the progressive corporation 2006 annual report
financial review
Consolidated Statements of Income | Consolidated Balance Sheets | Consolidated Statements of Changes in Shareholders' Equity | Consolidated Statements of Cash Flows | Notes to Consolidated Financial Statements
The Progressive Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
| For the years ended December 31, | 2006 | 2005 | 2004 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retained Earnings |
||||||||||||
| Balance, Beginning of year | $ | 4,726.0 | $ | 3,812.9 | $ | 3,729.8 | ||||||
| Net income | 1,647.5 | $ | 1,647.5 | 1,393.9 | $ | 1,393.9 | 1,648.7 | $ | 1,648.7 | |||
| Cash dividends on Common Shares ($.0325, $.0300 and $.0275 per share) | (25.0) | (23.7) | (23.3) | |||||||||
| Treasury shares purchased1,2 | (1,111.6) | (457.0) | (1,542.4) | |||||||||
| Capitalization of stock split | (585.9) | — | — | |||||||||
| Other, net3 | (4.1) | (.1) | .1 | |||||||||
| Balance, End of year | $ | 4,646.9 | $ | 4,726.0 | $ | 3,812.9 | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax |
||||||||||||
| Balance, Beginning of year | $ | 398.7 | $ | 444.8 | $ | 425.0 | ||||||
| Changes in: | ||||||||||||
| Net unrealized gains on securities | 206.7 | (45.0) | 16.9 | |||||||||
| Net unrealized gains on forecasted
transactions |
(1.1) | (1.1) | (1.0) | |||||||||
| Foreign currency translation adjustment | — | — | 3.9 | |||||||||
| Other comprehensive income | 205.6 | 205.6 | (46.1) | (46.1) | 19.8 | 19.8 | ||||||
| Balance, End of year | $ | 604.3 | $ | 398.7 | $ | 444.8 | ||||||
| Comprehensive Income | $ | 1,853.1 | $ | 1,347.8 | $ | 1,668.5 | ||||||
Common Shares, $1.00 Par Value |
||||||||||||
| Balance, Beginning of year | $ | 197.3 | $ | 200.4 | $ | 216.4 | ||||||
| Stock options exercised | 3.7 | 1.6 | 2.1 | |||||||||
| Treasury shares purchased1,2 | (39.1) | (5.2) | (18.6) | |||||||||
| Restricted stock issued, net of forfeitures | .2 | .5 | .5 | |||||||||
| Capitalization of stock split | 585.9 | — | — | |||||||||
| Balance, End of year | $ | 748.0 | $ | 197.3 | $ | 200.4 | ||||||
Paid-In Capital |
||||||||||||
| Balance, Beginning of year | $ | 848.2 | $ | 743.3 | $ | 688.3 | ||||||
| Stock options exercised | 39.6 | 42.6 | 49.6 | |||||||||
| Tax benefits from exercise/vesting of stock-based compensation |
38.8 | 41.2 | 44.3 | |||||||||
| Treasury shares purchased1,2 | (63.8) | (20.6) | (67.5) | |||||||||
| Restricted stock issued, net of forfeitures | (.2) | 41.7 | 27.3 | |||||||||
| Amortization of stock-based compensation | 27.8 | — | — | |||||||||
| SFAS 123(R) reclass4 | (51.5) | — | — | |||||||||
| Other3 | 8.5 | — | 1.3 | |||||||||
| Balance, End of year | $ | 847.4 | $ | 848.2 | $ | 743.3 | ||||||
Unamortized Restricted Stock |
||||||||||||
| Balance, Beginning of year | $ | (62.7) | $ | (46.0) | $ | (28.9) | ||||||
| Restricted stock issued, net of forfeitures | — | (42.2) | (40.6) | |||||||||
| Restricted stock market value adjustment | — | (8.2) | (.3) | |||||||||
| Amortization of restricted stock | — | 33.7 | 23.8 | |||||||||
| SFAS 123(R) reclass4 | 62.7 | — | — | |||||||||
| Balance, End of year | $ | — | $ | (62.7) | $ | (46.0) | ||||||
| Total Shareholders' Equity | $ | 6,846.6 | $ | 6,107.5 | $ | 5,155.4 | ||||||
1) Progressive did not split its treasury shares in conjunction with the May 18, 2006, 4-for-1 stock split. In 2006, we repurchased 3,182,497 Common Shares prior to the stock split and 35,887,246 Common Shares subsequent to the stock split.
2) Includes 16.9 million Common Shares purchased pursuant to a “Dutch auction” tender offer in 2004; these shares were purchased at a price of $88 per share, on a pre-split basis, for a total cost of $1.5 billion.
3) Primarily reflects activity associated with our deferred compensation plans.
4) Upon adoption of SFAS 123(R), companies were required to eliminate any unearned compensation (i.e., contra-equity) accounts against the appropriate equity accounts. As a result, as of January 1, 2006, we were required to reclassify $62.7 million of “Unamortized restricted stock,” of which $51.5 million related to equity awards and $11.2 million related to liability awards.
There are 20.0 million Serial Preferred Shares authorized; no such shares are issued or outstanding.
There are 5.0 million Voting Preference Shares authorized; no such shares have been issued.
See notes to consolidated financial statements.
