Progressive 2014 Annual Report Download - page 65

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The following tables show the composition of our Group I and Group II securities at December 31, 2014 and 2013:
($ in millions) Fair Value
%of
Total
Portfolio
2014
Group I securities:
Non-investment-grade fixed maturities $ 842.2 4.4%
Redeemable preferred stocks1178.6 0.9
Nonredeemable preferred stocks 827.5 4.4
Common equities 2,492.3 13.1
Total Group I securities 4,340.6 22.8
Group II securities:
Other fixed maturities212,528.4 65.9
Short-term investments 2,149.0 11.3
Total Group II securities 14,677.4 77.2
Total portfolio $19,018.0 100.0%
2013
Group I securities:
Non-investment-grade fixed maturities $ 592.1 3.3%
Redeemable preferred stocks1210.1 1.2
Nonredeemable preferred stocks 711.2 3.9
Common equities 2,530.5 14.0
Total Group I securities 4,043.9 22.4
Group II securities:
Other fixed maturities212,738.2 70.5
Short-term investments 1,272.6 7.1
Total Group II securities 14,010.8 77.6
Total portfolio $18,054.7 100.0%
1Includes non-investment-grade redeemable preferred stocks of $78.0 million and $106.3 million at December 31, 2014 and 2013, respectively.
2Includes investment-grade redeemable preferred stocks, with cumulative dividends, of $100.6 million at December 31, 2014 and $103.8 million at
December 31, 2013.
To determine the allocation between Group I and Group II, we use the credit ratings from models provided by the National
Association of Insurance Commissioners (NAIC) for classifying our residential and commercial mortgage-backed securities,
excluding interest-only securities, and the credit ratings from nationally recognized statistical rating organizations (NRSROs)
for all other debt securities. NAIC ratings are based on a model that considers the book price of our securities when
assessing the probability of future losses in assigning a credit rating. As a result, NAIC ratings can vary from credit ratings
issued by NRSROs. Management believes NAIC ratings more accurately reflect our risk profile when determining the asset
allocation between Group I and II securities.
Unrealized Gains and Losses
As of December 31, 2014, our portfolio had pretax net unrealized gains, recorded as part of accumulated other
comprehensive income, of $1,572.2 million, compared to $1,456.9 million at December 31, 2013.
During the year, the net unrealized gains in our fixed-income portfolio decreased $8.4 million, primarily the result of sales of
securities with net realized gains in our U.S. Treasury, corporate, and preferred stock portfolios. The contributions by
individual sector to the fixed-income portfolio change in net unrealized gains are discussed below. The net unrealized gains
in our common stock portfolio increased $123.7 million during 2014, reflecting positive returns in the broad equity market,
adjusting for net gains recognized on security sales.
See Note 2 – Investments for a further break-out of our gross unrealized gains and losses.
App.-A-64