Progressive 2015 Annual Report Download - page 47

Following is a summary of our shareholder dividends, both variable and special, that were declared in the last three years:
(millions, except per share amounts) Amount
Dividend Type Declared Paid Per Share Total1
Annual – Variable December 2015 February 2016 $0.8882 $519.2
Annual – Variable December 2014 February 2015 0.6862 404.1
Annual – Variable December 2013 February 2014 0.4929 293.9
Special December 2013 February 2014 1.0000 596.3
1Based on shares outstanding as of the record date.
15. ACQUISITION
On April 1, 2015, The Progressive Corporation acquired approximately 63.2% of the outstanding capital stock of ARX, the
parent company of ASI, primarily from non-management shareholders. Subsequently, in 2015, we purchased an additional
1.0% of ARX capital stock from certain employee shareholders and option holders. The total cost to acquire these shares
was $890.1 million and was funded with available cash. Prior to the acquisition, Progressive held a 5% interest in ARX as
part of our investment portfolio. During 2015, we recognized a $2.0 million loss to reflect the net acquisition cost attributable
to this holding. This loss was reported in net realized gains (losses) on securities in the comprehensive income statement.
At December 31, 2015, Progressive’s total ownership interest in ARX was 69.2%. The minority shareholders of ARX retain a
30.8% interest in the operating results of ARX. These interests are reflected in our comprehensive income statements as
“Net income/Other comprehensive income attributable to noncontrolling interest (NCI).”
The property business written by ASI accounted for approximately 3% of our total net premiums written during 2015. As part
of the acquisition, we recorded approximately $470 million of goodwill. Goodwill was calculated as the excess of the
purchase price over the estimated fair values of the assets and liabilities acquired, and represents the future economic
benefits arising from other assets acquired that could not be individually identified and separately recognized. As a result of
the ARX acquisition, we are able to build on the pre-existing relationship we had with ASI, which began in 2009, to expand
on our bundling strategy in the Agency channel. The goodwill has been allocated equally between the ASI property
business and our personal auto Agency business.
During 2015, subsequent to the date of acquisition, we completed our analysis related to the fair value of the loss and loss
adjustment expense reserves recorded as of the acquisition date and we obtained additional information about the state
and federal deferred tax liabilities that were recorded as of the acquisition date. As a result, we recognized a $42.0 million
fair value reduction to loss and loss adjustment expense reserves acquired, and a related $16.7 million fair value increase in
state and federal deferred taxes acquired, resulting in a net decrease of $25.3 million to the carrying value of goodwill. No
goodwill impairment charges were recognized during the year. As of December 31, 2015, goodwill associated with the
acquisition was $446.0 million.
In 2015, we adopted the newly issued accounting standard update related to business combinations, which simplifies the
accounting for measurement-period adjustments by allowing us to record any goodwill adjustment prospectively, rather than
retrospectively adjusting our previously issued financial statements.
As part of the acquisition, we recorded $520.4 million of other intangible assets; the other intangible assets will be amortized
over an average life of about 9 years. The following table reports the intangible assets by asset category as of
December 31, 2015:
($ in millions)
Category
Value at
Acquisition
Accumulated
Amortization
Useful
Life
Policies in force $256.2 $27.5 7 years
Agency relationships 159.2 8.5 14 years
Software 69.1 6.5 8 years
Trade name 34.8 2.6 10 years
Agent licenses 1.1 0 Indefinite
Total $520.4 $45.1
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