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 Drive Insurance from Progressive — Relax, just driveSMProgressive's Agency Business had a good year in 2004. We continued to enjoy our position as the nation's largest writer of private passenger auto insurance through independent agencies by growing net premiums written 10% to $7.9 billion. Our Agency Business represents approximately 5% of the total U.S. personal auto insurance market. The auto insurance market continued to soften throughout 2004 and quoting activity tapered off. New application volume, while strong for the market conditions, did not grow over 2003. Our auto policies in force grew 7% to 4.25 million, driven largely by policy renewals. Loss trends were more favorable then expected, particularly claim frequency, resulting in a year-end combined ratio of 86.0. The Agency Business introduced its new agency brand, DriveSM Insurance from Progressive. The brand highlights the choice and service that independent agencies offer consumers, as well as the superior claims service and financial strength associated with Progressive. Agent reaction has been positive, and we are now in the early stages of consumer advertising. Technology investments parallel the branding message. Our new Web site, driveinsurance.com, enables consumers to find local agents representing Drive Insurance from Progressive and obtain a quote online from that agency. We continue to improve our systems capabilities to enable agents to quickly and easily meet their customer service needs. Additionally, we are well into a countrywide roll out of a new product design, specifically oriented to our Agency Business, which is intended to improve an agent's ability to convert quotes to sales. Despite an active hurricane season, our Special Lines products, primarily motorcycles, motor homes and watercraft, had another great year; polices in force grew 18%. |
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Progressive Direct — Think Easier. Think ProgressiveSMProgressive's Direct Business had an excellent year growing net premiums written 17% to $3.8 billion, which represents about 2.4% of the U.S. personal auto insurance market. While the percentage growth in new business was lower than in prior years, we remain pleased with Direct's continued strong growth and future prospects, particularly from our Internet operations. Despite an increase in advertising spending in 2004 as compared to 2003, our relative share of voice fell as many competitors made substantially greater investments in consumer marketing. Nevertheless, response to our advertising showed favorable trends, with growth in both quotes and sales. Average premium levels and customer retention measures showed little change from the prior year. We made further investments in our customer experience initiatives, and hope to see continued increases in customer satisfaction.
Commercial AutoCommercial Auto had another strong year. Net premiums written grew 19% to $1.6 billion, representing about 6% of the U.S. commercial auto insurance market. New applications were slightly ahead of 2003 and, combined with strong renewals, led to a 15% increase in policies in force by year-end. Our favorable combined ratio was driven by an increase in renewal policies with lower expenses and lower than expected frequency. During the year, industry rate levels remained relatively stable while many competitors expanded their product offerings by accepting business lines and vehicles they had rejected in the previous two years. We introduced our product line in three new states in 2004, bringing the total number of states in which we offer our commercial auto product to 45, and plan on adding one or two more states in 2005. By our estimate, we finished 2004 as the first or second largest writer of commercial auto premium in 11 states. Significant investments were made in our Truck Physical Damage Claims organization. The field specialist staff was significantly increased and new procedures were introduced to improve the accuracy and timeliness of settlements. In January 2005, we opened what we believe to be the insurance industry's first claims training facility dedicated to commercial vehicle physical damage estimation. Our goal is to consistently be the leader in helping customers get their trucks repaired and back in service as soon as possible. We made substantial progress toward that objective this past year.
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