Progressive 2014 Annual Report Download - page 23

Fair Value
(millions) Level 1 Level 2 Level 3 Total Cost
December 31, 2013
Fixed maturities:
U.S. government obligations $3,662.2 $ 0 $ 0 $ 3,662.2 $ 3,630.4
State and local government obligations 0 2,256.0 0 2,256.0 2,247.3
Foreign government obligations 15.6 0 0 15.6 15.6
Corporate debt securities 0 2,926.6 0 2,926.6 2,885.0
Subtotal 3,677.8 5,182.6 0 8,860.4 8,778.3
Asset-backed securities:
Residential mortgage-backed 0 1,127.7 0.2 1,127.9 1,110.1
Commercial mortgage-backed 0 2,131.5 29.0 2,160.5 2,154.4
Other asset-backed 0 1,077.7 0 1,077.7 1,073.0
Subtotal asset-backed securities 0 4,336.9 29.2 4,366.1 4,337.5
Redeemable preferred stocks:
Financials 0 102.8 0 102.8 84.2
Utilities 0 65.6 0 65.6 64.9
Industrials 0 145.5 0 145.5 150.4
Subtotal redeemable preferred stocks 0 313.9 0 313.9 299.5
Total fixed maturities 3,677.8 9,833.4 29.2 13,540.4 13,415.3
Equity securities:
Nonredeemable preferred stocks:
Financials 240.8 414.6 39.0 694.4 431.5
Utilities 0 16.8 0 16.8 14.2
Subtotal nonredeemable preferred stocks 240.8 431.4 39.0 711.2 445.7
Common equities:
Common stocks 2,530.0 0 0 2,530.0 1,450.6
Other risk investments 0 0 0.5 0.5 0.5
Subtotal common equities 2,530.0 0 0.5 2,530.5 1,451.1
Total fixed maturities and equity securities 6,448.6 10,264.8 68.7 16,782.1 15,312.1
Short-term investments 987.8 284.8 0 1,272.6 1,272.6
Total portfolio $7,436.4 $10,549.6 $68.7 $18,054.7 $16,584.7
Debt $ 0 $ 2,073.7 $ 0 $ 2,073.7 $ 1,860.9
Our portfolio valuations classified as either Level 1 or Level 2 in the above tables are priced exclusively by external sources,
including: pricing vendors, dealers/market makers, and exchange-quoted prices. During 2014, we had two nonredeemable
preferred stocks with a value of $41.7 million that were transferred from Level 2 to Level 1 due to the availability of a
consistent exchange price. During 2013, we did not have any securities that were transferred between Level 1 and Level 2.
We recognize transfers between levels at the end of the reporting period.
Our short-term security holdings classified as Level 1 are highly liquid, actively marketed, and have a very short duration,
primarily 30 days or less to redemption. These securities are held at their original cost, adjusted for any accretion of
discount, since that value very closely approximates what an active market participant would be willing to pay for such
securities. The remainder of our short-term securities are classified as Level 2 and are not priced externally since these
securities continually trade at par value. These securities are classified as Level 2 since they are primarily longer-dated
auction securities issued by municipalities that contain a redemption put feature back to the auction pool with a redemption
period typically less than seven days. The auction pool is created by a liquidity provider and if the auction is not available at
the end of the seven days, we have the right to put the security back to the issuer at par.
At December 31, 2014, vendor-quoted prices represented 50% of our Level 1 classifications (excluding short-term
investments), compared to 56% at December 31, 2013. The securities quoted by vendors in Level 1 primarily represent our
holdings in U.S. Treasury Notes, which are frequently traded and the quotes are considered similar to exchange-traded
quotes. The balance of our Level 1 pricing comes from quotes obtained directly from trades made on active exchanges. The
year-over-year decline in vendor-quoted Level 1 prices was due to a reduction of U.S. Treasury Notes with the funds
deployed primarily to short-term investments.
App.-A-22