Welcome to The Progressive Corporation's Second Quarter Investor Event. The company will not make detailed comments related to quarterly results in addition to those provided in its quarterly report on Form 10-Q and the letter to shareholders, which have been posted to the company's website and will use this event to respond to questions after the prepared presentation by the company. This event is available via moderated conference call line and a live webcast with a brief delay. Webcast participants will be able to view the presentation slides live or download them from the webcast website. Participants on the phone can access the slides from the events pages at planned by investor.progressive.com. In the event, we encounter any technical difficulty with the webcast transmission, webcast participants can connect through the conference call line. The dial-in information and passcode are available on the Events page at investor.progressive.com. Acting as moderator for the event will be Julia Hornack. At this time, I will turn the event over to Ms. Harnack.

Thank you, Andrew, and good afternoon to all. Today, We'll begin our event with a presentation on customer experience. After that presentation, we will be -- we will have a Q&A session with our CEO, Tricia Griffith; our CFO, John Sauerland; and our guest speakers today, John Murphy and Steve Brose. Our Chief Investment Officer, Bill Cody, will also join us by phone for Q&A. This event is scheduled to last 90 minutes. 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 to differ materially from those discussed during the event today. Additional information concerning those risks and uncertainties is available on our 2017 annual report on Form 10-K, where you will find discussions of the risk factors affecting our businesses, safe harbor statements related to forward-looking statements and other discussions of the challenges we face. These documents can be found via the Investors page of our website progressive.com. It's my pleasure to introduce to you our CEO, Tricia Griffith.

Good afternoon, and welcome to Progressive Second Quarter Webcast. We are thrilled to be able to talk to you about the investments we've been making for and on behalf of our customers and our customer relationship management group. If you read my letter to shareholders, I outlined several other investments that we're making on behalf of our customer on the claim side. We've been talking about for a couple of years, and we are excited to tell you that a lot of the things that we had in place were come to fruition, and we're really pleased with how they're coming along. But before we get to that, I have to mention an accomplishment that has been over 10 years in the making, and that is getting our #3 ranking in the private passenger auto back. It's been a lot of hard work, and we're really excited and thrilled to be able to celebrate this accomplishment. And of course, it leads us to get even closer to our ultimate vision of becoming consumer's #1 choice. So we're really proud of that accomplishment, and I want to take just a moment to thank the over 36,000 Progressive people for their hard work, their dedication and their commitment to our core values. I want to thank our shareholders for their confidence in us. And ultimately, I want to thank our customers that were so privilege and honor to serve. So let me set up the day. You will have seen in this construct before, this is the third time we've talked about it. This is what we call our 4 cornerstones. Our core values, who we are; our purpose, why we're here. Our purpose statement is true to our name progressive; our vision, where we're headed, I just talked about that becoming…

Great. Thank you, Tricia, and good afternoon, everyone. Over the past 3 years, we've been on a very deliberate journey to customer centricity. No longer just auto an insurance company, but instead a customer company that really specializes in insurance products and services to meet customers needs where as they long as they have them. To fuel ongoing sustained and now accelerating growth, we've may retaining our existing customers as large a priority as acquiring new ones. And that business mandate is really the catalyst for the changes that Steve and I are going to discuss today. So we're going to start with some foundational adjustments that are attended to position us really well near- and long-term for success. And then we will refresh you on our preferred measure of retention, policy life expectancy as well as how we think about it and approach it. We'll spend much of our time on the technology-related investments that we've made for or on behalf of our customers, going across the lifecycle, while also giving you some insights into how we choose what we're going to invest in. And then finally, we're going to share how customers are rewarding us for the improvements that we delivered. And I think, you will see that the return on these investments has been really substantial. Now historically speaking, sustained improvements in retention have been elusive for us as they have been for many others. Knowing that we wanted to see both significant and sustainable progress going forward, we felt it necessary to make some foundational adjustments to position us to deliver in that matter. Now this list that you will see here is far from comprehensive, but we want to give you just review into few meaningful changes that we've made. We're going to start with…

Thank you, John. Good afternoon. Let's kick off our discussion here with the Slide that John shared a few minutes ago. Becoming a destination insurer for our customers requires an investment in product breadth. Adding products to our portfolio allows us to meet the broader needs of our customers over their lifetime. And if you look at the PLE data on the right here, it's clear that no product is more important to add than homeowner sending. It increases auto PLE more than any other additional products we sell. Going back to the graph on the left, John rightly pointed out how much Robinsons have grown. I just want to add another piece of here which Diane's on the Wrights are the largest customer segments in terms of policies in force and seeing growth there is important too, because they are the Robinsons of the future. We've been talking about Robinsons a lot, so let's talk about where Robinsons come from. Some Robinsons are is a fully bundled customer. They bundle their home and their auto from the moment they join Progressive. For these customers, it's really important that we're really good at marketing to prospective customers and consumers. Many Robinsons come through graduation. They start at Progressive with either auto policy or their home policy. And as their needs evolve overtime, they have the other policy along the way. No matter how they get there, we call all of the groups Robinsons. And to be clear, the second line on this diagram is the largest source of Robinsons for us. Those who first buy their auto policy with Progressive and later by their homes, and this means that marketing to current customers is every bit is important as marketing to potential customers. Whether you're current customer or potential customer,…

Thank you, Steve. So in summary, to fuel ongoing and sustained growth, we've made retaining our existing customers as large a priority as acquiring new ones. We've made foundational and cultural adjustments to really position us for near- and long-term success. We've shifted our mix to longer retaining customers, while continuing to grow all segments and delivered significant and measurable improvements to the experience, and these improvements go across the customer journey. Now we would not be nearly as successful, but for the really strong partnerships like the ones that Steve and I have and our teams have working toward a common objective. So after hearing our story today, we suspect you might be wondering how are we doing? And the answer is exceptionally well. Policy life expectancy is at an all-time high. We've increased at more than 20% in just 3 years, and this increase in retention equates to well more than $10 billion in life time on premium across our entire book of business. And this is not a one-year phenomenon. We made steady progress in 2016 and built on it again in 2017. We saw significant and sustained improvements and that is exactly what we've delivered. And while we're proud of the progress we made of the past 3 years, we are far more excited about what the future holds, because we believe firmly that we have just scratched the surface of what's possible. So on behalf on Steve and I, thank you very much for your time today. And now, please give Tricia and John a few moments to set up for the Q&A.

Thank you. [Operator Instructions]. And with that, Andrew, please introduce our first participant from the conference call line.

[Operator Instructions]. Our first question comes from the line of Amit Kumar with Buckingham Research.

Good afternoon, thanks for that great presentation. Two quick questions. The first question goes back to, I guess, with the discussion on HQX and MPQ. It's been a year since HQX came online, and I was sort of broadly thinking of what kind of customer would respond to this product? Now that past, do you think younger, I guess, Sam or Diane is responding more than what you might have anticipated? And now that you have to sit and watch and on into our Robinsons? Or maybe talk about, I guess, the percentage share by the names you have as to how they are responded to this product?

I would say rather than thinking about from a demographic, likely wouldn't be the Sam necessarily, Diane graduate, it would be someone is going to become a Robinsons anyway because they have a home. So I think when I think of customers that want to go through the HQX process, it's people that are digitally savvy and they want to make it easy and they want to make sure there is a place where they can go and they understand very clearly with pictures, what kind of rules they have. We can take publicly available data and input. It's really take the customer 20 years ago that started searching for auto online, these direct peoples are no one is going to ever search for auto online, but of course, that happened. Think of that customer, and that's what we think it will grow, because ultimately it's a customer that's just digitally savvy, and they want to do all of their business online.

The second question sort of shifting gears, you're talking about growth. Recently last month a number of auto manufacturers in fact, revise their outlook as the impact of tariffs comes in. I was going through some all old transcripts, and if you go back to '08, '09, Glenn and others have talked about the impact of slowing auto sales in terms of margins. What is your view on that impact from here?

We're not sure what we with the Obviously, we're watching that closely, and if there is less autos to ensure that affects the industry. However, we have a very small share of that addressable market. So when you think about that $300-plus billion in auto and home, we have 10%. So we believe even if the pie shrinks, it actually grew 8% last year. Even if the prior shrinks, we believe with where we're positioned that we will be able to have a bigger piece of that pie.

Thank you. Andrew, can we take the next caller please?

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

Going back to HomeQuote Explorer, I was wondering if you could provide some additional current around the number of carriers that are participating in that product? And I know recently there were some news there around curtailing its partnership with Progressive. And I'm wondering if you could take your discussion around HomeQuote Explorer and the number of carriers and also comment on the announcement?

Sure, Greg. Currently on HQX, we have four carriers, including Progressive Home. And for we've been working with them for years in our Progressive Advantage Agency and although the news came out this week for us is all news. We've been working with them at a price for over a year now to convert that business and upon nonrenewable be able to give them our rate for Progressive Home and other unaffiliated partners. The majority has gone to Progressive Home, and some to the partners, but we're happy about we continue to do around every month as things and that will continue through 2019. We're really impressed with the retention rate of those customers once they change their business from over to Progressive Home.

And then another specific question. I found your discussion around mobile adoption quite interesting. And I'm not sure you're going to be willing to give me what percentage of your total customers have adopted a mobile solution for your company. But maybe you could -- and maybe you will answer that, but if you don't, may be you could provide us some color around the split of mobile adoption between the segments, including the Robinsons?

We don't really share that, I would say, mobile adoption continues to increase and have probably come out a little bit more on the channels. So on direct channel, obviously that's a customer that wants to go directly as well. So that is a much higher rate of adoption than say our agency channel Although in talking to agents, they're continuing to talk to our customers, our collective customers to get them to do some of these things like Steve talked about on the mobile device. So they really -- if they don't need to call the agent there, they don't have to.

Just maybe can you give us a sense, is it more auto versus home? Or am I just get nowhere with this?

No. No. It is more auto versus our home goal, of course, when John talked about the targeted customer experiences to be able to have everything you have whether it is on Progressive paper or not. Mobile device, we're not there yet we continue to invest. I would say, it's a much higher percentage on auto.

I think we previously shared that a very large percentage of our direct customers, who quote online are now doing so via the mobile device. So our earliest our adoption of mobile was in quoting and buying as we've added functionality to the mobile app, the uptick there has been really impressive. So we found, as we build it, they will come, if you will, is predominantly been faster in the direct channel, not surprisingly. But increasingly agent customers are picking up on mobile as well. So one clarification I want to make on earlier comments on share for a home and auto, so Steve I think it was $325 billion market place of home and auto today, we're at about 10% share of the auto, think about 1 percentage of the home, $335 million is sort of 2/3 auto, 1/3 home, just a clarification.

I remember several years back, it was actually while I did a presentation for the yearly IR presentation on imagine Diane. And Diana, I showed a graph of whole mobile payments. We talked about when Diane becomes a Robinsons, she is not going to certain start paying the check. So we to invest way back then into having more of those future Robinsons, we're able to do as much as they can on mobile.

Great. Andrew, can we take the next caller from the line, please.

Our next question comes from the line of Bob Glasspiegel with Janney Montgomery Scott.

I was wondering if you could give us some dynamics in the homeowners rollout? What percentage is direct versus agency? And what is the relative profitability metrics of the 2 and growth as well?

First of all, I'll start with the fact that my daughter, her first accident was backing into At the time, I was running claims I was CEO. I can get worse than that right. That dynamics of the home, we continue to do roll out more and more agents, so that is growing on the direct side. Clearly, the HQX has been a big key that we rolled out last year that you can see sort of the hockey stick of where we're growing with that. So we're growing in both channels. We don't talk necessarily about profit or the target margins, I should say, in that aspect we always, I'm sure for 96 in the aggregate. So we don't talk publicly about where we're targeting either channel.

Just for clarification, Bob. The property results we report in our monthly releases are the premium we're writing them through what we're not Progressive Home family as. We Steve, I believe mentioned also receiving commissions from the business that we write direct with our number of other carriers. But we also think the benefit of the currency we previously discussed around homeowners as being that auto PLE. So we showed you the relative policy life expectancy across Robinsons, Wrights, Diane and Sam, and the reason we are in the home is to get to that at least half of the marketplace, but to keep those auto customers, we've historically have been really good at bringing in those new customers to keep them for their lifetime for decades. That's the currency of the home. Obviously, that's, we previously talked about, the invisible balance sheet that we're building as a result of that PLE gain, but that's underline the profitability of your bill of home.

What the discount you give to someone that buys both

So the discount varies by product. There is a discount -- and generally speaking across states on both the home and auto, it varies by state and it varies by channel as well.

It would be great before too long we get the homeowners broken up by agency and directly auto so that we can track the relative growth and profitabilities?

Yes. It is a little bit of tough, because to what John said in terms of not all of its on our paper. So where we have four homeowner carriers on one to be in Progressive Home, we have multiple on Progressive Advantage Agency. get a little tough look at premium even though getting commissions on some of those, but again auto PLE is our currency for that.

Thank you. Andrew, can we take the next call from the conference line, please.

Our next question comes from the line of Kai Pan with Morgan Stanley.

I just want to also say congratulations to Steve by adding one more customers to your $17 million customer base. So my first question is on your last slide. If you look at PLE have a tremendous growth, but seems like kind of reaching a plateau in the last couple of months. Your second quarter 3-month PLE data or increase have also slowed down from previous quarters. I was wondering are you reaching the limits or seasonality? How much more room to grow there?

I can't predict the future in that We obviously we've have grown a lot and so to continue to grow is our goal and to continue to keep customers for decades is our goal. Part of want the FX PLE and John Murphy had on this a little bit on price. So people care about the price watching that closely, because lot of our competition has increased prices those are slowing down a little bit. What I will tell you from the perspective of business is we're finding our new business conversion is still really strong. And so we're going to continue to look at PLE from the nature and nurture price expect and to continue to him make sure that we give our customers what they need to stay and understand that.

Okay. My second question, Tricia, back to your shareholders letter for the 6 months results. You achieved remarkable like 90% commodity ratio, 20%-plus premium growth. You normally have one-off either of them having not of both. But going forward, do you think you will back on some of these margins or faster growth? Or do you think the growth rate is that as much as you can handle given the infrastructure, remember couple of years ago, in your ramp up your staffing to anticipate for this growth? So I was just wondering margin going to deteriorate for you to grow faster on top line? Or you want to keep the top line growth rate at it is and let the margin through?

That's a great question. Let's go back to our goal, and that is to grow fast as we can we are making at least $0.04 of underwriting profits. So when we have that ability to grow like we have and we have the margins like we have, we are really happy. We're really firing on all cylinders, and I think that's the key part here. We have a great infrastructure, an incredible brand, a competitive cost structure, and we have had no problem hiring great people across the company. So we don't believe where we have any need to slow down. Now when you step back and you look state-by-state, channel-by-channel, product-by-product, you started looking say we're still able to grow these margins. And if we don't believe we can grow then we will determine what we need to do to grow. But again, we look at it so surgically across so many variables, but again, I can't predict the future we're sitting in a great position right now, we're really bullish and excited about what we continue to do and again that momentum. So for me we're happy about our growth. Obviously, we're happy with our margin. We're going to continue to achieve our goal, and that is to -- our vision to become consumer's #1 choice and to grow as fast as we can, make $0.04 and take care of our customers. Anything, John?

I think you have it. I would reiterate the success we had with staffing and attention to people has been remarkable. There have been points in the past where we're growing very quickly, and we were challenged by having appropriately trained mature staff to handle the claims an example to take the calls and John Murphy's organization, customer relationship management has done a fabulous job getting ahead of the projected need. Our service levels have been outstanding. And at the level of growth, where we are enjoying, that's really impressive. And the claim sites, similarly we have had a little benefit there and the fact that claims frequency has been dropping a bit. So we haven't had to add people quite as quickly in claims. We also found some efficiencies, the stuff like photo estimating. But in short, we feel great about quality metrics and claims. We feel great about service levels in our customer relationship management organization. So as Tricia said, we're sort of firing on all cylinders right now and want to continue to grow as rapidly as we can.

Yes. And think about we talk about, so we're excited about our Robinsons growth and we have less than 2% of shares. So I mean to think of the runway with that. We're well positioned and our mix shift is changing as well. So we've had our 83 Project we thought was fantastic to get more preferred customers end, our 84 project was even better and now we have 85 coming on the streets. So we're continually excited about our ability to attract and retain our preferred business. And so that mix shift changes, we believe there is lot of opportunities as well.

And if 84 and 85 don't mean a lot to you, wait a quarter, we'll have Vice President give you a lot more to tell around our product, iterations, which we are happy to say we're hitting the market even faster than we had previously.

Yes. We're creating a lot of ways on how name our products.

Thanks. Andrew, can we take the next call from the conference call line, please.

Our next question comes from the line of Elyse Greenspan with Wells Fargo.

My question for a second quarter in a row, you guys pointed to favorable frequency trend. And we see that throughout the industry, I guess, a couple of questions, following on another quarter the favorable trends, what you guys think is driving the favorable auto frequency that we've seen in the industry? And when do you think we get to a point or maybe we say it's more of a new normal that the trends that persisted? What made the time to need to declare kind of a new home frequency base for the industry?

Yes. I have a lot of things going in frequency. It's really tough to pinpoint in particular, I just talked about clearly our mix shift is changing. You can go into a vehicle miles driven. If you look a lot of macroeconomic data, and it's hard to react quickly because things change along the way. So we're watching closely things like gas prices and unemployment and things like that. So you can change in any given quarter, and I can't tell you exactly when we'll say, okay, this is a new normal and we're going to price because prices severity. But we do watch those to kind of understand, where we're priced and what's happening in the macroeconomic atmosphere.

We get this question often and Tricia pointed out, it's very difficult for us to even -- with the data we have around miles driven, types of miles driven, the economic data is such even explaining frequency changes that are past it's difficult for us, it's even more difficult to project them. We do know that the long-term trend has been negative. We expect it to be negative. When I say long-term, I'm talking about the past 4 decades. But if you look back within that 4-decade period, what you see is a lot of what variability. In the '80s, frequency was dropping dramatically. The '90s, it went back up and almost got back to where it was at the beginning of the '80s and it culminated with 2,000 combined ratio for the industry something like 112. We were a little below that, where we had 104-ish. You get to a point. After that frequency drops very quickly over the past decade or so, it's been fairly flat up or down a Bit. But I think those experiences even though the long-term trend is negative, make the industry less likely to quickly price to a drop in frequency. We have had six straight quarters now, I believe, frequency drop. But again, when you look back at the history, there is reason to be cautious and the key for us, I think, is ensuring that we are very agile, where we think things have changed. We act very quickly and make those changes in the marketplace. And I think that's a big piece how we win

Okay. And then there is a slide in the deck where you guys highlighted all the products that you are now offering to customers and compared back '18 to 2017. And so if you go back before you guys made ASI acquisition you always are identified opportunity to bundle with the auto and home customer, that was driving force there. Is there anything on this list that as you think about maybe to future acquisitions, something that you guys are not writing directly today, but providing to insurance that might the list of something you would want to take on the underwriting risk completely yourself?

I think for now, we're happy with Progressive Advantage Agency products. And -- or I should say over the products that were on the paper that are given to our insurance. If we believe we need to access like we did with ASI and we start with the partnership, that to us is important, because we knew in the homeowners area. We started out and we actually after with a great career, but just in market agency channel started a partnership with ASI knew they were on the same values as us. So that made sense to purchase, because we didn't have access to those customers and agency channel. We feel very comfortable with the product offering that we have and our ability to again extend our auto policies with the products on that side that we necessarily have to right on a paper.

And if I get one more quick one in. What's on the new money yield on the investment portfolio today?

Bill, you want to take that one? New money yield investment portfolio today.

The New money yield on the investment portfolio, start with this that we run the portfolio in a total return basis, and we don't necessarily target a new money yield. In the second quarter, it was just a little bit over 3.5%. So going forward, I would just say, duration is around the same as 3-year treasury. And if you add a spread on top of that high quality, fixed-income bonds, you can get reasonable proximation of what money looks like.

Andrew, can we take the next call from the conference call line, please.

Our next question comes from the line of Mike Zaremski with Crédit Suisse. Your line is now open.

Yes. Thanks for the info on the Robinsons growth versus the other customer types. Can you remind us the approximate combined ratio differential between Robinsons versus the Sam, Diane and Wrights?

I don't believe we shared it. So I think it would be.

And our target for all those customer segments are the same. It's 96. So we obviously have different economics across channels with an upfront loading the direct channel, the commission over the lifetime. So the pricing is not necessarily the same, but the target profit margin across those 4 customer segments is the same -- across channels.

Okay. I guess, you can -- you say -- you said a number of billion-dollar kind of invisible profits due to higher PLE. So I assume big chunk of that is coming from the Robinsons and more profitable, maybe I could through that more.

So you're talking about that last slide that John showed.

Yes.

Yes. So when we look at that, we look at the entire book and we say, if we added a month to our entire book, how much would that be in lifetime premium. And then John take a percentage of that, percentage of increase in PLE. So we normally sound average if we add them on to our entire book, it's about $1.6 billion in lifetime and premium.

So you might be confusing a new renewal split has been the same combined ratio, and it's not. So Robinson will stay for us for a longer than the Sam, for example. So that over the lifetime, we are achieving that 96 on a new customer versus renewal customer is dramatically different for Sam as you too from an acquisition because relative to Robinsons.

And the way our acquisition model works is very different depending upon what channel you arrive in.

Okay. Got it. That's helpful. And lastly, you talked about being optimistic about independent agents, potentially taking share from captives overtime and you're reasoning independent agents holding only one product. I thought that's kind of always been the case. So I'm trying to understand what's going to change for that market share dynamics to change?

Yes. I think the demographics are changing. So I think people expect to have multiple offerings wherever they go. So whether it's an insurance their online. And so I believe there is a demographic of being able to have more offerings, and you have seen some companies actually go that route from being captive to bring part of the independent agent channel. I think seeing that, it's very different to have only one product to have optionality to what fits on your lifestyle. That sort of our promise.

Andrew, can we take the next call from the conference call line, please.

Our next question comes from the line of Paul Newsome with Sandler O'Neill.

You covered a lot of ground, thank you for that. I just wanted to retouch the 10-year effect impact of the growth. It seems like you had accelerating growth with no impact on the combined ratio, where the mass majority when we see this growth, you see some impact on the combined ratio from the growth itself, because new business is typically not as profitable as all. Is the 10-year effort in there? And we're just not seeing that? Is there something else that is going on that we are all good. Could you give us a sense of how you think this in the current book right now?

I think there is so many, John. So many things going on, but what we've been really impressed about and read about so much in my letter is the biggest part of our cost is loss cost. And being able to have our claims organization, higher well in advance, trained well in advance and have systems that can alert us to make sure we have that high-quality outcome and we have been obsessed with watching those files because of the low tenure and the claims organization to make sure that we have the right people handling the right files at the right time with the supervisor being able to get out in front of file that might be going sideways before it settled. So that's, I believe, a big part of it. We do usually have a new business panel. We've been in this mode for a while, where we've been having a lot of new business. So that's kind of started to level out a bit.

To that, I would add, so we're going to try to understand how much better to grow new business. And we are conscious like I previously said, it's a 96 across channels all segments. We are actually cognizant of what we think the new renewal mix will be going into the air. So we say our target is that calendar year combined ratio less than 96, at the same time, we're looking at lifetime combined ratios for all those customer sites that we want to be within that 96 as well. So it's a balance across those 2 objectives, clearing the direct channel as you bring a lot of new business, those combined ratios are much higher than renewable and less differential. But increasingly, as we are moving the book to what's more preferred customers, the difference between the loss ratio for new customers on the Sam end is far bigger than the Robinson end. And then as we shift that book then the loss ratio a few put on the growth is far less.

Andrew, can we take the next caller, please.

Our next question comes from the line of Gary Banfield with and Partners.

I enjoyed your discussion on customer experience, I wanted to ask about another level of customer service that actually increases the opportunity to interact with customers. And this is may be at the product level, but it perhaps your snapshot, mobile may encourage additional interaction and also a product such as our pay by the mile might encourage additional interaction. I wonder if you could share thoughts on that level? And also more specifically, whether your been thinking about pay by the mile product?

We've been really focused from the snapshot perspective on having a more, we talked about is a mobile is a device. So actually using the phone to be able to understand the driving behavior, not just time a day, aggressive breaking our miles driven, but usage of your phone with an application or a phone call. So we're really trying to understand the behavior and the loss behavior that we have distracted driving. So that's really been our focus to understand with all the information we have at some point we can put that into a product model because of the data that we will have better drivers that have the mobile is a device versus a page ago.

So you don't have anything in the by the multi-product?

We're always thinking about things. Right now, we are focusing on mobile is a device in understanding the loss experiences for distracted driving as well as what we've always used as a huge editing variable. And when and talks the next quarter, we will talk a little bit about snapshot on the importance of that variable in terms of our ability to price and charge the right amount for the way people drive.

May be just one follow-up on snapshot. Is it your belief that you are -- truly is a reasonable amount or significant amount of adverse selection that you are causing and you are not alone, there are other peers that are using a similar product, but not very many? Is that actually making everyone else's loss ratio higher?

So I can't speak to the loss ratio of the competition. What I can say is that when our customers, who have driven with us and have a snapshot device get a surcharge often times they leave, which means that we're going to price them right, which is a high price. They didn't like it that to someone else and that to me sort of the definition the selection.

Andrew, can we take the next caller, please.

Our next question comes from the line of Adam Klauber with William Blair.

What's the year-over-year increase in platinum agents? Or else could you give us that rough ballpark of percentagewise? How much increased?

I'm not sure percentagewise. We used to give the number and we kind of start giving that because a number. I think I'll number to that, I think, it's around might be a little of it. We look at platinum now less of we need to increase more agents, but in any given geographic area, where we believe that our Robinsons, do we need to have a more platinum agents in there. So that's really how we look at now because we feel like we have a good footprint across the country, but we do look and say okay, here we're not growing as much is it the agents, is it the ability to have those Robinsons walk into those agencies not kind of a next level of assessment in terms of our need for more platinum agents.

Okay. And then a follow-up. A point to your 10-Q, seems pretty low has been improving, look like it's only 2%, that's materially better than the industry looks like it's improved compared to year ago. I guess, what are you doing better in the industry? And how are you improving severity in a tough time for severity?

I mean, I think from what I understood, it wasn't that different from the industry, 2, 2.5. We always obviously I talked about looking at making sure we are accurate in our payments to make sure we have the right level of people looking at our files because that's our biggest cost. And we have a an incredible training organization to be able to do that incredible leadership organization that claims area. And that's really what we look at this him in terms of making sure we get out there quickly, we have the customer and we help to manage the claim.

Andrew, we'll take the next call from the conference call line, please.

Our next question comes from the line of Meyer Shields with KBW.

Two questions, I think, touching on issues have been raised in the Q&A. First, to the extent that you are winning business either in independent agency or direct from captive agents, those customers are different either loss or PLEs than longer-term independent agent other customers?

There will be able to really actually see that data from that right now, I mean, it's more of -- I would look at it in terms of the types of customers. The customers that have multiple products, the customers that have more to take care, the customers that have the credit, all the things that we look at in terms of proof of priors, some of those things are company look for it's really the variables that we look at versus where they come from. Do you want to add anything too?

I think that's truly

Okay. That's helpful. And second, I have to agree to the point you made that demographically, we're going to see an increased focus on having options. Does that diminish the value of the brand recognition improvement that you have been fostering?

No, I don't think so at all. I think our brand recognition will tell you, especially HQX Progressive Advantage Agency that we want to have Progressive Home. We also have different options for you. So I think we actually have highlighted that and some of our commercials and arguably the commercials we talked about HQX, we're doing it to make sure brand recognition our own home, and it improved our prospects on both home and auto. So we feel like it's actually getting better.

I would add. I think the relative to competitors, we are the brand that is known for providing customers options.

Steve used the line in his presentation that was in the commercial years ago, when we used to have compared which we have to it was we're not always the lowest. And so that's kind of been our claim to fame to make sure we have the transparent company about saying you're better off getting going with XYZ. So we're part of that.

Thank you. And I'm actually going to, I think, you said, 2800 platinum agents.

Yes. Is that wrong?

No. You're close. Almost 2,900 agents of 45% since last June.

So I've ever reported a month ago. So must have add

Exactly. Andrew, can we take another caller from the conference line, please.

Our next question comes from Brian Meritor with UBS.

So just curious you've had at the ton of success here and lots of growth going on, but growth obviously requires capital. And I know you had the preferred offering. Just curious where are you with respect able to sustain or observe this growth here on your current capital position? And then what are your alternatives going forward given that your leverage ratio is up a little bit?

Yes. I mean, we look at capital in terms of need from many different areas and we wrote a paragraph about in the Q. As we grow, we're going to need more regulatory capital to hit the premium to surplus. So we will continue to watch that, that's a good problem to have. We have dividends, we have a lot of different things that go into our capital structure and of course, our debt-to-total capital ratio we usually talk about in a 30% range. If we believe we need capital to continue to grow, we'll determine what that means whether it's issuing debt or in the past. So we look at that on a monthly basis to kind of understand our need, but we believe we see that as a good problem in terms of growth in our ability to get that if we need it.

Yes, I don’t disagree, just wondering, your willingness to the equity capital.

We review it every time we go to market to determine where we should go with that, and what makes the most sense in terms of returns. So we do that as needed.

Got you. And my next question, obviously, great growth in homeowners is going terrific. How do you think about managing volatility that homeowners potentially I know you've got some great arrangements in place right now to do that, I assume, it's getting bigger and bigger, bigger and it's harder to manage their volatility and I guess, what's the run rate here you got -- you may run into some concerns about that?

Well, firstly, I think is really understanding segmentation in the home as much as we do on the auto side. So we're working very closely with the 2 R&D departments to understand the type of homes we should ride and obviously want to expand our coverage, not only just geographically, but to more homes. So we are watching that you understand, okay, this is the segment that we believe really fits in our in our real house. In addition to that, as you know, we added the aggregate last year and has been helpful and we feel really good about our insurance. So I think it's really about having a solid reinsurance plan and kind of understanding what we can on the history of weather and where we should write and how we should rate those homes and also continuing to segment homes as we do auto.

A lot of that growth is actually lessening our concentration risk geographically. So that getting bigger they're actually, I think, helps the volatility. The aggregate surplus agreement is not depending upon how big we are, it's a percentage across-the-board. So it's not dependent on sites.

Our goal is to continue to grow extensively in home and auto unbundled.

Thank you. We will take one last caller from the conference call line. Please, Andrew.

And our next question comes from the line of Ian Gutterman, Balyasny Asset Management.

I just had two quick ones. First on the homeowners, I guess, sort of go back on history right, ASI before acquire them was obviously very overweight Florida and Texas I recall and is a middle of the country obviously had a lot of these other partners. And now, first, I talk a little bit about how much of the non-coastal growth as you fill out the math? Should we assume that on the margin most of that will be ASI? And secondly to the extent that it is, can you just talk about what I'm really concerned about something for future call is the infrastructure build out in states where you are heavily concentrated, right. If Tennessee or Nevada or something like or maybe where you don't have homes and you have a lot of auto customers and people are now to call in. How quickly can you build that home infrastructure because there is a lot different than our infrastructure, right? so maybe I'll leave it there and let you start answering that.

Yes. So obviously as we expand on the agency channel, it will all be Progressive Home off. On the direction channel, we have multitude carrier. So really is the best fit for the customer. We only talk about the percentage get from each of the unaffiliated partners with Progressive Home at the direct side. We have lots of options to fill up the country. From an infrastructure perspective, we have made a commitment and investment on the claims organization to have offices across the country. We have hundreds and hundreds of officers across the country. For the most part in home, we use independent agents for the homes. So the infrastructure is already built out with our partnerships that, but we do have an opportunity to actually leverage our already infrastructure on the auto claims had with the leadership we had there. So and we also have our large losses and complicated losses, a very large kind of high value or high kind of loss organization here that handles any of those big claims on the commercial side, on the home side. And so we have an infrastructure build from the home we believe we can utilize for auto, for home as well as the fact that traditionally we've used independent agents across the country.

Yes, our writing a lot of the estimates for homes and states, where we don't have a lot of business yet. You're right about that for sure. But each of those files is owned by an adjuster that is an employee that is reviewing those estimates and reviewing coverage as well. So while there is some delegation of the adjusting process, it is still owned by an employee.

I assume the goal overtime as you get more critical more in certain states may be counties that you start to replace that independence with more of your own people when you have enough skill to do so?

I'm sorry, that's an absolutely what we've been doing as we grow in states in which we don't have a ton of business yet. So the claims organization for Progressive Home is growing very rapidly.

Okay. And then just quick follow-up about you earlier questions about an 86, I may be asked a little differently. Obviously, you've been in the 96 a fair amount for a number of years, let's say, a target on it, but somewhat down the line, you go from 2% of Robinsons to call it 10% Robinsons. Just given the longer PLE, they can sustain a higher combined ratio. Is it reasonable to expect that over the longer-term sort of neutral or be a smaller margin versus the 96, which isn't a bad thing is probably a good thing because the PV that is higher. But just from a GAAP perspective, is that something we should expect to happen overtime?

I wouldn't necessarily go to that. Remember, it wasn't long ago in 2016 that we were over 96 for the quarter we came in at 95.7, I believe. That my memory in my mind since its was my first quarter as CEO. But 96, again, we have been writing about this is our first annual public in 1971. So we will continue to look at the 96 aggregate for all of our coverages. And again, they are different, but we optimize to the aggregate. So what we will do whatever we can to grow as fast as we can, make at least $0.04 to service our customers, and that's really sort of -- that's our blueprint. And then everything else we can to fit into that. This is a 96 is and it is what we do here it's our culture and it is really is served us so well for our 8 years.

Absolutely. I just tried to think spreadsheet here as you have more, more success with the Robinsons mathematically little bit natural optical pressure, right, not economic profits fantastic, but nominally I was thinking there was a mix change, I guess, if you're well that makes the 96 little harder. Does it make sense? Or I'm the other way?

Yes. I think we're coming from new we just have to play it out and see how it goes as we continue to increase our mix of business.

I would just to reiterate. As we go into a calendar year, we know our calendar target is 96 or better, and we can project that we expect those combined ratios are by segment and by new renewal, and we can adjust our target pricing accordingly to make sure best sure as we can that we're below that 96 for the calendar year.

Thank you. So we've actually exhausted our scheduled time. So Andrew, I'm going to hand it back to you for the closing scripts.

Thank you. That concludes The Progressive Corporation's second quarter investor event. Information about a replay of the event will be available on the Investor Relations section of Progressive's website for the next year. You may now disconnect. Everyone, have a wonderful day.