Progressive 2014 Annual Report Download - page 19

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Gross realized gains and losses were predominantly the result of sales transactions in our fixed-income portfolio related to
movements in credit spreads and interest rates and sales from our equity-indexed portfolio. In addition, gains and losses
reflect recoveries from litigation settlements and holding period valuation changes on hybrids and derivatives. Also included
are write-downs for securities determined to be other-than-temporarily impaired in our fixed-maturity and/or equity portfolios.
Net Investment Income The components of net investment income for the years ended December 31, were:
(millions) 2014 2013 2012
Fixed maturities:
U.S. government obligations $ 46.2 $ 50.2 $ 49.8
State and local government obligations 50.1 48.0 51.1
Foreign government obligations 0.4 0.2 0
Corporate debt securities 82.1 98.8 107.5
Residential mortgage-backed securities 44.9 28.1 16.1
Commercial mortgage-backed securities 66.0 74.8 82.2
Other asset-backed securities 16.7 16.7 20.3
Redeemable preferred stocks 15.5 21.2 24.2
Total fixed maturities 321.9 338.0 351.2
Equity securities:
Nonredeemable preferred stocks 38.6 36.2 43.8
Common equities 46.6 45.8 44.9
Short-term investments 1.3 2.0 3.1
Investment income 408.4 422.0 443.0
Investment expenses (18.9) (18.8) (15.4)
Net investment income $389.5 $403.2 $427.6
The decrease in our investment income during 2014 was due in part to an increase in short-term investments held and
lower yields on securities purchased during the year.
Trading Securities At December 31, 2014 and 2013, 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, 2014, 2013, and 2012.
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.
App.-A-18