Its principal subsidiaries were American Bonding, which primarily underwrote surety bonds for contractors, and American Sentinel Insurance Company, which sold commercial property and casualty insurance. The findings herein are made pursuant to Kaplan's Offer and are not binding on any other person or entity named as a respondent in this or any other proceedings. D. Facts 1. American Bonding's comptroller drafted the report, shared it with American Bonding's chief financial officer around March 22, and then provided it to Kaplan. Loss reserves estimate the ultimate costs of an insurance claim and include case reserves, incurred but not reported reserves and loss adjustment expenses.
Net losses are increases in loss reserves after reinsurance offsets are taken into account.
Although compliance with FASB 113 was not mandated until the end of 1993, the company implemented the new standard in May 1993, causing 1992 operating results to be restated, since much of the losses were no longer reducible by reinsurance offsets as prescribed in FASB 113. However, Kaplan never provided or directed anyone at Pace American to furnish the report to Coopers during the audit. When he signed this letter, Kaplan was aware or should have been aware that these statements in the letter were misleading since they were not qualified by the disclosure of the existence of the special purpose report. In addition, during discussions with audit personnel Kaplan failed to make the auditors aware of the report's content. The financial statements materially overstated income and understated liabilities by not properly recognizing the increases in the case reserves which would have been revealed from a further evaluation of the information reflected in the special purpose report.