He explained that the company would look to grow its personal auto book opportunistically in 2002, but would weigh growth opportunities against the preparedness of its claims operations in each state.

Progressive, which had been known for aggressive growth in personal auto throughout the 1990s, fell victim to its own success in terms of profitability, leading the company to restructure claims operations in 2000 and to turn its attention toward achieving rate adequacy.

"In almost every state we are ready from a pricing standpoint. But the discipline we'll impose this year--and for the future--is to stay ahead of growth from a service standpoint."

"This means we would slow down in a particular state if the claims operation is understaffed. It also means that we will be aggressive about growth when all systems?claims, policy service and sales are ready to go," Mr. Renwick said.

Responding to an analyst's question, suggesting that the company had backed off on its growth goal last year, he said, "the change in growth goal last year was not, in any way, to back off of a cultural feeling at Progressive of growth is everything we live for. Profitable growth is really the only thing we accept."

"We realized that our own actions, at times, of growing faster than claims capacity [were] not a smart way to grow the business long term."

One area where Progressive has no immediate plans for expansion is in the homeowners line, where the company only writes $5 million of direct business in four states currently. (For all lines, written premiums for the company for the year totaled $7.3 billion.)

Explaining that Progressive's objective in getting into homeowners was to understand the impact of multiple products on sales and retention, Mr. Renwick said, "We don't know enough to plan any expansion and are very concerned about the environment." The environment he referred to is one in which the industry will likely report a homeowners combined ratio above 125 for the year.

Overall, Progressive achieved a companywide combined ratio of 95.2 for the year, compared to 104.4 in 2000.

Noting that Progressive had made a profit in all of its 10 largest states for the fourth-quarter, and a profit in all but one of those states (Louisiana) for the year, Mr. Renwick highlighted situations in three of the top 10 states?California, Georgia, and New York.

With rate actions taken ahead of the market in California, he said, "we believe we're adequately priced and have sufficient claims and policy service capacity to handle growth."

In New York, he said, Progressive is "managing [its] business cautiously" because of significant concerns about no-fault fraud, he said.

Mr. Renwick also noted Progressive has litigation pending in Georgia, "as do other companies," over the issue of payment for the diminution of value sustained by damaged vehicles.

"The Georgia law is an anomaly," he said. In most states, he said, the company has contract language that "not only doesn't recognize diminution of value, but it has an exclusion for it," noting that there only five states where the company either does not have such an exclusion or there is a state-mandated policy contract.

"We have been challenged in other states and have been able to uphold our policy language," he said.

Asked about potential regulatory challenges on the issue of credit scoring, Mr. Renwick said that Progressive had "consistently used financial responsibility in a very objective way?not to reject or not write people, but to find right tier," suggesting that this use was acceptable to regulators, legislators, and agents associations.

But, he conceded that in future Progressive could encounter scrutiny or restrictions over this issue. Mr. Renwick said, that elimination of credit scoring "would hurt" Progressive, since it is "a very valid rating variable." But if the entire personal lines market, which at this point is almost universally using credit scoring, had to change, "I would feel confident Progressives ability to change and fight it out with new systems," he said.

Progressive's 2001 operating income of $485.5 million, or $6.47 per share, compared to $55.4 million, or 75 cents per share, last year.

For the fourth quarter, operating income was $139.7 million, $1.87 per share, compared to $50.1 million, 67 cents per share, last year.

While there were no one-time items in the fourth quarter 2001, one-time items in fourth-quarter 2000 totaled $27.4 million, or 26 cents per share, including expenses associated with the termination of a Strategic Alliance relationship.

Fourth-quarter results for 2001 results included expenses of $14.3 million, or 12 cents per share, for exposure to guaranty fund assessments, primarily related to the Reliance Insurance Company insolvency.