Progressive 2014 Annual Report Download - page 70

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Collateralized Mortgage Obligations The following table details the credit quality rating and fair value of our CMOs, along
with the loan classification and a comparison of the fair value at December 31, 2014, to our original investment value
(adjusted for returns of principal, amortization, and write-downs):
Collateralized Mortgage Obligations (at December 31, 2014)
($ in millions)
Rating1
Non-agency
prime Alt-A Government/GSE2Total
%of
Total
AAA $ 66.4 $ 0 $ 5.9 $ 72.3 10.0%
AA 13.8 16.6 1.6 32.0 4.4
A 274.2 111.2 0 385.4 53.3
BBB 51.9 38.7 0 90.6 12.5
Non-investment grade 86.0 57.6 0 143.6 19.8
Total $492.3 $224.1 $ 7.5 $723.9 100.0%
Increase (decrease) in value (0.1)% 1.1% 14.0% 0.4%
1The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings, all of our CMOs are rated investment
grade and classified as Group II.
2The securities in this category are insured by a Government Sponsored Entity (GSE) and/or collateralized by mortgage loans insured by the
Federal Housing Administration (FHA) or the U.S. Department of Veteran Affairs (VA).
The majority of our CMO portfolio is composed of non-agency mortgage securities. In the largest part of this portfolio, we
take advantage of the securitization structure to have an underlying bond split into senior and subordinated classes. In this
way, we can add extra credit support to our position. We will choose how much credit support we feel is necessary to
protect our position from potential credit losses.
Home-Equity Securities The following table shows the credit quality rating of our home-equity securities, along with a
comparison of the fair value at December 31, 2014, to our original investment value (adjusted for returns of principal,
amortization, and write-downs):
Home Equity Securities (at December 31, 2014)
($ in millions)
Rating1Total
%of
Total
AAA $ 26.9 2.9%
AA 14.2 1.5
A 133.0 14.2
BBB 216.9 23.2
Non-investment grade 543.6 58.2
Total $934.6 100.0%
Increase (decrease) in value 2.2%
1The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings, all of our home equity securities are
rated investment grade and classified as Group II.
We added to our home-equity exposure in 2014. We feel that the market for home equity loan-backed bonds continues to
trade with greater return potential than other sectors with comparable risk characteristics. This is most likely due to the
negative performance of this sector during the last recession. We look for securities where we feel potential losses are
mitigated by credit support.
App.-A-69