Good morning and thank you for joining us today for Progressive’s Second Quarter Investor Event. I am Doug Constantine, Director of Investor Relations and I will be your moderator for today's event. The company will not make detailed comments related to quarterly results in addition to those provided and its quarterly report on Form 10-Q and the letter to shareholders which have been posted to the company's website. This quarter marks the return to our typical format, which is a presentation on a specific portion of our business, followed by a question-and-answer session with members of our leadership team. The introductory comments by our CEO and the presentation were previously recorded. Upon completion of the previously recorded remarks, we will use the balance of the 90 minutes scheduled for this event for live questions-and-answers with leaders featured in our recorded remarks as well as other members of our management team. As always, discussions in this event may include forward-looking statements. These statements are based on management's current expectations and are subject to many risks and uncertainties that could cause actual events and results to differ materially from those discussed during today's event. Additional information concerning those risks and uncertainties is available on our Annual Report on Form 10-K for the year ended December 31, 2020, as supplemented by our 10-Q report for the first and second quarters of 2021. We will find discussions of the risk factors affecting our business, Safe Harbor statements related to forward-looking statements, and other discussions of challenges we face. These documents can be found via the Investor Relations section of our website @investors.progressive.com. To begin today, I'm pleased to introduce our CEO Tricia Griffith, who will kick us off with some introductory comments, Trisha.

Let me set the stage for this session. As a reminder, these are construct we call the four cornerstones. This construct allows us to focus and make investments that drive value to the organization and all of our constituents; who we are, which are our five core values. Peter Lewis wrote these back in 1987 and they have served us well over the decades. Specifically during this past year and a half as we've navigated completely foreign waters and have made decisions on behalf of all of our constituents, we have used our core values as a guide. I won't go into all that we did because I've publicly written about much of it but suffice it to say we believe all along the way, we did the right thing. Why we're here? Our purpose statement, which is true to our name, Progressive. We believe this statement is about forward progress, innovation and never resting on our past performance, where we're headed, our vision, which is to become consumers and agents number one choice and [Technical Difficulty] assurance needs with us now and as those needs evolve. We know that we must earn their trust every day in order to achieve this vision. How we'll get there? Our strategy, and more specifically our four strategic pillars, which is how we think explicitly about investing to ultimately achieve our vision. I'll briefly give you a high-level overview of how we think about each pillar. People and culture, our goal is to ensure our people and culture collectively remain our most powerful source of competitive advantage, including attracting and hiring new talent, retain the people we have and developing everyone. So that we can all have long and prosperous careers. We will support our people and culture by ensuring our people can…

We'll be sharing a number of charts and graphs to highlight our business performance during this presentation. While our June results include Protective based on our closing date of June 1. For the purposes of this presentation unless otherwise stated, the numbers exclude Protective. I'd like to begin with a look at our performance relative to the industry. This is a 20-year time series of Progressive commercial auto net written premium growth rate versus the rest of the industry. During this time period, our results have really diverged from the industry. There are a couple of observations around growth that I'd like to highlight. First, commercial auto has some cyclicality to it and tends to move with the larger economy. And second, when the market grows Progressive has historically grown at a faster pace. In fact, since 2016, we've doubled the business and gained almost four points of market share. And that equates to more than 20% compounded growth rate and achieving more than 12% market share. The more significant divergence from the market has been an underwriting profit. We've outperformed the industry by 8 to 10 and as much as 20 points over those 20 years. Our objective is to grow as fast as we can at target combined ratios. And we've had a track record of success and outperformed the industry on both growth and profit over those 20 years. There's a number of contributing factors. But perhaps most important has been the intense focus on commercial auto as a core line of business for the company. We've shared this information in the past and wanted to provide a brief refresher on how we approach our auto business. We segment our business into what we refer to as business market targets and we introduced these business market targets…

Thank you, Karen. I'd like to spend some time talking about our track record of extending our commercial auto leadership position and investments that we continue to make. Let me start by talking a little bit about our two telematics programs that we have in market today. Smart Haul and Snapshot ProView. We're proud to say that we have recently surpassed $500 million of commercial auto premium in force from these telematics based programs and that we've analyzed over 10 billion miles of data. Smart Haul is our truck focused telematics program that leverages the data from federally mandated electronic logging devices or ELD for short, through the federal mandate most over the road truckers need an ELD to managed hours of service. Smart Haul uses driving data from a trucker's existing ELD in exchange for a discount on the insurance of up to 18%. And while conversion is nearly double our normal truck conversion, we continue to see a sizable loss ratio advantage for this book even after applying those steep discounts, which average about $1500 per policy. It's clear this is good business and it's all incremental and verifiable segmentation that we're able to apply at point-of-sale. To demonstrate how powerful the segmentation has proven to be, I'd like to draw your attention to the chart on the left. Telematics is the most predictive variable in our for-hire transportation segment. The depicted bar includes the power of new variables enabled by telematics in addition to variables that can be derived from telematics, such as territory ozone. As you can see, telematics is by far our most predictive rating variable, and we have plans to further evolve the model by adding even more predictiveness to it. Our continued research of driving data is allowing us to constantly evolve and…

Efforts to meet the broader needs of small business owners are focused on building products and capabilities to support our agency business and to meet the growing demand in the direct channel. We believe customer choice is important and our goal is to continue to work toward customers having options for how they shop for insurance with us. Our plans include both adding products we develop ourselves, as well as offering other carrier products in our in-house agency. In our experience, developing products ourselves works best in our agency business and we will continue to focus on investments that enable us to continue to grow and succeed with our agents. We're pursuing a different strategy for consumers that come to us directly. In addition to developing our own products, we're offering other carrier products through our in-house agency. That approach is working well for us and it will remain a part of our strategy for that part of our business. In the end, expanding our product offering is all about having a broad enough product portfolio that agents and customers never have to look elsewhere for their insurance needs. In 2019, we expanded our product offering with our own business owners policy and general liability product. This line of business opens up our addressable market with a product that fits with our customer set and creates an opportunity to extend relationships with our customers. Similar to commercial auto, our goal is to have a streamlined intuitive quote flow and competitive pricing derived from expense discipline and price segmentation. We initially limited our appetite to the first five categories in this table, they are big enough to matter, allow us to develop pricing and segmentation skills and allow for a straightforward streamlined quoting and binding process. We've since added a sixth…

This concludes the previously recorded portion of today's event. We now have members of our management team available live to answer questions including Karen Bailo and Jochen Schunter who can answer questions about our commercial lines presentation. The Q&A session will be audio only. To submit a question or online audience can use the Ask a Question tab located at the top right of the webcast, phone participants can press star one on your keypad. In order to get as many questions as possible, please limit yourself to one question and one follow up. We will now take our first question from the phone.

Our first question coming from the line of Elyse Greenspan with Wells Fargo.

My first question. I believe there's been some regulatory pushback, in some states including Nevada, Texas and Ohio to some rates that you guys have filed for. So how does Progressive respond to the situations where you're not getting the rates that you need?

Thanks, Elyse. This is Tricia. We respond with data. So we have data that is showing on steep trends and severity and our need to get rates on the street. And we provide that and try to work with our regulators to get those push through. In the long run, we want to make sure we're available for consumers. And we can only be available if we're able to reach our objective of growing as fast as we can. But more importantly, at a 96 combined ratio or less. So we continue to work with regulators, we've had some good success in Texas, as you mentioned, every state has little nuances. But we're going to continue to work side-by-side to do the right things for our collective consumers and customers.

And then, in the presentation that we just heard, I believe you guys were talking about, seeing beating at higher levels and not going back to like pre-pandemic levels. I don't know is specific to commercial auto. But it sounds like that's perhaps something we're seeing within commercial and personal auto. So do you think that this is a new normal? Because if there's higher levels of speeding, right, and there could be much more severe accidents? And do you think some of the higher severity trends within both commercial and personal auto are perhaps here to stay even after we fully come out of the pandemic?

That's a great question. On the commercial side, we're seeing both congestion and speeding up, on the personal line side, we still haven't seen commuting congestion back to pre-pandemic. I think we're just going to have to watch that. I think we thought we were sort of coming out of the pandemic and now of course, with some of the new local ordinances, will that change, will people stay home and work from home longer? We imagine that might happen. So that could continue to have speeding at a higher rate. I think miles traveled as well. When you think about, we opened up, people were excited to get on the road, go on vacations with their family, go see grandma and grandpa, but you're right on the severity of accidents. And we're just going to have to watch that trend and see what happens when we get to some normalcy post-pandemic on commuting and congestion as well as speeding.

And then one last one, in terms of like you mentioned, you haven't seen, drive to work miles fully go back. If you were going to look at your book between the non-standard and the standard on the personal auto side. Have you seen on the drive to work miles perhaps pick up more of the non-standard side with maybe there's less work from home flexibility?

Yes. When we look at our UBI miles, we sort of compare it to some occupations that would be more available to work from home. And that wouldn't and so we do see differences in those as well as even age groups in terms of, if I'm retired and I'm able to stay home. So we watch those closely as well. But remember, we price all of our customers to a lifetime 96 and that's what we work towards.

And our second question coming from the line of Michael Phillips with Morgan Stanley.

Follow up question to the first question that you just answered. Tricia, you said that you respond with data, higher level question that. I guess the regulatory question is, what's the question is, is it tougher to push for rates today than a normal environment? And what I mean by that is, I think there's a pretty clear contrast today, unlike in other periods where the experience period you use to do your rate filings is pretty profitable, unlike the projection period where there's clearly some deterioration and not only deterioration, but questions on how long that deterioration might last is the severity, short lived, is frequency short lived as well. So some questions around that against the backdrop of a pretty profitable experience period that you're using for your rate. So does that backdrop make it harder to push for rate volumes than normally would?

I think it is more of a challenge, but remember, we aren't looking in the rearview mirror, we're looking ahead and looking at the severity of trends, because we price for those, in the future. So while it's been a challenge, in some venues, we continue to work towards that, and again, we'll watch it closely. And just like we did during the pandemic, after we gave the over billion dollars back on the private passenger auto side, for the credits, we looked across, because we knew that, consumers were struggling, there was layoffs et cetera. We looked across states and channels and products and took rates down a little bit. And so that's really the conversation we're having with regulators. We're going to always try to do the right thing to grow as fast as we can but we have to make our target profit margins. And what we're seeing now is some pretty steep severity trends. And again, we'll watch for that we'll watch for any macroeconomic inflationary trends and the like to understand what our future rate should be.

Okay, thank you. Second question kind of goes towards whether the personal auto margin deterioration is -- are there certain pockets where it's worse than others. And what I mean, there is you mentioned in the Q a couple things that might make one think so, reduce marketing spend in certain areas. Number one, number two, tightening the underwriting criteria for certain consumer segments, those two things combined, make you think that maybe there's certain pockets that it's worse. And I guess, is that true? Or is it more just certainly across the board because of what's happening with driving levels going back to normal levels?

Yes. It's really the margin erosion is really across the board in terms of frequency trends, getting closer to pre-pandemic, severity trends up whether it's injury or used parts. And then, of course, our average written premium was down. When we look at media, when we talk about that we look at our less efficient media. So it's not necessarily based on a certain customer, we look across the board and say, okay, this is our, our cost per sale, et cetera. And here's, what we believe we can get for that. On the other side, we really tried to avoid what we believe could be under priced risks. And so we developed an underwriting program many, many years ago, just to ask a few more questions to understand how to appropriately rate each of our customers to the appropriate risks. So a little bit different viewpoint from when we look at media and we look at bringing on risks that we believe are underpriced.

I just tag on that to say, in markets where we're struggling to get right back to the previous question, we're more likely to push harder on the underwriting levers. So in markets where profitability has struggled recently, and we've yet to be able to raise price, you'll see the underwriting levers tighter than in a market where we're more confident about profitability.

And our next question coming from the line of David Motemaden with Evercore.

Just another question just on the rate filings and just wondering if you could share, what you're contemplating for future frequency and severity from second quarter levels? You assume that those continue to get much worse or at the same levels? Or, is it going to take some time before you get more actual experience and more results that you can include in the filings before you get data to justify the rate changes?

Well, I mean, I think the fact that we're going to continue to take rates up means that we expect some future positive trend. It will be tough to say so we'll watch it and our belief is that long-term trends from a frequency perspective, we believe that there's a chance that could go up to pre-pandemic levels, but if you look at over the last 50 or 60 years, frequency trends have gone down based on safer cars and more strict laws, et cetera. Severity has more than offset that, whether it's injury, attorney reps or components of vehicles and we believe that can continue. We hope that it abates a little bit. But, if you look forward a couple of years, we would hope that they would have be more normalized, so we could have that sense of normalcy. Now, it's been -- there's the comparisons are often also difficult but we watch those closely. And we believe that, as of now, obviously, we talked about the rate filings that we have done in quarter two that will continue to be fairly aggressive with rates.

Got it. Thanks. And just thinking about, I think you said you were looking at 5% rate increases location specific in the second quarter. Is that of the amount you think you need to take across the entire book. If I look at it, I think last costs versus '19, were up a couple percent in the second quarter, versus 2Q '19. And it looks like you took maybe three or four points of rate. So is the intention to get back to sort of the '19 loss ratio level with the 5% rate increase.

So the 5% is the average increase and it was an aggregate of 2%. But we do look very specifically across states, across channels, across products. So there won't be a flat rate across any one of those venues, we will look at where we needed the most to get to our target lifetime profit margin. So we'll give you the averages because we're not going to go into specifics. But I will tell you that it's very different depending on the states and what we're seeing both frequency and severity.

And our next question coming from the line of Josh Shanker with Bank of America.

I want to talk about a year ago, or 18 months ago when the pandemic came on, and you made decisions to refund money to customers to cut price to increase advertising spend, in order to getting a new pool of customers and certainly the growth was very strong during the pandemic, to what extent are those customers that you put on and brought on the book, achieving the lifetime value of 96% or better? And to what extent is this period of compressed margin following with what you expected to happen as you put these customers on your books and frequency came back to normal levels?

Yes. I mean, I think we did the right thing during the pandemic and things have been very volatile and very fluid. And so in terms of -- our sort of Holy Grail is retention. So we're going to do what we can to keep those customers at the target profit margin -- the increases will flow into renewal business. And we expect that could cause people to shop and we get that. But what we want is, in our choice of growth is policies enforced, we want to continue that growth, we know that we need to have the right rates on the street and then we've talked about that a lot. Our objective for many, many years, many decades has been to grow as fast as we can, out to below 96. And profit comes first in that order. It's one of our core values. So we'll continue to look at that. How we treat these circumstances are things that we've done before and so, not to this extent, because we don't -- this is we've never been involved in a pandemic, but we've been in these circumstances before. In fact, if you go back in time, 2012 we had similar circumstances where we found that we needed rates at the time, actually, John Sauerland, our CFO was the Personal line President and I was the President of Claims. And we set forth to get the right rate, keep it as many customers as we could, that's really important. And that worked and we were able to grow. But probably the most important example would be in 2016, when we found ourselves over our 96 goal and we reduced expenses and a little bit of marketing and really positioned ourselves well for huge growth. And in fact, in the last five years, we have grown policies in force on the private passenger auto side, greater than 70%. So how we're looking at today is, we believe we did the right thing for customers during the pandemic, we have seen trends steepen at a pretty quick rate, we're going to get the rate we need to get back and be well positioned for that growth that we believe we will calm should we head into a hard market.

And then, I think you said that March 17, was either the best, or the second best shopping day in the company's history. I think you've probably put on a lot of Sam's or inconsistently in the short customers, to what extent is a huge growth over the past 18 months and really, even just a few months ago by having a new customer penalty on top of your overall book.

Well, we have had a lot of Sam's, we've had a lot of growth overall. And I talked in my most recent letter about our growth in Robinson's. And again, comparisons are tough as well, because of the large growth we've had in Robinson's and some of our preferred, but yet we've brought on a fair amount of Sam's in again. We are fine with Sam's coming on the book as long as we are priced to our target profit margin.

I will answer that part Josh, so we have what we call cohort targets, by segment by segment. We call them our consumer marketing tiers. But we also think by channel direct versus agency, new versus renewal and obviously, geographically. And our product managers are constantly looking at their performance relative to those cohort targets. So for example, the new Sam direct customer has a target, obviously new business, we're going to spend a lot to acquire Sam, we're going to want to recoup that quickly on renewal to make sure we were in that lifetime 96. So regardless of the climate we're in, those product managers are monitoring their performance versus those targets. And where we're not meeting them, they're going to take action to make sure they meet him. So we do manage to the calendar combined ratio as a company for sure. And that's what we say our goal is, beneath that product managers are managing to those segments to those cohort targets. Does that help a little?

Certainly. Thank you very much for the answers.

Now our next question coming from the line of Ryan Tunis with Autonomous Research.

I had couple on severity and one on growth. The first one is, I mean, just thinking about this. So frequencies, almost back to pre-pandemic levels. That make sense was bound to happen originally, in any event, we're going to get back there. Severity was plus seven in 2019, plus 10 in 2020. And this quarter was plus eight. So it's not exactly clear to me why this severity numbers all that surprising. I'm just trying to square all this and understand why we only started taking rate in this past quarter.

Well, so we've seen severity trends go up in injuries, what we probably under predicted on severity was the used car valuations and not just the magnitude, but the length of time, the duration. And we did look at that for future trends, not to the extent that of what we're seeing. And again, that's something that's been very different during the pandemic in terms of supply and demand and what is happening with new cars and the lack of available chips, et cetera. So I would say that was probably a miss on our part slightly just because we hadn't seen that we did we did see it going up but not to the extent or the duration of time. And then, the injuries we continue to look at, attorney rep rate continues to go up. And we're seeing attorneys earlier in the claim sort of across regions and across limit profiles and there could be a lot of theories on that. It could be that there's more advertising on the attorney parts, it could be that if you're working from home or that you're not working, you're seeing more advertising in order to call that attorney but we are seeing attorney reps earlier in the claims than we have in the past.

Got it. Yes, it's not like what you guys were reporting numbers last quarter, people are talking more about the property inflection but I mean, clearly we're seeing some social inflation on the BI side. Is that one that you'd say you're more concerned about, kind of a casualty type lost trend versus property lost driven auto.

I mean for the casualty trends, obviously you want to get your arms around attorney reps because those claims are more expensive take longer, not necessarily great experience. We've seen on the private passenger auto because we've seen speeding up there's been more severe accidents. We've seen, labor hours increase and number of parts increase. So that's a little bit different. On the property side, we had 25 points of cat exposure and so I think, we are looking at a little bit different geographic expansion to make sure that we -- in a sense, derisk a little bit of that book. And then, in addition, on the property side, we want to be able to continue to get rate as we've since last year, and have a more segmented product. So it's a little bit different way we're looking at it, ultimately to get to the same endpoint of a 96 combined ratio.

Got it. And then, just lastly, will you describe these trends is broad based across all states and customer segments? Or is it more localized, is it more Sam's, is more Robinson's that type of thing.

The trends of the attorney rep have been across all regions and they've gone up in different rates upon -- with limit profiles. So that's been across the board. Property really is much more specific in states where there's more weather volatility.

And our next question coming from the line of Tracy Benguigui with Barclays.

I don't mean to beat a dead horse here. But is it your impression that regulators are discounting the 2020 year as an anomaly, but relying on 2019 data for indicated rate needs, which may be problematic given their higher premiums at the time and less elevated severity? At least that's what I saw in Texas, explicitly mentioning 2019 data.

Yes. It was hard for me to be in the seat of a regulator. I think they're trying to do the best thing they are trying to do for their constituents as we are. And so that's why we share data, we talk it through and we try to do the right thing, which again, is availability for the consumers, whether it be Texas or any other state. So it's hard for me to say what a regulator is looking at, I think they always want to make sure that there's affordability for the consumers that they represent.

Okay. Yes. I just want to know, if there's any way that you could make headway or there may just be a difference of opinion, just given you're looking at different parameters?

Probably a little of both.

Okay. I've been just thinking of rate increases. I mean, also you took a 6.1% rate increase in Florida. And I'm just wondering how much that has to do with PIP. Understand there's a debate going on right now, if insurance could pay 80% of the claims regardless where it lies on the fee schedule. Can you just remind us your conservatism on that spectrum?

Yes, I had a lot to do with PIP a lot to do with injury increases as well, that we've talked about in terms of severity. But, Florida has always been volatile with PIP and interpretations of PIP and plaintiff attorneys. And so we are we're pricing to that. And we've seen a lot as you -- as we've told you have -- reopens based on recent decisions.

So any concerns over prior period that could result in adverse reserve development?

For Florida PIP, I think we've seen less late reports, and we've anticipated in 2020, which is on the PIP side. I don't know that there's any prior, I think it's been the last couple of years. I think prior to that, I would say '19 and 20, not as much '18.

That's a great characterization. And frankly, Florida PIP even going back further than that has been a challenge to price accurately because courts decide what they decide and that changes a lot of the past claims decisions that were made, and a lot of files get reopened. So as we pointed out, we have had adverse development in Florida PIP past couple few years. And if you go back a decade, we had similar. The good news is over the longer term, we've been very successful in the Florida market. We have great share there and we want to continue to grow in Florida as long as we're in that 96 right now, as you pointed out, we are taking actions to address the combined in Florida. But again, over the long-term, we're very confident and happy to grow in Florida.

And the last thing I'll say on that is, we were very happy that the governor vetoed the latest PIP reform because we thought that would not be good for consumers of Florida. And so, we always work with regulators to make sure we have the right rates there and it is a complicated state but one with which the long-term we've done well.

We do have a question on the web, asking about Texas and commercial and personalized loss trends and what actions we are taking to improve profitability in Texas.

We are taking rate.

Very good. Livia, next question.

Our next question coming from the line of Greg Peters with Raymond James.

Good morning, thank you for fitting me in to your schedule. My first question will be on your comments around the targeted 96 combined ratio. You're talking about growing into other lines of commercial and the capital requirements for some of these other lines embedded in commercial are going to be different than the capital requirements, you have with other parts of your personal auto business. And it also, frankly, is applicable to your property business as well. I'm just curious, if your 96 targeted combined ratio changes depending on the capital requirements on the type of business that you're in.

Yes. And remember, our 96 is the aggregate. So 96 is slightly different. And it's not for public consumption, but slightly different in different areas, depending on that. What we look at, also is what we want that ROE to be in any part of the business and we work towards that. Anytime you have a new business, obviously, you have a big learning experience when we went into the direct private passenger auto, we didn't make money for many years as we learned and grew. And so we expect those, that to happen as well as we learn new businesses and have our arms around trends. And as we grow, that's one of the reasons why, except for the Protective acquisition, which is very different, because they know what they're doing on larger fleets. We sort of try to grow into that. So a great example is fleets for many, many years, we did zero to nine power units, we felt we had our arms around that we were a leader in that, and now we've gone 10 to 40. So we try to learn along the way. Same thing with small business, we're starting with micro businesses, less than 20 employees to make sure that we learn as we grow and expand that addressable market.

Just like to clarify your answer on that, on the property business, you've been running about 100 combined ratio for five years now. How much longer will it be above 100, before you get -- before it stops being a drag on your consolidated results.

Hopefully not long, because we're not happy with that either. I talked a little bit about the geographic footprint and how we are taking actions to be not have such a high percentage in states that have much more weather volatility, because as we said, that's those 25 points on the property CR. It takes time. It doesn't happen overnight. And we've had just a lot of headwinds from that perspective. So I can't tell you the length of time, but we're working aggressively towards derisking geographically, even if we need to slow down on getting the right rates on the street and making sure that we continue to segment our property models as deeply as we segmented our private passenger auto and commercial auto.

I might elaborate briefly there. We are not intending to run property above 100. And in fact, as Tricia was noting, we look at ROE across our business lines and as you note required capital we also look at expected investment returns because the duration of claims is different across lines as well. But we target ROEs across the businesses that are equal to or better than private passenger auto and we back into target combined ratios. So for home as you would expect, given the higher capital requirements, the combined ratio target is going to be richer. We took 12 points rates in home last year. We're on track to do similarly this year. And as Tricia noted, we're taking a lot of actions to get a better geographic footprint that we think reduces the impact of storm losses going forward. If you look back at our recent history, the primary driver of being over 100 has been weather losses. And here it's been difficult to model difficult to price. We're into newer markets. We're learning and we are taking -- we think aggressive actions to get that combined ratio where we want it which is well below 100.

Thank you for clarifying that. My second question, and I know it's really small relative to your overall book, but you did spend a portion of your presentation talking about it and that's Protective. And how you plan to use that as part of your commercial lines expansion strategy. And, if I look at Protective's results, over the last three years really hasn't been able to grow at all, they saddled with one large customer and their combined ratio results have certainly been well above what Progressive likes to target. So I'm just curious, if you could just give us a sense of what you see within Protective that helps you gain confidence that it's going to fit well within your overall strategy.

Yes. I think first of all, if you look at Protective and the rates they've taken, as they've seen their steep severity trend since 2019, they saw that and they've been working towards that. And we're seeing the fruits of that. But more importantly, that addressable market that we saw, so there, they put us upstream into larger fleet, workers comp, which is a really important piece for small and medium fleets. So although we didn't talk a lot about what we believe we can do together long-term and we're going to spend this next six months since we literally just closed in June. We're going to spend this next six months, understanding synergies, learning from each other and then getting a very firm game plan together on what we think we can achieve in the next five years.

And the next question coming from the line of Meyer Shields with KBW.

Going back to the -- I guess, capital requirement and combined ratio constraints by line of business, if we're still at 96, overall, and other lines of business probably has to come in lower, should we understand that auto on its own to go above 96 and still be within the company constraint?

You could understand that what we look at is very different, how we expense it as well. So on the direct side is front loaded versus more variable on the agency side. It's different depending on the venue, et cetera. But again, the aggregate is 96. And now we look at each of those different areas, whether it's product or channel to get there.

Okay. I think it's like the related question. And again, it's on Florida, with the rate filings actually requested an increase that was below the indication. And I was wondering if you could talk to the considerations of when that would come into play?

Would you repeat the question?

Looking at a recent Florida rate filing, there was a requested increase, that was about half of the indicated rate increase. And I was wondering if you could talk through the considerations of when you make that sort of filing?

Sure. This is Pat Callahan, I’m the personalized president. So typically, in some states, there will be a templated indication, and then there's our indication. And when there's a lot of uncertainty, as we look at our future trends, we'll fill out the template as required to from a filing compliance perspective. But then we apply a lot of judgment to kind of how much we actually want to take to balance growth and profitability for the business. So we recognize that in states that are relatively open to file, and then use rates like Florida, we want to take smaller bites at the apple over time to ensure that we're not bouncing our customers or increasing rates faster than necessary. So in the Florida specific case, I expect we're in there frequently, and we will be in there at least once or twice more throughout the remainder of the year.

Our next question coming from the line of Gary Ransom with Dowling & Company.

I wanted to ask about small commercial and specifically, you were talking about more activity in the direct side for the BOP product. Is there anything you can talk about on the propensity to buy online? I've thought about it is somewhat of a slower moving demographic trend, but are there customers that have been through an agent for 25 years and now suddenly that they like online and starting to buy it that way?

Yes. I think what you're seeing is one of our strategic pillars in place and that's a broad coverage. We want to be where, when and how customers want to shop. And so there are customers because it's a little bit more complicated and especially if this is your dream, your first business venture, you want to make sure you're protected, you have a lot of questions. And so typically and it continue to be the majority of the business have gone through agents in that coverage. We've opened up Business Quote Explorer for those customers not unlike we did years ago on the auto side, when we opened up direct, that feel comfortable with what they need to get there. And as you see the that's gone up a couple percentages, increasing on the direct side, which we are not surprised that and I think especially with the pandemic, where there was less availability, even though a lot of people weren't necessarily opening small businesses, but there was a less availability of agents versus direct just based on shelter in place opportunities that we saw that change. I would expect that more and more customers that have not ever worked with an agent will continue to go online, and that that percentage would increase, we're going to have to continue to get savvy with our investments on the business, quote, explorer side. But that's, we believe a really great opportunity. We love the fact that we have a big agent presence, but there will be customers that want to go through direct and will be there for them as part of our strategic pillar of broad coverage.

Gary, I would add to that. One part of it is demand, the other part is fulfillment. And across auto overtime property and now commercial, we've gotten a lot better online, meaning a far better experience. And we're starting to roll out the ability to buy online. And we see as we continue to improve the experience, make sure customers can get smoothly through quotes and actually buy online, the fulfillment piece of that equation is improving a lot. And in a direct business, to the extent you are making that side of the funnel, if you will more efficient, it's really powerful in your ability to continue to grow that business because the more efficient you are in fulfilling, the more you can spend upfront to acquire customers.

Is there any specific item you would identify as important to that fulfillment piece? Is there your questions or things along those lines?

Well, the ability to buy online is very, very important. So if people go through an online quote, their expectation generally we think is and some people want to call for clarification, assurance, et cetera. But many people expect to be able to click a button and buy. And we find when we elevate that in a state and this goes back to when we were doing this long time ago and auto we're now doing a property. And now in commercial, when we elevate that ability, the conversion rate goes up.

Our next question coming from the line of Brian Meredith with UBS.

Just one quick question here. And I think kind of a follow up to previous question. Tricia, I know the personal auto care recently did take a reserve charge and related to participating versus limited, rate scheduled in the court decision in Florida. How did you interpret that decision? And does that factor in at all how you think about your reserve position in Florida PIP?

Yes, Brian. Thanks. So I think you're referring to the limited charge and that we have. We accrue for that, as well as a couple of other that has happened over the last couple of years. And so we you know, we look at that we work with the claims organization to understand even though we don't necessarily disagree with the decision that the DCA agreed with that and, we are still challenging that. That said we want to extinguish those exposures and move on because by the time it gets to the core system, possibly to the Supreme Court, it takes many years and so we have our reserves, and our unfavorable reserves have taken that case into account.

We've exhausted our scheduled time and so that concludes our event. Livia, I will hand the call back over to you for the closing scripts.

Ladies and gentlemen, this does conclude Progressive Corporations [first] (sic) second quarter investment event. Information about replay of the event will be available on Investor Relations section of Progressive website for the next year. You may now disconnect.