Progressive 2014 Annual Report Download - page 74

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The following is a summary of our indexed common stock portfolio holdings by sector compared to the Russell 1000 Index
composition:
Sector
Equity Portfolio
Allocation at
December 31, 2014
Russell 1000
Allocation at
December 31, 2014
Russell 1000
Sector Return
in 2014
Consumer discretionary 15.1% 15.0% 9.5%
Consumer staples 7.6 7.9 17.0
Financial services 18.3 19.0 14.7
Health care 13.6 13.5 26.0
Materials and processing 3.7 4.1 5.5
Other energy 7.9 7.9 (8.6)
Producer durable 10.0 11.0 9.8
Technology 17.0 16.4 20.3
Utilities 5.0 5.2 16.3
Other equity 1.8 NA NA
Total common stocks 100.0% 100.0% 13.2%
NA = Not Applicable
Derivative Instruments
CASH FLOW HEDGES
We issued $350 million of 4.35% Senior Notes in April 2014. Upon issuance, we closed a forecasted debt issuance hedge
and recognized a $1.6 million pretax loss as part of accumulated other comprehensive income (loss). During 2014, we
repurchased, in the open market, $44.3 million in aggregate principal amount of our 6.70% Debentures and reclassified
$0.5 million, on a pretax basis, of the unrealized gain on forecasted transactions from accumulated other comprehensive
income on the balance sheet to net realized gains on securities on the comprehensive income statement. See Note 2 –
Investments for further discussion.
INTEREST RATE SWAPS
We invest in interest rate swaps primarily to manage the fixed-income portfolio duration. The $750 million notional value
swaps reflected a loss for 2014, as interest rates have fallen during the year. These positions reflected a gain for 2013 as
interest rates rose during the year. The losses on the $1,263 million notional value swaps during 2013 and 2012 reflected a
decline in rates during the applicable periods. The following table summarizes our interest rate swap activity:
Net Realized Gains
(Losses)
(millions) Date Notional Value
Years ended
December 31,
Term Effective Maturity Coupon 2014 2013 2012 2014 2013 2012
Open:
10-year 04/2013 04/2023 Receive variable $150 $ 150 $ 0 $(12.9) $11.9 $ 0
10-year 04/2013 04/2023 Receive variable 185 185 0 (15.9) 14.8 0
10-year 04/2013 04/2023 Receive variable 415 415 0 (35.8) 33.1 0
5-year 05/2011 05/2016 Receive variable 0 0 400 0 0 (10.5)
5-year 08/2011 08/2016 Receive variable 0 0 500 0 0 (13.5)
9-year 12/2009 01/2019 Receive variable 0 0 363 0 0 (18.7)
Total open positions $750 $ 750 $1,263 $(64.6) $59.8 $(42.7)
Closed:
5-year NA NA Receive variable $ 0 $ 400 $ 0 $ 0 $ (1.0) $ 0
5-year NA NA Receive variable 0 500 0 0 (1.6) 0
9-year NA NA Receive variable 0 363 0 0 (1.4) 0
Total closed positions $ 0 $1,263 $ 0 $ 0 $ (4.0) $ 0
Total interest rate swaps $(64.6) $55.8 $(42.7)
NA = Not Applicable
App.-A-73