Redeemable Noncontrolling Interest

6 Months Ended

Jun. 30, 2018

Temporary Equity Disclosure [Abstract]

Redeemable Noncontrolling Interest — In connection with the April 2015 acquisition of a controlling interest in ARX, The Progressive Corporation entered into a stockholders’ agreement with the other ARX stockholders. As part of the stockholders’ agreement, the minority ARX stockholders had the right to “put” a portion of their ARX shares to Progressive in 2018, and have the right to put all of their remaining shares to Progressive in 2021. During the second quarter 2018, the minority ARX stockholders put 204,527 shares, including 5,483 shares that were issued upon the exercise of outstanding stock options, bringing Progressive’s total ownership interest in ARX to 86.7%. Progressive acquired these additional shares, in a cash transaction, for a total cost of $295.9 million. If ARX stockholders do not put all of their shares to Progressive in 2021, Progressive has the ability to “call” all of the outstanding shares shortly thereafter and to bring its ownership stake to 100% in 2021. See Note 15 – Redeemable Noncontrolling Interest in our 2017 Annual Report to Shareholders for a discussion of the purchase price for shares to be purchased by Progressive pursuant to these put or call rights.

Since these securities are redeemable upon the occurrence of an event that is not solely within the control of Progressive, we have recorded the redeemable noncontrolling interest (NCI) as mezzanine equity on our consolidated balance sheets, which represents the minority shares at the current estimated purchase price pursuant to the put and call provisions of the stockholders’ agreement. The estimated purchase price is based, in part, on the change in tangible net book value of ARX from December 31, 2014 to the balance sheet dates.

In addition to these minority shares, at June 30, 2018, ARX employees held options to purchase 16,067 ARX shares. These options and any shares issued upon exercise are subject to the stockholders’ agreement, including the “put” and “call” rights described above. Until the options are exercised, the underlying obligation of approximately $23.2 million is not recorded as part of redeemable NCI. See Note 9 – Employee Benefit Plans in our 2017 Annual Report to Shareholders for a discussion of our employee stock options.

The changes in the components of redeemable NCI during the six months ended June 30, 2018 and 2017, and the year ended December 31, 2017, were:



(millions)	June 30, 2018			June 30, 2017		December 31, 2017
Balance, Beginning of period	$	503.7		$	483.7	$	483.7
Net income attributable to NCI	8.8			11.1		5.9
Other comprehensive income (loss) attributable to NCI	(4.6		)	2.2		2.3
Exercise of employee stock options	9.4			3.4		3.4
Purchase of ARX shares	(295.9		)	0		0
Change in redemption value of NCI	(3.2		)	1.4		8.4
Balance, End of period	$	218.2		$	501.8	$	503.7