The Progressive Corporation (PGR) and its subsidiaries’ ratings have recently been affirmed by A.M. Best Company. The rating agency has affirmed Progressive’s issuer credit ratings of “a-” as well as all of its debt ratings.

Additionally, the agency has affirmed the financial strength ratings of A+ (Superior) and issuer credit ratings of “aa” of the Progressive Agency Pool, Progressive Direct Pool and Progressive Commercial Auto Group and their respective members. A.M. Best also has affirmed the financial strength ratings of A (Excellent) and issuer credit ratings of “a+” of National Continental Insurance Company. The outlook assigned for all ratings is stable.

The ratings affirmation reflects Progressive’s solid capital position, sturdy operating performances and its reasonable competitive advantages. These positives are partially offset by its high underwriting leverage relative to industry averages. Though the company exhibited an improvement in underwriting leverage in 2009, financial leverage remains higher than 2006 and earlier.

Progressive reports earnings on a monthly basis. Its income for October fell to 16 cents per share compared with 22 cents in the year-ago period. Though the company has posted a growth in premium writings, realized gains were lower in the quarter compared to the year-ago quarter. Net premiums written increased 3% year-over-year to $1.3 billion. Policies in force were strong in Personal Auto and Special Lines.

Progressive has experienced improved underwriting results in 2009. The rebound in the capital markets have resulted in a recovery in its investment portfolio. The company continues to benefit from its market leading position, efficient management team, solid distribution platform, pioneering underwriting standards and claims-handling technology.

Progressive’s debt-to-adjusted capitalization also remains within the rating agency’s expectations. However, its Commercial Auto business continues to be negatively impacted by the economic downturn. Nevertheless, we expect Progressive to benefit from the recent signs of economic improvement and from indications of an increase in auto insurance rates.

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