Progressive 2005 Annual Report Download - page 15

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INVESTMENTS AND CAPITAL MANAGEMENT
Solid growth in the economy and improving profits supported the
equity markets in 2005 while “measured” interest rate increases
from the Federal Reserve pushed short-term rates higher to essen-
tially flat with steady longer maturity yields. We took advantage
of interest rate volatility during the year to shorten our portfolio’s
average maturity when rates were low and extend it when rates
increased. We decreased our exposure to corporate and other non-
government issued bonds early in the year, believing the incremen-
tal yield premium relative to U.S. treasury bonds was insufficient
for the risk taken. Our portfolio produced a 4% total return
in 2005 with equities tracking their benchmark and fixed-income
securities performing better than the general bond market.