Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. PROGRESSIVE CORP/OH/ (80661) 10-K published on Feb 27, 2019 at 8:23 am
Reporting Period: Dec 30, 2018
In addition, there has been a proliferation of patents related to new ways in which technologies can affect competitive positions in the insurance industry. Some of our competitors have many more patents than we do. Some of the patents we currently hold include two patents related to our online policy self-service technology (expiring mid-2019), a usage-based insurance patent (expiring in 2024), two patents for the system we use for securing our e-signature transactions (expiring in 2025), two U.S. patents on the Name Your Price® functionality on our website (expiring in 2028), two multi-product quoting patents (expiring in 2032), a patent for our implementation of a mobile insurance platform and architecture (expiring in 2032), a patent on our system of providing customized insurance quotes based on user’s price and/or coverage preferences (expiring in 2033), two patents for our loyalty call routing system (expiring in 2033), and a patent for the implementation of a chatbot in online quoting and buying (expiring in 2038).
Our principal investment goals are to manage our portfolio on a total return basis to support all of the insurance premiums that we can profitably write and contribute to our comprehensive income. Our portfolio is invested primarily in short-term and intermediate-term, investment-grade fixed-income securities. Our investment portfolio had a fair value of $33.6 billion at December 31, 2018, compared to $27.3 billion at December 31, 2017.
Investment income is affected by the variability of cash flows to or from the portfolio, shifts in the type and quality of investments in the portfolio, changes in yield, and other factors. For securities held in our investment portfolios, total investment income includes interest and dividends, net realized gains (losses) on securities sold, net holding period gains (losses) on securities, which for 2018 is composed primarily of valuation changes on equity securities, and write-downs on securities held in our investment portfolio. Total investment income, before expenses and taxes, was $483.3 million in 2018, compared to $662.3 million in 2017, and $589.7 million in 2016. For our investment portfolio, on a pretax total return basis (i.e., total investment income plus changes in net unrealized gains (losses)), investment income was $357.5 million, $1,210.8 million, and $791.0 million for the years ended December 31, 2018, 2017, and 2016, respectively. Outside of our investment portfolio, but reported in impairment losses in the consolidated statements of comprehensive income, were $68.3 million, $49.6 million, and $59.7 million of other-than-temporary impairment losses resulting from renewable energy tax credit investments entered into during 2018, 2017, and 2016, respectively. For more detailed discussion of our investment portfolio, see Note 2 – Investments, Note 3 – Fair Value, and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report.
In addition, data privacy and security regulations impose complex compliance and reporting requirements and challenges. For example, California recently enacted consumer privacy protection legislation that will become effective in 2020. Compliance with this new legislation will be challenging as it will require us to modify our current business systems and operations in a short time frame and without the benefit of related regulations, which are not required to be issued until six months after the legislation’s effective date. Other states are considering privacy and security legislation, and variations in requirements across the states present ongoing compliance challenges. Compliance with these laws and regulations may result in increased costs, which may be substantial and may adversely affect our profitability or our ability or desire to grow or operate our business in certain jurisdictions.
Efforts to develop new products or enter new areas of business may not be successful and may create enhanced risks.
We are developing, and may develop in the future, new insurance products, including those that insure risks that we have not previously insured, contain new coverages, or change coverage terms. These new products may not be as profitable as our existing products and may not perform as well as we expect. In addition, these new products may change our risk exposures, and the business systems, data, and models we use to manage those exposures may be less accurate or less effective than those we use with existing products.
In addition, we are evaluating other business models, both insurance and non-insurance related, and are considering investments in different business areas. These activities may take the form of internal development, equity investments, targeted mergers or acquisitions, joint ventures, or strategic partnerships. These new ventures may require us to make significant expenditures, which may negatively impact our results in the near term, and if not successful, could materially and adversely affect our results of operations. While at the onset of the venture we would expect these projects to provide long-term value, there can be no assurance that our expectations will be realized.