Progressive 2015 Annual Report Download - page 20

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Gross realized gains and losses were predominantly the result of sales transactions in our fixed-income portfolio related to
movements in credit spreads and interest rates and sales from our equity portfolios. In addition, gains and losses reflect
recoveries from litigation settlements and holding period valuation changes on hybrids and derivatives. Also included are
write-downs for securities determined to be other-than-temporarily impaired in our fixed-maturity and/or equity portfolios.
Net Investment Income The components of net investment income for the years ended December 31, were:
(millions) 2015 2014 2013
Fixed maturities:
U.S. government obligations $ 28.3 $ 46.2 $ 50.2
State and local government obligations 60.7 50.1 48.0
Foreign government obligations 0.4 0.4 0.2
Corporate debt securities 102.4 82.1 98.8
Residential mortgage-backed securities 52.2 44.9 28.1
Agency residential pass-through obligations 2.1 0 0
Commercial mortgage-backed securities 74.6 66.0 74.8
Other asset-backed securities 22.0 16.7 16.7
Redeemable preferred stocks 15.0 15.5 21.2
Total fixed maturities 357.7 321.9 338.0
Equity securities:
Nonredeemable preferred stocks 43.7 38.6 36.2
Common equities 51.0 46.6 45.8
Short-term investments 2.2 1.3 2.0
Investment income 454.6 408.4 422.0
Investment expenses (22.8) (18.9) (18.8)
Net investment income $431.8 $389.5 $403.2
The amount of investment income (interest and dividends) we recognize varies from year to year based on the average
assets held during the year and the book yields of the securities in our portfolio. The increase in 2015 primarily reflects an
increase in average assets, due in large part to profitable underwriting results and the acquisition of a controlling interest in
ARX, while the decrease in 2014 was due in part to an increase in short-term investments held and lower yields on
securities purchased during the year.
Trading Securities At December 31, 2015 and 2014, we did not hold any trading securities and we did not have any net
realized gains (losses) on trading securities for the years ended December 31, 2015, 2014, and 2013.
Derivative Instruments For all derivative positions discussed below, realized holding period gains and losses are netted
with any upfront cash that may be exchanged under the contract to determine if the net position should be classified either
as an asset or liability. To be reported as a net derivative asset and a component of the available-for-sale portfolio, the
inception-to-date holding period (realized) gain on the derivative position at period end would have to exceed any upfront
cash received. On the other hand, a net derivative liability would include any inception-to-date holding period (realized) loss
plus the amount of upfront cash received (or netted, if upfront cash was paid) and would be reported as a component of
other liabilities. These net derivative assets/liabilities are not separately disclosed on the balance sheet due to their
immaterial effect on our financial condition, cash flows, and results of operations.
App.-A-19