Progressive 2003 Annual Report Download - page 13

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In July 2003, the Company received notice from the Internal Revenue Service that the Joint Committee of Taxation of Con-
gress had completed its review of a Federal income tax settlement agreed to by the Internal Revenue Service, primarily at-
tributable to the amount of loss reserves deductible for tax purposes.As a result, the Company will receive an income tax
refund of approximately $58 million,which is reflected as a tax recoverable as a component of the Company’s “Income Taxes”
item on the balance sheet.In addition,as of December 31,2003,the Company estimated that it will receive $31.2 million,or
$.09 per share,of interest; interest will continue to accrue thereafter until payment is received.
Deferred income taxes reflect the effect for financial statement reporting purposes of temporary differences between the fi-
nancial statement carrying amounts and the tax bases of assets and liabilities.At December 31, 2003 and 2002, the compo-
nents of the net deferred tax assets were as follows:
(millions) 2003 2002
Deferred tax assets:
Unearned premium reserve $ 268.4 $ 230.7
Non-deductible accruals 84.5 79.2
Loss reserves 113.1 149.6
Write-downs on securities 34.7 50.7
Other —5.6
Deferred tax liabilities:
Deferred acquisition costs (144.3) (127.2)
Unrealized gains (225.2) (87.5)
Hedges on forecasted transactions (5.8) (6.3)
Other (28.5) —
Net deferred tax assets $ 96.9 $ 294.8
- APP.-B-13 -
The provision for income taxes in the accompanying consolidated statements of income differed from the statutory rate
as follows:
(millions) 2003 2002 2001
Income before income taxes $ 1,859.7 $ 9 81.4$587.6
Tax at statutory rate $ 650.9 35% $ 343.5 35% $ 205.7 35%
Tax effect of :
Exempt interest income (26.9) (1) (15.6) (2) (14.7) (3)
Dividends received deduction (16.6) (1) (12.9) (1) (12.6) (2)
Other items, net (3.1) — (.9) — (2.2) —
$604.3 33% $ 314.1 32% $176.2 30%
At December 31, 2003 and 2002, net income taxes payable were $15.3 million and $75.6 m i ll i o n, respectively.