Fitch affirms Progressive

Fitch Ratings said it affirmed Progressive Corp.'s issuer default rating at AA-, its senior debt rating, $347.7 million 6 3/8% notes due 2012, $148.9 million 7% notes due 2013, $294.1 million 6 5/8% bonds due 2029 and $393.7 million 6¼% bonds due 2032 at A+ and its junior subordinated debentures and $1 billion 6.7% bonds due June 18, 2067 at A.

The outlook is stable.

Progressive recently announced a pretax $1.1 billion other-than-temporary impairment charge primarily related to preferred security holdings at Progressive Investment Corp. Inc. However, Fitch said a pro forma analysis as of Sept. 30 still indicates excellent operating capital at the operating subsidiary level because the reduction in capital was mainly at Progressive Investment, an entity Fitch excludes when analyzing capital adequacy of the insurance subsidiaries due to the lack of permanency of the assets it holds.

The ratings and outlook reflect Progressive's strong operating performance, pricing and underwriting expertise, personal auto insurance franchise, modest catastrophe risk and strong capital position, the agency said.

The ratings also reflect Progressive's declining growth rate, limited product diversification and modest reserve position, Fitch said.

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