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[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
PEST ANALYSIS Nature of Change Impact of Change Opportunities Threats Strategic Response Political Change ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Economic Change ,[object Object],[object Object],[object Object],[object Object],[object Object]
PEST ANALYSIS, cont. Nature of Change Impact of Change Opportunities Threats Strategic Response Social Change ,[object Object],[object Object],[object Object],[object Object],[object Object],Technological  Change ,[object Object],[object Object],[object Object],[object Object],[object Object]
PEST ANALYSIS, cont. Nature of Change Impact of Change Opportunities Threats Strategic Response Technological change  ,[object Object],[object Object],[object Object]
INDUSTRY ANALYSIS 524: The Insurance Carriers and Related Activities Industry http://www.census.gov/epcd/naics02/N2SIC52.HTM#N524 2002 NAICS Code 1987 SIC Code NAICS Industry Definition 524 Insurance Carriers and Related Activities  – Industries in the Insurance Carriers and Related Activities subsector group establishments that are primarily engaged in one of the following: (1) underwriting (assuming the risk, assigning premiums, and so forth) annuities and insurance policies or (2) facilitating such underwriting by selling insurance policies, and by providing other insurance and employee-benefit related services.  5241 Insurance Carriers  – This industry group comprises establishments primarily engaged in underwriting (assuming the risk, assigning premiums, and so forth) annuities and insurance policies and investing premiums to build up a portfolio of financial assets to be used against future claims. Direct insurance carriers are establishments that are primarily engaged in initially underwriting and assuming the risk of annuities and insurance policies. Reinsurance carriers are establishments that are primarily engaged in assuming all or part of the risk associated with an existing insurance policy (or set of policies) originally underwritten by another insurance carrier. Industries are defined in terms of the type of risk being insured against, such as death, loss of employment because of age or disability, and/or property damage. Contributions and premiums are set on the basis of actuarial calculations of probable payouts based on risk factors from experience tables and expected investment returns on reserves. 52412 Direct Insurance (except Life, Health, and Medical) Carriers  – This industry comprises establishments primarily engaged in initially underwriting (i.e., assuming the risk and assigning premiums) various types of insurance policies (except life, disability income, accidental death and dismemberment, and health and medical insurance policies)  524126 6331, 6351 Direct Property and Casualty Insurance Carriers  – This U.S. industry comprises establishments primarily engaged in initially underwriting (i.e., assuming the risk and assigning premiums) insurance policies that protect policyholders against losses that may occur as a result of property damage or liability.
[object Object],[object Object],[object Object],[object Object],INDUSTRY ANALYSIS Automobile Insurance Industry Size and Growth
INDUSTRY ANALYSIS Progressive Corp. and Industry Profitability, 1984-93 * Industry underwriting profitability refers to the entire automobile insurance market ** Industry ROE refers to the entire Property-Casualty insurance industry All data from the case 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 PROGRESSIVE Underwriting Profit -2.4% 0.0% 4.3% 5.6% 2.9% -1.2% 1.0% -3.7% 3.5% 10.7% Return on Average Equity 18.0% 36.9% 26.9% 24.7% 25.9% 17.4% 21.5% 6.7% 34.7% 36.0% INDUSTRY Underwriting Profit* -17.4% -17.0% -8.6% -4.7% -5.4% -10.4% -9.8% -9.0% -3.0% -2.0% Return on Equity** 1.9% 4.0% 13.6% 15.8% 13.2% 9.9% 8.6% 9.2% 4.4% 9.8%
INDUSTRY ANALYSIS Progressive Corp. vs. Industry Performance, 1984-93 Data from finance.yahoo.com from 1986 -1993 plotted against S&P500 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Data taken from the case
INDUSTRY ANALYSIS HH Index, 1993 Data taken from the case ,[object Object],[object Object],[object Object],[object Object],[object Object],Insurer Net Premiums Written  Market Share w/o ARPs  Market Share w/ ARPs State Farm  $  2,430,000  13.50% 19.16% Allstate Indemnity  $  2,192,836  12.18% 17.29% Progressive  $  1,819,000  10.11% 14.35% Mid-Century  $  1,000,000  5.56% 7.89% American Premier  $  935,525  5.20% 7.38% Hartford  $  372,311  2.07% 2.94% Colonial Insurance Company  $  335,635  1.86% 2.65% Integon  $  246,393  1.37% 1.94% Guaranty International  $  236,804  1.32% 1.87% Dairyland (Sentry Insurance Corp.)  $  207,223  1.15% 1.63% Assigned Risk Plans  $  5,320,000  29.56% N/A Others (approx. 290)‏ $  2,904,000  16.13% 22.90% total $  17,999,727      total w/o ARPs $  12,679,727     
VALUE CHAIN Progressive Corporation *Taken from the case **Assumption Progressive Consumers 100% Underwriters Revenue 10.7%* Underwriters OpEx 25.4%* Other/After Sales OpEx 48.9%** Legal 15%*
INDUSTRY SUPPLY/VALUE CHAIN Non-Standard Insurance Industry Independent Agency Forces Non-Standard Insurers Progressive Agent Progressive Two main chains in the non-standard insurance industry: 1. Insurance companies worked with an independent agent, who procured clients for them.  2. Progressive worked with their own agents who were an important part of matching clients to claims and pricing claims fairly.
VALUE CHAIN Progressive Corporation Margin Inbound  Logistics Operations Outbound  Logistics Marketing & Sales After-Sale  Service Data  Gathering Rating Underwriting Investing Policy Issues Billing and  Collections New Sales Policy Renewal Policy Re-pricing Agent Mgmt.  Advertising Claims response Loss Control Loss Settlement Financial Accounting / Legal Counsel / Regulatory Compliance Personnel Training Research and Development (Product/sales practices/Settlement procedures)‏ IT & Communications
VALUE-ADDED ACTIVITIES Human Resources After-Sales Services Marketing & Sales Info. & Comm. Tech. Inbound Logistics Service Non-Standard Sector
VALUE-ADDED ACTIVITIES Human Resources ,[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],VALUE-ADDED ACTIVITIES Value added by Human Resources
VALUE-ADDED ACTIVITIES After-Sales Services ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],VALUE-ADDED ACTIVITIES Value added by After-Sales Services
VALUE-ADDED ACTIVITIES Marketing & Sales ,[object Object],[object Object],[object Object],[object Object],[object Object]
VALUE-ADDED ACTIVITIES Value added by Marketing & Sales ,[object Object],[object Object]
VALUE-ADDED ACTIVITIES Information & Communication Technology ,[object Object],[object Object]
VALUE-ADDED ACTIVITIES  Value added by Info. & Comm. Tech. ,[object Object]
VALUE-ADDED ACTIVITIES  Inbound Logistics and Operations  ,[object Object],[object Object],[object Object]
VALUE-ADDED ACTIVITIES  Value-Added by Inbound Logistics and Ops ,[object Object]
VALUE-ADDED ACTIVITIES  Servicing Non-Standard Sector ,[object Object]

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Progressive Corporation.Sssg

  • 1.
  • 2.
  • 3.
  • 4.
  • 5. INDUSTRY ANALYSIS 524: The Insurance Carriers and Related Activities Industry http://www.census.gov/epcd/naics02/N2SIC52.HTM#N524 2002 NAICS Code 1987 SIC Code NAICS Industry Definition 524 Insurance Carriers and Related Activities – Industries in the Insurance Carriers and Related Activities subsector group establishments that are primarily engaged in one of the following: (1) underwriting (assuming the risk, assigning premiums, and so forth) annuities and insurance policies or (2) facilitating such underwriting by selling insurance policies, and by providing other insurance and employee-benefit related services. 5241 Insurance Carriers – This industry group comprises establishments primarily engaged in underwriting (assuming the risk, assigning premiums, and so forth) annuities and insurance policies and investing premiums to build up a portfolio of financial assets to be used against future claims. Direct insurance carriers are establishments that are primarily engaged in initially underwriting and assuming the risk of annuities and insurance policies. Reinsurance carriers are establishments that are primarily engaged in assuming all or part of the risk associated with an existing insurance policy (or set of policies) originally underwritten by another insurance carrier. Industries are defined in terms of the type of risk being insured against, such as death, loss of employment because of age or disability, and/or property damage. Contributions and premiums are set on the basis of actuarial calculations of probable payouts based on risk factors from experience tables and expected investment returns on reserves. 52412 Direct Insurance (except Life, Health, and Medical) Carriers – This industry comprises establishments primarily engaged in initially underwriting (i.e., assuming the risk and assigning premiums) various types of insurance policies (except life, disability income, accidental death and dismemberment, and health and medical insurance policies) 524126 6331, 6351 Direct Property and Casualty Insurance Carriers – This U.S. industry comprises establishments primarily engaged in initially underwriting (i.e., assuming the risk and assigning premiums) insurance policies that protect policyholders against losses that may occur as a result of property damage or liability.
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  • 7. INDUSTRY ANALYSIS Progressive Corp. and Industry Profitability, 1984-93 * Industry underwriting profitability refers to the entire automobile insurance market ** Industry ROE refers to the entire Property-Casualty insurance industry All data from the case 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 PROGRESSIVE Underwriting Profit -2.4% 0.0% 4.3% 5.6% 2.9% -1.2% 1.0% -3.7% 3.5% 10.7% Return on Average Equity 18.0% 36.9% 26.9% 24.7% 25.9% 17.4% 21.5% 6.7% 34.7% 36.0% INDUSTRY Underwriting Profit* -17.4% -17.0% -8.6% -4.7% -5.4% -10.4% -9.8% -9.0% -3.0% -2.0% Return on Equity** 1.9% 4.0% 13.6% 15.8% 13.2% 9.9% 8.6% 9.2% 4.4% 9.8%
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  • 10. VALUE CHAIN Progressive Corporation *Taken from the case **Assumption Progressive Consumers 100% Underwriters Revenue 10.7%* Underwriters OpEx 25.4%* Other/After Sales OpEx 48.9%** Legal 15%*
  • 11. INDUSTRY SUPPLY/VALUE CHAIN Non-Standard Insurance Industry Independent Agency Forces Non-Standard Insurers Progressive Agent Progressive Two main chains in the non-standard insurance industry: 1. Insurance companies worked with an independent agent, who procured clients for them. 2. Progressive worked with their own agents who were an important part of matching clients to claims and pricing claims fairly.
  • 12. VALUE CHAIN Progressive Corporation Margin Inbound Logistics Operations Outbound Logistics Marketing & Sales After-Sale Service Data Gathering Rating Underwriting Investing Policy Issues Billing and Collections New Sales Policy Renewal Policy Re-pricing Agent Mgmt. Advertising Claims response Loss Control Loss Settlement Financial Accounting / Legal Counsel / Regulatory Compliance Personnel Training Research and Development (Product/sales practices/Settlement procedures)‏ IT & Communications
  • 13. VALUE-ADDED ACTIVITIES Human Resources After-Sales Services Marketing & Sales Info. & Comm. Tech. Inbound Logistics Service Non-Standard Sector
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