Progressive (PGR) Q2 2012 Earnings Call August 03, 2012 9:00 am ET Executives Matt Downing Glenn M. Renwick - Chief Executive Officer, President, Director and Member of Executive Committee Brian C. Domeck - Chief Financial Officer and Vice President William M. Cody - Chief Investment Officer Analysts Vinay Misquith - Evercore Partners Inc., Research Division Michael Nannizzi - Goldman Sachs Group Inc., Research Division Adam Klauber - William Blair & Company L.L.C., Research Division J. Paul Newsome - Sandler O'Neill + Partners, L.P., Research Division Josh Stirling - Sanford C. Bernstein & Co., LLC., Research Division Gregory Locraft - Morgan Stanley, Research Division Brian Meredith - UBS Investment Bank, Research Division James Allyn Engle - John W. Bristol & Co., Inc. Robert Glasspiegel - Janney Montgomery Scott LLC, Research Division Meyer Shields - Stifel, Nicolaus & Co., Inc., Research Division Ian Gutterman - Adage Capital Management, L.P. Keith F. Walsh - Citigroup Inc, Research Division Joshua D. Shanker - Deutsche Bank AG, Research Division Presentation Operator
Previous Statements by PGR
» Progressive Corp. - Shareholder/Analyst Call
» Progressive's CEO Discusses Q4 2011 Results - Earnings Call Transcript
» Progressive Corp. - Shareholder/Analyst Call
Matt DowningThank you, Wendy, and good morning. Welcome to Progressive's conference call. Participating on today's call are Glenn Renwick, our CEO; and Brian Domeck, our CFO; and Bill Cody, our Chief Investment Officer. This call is scheduled to last about an hour. As always, our discussions on this call may include forward-looking statements. These forward-looking statements are based on management's current expectations and are subject to many risks and uncertainties that could cause the actual events and results to differ materially from those discussed during this call. Additional information concerning those risks and uncertainties is available in our 2010 annual report on Form 10-K and our quarterly report on Form 10-Q issued during 2012, where you will find discussions of the risk factors affecting our businesses, Safe Harbor statements relating to forward-looking statements and other discussions of the risks, uncertainties and other challenges we face. Each of these documents can be found via the Investors page of our website, progressive.com. Wendy, we are now ready to take our first question. Question-and-Answer Session Operator [Operator Instructions] Our first question today is from Vincent D'Agostino [ph] from Stifel, Nicolaus. Unknown Analyst In our own test drive of Snapshot, we had a few issues with foreign-made cars, where we had to get a second device. And the customer service representative that helped us out was able to confirm that there was some communication issues with nondomestic vehicles. So I was just curious how prevalent of an issue is that really in reality. Glenn M. Renwick I am sorry. I'm not going to be able to give you a great deal of information on that. If it was a significant issue, I'd know about it. I know there are some contingencies, but nothing that's sort of -- it's what I would call a significant level. So I can't give you more specifics than that, but i"m happy to follow up on it. But really, given the numbers that we're dealing with, that's a very, very small number.
Unknown AnalystOkay. That's good news. And then just for the second, a follow-up. I'm kind of asking you to predict the future here, but should we expect maybe some modest retention slippage in the back half of 2012 from the rate increases on auto? Or at this point, do you feel that enough of your competitors are taking rate that your own rate increases, even though they're warranted, shouldn't inhibit your competitive positioning at all? Glenn M. Renwick You're on the right track. And frankly, I think we just have to let the numbers do the talking. And I don't mean to sidestep it in any way, shape or form. The fact is if you take rates come up, conversion likely comes down to some degree. Retention gets some pressure on it. I think the key thing to remember, however, when we discuss rates -- and hopefully, I've discussed that in a fairly open and forthright way, is rate increases -- it always depends from when you're coming. So we have a very competitive position in the marketplace. Even a rate increase may not necessarily take us out of that competitive position in certain circumstances. And we have other tools that allow people to actually manage their rate, even at renewal, if they choose to. So it's a really a tough thing to sort of speculate on. Clearly, we've worked so hard, as you all know, on retention, and we don't want to lose that. But if you had to put down a bet when you take rates up, generally, you're going to be fighting against conversion and retention. We hope rate, even though I've expressed disappointment -- and that's the way I am. I'm just -- we have a target, and we don't hit it, we call it that. We have caught rate change from what I would call sort of lower single-digit severity changes to mid single-digit reasonably quickly, reasonably quickly, not as quickly as I would have liked. And hopefully, those rate changes are not the kind of rate changes that force consumers to say, "What really is going on here?" And while this may not be able to jog consumers' memories for a long time, it actually had some rate levels for quite some time now. So maybe 2%, 3%, 4% changes, whatever they might see, are something that they are perfectly wanting to tolerate and recognize that's cost of doing business. Read the rest of this transcript for free on seekingalpha.com