2003 Other Charter: PGR

Investment and Capital Committee Charter

Organization
Statement of Purpose
Responsibilities of the Investment and Capital Committee
Communications with the Investment and Capital Committee

Organization
The Investment and Capital Committee (Committee), appointed by the Board of Directors (Board) of The Progressive Corporation (Company), shall consist of at least three directors including the Chairperson. The Chairperson shall be independent of the management of the Company (as defined by the listing standards of the New York Stock Exchange) and free of any relationship that, in the opinion of the Board, would interfere with his or her exercise of independent judgment as a Committee member. The Chief Executive Officer may be a member of the Committee. Each member of the Committee shall be financially literate.

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Statement of Purpose
The Committee shall, through regular or special meetings with management, assist the Board in monitoring (1) whether the Company has adopted and adheres to a rational and prudent investment and capital management policy, (2) whether management's investment and capital management actions are consistent with attainment of the Company's investment policy, financial objectives and business goals, (3) the Company's compliance with legal and regulatory requirements pertaining to investment and capital management, (4) the competence, performance, and compensation of the Company's internal and external money managers, and (5) such other matters as the Board or Committee deems appropriate.

It is not the duty of the Committee to make operating decisions about money manager selection or compensation, asset allocation, market timing, sector rotation, or security selection. These are responsibilities of management. The Board must approve significant changes to the Company's capital structure, dividend policy, or portfolio asset allocation.

The Committee shall have the authority to retain special legal, financial or other consultants to advise the Committee. The Committee may request any officer or employee of the Company or any of the Company's outside money managers or advisers to attend a meeting of the Committee or to meet with any member of, or consultants to, the Committee.

The Board's Audit Committee is responsible for determining whether there is an appropriate segregation of duties between decision making, investment accounting and performance measurement.

The Board's Executive Compensation Committee is responsible for approving compensation plans for the Company's senior investment staff. The Executive Compensation Committee will consider the counsel of the Investment and Capital Committee before making such a decision.

The Investment and Capital Committee shall make regular reports to the Board on the Committee's activities.


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Responsibilities of the Investment and Capital Committee

The Committee shall:

1. At least annually, review the continued adequacy of this Investment and Capital Committee Charter and recommend any changes to the Board for approval.
2. Determine that the Company has a clearly articulated Investment Policy, which specifies asset allocation and money management guidelines which provide reasonable assurance that the Company can meet its business and financial objectives with a reasoned balance between risk, return and cost. The over-riding constraints are to maintain the ability to meet any foreseeable financial obligation in a timely manner, support growth, and allow the Company to meet its financial goals.
3. Determine that investment constraints are consistent with the Investment Policy, clearly defined, properly measured, and consistently followed and that procedures are in place to ensure that the investment portfolio is managed in a manner consistent with the Investment Policy and applicable investment constraints.
4. Determine that the Company has a clearly articulated capital plan for capital structure, dividend policy, and share repurchases that considers future growth plans, business risk factors, and financial and regulatory constraints.
5. Ensure that roles and responsibilities are clearly established for the Investment Strategist, internal and external money managers, and Treasurer.
6. Contribute to the evaluation of the qualifications and performance of the Company's Investment Strategist and Treasurer and provide feedback to the Chief Financial Officer and Chief Executive Officer.
7. Ensure that management reviews portfolio performance against objectives and assesses the performance of the Company's investment staff and, as necessary, takes corrective action.

8. Ensure that systems and procedures are in place to inform the Company's investment staff of applicable state and federal legal and regulatory requirements, to monitor compliance with those requirements, and to report and take remedial action in the event of any deviations therefrom.
9. Ensure that the Company has adopted and enforces a policy that requires Committee approval before the Company makes an investment where any member of its investment staff has a direct or indirect personal interest in the investment opportunity.
10. Confirm that the Company has in place a policy which prohibits its investment personnel from misappropriating for their own benefit investment opportunities that are made available to the Company, and from knowingly trading or taking a position in any security in advance of the Company's planned execution of a trade in that security or taking any other action that may frustrate or undermine the investment strategy or plans of the Company.
11. Determine that procedures are in place to help ensure that members of the Company's investment staff do not trade any security while in possession of material inside information regarding the issuer thereof in violation of the federal securities laws.
12. Determine that share repurchases by the Company are executed pursuant to a program which has been reviewed by legal counsel to ensure that the applicable legal requirements have been satisfied, including compliance with, as applicable, issuer tender offer rules, insider trading laws, Regulation M (which prohibits repurchases during a distribution of securities) and the requirements of SEC's Rule 10b-18 promulgated under the Securities Act of 1934.
13. Determine that procedures are in place to ensure that any offer or sale by the Company of any of its debt or equity securities is made in compliance with applicable federal and state securities laws.

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Communications with the Investment and Capital Committee
The Committee makes known to management and associates of the Company that the Investment and Capital Committee desires direct communication from them regarding concerns or issues related to the Committee's Charter. The Committee expects management to advise it promptly of any significant operational or accounting issues which vary from traditional practices, Progressive's investment policy or Progressive's investment constraints. The Investment Strategist and the Treasurer will have direct access to the Committee. The Investment Committee will meet in separate executive sessions, at least once a year, with the Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer.