Progressive 2007 Annual Report Download - page 17

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16
No quarterly dividends were paid in
2007, since this is the first year of the
annual variable dividend documented in
prior reports. This annual dividend was
declared by the Board of Directors on
December 14 using year-end results for
after-tax underwriting income and the final
Gainshare factor of .74. The dividend, paid
on January 31, was 14.5 cents per share,
compared to 2006 total dividends of 3.25
cents per share.
The Board has established a 20% target
of after-tax underwriting income as the
base to which the 2008 Gainshare factor will be applied for the 2008 calendar year dividend
calculation. We anticipate no substantive change in the dividend format or calculation,
but will add the pragmatic constraint that if our comprehensive income (which includes
investment income and realized and unrealized gains and losses) is less than after-tax
underwriting income, no dividend will be payable.
The Gainshare calculation is recalibrated every year, but the structure generally remains
similar. Last year, we introduced greater accountability for the new and renewal business
components of growth in our Direct business. We are very comfortable with the calibra-
tion and approach and will extend that structure to all business units in 2008 consistent
with our efforts to maximize retention of our customers.
If 2007 was a year of “adjustment” for auto insurance rates, it pales in comparison to the
“adjustment” in the mortgage-backed investment markets. Our strategy of maintaining a
high-quality investment portfolio served us well during the disruptions that emerged in
We do not believe in providing earnings guidance, but realized that reporting
financial results on a quarterly basis often left unanswered questions. To address
these questions, in 2001 we began reporting operating results on a monthly basis.
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