Form 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, 2013

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, 2013, 2012 and 2011.

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/ Jeffrey W. Basch
  Jeffrey W. Basch
  Authorized Signatory

Date: March 25, 2014


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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, 2013, 2012 and 2011


Table of Contents

INDEX

 

     Page

Report of Independent Registered Public Accounting Firm

   1

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


Table of Contents

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, 2013 and 2012, and the related statement of changes in net assets available for benefits for the three years in the period ended December 31, 2013. 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, 2013 and 2012, 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 25, 2014

Cleveland, Ohio

 

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STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS

The Progressive Corporation

Executive Deferred Compensation Plan

 

     December 31  
     2013      2012  

Assets:

     

Receivables:

     

Employer

   $ 3,311,974       $ 1,535,998   
  

 

 

    

 

 

 

Total Receivables

     3,311,974         1,535,998   

Investments, at Fair Value:

     

Common Shares of The Progressive Corporation (cost: $62,097,394 and $53,243,367)

     79,931,375         57,280,863   

Other investments (cost: $97,305,882 and $65,965,729)

     113,032,066         73,463,097   
  

 

 

    

 

 

 

Total Investments

     192,963,441         130,743,960   
  

 

 

    

 

 

 

Total Assets

     196,275,415         132,279,958   

Liabilities:

     —           —     
  

 

 

    

 

 

 

Net Assets Available for Benefits

   $ 196,275,415       $ 132,279,958   
  

 

 

    

 

 

 

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  
     2013      2012      2011  

Additions to Net Assets Attributed to:

        

Contributions:

        

Employer

   $ 32,779,366       $ 20,872,599       $ 7,891,502   

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

     13,796,485         3,050,517         (677,483

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

     8,228,816         4,327,165         (2,691,212

Net realized gains

     11,960,494         1,965,568         764,355   

Dividends

     4,017,961         5,773,792         2,411,571   

Interest

     —           80         11   
  

 

 

    

 

 

    

 

 

 

Total Additions

     70,783,122         35,989,721         7,698,744   

Deductions from Net Assets Attributed to:

        

Benefits paid to participants

     6,787,665         5,287,067         5,141,857   

Short-term trading fees

     —           183         36   
  

 

 

    

 

 

    

 

 

 
     6,787,665         5,287,250         5,141,893   
  

 

 

    

 

 

    

 

 

 

Net Increase

     63,995,457         30,702,471         2,556,852   

Net Assets Available for Benefits:

        

Beginning of Year

     132,279,958         101,577,487         99,020,635   
  

 

 

    

 

 

    

 

 

 

End of Year

   $ 196,275,415       $ 132,279,958       $ 101,577,487   
  

 

 

    

 

 

    

 

 

 

See accompanying notes.

 

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NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

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 and First Amendment thereto. 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, 2013

 

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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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

2 Summary of Significant Accounting Policies, Continued

 

Investment Valuation:

At the close of business on June 3, 2013, the Vanguard Institutional Index Fund Institutional Shares were moved to the Vanguard Institutional Index Fund Institutional Plus Shares.

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

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. 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. 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.

During 2013, the Plan transferred from Level 2 to Level 1 the Fidelity Money Market Trust Retirement Money Market Portfolio based on additional information obtained. The Plan recognizes transfers between levels at the end of the reporting period.

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

2 Summary of Significant Accounting Policies, Continued

 

Fair Value, Continued:

 

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

 

Description

   12/31/2013      Quoted Prices
in Active
Markets for
Identical Assets

(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Money Market Fund

   $ 10,550,328       $ 10,550,328       $ —         $ —     

Mutual Funds

           

Growth Funds

     17,090,909         17,090,909         —           —     

Balanced Funds

     13,700,456         13,700,456         —           —     

Index Funds

     62,342,025         62,342,025         —           —     

Income Funds

     9,348,348         9,348,348         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Mutual Funds

     102,481,738         102,481,738         —           —     

Common Equities

           

Insurance

     79,931,375         79,931,375         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 192,963,441       $ 192,963,441       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Description

   12/31/2012      Quoted Prices
in Active
Markets for
Identical Assets

(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Money Market Fund

   $ 9,514,833       $ —         $ 9,514,833       $ —     

Mutual Funds

           

Growth Funds

     10,424,910         10,424,910         —           —     

Balanced Funds

     13,016,083         13,016,083         —           —     

Index Funds

     27,541,351         27,541,351         —           —     

Income Funds

     12,965,920         12,965,920         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Mutual Funds

     63,948,264         63,948,264         —           —     

Common Equities

           

Insurance

     57,280,863         57,280,863         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 130,743,960       $ 121,229,127       $ 9,514,833       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

2 Summary of Significant Accounting Policies, Continued

 

Reclassifications:

Certain amounts have been reclassified to conform to current year presentation.

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, 2013

 

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, 2013 and 2012, by fund, were as follows:

 

Investment Options

   Ticker
Symbol
   Total Number of
Shares
     Net Asset
Share Value ($)
 

2013

                  

The Progressive Corporation

   PGR      2,931,110.18         27.27   

Templeton World Fund Class A

   TEMWX      25,135.36         19.41   

Fidelity Diversified International Fund - Class K

   FDIKX      194,506.82         36.84   

Fidelity Low-Priced Stock Fund - Class K

   FLPKX      25,972.26         49.42   

Wasatch Small Cap Growth Fund

   WAAEX      33,883.06         52.47   

John Hancock Small Company Fund Class A

   JCSAX      21,311.02         28.05   

American Beacon Small Cap Value Fund Class Institutional

   AVFIX      155,106.28         27.19   

Fidelity Mid-Cap Stock Fund - Class K

   FKMCX      39,516.31         39.50   

Vanguard Institutional Index Fund Institutional Plus Shares

   VIIIX      282,502.08         169.28   

Vanguard Value Index Fund Institutional Shares

   VIVIX      241,939.56         29.78   

Vanguard Growth Index Fund Institutional Shares

   VIGIX      30,012.70         47.87   

Vanguard Mid-Cap Index Fund Institutional Shares

   VMCIX      29,941.86         30.08   

Vanguard Total International Stock Index Fund Institutional Shares

   VTSNX      16,160.61         112.01   

Vanguard Small-Cap Index Fund Institutional Shares

   VSCIX      14,866.90         52.71   

Vanguard Total Bond Market Index Fund Institutional Shares

   VBTIX      225,754.61         10.56   

Oakmark Equity And Income Fund Class I

   OAKBX      419,615.81         32.65   

PIMCO Total Return Fund Institutional Class

   PTTRX      874,494.67         10.69   

Fidelity Money Market Trust Retirement Money Market Portfolio

   FRTXX      10,550,328.12         1.00   

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

3 Participant Accounts, Continued

 

Investment Options

   Ticker
Symbol
     Total Number of
Shares
     Net Asset
Share Value ($)
 

2012

                    

The Progressive Corporation

     PGR         2,714,732.82         21.10   

Templeton World Fund Class A

     TEMWX         29,445.97         15.74   

Fidelity Diversified International Fund - Class K

     FDIKX         176,392.41         29.89   

Fidelity Low-Priced Stock Fund - Class K

     FLPKX         22,914.70         39.47   

Wasatch Small Cap Growth Fund

     WAAEX         38,973.24         41.29   

John Hancock Small Company Fund Class A

     JCSAX         26,453.95         21.22   

American Beacon Small Cap Value Fund Class Institutional

     AVFIX         133,639.03         21.30   

Fidelity Mid-Cap Stock Fund - Class K

     FKMCX         54,993.56         29.35   

Vanguard Institutional Index Fund Institutional Shares

     VINIX         140,655.67         130.52   

Vanguard Value Index Fund Institutional Shares

     VIVIX         237,740.93         22.93   

Vanguard Growth Index Fund Institutional Shares

     VIGIX         34,366.93         36.64   

Vanguard Mid-Cap Index Fund Institutional Shares

     VMCIX         26,412.18         22.52   

Vanguard Total International Stock Index Fund Institutional Shares

     VTSNX         13,581.61         100.18   

Vanguard Small-Cap Index Fund Institutional Shares

     VSCIX         13,337.47         38.76   

Vanguard Total Bond Market Index Fund Institutional Shares

     VBTIX         205,248.07         11.09   

Oakmark Equity And Income Fund Class I

     OAKBX         356,827.06         28.50   

PIMCO Total Return Fund Institutional Class

     PTTRX         951,042.64         11.24   

Fidelity Money Market Trust Retirement Money Market Portfolio

     FRTXX         9,514,833.09         1.00   

 

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Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

4 Investment Programs

 

At December 31, 2013 and 2012, there were 72 and 73 (respectively) Plan participants with contributions in one or more of the following funds:

 

Investment Options

   Ticker
Symbol
   Number of
Participants
 

2013

           

The Progressive Corporation

   PGR      45   

Templeton World Fund Class A

   TEMWX      10   

Fidelity Diversified International Fund - Class K

   FDIKX      39   

Fidelity Low-Priced Stock Fund - Class K

   FLPKX      18   

Wasatch Small Cap Growth Fund

   WAAEX      24   

John Hancock Small Company Fund Class A

   JCSAX      13   

American Beacon Small Cap Value Fund Class Institutional

   AVFIX      13   

Fidelity Mid-Cap Stock Fund - Class K

   FKMCX      22   

Vanguard Institutional Index Fund Institutional Plus Shares

   VIIIX      49   

Vanguard Value Index Fund Institutional Shares

   VIVIX      27   

Vanguard Growth Index Fund Institutional Shares

   VIGIX      22   

Vanguard Mid-Cap Index Fund Institutional Shares

   VMCIX      12   

Vanguard Total International Stock Index Fund Institutional Shares

   VTSNX      14   

Vanguard Small-Cap Index Fund Institutional Shares

   VSCIX      14   

Vanguard Total Bond Market Index Fund Institutional Shares

   VBTIX      15   

Oakmark Equity And Income Fund Class I

   OAKBX      34   

PIMCO Total Return Fund Institutional Class

   PTTRX      40   

Fidelity Money Market Trust Retirement Money Market Portfolio

   FRTXX      31   

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, 2013

 

4 Investment Programs, Continued

 

Investment Options

   Ticker
Symbol
     Number of
Participants
 

2012

             

The Progressive Corporation

     PGR         43   

Templeton World Fund Class A

     TEMWX         13   

Fidelity Diversified International Fund - Class K

     FDIKX         39   

Fidelity Low-Priced Stock Fund - Class K

     FLPKX         14   

Wasatch Small Cap Growth Fund

     WAAEX         26   

John Hancock Small Company Fund Class A

     JCSAX         15   

American Beacon Small Cap Value Fund Class Institutional

     AVFIX         12   

Fidelity Mid-Cap Stock Fund - Class K

     FKMCX         25   

Vanguard Institutional Index Fund Institutional Shares

     VINIX         50   

Vanguard Value Index Fund Institutional Shares

     VIVIX         23   

Vanguard Growth Index Fund Institutional Shares

     VIGIX         19   

Vanguard Mid-Cap Index Fund Institutional Shares

     VMCIX         10   

Vanguard Total International Stock Index Fund Institutional Shares

     VTSNX         13   

Vanguard Small-Cap Index Fund Institutional Shares

     VSCIX         11   

Vanguard Total Bond Market Index Fund Institutional Shares

     VBTIX         12   

Oakmark Equity And Income Fund Class I

     OAKBX         34   

PIMCO Total Return Fund Institutional Class

     PTTRX         41   

Fidelity Money Market Trust Retirement Money Market Portfolio

     FRTXX         30   

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, 2013

 

5 Investments

 

The Plan’s investments and unrealized appreciation (depreciation) at December 31, 2013 and 2012, were as follows:

 

     Ticker
Symbol
   Number of
Shares
     Cost      Fair Value      Unrealized
Appreciation
(Depreciation)
 

2013

                                

Common Shares

              

The Progressive Corporation

   PGR      2,931,110.18       $ 62,097,394       $ 79,931,375       $ 17,833,981   

Other Investments

              

Templeton World Fund Class A

   TEMWX      25,135.36         431,783         487,877         56,094   

Fidelity Diversified International Fund - Class K

   FDIKX      194,506.82         4,489,166         7,165,631         2,676,465   

Fidelity Low-Priced Stock Fund - Class K

   FLPKX      25,972.26         976,886         1,283,549         306,663   

Wasatch Small Cap Growth Fund

   WAAEX      33,883.06         1,281,179         1,777,844         496,665   

John Hancock Small Company Fund Class A

   JCSAX      21,311.02         413,675         597,774         184,099   

American Beacon Small Cap Value Fund Class Institutional

   AVFIX      155,106.28         2,784,060         4,217,340         1,433,280   

Fidelity Mid-Cap Stock Fund - Class K

   FKMCX      39,516.31         765,380         1,560,894         795,514   

Vanguard Institutional Index Fund Institutional Plus Shares

   VIIIX      282,502.08         42,652,732         47,821,952         5,169,220   

Vanguard Value Index Fund Institutional Shares

   VIVIX      241,939.56         6,352,910         7,204,960         852,050   

Vanguard Growth Index Fund Institutional Shares

   VIGIX      30,012.70         930,962         1,436,708         505,746   

Vanguard Mid-Cap Index Fund Institutional Shares

   VMCIX      29,941.86         570,695         900,651         329,956   

Vanguard Total International Stock Index Fund Institutional Shares

   VTSNX      16,160.61         1,692,168         1,810,150         117,982   

Vanguard Small-Cap Index Fund Institutional Shares

   VSCIX      14,866.90         572,885         783,635         210,750   

Vanguard Total Bond Market Index Fund Institutional Shares

   VBTIX      225,754.61         2,424,786         2,383,969         (40,817

Oakmark Equity And Income Fund Class I

   OAKBX      419,615.81         11,051,473         13,700,456         2,648,983   

PIMCO Total Return Fund Institutional Class

   PTTRX      874,494.67         9,364,814         9,348,348         (16,466

Fidelity Money Market Trust Retirement Money Market Portfolio

   FRTXX      10,550,328.12         10,550,328         10,550,328         —     
        

 

 

    

 

 

    

 

 

 
           97,305,882         113,032,066         15,726,184   
        

 

 

    

 

 

    

 

 

 

Total Assets Held for Investment

         $ 159,403,276       $ 192,963,441       $ 33,560,165   
        

 

 

    

 

 

    

 

 

 

 

- 13 -


Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

5 Investments, Continued

 

     Ticker
Symbol
     Number of
Shares
     Cost      Fair Value      Unrealized
Appreciation
(Depreciation)
 

2012

                                  

Common Shares

              

The Progressive Corporation

     PGR         2,714,732.82       $ 53,243,367       $ 57,280,863       $ 4,037,496   

Other Investments

              

Templeton World Fund Class A

     TEMWX         29,445.97         505,293         463,480         (41,813

Fidelity Diversified International Fund - Class K

     FDIKX         176,392.41         3,720,023         5,272,369         1,552,346   

Fidelity Low-Priced Stock Fund - Class K

     FLPKX         22,914.70         774,888         904,443         129,555   

Wasatch Small Cap Growth Fund

     WAAEX         38,973.24         1,404,199         1,609,205         205,006   

John Hancock Small Company Fund Class A

     JCSAX         26,453.95         505,982         561,353         55,371   

American Beacon Small Cap Value Fund Class Institutional

     AVFIX         133,639.03         2,213,373         2,846,511         633,138   

Fidelity Mid-Cap Stock Fund - Class K

     FKMCX         54,993.56         1,033,005         1,614,061         581,056   

Vanguard Institutional Index Fund Institutional Shares

     VINIX         140,655.67         15,686,029         18,358,379         2,672,350   

Vanguard Value Index Fund Institutional Shares

     VIVIX         237,740.93         6,119,622         5,451,400         (668,222

Vanguard Growth Index Fund Institutional Shares

     VIGIX         34,366.93         963,627         1,259,204         295,577   

Vanguard Mid-Cap Index Fund Institutional Shares

     VMCIX         26,412.18         453,498         594,802         141,304   

Vanguard Total International Stock Index Fund Institutional Shares

     VTSNX         13,581.61         1,414,933         1,360,606         (54,327

Vanguard Small-Cap Index Fund Institutional Shares

     VSCIX         13,337.47         444,410         516,960         72,550   

Vanguard Total Bond Market Index Fund Institutional Shares

     VBTIX         205,248.07         2,200,606         2,276,201         75,595   

Oakmark Equity And Income Fund Class I

     OAKBX         356,827.06         8,890,108         10,169,571         1,279,463   

PIMCO Total Return Fund Institutional Class

     PTTRX         951,042.64         10,121,300         10,689,719         568,419   

Fidelity Money Market Trust Retirement Money Market Portfolio

     FRTXX         9,514,833.09         9,514,833         9,514,833         —     
        

 

 

    

 

 

    

 

 

 
           65,965,729         73,463,097         7,497,368   
        

 

 

    

 

 

    

 

 

 

Total Assets Held for Investment

         $ 119,209,096       $ 130,743,960       $ 11,534,864   
        

 

 

    

 

 

    

 

 

 

 

- 14 -


Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

5 Investments, Continued

 

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

 

                        Net  
     Ticker    Aggregate             Realized  
     Symbol    Proceeds      Cost      Gains (Losses)  

2013

                         

The Progressive Corporation

   PGR    $ 25,144,230       $ 19,585,624       $ 5,558,606   

Templeton World Fund Class A

   TEMWX      96,258         97,691         (1,433

Fidelity Diversified International Fund - Class K

   FDIKX      578,428         389,549         188,879   

Fidelity Low-Priced Stock Fund - Class K

   FLPKX      272,786         217,197         55,589   

Wasatch Small Cap Growth Fund

   WAAEX      447,710         346,045         101,665   

John Hancock Small Company Fund Class A

   JCSAX      140,005         103,313         36,692   

American Beacon Small Cap Value Fund Class Institutional

   AVFIX      72,384         47,234         25,150   

Fidelity Mid-Cap Stock Fund - Class K

   FKMCX      639,285         389,922         249,363   

Vanguard Institutional Index Fund Institutional Plus Shares

   VIIIX      215,163         211,338         3,825   

Vanguard Institutional Index Fund Institutional Shares

   VINIX      43,935,171         38,670,633         5,264,538   

Vanguard Value Index Fund Institutional Shares

   VIVIX      495,238         402,264         92,974   

Vanguard Growth Index Fund Institutional Shares

   VIGIX      478,540         352,179         126,361   

Vanguard Mid-Cap Index Fund Institutional Shares

   VMCIX      36,408         21,958         14,450   

Vanguard Total International Stock Index Fund Institutional Shares

   VTSNX      388,500         386,511         1,989   

Vanguard Small-Cap Index Fund Institutional Shares

   VSCIX      177,057         143,659         33,398   

Vanguard Total Bond Market Index Fund Institutional Shares

   VBTIX      238,291         233,154         5,137   

Oakmark Equity And Income Fund Class I

   OAKBX      714,021         567,522         146,499   

PIMCO Total Return Fund Institutional Class

   PTTRX      2,549,711         2,492,899         56,812   

Fidelity Money Market Trust Retirement Money Market Portfolio

   FRTXX      2,090,451         2,090,451         —     
     

 

 

    

 

 

    

 

 

 

Total Net Realized Gains (Losses)

      $ 78,709,637       $ 66,749,143       $ 11,960,494   
     

 

 

    

 

 

    

 

 

 

 

- 15 -


Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

5 Investments, Continued

 

     Ticker
Symbol
   Aggregate
Proceeds
     Cost      Net Realized
Gains
(Losses)
 

2012

                         

The Progressive Corporation

   PGR    $ 1,299,981       $ 1,097,983       $ 201,998   

Templeton World Fund Class A

   TEMWX      134,913         157,543         (22,630

Fidelity Diversified International Fund - Class K

   FDIKX      881,832         675,023         206,809   

Fidelity Low-Priced Stock Fund - Class K

   FLPKX      496,065         462,308         33,757   

Wasatch Small Cap Growth Fund

   WAAEX      660,382         564,851         95,531   

John Hancock Small Company Fund Class A

   JCSAX      448,198         401,629         46,569   

American Beacon Small Cap Value Fund Class Institutional

   AVFIX      279,250         205,500         73,750   

Fidelity Mid-Cap Stock Fund - Class K

   FKMCX      406,603         253,440         153,163   

Vanguard Institutional Index Fund Institutional Shares

   VINIX      2,312,061         1,791,407         520,654   

Vanguard Value Index Fund Institutional Shares

   VIVIX      668,794         635,177         33,617   

Vanguard Growth Index Fund Institutional Shares

   VIGIX      644,005         540,577         103,428   

Vanguard Mid-Cap Index Fund Institutional Shares

   VMCIX      129,804         114,696         15,108   

Vanguard Total International Stock Index Fund Institutional Shares

   VTSNX      513,135         565,367         (52,232

Vanguard Small-Cap Index Fund Institutional Shares

   VSCIX      68,098         59,757         8,341   

Vanguard Total Bond Market Index Fund Institutional Shares

   VBTIX      1,027,255         1,008,892         18,363   

Oakmark Equity And Income Fund Class I

   OAKBX      2,189,470         1,911,863         277,607   

PIMCO Total Return Fund Institutional Class

   PTTRX      4,351,522         4,099,787         251,735   

Fidelity Money Market Trust Retirement Money Market Portfolio

   FRTXX      1,600,430         1,600,430         —     
     

 

 

    

 

 

    

 

 

 

Total Net Realized Gains (Losses)

      $ 18,111,798       $ 16,146,230       $ 1,965,568   
     

 

 

    

 

 

    

 

 

 

 

- 16 -


Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

5 Investments, Continued

 

     Ticker
Symbol
   Aggregate
Proceeds
     Cost      Net Realized
Gains (Losses)
 

2011

                         

The Progressive Corporation

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

Templeton World Fund Class A

   TEMWX      114,986         131,147         (16,161

Fidelity Diversified International Fund - Class K

   FDIKX      604,860         417,810         187,050   

Fidelity Low-Priced Stock Fund - Class K

   FLPKX      62,381         58,657         3,724   

Wasatch Small Cap Growth Fund

   WAAEX      261,124         263,761         (2,637

John Hancock Small Company Fund Class A

   JCSAX      210,561         199,352         11,209   

American Beacon Small Cap Value Fund Class Institutional

   AVFIX      116,244         92,480         23,764   

Fidelity Mid-Cap Stock Fund - Class K

   FKMCX      377,038         220,391         156,647   

Vanguard Institutional Index Fund Institutional Shares

   VINIX      1,051,290         942,891         108,399   

Vanguard Value Index Fund Institutional Shares

   VIVIX      558,870         581,747         (22,877

Vanguard Growth Index Fund Institutional Shares

   VIGIX      441,547         405,408         36,139   

Vanguard Mid-Cap Index Fund Institutional Shares

   VMCIX      219,204         205,817         13,387   

Vanguard Total International Stock Index Fund Investor Shares

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

Vanguard Total International Stock Index Fund Institutional Shares

   VTSNX      116,207         135,117         (18,910

Vanguard Small-Cap Index Fund Institutional Shares

   VSCIX      142,158         139,193         2,965   

Vanguard Total Bond Market Index Fund Institutional Shares

   VBTIX      469,690         461,862         7,828   

Oakmark Equity And Income Fund Class I

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

PIMCO Total Return Fund Institutional Class

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

Fidelity Money Market Trust Retirement Money Market Portfolio

   FRTXX      2,704,052         2,704,052         —     
     

 

 

    

 

 

    

 

 

 

Total Net Realized Gains (Losses)

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

 

 

    

 

 

    

 

 

 

 

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.

 

- 17 -


Table of Contents

NOTES TO FINANCIAL STATEMENTS

The Progressive Corporation

Executive Deferred Compensation Plan

December 31, 2013

 

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 2013, 2012 or 2011 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, 2013, 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, 2010.

 

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.

 

- 18 -


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 25, 2014, to incorporate by reference their report dated March 25, 2014.