Progressive 2012 Annual Report Download - page 44

Following is a summary of our shareholder dividends that were either declared or paid in the last three years:
(millions, except per share amounts) Amount
Year Dividend Type Declared Paid
Per
Share Total1
2012 Annual – Variable December 2012 February 2013 $ .2845 $172.0
2012 Special October 2012 November 2012 1.0000 604.7
2011 Annual – Variable December 2011 February 2012 .4072 249.4
2010 Annual – Variable December 2010 February 2011 .3987 263.8
2010 Special October 2010 December 2010 1.0000 663.2
2009 Annual – Variable December 2009 February 2010 .1613 108.4
1Based on shares outstanding as of the record date.
The declaration of the special dividends is consistent with our published policy of returning capital to shareholders when
appropriate and did not affect our annual variable dividend program in those years.
B. Liquidity and Capital Resources
Progressive’s insurance operations create liquidity by collecting and investing premiums from new and renewal business in
advance of paying claims. As an auto insurer, our claims liabilities are generally short in duration. Generally, at any point in
time, approximately 50% of our outstanding reserves are paid within the following twelve months and less than 15% are still
outstanding after three years. See Claims Payment Patterns, a supplemental disclosure provided in this Annual Report, for
further discussion of the timing of claims payments.
As of December 31, 2012, our consolidated statutory surplus was $5.6 billion, compared to $5.3 billion at December 31,
2011. Our net premiums written-to-surplus ratio was 2.9 to 1 at year-end in each of the last three years. We also have
access to $1.4 billion of securities held in a non-insurance subsidiary, portions of which could be contributed to the capital of
our insurance subsidiaries to support growth as needed. In addition, our risk-based capital ratios, which are a series of
dynamic surplus-related formulas that contain a variety of factors that are applied to financial balances based on the degree
of certain risks (e.g., asset, credit, and underwriting), are well in excess of minimum regulatory requirements. Nonetheless,
the payment of dividends by our subsidiaries may be subject to certain limitations. See Note 8 – Statutory Financial
Information for additional information on subsidiary dividends.
For the three years ended December 31, 2012, operations generated positive cash flows of $4.9 billion, and cash flows are
expected to remain positive in both the short-term and reasonably foreseeable future. In 2012, our operating cash flows
increased $194 million, compared to 2011, reflecting premium growth in excess of losses paid in 2012.
As of December 31, 2012, 79% of our portfolio was invested in Group II securities, as defined above. In addition, our fixed-
income portfolio duration was 1.9 years, with a weighted average credit quality of AA-. At year end, we held $4.9 billion in
short-term investments and U.S. Treasury securities. Based on our portfolio allocation and investment strategies, we believe
that we have sufficient readily available marketable securities to cover our claims payments without having a negative effect
on our cash flows from operations. See Item 1A, “Risk Factors,” in our Form 10-K filed with the SEC for a discussion of
certain matters that may affect our portfolio and capital position.
As noted above, during 2011, we issued $500 million of our 3.75% Senior Notes. We received proceeds of $497 million,
after deducting underwriting discounts and commissions, and incurred an additional $1.0 million of expenses related to the
issuance. In January 2012, we retired all $350 million of our 6.375% Senior Notes at maturity. Our next scheduled debt
maturity will be in October 2013 of the entire $150 million of our 7% Notes.
Based upon our capital planning and forecasting efforts, we believe that we have sufficient capital resources, cash flows
from operations, and borrowing capability to support our current and anticipated business, scheduled principal and interest
payments on our debt, announced dividends, and expected capital requirements. The covenants on our existing debt
securities do not include any rating or credit triggers that would require an adjustment of the interest rate or an acceleration
of principal payments in the event our securities are downgraded by a rating agency.
We seek to deploy capital in a prudent manner and use multiple data sources and modeling tools to estimate the frequency,
severity, and correlation of identified exposures, including, but not limited to, catastrophic losses, natural disasters, and
other significant business interruptions, to estimate our potential capital needs.
App.-A-44