felanders/preprocessed huggingface dataset:
The Insurance Group's operating income increased $3.6 million to $19.5 million in 2000 from $15.9 million in 1999. Operating income includes net realized and unrealized losses of $.2 million in 2000 compared to $1.2 million in 1999. Operating income excluding net realized and unrealized losses was $19.7 million in 2000 compared to $17.0 million in 1999, an increase of 16%.
Subsequent to December 31, 2000, IndependenceCare acquired all of the assets of two managed care managing general underwriters ("MGU") based in Nashville and Chicago writing Provider Excess Loss and HMO Reinsurance. IHC also acquired a significant equity stake in Standard Life's largest health care MGU. These investments, together with the Company's equity stakes in four other MGUs, should enable IHC to control a substantial portion of Standard Life's distribution network for its core health care products, as well as providing an outlet for our other group benefits products, including group life, statutory short-term disability, long- term disability, vision and dental marketed to employers through brokers, producers and HMO's.
Premiums relate to annuity products containing life contingencies. Premiums decreased by $79.5 million in 1996 and increased by $26.8 million in 1995. The 1996 decrease resulted primarily from the Company ceasing to write structured settlement annuities in the fourth quarter of 1995. The cessation of writing this product did not and is not expected to have a material effect on results of the segment. The 1995 increase resulted primarily from increases in annuitizations (i.e., contracts converting from the accumulation phase to payout options with life contingencies) and immediate annuity sales.
Debt Securities Investments by Market Sector at December 31, 1996 - --------------------------------------------------------------------------------
Years Ended December 31, -------------------------------- 1996 1995 1994 ---- ---- ----
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles. Certain reclassifications have been made to 1995 and 1994 financial information to conform to the 1996 presentation.
For universal life and certain annuity contracts, charges assessed against policyholders' funds for the cost of insurance, surrender charges, actuarial margin and other fees are recorded as revenue in charges assessed against policyholders. Other amounts received for these contracts are reflected as deposits and are not recorded as revenue. Life insurance premiums, other than premiums for universal life and certain annuity contracts, are recorded as premium revenue when due. Related policy benefits are recorded in relation to the associated premiums or gross profit so that profits are recognized over the expected lives of the contracts. When annuity payments begin under contracts with life contingent payouts that were initially investment contracts, the accumulated balance in the account is treated as a single premium for the purchase of an annuity, reflected as an offsetting amount in both premiums and current and future benefits in the Consolidated Statements of Income.
Debt securities available for sale as of December 31, 1995 were as follows:
At December 31, 1996 and 1995, net unrealized appreciation of $366.4 million and $797.1 million, respectively, on available for sale debt securities included $288.5 million and $619.1 million, respectively, related to experience rated contracts, which were not reflected in shareholder's equity but in Future Policy Benefits and Policyholders' Funds Left With the Company.
Investment income of $44.1 million, $46.5 million and $51.5 million was generated from the reinsurance loan to affiliate in 1996, 1995 and 1994, respectively. Net income of approximately $8.1 million, $18.4 million and $25.1 million resulted from this agreement in 1996, 1995 and 1994, respectively.
As of December 31, 1997, the Company had no material commitments for capital expenditures.
The consolidated financial statements include the accounts of Mercury General Corporation (the Company) and its wholly-owned subsidiaries, Mercury Casualty Company, Mercury Insurance Company, California Automobile Insurance Company, California General Underwriters Insurance Company, Inc., Mercury Insurance Company of Georgia, Mercury Insurance Company of Illinois, Mercury Indemnity Company of Georgia and Mercury Indemnity Company of Illinois. Effective December 1, 1996 the financial statements also include newly acquired companies American Mercury Insurance Company, Cimarron Insurance Company, Inc., AFI Management Company, Inc. (AFIMC), and American Mercury Lloyds Insurance Company (AML). AML is not owned by MGC, but is controlled by MGC through its attorney-in-fact, AFIMC. The acquisition is discussed further in Note 8. Collectively, the newly-acquired companies, including AML, are referred to as AMI. All of the subsidiaries as a group, including AML, but excluding AFIMC, are referred to as the Insurance Companies. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles (GAAP) which differ in some respects from those filed in reports to insurance regulatory authorities. All significant intercompany balances and transactions have been eliminated.
Income of the Group attributable to the minority interest in Franklin Holding Company, which interest was acquired by the Group immediately after the Conversion for shares of the Group.
We are required to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related footnotes. We evaluate these estimates and assumptions on an on-going basis based on historical developments, market conditions, industry trends and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to our estimates and assumptions, and that reported results of operation will not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. We believe the following policies are the most sensitive to estimates and judgments.
agreements to hedge against interest rate risk on its floating rate trust preferred securities. The estimated fair value of the interest rates swaps is obtained from the third-party financial institution counterparties. The Group marks the investments to market using these valuations and records the change in the economic value of the interest rate swap as a realized gain or loss in the consolidated statement of earnings.
Net investment income increased 57.2% to $4.5 million, primarily as a result of increased yields on short-term investments held in the fixed-income investment portfolio and the acquisition of Financial Pacific and its net investment income. Realized investment gains amounted to $1.3 million in 2005, compared to a gain of $484,000 in 2004, with the higher level of realized gains in 2005 attributable to the disposition of securities in anticipation of funding the acquisition of Financial Pacific on October 1, 2005, for $41.1 million in cash (including acquisition costs). Our other income, primarily service charges recorded on insurance premiums, increased 100.8% in 2005 to $719,000, reflecting the inclusion of service charges recognized by Financial Pacific since its acquisition.
Includes approximately $48,840 (cost) and $48,548 (estimated fair value) of mortgage-backed securities backed by the U.S. government and government agencies.
as well as other litigation. In addition, the Group’s business practices are regularly subject to review by various state insurance regulatory authorities. These reviews may result in changes or clarifications of the Group’s business practices, and may result in fines, penalties or other sanctions. In the opinion of management, while the ultimate outcome of these actions and these regulatory proceedings cannot be determined at this time, they are not expected to result in liability for amounts material to the financial condition, results of operations, or liquidity, of the Group.
The Company's results of operations are derived from its two main segments which include the domestic insurance companies/agencies and MMO London. The Company's domestic insurance companies participate in pools of insurance covering ocean marine, inland marine, aircraft and non-marine liability insurance managed by MMO and affiliates. Effective January 1, 1997 and subsequent, the Company's participation in the pools increased to 100%. MMO London wrote a book of ocean marine insurance through its participation in Syndicate 1265. The following represents the Company's net premiums written and net premiums earned for each of the past three years.
Realized investment gains were $5.2 million and $12.5 million for the years ended December 31, 2000 and 1999, respectively, and each resulted mainly from the sale of appreciated equity securities.
Ocean marine net premiums earned increased in 1999 by 5%, excluding one-time items, and is largely attributable to business derived from MMO London. Approximately $13.6 million in net premiums earned, mostly ocean marine hull, was produced by Syndicate 1265 through MMO London in 1999, its first full year of operations, when compared to $700,000, excluding one-time items, in 1998. Net premiums earned from the domestic insurance companies/agencies segment were down 24% as competition generally remained intense in 1999 and adversely affected ocean marine premium rates as well as premium renewals.
Income taxes on continuing operations. Income tax expense on continuing operations for 2001 was $198,000 compared to $1.5 million for 2000. The effective income tax rates for 2001 and 2000 were 43.0% and (22.1%), respectively The total tax expense (benefit) from continuing operations is different from the applicable Federal income tax rate of 34% for the reasons reflected in the following reconciliation ($’s in 000’s):
Management believes that funds currently available and expected to be generated by agency operations will be sufficient to meet the required principal and interest payments on the term loan.
Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended December 31, 2002
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of PAULA Financial and subsidiaries as of December 31, 2002 and 2001 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.
The fair value for options granted in 2002, 2001 and 2000 was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: risk free interest rate of 3% in 2002 and 2001 and 6.0% in 2000, average option exercise period of seven years, and a volatility factor of 50%. The fair value per option was $0.25, $0.98 to $1.14, $1.55 for options granted in 2002, 2001 and 2000, respectively.
In the ordinary course of business, the Company’s subsidiaries are defendants in various lawsuits. Pan American Underwriters Insurance Agents and Brokers, Inc. (the “Arizona Company”) has been named as a defendant in a civil action filed with the Arizona Superior Court related to the failure of a multiple employer welfare arrangement for which the Arizona Company acted as an agent. The Arizona Company was served on February 12, 2003. The Arizona Company intends to file an answer denying plaintiff’s allegations. Management believes that the ultimate disposition of the litigation will not result in a material impact to the financial position or operating results of the Company.
Includes the results of operations subsequent to the date of acquisition of the following:
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Securities and Exchange Commission (“SEC”) has defined a company’s most critical accounting policies as those that are most important to the portrayal of its financial condition and the results of operations, and which require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Although we believe that our estimates and assumptions are reasonable, they are based upon information available when they are made. Actual results may differ significantly from these estimates under different assumptions and conditions.
Total shareholder equity of the Company decreased from $13,540,357 as of December 31, 2017 to $12,028,873 as of December 31, 2018, a decrease of $1,511,484. The decrease is mainly due to the net loss from operations of $1,227,436 and the purchase of treasury shares of $35,000. Additionally, the increase in unrealized losses on fixed maturity securities due to the interest rate environment added $249,048 to the decrease in equity but should be recaptured as the bonds mature.
The expense ratio was 22.7% for the year ended December 31, 2014, compared with 24.9% for the year ended December 31, 2013. The year-over-year decrease in the expense ratio was primarily due to the increase in premiums earned which resulted in a lower percentage of fixed expenses in our retail operations (such as rent and base salary).
Cash and cash equivalents consist of bank demand deposits and highly-liquid investments, including overnight collateralized repurchase agreements. All investments with maturities of three months or less at the date of purchase are considered cash equivalents.
On June 29, 2015, to finance the acquisition of the Titan Agencies, the Company borrowed the full amount under a $30 million Loan Agreement (the “Loan Agreement”) with Diamond Family Investments, LP, an affiliate of Gerald J. Ford, the Company’s controlling stockholder. The Loan Agreement provided a $30 million interest-only senior term loan facility, maturing in full on June 29, 2025. Commencing June 29, 2016, the Company has the right to prepay the loan in whole or in part, in cash, without premium or penalty, upon written notice to the lender. Amounts prepaid under the Loan Agreement may not be reborrowed. The term loan outstanding under the Loan Agreement bears interest at a rate of 8% per annum. The Loan Agreement contains certain representations, warranties and covenants. The Loan Agreement also contains customary events of default, including but not limited to: nonpayment; material inaccuracy of representations and warranties; violations of covenants; cross-default to material indebtedness; certain material judgments; certain bankruptcies and liquidations; invalidity of the loan documents and related events; and a change of control (as defined in the Loan Agreement). At December 31, 2015 the unamortized loan issuance costs of $0.2 million is being amortized to interest expense over the term of the loan.
The change in the total valuation allowance for the year ended December 31, 2013 was a decrease of $4.3 million. For the year ended December 31, 2013, the change in the valuation allowance included decreases of $1.9 million related to the unrealized change on investments included in other comprehensive income (loss) and was net of the utilization of $8.6 million in NOL carryforwards.
On July 1, 2015, in order to expand its geographic presence, the Company completed the acquisition of certain assets of Titan Insurance Services, Inc. and Titan Auto Insurance of New Mexico, Inc. (the “Titan Agencies”). These agencies sell private passenger non-standard automobile insurance and complimentary products, principally in California, but also in Texas, Arizona, Florida, Nevada and New Mexico. The Titan Agencies were previously owned and operated by Nationwide. Pursuant to the Asset Purchase Agreement (the “APA”), the Company acquired the assets of 83 retail stores for total consideration of $36.0 million, which included liabilities assumed estimated to be $2.3 million. The Company has accounted for the acquisition as a business combination applying the acquisition method.
During the years ending December 31, 2001 and 2000, Security National Mortgage Company (SNMC) experienced increases in revenue and expenses due to the increase in loan volume of its operations. SNMC is a mortgage lender incorporated under the laws of the State of Utah. SNMC is approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), to originate mortgage loans that qualify for government insurance in the event of default by the borrower. SNMC obtains loans primarily from independent brokers and correspondents. SNMC funds the loans from internal cash flows and lines of credit from financial institutions. SNMC receives fees from origination points paid by the borrowers and service and release premiums received from third party investors who purchase the loans from SNMC. SNMC sales all of its loans to third party investors and does not retain servicing to these loans. SNMC pays the brokers and correspondents a commission for loans that are brokered through SNMC. In 1999 SNMC opened new wholesale branches in Sacramento, California and Valencia, California. In 2000 SNMC opened new wholesale branches in Orlando, Florida, Colorado Springs, Colorado and Provo, Utah. In 2001, SNMC opened two wholesale branches in Phoenix, Arizona and Houston, Texas. SNMC originated and sold 8,738 ($1,268,000,000), 4,845 ($652,000,000) and 3,526 ($453,000,000) loans, respectively, in 2001, 2000 and 1999.
-200 bps -100 bps +100 bps +200 bps -------- -------- -------- -------- Change in Market Value (in thousands) $3,655 $2,413 $(3,194) $(7,558)
Due in 2002 $5,524,410 $5,631,885 Due in 2003 through 2006 13,401,476 14,024,814 Due in 2007 through 2011 3,745,930 3,699,128 Due after 2011 927,162 1,043,301 Mortgage-backed securities 4,172,926 4,270,550 Redeemable preferred stock 28,005 28,308 ----------- ----------- $27,799,909 $28,697,986 =========== ===========
Other collateralized bank loans payable 195,113 497,116 ---------- ---------- Total bank loans 8,461,900 9,805,118
The insurance companies have remaining loss carry forwards of approximately $620,000, approximately $286,000 of which is subject to an annual limitation of approximately $300,000.
Year Ended December 31, ----------------------- 2001 2000 1999 ---- ---- ----
December 31, ------------ 2001 2000 ---- ---- 10 year notes due April 16, 1999, 1% over U.S. Treasury 6 month bill rate $ 536 $ 536
Total notes and contracts 152,818 304,675 -------- -------- Less current installments 152,818 152,818 -------- -------- Notes and contracts, excluding current installments $ -- $151,857 ======== ========
third quarter of 1993. The effect of this increase was partially offset by an increase in deferred acquisition costs in the fourth quarter of 1994, as reflected by an improvement in the expense ratio, due primarily to the increase in new life insurance policies written in 1994 for which deferred acquisition costs were first established in the fourth quarter of 1994.
Renewal long-term care premiums earned by the Company in 1995 increased 21.6% to $59,624,488, compared to $49,054,157 in 1994. This increase reflects renewal of a larger base of in-force policies as well as the effect of rate increases the Company received in various states. The Company believes that this increase also reflects an increase in persistency which increased from 75.4% in 1994 to 77.4% in 1995. Renewal Medicare supplement premiums earned by the Company in 1995 decreased 12.7% to $2,777,580, compared to $3,182,823 in 1994, consistent with the Company's de-emphasis in marketing this product discussed above.
The Company's insurance subsidiaries (PTLIC and Network America) are required by insurance laws and regulations to maintain minimum capital and surplus. At December 31, 1995 and 1994, both subsidiaries' capital and surplus exceed the minimum required capital and surplus in all states in which they are licensed to conduct business.
The Company currently reinsures with unaffiliated companies any life insurance policy to the extent the risk on that policy exceeds $30,000.
Premiums for Retrocession, less cancellations Commission, less Retrocession Claims paid Frs. 237,316,758.97 less Retrocession „ 46,584,346.26 Premium Reserve, less Retrocession Reserve for Unsettled Claims, less Retrocession Reserve for Extraordinary Losses
Liabilities, Capital (58,000 shares of Frs. 1000 each) ..... 58,000,000 — Reserve Fund 20,000,000 — Special Reserve Fund 25,000,000 — Reserve for Contingencies . 10,000,000 — Due to other Companies 65,214,247 28 Life and other funds retained from other Companies . 134,949,221 62 Sundry Creditors 5,996,395 38 Reserves: Fire, Accident, Liability, Burglary, Fidelity, Surety and Marine Dept|; Premium Reserve Frs. 192,450,709. —
(e) To reflect the Pro Forma Statement of Income federal and state tax provision after giving effect to pro forma adjustments (b), (c), and (d) described above.
Subsequent to the acquisitions of Harrington and Consolidated Group, the Company now serves approximately 125,000 businesses, plan holders, and governmental agencies in 50 states, Washington, D.C., and Puerto Rico, covering approximately 2.6 million members.
Typically, the Company's insurance and managed care payors sign contracts with the Company that are cancelable by either party without penalty upon advance written notice of between 90 days and one year and are also cancelable upon a significant change of ownership of the Company. The New England, Celtic Life Insurance Company, and Ameritas Life Insurance Corporation businesses accounted for approximately 31.0%, 23.0%, and 10.7%, respectively, of the Company's consolidated revenue in 1995 and approximately 16.2%, 12.5%, and 6.5%, respectively, of the Company's consolidated revenue for the year ended December 31, 1996. Although this decline is due primarily to the Company's expansion through acquisition, which has diluted its concentration of revenues from these sources, it should be noted that the Company continues to experience higher lapses than originations in the business written with these payors, and it is not certain when, if ever, this trend will be reversed. In the third quarter of 1996, Metropolitan Life Insurance Company completed a merger with The New England. The Company is unable to predict what effect, if any, such merger will ultimately have on the Company's relationship with The New England.
The Company incurred $1.7 million in pre-operating and start-up costs during the year ended December 31, 1995. These costs related primarily to the state-sponsored health care purchasing alliances in Kentucky and North Carolina and consisted of salaries and wages and temporary help, printing, and travel expenses.
The Company incurred a cash outlay of approximately $7.8 million in 1996 for non-recurring integration costs related primarily to systems integration and expects to incur an additional cash outlay of approximately $1.5 million in 1997.
The following table sets forth selected financial data and other operating information. The selected financial data have been derived from our consolidated financial statements and should be read in conjunction with our consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.
Premiums. Premiums decreased $292,000, or 2%, from $17.4 million for the year ended December 31, 2003 to $17.1 million for the same period in 2004. The majority of the premium decrease was due to the decreasing business in force under our renewable term agreements, which is partially offset by an increase in the average premium per policy. Policies in force are decreasing because the number of policy surrenders and lapses currently exceeds the number of new policies reinsured. Average premiums per policy increase as policyholders age.
In accordance with Statements of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, we have $1.3 million of net operating loss carry-forwards, which begin to expire in 2018. These net operating loss carry-forwards at a 34% effective tax rate are included as an offset to the deferred tax liability. If the transactions contemplated by the Reorganization Agreement are not consummated, it is our belief that it is more likely than not that the deferred tax assets will be realized by us as an offset against future taxable income, however, if we do not have sufficient taxable income in the future to utilize this asset, a write-off may result, thereby reducing our net income, otherwise, these assets will be transferred in the sale of Global Preferred Re.
These forward-looking statements are subject to change and uncertainty that are beyond our control and have been made based upon our expectations and beliefs concerning future developments and their potential effect on our business. We cannot assure you that future developments will be in accordance with our expectations or that the effect of future developments will be those we anticipate. Actual results could differ materially from those we expect, depending upon the outcome of certain factors, including those described in the forward-looking statements. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. We have described some important factors that could cause our actual results to differ materially from our expectations in “Factors That May Affect Future Results of Operations” included as Exhibit 99.1. You should carefully review these risks and additional risks described in other documents we file from time to time with the Securities and Exchange Commission, including quarterly reports on the Form 10-Q. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Written premiums are a function of the number and type of contracts written and the prevailing market prices. Renewal dates for reinsurance business tend to be concentrated at the beginning of quarters, with the timing of premiums written varying by line of business. Most property catastrophe business incepts January 1, April 1, June 1 and July 1 with an annual policy, while most insurance and specialty lines renewals are more evenly spread throughout the year. Written premiums are generally highest in the first quarter and lowest during the fourth quarter of the year. Gross premiums written for pro rata programs are initially recorded as estimates and are then adjusted as actual results become known. Pro rata reinsurance is a type of reinsurance whereby the reinsurer indemnifies the policyholder against a predetermined portion of losses in return for a proportional share of the direct premiums. Premiums are then generally earned over a 24 month period and paid in monthly or quarterly installments.
During the January 2013 renewal season, the Validus Re and AlphaCat segments underwrote $655.7 million in gross premiums written, an increase of 12.7% from the prior year period. This increase is driven primarily by an increase in gross premiums written in the specialty lines. This renewal data does not include Talbot’s operations as its business is distributed relatively evenly throughout the year.
To the extent insurance and reinsurance industry data is relied upon to aid in establishing reserve estimates, there is a risk that the data may not match the Company’s risk profile or that the industry’s reserving practices overall differ from those of the Company and its clients. In addition, reserving can prove especially difficult should a significant loss event take place near the end of an accounting period, particularly if it involves a catastrophic event. These factors further contribute to the degree of uncertainty in the reserving process.
Net reserve for losses and loss expenses at December 31, 2012-Sensitivity to expected loss expenses
Net premiums written increased $124 million or 5% in 1999, primarily attributable to the acquisitions of Eagle Star Re and GE Re and core growth in various product lines, partially offset by continued competitive market conditions, an increase in contingently payable ceded premiums relating to recorded recoveries under aggregate excess retrocession programs and the impact of foreign currency translation in connection with the strengthening of the U.S. dollar compared to most major European currencies. Net premiums written increased $705 million or 42% in 1998, primarily attributable to growth in various product lines, including new property and casualty business associated with the acquisition of GE Re, partially offset by the impact of foreign currency translation in association with the strengthening of the U.S. dollar and continued competitive market conditions.
The FASB has also proposed new accounting for business combinations that, among other things, would change the accounting for and display of goodwill and other intangibles recorded in business acquisitions for transactions after January 1, 2001. An important aspect of the proposal is that goodwill amortization would be displayed as a separate element in the Statement of Earnings. Management believes that this proposal represents a useful approach to understanding financial performance, but believes that the utility of this information would be materially enhanced if the proposed approach for goodwill were applied to all intangible assets acquired with a business.
Management's Discussion and Analysis of Results of Operations And Financial Condition
Our exposure to market risk for changes in interest rates is concentrated in our investment portfolio. We expect that changes in investment values attributable to interest rate changes will be mitigated, however, by corresponding and partially offsetting changes in the economic value of our insurance reserves to the extent we have established such loss reserves. We will monitor this exposure through periodic reviews of our consolidated asset and liability positions. We will model and periodically review estimates of cash flows, as well as the impact of interest rate fluctuations relating to the investment portfolio and insurance reserves.
The portfolio of fixed maturities consists solely of high quality bonds at December 31, 2004, and we had no investments at December 31, 2003. The following table summarizes bond ratings at carrying value.
Potomac commenced business in 1982 at which time it was licensed solely in Illinois and consequently started writing business on a very limited basis. Potomac expanded its writings as it gradually accumulated licenses in additional states during the next several years. During this time, the insurance industry came to recognize its exposure to asbestos and environmental hazards and took actions to mitigate such exposure
The Company's revenues are derived primarily from premiums on insurance policies generated by NPS. In the event of a decline in NPS's preneed sales, the Company's future revenue growth could be impacted in the event that the Company could not replace the NPS sales force with its own or another marketing entity's sales force. Net investment income and realized investment gains also have contributed significantly to total revenues as the Company's invested assets have grown.
Changes in the Company's consolidated balance sheet between December 31, 1998 and December 31, 1997, reflect growth through operations, changes in the fair value of actively managed fixed maturity and equity securities, changes in the investment portfolio mix and the purchase of the World Block.
In December 1997, the American Institute of Certified Public Accountants issued Statement of Position 97-3 Accounting by Insurance and Other Enterprises for Insurance-related Assessments (SOP 97-3). SOP 97-3 provides guidance for determining when an insurance company or other enterprise should recognize a liability for guaranty-fund assessments and guidance for measuring the liability. SOP 97-3 is effective for financial statements of fiscal years beginning after December 15, 1998. The Company anticipates that the adoption of SOP 97-3 will not have a material effect on the Company's financial position, results of operations or cash flows.
The Company conducts its business operations primarily in leased office space. Lawyers Title leases approximately 83,300 square feet of office space for its corporate headquarters in Richmond, Virginia. This lease expires on September 30, 2000. The Company
In addition, during the fourth quarter of 1996 the Company determined that the trend of favorable loss experience which has emerged over the past few years could be relied upon and the Company changed its estimate of the ultimate net cost of all reported and unreported losses incurred through September 30, 1996 to reflect this favorable experience. The effect of the change in estimate was to decrease the provision for policy and contract claims by $78 million and to increase net income by $50.7 million and net income per share by $5.70.
Other Expenses - The most significant components of other expenses are rent for office space, outside costs of title production, travel, communications and taxes levied by states on premiums.
Equity in Earnings of Geotrac, Inc. During July, 1997, the Company purchased a 49% interest in Old Geotrac. Equity in earnings of Old Geotrac contributed $201,009 to the Company in 1997. During 1998, Geotrac was shown on a consolidated basis.
Outsourcing Services Revenues. Outsourcing services revenues increased $24.6 million, or 479.8%, to $29.7 million in 1997 from $5.1 million in 1996. During 1997, outsourcing services revenue was generated primarily from the Company's service agreements with BIG to provide policy and claims administration
Cost of Flood Zone Determination Services. Cost of flood zone determination services decreased $598,000, or 11.2%, to $4.8 million in 1997 from $5.4 million in 1996. As a percentage of flood zone determination services revenue, cost of flood zone determination services decreased from 69.6% in 1996 to 54.2% in 1997. The decrease was primarily the result of reduced insurance cost of approximately $800,000 related to the Company's life-of-loan program due to favorable loss experience under the life of loan program. The cost savings during 1997 under this program was partially offset by increases in personnel to process the increased volume of flood zone determinations.
The Singapore office is leased from a third party starting from December 2012.
ALCO’s current total monthly rental payment for the facilities mentioned as above is approximately US$46,979. We intend to renew these leases upon their expiration.
Rents - increased by $43,077, or 6%, from $702,308 in 2014 to $745,385 in 2015. The increase was mainly due to the new office space rent for Shanghai office and rental rates increased.
Bad debt expenses - increased by $58,569 from ($4,686) in 2014 to $53,883 in 2015. The increase was mainly because the provision of doubtful debts increased during the year.
From time to time, the Company has amounts due to directors which represent loans payable that are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand.
Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with ASC840. When substantially all of the risks and benefits of property ownership have been transferred to the Company, as determined by the
For the Director quarter in Shanghai, the initial term of the lease is one year beginning January 1, 2016 with a minimum lease commitment of $30,769.
Our business involves marketing and underwriting commercial insurance in Texas, New Mexico, Idaho, Oregon, Montana and Washington; marketing and underwriting non-standard personal automobile insurance in Texas, New Mexico and Arizona; marketing of general aviation insurance in 44 states (effective January 1, 2006); claims administration; and other insurance related services. We have pursued our business activities through subsidiaries whose operations are organized into our Commercial Insurance Operation segment, which handles commercial insurance products and services, and our Personal Insurance Operation segment, which handles non-standard personal automobile insurance products and services. We expect to realign our operational segments during 2006 to reflect the activities of newly acquired subsidiaries. (See, "Item 1. Business - Recent Events.")
Statutory capital and surplus is calculated as statutory assets less statutory liabilities. TDI requires that AHIC maintain minimum statutory capital and surplus of $2.0 million and AZDOI requires that PIIC maintain minimum statutory capital and surplus of $1.5 million. As of December 31, 2005, AHIC and PIIC each significantly exceeded the minimum required statutory capital and surplus. At December 31, 2005, AHIC reported statutory capital and surplus of $63.7 million, which reflects an increase of $52.2 million from the $11.5 million reported at December 31, 2004. At December 31, 2005, PIIC reported statutory capital and surplus of $36.3 million, which is $22.3 million more than the $14.0 million reported at December 31, 2004. AHIC reported a statutory net loss of $4.6 million during 2005 compared to statutory net income of $1.5 million in 2004. The net loss was primarily due to the statutory recognition of acquisition costs from the retention of business produced by HGA. These costs are deferred over the life of the underlying policies under GAAP. PIIC reported statutory net income of $2.7 million during 2005 compared to $3.4 million in 2004. At December 31, 2005, AHIC's premium-to-surplus percentage was 94% as compared to 122% for the year ended December 31, 2004. PIIC's premium-to- surplus percentage was 79% for the year ended December 31, 2005 as compared to 135% for the year ended December 31, 2004.
Total revenues for 2005 increased $23.9 million, or 37.9%, as compared to 2004, primarily as a result of a $19.5 million increase in revenues from our Commercial Insurance Operation due to the transition which began in the third quarter of 2005 of our premium produced by HGA from Clarendon to AHIC. Income before tax for 2005 increased $4.9 million over 2004. The improvement in operating earnings reflects additional investment income on capital raised in 2005, the transition of the commercial business and improved underwriting results.
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the Years Ended December 31, 2005, 2004 and 2003
FORWARD-LOOKING STATEMENTS IN THIS FORM 10-K ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. INVESTORS ARE CAUTIONED THAT ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTY, INCLUDING WITHOUT LIMITATION, THE RISK OF A SIGNIFICANT NATURAL DISASTER, THE INABILITY OF THE COMPANY TO REINSURE CERTAIN RISKS, THE ADEQUACY OF ITS LOSS RESERVES, EXPANSION OR CONTRACTION IN ITS VARIOUS LINES OF BUSINESS, THE IMPACT OF INFLATION, CHANGING REGULATIONS IN FOREIGN COUNTRIES, THE EFFECT OF PENDING ACQUISITIONS, AS WELL AS GENERAL MARKET CONDITIONS, COMPETITION, LICENSING AND PRICING. PLEASE REFER TO THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION FILINGS, COPIES OF WHICH ARE AVAILABLE FROM THE COMPANY WITHOUT CHARGE, FOR FURTHER INFORMATION.
The Company's insurance company subsidiaries' statutory combined ratio was 72.0% for 1996 compared to 74.9% in 1995. The Company's combined ratio remains significantly better than the industry average.
Net earnings increased 59% to $24.3 million from $15.3 million in 1994. This increase was principally a result of more efficient and continued profitable underwriting plus higher investment income and fee and commission income.
The Company closely monitors its credited interest rates on interest sensitive policies, taking into consideration such factors as profitability goals, policyholder benefits, product marketability, and economic market conditions. Average credited rates, calculated based on policy reserves for the Company's universal life and annuity business, have generally declined over the past several years, which is consistent with declines in market interest rates. As market interest rates fluctuate, the Company's credited interest rates are often adjusted accordingly taking into consideration the factors described above. Raising policy credited rates can typically have an impact sooner than higher market rates on the Company's investment portfolio yield, making it more difficult to maintain the current interest spread. The difference between yields earned over policy credited rates is often referred to as the interest spread.
The contractual maturities of mortgage loan principal balances at December 31, 2003 are as follows:
Mortgage and other loans were modeled by discounting scheduled cash flows through the scheduled maturities of the loans, starting with interest rates currently being offered for similar loans to borrowers with similar credit ratings. Policy loans were modeled by discounting estimated cash flows using U.S. Treasury Bill interest rates as the base rates at December 31, 2003. The estimated cash flows include assumptions as to whether such loans will be repaid by the policyholders or settled upon payment of death or surrender benefits on the underlying insurance contracts and incorporate both Company experience and mortality assumptions associated with such contracts.
The above-described scenarios produce estimated changes in cash flows as well as cash flow reinvestment projections. Estimated cash flows in the Company's model assume cash flow reinvestments which are representative of the Company's current investment strategy. Calls and prepayments include scheduled maturities and those expected to occur which would benefit the security issuers. Assumed policy surrenders consider differences and relationships between credited interest rates and market interest rates as well as surrender charges on individual policies. The impact to earnings also includes the expected effects on amortization of deferred policy acquisition costs. The model considers only annuity and supplemental contracts in force at December 31, 2003, and does not consider new product sales or the possible impact of interest rate changes on sales.
Reported net premiums written amounted to $5.7 billion in 1999, an increase of 4% compared with 1998. Excluding premiums written by Executive Risk, premium growth was 1% in 1999. Personal coverages accounted for $1.5 billion or 27% of 1999 premiums written, standard commercial coverages for $1.9 billion or 32% and specialty commercial coverages for $2.3 billion or 41%. Reported net premiums written increased 1% in 1998 compared with 1997. The reported growth in premiums written in 1998 was affected by the termination in 1997 of certain reinsurance agreements, which are discussed below.
It will take at least two annual renewal cycles to adequately reprice the entire standard commercial book, and during that time we will continue to have losses from underpriced business. Thus, it will be the latter part of 2000 before our pricing initiative is expected to have a noticeable effect on our standard commercial results.
Property and marine premiums decreased due to the effect on retention levels of pricing initiatives and non-renewing certain unprofitable accounts. Other specialty commercial business includes $73 million of premiums in 1999 generated by Chubb Re, our reinsurance business that began operations during the year.
Sales of equity securities in each of the last three years resulted in net realized investment gains due primarily to the significant appreciation in the United States equity markets. A primary reason for the sale of fixed maturities in each of the last three years has been to improve our after-tax portfolio return without sacrificing quality where market opportunities have existed to do so.
Interest rate risk also exists on our debt obligations. At December 31, 1999, the expected cash flows of principal amounts of such debt obligations were a $15 million 7.3% term loan in 2001, $100 million of 6 7/8% notes in 2003 and $642 million after 2004 with a weighted average interest rate of 7.0%.
Consolidated financial statements of the Corporation at December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 and the Report of Independent Auditors thereon and the Corporation's unaudited quarterly financial data for the two-year period ended December 31, 1999 are incorporated by reference from the Corporation's 1999 Annual Report to Shareholders, pages 40 through 62 and 64.
Management believes that the Company's strong market position will provide opportunities for growth in this segment as individuals increasingly focus on estate planning. The Hartford's agreement, through Hartford Life, to acquire the U.S. individual life insurance business of Fortis is expected to increase the Company's scale in the individual life insurance business while broadening its distribution capabilities through the addition of a retail broker-dealer. It is expected that the consummation of this transaction will enhance the Company's goal of broadening its reach in the emerging affluent market.
Hartford Life has established investment credit policies that focus on the credit quality of obligors and counterparties, limit credit concentrations, encourage diversification and require frequent creditworthiness reviews. Investment activity, including setting of policy and defining acceptable risk levels, is subject to regular review and approval by senior management and reported to The Hartford's Finance Committee.
(1) Negative weighted average receive rate in 2005 results when payments are required on both sides of an index swap.
Underwriting Income. Underwriting income is net pre-tax income attributable to our insurance underwriting business except for net investment income, net realized gains from investments, and depreciation and amortization (net premiums earned less expenses included in combined ratio). Underwriting income is a measure of an insurance company’s overall operating profitability before items such as investment income, depreciation and amortization, interest expense and income taxes.
Ceding commission revenue was $10,625,000 in 2011 compared to $8,583,000 in 2010. The increase of $2,042,000, or 23.8%, was due to the increase in the amount of premiums ceded and more favorable ceding commission rates, offset by the effects of Tropical Storm Irene on our ceded net loss ratio which reduced our contingent ceding commission revenue by $200,000. Our quota share reinsurance treaty, which expired June 30, 2011, contained a provision which limited the maximum contingent ceding commission that could be paid to us, with the unused benefit carried forward to the current treaty year which began July 1, 2011. The carryover amount was included in our computation of contingent ceding commission effective July 1, 2011, and resulted in an additional $264,000 to our contingent ceding commission revenue. Ceding commission revenue also increased as a result of favorable development on prior year’s quota share treaties.
Net cash used by investing activities was $6,526,000 in 2011 compared to $4,395,000 used in 2010. The $2,131,000 increase in cash flows used in investing activities is a result of the increase in net investments in fixed-maturity securities and equity securities, resulting from positive cash flow from operations.
The investment performance in the underlying U.S. equity-based mutual funds supporting ML of New York’s variable products do not replicate the returns on any specific U.S. equity market index. However, investment performance will generally increase or decrease with corresponding increases or decreases in the overall U.S. equity market.