Progressive 2014 Annual Report Download - page 32

Download and view the complete annual report

Please find page 32 of the 2014 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 91

  • 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

Our ceded premiums consist of “State Plans” and “Non-State Plans.” State Plans include: (i) amounts ceded to state-
provided reinsurance facilities, including the Michigan Catastrophic Claims Association (MCCA) and the North Carolina
Reinsurance Facility (NCRF), and (ii) state-mandated involuntary Commercial Auto Insurance Procedures/Plans (CAIP).
Collectively, the State Plans accounted for 97%, 97%, and 98% of our ceded premiums for the years ended December 31,
2014, 2013, and 2012, respectively; the MCCA and NCRF together accounted for 75%, 77%, and 80% of the ceded
premiums for these same time periods.
Losses and loss adjustment expenses were net of reinsurance ceded of $322.7 million in 2014, $347.0 million in 2013, and
$230.7 million in 2012.
Our prepaid reinsurance premiums and reinsurance recoverables were comprised of the following at December 31:
Prepaid Reinsurance Premiums Reinsurance Recoverables
($ in millions) 2014 2013 2014 2013
MCCA $32.8 38% $29.5 40% $1,018.8 83% $ 875.9 80%
CAIP 26.5 31 21.1 28 110.1 9 79.3 7
NCRF 21.9 26 20.5 27 51.1 4 50.1 5
State Plans 81.2 95 71.1 95 1,180.0 96 1,005.3 92
Non-State Plans 4.1 5 3.8 5 51.9 4 84.9 8
Total $85.3 100% $74.9 100% $1,231.9 100% $1,090.2 100%
Reinsurance contracts do not relieve us from our obligations to policyholders. Failure of reinsurers to honor their obligations
could result in losses to Progressive. Since substantially all of our reinsurance is through State Plans, our exposure to
losses from their failure is minimal, since the plans are funded by mechanisms supported by the insurance companies in the
state. We evaluate the financial condition of our other reinsurers and monitor concentrations of credit risk to minimize our
exposure to significant losses from reinsurer insolvencies.
8. STATUTORY FINANCIAL INFORMATION
Consolidated statutory surplus was $6,442.8 million and $5,991.0 million at December 31, 2014 and 2013, respectively.
Statutory net income was $1,289.5 million, $1,086.3 million, and $808.3 million for the years ended December 31, 2014,
2013, and 2012, respectively.
At December 31, 2014, $549.2 million of consolidated statutory surplus represented net admitted assets of our insurance
subsidiaries and affiliate that are required to meet minimum statutory surplus requirements in such entities’ states of
domicile. The companies may be licensed in states other than their states of domicile, which may have higher minimum
statutory surplus requirements. Generally, the net admitted assets of insurance companies that, subject to other applicable
insurance laws and regulations, are available for transfer to the parent company cannot include the net admitted assets
required to meet the minimum statutory surplus requirements of the states where the companies are licensed.
During 2014, the insurance subsidiaries paid aggregate cash dividends of $1,000.2 million to the parent company. Based on
the dividend laws currently in effect, the insurance subsidiaries could pay aggregate dividends of $1,346.5 million in 2015
without prior approval from regulatory authorities, provided the dividend payments are not made within 12 months of
previous dividends paid by the applicable subsidiary.
9. EMPLOYEE BENEFIT PLANS
Retirement Plans Progressive has a defined contribution pension plan (401(k) Plan) that covers most employees who are
United States residents and have been employed with the company for at least 30 days. Under this plan, Progressive
matches up to a maximum of 6% of an employee’s eligible compensation contributed to the plan. Employee and company
matching contributions are invested, at the direction of the employee, in a number of investment options available under the
plan, including various mutual funds, a self-directed brokerage option, and a Progressive common stock fund. The
Progressive common stock fund is an employee stock ownership program (ESOP) within the 401(k) Plan. At December 31,
2014, the ESOP held 26.2 million of our common shares, all of which are included in shares outstanding. Dividends on
these shares are reinvested in common shares or paid out in cash at the election of the participant and the related tax
benefit is recorded as part of our tax provision.
App.-A-31