Progressive 2015 Annual Report Download - page 75

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expect approximately $3.0 billion, or 22%, of principal repayment from our fixed-income portfolio, excluding U.S. Treasury
Notes and short-term investments, during 2016. Cash from interest and dividend payments provides an additional source of
recurring liquidity.
Included in the fixed-income portfolio are U.S. government obligations, which include U.S. Treasury Notes and interest rate
swaps. Although the interest rate swaps are not obligations of the U.S. government, they are recorded in this portfolio as the
change in fair value is correlated to movements in the U.S. Treasury market. The duration of these securities was
comprised of the following at December 31, 2015:
($ in millions)
Fair
Value
Duration
(years)
U.S. Treasury Notes
Less than two years $1,831.4 0.3
Two to five years 4.9 2.7
Five to ten years 588.5 7.3
Total U.S. Treasury Notes 2,424.8 2.0
Interest Rate Swaps
Five to ten years ($750 notional value) 4.4 (7.1)
Total U.S. government obligations $2,429.2 (0.2)
The interest rate swap positions had a fair value of $4.4 million at December 31, 2015 as they were in an overall asset
position, which is fully collateralized by cash payments received from the counterparty. The liability associated with the cash
collateral received is reported in the “other liabilities” section of the consolidated balance sheets. As of December 31, 2015,
we had no treasury futures. During February 2016, we entered into new treasury future positions as an additional means to
manage the portfolio duration. The negative duration of the interest rate swaps is due to the positions being short interest-
rate exposure (i.e., receiving a variable-rate coupon on the interest rate swaps). In determining duration, we add the interest
rate sensitivity of our interest rate swap positions to that of our Treasury holdings, but do not add the notional value of the
swaps to our Treasury holdings in order to calculate an unlevered duration for the portfolio.
App.-A-74