Fitch affirms Progressive

Fitch Ratings said it affirmed Progressive Corp.'s issuer default rating at A+; its senior debt at A, which includes $350 million of 6.375% notes due 2012, $150 million of 7% notes due 2013, $300 million of 6.625% notes due 2029 and $400 million of 6.25% notes due 2032; and its junior subordinated debt BBB+, which includes $777 million of 6.7% notes due 2067.

The outlook is stable.

The affirmation follows the company's announcement that it will issue a $1-per-share extraordinary dividend, which will return to shareholders approximately $660 million, and that the special dividend will not affect the company's annual variable dividend rate plan for 2010. Fitch said this transaction will increase the company's statutory net leverage to 4.3 times on a pro forma basis from 3.9 times, but this is within the agency's current expectations.

Fitch said the ratings are based on Progressive's excellent operating performance, pricing and underwriting expertise, personal auto insurance franchise, modest catastrophe risk, conservative investment allocatio, and strong risk-based capital position.

The ratings also reflect the limited product diversification and high notional leverage of the company, the agency said.

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