(The following statement was released by the rating agency)
CHICAGO, April 03 (Fitch) Fitch Ratings has assigned an 'A'
rating to The
Progressive Corporation's (NYSE: PGR) $850 million issuance of
maturing in 2047.
KEY RATING DRIVERS
Net proceeds from the issuance are expected to be used to redeem
$564 million of
its Junior Subordinated Debentures due 2067. The remaining net
expected to be used for general corporate purposes. The new
notes' rating is
equivalent to the ratings on Progressive's existing senior debt.
Progressive's financial leverage as of Feb. 28, 2017, was 27.1%.
leverage as of the same date, including the additional debt and
redemption of the company's junior subordinated debentures, will
28.8%, within Fitch's expectations.
Progressive's profitability promotes strong interest coverage.
coverage, excluding realized gains, in 2016 was 11.1x, down from
average between 2012 - 2016 of 12.5x. Fitch believes that GAAP
coverage will range from high single-digits to low double-digits
over the near
term, including the new senior note issuance.
Fitch's ratings are based on Progressive's excellent operating
pricing and underwriting expertise, personal and commercial auto
franchise, conservative investment allocation, and very strong
Factors that could lead to a ratings downgrade include:
--Obtaining a GAAP calendar-year combined ratio of 99% or
--Failure to maintain a Prism score of 'Very Strong' or better.
--An increase in statutory net leverage, defined as net written
total liabilities relative to policyholders surplus plus
Company, Inc.'s assets, above 5x.
--Failure to maintain statutory maximum dividend coverage ratio
of 7x or higher
on a sustained basis.
--A meaningful change to the auto insurance market that
unfavorably alters the
--Growth in homeowners business that substantially increases
loss (PML) levels.
Fitch believes that a ratings upgrade for Progressive would
require a broadened
product focus with a material reduction of net leverage.
FULL LIST OF RATING ACTIONS
Fitch has assigned the following ratings:
The Progressive Corporation
--$850 million senior notes due 2047 'A'.
Christopher A. Grimes, CFA
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
Gerry Glombicki, CPA
Donald Thorpe, CFA, CPA
Media Relations: Hannah James, New York, Tel: + 1 646 582 4947,
Relevant Rating Committee: July 11, 2016.
Additional information is available on www.fitchratings.com
Insurance Rating Methodology - Effective May 17, 2016 to Sept.
15, 2016 (pub. 17
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