Fitch Expects to Rate Progressive's Senior Notes 'A'

Fitch Ratings expects to assign an 'A' rating to Progressive Corporation's (NYSE: PGR) $350 million issuance of senior unsecured notes maturing in 2044. The new notes' rating is equivalent to the ratings on PGR's existing senior debt. Progressive intends to use the net proceeds from the sale of the senior notes for general corporate purposes.

KEY RATING DRIVERS

Fitch's expected rating reflects PGR's strong balance sheet and Fitch's belief that PGR's financial leverage, as measured by total debt to total capital, will remain within a reasonable range for the rating category in the near term. PGR's financial leverage at March 31, 2014 was 22.7%. Pro forma leverage including the additional debt will temporarily increase to 25.9%, within Fitch's expectations.

PGR's profitability promotes strong interest coverage. GAAP fixed charge coverage through the first quarter of 2014 was 14.6 times (x) up from year-end 2013 of 12.9x. Fitch believes that GAAP fixed charge coverage will range from high single digits to low double digits over the near term.

On March 28, 2014, Fitch affirmed all of its ratings for PGR and PGR's subsidiaries with a Stable Outlook.

RATING SENSITIVITIES

Factors that could lead to a ratings downgrade include the following:

--Obtaining a GAAP calendar year combined ratio of 99% or higher.

--Failure to maintain a Prism score of 'Very Strong' or better. Based on year-end 2012 data, PGR's Prism score was 'Extremely Strong.'

--An increase in statutory net leverage, defined as net written premiums plus total liabilities relative to policyholders surplus plus Progressive Investment Company, Inc.'s assets, above 5.0x.

--Failure to maintain statutory maximum dividend coverage ratio of 7.0x or higher on a sustained basis.

--A meaningful change to the auto insurance market that unfavorably alters operating environment.

Fitch believes that a ratings upgrade for Progressive is unlikely in the near term given the company's narrow product focus and high notional leverage.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Nov. 13, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827454

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