1998-03-27 Peter B. Lewis’s Letters to PGR Shareholders
Refer To：《PGR-Form 10-K - Annual report-1997》。
In 1997, Progressive continued on its path to leadership in automobile insurance. I am proud and happy to report that we believe that our private passenger auto premium growth in 1997 made Progressive the 5th largest United States auto insurance company. We grew in 1997 by increasing our share of the approximately $25 billion nonstandard auto insurance market and by continuing to grow in the approximately $89 billion standard and preferred auto insurance market. We work hard and invest heavily in people and process in order to reduce the human trauma and economic costs of auto accidents. Our results reflect the cost of these investments, designed to make us more competitive for all auto insurance.
1997年，Progressive在通往汽车保险业领导地位的道路上继续前行。我很自豪且高兴地宣布，我们相信1997年私人乘用车保费的增长使Progressive成为美国第五大汽车保险公司。我们在1997年的增长主要来自于扩大约250亿美元非标准汽车保险市场中的占有率，并在约890亿美元的标准及优选汽车保险市场中持续扩大份额。我们投入大量精力和资金来培养人才并优化流程，以降低交通事故带给人们的创伤和经济负担。我们的业绩体现了这些投入的成本，这些投资正是为了使我们在所有汽车保险业务中更具竞争力。
In 1997, Progressive's organization continued to adapt to the Company's larger size and focus on the customer. Our focus on "Process" became more ingrained and natural, and a number of major accomplishments occurred.
在1997年，Progressive的组织架构持续适应公司规模的不断扩大并更加注重客户需求。我们对“流程”的关注变得更加深入和自然而然，并且取得了一系列重大成果。
During 1997, we hired and trained over 5,700 people company-wide to help us keep pace with our extraordinary growth. Our net premiums written grew 36% and our total number of auto policyholders increased by 575,000 to 2.5 million. We answered 16 million telephone calls during the year, responding to the policy servicing needs of our customers 24 hours a day, 7 days a week. To maintain our high standards and meet our customers’ expectations was a challenge. We identified opportunities to improve this process and made strides in this direction by rolling out the first iteration of our Ownership Workbench, a smart system designed to increase customer service, quality and productivity.
在1997年，我们在全公司范围内招聘并培训了5,700多名员工，以应对我们惊人的增长速度。我们的净承保保费增长了36%，汽车保单持有人总数增加了57.5万，达到250万份。我们全年共接听了1,600万通来电，全天候（每周7天、每天24小时）满足客户的保单服务需求。要维持我们的高标准并达到客户的期望是一项挑战。我们发现了改进这一流程的机会，并通过推出首个版本的Ownership Workbench这一智能系统在此方面取得了进展，旨在提升客户服务、质量和工作效率。
Despite the record increase in new employees, we were also able to improve the timeliness of our Immediate Response(R) claims service and produce an average claim severity that was more favorable than the entire industry. In addition to hiring quality people, we continued to make significant investments in technology to improve the way we respond to customers. We installed new phone switches in our claim branches and developed new workflows to more effectively answer our 25,000 daily claim calls. Also, through our wireless Claims Workbench, we were able to increase the amount of information our claim representatives have available when they meet with customers off-site.
尽管新员工数量创下纪录，但我们仍成功提高了即时响应(Immediate Response(R))理赔服务的时效性，并使平均理赔损失程度优于全行业水平。除了招聘优秀人才外，我们还不断在技术上进行重大投资，以改进应对客户需求的方式。我们在理赔分部安装了新的电话交换机，并开发了新的工作流程，以更有效地应对每天2.5万通的理赔来电。此外，通过我们无线化的Claims Workbench系统，我们能够在理赔代表外出与客户会面时，为他们提供更多可用信息。
Progressive recognized early on that the Internet would be come an increasingly important vehicle for commerce communication. We launched America’s first auto insurance web site in April 1995, offering our customers a quick way to find a local agent and to determine whether their vehicle is subject to any federal recall. We continued to lead the way, being the first auto insurer to offer interactive quoting and customer account status in 1996 and the first to conduct direct Internet sales and accept online payments in 1997. Progressive’s web site (www.progressive.com) has won several awards, being named one of ComputerWorld magazine’s Premier 100 Web Sites and WebMaster magazine’s top 50 Internet sites. As our experience with the Internet grows, so does our excitement around how it will benefit our customers and our agents. Plans for the future include enabling agents and customers to conduct more of their transactions online, broadening our online sales offerings, and offering “paperless” alternatives to our customers and agents.
Progressive很早就意识到互联网将在商业交流中扮演越来越重要的角色。我们于1995年4月推出了全美首个汽车保险网站，为客户快速找到当地代理人并查询其车辆是否存在任何联邦召回提供了便捷方式。我们随后持续引领潮流：在1996年成为首家提供在线互动报价及客户账户状态查询的汽车保险商，并在1997年率先实现网络直接销售并接受在线支付。Progressive的网站(www.progressive.com)获得了多项殊荣，曾被《ComputerWorld》杂志评为百佳网站之一，也被《WebMaster》杂志评为50佳互联网网站之一。随着我们在互联网领域的经验不断积累，也对互联网为客户及代理人带来的益处越发兴奋。我们的未来计划包括让代理人和客户可在线完成更多业务交易，拓展在线销售产品范围，并为客户及代理人提供“无纸化”替代方案。
Progressive’s strong focus on customers leads to steady growth in market share which, in turn, permits us to reduce the costs of doing business and become even more competitive. Our people’s superb response to the challenge of creating and managing growth reaffirms both how committed and how talented they are. Great people operating with a clear Vision, strong Core Values and creative Strategies will continue to drive Progressive’s profitable growth.
Progressive对客户的高度关注带来了市场份额的持续增长，进而使我们能够降低运营成本并提高竞争力。我们的员工在应对发展与管理增长方面展现出的卓越表现，再次印证了他们的投入与才干。拥有清晰愿景、坚定核心价值观和富有创造性战略的优秀人才，将继续推动Progressive实现盈利性增长。
Like all shareholders, we want premium growth to translate into current earnings growth and a higher stock price. However, we manage by executing meaningful, long-term strategies that build value which we expect to be reflected in the stock price over five-year periods. Therefore, as an investment, Progressive stock may be most attractive to investors interested in long-term appreciation. On August 1, 1997, Standard & Poor's recognized our leadership in the auto insurance business and strong historical financial performance by adding Progressive to the S&P 500 Index. I am proud to report that Progressive's total return to shareholders' in 1997, was 78.4%, ranking 28th out of the 500 companies in this index.
与所有股东一样，我们希望保费增长能够转化为当期收益增长和更高的股价。然而，我们通过执行具有实际意义的长期战略来管理公司，这些战略能够创造价值，并有望在五年周期内反映到股价之中。因此，作为一项投资，对于那些关注长期增值的投资者而言，Progressive的股票或许最具吸引力。1997年8月1日，标准普尔公司因我们在汽车保险业务上的领导地位以及强劲的历史财务表现，将Progressive纳入标普500指数。我很自豪地报告，1997年Progressive的股东总回报率为78.4%，在该指数的500家公司中排名第28位。
To facilitate growth and the execution of our strategies, we expanded the number of local business units to bring us closer to the customer. During 1997, we formed 21 new business units bringing the number of communities/states where our operations are run by a local manager to 47 and bringing the total number of business units to 54. In addition, we expanded our "Policy Team," which is now comprised of 13 people who make Progressive's final management-level decisions. A new role on the Policy Team is the Community Manager Support Process Leader who is responsible for encouraging experimentation, fostering communication among community managers and advocating community manager perspectives on the Policy Team. This Process Leader joins our six other Process Leaders, respectively responsible for Product, Independent Agent Marketing, Consumer Marketing, Ownership (customer service), Technology and Claims, as well as the Chief Financial, Human Resources, Legal, Information and International/Internet Officers, and me, to ensure that we sustain our superior performance in the face of increasingly intense competition and increasingly rapid technological change.
为促进增长并执行我们的战略，我们扩大了本地业务单元的数量，从而更贴近客户。1997年期间，我们新成立了21个业务单元，使由本地经理运营的社区/州数量达到47个，业务单元总数增至54个。此外，我们还扩充了“政策团队”，该团队现由13名成员组成，他们负责对Progressive进行最终的管理决策。政策团队中新设了一个角色——社区经理支持流程负责人，负责鼓励创新、促进社区经理之间的沟通，并在政策团队中为社区经理视角发声。这位流程负责人将与我们其他六位流程负责人一起工作，后者分别负责产品、独立代理人营销、消费者营销、客户所有权（客户服务）、技术与理赔，以及首席财务、人力资源、法律、信息和国际/互联网主管，加上我本人，共同确保我们在竞争日益激烈、技术变革日益加速的环境中持续保持卓越表现。
Most community managers report to Process Leaders. Community managers are responsible for reducing claim costs while improving service, managing agent distribution and relationships, direct marketing, and deciding price levels for their territory. During 1997, we concentrated on developing our community managers to help them meet their objectives. We defined the necessary competencies and attributes and designed a Leadership Model showing how these qualities are linked to attaining world-class results. Several community managers participated in a week-long program focused on the dimensions included in the model. The cornerstone of the experience was an assessment tool which provided feedback to community managers and helped them create individual development plans.
大多数社区经理向流程负责人汇报工作。社区经理负责在改进服务的同时降低理赔成本、管理代理人分销渠道及关系、进行直接营销，并为其所管辖区域确定费率水平。1997年，我们着重培养社区经理，以帮助他们实现目标。我们明确了所需的能力和素质，并设计了一个领导力模型，展示这些品质如何与达成世界级业绩相互关联。多位社区经理参加了为期一周的培训项目，重点学习该模型涵盖的各项内容。这项体验活动的核心是一种评估工具，用于为社区经理提供反馈，帮助他们制定个人发展计划。
Progressive's unique approach to management continues to evolve along with its business strategy. Our management philosophy includes the following:
Progressive独特的管理方法会随着业务战略的演进而不断发展。我们的管理理念包括以下几点：
Total Quality Management dovetails with our Excellence Core Value--doing better than we did before--and empowers Progressive people to change how they function if the change measurably improves customer service or reduces costs, and if it does not disrupt others in the work chain. Because measurement is essential to TQM, we have dramatically improved our ability to measure performance and to control quality.
全面质量管理与我们的卓越核心价值观——“比以往做得更好”——高度契合，赋予Progressive的员工根据实际量化结果改变工作方式的权力，只要这种改变能够显著提升客户服务或降低成本，并且不会对工作链中的其他人造成干扰。由于衡量对于全面质量管理至关重要，我们已经显著提升了衡量绩效和控制质量的能力。
Teamwork is the way we work. We continue to improve the ways in which we motivate, manage, evaluate and reward teams.
团队协作是我们的工作方式。我们会持续改进激励、管理、评估及回报团队的方式。
Steady Cost Reduction has been, and continues to be, critical to our strategy. Underwriting expenses were 22.5% of premiums in 1997, compared to 21.6% in 1996 and 35.0% in 1990.
持续降低成本在过去和现在一直是我们战略的关键。1997年的承保费用占保费比重为22.5%，而1996年为21.6%，1990年为35.0%。
In 1997, we incurred additional expenses to support our infrastructure and to hire and train people in anticipation of our growth. We also introduced our advertising campaign to 13 states, bringing the total number of states where we advertise to 19. In addition, we paid out record profit-sharing bonuses to employees this year. In 1997, 14.4% of total compensation resulted from our Gainsharing program (contingent cash incentive compensation program for all Progressive people). We set our annual Gainsharing target at achieving a combined ratio of 96% over the entire retention period of a policyholder and growth in net premium volume in excess of 15% plus the rate of inflation. Our outstanding financial results caused our payout to exceed our annual target by an amount that had a .5 point effect on the expense ratio. Process Management by top managers eliminates much staff/line friction, fosters cooperation among business units and departments, and requires balancing delicate trade-offs between local autonomy and collective effectiveness.
1997年，我们为支持公司的基础设施建设以及为应对增长而招聘、培训人员而产生了额外支出。同时，我们在13个州开展了广告宣传，使开展广告投放的州总数增至19个。此外，我们还向员工发放了创纪录的利润分享奖金。1997年，我们14.4%的总薪酬来自我们的Gainsharing计划（面向所有Progressive员工的现金激励薪酬计划）。我们将年度Gainsharing目标设定为在保单持有人整个保单留存期内实现综合赔付率96%，以及净保费规模增长超过15%加通货膨胀率。由于我们的财务业绩表现突出，导致最终发放的奖金超出年度目标，并对费用率产生了0.5个百分点的影响。高层管理者通过流程管理减少了大量员工/部门之间的摩擦，促进各业务单元及部门间的合作，并在本地自主权与整体效率之间进行微妙的平衡。
Thorough Testing of new ideas has replaced our former propensity to seize perceived opportunities and develop them as fast as possible.
对新想法进行深入测试已取代我们过去那种只要看到机会就尽快抓住并加速推进的做法。
Performance-based Compensation pays our people very well for exceptional performance, makes contingent pay significant to everyone and fosters the achievement of our demanding objectives.
基于绩效的薪酬使表现出色的员工获得丰厚的回报，让每个人都能切实感受到弹性薪酬的意义，并推动我们对高目标的实现。
RESULTS
业绩
In 1997, net premiums written increased 36% to $4,665.1 million, compared to $3,441.7 million in 1996. We posted an annual underwriting profit for the 25th time in the last 31 years and bettered our 4% underwriting goal with a 6.6% margin in 1997.
1997年，我们的净承保保费同比增长36%，达到46.651亿美元，而1996年为34.417亿美元。在过去的31年里，这是我们第25次实现全年承保盈利，并在1997年以6.6%的利润率超越了我们4%的承保目标。
Operating income, which excludes net realized gains on security sales and one-time items, is the best measure of how well we manage our insurance operations. Operating income increased to $336.0 million, or $4.46, compared to $309.1 million, or $4.12 per share, in 1996. Operating income excludes $98.5 million of net realized gains in 1997, compared to $7.1 million in 1996. Net income was $400.0 million, or $5.31 per share, this year, compared to $313.7 million, or $4.14 per share, in 1996. Return on shareholders' equity was 20.9%, compared to 20.5% in 1996.
经营收入（不含证券销售的已实现净收益及一次性项目）是衡量我们保险业务管理成效的最佳指标。经营收入从1996年的3.091亿美元（合每股4.12美元）增长至3.36亿美元（合每股4.46美元）。经营收入不包括1997年的9,850万美元已实现净收益，而1996年该数字为710万美元。本年度净利润为4亿美元（合每股5.31美元），而1996年为3.137亿美元（合每股4.14美元）。股东权益回报率为20.9%，而1996年为20.5%。
PROGRESSIVE'S CORE BUSINESS
PROGRESSIVE的核心业务
Ninety-six percent of Progressive's net premiums written is insurance for private passenger automobiles, recreational vehicles and small fleets of commercial vehicles, which we categorize as "core." Core business net premiums written grew 33% to $4,467.4 million, compared to $3,367.2 million in 1996. The underwriting profit margin was 6.9%, compared to 8.1% in 1996.
Progressive 96%的净承保保费来自私人乘用车、休闲车以及小型商用车车队保险，我们将其归为“核心”业务。核心业务的净承保保费从1996年的33.672亿美元增长33%，达到44.674亿美元。承保利润率为6.9%，而1996年为8.1%。
In 1997, we used a new approach which includes rating based partially upon consumer financial responsibility. This approach has been approved by regulators and is in use in the 31 states that represent 80% of our core written premiums. We hope to complete the rollout of this approach into the remaining business units where it can be offered in 1998. We believe our use of financial responsibility in auto insurance rating produces a more accurate distribution of losses among consumers and, therefore, produces more accurate pricing resulting in lower rates for most consumers as compared to our previous approach. In addition, by ensuring more consistent products on a national basis, we are able to analyze the data better and reduce the complexity of our products for our customer service representatives and programmers.
1997年，我们采用了一种新的定价方式，其中部分依据消费者的财务责任。该方式已获得监管部门批准，并应用于占我们核心保费总额80%的31个州。我们希望在1998年完成该方式在剩余业务单元中的推广。我们相信，将财务责任纳入汽车保险定价能够在消费者之间更准确地分配赔付损失，从而实现更准确的定价，使大多数消费者的费率相比以往方式更为优惠。此外，通过在全国范围内确保产品的一致性，我们也能更好地分析数据，并降低客服代表与程序员所需应对的产品复杂度。
Four years ago, we consolidated our new, unique and superior customer services into a Progressive brand by expanding service in a number of states and testing ways to project the brand to potential customers. We focused managers on empowering people and constantly improving the delivery of around-the-clock, immediate response, information-rich service, designed to delight customers.
四年前，我们通过在多个州扩展服务并探索将品牌传递给潜在客户的方式，将新颖、独特且优质的客户服务整合成Progressive品牌。我们让管理者注重赋权员工，并持续改进随时随地、即时响应且信息充足的服务，以便让客户满意。
We use a combination of television commercials, direct mail and other media to urge consumers to consider Progressive's unique combination of price and service. In 1997, we expanded the number of markets in which we advertise to over 40 media markets reaching parts of 19 states.
我们结合电视广告、直邮以及其他媒体的方式，鼓励消费者了解Progressive在价格与服务上的独特结合。1997年，我们将广告投放的市场扩大到40多个媒体市场，覆盖19个州的部分地区。
Our advertising is largely situational and dramatizes the concerns consumers have in claims and buying experiences with their auto insurance and highlights "what you should expect" as the Progressive difference. Several new commercials were developed in 1997 and will be used in 1998 to further our brand communication. The consumers' choice to buy through our independent agent network or by calling 1 800 AUTO PRO(R) (1-800-288-6776) is supported by our advertising and we are encouraged by its impact on both distributions. In an average 15-minute call, consumers can receive a quote for their particular risk profile from Progressive as well as the rates that would be charged by up to three other leading auto insurers, including State Farm and Allstate. Our representative also explains the following service improvements, which when considered together, are unique to Progressive:
我们的广告主要以情景形式呈现，突出了消费者在理赔及购买汽车保险时所关注的问题，并强调“你应当预期得到”的Progressive差异化优势。我们在1997年制作了几支新广告，并将于1998年使用来进一步开展品牌传播。消费者可通过我们的独立代理人网络或拨打1 800 AUTO PRO(R)（1-800-288-6776）进行购买，这两种渠道都在我们的广告中得到支持，而且它们对各自的销售渠道都产生了积极影响。消费者平均只需花15分钟通话，就能获得Progressive针对其特定风险状况的报价，以及包括State Farm和Allstate在内的最多三家主要汽车保险公司的费率信息。我们的客服代表还会向消费者解释以下服务改进，这些改进结合在一起，构成了Progressive独一无二的优势：
Assistance after an accident, or other loss, is Progressive's most important service, so we implore our customers to call 1-800-274-4499 immediately after any incident. Twenty four hours a day, 7 days a week, a Progressive person answers the phone, takes the information, authorizes emergency measures and almost always can have a Progressive claim representative meeting with the customer or claimant within a few hours.
事故或其他损失发生后所获得的帮助，是Progressive最重要的服务，因此我们恳请客户在任何事故发生后立即拨打1-800-274-4499。我们全年无休、全天候接听电话，获取信息并授权紧急措施，几乎总是能够在数小时内安排Progressive理赔代表与客户或索赔方见面。
Universal acceptance, because consumers abhor being rejected or cancelled. Progressive rarely rejects and never cancels honest customers who pay their premiums in the 45 states where our complete program is operative.
普遍接受，因为消费者非常厌恶被拒保或退保。在我们完整项目已开展的45个州里，只要客户诚实且按时缴纳保费，Progressive几乎不会拒绝承保，也不会将其退保。
Competitive rates for risks from ultra-preferred to nonstandard in the states with our complete program. As experience makes us more comfortable with pricing standard/preferred risks, we increasingly concentrate on this market which accounted for between 20% and 25% of 1997 core premium volume and is expected to become an increasing percentage of total premium volume.
在开展完整项目的州里，我们为从“超优选”到“非标准”的各类风险提供具有竞争力的费率。随着我们在标准/优选风险定价上愈发熟练，我们正不断加大对这一市场的投入。该市场在1997年约占核心保费总额的20%至25%，并预计将在总体保费占比中继续上升。
Many different ways to buy, to accommodate different consumer preferences. More than 30,000 independent insurance agencies (our most important method of distribution) sell Progressive products. In addition, we have joint marketing relationships with national accounts and Progressive's 1 800 AUTO PRO(R) telephone service. In 1997, increased price competitiveness, superior service and greater consumer awareness of the Progressive brand helped independent agents regain lost standard and preferred auto market share. The number of independent agencies writing Progressive standard and preferred auto more than doubled, resulting in 126% growth of agent-produced standard and preferred new auto policies.
多种购买方式，以满足不同消费者偏好。3万多家独立保险代理人（我们最重要的销售渠道）都销售Progressive产品。此外，我们还与全国性客户及Progressive的1 800 AUTO PRO(R)电话服务建立了联合营销关系。1997年，随着价格竞争力的提升、更优质的服务以及消费者对Progressive品牌认知度的提高，独立代理人得以夺回在标准及优选汽车保险市场中失去的份额。为Progressive销售标准及优选汽车保险的独立代理人数量增加了一倍以上，进而带动经代理人销售的标准及优选新汽车保单增长了126%。
24 hours a day, 7 days a week service. Consumers want to do business when it's convenient for them, so we operate 24 hours a day, 7 days a week to provide new insurance quotes, handle endorsements and questions concerning current policies, and, most importantly, respond to accidents and other incidents. Our customers depend upon our service, which is supported by a real-time disaster management approach that continuously monitors performance of internal systems, threatening weather patterns and other natural events. This approach allows us to regularly reconfigure our network and place disaster response teams in motion as soon as we hear of an event requiring special resources.
每周7天、每天24小时的服务。消费者希望在他们方便的时间办理业务，因此我们实行全年无休、全天候运营，为客户提供新的保险报价、处理保单批改以及答复现有保单的疑问，更重要的是应对各种事故或其他突发事件。我们的服务依赖于实时灾难管理方式来支撑，对内部系统性能、恶劣天气模式和其他自然事件进行持续监控。一旦我们发现需要特殊资源的事件，就能够迅速重配网络并派出灾难应对团队。
PROGRESSIVE'S DIVERSIFIED BUSINESSES
PROGRESSIVE的多元化业务
The United Financial Casualty Company, Professional Liability Group, Midland Financial Group and Motor Carrier business units provide combinations of service and indemnity to businesses and individuals. Their primary products are collateral protection coverage and loan tracking for automobile lenders and financial institutions, directors and officers liability and fidelity coverage for American Bankers Association member community banks, nonstandard auto insurance, and underwriting and claim servicing for state involuntary residual market commercial and personal auto programs. We are the largest provider of collateral protection and D&O coverage to banks and the largest service carrier for the involuntary market, though the market size for each declined in 1997.
United Financial Casualty Company、Professional Liability Group、Midland Financial Group以及Motor Carrier等业务部门，为企业和个人提供服务与赔付的组合。它们的主要产品包括：为汽车贷款机构和金融机构提供抵押品保护与贷款跟踪服务、为美国银行家协会成员社区银行提供董事及高管责任险和忠诚保险、非标准汽车保险，以及为州强制性剩余市场的商用和个人汽车项目提供承保与理赔服务。我们是为银行提供抵押品保护和董责险(D&O)的最大供应商，也是强制性剩余市场的最大服务承运人，尽管这几类业务的市场规模在1997年都有所缩减。
On March 7, 1997, Progressive acquired Midland Financial Group, Inc. for about $50 million. Midland underwrites and markets nonstandard private passenger automobile insurance through approximately 3,700 independent agents across 11 states, primarily in the southern and western United States. During 1997, Progressive was able to effectively raise rates, improve claim handling and customer service, implement new measures and controls, consolidate offices and introduce objectives, performance evaluations and Gainsharing incentives to all Midland people.
1997年3月7日，Progressive以约5,000万美元收购了Midland Financial Group, Inc.。Midland主要通过其在11个州、约3,700家独立代理人开展非标准私人乘用车保险业务，这些州主要位于美国南部和西部。1997年期间，Progressive成功地在Midland业务中有效提升费率、改善理赔处理及客户服务、实施新的管理措施和控制手段、整合办公室，并为所有Midland员工引入了目标管理、绩效评估和Gainsharing激励机制。
The diversified businesses produced revenues and pre-tax profits of $248.7 million and $.7 million, respectively, in 1997, compared to $117.7 million and $24.3 million in 1996. During 1997, Midland contributed revenues of $84.1 million.
在1997年，公司的多元化业务分别实现了2.487亿美元的营收和70万美元的税前利润，而1996年则分别为1.177亿美元和2,430万美元。1997年期间，Midland贡献的营收为8,410万美元。
INVESTMENTS AND CAPITAL MANAGEMENT
投资与资本管理
Progressive, like all insurance companies, consists of two distinct enterprises:
the operating insurance business and investment management. We recognize the challenge and the opportunity of having two businesses, requiring different expertise, resident in the same company. The success of each bears meaningfully on the results of the other, and the success of the whole.
与所有保险公司一样，Progressive由两个截然不同的业务组成： 一是保险运营业务，二是投资管理。我们深知，在同一家企业内同时运营这两类需要不同专业能力的业务，既是一项挑战，也是一种机遇。两项业务中的任何一方都能对另一方以及整体的成果产生重大影响。
The financial markets are dynamic, requiring flexibility and responsiveness from our professionals. Our portfolio is a financial institution that provides capital to other enterprises and is a business that lends and invests. We aspire to generate better after-tax portfolio returns than those available from comparable outside management at less cost without losses that curtail underwriting growth. Our approach to risk is conservative. A majority of the investment decisions are derived from "bottom up" rather than "top down" processes. We eschew formula investing. We endeavor to examine as broad a field of opportunity as possible and to take advantage of opportunities that are consistent with our available resources. The examination of every possibility is less important than the quality of our performance at the tasks we undertake.
金融市场瞬息万变，这就要求我们的专业人员具备灵活性和快速应对能力。我们的投资组合既扮演着向其他企业提供资金的金融机构角色，又是一项从事贷款与投资的业务。我们的目标是在不削弱承保增长、不产生损失的前提下，以更低成本获得比外部同类管理更高的税后投资组合回报。我们在风险方面采取保守策略。大部分投资决策出自“自下而上”，而非“自上而下”的流程。我们避免公式化的投资，尽力研究尽可能广泛的机会领域，并利用与我们现有资源相匹配的机会。我们认为，比起对所有可能性进行穷尽调查，更重要的是在我们所承担的任务上展现高质量的执行力。
Our professionals should be broad gauge and of the highest quality, able to compete effectively with their counterparts in other financial institutions. We hire the best raw talent we can find, then train and develop it. We pay above average compensation for good performance and to retain our best people. Stock options align their interests with shareholders. We re-evaluate our compensation approach annually to ensure that it is performance driven but does not motivate counterproductive behavior. We want our professionals to possess financial sophistication, thoroughness, experience and integrity. The exercise of good judgment is our best protection against loss.
我们的专业人员应当具有广博的视野和出色的素质，并能与其他金融机构的同行进行有效竞争。我们会尽可能招聘最优秀的潜力人才，随后对其进行培训和培养。我们为良好表现支付高于平均水平的薪酬，以留住最优秀的人才。期权将他们的利益与股东的利益紧密结合。我们每年都会重新评估薪酬机制，确保其以绩效为导向，但不会激励适得其反的行为。我们希望我们的专业人员具备财务专业能力、工作严谨、经验丰富且正直可信。明智判断是我们避免损失的最大保障。
We are building long-term business relationships by co-venturing with outside organizations and financial professionals that will enhance our investment program. These relationships, combined with our internal resources, form a virtual investment organization with more experience, expertise and access to opportunity than any organization we could assemble internally.
我们通过与外部机构和金融专业人士的合作建立长期业务关系，以提升我们的投资计划。这些合作关系与我们的内部资源相结合，形成了一个“虚拟投资组织”，拥有比我们内部自主组建的任何团队都更丰富的经验、更专业的技能以及更广泛的机会获取渠道。
目标不清晰产生的幻觉。
The Company's rapid growth and high margins produce expanding capital resources that support the operating business or are deployed in financial investments. Our highest priorities are to: manage the Company's capital to support all the insurance we can profitably underwrite, without issuing stock or losing our investment-grade debt rating; improve our debt cost relative to peer companies; and repurchase stock more cost effectively than a passive strategy.
公司迅速的增长与高额利润率产生了不断扩大的资本资源，可用于支持运营业务或进行金融投资。我们最优先的目标包括：在不发行股票或不失去投资级债务评级的情况下，管理好公司资本以支持所有能获得盈利的保险承保业务；在债务成本方面优于同业公司；并以较被动策略更具成本效益的方式进行股票回购。
Our investment processes fall into five broad categories: stocks, bonds, alternative investments, capital management and acquisitions. All require quantitative skills and a knowledge of accounting, financial analysis, economics, financial markets and securities regulation. Common stock and the bond portfolio performance is compared to a sample of other managed portfolios on an annual basis.
我们的投资流程可分为五大类别：股票、债券、另类投资、资本管理以及收购。所有类别都需要具备量化分析能力，并懂得会计、财务分析、经济学、金融市场以及证券监管方面的知识。我们每年都会将普通股和债券投资组合的表现与其他同类管理组合样本进行对比。
Common Stock Investing Our holdings consist of a diversified portfolio of publicly-traded issues. Foreign investments are evaluated on an individual basis. A knowledge of the stock markets and trading, and the analysis of industries, business processes, historical performance and financial structure, in combination with the assessment of management capabilities, are the essential competencies of our stock investing.
普通股投资 我们的持仓由多元化的公开交易股票组合构成。海外投资则需单独评估。熟悉股票市场与交易，分析行业、业务流程、历史表现与财务结构，并结合对管理能力的评估，是我们股票投资的核心能力。
Fixed-Income Investing The fixed-income holdings are comprised of investment-grade issues and BB rated securities, which do not exceed 5% of the portfolio. Allocations are made to market sectors, including foreign denominated securities on a fully hedged basis, with consideration for availability, degree of opportunity and diversification. Quantitative analysis of security cash flows, credit analysis, and knowledge of the bond markets, trading, derivatives, options, foreign exchange and risk management are the key skill sets.
固定收益投资 我们的固定收益组合由投资级债券和BB级债券构成，后者占比不超过组合的5%。我们的配置会考虑市场机会与分散性，涵盖包括在充分对冲基础上的外币计价证券等板块。对证券现金流进行量化分析、信用分析，以及掌握债券市场、交易、衍生品、期权、外汇和风险管理的知识，是其中的关键能力。
Alternative Investing The commitment to alternative investments is influenced by the amount of capital in excess of our anticipated three-year need for additional surplus. These securities can reduce the dilution of our return on equity by producing returns on excess capital superior to the expected long-term return on common stocks. Funds, private equities, mezzanine investments, distressed securities and similar investments comprise this portfolio. These equity-like commitments are anticipated to bear returns that are higher than, and offer some diversification from, common stocks. A knowledge of specific documentary requirements and the ability to conduct detailed due diligence and negotiations are required in addition to competencies relevant to stock and bond investing.
另类投资 对另类投资的投入主要取决于超出我们三年所需额外盈余的资本总量。这些证券可在提升过剩资本回报的同时，优于我们对普通股长期回报的预期，从而减少对股本回报率的稀释。此类投资组合包括基金、私人股权、夹层投资、不良债务等类似投资。这些类似股票的投入预计能带来高于普通股的回报，并提供一定的分散化。在具备与股票与债券投资相关能力的基础上，还需要熟悉特定的文件要求，并具备进行尽职调查和谈判的详细技能。
Capital Management We believe that the optimal capital structure is defined by a debt to total capital ratio that maintains our A bond ratings. This structure provides for a low cost of debt capital and the availability of higher leverage to fund extraordinary needs without introducing a volatility to our stock price that would prejudice our multiple. We try to reduce our interest expense by issuing debt when interest rates are low. We repurchase stock on an opportunistic basis to reduce or eliminate the dilution of employee option exercises, improve the return on our stock and distribute excess capital to our shareholders. The required knowledge and skills include: the dynamics of our capital needs, rating agencies, capital markets, financing alternatives, regulatory filings, documentation and hedging.
资本管理 我们认为，最优的资本结构应该以保持A级债券评级的债务占总资本比率为标准。这样的结构能为我们带来更低成本的债务资金，并为应对特殊需求提供更高的杠杆空间，同时不会引发股价过度波动而损害我们的估值倍数。我们会在利率较低时发行债券以减少利息支出，并在合适时机回购股票，以降低或消除因员工期权行权带来的稀释效应，提高股票回报率，并将多余资本返还给股东。相应需要的知识与技能包括：对公司资本需求动态的把握、对评级机构和资本市场的理解、对融资方式的认识、监管申报、文档处理及对冲操作。
Contributions of surplus to new operating subsidiaries are evaluated on the basis of the appropriateness of the expected return. Surplus exceeding one third of net premiums written is returned to the holding company when possible. Decisions regarding the underemployed leveraged equity retained in the holding company are driven by estimated growth in operating surplus requirements for three years, our ability to generate high returns on the excess above operating requirements, the possibility of strategic investments and the relative value of our stock in the context of a repurchase.
我们在向新运营子公司注入盈余资金时，会根据其预期回报是否合理进行评估。当盈余超过净承保保费的三分之一时，如有可能会返还给控股公司。关于控股公司持有的、尚未充分利用的杠杆权益的决策，主要取决于我们对未来三年运营盈余需求增长的估计、我们对超出运营需求部分获取高额回报的能力、潜在战略投资机会，以及在进行回购时我们股票的相对价值。
RISKS
风险
Legislative and Regulatory Risk Insurance laws and regulations change continually. On January 1, 1997, California enacted mandatory insurance laws, requiring proof of insurance when renewing auto registrations. Several other reforms were approved, but, because of the legal process, may not be effective until the future. California passed Proposition 213, which eliminates pain and suffering awards for uninsured motorists, drunk drivers and fleeing felons. An appeal to the Supreme Court is likely. In addition, Louisiana passed its "no pay, no play" bill, forcing uninsured drivers to self insure their first $10,000 in both bodily injury and property damage; concurrently, companies must roll back rates 10% on the same coverage and offer uninsured motorists the option to elect coverage that waives their right to recover pain and suffering damages at a 20% discount. This case is still under appeal.
立法与监管风险 保险法律与法规不断变化。1997年1月1日，加利福尼亚州实施了强制保险法，要求车主在更新车辆注册时提供保险证明。其他一些改革法案虽然获批，但由于法律程序的原因，可能要到未来某个时间才能生效。加州通过了第213号提案(Proposition 213)，取消了无保险驾驶人、酒后驾车者以及逃逸重罪犯对“痛苦与精神损害赔偿”的索赔权。该提案很可能会上诉至最高法院。此外，路易斯安那州通过了“no pay, no play”法案，要求无保险驾驶人自行承担前1万美元的人身伤害和财产损失；同时，公司必须对同类保险费率下调10%，并向无保险驾驶人提供以放弃对痛苦与精神损害赔偿索赔权为条件、并可享受八折费率折扣的选择。该案目前仍处于上诉阶段。
Unpredictable Underwriting Margin and Growth Rate Our strategy is to strive to achieve a 4% underwriting profit margin over the entire retention period of an insured. We cannot predict with precision the timing and pace of changes in underwriting margins, in retention nor in the rate of growth. We monitor closely to ensure that rates are adjusted promptly and adequately to obtain 4% margins over the entire retention period of a policyholder.
不可预测的承保利润率与增长率 我们的战略目标是在被保险人整个保单留存期内实现4%的承保利润率。我们无法准确预测承保利润率、保单留存率以及业务增长率在何时及如何发生变化。我们会进行密切监控，确保及时且充分地调整费率，以便在保单持有人整个留存期内实现4%的目标利润率。
Pricing Risk We continue to learn how to price standard and preferred auto insurance, and to experiment with new ways to price certain segments. We minimize the risk implicit in new pricing methodology by controlling volume in new programs and changing rates immediately when experience dictates. During 1997, Progressive lowered countrywide auto rates an average of .9%.
定价风险 我们不断学习如何为标准及优选车险定价，并持续尝试为特定细分市场采用新的定价方式。我们通过在新项目中控制投保量，并在实践经验表明需要时立即调整费率，以尽量降低新定价方法中所蕴含的风险。1997年期间，Progressive在全美范围内将汽车保险费率平均下调了0.9%。
Homeowners Insurance This type of insurance has the potential to expose Progressive to catastrophes. Thus, there will be risk if our auto insurance market share objectives require us to offer it. In 1997, we began selling Travelers homeowners insurance to direct customers in Ohio. This effort has yet to produce any material results, but we continue to study the effects on our auto sales. Our current lack of a homeowners product in most states is also risky because many consumers prefer to buy all their insurance from one company. We do not intend to enter the homeowners market at this time, primarily to avoid the risk of disrupting our existing business rather than due to the risks inherent in the homeowners line.
房主保险 这类保险可能让Progressive面临巨灾风险。如果我们的汽车保险市场份额目标要求我们提供房主险，就会产生相应的风险。1997年，我们开始向俄亥俄州的直销客户提供Travelers公司的房主保险。此举尚未带来实质性成果，但我们会继续研究对汽车保险销售的影响。我们在大多数州尚未提供房主险，这也存在一定风险，因为不少消费者倾向于在同一家保险公司购买所有险种。我们目前无意进入房主保险市场，主要原因在于我们不想因经营房主险而扰乱现有业务，而非房主险本身所固有的风险。
有清醒的自我认知。
Advertised Brand Consumer advertising and brand awareness require higher performance standards. We continually consider consumers' demands and appreciate their ability to make wise choices. In response, we are always looking for new and innovative ways to improve service at a lower cost.
品牌宣传 随着消费者广告和品牌知名度的提升，我们必须执行更高的绩效标准。我们不断考虑消费者需求，并认可他们做出明智选择的能力。对此，我们始终在寻找新颖且富有创新力的方式来以更低的成本提升服务质量。
Competitor Response Other insurers are reacting to Progressive's attempt to change consumers' auto insurance experience, but we cannot predict when and how their response will affect our growth and profitability. We monitor competitors and improve our products and services to assure that our consumer offerings are among the best in the industry. In addition, our people, with their knowledge of our operations along with their skills and talents, are being sought by companies with whom we compete. The property-casualty industry's excessive capitalization, measured by the net premiums written to surplus ratio of .9 to 1, the lowest ratio for the industry in 60 years, means competitors might accept lower returns on equity than they historically received.
竞争对手的反应 其他保险公司对Progressive试图改变消费者购买汽车保险体验的举措已有所回应，但我们无法预测其应对方式及时间会对我们的增长与盈利能力产生何种影响。我们会持续关注竞争对手并改进产品与服务，以确保为消费者提供业内名列前茅的选择。此外，了解我们运营方式且具备相应技能与才华的员工，也正成为与我们竞争的公司所青睐的对象。财产及意外伤害保险行业的资本化程度过高，从“净承保保费/盈余比”来看，目前为0.9：1，这是60年来的最低值，表示竞争对手可能会接受比历史水平更低的股本回报率。
THE FUTURE
未来
Progressive is leading a wave of change in the United States' system for dealing with auto accident injuries and property damage. We are reducing auto accident victims' trauma and costs, improving how consumers feel about auto insurance and being rewarded for our leadership and commitment. Success so far encourages us to expand at a pace that tests our ability to provide the service we aspire to deliver.
Progressive正引领着美国在处理汽车事故伤害和财产损失方面的变革浪潮。我们致力于减轻车祸受害者的创伤与成本，改善消费者对汽车保险的体验，并因我们的领导力与投入而得到回报。迄今取得的成功鼓舞我们继续以一个能检验我们服务能力的步伐扩张。
We begin 1998 as we began all other years--excited, respectful of the challenge implicit in our objectives and strategy, humbled by our failures, proud of having responded to them and confident that our excellent people will continue to achieve superior results.
我们以往年相同的姿态开启1998年——充满热情，同时对目标与战略中蕴含的挑战心怀敬畏；因过去的失误而保持谦逊，但也因积极应对而自豪，并坚信我们优秀的员工能继续取得卓越成果。
Much will be required to realize our Vision. At Progressive, it is always as if we are just beginning our business and so we look at a future that is brighter than ever.
要实现我们的愿景，还需要付出很多努力。对于Progressive而言，就好像我们始终处在创业的初始阶段，也因此我们对未来充满前所未有的期待。
We deeply appreciate the customers we are privileged to serve. Thank you for your business, and thanks especially to the more than 30,000 independent insurance agents who chose to do business with Progressive in 1997. We are particularly grateful for our shareholders' continued confidence. To the men and women who make Progressive a great company, thanks for all your contributions in 1997 and the promise you bring to our future.
我们对能为广大客户服务深表感激。感谢您选择我们的服务，尤其要感谢1997年与Progressive合作的三万多名独立保险代理人。同时，我们也对股东们始终如一的信任深表感激。对于所有让Progressive成为卓越企业的同仁们，感谢你们在1997年的所有付出，以及你们为我们未来带来的希望。
Joy, Love and Peace
/s/ Peter B. Lewis
Peter B. Lewis
Chairman, President and Chief Executive Officer
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