Progressive 2013 Annual Report Download - page 27

The gains (losses) on these hedges are deferred and are being amortized as adjustments to interest expense over the life
of the related Senior Notes, and over the 10-year fixed interest rate term for the 6.70% Debentures. In addition to this
amortization, during 2013 and 2012, we reclassified $0.8 million and $0.6 million, respectively, on a pretax basis, from
accumulated other comprehensive income on the balance sheet to net realized gains on securities on the comprehensive
income statement, reflecting the portion of the unrealized gain on forecasted transactions that was related to the portion of
the 6.70% Debentures repurchased during the periods.
In March 2013, we entered into an unsecured, discretionary line of credit (the “Line of Credit”) with PNC Bank, National
Association (“PNC”) in the maximum principal amount of $100 million. Subject to the terms and conditions of the Line of
Credit documents, advances under the Line of Credit (if any) will bear interest at a variable rate equal to the higher of PNC’s
Prime Rate and the sum of the Federal Funds Open Rate plus 50 basis points. Each advance must be repaid on the 30th
date after the advance or, if earlier, on March 25, 2014, the expiration date of the Line of Credit. Prepayments are permitted
without penalty. All advances under the Line of Credit are subject to PNC’s discretion. We had no borrowings under the Line
of Credit in 2013.
During 2012, we had the ability to borrow up to $125 million under the 364-Day Secured Liquidity Credit Facility Agreement
(“Credit Facility Agreement”) with PNC. The Credit Facility Agreement expired on December 31, 2012. The purpose of the
credit facility was to provide liquidity in the event of disruptions in our cash management operations, such as disruptions in
the financial markets or related facilities that could have affected our ability to transfer or receive funds. We did not pay
facility fees in 2012. We had no borrowings under this arrangement in 2012.
Aggregate required principal payments on debt outstanding at December 31, 2013, were as follows:
(millions)
Year Payments
2014 $0
2015 0
2016 0
2017 0
2018 0
Thereafter 1,877.1
Total $1,877.1
5. INCOME TAXES
The components of our income tax provision were as follows:
(millions) 2013 2012 2011
Current tax provision $460.2 $424.8 $440.2
Deferred tax expense (benefit) 94.4 (9.4) 31.3
Total income tax provision $554.6 $415.4 $471.5
The provision for income taxes in the accompanying consolidated statements of comprehensive income differed from the
statutory rate as follows:
($ in millions) 2013 2012 2011
Income before income taxes $1,720.0 $1,317.7 $1,487.0
Tax at statutory rate $ 602.0 35% $ 461.2 35% $ 520.5 35%
Tax effect of:
Dividends received deduction (17.6) (1) (18.2) (1) (18.2) (1)
Exempt interest income (13.1) (1) (14.7) (1) (17.5) (1)
Tax-deductible dividends (13.6) (1) (11.9) (1) (3.8) 0
Tax credits (2.3) 0 0 0 (9.1) (1)
Other items, net (.8) 0 (1.0) 0 (.4) 0
Total income tax provision $ 554.6 32% $ 415.4 32% $ 471.5 32%
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