Quantify 2016 - Progressive

Michael Ezzat, Ethan Le, Ye Na Lee, Ahraniya Ragavan

Introducing: Snapshot Plus

Industry Trends

Industry Overview Snapshot Plus Implementation Forecast Risk Managmenet

Progressive Position

Industry Overview Snapshot PlusInvestment

ThesisValuation Risks & Catalysts Recommendation

The Current Model: Snapshot

Usage-based telematics device using GPS

Collects information about driving habits

PROS: Reward good driver up to 30% discount, competitive pricing model and accurate information

CONS: Privacy concerns and Reservation to change

Snapshot Plus

Industry Overview Snapshot Plus Implementation Forecast Risk Managmenet

Accelerometer

• Speeding

• Breaking Pattern

Motion Sensor

• Hard Turn

• DUI

Light Sensor

• Night Driving

Environmental Sensors

• Weather Condition

• Distracted Driver through Music

Position Sensor

• Distracted Driver through Phone Usage

Snapshot Plus

Rethink Insurance

Policy

Holders

Insurance

Company

Risk

Premium/

Restrictions

Reducing

Risk

Reducing Claim

Snapshot Plus

Watch your speed! Speed

Limit: 80kmSnapShot+

Driving Your Saving

Level of Assisstance

Off

Minimal

Moderate

Recommended

Industry Overview Snapshot Plus Implementation Forecast Risk Managmenet

BenefitsWecome to SnapShot+

Driving Your Saving

Ready to Save?

GO!

Reducing manufacturing costs

Utilizing build-in sensors of mobile phones

Monitoring the safety of your vehicle, home and more

Reducing privacy concern

Industry Overview Snapshot Plus Implementation Forecast Risk Managmenet

Implementation

Industry Overview Snapshot Plus Implementation Forecast Risk Managmenet

Beta launch to Snapshot user

Open to public

Covering more

products line

Developing

App

3-6 months 6 months -

1 year

1st year 2nd year

Industry Overview Snapshot Plus Implementation Forecast Risk Management

115,580,040$Sales Growth

800,000$Cost

42,576,929$Saving on Claim from 9,160 cases

Risk Management

Industry Overview Snapshot Plus Implementation Forecast Risk Management

Apps Hacking

• Audit

• Contract

• Incentives

• Patents

• Regulations

• Copy

Future Risks

Assumptions

Snapshot will be implemented on all products lines

In 2013, 11% people who shop Progressive, opt for Snapshot

We plan to increase number by 5-15% after Snapshot+

In 2013, 15% policies are closed by Progressive with the aid of Snapshot

We plan to increase this number by 2-10% after Snapshot+

We assume that Snapshot+ will reduce 1-5% number of claim due to safer driving behaviors

cost of changing the apps is insignificant, less than 1 million

Appendix

https://www.jdpower.com/sites/default/files/InfluenceofTelematics%20JDPower%20Insights.pdf

Assumption Rationale

Cost of Making An Apps

http://www.formotus.com/14018/b

log-mobility/figuring-the-costs-of-

custom-mobile-business-app-

development

Appendix

Sensitivity Analysis

28.8951 10% 8% 6% 4% 2%

15% 289.0$ 231.2$ 173.4$ 115.6$ 57.8$

12% 231.2$ 184.9$ 138.7$ 92.5$ 46.2$

10% 192.6$ 154.1$ 115.6$ 77.1$ 38.5$

8% 154.1$ 123.3$ 92.5$ 61.6$ 30.8$

5% 96.3$ 77.1$ 57.8$ 38.5$ 19.3$

21.288465 5% 4% 3% 2% 1%

15% 106.4$ 85.2$ 63.9$ 42.6$ 21.3$

12% 85.2$ 68.1$ 51.1$ 34.1$ 17.0$

10% 71.0$ 56.8$ 42.6$ 28.4$ 14.2$

8% 56.8$ 45.4$ 34.1$ 22.7$ 11.4$

5% 35.5$ 28.4$ 21.3$ 14.2$ 7.1$

5% 4% 3% 2% 1%

15% 395.4$ 316.3$ 237.2$ 158.2$ 79.1$

12% 316.3$ 253.1$ 189.8$ 126.5$ 63.3$

10% 263.6$ 210.9$ 158.2$ 105.4$ 52.7$

8% 210.9$ 168.7$ 126.5$ 84.4$ 42.2$

5% 131.8$ 105.4$ 79.1$ 52.7$ 26.4$

Sales 19,263.4

Opt in Snapshot 5%

Policy Closed 3%

Claim 14,192.31

Opt in Snapshot 5%

Accident Reduction 3%

Revenue Forecast bases on historical performance(In Millions) 2011A 2012 A 2013 A 2014 A 2015 A 2016 E 2017 E 2018 E 2019 E 2020 E

Agency 7,627$ 8,104$ 8,602$ 9,087$ 9,109$ 9,473$ 9,852$ 10,246$ 10,656$ 11,082$

Growth 6.2% 6.1% 5.6% 0.2% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%

Direct 5,804$ 6,264$ 6,740$ 7,474$ 8,159$ 8,812$ 9,517$ 10,278$ 11,100$ 11,988$

Growth 7.9% 7.6% 10.9% 9.2% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%

Commercial Line 1,467$ 1,649$ 1,762$ 1,838$ 1,996$ 2,108$ 2,226$ 2,350$ 2,482$ 2,621$

Growth 12.4% 6.8% 4.3% 8.6% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6%

Loss Ratio 71.2 74.6 73.0 72.8 73.7 73.0 72.3 71.6 71.0 70.3

Growth 4.9% -2.2% -0.3% 1.2% -0.9% -0.9% -0.9% -0.9% -0.9% -0.9%

Expense Ratio 21.6 21.3 20.4 19.8 19.8 20.0 20.2 20.3 20.5 20.7

Growth -1.5% -4.3% -2.9% 0.3% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8%

Combine Ratio 92.8 95.9 93.4 92.6 93.5 93.0 92.5 92.0 91.5 91.0

Growth 3.4% -2.6% -0.9% 1.0% -0.5% -0.5% -0.5% -0.5% -0.5% -0.5%

Appendix: Company Financial Forecast

Earning Analysis and Forecast

Industry Comparison