Patrick K. Callahan
PROGRESSIVE CORP/OH/About Patrick K. Callahan
Patrick K. Callahan is Personal Lines President at The Progressive Corporation (PGR) and a named executive officer (NEO). His pay is heavily weighted to at-risk incentives (annual Gainshare cash and performance-based RSUs) aligned to core insurance operating metrics—combined ratio, premium growth, and policies-in-force (PIF) growth—and excludes investment portfolio metrics used for the CEO/CFO awards . Progressive’s 2024 operating performance was strong: underwriting margin of 11.2% (pretax underwriting profit of $8.0B) with net premiums written of $74.4B (+$12.9B YoY), supporting above-target incentive outcomes; five-year cumulative TSR reached $370.40 vs. $222.44 for the S&P 500 P/C peer group .
Fixed Compensation
- Salary comprised ~13% of Callahan’s total compensation in 2024, illustrating a low fixed-pay, high-performance mix .
- 2024 base salary: $680,000; annual salaries are set below market median with pay-for-performance upside through incentives .
Multi-Year Compensation (Summary Compensation Table)
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | $622,115 | $647,115 | $676,539 |
| Stock Awards ($) | $2,343,838 | $2,437,619 | $2,550,336 |
| Non-Equity Incentive Plan Compensation ($) | $802,529 | $1,727,798 | $1,806,357 |
| All Other Compensation ($) | $12,500 | $12,000 | $12,000 |
| Total ($) | $3,780,982 | $4,824,532 | $5,045,232 |
Performance Compensation
Gainshare (Annual Cash Incentive)
- Targets are set as a multiple of salary; payouts depend on a performance factor (0.00–2.00) from product-level growth and profitability matrices, anchored around combined ratio and aggressive growth goals .
- 2024 Gainshare Factor: 1.78 (of 2.00); Callahan’s target multiple remained 1.50x (unchanged vs. 2023) .
| Year | Target Multiple of Salary | Performance Factor | Actual Payment ($) |
|---|---|---|---|
| 2022 | — | — | $802,529 |
| 2023 | 1.50x | — | $1,727,798 |
| 2024 | 1.50x | 1.78 | $1,806,357 |
2024 Equity Grants (RSUs)
- Structure: time-based RSUs vest in equal tranches in Jan 2027/2028/2029; performance-based RSUs (three-year periods) depend on Progressive’s growth outpacing market growth, with a profitability gate (96 combined ratio or better). CEO/CFO receive additional investment-based awards; other NEOs, including Callahan, receive insurance operations awards only .
| Award Type | Grant Date | Target Units (#) | Maximum Units (#) | Grant Date Fair Value ($) |
|---|---|---|---|---|
| Time-based RSUs | 03/19/2024 | 3,310 | — | $680,172 |
| Performance-based RSUs (Insurance ops) | 03/19/2024 | 9,101 | 22,753 | $1,870,164 |
Stock Vested in 2024
| Metric | 2024 |
|---|---|
| Shares acquired on vesting (#) | 49,161 |
| Value realized on vesting ($) | $10,444,839 |
Outstanding Unvested Performance-Based RSUs (as of 12/31/2024)
| Grant Year | Units (#) |
|---|---|
| 2022 | 39,697 |
| 2023 | 32,405 |
| 2024 | 22,783 |
Time-Based RSU Scheduled Vesting (as of 12/31/2024)
| Vest Date | 01/01/2025 | 01/21/2025 | 01/20/2026 | 01/19/2027 | 01/18/2028 | 01/16/2029 |
|---|---|---|---|---|---|---|
| Units (#) | 2,967 | 4,206 | 5,777 | 4,601 | 2,676 | 1,105 |
Equity Ownership & Alignment
- Beneficial ownership (as of 01/31/2025): Callahan owns 19,860 common shares (<1%); holds 106,631 units equivalent to common shares via plans; total interest in shares and equivalents: 126,491 .
- Ownership guidelines: NEOs must hold equity worth ≥3x salary (time-based unvested RSUs count); as of 01/31/2025, all NEOs, including Callahan, satisfied the guideline .
- Hedging/pledging: Executives are prohibited from derivatives/hedging and from pledging Progressive shares; the company is not aware of any pledges by directors or executive officers .
Beneficial Ownership Detail (as of 01/31/2025)
| Metric | Amount |
|---|---|
| Total Common Shares Beneficially Owned (#) | 19,860 |
| Percent of Class | <1% |
| Units Equivalent to Common Shares (#) | 106,631 |
| Total Interest (Shares + Unit Equivalents) (#) | 126,491 |
Employment Terms
- Severance plan (Executive Separation Allowance Plan): 3x salary only (excludes cash incentives/equity), plus up to 18 months medical/dental/vision at regular employee cost and outplacement services (~$13,000); no tax gross-ups .
- Double-trigger change-in-control (CIC) under equity plans: awards accelerate only if not honored/assumed/replaced or upon qualifying termination within 24 months post-CIC; performance-based awards paid at target or based on achievement to date, as applicable .
- Non-compete: RSU agreements include a non-compete provision; Progressive does not use employment agreements for executives .
Potential Payments (as of 12/31/2024)
| Scenario | Cash Severance ($) | Health Benefits Est. ($) | CIC Equity Acceleration ($) |
|---|---|---|---|
| Qualifying termination (no CIC or post-CIC good reason) | $2,040,000 | $28,502 | — |
| CIC with equity vesting required (RSUs) | — | — | $14,205,518 |
Deferred Compensation (EDCP) – 2024
| Metric | Amount ($) |
|---|---|
| Executive Contributions (2024) | — |
| Registrant Contributions (2024) | — |
| Aggregate Earnings (Losses) (2024) | $7,389,041 |
| Aggregate Withdrawals/Distributions (2024) | — |
| Aggregate Balance at FY-End | $23,046,007 |
| Cumulative Amounts Previously Deferred (disclosed) | $2,777,037 |
Compensation Structure Analysis
- Cash vs. equity mix: Salary ~13% of Callahan’s 2024 total; equity and variable incentives drive the majority, consistent with Progressive’s pay-for-performance design .
- Incentive emphasis: 2024 other NEOs’ annual equity targets averaged 2.16x salary for performance-based RSUs and 1.0x for time-based RSUs; Callahan’s performance award target set at 2.75x salary and time-based at 1.0x .
- Performance metrics: Compensation programs link to combined ratio and growth (PIF/premium); Callahan’s awards exclude fixed-income investment return metrics used for CEO/CFO .
- Governance safeguards: Clawback/forfeiture provisions including restatements and reputational harm, plus separate Dodd-Frank clawback policy; no employment agreements; no single-trigger CIC; no hedging/pledging; no tax gross-ups on severance .
Say-on-Pay & Peer Benchmarking
- 2024 say-on-pay approval: 95% support; committee took no specific action in response given strong shareholder backing .
- Pay versus performance peer group: S&P 500 Property & Casualty Insurance Index used for TSR comparison in regulatory Pay vs. Performance disclosure .
- Market benchmarking for Callahan’s role: Uses Willis Towers Watson and Radford survey data for Personal Lines President; company targets salaries near/below median with upside for strong performance .
Risk Indicators & Red Flags
- Related party transactions: None exceeding $120,000 in 2024, excluding ordinary-course insurance transactions; no committee interlocks .
- Hedging/pledging: Prohibited; none reported—reduces alignment risk .
- CIC and severance economics: Double-trigger equity vesting; severance limited to salary (3x), excluding bonus/equity; no gross-ups—shareholder-friendly terms, moderating windfall risk .
Investment Implications
- Alignment and retention: Significant unvested RSUs and EDCP balance ($23.0M) create retention hooks and long-term alignment; ownership guidelines met at ≥3x salary; no pledging reduces forced-sale risk .
- Incentive levers: 2024 Gainshare factor of 1.78 and above-target vesting outcomes in 2024 support strong realized variable pay—future payouts will be sensitive to maintaining growth above market with profitability at or better than 96 combined ratio .
- Potential selling pressure windows: Material RSU vesting tranches scheduled annually through 2029 (e.g., 5,777 units in Jan-2026, 4,601 in Jan-2027), which can coincide with Form 4 activity and short-term supply; monitor blackout windows and 10b5-1 plans around those dates .
- CIC/severance downside protection: Double-trigger equity treatment and capped salary-only severance suggest balanced change-of-control economics with limited windfalls; no tax gross-ups and no employment agreements further mitigate governance risk .