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

John Sauerland : A couple of adds there. So it’s — I would characterize it as dynamic and opportunistic. So, to the extent we feel we’re adequately priced, we’re going to spend a lot more on advertising. Again, with as Tricia said, an eye towards our targeted acquisition cost that we priced into the product and our lifetime economics on those policies. But, if you look at our expense ratio, especially our direct expense ratio for January, as an example, you can see it was up. So, clearly, through the latter part of last year as we were working hard to ensure we hit our 96 combined ratio for the year, you saw that expense ratio drop which was driven to a large degree by lower advertising costs. In January, you saw that pop back up, which is a great indicator that we’re spending more on advertising right now.

Gregory Peters: Okay. My second question was on reinsurance. Now, the market’s hard that you’ve had. Obviously, reinsurance is an important part of your story last year. Can you talk to us about your perspective on reinsurance and how it might change this year versus last year?

Tricia Griffith: Yes, absolutely. We have Brandon here who runs our reinsurance organization. So, I’ll have him weigh in.

Unidentified Company Representative: Thanks for the question on reinsurance. I mean, I think we — particularly with how we adapted to the placement at 1/1, we’ll carry that forward to how we look to our June placement, which is really the core part of our program. We tend to be fairly conservative in how we want to retain property cat losses. I think we’ll continue that. We’ll have to be flexible in what the market is willing to offer as far as how we can tailor that to what we decide to purchase.

Gregory Peters: Does that mean you’re going to have a higher deductible or a lower deductible?

Unidentified Company Representative: It’s a little early to say exactly where we’re going to land on that. Certainly, the bottom end of reinsurance programs have seen a lot of pressure, not just this year but over the last couple of years. We will be looking at other creative options if need be to manage our retention.

Operator: Our next question comes from Michael Ward with Citi.

Michael Ward: I did have a question on telematics, specifically the OEM data and vehicles. Just curious if you have any data on the capabilities of the existing vehicles on the road in the U.S. It just — it seems like that might be limited to more newer vehicles with cellular data connections, which I get the sense might be — at least currently might be a fairly small chunk of the vehicle population in the U.S., just given turnover. So, just wondering if you can elaborate on that at all.

Jim Haas: Yes, you’re correct. The firm we’re talking about depends upon vehicles with the cellular connection as we’re referring to OEMs over the last several years have been investing in that. They’re in really different places depending on the OEM. Some are — have had been there for a number of years, some are still working on it. So, it’s — and it does take a while for the fleet to turn over. So, it’s very focused on a few OEMs and the most recent model years. But as we mentioned, we’ve got relationships with GM and Toyota, which are two of the larger ones. They’ve got more of an installed base. And we expect other — almost every OEM is moving in this direction. So we expect that this population will grow over time.

Michael Ward: And then maybe could you discuss kind of the take-up between OEM data versus using the mobile phone app route? It just seems like there’s more hurdles involved in the mobile app, and that maybe that’s why take-up wasn’t great initially. And so sort of curious about how you see those 2 trending?