11-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 11-K

 

 

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 1-9518

 

 

 

A. Full title of the plan and the address of the Plan, if different from that of the issuer named below:

THE PROGRESSIVE CORPORATION

EXECUTIVE DEFERRED COMPENSATION PLAN

 

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

THE PROGRESSIVE CORPORATION

6300 WILSON MILLS ROAD

MAYFIELD VILLAGE, OHIO 44143

 

 

 


Table of Contents

REQUIRED INFORMATION

See the attached Financial Statements for The Progressive Corporation Executive Deferred Compensation Plan, for the years ended December 31, 2011, 2010 and 2009.

SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

The Progressive Corporation Executive Deferred
Compensation Plan
By:   /s/ Charles E. Jarrett
 

 

  Charles E. Jarrett
  Vice President, Secretary and
  Chief Legal Officer

Date: March 28, 2012


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THE PROGRESSIVE CORPORATION

EXECUTIVE DEFERRED COMPENSATION PLAN

FINANCIAL STATEMENTS

WITH

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

For the Years Ended

December 31, 2011, 2010 and 2009


Table of Contents

INDEX

 

     Page

Report of Independent Registered Public Accounting Firm

  

Financial Statements:

  

Statement of Net Assets Available for Benefits

   2

Statement of Changes in Net Assets Available for Benefits

   3

Notes to Financial Statements

   4 - 18


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

The Progressive Corporation

We have audited the accompanying statement of net assets available for benefits of The Progressive Corporation Executive Deferred Compensation Plan (the Plan), as of December 31, 2011 and 2010, and the related statement of changes in net assets available for benefits for the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects the net assets available for benefits of the Plan as of December 31, 2011 and 2010, and the changes in net assets available for benefits for the three years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ MEADEN & MOORE, LTD.
MEADEN & MOORE, LTD.
Certified Public Accountants

March 28, 2012

Cleveland, Ohio


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STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS

The Progressive Corporation

Executive Deferred Compensation Plan

 

     December 31  
     2011      2010  

ASSETS

     

Receivables:

     

Employer

   $ 1,964,995       $ 2,193,573   

Pending trade settlement

     140,025         —     
  

 

 

    

 

 

 

Total Receivables

     2,105,020         2,193,573   

Investments, at Fair Value:

     

Common Shares of The Progressive Corporation (cost: $32,321,104 and $27,836,047)

     33,308,083         29,500,509   

Other investments (cost: $62,994,182 and $61,465,139)

     66,164,384         67,326,553   
  

 

 

    

 

 

 

Total Investments

     99,472,467         96,827,062   
  

 

 

    

 

 

 

Total Assets

     101,577,487         99,020,635   

LIABILITIES

     —           —     
  

 

 

    

 

 

 

Net Assets Available for Benefits

   $ 101,577,487       $ 99,020,635   
  

 

 

    

 

 

 

See accompanying notes.

 

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STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

The Progressive Corporation

Executive Deferred Compensation Plan

 

     Year Ended December 31  
     2011     2010      2009  

Additions to Net Assets Attributed to:

       

Contributions:

       

Employer

   $ 7,891,502      $ 7,724,410       $ 5,020,411   

Net appreciation (depreciation) in the fair value of Common Shares of The Progressive Corporation

     (677,483     2,626,130         4,136,403   

Net appreciation (depreciation) in the fair value of other investments

     (2,691,212     5,012,949         14,833,349   

Net realized gains (losses)

     764,355        783,332         (5,263,325

Dividends

     2,411,571        3,231,505         1,482,879   

Interest

     11        —           1,158   
  

 

 

   

 

 

    

 

 

 

Total Additions

     7,698,744        19,378,326         20,210,875   

Deductions from Net Assets Attributed to:

       

Benefits paid to participants

     5,141,857        5,905,755         5,107,957   

Short-term trading fees

     36        21         105   
  

 

 

   

 

 

    

 

 

 
     5,141,893        5,905,776         5,108,062   
  

 

 

   

 

 

    

 

 

 

Net Increase

     2,556,852        13,472,550         15,102,813   

Net Assets Available for Benefits:

       

Beginning of Year

     99,020,635        85,548,085         70,445,272   
  

 

 

   

 

 

    

 

 

 

End of Year

   $ 101,577,487      $ 99,020,635       $ 85,548,085   
  

 

 

   

 

 

    

 

 

 

See accompanying notes.

 

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NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

1 Description of the Plan

The Progressive Corporation Executive Deferred Compensation Plan (the “Plan”) became effective January 1, 1995, and is maintained pursuant to a 2010 Amendment and Restatement. The Plan permits eligible executives of The Progressive Corporation (the “Company”) and its subsidiaries to defer all, or a portion, of their bonuses, restricted stock unit awards and incentive awards payable under certain bonus and incentive plans of the Company. Eligible executives include those with bonus targets of at least 35% and other employees designated by the Compensation Committee of the Company’s Board of Directors. Plan participation is voluntary.

Eligible executives who wish to participate in the Plan must sign an irrevocable deferral agreement specifying the portion of the bonus to be deferred. Participants must sign a different deferral agreement for each bonus or other incentive award prior to the year in which the bonus or incentive award is earned. Deferral agreements relating to Stock Awards must be signed before the year in which the award is granted. Participants may transfer their fund balances on a daily basis, limited to two transfers per quarter.

The Plan is intended to be an unfunded Plan providing benefits for a select group of management and highly compensated employees for purposes of the Employee Retirement Income Security Act of 1974 (“ERISA”) and is, therefore, exempt from certain ERISA requirements.

A deferral account is established for all deferrals that relate to the same payout date. The account is credited with an amount equal to the initial amounts deferred as of the date such amounts otherwise would have been paid to the participant in cash. All amounts initially credited to each account will be deemed to be invested in the investment fund selected by the participant. However, deferrals of Stock Awards shall be deemed to be invested in Common Shares of the Company for six months and one day, following vesting of such awards. Any Deferral of a Stock Award granted on or after March 17, 2005, shall be deemed to be invested in the Company Stock Fund until the Deferral Account has been distributed or withdrawn. The gains or losses of each investment fund are allocated among the appropriate accounts based on the proportion each participant’s account balance bears to the total account balances for all participants. Each participant’s benefit at any date is equal to the value of his/her account as of that date.

All deferrals credited to a deferral account will be deemed to be invested in one or more of the investment funds available under the Plan, based on the participant’s investment election. Investment funds include Common Shares of the Company, a money market fund, and several stock and bond mutual funds. Income from each fund is deemed to be reinvested in the fund that produced the income.

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

1 Description of the Plan, Continued

 

The investment funds available under the Plan are merely devices used to calculate gains and losses on the amounts deferred by Plan participants. No participant has any rights or interests in any particular funds, securities or property of the Company or the Trust described in Note 6, or in any investment vehicle in which deferrals are deemed to be invested, by virtue of any investment election. Each deferral account, however, shall be credited or charged in accordance with the Plan with gains and losses as if the participant in fact had made a corresponding actual investment.

The balance of each deferral account will be distributed to the participant upon the earlier of death, termination of employment, change in control of the Company or the date on which any fixed deferral period elected by the participant expires. Distribution may also be made with the consent of the Plan committee, if the participant becomes disabled or experiences an unforeseeable emergency. Participants desiring to elect a fixed deferral period must do so irrevocably at the time the deferral agreement is signed.

Distributions made on account of the participant’s death, disability, unforeseeable emergency or change in control of the Company will be paid in a lump sum. Distributions made on account of the participant’s termination of employment or expiration of a fixed deferral period will be paid in either a lump sum or in three, five or ten annual installments, as elected by the participant. Distributions of deferred Stock Awards granted in 2005 and later years will be made in Common Shares; all other Plan distributions will be made in cash.

The above description is provided for informational purposes. Participants should refer to the Plan documents for a more complete description of the Plan’s provisions.

 

2 Summary of Significant Accounting Policies

General:

The accompanying financial statements have been prepared on an accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

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NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

2 Summary of Significant Accounting Policies, Continued

 

Investment Valuation:

At the close of business on June 14, 2011, the Vanguard Total International Stock Index Fund Investor Class was moved to the Vanguard Total International Stock Index Fund Institutional Class.

The investment in Common Shares of the Company is valued at the last reported trade price on the New York Stock Exchange on the last business day of the year. Investments in the stock, bond and money market funds are valued at market. Market values for these mutual funds were determined by quoted prices, which represent the net asset value of shares held by the Plan at year-end.

Investment securities are exposed to various risks such as interest rate, market and credit risks. Market values of securities fluctuate based on the magnitude of changing market conditions; significant changes in market conditions could materially affect Plan investments.

Fair Value:

As defined in FASB ASC 820, “Fair Value Measurements”, fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a framework for measuring fair value, establishes a fair value hierarchy based on inputs used to measure fair value, and expands disclosure about fair value measurements.

The plan has categorized our financial instruments, based on the degree of subjectivity inherent in the valuation technique, into a fair value hierarchy of three levels, as follows:

Level 1: Inputs are unadjusted, quoted prices in active markets for identical instruments at the measurement date (e.g., U.S. Government securities and active exchange-traded equity securities).

Level 2: Inputs (other than quoted prices included within Level 1) that are observable for the instrument either directly or indirectly (e.g., certain money market funds). This includes: (i) quoted prices for similar instruments in active markets, (ii) quoted prices for identical or similar instruments in markets that are not active, (iii) inputs other than quoted prices that are observable for the instruments, and (iv) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Inputs that are unobservable. Unobservable inputs reflect the reporting entity’s subjective evaluation about the assumptions market participants would use in pricing the financial instrument (e.g., certain structured securities and privately held investments).

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

2 Summary of Significant Accounting Policies, Continued

 

Fair Value, Continued:

 

The composition of the investment portfolio as of December 31 was:

 

            Quoted Prices in      Significant         
            Active Markets      Other      Significant  
            for Identical      Observable      Unobservable  
            Assets      Inputs      Inputs  

Description

   12/31/2011      (Level 1)      (Level 2)      (Level 3)  

Money Market Fund

   $ 4,125,392       $ —         $ 4,125,392       $ —     

Mutual Funds

           

Growth Funds

     9,287,598         9,287,598         —           —     

Balanced Funds

     10,415,863         10,415,863         —           —     

Index Funds

     24,410,283         24,410,283         —           —     

Income Funds

     17,925,248         17,925,248         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Mutual Funds

     62,038,992         62,038,992         —           —     

Common Equities

           

Insurance

     33,308,083         33,308,083         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 99,472,467       $ 95,347,075       $ 4,125,392       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

            Quoted Prices in      Significant         
            Active Markets      Other      Significant  
            for Identical      Observable      Unobservable  
            Assets      Inputs      Inputs  

Description

   12/31/2010      (Level 1)      (Level 2)      (Level 3)  

Money Market Fund

   $ 4,547,159       $ —         $ 4,547,159       $ —     

Mutual Funds

           

Growth Funds

     10,330,773         10,330,773         —           —     

Balanced Funds

     10,049,889         10,049,889         —           —     

Index Funds

     24,747,159         24,747,159         —           —     

Income Funds

     17,651,573         17,651,573         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Mutual Funds

     62,779,394         62,779,394         —           —     

Common Equities

           

Insurance

     29,500,509         29,500,509         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 96,827,062       $ 92,279,903       $ 4,547,159       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

2 Summary of Significant Accounting Policies, Continued

 

Subsequent Events:

Management evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affect the financial statements.

Other:

Investment transactions are recorded on a trade date basis.

Realized gains and losses on the sale or distribution of securities are determined based on the average cost of the securities sold.

Dividend income is recorded on the ex-dividend date. Interest and other investment income are recorded as earned on the accrual basis.

Short-term trading fees are imposed by some funds in the Plan if any shares are sold, either withdrawn or transferred out, after holding them for less than a specified period of time.

Administrative expenses of the Plan, including trust management, legal and other fees, are paid by the Company and are not expenses of the Plan.

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

3 Participant Accounts

Participant balances for all funds are maintained in shares. Share values are determined on a periodic basis. The total number of shares and share values as of December 31, 2011 and 2010, by fund, were as follows:

 

Investment Options

  

Total Number of
Shares

    

Net Asset
Share Value

 

2011

             

The Progressive Stock Fund

     1,707,231.30         19.51   

Templeton World Fund-Class A

     37,171.21         13.74   

Fidelity Diversified International Fund-K Shares

     191,764.45         25.48   

Fidelity Low Priced Stock Fund-K Shares

     27,140.19         35.70   

Wasatch Small Cap Growth Fund

     47,678.74         37.81   

JH Small Company Portfolio

     48,173.02         19.24   

ABF Small Cap Value Fund-Institutional

     131,483.55         19.01   

Fidelity Mid-Cap Stock Fund-K Shares

     61,178.75         26.64   

Vanguard Institutional Index Fund

     135,270.06         115.04   

Vanguard Value Index Fund

     253,983.47         20.47   

Vanguard Growth Index Fund

     38,300.19         31.79   

Vanguard Mid-Cap Index Fund

     27,986.19         19.69   

Vanguard Total International Stock Index Fund

     16,609.87         87.32   

Vanguard Small-Cap Index Fund

     12,901.71         33.39   

Vanguard Total Bond Market Fund

     152,047.10         11.00   

Oakmark Equity and Income Fund

     385,059.63         27.05   

PIMCO Total Return Fund-Institutional

     1,132,994.24         10.87   

Fidelity Retirement Money Market Fund

     4,125,392.07         1.00   

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

3 Participant Accounts, Continued

 

Investment Options

  

Total Number of
Shares

    

Net Asset
Share Value

 

2010

             

The Progressive Stock Fund

     1,484,675.82         19.87   

Templeton World Fund-Class A

     43,887.92         14.84   

Fidelity Diversified International Fund-K Shares

     195,727.78         30.12   

Fidelity Low Priced Stock Fund-K Shares

     16,887.31         38.36   

Wasatch Small Cap Growth Fund

     45,462.81         39.50   

JH Small Company Portfolio

     58,887.23         20.29   

ABF Small Cap Value Fund-Institutional

     125,926.60         19.90   

Fidelity Mid-Cap Stock Fund-K Shares

     69,114.30         28.82   

Vanguard Institutional Index Fund

     131,636.79         115.01   

Vanguard Value Index Fund

     264,982.02         20.79   

Vanguard Growth Index Fund

     42,093.54         31.60   

Vanguard Mid-Cap Index Fund

     28,471.31         20.36   

Vanguard Total International Stock Index Fund

     114,383.98         15.76   

Vanguard Small-Cap Index Fund

     11,104.77         34.77   

Vanguard Total Bond Market Fund

     164,135.87         10.60   

Oakmark Equity and Income Fund

     362,288.73         27.74   

PIMCO Total Return Fund-Institutional

     1,065,407.81         10.85   

Fidelity Retirement Money Market Fund

     4,547,158.71         1.00   

 

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NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

4 Investment Programs

At December 31, 2011 and 2010, there were 78 and 89 (respectively) Plan participants with contributions in one or more of the following funds:

 

Investment Options

  

Number of
Participants

 

2011

      

The Progressive Stock Fund

     47   

Templeton World Fund-Class A

     16   

Fidelity Diversified International Fund-K Shares

     41   

Fidelity Low Priced Stk-K Shares

     14   

Wasatch Small Cap Growth Fund

     28   

JH Small Company Portfolio

     18   

ABF Small Cap Value Fund-Institutional

     14   

Fidelity Mid-Cap Stock Fund-K Shares

     30   

Vanguard Institutional Index Fund

     52   

Vanguard Value Index Fund

     27   

Vanguard Growth Index Fund

     15   

Vanguard Mid-Cap Index Fund

     12   

Vanguard Total International Stock Index Fund

     14   

Vanguard Small-Cap Index Fund

     11   

Vanguard Total Bond Market Fund

     11   

Oakmark Equity and Income Fund

     41   

PIMCO Total Return Fund-Institutional

     42   

Fidelity Retirement Money Market Fund

     29   

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

4 Investment Programs, Continued

 

Investment Options

  

Number of
Participants

 

2010

      

The Progressive Stock Fund

     48   

Templeton World Fund-Class A

     17   

Fidelity Diversified International Fund-K Shares

     46   

Fidelity Low Priced Stk-K Shares

     12   

Wasatch Small Cap Growth Fund

     25   

JH Small Company Portfolio

     21   

ABF Small Cap Value Fund-Institutional

     14   

Fidelity Mid-Cap Stock Fund-K Shares

     32   

Vanguard Institutional Index Fund

     55   

Vanguard Value Index Fund

     30   

Vanguard Growth Index Fund

     12   

Vanguard Mid-Cap Index Fund

     9   

Vanguard Total International Stock Index Fund

     17   

Vanguard Small-Cap Index Fund

     8   

Vanguard Total Bond Market Fund

     9   

Oakmark Equity and Income Fund

     43   

PIMCO Total Return Fund-Institutional

     42   

Fidelity Retirement Money Market Fund

     33   

The total number of participants in the Plan is less than the sum of the number of participants shown above because many were participating in more than one fund.

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

5 Investments

The Plan’s investments and unrealized appreciation (depreciation) at December 31, 2011 and 2010, were as follows:

 

2011

   Number of
Shares
     Cost      Fair Value      Unrealized
Appreciation
(Depreciation)
 

Common Shares

           

The Progressive Corporation

     1,707,231.30       $ 32,321,104       $ 33,308,083       $ 986,979   

Other Investments

           

Templeton World Fund-Class A

     37,171.21         643,902         510,732         (133,170

Fidelity Diversified International Fund-K Shares

     191,764.45         3,956,187         4,886,158         929,971   

Fidelity Low Priced Stk-K Shares

     27,140.19         907,490         968,905         61,415   

Wasatch Small Cap Growth Fund

     47,678.74         1,682,103         1,802,733         120,630   

JH Small Company Portfolio

     48,173.02         907,611         926,849         19,238   

ABF Small Cap Value Fund- Institutional

     131,483.55         2,099,285         2,499,502         400,217   

Fidelity Mid-Cap Stock Fund- K Shares

     61,178.75         1,063,658         1,629,802         566,144   

Vanguard Institutional Index Fund

     135,270.06         14,539,501         15,561,468         1,021,967   

Vanguard Value Index Fund

     253,983.47         6,454,591         5,199,042         (1,255,549

Vanguard Growth Index Fund

     38,300.19         1,012,205         1,217,563         205,358   

Vanguard Mid-Cap Index Fund

     27,986.19         467,050         551,048         83,998   

Vanguard Total International Stock Index Fund

     16,609.87         1,763,503         1,450,374         (313,129

Vanguard Small-Cap Index Fund

     12,901.71         417,909         430,788         12,879   

Vanguard Total Bond Market Fund

     152,047.10         1,599,209         1,672,518         73,309   

Oakmark Equity and Income Fund

     385,059.63         9,422,394         10,415,863         993,469   

PIMCO Total Return Fund- Institutional

     1,132,994.24         11,932,192         12,315,647         383,455   

Fidelity Retirement Money Market Fund

     4,125,392.07         4,125,392         4,125,392         —     
     

 

 

    

 

 

    

 

 

 
        62,994,182         66,164,384         3,170,202   
     

 

 

    

 

 

    

 

 

 

Total Assets Held for Investment

      $ 95,315,286       $ 99,472,467       $ 4,157,181   
     

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

5 Investments, Continued

 

 

                          Unrealized  
     Number of                    Appreciation  

2010

   Shares      Cost      Fair Value      (Depreciation)  

Common Shares

           

The Progressive Corporation

     1,484,675.82       $ 27,836,047       $ 29,500,509       $ 1,664,462   

Other Investments

           

Templeton World Fund-Class A

     43,887.92         764,923         651,297         (113,626

Fidelity Diversified International Fund-K Shares

     195,727.78         3,907,660         5,895,321         1,987,661   

Fidelity Low Priced Stk-K Shares

     16,887.31         535,335         647,797         112,462   

Wasatch Small Cap Growth Fund

     45,462.81         1,590,851         1,795,781         204,930   

JH Small Company Portfolio

     58,887.23         1,106,963         1,194,822         87,859   

ABF Small Cap Value Fund- Institutional

     125,926.60         1,957,233         2,505,939         548,706   

Fidelity Mid-Cap Stock Fund- K Shares

     69,114.30         1,130,747         1,991,874         861,127   

Vanguard Institutional Index Fund

     131,636.79         14,013,382         15,139,547         1,126,165   

Vanguard Value Index Fund

     264,982.02         6,709,876         5,508,976         (1,200,900

Vanguard Growth Index Fund

     42,093.54         1,080,014         1,330,156         250,142   

Vanguard Mid-Cap Index Fund

     28,471.31         469,375         579,676         110,301   

Vanguard Total International Stock Index Fund

     114,383.98         1,777,177         1,802,691         25,514   

Vanguard Small-Cap Index Fund

     11,104.77         341,664         386,113         44,449   

Vanguard Total Bond Market Fund

     164,135.87         1,710,647         1,739,840         29,193   

Oakmark Equity and Income Fund

     362,288.73         8,683,113         10,049,889         1,366,776   

PIMCO Total Return Fund- Institutional

     1,065,407.81         11,139,020         11,559,675         420,655   

Fidelity Retirement Money Market Fund

     4,547,158.71         4,547,159         4,547,159         —     
     

 

 

    

 

 

    

 

 

 
        61,465,139         67,326,553         5,861,414   
     

 

 

    

 

 

    

 

 

 

Total Assets Held for Investment

      $ 89,301,186       $ 96,827,062       $ 7,525,876   
     

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

5 Investments, Continued

 

The Plan’s net realized gains and losses were as follows:

 

                   Net  
     Aggregate             Realized  

2011

   Proceeds      Cost      Gains (Losses)  

The Progressive Stock Fund

   $ 1,157,153       $ 1,095,383       $ 61,770   

Templeton World Fund-Class A

     114,986         131,147         (16,161

Fidelity Diversified International Fund-K Shares

     604,860         417,810         187,050   

Fidelity Low Priced Stk-K Shares

     62,381         58,657         3,724   

Wasatch Small Cap Growth Fund

     261,124         263,761         (2,637

JH Small Company Portfolio

     210,561         199,352         11,209   

ABF Small Cap Value Institutional

     116,244         92,480         23,764   

Fidelity Mid-Cap Stock Fund-K Shares

     377,038         220,391         156,647   

Vanguard Institutional Index Fund

     1,051,290         942,891         108,399   

Vanguard Value Index Fund

     558,870         581,747         (22,877

Vanguard Growth Index Fund

     441,547         405,408         36,139   

Vanguard Mid-Cap Index Fund

     219,204         205,817         13,387   

Vanguard Total International Stock Index Fund-Investor CL

     116,207         135,117         (18,910

Vanguard Total International Stock Index Fund-Institutional CL

     1,924,720         1,857,004         67,716   

Vanguard Small-Cap Index Fund

     142,158         139,193         2,965   

Vanguard Total Bond Market Fund

     469,690         461,862         7,828   

Oakmark Equity and Income Fund

     1,094,447         1,003,380         91,067   

PIMCO Total Return Fund-Institutional

     1,696,405         1,643,130         53,275   

Fidelity Retirement Money Market Fund

     2,704,052         2,704,052         —     
  

 

 

    

 

 

    

 

 

 

Total Net Realized Gains (Losses)

   $ 13,322,937       $ 12,558,582       $ 764,355   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

5 Investments, Continued

 

                   Net  
     Aggregate             Realized  

2010

   Proceeds      Cost      Gains (Losses)  

The Progressive Stock Fund

   $ 658,507       $ 605,622       $ 52,885   

Templeton World Fund-Class A

     407,451         488,510         (81,059

Fidelity Diversified International Fund-K Shares

     938,587         666,763         271,824   

Fidelity Low Priced Stk-K Shares

     69,079         65,592         3,487   

Wasatch Small Cap Growth Fund

     194,393         180,513         13,880   

JH Small Company Portfolio

     425,975         486,025         (60,050

ABF Small Cap Value Institutional

     121,855         119,529         2,326   

Fidelity Mid-Cap Stock Fund-K Shares

     467,118         280,569         186,549   

Vanguard Institutional Index Fund

     1,796,430         1,778,150         18,280   

Vanguard Value Index Fund

     346,367         443,101         (96,734

Vanguard Growth Index Fund

     162,462         131,299         31,163   

Vanguard Mid-Cap Index Fund

     55,347         58,289         (2,942

Vanguard Total International Stock Index Fund

     173,707         169,090         4,617   

Vanguard Small-Cap Index Fund

     39,038         37,028         2,010   

Vanguard Total Bond Market Fund

     590,259         565,456         24,803   

Oakmark Equity and Income Fund

     1,819,532         1,605,556         213,976   

PIMCO Total Return Fund-Institutional

     2,918,776         2,720,459         198,317   

Fidelity Retirement Money Market Fund

     2,239,061         2,239,061         —     
  

 

 

    

 

 

    

 

 

 

Total Net Realized Gains (Losses)

   $ 13,423,944       $ 12,640,612       $ 783,332   
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

5 Investments, Continued

 

                   Net  
                   Realized  

2009

   Aggregate
Proceeds
     Cost      Gains
(Losses)
 

The Progressive Stock Fund

   $ 1,348,453       $ 1,496,063       $ (147,610

Templeton World Fund-Class A

     49,993         77,062       $ (27,069

Fidelity Diversified International Fund

     4,971,683         7,499,051         (2,527,368

Fidelity Diversified International Fund-K Shares

     1,146,155         926,159         219,996   

Fidelity Low Priced Stk-K Shares

     1,608         1,037         571   

Wasatch Small Cap Growth Fund

     330,774         490,705         (159,931

JH Small Company Portfolio

     304,100         428,585         (124,485

American Advantage Small Cap Value Fund

     1,927,984         2,450,972         (522,988

ABF Small Cap Value Institutional

     7,015         7,042         (27

Fidelity Mid-Cap Stock Fund

     1,703,965         2,722,818         (1,018,853

Fidelity Mid-Cap Stock Fund-K Shares

     678,502         562,141         116,361   

Vanguard Institutional Index Fund

     1,942,142         2,319,986         (377,844

Vanguard Value Index Fund

     622,450         863,604         (241,154

Vanguard Growth Index Fund

     354,177         307,184         46,993   

Vanguard Mid-Cap Index Fund

     249,532         211,479         38,053   

Vanguard Total International Stock Index Fund

     320,624         540,345         (219,721

Vanguard Small-Cap Index Fund

     114,029         109,166         4,863   

Vanguard Total Bond Market Fund

     533,407         515,184         18,223   

Oakmark Equity and Income Fund

     980,697         998,163         (17,466

PIMCO Total Return Fund (Admin)

     10,247,562         10,588,200         (340,638

PIMCO Total Return Fund-Institutional

     1,789,938         1,773,169         16,769   

Fidelity Retirement Money Market Fund

     825,128         825,128         —     
  

 

 

    

 

 

    

 

 

 

Total Net Realized Gains (Losses)

   $ 30,449,918       $ 35,713,243       $ (5,263,325
  

 

 

    

 

 

    

 

 

 

 

6 Trust

The Company maintains a Trust to provide a source of funds to assist the Company in meeting its obligations under the Plan. The Trust is irrevocable. The Company is required to make annual deposits to the Trust to the extent necessary to insure that the value of all Trust assets is sufficient to pay all Plan obligations as of the close of each Plan year. The rights of participants and their beneficiaries under the Plan are merely unsecured contractual rights against the Company and its participating subsidiaries. Participants and beneficiaries have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. All assets of the Trust are subject to the claims of the general creditors of the Company and its participating subsidiaries under Federal and state law, should the Company and its participating subsidiaries become unable to pay their debts as they become due or become subject to Federal bankruptcy proceedings.

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2011

 

7 Related Party

Certain Plan investment choices are Fidelity mutual funds managed by Fidelity Management & Research Company (FMR Co.). Fidelity Management Trust Company (FMTC) is the current trustee of the Trust and along with FMR Co. is a subsidiary of FMR Corp. These transactions, therefore, qualify as related party transactions. The Plan paid no fees in 2011, 2010 or 2009 for investment management or Trust services.

 

8 Administration of the Plan

The Plan is administered by a Committee consisting of not less than three members of the Company’s Board of Directors, all of whom serve on the Committee at the pleasure of the Board. The Committee has full power to administer the Plan, including, but not limited to, the authority to make and enforce rules and regulations, to interpret the Plan’s provisions, to compute amounts payable under the Plan and to authorize disbursements from the Plan and the Trust.

Certain administrative functions are performed by employees of the Company, or its subsidiaries. No such employees receive compensation from the Plan.

 

9 Tax Status

The Plan is not, and is not intended to be, qualified under Section 401 of the Internal Revenue Code. Consequently, an application for a favorable determination has not been filed with the Internal Revenue Service.

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken uncertain tax positions that more-likely-than-not would not be sustained upon examination by applicable taxing authorities. The Plan administrator has analyzed tax positions taken by the Plan and has concluded that, as of December 31, 2011, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or that would require disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions. However, currently no audits for any tax periods are in progress. The Plan administrator believes that the Plan is no longer subject to income tax examinations for years prior to December 31, 2007.

 

10 Right to Terminate

The Company may terminate the Plan at any time and for any reason. Following termination of the Plan, no additional deferrals may be made, but all existing participant accounts will continue to be administered in accordance with the Plan, unless the Company elects to accelerate distribution of all Plan accounts in accordance with Section 409A of the Internal Revenue Code.

 

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Table of Contents

THE PROGRESSIVE CORPORATION

EXECUTIVE DEFERRED COMPENSATION PLAN

EXHIBIT INDEX

 

EXHIBIT NO.

UNDER REG.

S-K ITEM 601

    

FORM 11-K

EXHIBIT NO.

  

DESCRIPTION OF EXHIBIT

  23       23    Consent of Meaden & Moore, Ltd., Independent Registered Public Accounting Firm, dated March 28, 2012, to incorporate by reference their report dated March 28, 2012.