The Progressive Corporation (NYSE:PGR) Q4 2022 Earnings Call Transcript

Jim Haas: Paul, you’re right. The customer is continuously monitoring and they’re driving changes dramatically, like because of a pandemic or something like that, the telematics rating on the renewal would pick that up over time. In terms of the effect of that, you have to just — we just started to roll out continuous last year. For the first six months, it looks just like it did before, it’s not until the renewal that it changes, a lot of the states we elevated were towards the back half of the year. So they’re just coming up on their first renewal, so. And then you need to build up a bigger — that will grow over time to be a bigger share of the in-force book. But right now, it’s still early days of that. So it will be a little while before that’s like a really effective mechanism for that. Plus, we would need to get the rate on all the people who aren’t in UBI, we would do that through traditional means.

Paul Newsome: Can you talk about how quickly you can change the algorithm as well? Is that something that means that something can go into a filing or we effectively just change the algorithm for both the continuous and the non-continuous, if you see an environmental change of some type?

Jim Haas: Typically, that’s sort of filing. We file the algorithm of the states confidentially and that’s typically how that would be done.

Paul Newsome: Great. Thank you. That was my questions. These are wonderful calls. Thank you very much.

Operator: Our next question comes from Gregory Peters with Raymond James.

Gregory Peters: Most of my telematics questions have been answered. Tricia, in one of your comments you talked about media spend. I know you guys go through an annual budget. Can you talk to us about your perspective on your advertising media budget for 2023 versus 2022?

Tricia Griffith: Yes. So, I mean, we absolutely do a budget, but then ongoing, we assess it based on the efficiency of the spend. We look at our targeted acquisition cost, our cost per sale and then — and kind of where we’re getting the business from. So I talked a little bit about ambient shopping, which, of course, is really efficient. We’re in a little bit more of that position now. But, what we will do is as the year progresses, we will continually assess what we need to do to spend more if we believe it’s efficient or pull back if we believe we’re butting up against our 96 ceiling. And those are conversations that happen continuously. Some things we — to get sort of advanced discounts we pay for upfront. So those are kind of — those spend.

But we have a lot of flexibility, especially on the digital side to bolt back should we need to, like you saw in the last year. So, we have a budget, it’s fluid. And over the years, it can go up or down depending on what we believe is in the best interest of profitably growing the Company.

Gregory Peters: Does that answer mean that the budget is higher for €˜23 versus €˜22? I’m not sure what it means.

Tricia Griffith: At this point in time, it could be higher. I mean things changed. So, it was higher last year. If you would have asked me this last January, I said it would be higher than the year before, but it didn’t end up being that because we had to make some flexibility. So, we budget for what we think can happen with a lot of flexibility.