Results of Operations: --------------------- General - ------- The Company had a net loss of $3,224,689 for the year ended December 31, 2002, compared to a net loss of $10,870,018 for the year ended December 31, 2001, and net income of $439,797 for the year ended December 31, 2000. Total revenue for the year ended December 31, 2002, was $46,028,642 compared to $42,116,906 for the year ended December 31, 2001, and $38,367,949 for the year ended December 31, 2000.
Membership and fee income for the year ended December 31, 2002, increased $26,107 (7%), compared to the year ended December 31, 2001. The increase is primarily related to the increase in the membership base as a result of increased marketing of the AAQHC's programs and benefits.
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2002, December 31, 2001, and December 31, 2000 40
There is a high level of uncertainty inherent in the evaluation of the required loss and loss adjustment expense reserves for the Company. The long-tailed nature of liability claims and the volatility of jury awards exacerbates that uncertainty. Crusader sets loss and loss adjustment expense reserves at each balance sheet date at management's best estimate of the ultimate payments that it anticipates will be made to settle all losses incurred and related expenses incurred as of that date for both reported and unreported losses. The ultimate cost of claims is dependent upon future events, the outcomes of which are affected by many factors. Company claim reserving
The insurance company operation is conducted through the Company's wholly owned subsidiary Crusader Insurance Company, ("Crusader") which as of December 31, 2002, was licensed as an admitted insurance carrier in the states of Arizona, California, Colorado, Idaho, Montana, Nevada, Ohio, Oregon and Washington. Crusader is a multiple-line property and casualty insurance company which began transacting business on January 1, 1985. As of December 31, 2002, 97% of Crusader's business was commercial multiple peril business package insurance policies. Commercial multiple peril policies provide a combination of property and liability coverage for businesses. Commercial property coverages insure against loss or damage to buildings, inventory and equipment from natural disasters, including hurricanes, windstorms, hail, water, explosions, severe winter weather and other events such as theft and vandalism, fires and storms and financial loss due to business interruption resulting from covered property damage. Commercial liability coverages insure against third party liability from accidents occurring on the insured's premises or arising out of its operations, such as injuries sustained from products sold or operation of the insured premises. In addition to commercial multiple peril policies, Crusader also writes separate policies to insure commercial property and commercial liability risks on a mono-line basis.
2002 1999 ---- ---- Dividend yield 1.40% 2.46% Expected volatility 34% 43% Expected lives 10 Years 10 Years Risk-free interest rates 4.05% 6.09% Fair value of options granted $1.32 $4.30
A summary of the unrealized appreciation (depreciation) on investments carried at market and the applicable deferred federal income taxes is shown below:
Reserves for losses and loss adjustment expenses by line of business before reinsurance are as follows:
NOTE 9 - DEFERRED POLICY ACQUISITION COSTS - ------------------------------------------ Deferred policy acquisition costs consist of commissions (net of ceding commission), premium taxes, inspection fees, and certain other underwriting costs which are related to and vary with the production of Crusader policies. Policy acquisition costs are deferred and amortized as the related premiums are earned. Deferred acquisition costs are reviewed to determine if they are recoverable from future income, including investment income.
As of December 31, 2002 $26,258,452 As of December 31, 2001 $27,519,538
The Company's 1999 Omnibus Stock Plan that covers 500,000 shares of the Company's common stock (subject to adjustment in the case of stock splits, reverse stock splits, stock dividends, etc.) was approved by shareholders June 4, 1999. On August 26, 1999, the Company granted 135,000 incentive stock options of which 30,000 were terminated and 105,000 were outstanding as of December 31, 2002. These options expire 10 years from the date of the grant and were not exercisable prior to September 1, 2000. Options covering 10,000 or less shares become exercisable at the rate of 2,500 shares per year commencing September 1, 2000; and options covering more than 10,000 shares become exercisable at the rate of 5,000 shares per year commencing September 1, 2000. At December 31, 2002, there were 92,500 options under the 1999 stock option plan that were exercisable.
NOTE 18 - REPURCHASE OF COMMON STOCK - EFFECT ON STOCKHOLDERS' EQUITY - --------------------------------------------------------------------- The Company has previously announced that its Board of Directors had authorized the repurchase in the open market from time to time of up to an aggregate of 945,000 shares of the common stock of the Company. During the year ended December 31, 2002, the Company did not purchase any shares of the Company's common stock. As of December 31, 2002, the Company had purchased and retired under the Board of Directors authorization an aggregate of 868,958 shares of its common stock at a cost of $5,517,465.
*In loss periods options are excluded from the calculation of diluted EPS, as the inclusion of such options would have an antidilutive effect. Therefore, all options were excluded from the calculation of diluted EPS for the years ended December 31, 2002 and 2001.