Progressive 2006 Annual Report Download - page 28

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Consolidated Statements of Cash Flows
THE PROGRESSIVE CORPORATION AND SUBSIDIARIES
(millions)
For the years ended December 31, 2006 2005 2004
Cash Flows from Operating Activities
Net income $ 1,647.5 $ 1,393.9 $ 1,648.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 103.4 92.4 99.4
Amortization of fixed maturities 225.6 189.6 168.9
Amortization of stock-based compensation 27.6 33.7 23.8
Net realized (gains) losses on securities 9.7 37.9 (79.3)
Net loss on disposition of property and equipment .9 — —
Changes in:
Unearned premiums (.1) 227.1 213.3
Loss and loss adjustment expense reserves 64.7 374.7 709.3
Accounts payable, accrued expenses and other liabilities 7.1 49.5 70. 2
Prepaid reinsurance premiums 14.2 16.1 ( 5 .1 )
Reinsurance recoverables (28.1) (24.1) (110.3)
Premiums receivable 2.5 (213.5) (207.6)
Deferred acquisition costs 3.8 (12.6) (19.9)
Income taxes 10.1 (140.0) 98.5
Tax benefits from exercise/vesting of stock-based compensation1— 41. 2 44.3
Other, net (64.3) (71.9) 8.3
Net cash provided by operating activities 2,024.6 1,994.0 2,662.5
Cash Flows from Investing Activities
Purchases:
Fixed maturities (6,294.9) (9,154.4) (6,686.3)
Equity securities (1,131.6) (852.9) (678.3)
Short-term investments
—
auction rate securities (2,999.3) (7,935.3) (6,890.1)
Sales:
Fixed maturities 5,668.2 7,068.6 5,885.7
Equity securities 323.1 152.3 876.3
Short-term investments
—
auction rate securities 3,215.5 8,053.4 6,552.4
Maturities, paydowns, calls and other:
Fixed maturities 686.1 572.6 639.7
Equity securities 223.5 114.4 78.2
Net sales (purchases) of short-term investments
—
other (22.3) 491.8 (390.9)
Net unsettled security transactions (116.6) 126.6 (43.2)
Purchases of property and equipment (334.3) (219.3) (192.0)
Sale of property and equipment 15.4 36.1 —
Net cash used in investing activities (767.2) (1,546.1) (848.5)
Cash Flows from Financing Activities
Proceeds from exercise of stock options 43.3 44.2 51.7
Tax benefits from exercise/vesting of stock-based compensation138.8 — —
Payments of debt (100.0) — (206.0)
Dividends paid to shareholders (25.0) (23.7) (23.3)
Acquisition of treasury shares (1,214.5) (482.8) (1,628.5)
Net cash used in financing activities (1,257.4) (462.3) (1,806.1)
Increase (decrease) in cash — (14.4) 7.9
Cash, Beginning ofyear 5.6 20.0 12.1
Cash, End of year $ 5.6 $ 5.6 $ 20.0
1Reclassified pursuant to the adoption of SFAS 123(R).
See notes to the complete consolidated financial statements included in Progressive’s 2006 Annual Report to Shareholders,
which is attached as an Appendix to Progressive’s 2007 Proxy Statement.