image0a04a01a64.jpg
 
 
NEWS RELEASE
 
 
 
 
The Progressive Corporation
 
 
Company Contact:
6300 Wilson Mills Road
 
 
Julia Hornack
Mayfield Village, Ohio 44143
 
 
(440) 395-2164
 
 
 
 
 
 

PROGRESSIVE REPORTS MARCH RESULTS

MAYFIELD VILLAGE, OHIO -- April 15, 2020 -- The Progressive Corporation (NYSE:PGR) today reported the following results for March and the first quarter of 2020:
 
March
Quarter
(millions, except per share amounts and ratios; unaudited)
2020
 
2019
 
Change
2020
 
2019
 
Change
Net premiums written
$
2,860.8

 
$
2,959.7

 
(3)
 %
$
9,871.3

 
$
9,239.9

 
7
 %
Net premiums earned
$
2,936.5

 
$
2,668.6

 
10
 %
$
9,430.7

 
$
8,459.8

 
11
 %
Net income attributable to Progressive
$
318.6

 
$
194.8

 
64
 %
$
692.7

 
$
1,078.4

 
(36)
 %
  Per share available to common shareholders
$
0.54

 
$
0.33

 
64
 %
$
1.17

 
$
1.83

 
(36)
 %
Total pretax net realized gains (losses) on securities
$
(329.1
)
 
$
35.1

 
NM

$
(553.6
)
 
$
414.5

 
NM

Combined ratio
77.1

 
87.0

 
(9.9) pts.

86.9

 
88.8

 
(1.9) pts.

Average diluted equivalent common shares
587.0

 
586.6

 
0
 %
586.9

 
586.6

 
0
 %
NM = Not Meaningful
Note: See the footnotes on page 5 and the Monthly Commentary at the end of the release for discussion.

 
March
(thousands; unaudited)
2020
 
2019
 
Change
Policies in Force
 
 
 
 
 
Personal Lines
 
 
 
 
 
Agency – auto
7,164.6
 
6,609.1
 
8 %
Direct – auto
8,126.3
 
7,335.3
 
11 %
Total personal auto
15,290.9
 
13,944.4
 
10 %
Total special lines
4,574.5
 
4,402.1
 
4 %
Total Personal Lines
19,865.4
 
18,346.5
 
8 %
Total Commercial Lines
759.7
 
711.6
 
7 %
Property business
2,264.1
 
2,002.3
 
13 %
Companywide Total
22,889.2
 
21,060.4
 
9 %
 
 
 
 
 
 
Note: See Monthly Commentary at the end of the release for discussion.


Progressive offers personal and commercial insurance throughout the United States. Our Personal Lines business writes insurance for personal autos and special lines products. Our Commercial Lines business writes auto-related primary liability and physical
damage insurance, and general liability and property insurance, predominantly for small businesses. Our Property business writes
residential property insurance for homeowners, other property owners, and renters.

- 1 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENT
March 2020
(millions)
(unaudited)

 
Current Month
 
Comments on Monthly Results1
Net premiums written
$
2,860.8

 
 
 
 
 
 
Revenues:
 
 
 
Net premiums earned
$
2,936.5

 
 
Investment income
78.7

 
 
Net realized gains (losses) on securities:
 
 
 
Net realized gains (losses) on security sales
223.5

 
 
Net holding period gains (losses) on securities
(552.6
)
 
 
Total net realized gains (losses) on securities
(329.1
)
 
 
Fees and other revenues
45.9

 
 
Service revenues
17.0

 
 
Total revenues
2,749.0

 
 
 
 
 
 
Expenses:
 
 
 
Losses and loss adjustment expenses
1,586.6

 
 
Policy acquisition costs
243.3

 
 
Other underwriting expenses
480.9

 
 
Investment expenses
1.9

 
 
Service expenses
17.3

 
Wrote off $2.9 million of software no longer in use.
Interest expense
16.3

 
See note 4 on page 7 regarding debt issued during the month.
Total expenses
2,346.3

 
 
 
 
 
 
Income before income taxes
402.7

 
 
Provision for income taxes
83.0

 
 
Net income
319.7

 
 
Net (income) loss attributable to noncontrolling interest (NCI)
(1.1
)
 
 
Net income attributable to Progressive
318.6

 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
Changes in:
 
 
 
Total net unrealized gains (losses) on fixed-maturity securities
(444.9
)
 
 
Net unrealized losses on forecasted transactions
0.1

 
 
Other comprehensive income (loss)
(444.8
)
 
 
Other comprehensive (income) loss attributable to NCI
3.9

 
 
Total comprehensive income (loss) attributable to Progressive
$
(122.3
)
 
 
 
 
 
 
1See the Monthly Commentary at the end of this release for additional discussion. For a description of our financial reporting and accounting policies, see Note 1 to our 2019 audited consolidated financial statements included in our 2019 Shareholders’ Report, which can be found at www.progressive.com/annualreport.

- 2 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPREHENSIVE INCOME STATEMENTS
March 2020
(millions)
(unaudited)


 
Year-to-Date
 
 
 
2020
 
2019
 
% Change
Net premiums written
$
9,871.3

 
$
9,239.9

 
7
 
 
 
 
 
 
Revenues:
 
 
 
 
 
Net premiums earned
$
9,430.7

 
$
8,459.8

 
11
Investment income
241.2

 
252.9

 
(5)
Net realized gains (losses) on securities:
 
 
 
 
 
Net realized gains (losses) on security sales
315.2

 
46.1

 
NM
Net holding period gains (losses) on securities
(868.8
)
 
392.7

 
NM
Net impairment losses recognized in earnings
0

 
(24.3
)
 
(100)
Total net realized gains (losses) on securities
(553.6
)
 
414.5

 
NM
Fees and other revenues
153.5

 
130.2

 
18
Service revenues
51.6

 
42.6

 
21
Total revenues
9,323.4

 
9,300.0

 
0
 
 
 
 
 
 
Expenses:
 
 
 
 
 
Losses and loss adjustment expenses
6,155.2

 
5,759.0

 
7
Policy acquisition costs
782.8

 
710.6

 
10
Other underwriting expenses
1,409.9

 
1,171.2

 
20
Investment expenses
5.3

 
6.2

 
(15)
Service expenses
47.5

 
38.1

 
25
Interest expense
48.0

 
47.4

 
1
Total expenses
8,448.7

 
7,732.5

 
9
 
 
 
 
 
 
Income before income taxes
874.7

 
1,567.5

 
(44)
Provision for income taxes
175.6

 
484.7

 
(64)
Net income
699.1

 
1,082.8

 
(35)
Net (income) loss attributable to noncontrolling interest (NCI)
(6.4
)
 
(4.4
)
 
45
Net income attributable to Progressive
692.7

 
1,078.4

 
(36)
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
Changes in:
 
 
 
 
 
Total net unrealized gains (losses) on fixed-maturity securities
62.8

 
301.1

 
(79)
Net unrealized losses on forecasted transactions
0.2

 
0.2

 
0
Other comprehensive income (loss)
63.0

 
301.3

 
(79)
Other comprehensive (income) loss attributable to NCI
(0.5
)
 
(2.3
)
 
(78)
Total comprehensive income attributable to Progressive
$
755.2

 
$
1,377.4

 
(45)
 
 
 
 
 
 
NM = Not Meaningful
 
 
 
 
 


- 3 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME AND COMPREHENSIVE INCOME PER SHARE
&
INVESTMENT RESULTS
March 2020
(millions – except per share amounts)
(unaudited)




The following table sets forth the computation of per share results:
 
 
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
Month
 
2020
 
2019
 
 
 
 
 
 
 
 
Net income attributable to Progressive
$
318.6

 
$
692.7

 
$
1,078.4

 
Less: Preferred share dividends
2.2

 
6.7

 
6.7

 
Net income available to common shareholders
$
316.4

 
$
686.0

 
$
1,071.7

 
Per common share:
 
 
 
 
 
 
Basic
$
0.54

 
$
1.17

 
$
1.84

 
Diluted
$
0.54

 
$
1.17

 
$
1.83

 
 
 
 
 
 
 
 
Comprehensive income (loss) attributable to Progressive
$
(122.3
)
 
$
755.2

 
$
1,377.4

 
Less: Preferred share dividends
2.2

 
6.7

 
6.7

 
Comprehensive income (loss) attributable to common shareholders
$
(124.5
)
 
$
748.5

 
$
1,370.7

 
Per common share:
 
 
 
 
 
 
Diluted
$
(0.21
)
 
$
1.28

 
$
2.34

 
 
 
 
 
 
 
 
Average common shares outstanding - Basic
584.7

 
584.7

 
583.5

 
Net effect of dilutive stock-based compensation
2.3

 
2.2

 
3.1

 
Total average equivalent common shares - Diluted
587.0

 
586.9

 
586.6

 
 
 
 
 
 
 
 


The following table sets forth the investment results for the period:
 
 
 
 
 
 
 
Current
 
Year-to-Date
 
 
 
Month
 
2020
 
2019
 
 
Fully taxable equivalent (FTE) total return:
 
 
 
 
 
 
 
Fixed-income securities
(1.1)%
 
1.2%
 
2.3%
 
 
Common stocks
(13.4)%
 
(20.5)%
 
13.3%
 
 
     Total portfolio
(2.1)%
 
(0.6)%
 
3.2%
 
 
 
 
 
 
 
 
 
 
Pretax annualized investment income book yield
2.6%
 
2.7%
 
3.1%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




- 4 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
March 2020
($ in millions)
(unaudited)



Current Month
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Property
Companywide
 
Agency
Direct
Total
Business1
Business
Total
Net Premiums Written
$
1,221.1

$
1,270.1

$
2,491.2

$
212.6

$
157.0

$
2,860.8

% Growth in NPW
1
%
1
%
1
%
(40
)%
13
%
(3
)%
Net Premiums Earned
$
1,190.6

$
1,247.5

$
2,438.1

$
353.8

$
144.6

$
2,936.5

% Growth in NPE
8
%
11
%
10
%
11
 %
15%
10
 %
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
52.7

51.8

52.2

61.7

65.1-

54.0

Expense ratio
21.5

23.4

22.5

24.7

30.02

23.1

Combined ratio
74.2

75.2

74.7

86.4

95.12

77.1

Net catastrophe loss ratio3
 
 
1.0

0.2

12.6

1.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Actuarial Adjustments4
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
(6.7
)
Current accident year
 
 
 
 
 
3.0

Calendar year actuarial adjustment
$
3.2

$
4.9

$
8.1

$
(6.3
)
$
(5.5
)
$
(3.7
)
 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
(6.7
)
All other development5
 
 
 
 
 
(63.7
)
Total development5
 
 
 
 
 
$
(70.4
)
 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
54.0

Accident year loss/LAE ratio
 
 
 
 
 
51.6

 
 
 
 
 
 
 

1The net premiums written in the Commercial Lines transportation network company (TNC) businesses were reduced $110.5 million to reflect the decrease in actual miles driven during the month and a revised estimate of the miles to be driven during the remainder of the policy terms, which is the basis for determining the premiums written on the TNC policies.

2Included in both the expense ratio and combined ratio is 3.3 points of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Excluding these additional expenses, the Property business would have reported an expense ratio of 26.7 and a combined ratio of 91.8.

3Represents catastrophe losses incurred during the period, including the impact of reinsurance, if any, as a percent of net premiums earned.

4Represents adjustments solely based on our normally scheduled actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.

5Included in all other development and total prior accident year development are about $103 million of reserve increases that were made during the month to reflect the impact that COVID-19 restrictions had on our estimates of ultimate costs to settle claims.

- 5 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
March 2020
($ in millions)
(unaudited)



Year-to-Date
 
 
 
 
Commercial
 
 
 
Personal Lines Business
Lines
Property
Companywide
 
Agency
Direct
Total
Business
Business
Total
Net Premiums Written
$
4,026.5

$
4,297.4

$
8,323.9

$
1,144.1

$
403.3

$
9,871.3

% Growth in NPW
7
%
9
%
8
%
(2
)%
15
%
7
%
Net Premiums Earned
$
3,828.7

$
3,992.4

$
7,821.1

$
1,189.0

$
420.6

$
9,430.7

% Growth in NPE
9
%
12
%
10
%
17
 %
16%
11
%
 
 
 
 
 
 
 
GAAP Ratios
 
 
 
 
 
 
Loss/LAE ratio
64.7

65.7

65.2

68.1

58.2
65.3

Expense ratio
19.6

22.4

21.1

22.4

30.11
21.6

Combined ratio
84.3

88.1

86.3

90.5

88.31

86.9

Net catastrophe loss ratio2
 
 
0.5

0.1

10.0

0.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Actuarial Adjustments3
 
 
 
 
 
 
Reserve Decrease/(Increase)
 
 
 
 
 
 
Prior accident years
 
 
 
 
 
$
(9.5
)
Current accident year
 
 
 
 
 
1.6

Calendar year actuarial adjustment
$
3.6

$
5.3

$
8.9

$
(9.1
)
$
(7.7
)
$
(7.9
)
 
 
 
 
 
 
 
Prior Accident Years Development
 
 
 
 
 
 
Favorable/(Unfavorable)
 
 
 
 
 
 
Actuarial adjustment
 
 
 
 
 
$
(9.5
)
All other development
 
 
 
 
 
(134.6
)
Total development
 
 
 
 
 
$
(144.1
)
 
 
 
 
 
 
 
Calendar year loss/LAE ratio
 
 
 
 
 
65.3

Accident year loss/LAE ratio
 
 
 
 
 
63.8

 
 
 
 
 
 
 

1Included in both the expense ratio and combined ratio is 3.4 points of amortization expense predominately associated with the acquisition of a controlling interest in ARX. Excluding these additional expenses, the Property business would have reported an expense ratio of 26.7 and a combined ratio of 84.9.

2Represents catastrophe losses incurred during the period, including the impact of reinsurance, if any, as a percent of net premiums earned.

3Represents adjustments solely based on our normally scheduled actuarial reviews. For our Property business, the actuarial reserving methodology includes changes to catastrophe losses, while the reviews in our vehicle businesses do not include catastrophes.






- 6 -

THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
BALANCE SHEET AND OTHER INFORMATION
(millions - except per share amounts)
(unaudited)

 
March 2020
CONDENSED GAAP BALANCE SHEET:
 
Investments, at fair value:
 
Available-for-sale securities:
 
Fixed maturities1 (amortized cost: $33,761.1)
$
34,276.6

Short-term investments (amortized cost: $2,524.2)
2,524.2

Total available-for-sale securities
36,800.8

Equity securities:
 
Nonredeemable preferred stocks (cost: $1,017.5)
933.4

Common equities (cost: $1,113.2)
2,608.1

Total equity securities
3,541.5

Total investments2,3
40,342.3

Net premiums receivable
7,568.3

Reinsurance recoverables (including $3,443.7 on unpaid loss and LAE reserves)
3,639.6

Deferred acquisition costs
1,095.8

Goodwill and intangible assets
666.5

Other assets
2,952.7

Total assets
$
56,265.2

 
 
Unearned premiums
$
12,641.1

Loss and loss adjustment expense reserves
18,306.5

Other liabilities2
5,346.5

Debt4
5,394.0

Total liabilities
41,688.1

Redeemable noncontrolling interest (NCI)5
225.6

Shareholders' equity
14,351.5

Total liabilities, NCI, and shareholders' equity
$
56,265.2

 
 
 
 
Common shares outstanding
585.3

Common shares repurchased - March
0

Average cost per common share
$
0

Book value per common share
$
23.68

Trailing 12-month return on average common shareholders' equity
 
Net income attributable to Progressive
26.8
%
Comprehensive income attributable to Progressive
28.5
%
Net unrealized pretax gains (losses) on fixed-maturity securities
$
538.9

Increase (decrease) from February 2020
$
(563.1
)
Increase (decrease) from December 2019
$
79.5

Debt-to-total capital ratio4
27.3
%
Fixed-income portfolio duration
3.0

Weighted average credit quality
AA-

1 As of March 31, 2020, we held certain hybrid securities and recognized a change in fair value of $23.4 million as a realized loss during the period we held these securities.
2 At March 31, 2020, we had $598.0 million of net unsettled security transactions classified in “other liabilities.”
3 Includes $2.6 billion, net of unsettled security transactions, of investments in a consolidated, non-insurance subsidiary of the holding company; the balance at March 31, 2020, includes the net proceeds of the Senior Notes issued during the month (see Note 4).
4 Includes $986.3 million of net proceeds from the March 2020 issuances of our 3.20% Senior Notes due 2030 and our 3.95% Senior Notes due 2050. Ratio reflects debt as a percent of debt plus shareholders' equity; redeemable noncontrolling interest is not part of this calculation.
5 On April 1, 2020, we acquired all of the remaining outstanding shares of ARX Holding Corp.

- 7 -



Monthly Commentary
•
During March, we began to experience the impact from the social distancing and shelter-at-home restrictions that were put in place in response to COVID-19. Net premiums written, losses and loss adjustment expenses (LAE), and underwriting expenses experienced the most significant changes during the month.
◦
The year-over-year reduction in net premiums written for the month reflects decreases in both new applications and average written premiums per policy, as well as the $110.5 million reduction in our transportation network company business net premiums written discussed on page 5. Compared to the same weeks in the prior year, for the first week of fiscal March, which was prior to the implementation of the COVID-19 restrictions, our personal auto new application growth was over 2%, while new auto applications decreased about 23% for the last three weeks of the month, which was after the COVID-19 restrictions were in effect. Policies in force growth was only down slightly from February month end as increases in renewal applications in part offset the decreases in new applications.
◦
The companywide loss/LAE ratio for March was 16.3 points lower than the ratio reported on a year-to-date basis through February 2020. For the month, the incurred losses and LAE reflect the decrease in auto accident frequency that we experienced as a result of the COVID-19 restrictions, and were in part offset by $103 million of reserve increases based on actuarial analysis of the ultimate costs of claims incurred through the end of the month.
◦
During the month, based on an evaluation of the recoverability of our premiums receivable in light of the billing leniencies we had in place during the month, including our program to not cancel or non-renew due to non-payment and pause collection efforts, and considering the impact of the moratoriums in place through May 15, 2020 on earned but uncollected premiums at month end, we recognized an additional allowance for doubtful accounts, which increased our underwriting expense ratio and combined ratio about 2.4 points. In addition to the expense impact, we estimate that there were about 200,000 personal auto policies that remained in force at month end as a result of the billing leniencies in place during the month.
•
In an effort to help our employees, customers, agents, and communities during these unprecedented times, in March we funded $8 million of donations through The Progressive Foundation to charities primarily focused on hunger, health, and homelessness. More information regarding these and other efforts we are undertaking as part of our "Apron Relief Program," can be found at progressive.com.

Events
We are currently scheduled to hold a quarterly Investor Relations conference call on Wednesday, May 6, 2020, at 9:30 a.m. eastern time; this quarter's event will not be simultaneously broadcast via webcast. The call is scheduled to last 60 minutes. Although our quarterly Investor Relations events typically include a presentation on a specific portion of our business, we will instead use all of the time for this event for a question and answer session with Tricia Griffith, our CEO, and John Sauerland, our CFO. We are currently planning to file our Quarterly Report on Form 10-Q with the SEC on Tuesday, May 5, 2020. If the dates of our events, which are always subject to change, are rescheduled, we will announce the change in a press release as soon as practical and publish it on our investor website. Details regarding access to the teleconference, or any event changes, will be available at: https://investors.progressive.com/events/default.aspx.

We plan to release April results on Wednesday, May 20, 2020, before the market opens.


- 8 -



About Progressive
The Progressive Group of Insurance Companies makes it easy to understand, buy and use auto insurance. Progressive offers choices so consumers can reach us whenever, wherever and however it's most convenient - online at progressive.com, by phone at 1-800-PROGRESSIVE, on a mobile device or in-person with a local agent.

Progressive provides insurance for personal and commercial autos and trucks, motorcycles, boats, recreational vehicles, and homes; it is the third largest auto insurer in the country, a leading seller of motorcycle and commercial auto insurance, and one of the top 15 homeowners insurance carriers.

Founded in 1937, Progressive continues its long history of offering shopping tools and services that save customers time and money, like Name Your Price®, Snapshot®, and HomeQuote Explorer®.

The Common Shares of The Progressive Corporation, the Mayfield Village, Ohio-based holding company, trade publicly at NYSE:PGR.

- 9 -




Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Investors are cautioned that certain statements in this report not based upon historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements often use words such as “estimate,” “expect,” “intend,” “plan,” “believe,” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. Forward-looking statements are based on current expectations and projections about future events, and are subject to certain risks, assumptions and uncertainties that could cause actual events and results to differ materially from those discussed herein. These risks and uncertainties include, without limitation, uncertainties related to:

•
our ability to underwrite and price risks accurately and to charge adequate rates to policyholders;
•
our ability to establish accurate loss reserves;
•
the impact of severe weather, other catastrophe events and climate change;
•
the effectiveness of our reinsurance programs;
•
the highly competitive nature of property-casualty insurance markets;
•
whether we innovate effectively and respond to our competitors’ initiatives;
•
whether we effectively manage complexity as we develop and deliver products and customer experiences;
•
how intellectual property rights could affect our competitiveness and our business operations;
•
whether we adjust claims accurately;
•
our ability to maintain a recognized and trusted brand;
•
our ability to attract, develop and retain talent and maintain appropriate staffing levels;
•
compliance with complex laws and regulations;
•
litigation challenging our business practices, and those of our competitors and other companies;
•
the impacts of a security breach or other attack involving our computer systems or the systems of one or more of our vendors;
•
the secure and uninterrupted operation of the facilities, systems, and business functions that are critical to our business;
•
the success of our efforts to develop new products or enter into new areas of business and navigate related risks;
•
our continued ability to send and accept electronic payments;
•
the possible impairment of our goodwill or intangible assets;
•
the performance of our fixed-income and equity investment portfolios;
•
the potential elimination of, or change in, the London Interbank Offered Rate;
•
our continued ability to access our cash accounts and/or convert securities into cash on favorable terms;
•
the impact if one or more parties with which we enter into significant contracts or transact business fail to perform;
•
legal restrictions on our insurance subsidiaries’ ability to pay dividends to The Progressive Corporation;
•
limitations on our ability to pay dividends on our common shares under the terms of our outstanding preferred shares;
•
our ability to obtain capital when necessary to support our business and potential growth;
•
evaluations by credit rating and other rating agencies;
•
the variable nature of our common share dividend policy;
•
whether our investments in certain tax-advantaged projects generate the anticipated returns;
•
the impact from not managing to short-term earnings expectations in light of our goal to maximize the long-term value of the enterprise; and
•
other matters described from time to time in our releases and publications, and in our periodic reports and other documents filed with the United States Securities and Exchange Commission, including, without limitation, the Risk Factors section of our Annual Report on Form 10-K for the year ending December 31, 2019.

In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when we establish reserves for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.



- 10 -