Progressive 2015 Annual Report Download - page 57

advances under this agreement are subject to PNC’s discretion, would bear interest at a variable daily rate, and must be
repaid on the earlier of the 30th day after the advance or the expiration date of the facility, April 30, 2016. We incurred no
debt issuance costs and had no borrowings under either line of credit throughout 2015 or 2014.
During 2015, we entered into repurchase commitment transactions, which were open for a total of four days. In these
transactions, we loaned U.S. Treasury securities to internally approved counterparties in exchange for cash equal to the fair
value of the securities. These transactions were entered into as overnight arrangements, and we had no open repurchase
commitments at December 31, 2015. On the days that we invested in repurchase transactions, the largest single
outstanding balance was $40.4 million, which was open for one day; the average daily balance was $29.0 million. These
investment transactions were entered into to enhance the yield from our fixed-income portfolio and not as a source of
liquidity or funding for our operations. We did not enter into any repurchase commitment transactions during 2014.
C. Commitments and Contingencies
Contractual Obligations
A summary of our noncancelable contractual obligations as of December 31, 2015, follows:
Payments due by period
(millions) Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Debt $ 2,729.3 $ 27.2 $ 54.4 $ 16.4 $2,631.3
Interest payments on debt11,822.0 141.2 218.6 196.1 1,266.1
Operating leases 171.6 50.4 85.1 34.3 1.8
Purchase obligations 408.0 290.9 95.7 13.2 8.2
Catastrophe excess of loss reinsurance contracts282.4 76.1 6.3 0.0 0.0
Loss and loss adjustment expense reserves 10,039.0 5,252.5 3,166.3 881.6 738.6
Total $15,252.3 $5,838.3 $3,626.4 $1,141.6 $4,646.0
1Includes interest on the 6.70% Debentures at the fixed annual rate through, but excluding, June 15, 2017. Amounts also include variable rate
interest on the ARX debt for which we made assumptions in calculating the amount of future interest payments. We used the rates in effect as of
December 31, 2015, for all future periods. See Note 4 – Debt for further discussion on interest rates and maturity dates.
2During 2015, the insurance operations of ARX entered into several multiple-layer property catastrophe excess of loss reinsurance contracts with
various reinsurers with terms ranging from one to two years.
Purchase obligations represent our noncancelable commitments for goods and services (e.g., software licenses,
maintenance on information technology equipment, and media placements). Unlike many other forms of contractual
obligations, loss and loss adjustment expense (LAE) reserves do not have definitive due dates and the ultimate payment
dates are subject to a number of variables and uncertainties. As a result, the total loss and LAE reserve payments to be
made by period, as shown above, are estimates based on our recent payment patterns. To further understand our personal
auto claims payments, see Claims Payment Patterns, a supplemental disclosure provided in this Annual Report. In addition,
we annually publish a comprehensive Report on Loss Reserving Practices, which was most recently filed with the SEC on a
Form 8-K on August 26, 2015, that further discusses our claims payment development patterns, primarily related to our
vehicle businesses. The majority of the loss and LAE reserves in our Property business are paid in less than one year.
During the last three years, the only other significant new contractual commitments we entered outside the ordinary course
of business were the issuance of $400 million of our 3.70% Senior Notes in 2015 and $350 million of our 4.35% Senior
Notes in 2014, and the put and call rights included in the ARX stockholders’ agreement, as discussed in more detail in
Note 16 – Redeemable Noncontrolling Interest.
As discussed in the Liquidity and Capital Resources section above, we believe that we have sufficient liquid investments,
borrowing capability, cash flows, and other capital resources to satisfy these contractual obligations.
Off-Balance-Sheet Arrangements
Our off-balance-sheet leverage includes derivative positions (as disclosed in Note 2 – Investments and the Derivative
Instruments section of this Management’s Discussion and Analysis), operating leases, and purchase obligations (disclosed
in the table above). During 2015, we entered into futures contracts on both 5-year and 10-year Treasury notes as a means
to manage the overall duration of our fixed-income portfolio. These positions were closed during the fourth quarter 2015 and
we recorded a net $2.5 million realized gain on these positions for the period they were open. We did not have any open
futures contracts at December 31, 2015.
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