Securities or any other debt which may be incurred by the Company. In
addition, the provisions of the Indenture do not afford holders of the Debt
Securities protection in the event of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction involving the
Company that may adversely affect holders of the Debt Securities. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture, which is an exhibit to the Registration Statement
of which this Prospectus is a part. Certain capitalized terms used herein are
defined in the Indenture. References are to sections or articles of the
Indenture.
GENERAL
The Indenture does not limit the amount of Debt Securities which may be
issued thereunder and provides that Debt Securities may be issued in series
thereunder up to the aggregate principal amount which may be authorized from
time to time by the Company. The Debt Securities may be denominated and payable
in U.S. dollars, foreign currencies or units based on or relating to U.S. or
foreign currencies. Debt Securities may be offered to the public on terms
determined by market conditions at the time of sale. (Section 2.3 of the
Indenture.)
Reference is made to the appropriate Prospectus Supplement for the
following terms of each series of Debt Securities in respect of which this
Prospectus is being delivered: (1) the title, aggregate principal amount and
authorized denominations of such Debt Securities; (2) the purchase price of such
Debt Securities (expressed as a percentage of the principal amount thereof); (3)
the date on which such Debt Securities will mature; (4) the rate or rates (which
may be fixed or variable) per annum at which such Debt Securities will bear
interest, if any, or the method by which such rate or rates will be determined;
(5) the coin or currency or units based on or relating to currencies in which
Debt Securities may be purchased and in which payment of principal and interest
will be made; (6) the periods for which and the dates on which such interest, if
any, will be payable; (7) the place or places where the principal of and premium
and interest, if any, on such Debt Securities will be payable; (8) the terms of
any mandatory or optional redemption (including any sinking fund); (9) whether
such Debt Securities will be issuable in registered form or bearer form (with or
without coupons) or both, and, if Debt Securities in bearer form will be issued,
restrictions applicable to the exchange of one form for another and to the
offer, sale and delivery of Debt Securities in bearer form; (10) whether, and
under what circumstances, the Company will pay additional amounts on such Debt
Securities held by a person who is not a U.S. person (as defined in an
appropriate Prospectus Supplement) in respect of any tax, assessment or
governmental charge withheld or deducted, and if so, whether the Company will
have the option to redeem such Debt Securities rather than pay such additional
amounts; and (11) any other specific terms of such series. If a Prospectus
Supplement specifies that Debt Securities are denominated in a currency other
than U.S. dollars or U.S. currency units, such Prospectus Supplement shall also
specify the denomination in which such Debt Securities will be issued and the
coin or currency or currency unit in which the principal of and premium and
interest, if any, on such Debt Securities will be payable, which may be
4
<PAGE> 20
U.S. dollars based upon the exchange rate for such other currency or currency
unit existing on or about the time a payment is due. (Section 2.3 of the
Indenture.)
Debt Securities may be presented for exchange and registered Debt
Securities may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Indenture. Such services will be
provided without charge, other than any tax or other governmental charge payable
in connection therewith, but subject to the limitations provided in the
Indenture. Debt Securities in bearer form and the coupons, if any, pertaining
thereto will be transferable by delivery. (Section 2.8 of the Indenture.)
The Debt Securities will be unsecured. The Debt Securities will rank on a
parity with all other existing and future unsecured and unsubordinated
indebtedness of the Company and prior to subordinated indebtedness, if any.
Because the Company is a holding company, however, its rights and the rights of
its creditors to participate in the assets of any subsidiary upon the latter's
liquidation or recapitalization (and thus the ability of holders of the Debt
Securities to benefit as creditors of the Company in such liquidation or
recapitalization) will be subject to the prior claims of the subsidiary's
creditors, except to the extent that the Company may itself be a creditor with
recognized claims (other than as a holder of the subsidiary's outstanding shares
of capital stock) against the subsidiary.
In addition, insurance statutes in many states limit the extent to which
regulated insurance companies may pay dividends and transfer assets to their
affiliates and either prohibit or require prior regulatory approval for the
payment of dividends and other distributions in excess of such limits. Since a
source of the Company's internally generated cash flow is dividends paid to it
by its subsidiaries, the Company's ability to meet its obligations (including
the obligation to pay principal of and premium, if any, and interest on the Debt
Securities) may be affected by any such limitations or prior approval
requirements.
GLOBAL SECURITIES
The Debt Securities may be issued in the form of one or more global
securities (a "Global Security") that will be deposited with a depositary (a
"Depositary") or with a nominee for a Depositary identified in an appropriate
Prospectus Supplement and registered in the name of the Depositary or a nominee
thereof. In such case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive registered form, a Global Security may not be
transferred, except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any Debt
Securities to be represented by a Global Security will be described in a
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, WAIVER AND NOTICE
As to any series of Debt Securities, an Event of Default is defined in the
Indenture as (a) default for 30 days in payment of any interest on the Debt
Securities of such series; (b) default in payment of principal of or premium, if
any, on the Debt Securities of such series when due either at maturity, upon
redemption, by declaration or otherwise; (c) default in the payment of a sinking
fund installment, if any, on the Debt Securities of such series; (d) default by
the Company in the performance of any other covenant or warranty contained in
the Indenture for the benefit of such series which shall not have been remedied
for a period of 60 days after notice given as specified in the Indenture; and
(e) certain events of bankruptcy, insolvency and reorganization of the Company.
(Section 5.1 of the Indenture.) An Event of Default with respect to a particular
series of Debt Securities issued under the Indenture does not necessarily
constitute an Event of Default with respect to any other series of Debt
Securities issued thereunder. The Indenture provides that the Trustee may
withhold notice to the holders of Debt Securities of any series of any default
(except in payment of principal of, or premium, if any, or interest on such Debt
Securities) if the Trustee determines, in good faith, that it is in the interest
of the holders of Debt Securities of such series to do so; provided, however,
that
5
<PAGE> 21
in the case of a default of the character specified in clause (d) above, no such
notice to holders of Debt Securities of such series shall be given until at
least 30 days after the occurrence thereof. (Section 5.11 of the Indenture.)
The Indenture provides that (1) if an Event of Default described in clause
(a), (b), (c) or (d) above with respect to a particular series of Debt
Securities shall have occurred and be continuing, either the Trustee or the
holders of at least 25% in principal amount of the Debt Securities of such
series then outstanding may declare the entire principal (or, in the case of
original issue discount Debt Securities, the portion thereof specified in the
terms thereof) of all outstanding Debt Securities of such series and the
interest accrued thereon, if any, to be due and payable immediately and (2) if
an Event of Default described in clause (e) above shall have occurred and be
continuing, either the Trustee or the holders of at least 25% in principal
amount of all Debt Securities then outstanding thereunder (voting as one class)
may declare the entire principal (or, in the case of original issue discount
Debt Securities, the portion thereof specified in the terms thereof) of all Debt
Securities then outstanding thereunder and the interest accrued thereon, if any,
to be due and payable immediately, but upon certain conditions such declarations
may be annulled and past defaults (except for defaults in the payment of
principal of or premium, if any, or interest on such Debt Securities) may be
waived by the holders of a majority in principal amount of the Debt Securities
of such series (or of all series thereunder, as the case may be) then
outstanding. (Sections 5.1, 5.10 and 8.1 of the Indenture.)
The Indenture provides that holders of a majority in principal amount of
the outstanding Debt Securities of each series affected (with each series voting
as a separate class) shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee under the
Indenture with respect to Debt Securities of such series, subject to certain
limitations specified in the Indenture, provided that the holders of Debt
Securities shall have offered to the Trustee reasonable security or indemnity
against expenses and liabilities. (Sections 5.9 and 6.2(d) of the Indenture.)
The Indenture requires the annual delivery by the Company to the Trustee of a
written statement as to the absence of certain defaults under the Indenture.
(Section 3.5 of the Indenture.) Whenever the Indenture provides for an action
by, or the determination of any of the rights of, or any distribution to,
holders of Debt Securities denominated in U.S. dollars and in any other currency
or currency unit, in the absence of any provision to the contrary in the form of
Debt Security of any particular series, any amount in respect of any Debt
Security denominated in a currency or currency unit other than U.S. dollars
shall be treated for any such action or distribution as the amount of U.S.
dollars that could be obtained for such amount on such reasonable basis of
exchange and as of such date as the Company reasonably specifies to the Trustee
or in the absence of such specification, as the Trustee may determine. (Section
11.11 of the Indenture.) Under the terms of the Indenture, the holders of a
majority in aggregate principal amount of all series of the Debt Securities to
be affected thereby at the time outstanding may waive compliance with certain
covenants contained in the Indenture. (Section 5.10 of the Indenture.)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than 66 2/3% in aggregate principal
amount of the Debt Securities of all series affected by such modification at the
time outstanding (voting as one class), to modify the Indenture or any
supplemental indenture or the rights of the holders of such Debt Securities;
provided that no such modification shall (i) extend the final maturity of any
Debt Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or change the currency or
currency unit of payment thereof, or change the method by which amounts of
payments of principal or interest thereon are determined, or reduce the portion
of the principal amount of an original issue discount Debt Security due and
payable upon acceleration of the maturity thereof or the portion of the
principal amount thereof provable in bankruptcy, or reduce any amount payable
upon redemption of any Debt Security, or impair or affect the right of a holder
to institute suit for the payment thereof or, if the Debt Securities provide
therefor, any right of repayment at the option of the holder of a Debt Security,
without the consent of the holders of each Debt Security so affected or (ii)
reduce the aforesaid percentage of Debt Securities of any series, the consent of
the holders of which is required for any such modification, without the consent
of the holder of each Debt
6
<PAGE> 22
Security so affected. (Section 8.2 of the Indenture.) The Indenture also
provides that the Company and the Trustee may from time to time execute
supplemental indentures. (Section 8.1 of the Indenture.)
CONSOLIDATIONS, MERGERS AND SALES OF ASSETS
The Company may not merge or consolidate with any other corporation or sell
or convey all or substantially all of its assets to any Person, unless either
the Company shall be the continuing corporation or the successor corporation
shall be a corporation organized under the laws of the United States or any
state thereof and shall expressly assume the payment of the principal of and
interest on the Debt Securities and the performance and observance of all the
covenants and conditions of the Indenture binding upon the Company, and,
immediately after such merger or consolidation, or such sale or conveyance, the
Company or such successor corporation shall not be in default in the performance
of any such covenant or condition. (Article Nine of the Indenture.)
DEFEASANCE
The Indenture provides that, unless the terms of any series of Debt
Securities provide otherwise, the Company will be discharged from obligations in
respect of the outstanding Debt Securities of any series and the provisions of
the Indenture with respect thereto (excluding certain obligations, such as
obligations to register the transfer or exchange of such outstanding Debt
Securities, to replace stolen, lost or mutilated certificates or coupons, and to
hold moneys for payment in trust), upon the irrevocable deposit, in trust, of
cash or U.S. Government Obligations (as defined in the Indenture) which, through
the payment of interest and principal thereof in accordance with their terms,
will provide cash in an amount sufficient to pay the principal of and premium,
if any, and interest on and mandatory sinking fund payments, if any, in respect
of all outstanding Debt Securities of such series on the stated dates such
payments are due in accordance with the terms of the Indenture and such
outstanding Debt Securities, provided that the Company has received an opinion
of counsel to the effect that such a discharge will not be deemed, or result in,
a taxable event with respect to holders of such outstanding Debt Securities and
that certain other conditions are met. (Section 10.1(B) of the Indenture.)
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect and the Trustee, on demand
of and at the expense of the Company, shall execute appropriate instruments
acknowledging the satisfaction and discharge of the Indenture upon compliance
with certain enumerated conditions, including (a) the Company having paid all
sums payable by the Company under the Indenture, as and when the same shall be
due and payable, (b) the Company shall have delivered to the Trustee for
cancellation all Debt Securities theretofore authenticated under the Indenture
or (c) all Debt Securities not theretofore delivered to the Trustee for
cancellation shall have become due and payable or are by their terms to become
due and payable within one year and the Company shall have deposited with the
Trustee sufficient cash or U.S. Government Obligations which, through the
payment of principal and interest thereon in accordance with their terms, will
provide sufficient cash to pay, at maturity or upon redemption, all Debt
Securities of any series outstanding under the Indenture. (Section 10.1(A) of
the Indenture.)
GOVERNING LAW
The Debt Securities and the Indenture will be governed by the laws of the
State of New York. (Section 11.8 of the Indenture.)
CONCERNING THE TRUSTEE
The Company entered into the Indenture with The First National Bank of
Boston, as Trustee ("FNBB"), pursuant to which the Company may issue one or more
series of its Debt Securities. Effective October 2, 1995, State Street Bank and
Trust Company acquired the trust business of FNBB, and, as a result, State
Street Bank and Trust Company became and is currently the Trustee under the
Indenture. State Street Bank
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and Trust Company may from time to time make loans to the Company, and various
subsidiaries of the Company may participate in loan syndications or other
investments offered by State Street Bank and Trust Company from time to time, in
the normal course of business. State Street Bank and Trust Company also serves
as trustee for the Company's outstanding 10% Notes due December 15, 2000,
10 1/8% Subordinated Notes due December 15, 2000, 8 3/4% Notes due June 1, 1999,
7% Notes due October 1, 2013, 6.60% Notes due January 15, 2004 and 7.30% Notes
due June 1, 2006.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities being offered hereby (i) through
agents, (ii) through underwriters, (iii) through dealers or (iv) directly to one
or more purchasers. The Prospectus Supplement with respect to a particular
offering of Debt Securities will set forth the terms of the offering of such
Debt Securities, including the name or names of the specific agents, dealers or
underwriters (including managing underwriters, if any), the purchase price and
the proceeds to the Company from such sales, any underwriting discounts, agency
fees or commissions and other items constituting compensation to the
underwriters, agents or dealers, initial public offering price, any discounts or
concessions to be allowed or reallowed or paid to dealers, the securities
exchange, if any, on which such Debt Securities may be listed, and the place and
time of delivery of the Debt Securities offered.
Debt Securities may be offered and sold through agents designated by the
Company from time to time. Unless otherwise indicated in the applicable
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of any Debt
Securities so offered and sold. Agents may be entitled under agreements which
may be entered into with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with, or perform services for, the Company
in the ordinary course of business.
If an underwriter or underwriters are utilized in the sale of any Debt
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is reached.
Such underwriter or underwriters will acquire Debt Securities for their own
account and may resell such Debt Securities from time to time in one or more
transactions, including negotiated transactions, at fixed public offering prices
or at varying prices determined at the time of sale. Debt Securities may be
offered to the public either through underwriting syndicates represented by
managing underwriters, or by underwriters without a syndicate. The underwriters
may be entitled, under the relevant underwriting agreement, to indemnification
by the Company against certain liabilities, including liabilities under the
Securities Act. If any underwriter or underwriters are utilized in the sale of
any Debt Securities, unless otherwise set forth in the applicable Prospectus
Supplement, the underwriting agreement will provide that the obligations of the
underwriters will be subject to certain conditions precedent and that the
underwriters with respect to a sale of such Debt Securities will be obligated to
purchase all such Debt Securities if any are purchased.
If a dealer is utilized in the sale of any Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities to
the public at varying prices to be determined by such dealer at the time of
resale. Any such dealer may be deemed to be an underwriter, as such term is
defined in the Securities Act, of the Debt Securities so offered and sold.
Dealers may be entitled, under agreements which may be entered into with the
Company, to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act. The name of any such dealer and
the terms of the transaction will be set forth in a Prospectus Supplement
relating thereto.
Offers to purchase Debt Securities may be solicited directly by the Company
and sales thereof may be made by the Company directly to institutional investors
or others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any sale thereof. The terms of any such sales
will be described in a Prospectus Supplement relating thereto.
The place and time of delivery of the Debt Securities in respect of which
this Prospectus is delivered will be set forth in an accompanying Prospectus
Supplement.
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<PAGE> 24
LEGAL MATTERS
Unless otherwise indicated in a Prospectus Supplement relating to the Debt
Securities, certain legal matters in connection with the Debt Securities will be
passed upon for the Company by Baker & Hostetler LLP, Cleveland, Ohio. Certain
legal matters in connection with the Debt Securities offered hereby will be
passed upon for any purchasers, dealers, underwriters or agents by Davis Polk &
Wardwell, New York, New York. Davis Polk & Wardwell may rely as to all matters
of Ohio law on the opinion of Baker & Hostetler LLP, and Baker & Hostetler LLP
may rely as to all matters of New York law on the opinion of Davis Polk &
Wardwell. Davis Polk & Wardwell may represent the Company from time to time in
connection with certain legal matters.
EXPERTS
The consolidated financial statements and financial statement schedules of
The Progressive Corporation and subsidiaries as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997, all
incorporated by reference in the Registration Statement of which this Prospectus
forms a part, have been incorporated herein in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
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February , 1999
THE PROGRESSIVE CORPORATION
$300,000,000
% SENIOR NOTES DUE 2029
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P R O S P E C T U S S U P P L E M E N T
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DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU ANY
INFORMATION OTHER THAN THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS OR
TO MAKE REPRESENTATIONS AS TO MATTERS NOT STATED IN THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED INFORMATION. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THE SECURITIES OR OUR SOLICITATION
OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT WOULD NOT BE
PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ATTACHED PROSPECTUS NOR ANY SALES MADE HEREUNDER AFTER THE DATE OF THIS
PROSPECTUS SUPPLEMENT SHALL CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN OR THE AFFAIRS OF THE COMPANY HAVE NOT CHANGED SINCE THE DATE HEREOF.
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