Capital and Liquidity Position

Progressive views its capital as being made up of three distinct layers, each of which has a specific size and purpose. Significant declines in the valuation of PGR’s investment portfolio during 2008 lowered the Company’s excess capital position, which stands at $700 million at present, according to management. Strains on the investment portfolio have caused a significant increase in PGR’s financial leverage over the past year. The debt-to-capital ratio was as high as 35.4% in November 2008, but declined to 30.6% in June 2009, modestly exceeding PGR’s target to operate below 30%.

In terms of liquidity, PGR held approximately $6.4 billion in cash. Further, the U.S. Treasuries on June 30, 2009, represented nearly half of its invested assets and also entered into a one-year, $125 million credit facility at the end of 2008 (which was not tapped during H1 2009), financed by National City Bank.

Net Realized Losses

During June 2009, PGR recognized $13.7 million in net realized gains in its investment portfolio. PGR wrote down $30.0 million in securities. In addition to the write-downs, PGR recognized net gains on sales of securities, including holding period gains of $43.7 million during the month.

Share Repurchase Program

Following the June 11, 2009 investor day announcement of resuming their share repurchase program to buyback up to 50 million shares, the Company repurchased 1 million shares in June for approximately $14.8 million.