UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
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Annual Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934 |
For the fiscal year ended December 31, 2022
OR
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Transition Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934 |
For the transition period from __________to__________
Commission file number 001-09518
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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
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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
REQUIRED INFORMATION
See the attached Financial Statements for
The Progressive Corporation Executive Deferred Compensation Plan,
as of December 31, 2022 and 2021 and for each of the three
years in the period ended December 31, 2022.
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.
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The Progressive Corporation Executive Deferred Compensation
Plan
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By: |
/s/ Mariann Wojtkun Marshall |
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Name: |
Mariann Wojtkun Marshall |
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Authorized Signatory |
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Date: |
March 7, 2023 |
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THE PROGRESSIVE CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
FINANCIAL STATEMENTS
WITH
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
As of December 31, 2022 and 2021
and for Each of the Three Years in the Period Ended
December 31, 2022
INDEX
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Page |
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Report of Independent Registered Public Accounting Firm |
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1 |
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Financial Statements: |
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Statement of Net Assets Available for Benefits |
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2 |
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Statement of Changes in Net Assets Available for
Benefits |
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3 |
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Notes to Financial Statements |
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4 |
- |
9 |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors
The Progressive Corporation
Cleveland, Ohio
Opinion of the Financial Statements
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, 2022 and 2021 and
the related Statements of Changes in Net Assets Available for
Benefits for each of the three years in the period ended December
31, 2022 and the related notes (collectively referred to as the
"financial statements"). In our opinion, the financial statements
present fairly, in all material respects, the net assets available
for benefits of the Plan as of
December 31, 2022 and 2021 and the changes in net assets available
for benefits for each of the three years in the period ended
December 31, 2022, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on the
Plan’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Plan in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
/s/ Meaden & Moore, Ltd.
MEADEN & MOORE, LTD.
We have served as the Plan’s auditor since 1999.
Cleveland, Ohio
March 7, 2023
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
The Progressive Corporation
Executive Deferred Compensation Plan
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December 31 |
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2022 |
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2021 |
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Assets: |
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Employer Receivables |
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$ |
3,169,684 |
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$ |
4,354,419 |
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Investments, at Fair Value: |
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Common Shares of The Progressive Corporation |
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344,040,964 |
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333,382,824 |
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Other investments |
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150,365,332 |
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189,062,709 |
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Total Investments |
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494,406,296 |
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522,445,533 |
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Net Assets Available for Benefits |
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$ |
497,575,980 |
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$ |
526,799,952 |
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See accompanying notes.
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS
The Progressive Corporation
Executive Deferred Compensation Plan
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Year Ended December 31 |
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2022 |
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2021 |
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2020 |
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Additions to Net Assets Attributed to: |
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Contributions: |
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Employer |
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$ |
8,433,530 |
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$ |
14,056,829 |
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$ |
15,030,336 |
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Net appreciation/(depreciation) in the fair value of
investments |
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(10,224,157) |
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(15,117,441) |
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76,846,446 |
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Net realized gains |
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54,483,730 |
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46,723,486 |
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39,749,288 |
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Dividends |
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5,425,306 |
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28,617,181 |
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15,139,586 |
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Revenue Share - see footnote 2 |
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11,851 |
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18,857 |
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20,070 |
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Total Additions |
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58,130,260 |
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74,298,912 |
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146,785,726 |
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Deductions from Net Assets Attributed to: |
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Benefits paid to participants
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87,354,232 |
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73,960,185 |
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64,553,904 |
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Net Increase/(Decrease) |
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(29,223,972) |
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338,727 |
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82,231,822 |
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Net Assets Available for Benefits: |
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Beginning of Year
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526,799,952 |
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526,461,225 |
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444,229,403 |
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End of Year
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$ |
497,575,980 |
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$ |
526,799,952 |
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$ |
526,461,225 |
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See accompanying notes.
NOTES TO FINANCIAL STATEMENTS
The Progressive Corporation
Executive Deferred Compensation Plan
December 31, 2022 and 2021
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 2018 Amendment and Restatement. The Plan permits
eligible executives of The Progressive Corporation (the "Company")
and certain of its subsidiaries to defer all, or a portion, of
their bonuses, annual 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 enter
into an irrevocable deferral agreement specifying the portion of
the bonus and/or annual stock award to be deferred. Participants
must enter into 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 annual
stock awards must be entered into before the year in which the
award is granted. Except as described in these notes, each
Participant may elect to transfer any portion of their account from
one investment fund to another on any day the New York Stock
Exchange is open, but not more frequently than twice per calendar
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. 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.
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 4, 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 after 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 experiences an unforeseeable emergency. A participant's
fixed deferral period election is irrevocable.
Distributions made on account of the participant's death,
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 of the Company; 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.
NOTES TO FINANCIAL STATEMENTS
The Progressive Corporation
Executive Deferred Compensation Plan
December 31, 2022 and 2021
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.
Investment Valuation:
The following is a description of the valuation methodologies used
for assets measured at fair value. There have been no changes in
the methodologies used at December 31, 2022 and 2021.
The investment in common shares of the Company is valued at the
last reported close price on the New York Stock Exchange on the
last business day of the year. Investments in the stock and bond
mutual funds and money market fund are valued at market. Market
values for these investments were determined by quoted prices,
which represent the net asset value of shares held by the Plan at
December 31.
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 Financial Accounting Standards Board Accounting
Standards Codification 820, Fair Value Measurement, 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 its 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.
NOTES TO FINANCIAL STATEMENTS
The Progressive Corporation
Executive Deferred Compensation Plan
December 31, 2022 and 2021
2 Summary of Significant Accounting Policies,
Continued
The composition of the investment portfolio as of December 31
was:
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Description |
12/31/2022 |
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Level 1 |
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Level 2 |
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Level 3 |
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Money Market Fund |
$ |
26,232,807 |
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$ |
26,232,807 |
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$ |
— |
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$ |
— |
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Mutual Funds |
124,132,525 |
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124,132,525 |
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— |
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— |
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Common Stock |
344,040,964 |
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344,040,964 |
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— |
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— |
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Total |
$ |
494,406,296 |
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$ |
494,406,296 |
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$ |
— |
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$ |
— |
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Description |
12/31/2021 |
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Level 1 |
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Level 2 |
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Level 3 |
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Money Market Fund |
$ |
20,880,248 |
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$ |
20,880,248 |
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$ |
— |
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$ |
— |
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Mutual Funds |
168,182,461 |
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168,182,461 |
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— |
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— |
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Common Stock |
333,382,824 |
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333,382,824 |
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— |
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— |
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Total |
$ |
522,445,533 |
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$ |
522,445,533 |
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$ |
— |
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$ |
— |
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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.
Dividends are recorded on their payment date for shareholders of
record 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, 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.
Revenue Share:
For any investment that generates revenue share for Fidelity
Management Trust Company (FMTC), the trustee of the rabbi trust
described in Note 4, FMTC is returning that revenue share back to
the Plan and the Plan in turn returns that revenue to the
participants who are invested in those funds. This fee credit is
issued to participants quarterly.
NOTES TO FINANCIAL STATEMENTS
The Progressive Corporation
Executive Deferred Compensation Plan
December 31, 2022 and 2021
3 Participant Accounts
At December 31, 2022 and 2021, there were 119 and 112 Plan
participants, respectively.
Effective March 31, 2022 The Vanguard Mid-Cap Index Fund
Institutional Shares fund was transferred to The Vanguard Mid-Cap
Index Fund Institutional Plus Shares fund.
Effective September 30, 2021 The Fidelity Mid Cap Stock Fund -
Class K was removed. All existing balances were transferred to the
Vanguard Mid-Cap Index Fund Institutional Shares.
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, 2022 and 2021, by fund,
were as follows:
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2022 |
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Ticker |
Total Number |
Net Asset |
Fair |
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Investment Options |
Symbol |
of Shares |
Share Value ($) |
Value |
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American Beacon Small Cap Value Fund |
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Class Institutional |
AVFIX |
15,855.41 |
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22.43 |
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$ |
355,637 |
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Fidelity Diversified International K6 Fund |
FKIDX |
101,082.79 |
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11.73 |
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1,185,701 |
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Fidelity Low-Priced Stock K6 Fund |
FLKSX |
121,731.50 |
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14.05 |
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1,710,328 |
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John Hancock Small Cap Core Fund Class A |
JCCAX |
3,773.25 |
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13.47 |
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50,826 |
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Oakmark Equity And Income Fund Class I |
OAKBX |
38,742.24 |
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29.43 |
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1,140,184 |
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PIMCO Total Return Fund Institutional Class |
PTTRX |
1,641,202.62 |
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8.46 |
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13,884,574 |
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Templeton World Fund Class A |
TEMWX |
5,574.03 |
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11.41 |
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63,600 |
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* |
The Progressive Corporation |
PGR |
2,652,385.81 |
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129.71 |
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344,040,964 |
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Vanguard Balanced Index Fund Institutional Shares |
VBAIX |
266,989.69 |
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39.66 |
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10,588,811 |
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Vanguard Federal Money Market Fund Investor Shares |
VMFXX |
26,232,806.58 |
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1.00 |
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26,232,807 |
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Vanguard Growth Index Fund Institutional Shares |
VIGIX |
46,008.62 |
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109.72 |
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5,048,066 |
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Vanguard Institutional Index Fund Institutional |
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Plus Shares |
VIIIX |
174,581.91 |
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321.62 |
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56,149,034 |
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Vanguard Mid-Cap Index Fund Institutional Shares |
VMCIX |
— |
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55.77 |
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— |
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Vanguard Mid-Cap Index Fund Institutional Plus Shares |
VMCPX |
24,869.05 |
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275.06 |
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6,840,481 |
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Vanguard Small-Cap Index Fund |
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Institutional Plus Shares |
VSCPX |
20,081.49 |
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253.81 |
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5,096,883 |
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Vanguard Total Bond Market Index Fund |
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Institutional Plus Shares |
VBMPX |
1,209,728.95 |
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9.48 |
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11,468,230 |
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Vanguard Total International Stock Index Fund |
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Institutional Shares |
VTSNX |
22,462.66 |
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111.42 |
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2,502,790 |
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Vanguard Value Index Fund Institutional Shares |
VIVIX |
127,063.72 |
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54.76 |
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6,958,009 |
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Wasatch Small Cap Growth Fund |
WAAEX |
36,494.84 |
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29.85 |
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1,089,371 |
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$ |
494,406,296 |
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* |
Includes 1,974,185.76 common shares distributable in common
shares. |
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NOTES TO FINANCIAL STATEMENTS
The Progressive Corporation
Executive Deferred Compensation Plan
December 31, 2022 and 2021
3 Participant Accounts, Continued
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2021 |
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Ticker |
Total Number |
Net Asset |
Fair |
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Investment Options |
Symbol |
of Shares |
Share Value ($) |
Value |
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American Beacon Small Cap Value Fund |
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Class Institutional |
AVFIX |
13,797.34 |
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28.68 |
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$ |
395,708 |
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Fidelity Diversified International K6 Fund |
FKIDX |
139,041.79 |
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15.42 |
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2,144,024 |
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Fidelity Low-Priced Stock K6 Fund |
FLKSX |
124,268.05 |
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15.35 |
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1,907,515 |
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Fidelity Mid-Cap Stock Fund - Class K |
FKMCX |
— |
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42.20 |
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— |
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John Hancock Small Cap Core Fund Class A |
JCCAX |
4,959.70 |
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16.86 |
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83,621 |
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Oakmark Equity And Income Fund Class I |
OAKBX |
41,603.62 |
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34.28 |
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1,426,172 |
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PIMCO Total Return Fund Institutional Class |
PTTRX |
2,028,284.11 |
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10.27 |
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20,830,478 |
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Templeton World Fund Class A |
TEMWX |
6,689.95 |
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15.03 |
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100,550 |
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* |
The Progressive Corporation |
PGR |
3,247,762.53 |
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102.65 |
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333,382,824 |
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Vanguard Balanced Index Fund Institutional Shares |
VBAIX |
271,016.92 |
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49.02 |
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13,285,250 |
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|
Vanguard Federal Money Market Fund Investor Shares |
VMFXX |
20,880,248.55 |
|
1.00 |
|
20,880,248 |
|
|
|
Vanguard Growth Index Fund Institutional Shares |
VIGIX |
54,209.66 |
|
165.16 |
|
8,953,267 |
|
|
|
Vanguard Institutional Index Fund Institutional |
|
|
|
|
|
|
Plus Shares |
VIIIX |
194,474.86 |
|
405.80 |
|
78,917,898 |
|
|
|
Vanguard Mid-Cap Index Fund Institutional Shares |
VMCIX |
122,899.89 |
|
69.69 |
|
8,564,893 |
|
|
|
Vanguard Small-Cap Index Fund |
|
|
|
|
|
|
Institutional Plus Shares |
VSCPX |
17,635.22 |
|
312.78 |
|
5,515,944 |
|
|
|
Vanguard Total Bond Market Index Fund |
|
|
|
|
|
|
Institutional Plus Shares |
VBMPX |
1,177,622.80 |
|
11.19 |
|
13,177,599 |
|
|
|
Vanguard Total International Stock Index Fund |
|
|
|
|
|
|
Institutional Shares |
VTSNX |
27,387.94 |
|
136.77 |
|
3,745,849 |
|
|
|
Vanguard Value Index Fund Institutional Shares |
VIVIX |
121,572.93 |
|
57.37 |
|
6,974,639 |
|
|
|
Wasatch Small Cap Growth Fund |
WAAEX |
43,207.00 |
|
49.97 |
|
2,159,054 |
|
|
|
|
|
|
|
$ |
522,445,533 |
|
|
|
|
|
|
|
|
* |
Includes 2,411,401.36 common shares distributable in common
shares. |
|
|
4 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 ensure 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.
5 Related Party
Certain Plan investment choices are mutual funds managed by
Fidelity Management & Research Company (FMR Co.). 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 2022, 2021 or
2020 for investment management or Trust services.
6 Administration of the Plan
The Plan is administered by a committee consisting of not less than
two 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.
NOTES TO FINANCIAL STATEMENTS
The Progressive Corporation
Executive Deferred Compensation Plan
December 31, 2022 and 2021
7 Tax Status
The Plan is not, and is not intended to be, qualified under Section
401 of the Internal Revenue Code.
GAAP requires 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, 2022, 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.
8 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.
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 |
|
|
Progressive (NYSE:PGR)
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