Capital Markets

A Progressive Recapitalization Plan

The auto insurer plans a $2-a-share special dividend, a $1-billion hybrid debt offering, and buybacks.
Stephen TaubJune 14, 2007

Progressive Corp. announced a sweeping recapitalization that involves paying a special dividend, an authorization to repurchase more shares, and the offer of new hybrid debt securities.

The auto insurance company estimates the plan will return roughly $3 billion to shareholders, including through a $2-a-share dividend that would account for about $1.46 billion of the total based on current shares outstanding.

CFO Brian Domeck singled out the anticipated offering of about $1 billion of hybrid debt for discussion. “The substitution of approximately $1 billion of hybrid capital for common equity on our balance sheet, as well as the return of a substantial amount of equity capital to shareholders, will lower our overall cost of capital and allow us to operate our business on a more efficient basis,” he said in a statement. The company did not provide specific terms of the debt securities, however.

The company authorized repurchase of up to 100 million shares over the next 24 months, in addition to about 8.3 million shares that remain available under the its board’s April 2006 repurchase authorization. The company said that it had made $523 million of share repurchases already in 2007.

President and CEO Glenn Renwick said in the company’s statement that decisions to make additional share repurchases under the new authorization would reflect management’s assessments of the company’s capital position, the future, and the company’s stock price.

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