Progressive Executive Insights: Technology Risks, Business Snapshot

On Thursday, Progressive Corporation (NYSE:PGR) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Technology Risks:

Glenn M. Renwick – President and CEO: First with regard to mobile, are there any risks in different technologies coming? Yes. There is always risk. I alluded to it. We clearly have a cell phone app that does a lot of the sort of things that we know we can do. So, we’re very well aware and we have different alternatives. We chose to use the one that we have and what John outlined. Let me say it again, it’s all about execution. No matter who comes up with a new technology, a lot of that appear to be meaningless scatter plot of almost seagull like situations. Those were our insurers. It’s massive amounts of data. What really has been the issue there hasn’t been so much the technology curve. We knew that would come to us. We’re not in the technology business. We’re in the data business. So, yeah, I expect there will be all sorts of things that will develop over the next several years, but I am not – I can’t concern myself of what I don’t know. I’ll concern myself of what we do know. Could you just repeat the second part of the question?

Unidentified Analyst: Just in terms of – does the cell phone and mobile apps, is that just proportionally benefit direct enrollers like you and GEICO and are there risk to it – are everybody doing this and people retention going way down for the industry?

Glenn M. Renwick – President and CEO: Certainly, you’ve heard today. Clearly, we – and I have stated several times, I think we’re in a very advantage position having both, an agent distribution and a Direct distribution. Lots of time people sort of feel that perhaps we control the distribution. We don’t. We have to appeal to the way consumers want to shop, and I think what you heard in from Jeff and Matt, is that consumers are using the mobile device. They would more like be direct of course. But, that doesn’t mean some of the things that Karen presented to you, that we won’t be able to take in some way, shape or form and help our agents as well, and keep them relevant in the mobile world. So, I think that’s one that you will see just as you saw with – if you were around, our internet strategy we developed over a good number of years, we’ll just keep that one rolling. The really key message today is we’re not going to hedge your bet on this one. This is not – we’re not going to wait and see. We intend to lead on this one.

Business Snapshot:

Unidentified Analyst: Hi, I had a question, just on Snapshot, so just quickly, could you remind us what you measure today with Snapshot for the drive of data. How that evolved, clearly you looked at a lot of things and there was push back from privacy issues. Where is it going and how do you change the metrics that you measure? And do you have to wait for renewal to change the metric, say, okay, now we’re going measure this, because you’re going to get push back from the consumer, and then can you help us at least frame, what the payback is, for these new, I mean you give it a discount, what’s the payback and how does it help the EPS over what time frame?

Glenn M. Renwick – President and CEO: Once, you sort of build on John’s comment for the EPS question if you can, we are always revising our algorithms based on the data set that we got. You mentioned a privacy issue, and I think we’ve been very forthright with that before. We actually took out GPS for example from the chip. So do we believe or now that a GPS could help us? Yeah. Probably. But right now we have so much marginal gain in the data that we have that we’re very conformable that we’re not event exploiting a full depth of that. You heard John refer to that, so we’re not dramatically changing the variables that we’re measuring. Last year Tom talked about horizontal axis, so lane changing behavior, something that certainly is in the scope of types of things that we’ll consider, but we’ve been pretty public about a few of the things we measure time of the day, actual usage and braking and acceleration behavior. Beyond that, we really don’t need to give anyway to anyone else. This is somewhat proprietary, and to the extent that when someone’s got a renewal, they have, if you’re one of our customers, you will have now pretty much gotten your discount and returned the device. So, we’re not – we would never. This whole thing will come down on its ears if we don’t have the integrity to live what we tell our customers we’re doing. So ultimately, once you’ve got that discount, unless we came up with something fundamentally new that we think you could benefit from and we do reserve the right to resample your behavior, and we of course will manage that. No one could expect that whatever we know today is all we’ll know for the future, but realistically, it’s not that dynamic from the consumer perspective.