Progressive 2013 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2013 Progressive annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 92

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92

The following is a summary of our indexed common stock portfolio holdings by sector compared to the Russell 1000 Index
composition:
Sector
Equity Portfolio
Allocation at
December 31, 2013
Russell 1000
Allocation at
December 31, 2013
Russell 1000
Sector Return
in 2013
Consumer discretionary 15.3% 15.6% 41.6%
Consumer staples 7.5 7.8 27.7
Financial services 17.9 18.2 34.8
Health care 12.4 12.0 42.3
Materials and processing 4.2 4.3 25.2
Other energy 9.6 9.5 25.5
Producer durable 10.5 11.3 41.9
Technology 16.0 16.2 27.6
Utilities 5.0 5.1 15.2
Other equity 1.6 NA NA
Total common stocks 100.0% 100.0% 33.1%
NA = Not Applicable
Trading Securities
At December 31, 2013 and 2012, we did not hold any trading securities and we did not have any net realized gains (losses)
on trading securities for the years ended December 31, 2013, 2012, and 2011.
Derivative Instruments
For all derivative positions discussed below, realized holding period gains and losses are netted with any upfront cash that
may be exchanged under the contract to determine if the net position should be classified either as an asset or liability. To be
reported as a net derivative asset and a component of the available-for-sale portfolio, the inception-to-date realized gain on
the derivative position at period end would have to exceed any upfront cash received. On the other hand, a net derivative
liability would include any inception-to-date realized loss plus the amount of upfront cash received (or netted, if upfront cash
was paid) and would be reported as a component of other liabilities. These net derivative assets/liabilities are not separately
disclosed on the balance sheet due to their immaterial effect on our financial condition, cash flows, and results of operations.
INTEREST RATE SWAPS
We invest in interest rate swaps primarily to manage the fixed-income portfolio duration. The $750 million notional value swaps
open in 2013 reflected a gain for the year, as interest rates have risen since the inception of the trades. The losses on the
$1,263 million notional value swaps during 2013, 2012, and 2011 and the loss on the $350 million notional value swap during
2011 reflected a decline in rates during the applicable periods. The following table summarizes our interest rate swap activity:
Net Realized Gains
(Losses)
(millions) Date Notional Value
Years ended
December 31,
Term Effective Maturity Coupon 2013 2012 2011 2013 2012 2011
Open:
10-year 04/2013 04/2023 Receive variable $ 150 $ 0 $ 0 $11.9 $ 0 $ 0
10-year 04/2013 04/2023 Receive variable 185 0 0 14.8 0 0
10-year 04/2013 04/2023 Receive variable 415 0 0 33.1 0 0
5-year 05/2011 05/2016 Receive variable 0 400 400 0 (10.5) (20.0)
5-year 08/2011 08/2016 Receive variable 0 500 500 0 (13.5) (9.2)
9-year 12/2009 01/2019 Receive variable 0 363 363 0 (18.7) (44.8)
Total open positions $ 750 $1,263 $1,263 $59.8 $(42.7) $(74.0)
Closed:
5-year NA NA Receive variable $ 400 $ 0 $ 0 $ (1.0) $ 0 $ 0
5-year NA NA Receive variable 500 0 0 (1.6) 0 0
9-year NA NA Receive variable 363 0 350 (1.4) 0 (25.5)
Total closed positions $1,263 $ 0 $ 350 $ (4.0) $ 0 $(25.5)
Total interest rate swaps $55.8 $(42.7) $(99.5)
NA = Not Applicable
App.-A-73