felanders/preprocessed huggingface dataset:
As the merger agreement was executed in January 2008, expenses related to the merger will be recorded as incurred during 2008. If the transaction closes and the merger is completed, significant costs will be incurred related to employment change of control agreements in effect for various officers and employees of the Company.
Prior to the sale, the Company transitioned the sales force of Family Life to a new division of Investors Life, FIC’s remaining insurance subsidiary. Although Investors Life is now selling similar products as those that were sold by Family Life, there are notable differences. The insurance is written on Investors Life policy forms and leads are no longer obtained from lending institutions. Leads are now purchased through other sources and the focus is on a different market demographic than the previous Family Life target market. The new division also now sells final expense insurance products, which was not a market focus for Family Life. Additionally, as a condition of the sales agreement, the new division of Investors Life is prohibited from selling products to existing policyholders and related customers of Family Life for five years.
Net decrease in accumulated other comprehensive loss of $3.8 million for items as follows:
Market interest rates increased, allowing for the investment of cash and short-term investments in fixed maturity securities with higher interest yields, thus allowing for increased investment income during 2006. With the sale of the River Place Corporate Park property in June 2005, the Company had additional funds to invest in the latter half of 2005 and during 2006. Net realized gains on real estate were $517,000 in 2006 compared to $9.2 million in 2005, with the decline attributable to the sale of River Place Corporate Park in 2005.
In addition to debt service, the holding company must pay its expenses in connection with Board of Directors fees, insurance costs, corporate overhead, certain audit and accounting fees, and legal and consulting expenses as incurred. The holding company has not paid any dividends to its shareholders since 2003, and management does not anticipate the payment of such dividends in the near future.
Other significant accounting policies, although not involving the same level of measurement uncertainties as those discussed above but nonetheless important to the understanding of the financial statements, are described in Note 1 to the accompanying consolidated financial statements.
CAIS leases 1,240 square feet of office space in Bloomington, Minnesota.
Revenues of $296.4 million, a 31.3% increase from 2004 primarily due to an increase in net retention of the Medical Stop-Loss line to 45.3% in 2005 from 34.1% in 2004 (“retention” refers to net earned premiums after reinsurance);
Benefits, claims and reserves increased $47.6 million. The increase is due to: (i) $26.8 million in the Medical Stop-Loss segment primarily resulting from an increase in retention in 2005 as well as higher Net Loss Ratios on its Medical Stop-Loss line of business in 2005 (93.2%) as compared to 2004 (86.6%); (ii) an increase of $10.8 million in the Fully-Insured Health segment which was not formed until after the third quarter of 2004; (iii) a $7.2 million increase in the Individual and Other segment due to higher losses on the assumed block of annuity and life business in run-off status, and higher mortality losses on the ordinary life line subsequent to the acquisitions; (iv) a $1.0 million increase in Credit claims and reserves due to an increase in premiums; and (v) an increase of $1.8 million in the Group segment primarily due to a $1.3 million increase in the GTL line caused by increased retention and frequency of claims experienced, a $2.1 million increase in the group A&H line due to new business, and a $.7 million increase in the VFD annuity line due to increased business, partially offset by a $2.3 million decrease in the DBL line due to the 20% reinsurance agreement previously mentioned. Insurance benefits, claims and reserves for 2005 includes a charge of $.6 million to reflect loss development from prior years and a corresponding increase in reserves for the current year. While management sets reserves based on its best estimates of ultimate claim settlement costs, the Company adjusts reserves as claims mature, approach settlement or are otherwise resolved.
The Company does not anticipate significant growth or shrinkage in its other historic core business, including group life and disability, DBL, and credit life and disability.
Excluding the effect of realized gains and losses on investments our earnings would be as follows:
Fee income includes fees earned from our Wealth Management products offered to high net worth individuals by SAC and SALIC in the Cayman Islands and Scottish Crown in Bermuda. These fees increased to $2.2 million in 2000 from $1.0 million in 1999 and $0.2 million in 1998 primarily due to increases in variable account balances on which we earn fees and the increase in the number of clients. We acquired SAC effective December 31, 1999; this resulted in 100% of its fee income reverting to us in 2000. In 1999 and 1998 we received a fee for insurance administration and accounting services provided to SAC. At December 31, 1999 we had 79 annuity clients with total assets of $256.2 million and 2 variable life clients with total assets of $0.3 million. As at December 31, 2000 we have increased our client base to 81 annuity clients with total assets of $362.5 million and 11 variable life clients with total assets of $47.2 million. Fees are also earned by Scottish Re on financial reinsurance treaties, which do not qualify under GAAP risk transfer rules, issued to U.S. insurance company clients.
We have in place a credit facility with a U.S. bank that provides up to $70 million in the form of borrowings or outstanding letters of credit. Under the agreement, we may borrow at a predetermined interest rate of 40 basis points over LIBOR. The agreement expires in July 2001, but is renewable with the agreement of both parties. We have letters of credit outstanding at December 31, 2000 in the amount of $20.3 million in support of our reinsurance business. The agreement requires that we pledge assets as collateral with a market value not less than 110% of the sum of outstanding borrowings and letters of credit.
In all of these cases, to the extent that required collateral exceeds the GAAP reserves, we must pledge assets from our capital account. Depending on the amount and mix of business we do in the coming year, we may need to raise additional capital and/or find alternative sources of pledgeable assets or unsecured letters of credit to continue to grow.
Pension Plans and Other Postretirement Benefits. The Company sponsors a qualified defined benefit pension plan covering substantially all employees and three nonqualified defined benefit plans covering certain senior officers. In addition, the Company also has postretirement health care benefits for certain senior officers. In accordance with prescribed accounting standards, the Company annually reviews plan asssumptions.
Net investment income performance is analyzed excluding derivative income, which is a common practice in the insurance industry, in order to assess underlying profitability and results from ongoing operations. Net investment income performance is summarized as follows:
The yield on average invested assets declined from 6.98% in 2003 to 6.47% in 2004 and 6.23% in 2005, excluding derivatives. This decline in yield is due to the overall interest rate decline and the Company obtaining lower yields on newly invested funds. In addition, prepayments, calls, and maturities of higher yielding debt securities have added to the yield decrease as these funds are reinvested at lower rates. Refer to the Derivatives discussion following this section for a more detailed explanation.
Gains and losses from index options are due to market conditions. Index options are intended to act as hedges to match the returns on the S&P 500 Index® and the rise or decline in this index causes index option values to likewise rise or decline. While income from index options fluctuates with the index, the contract interest expense to policyholder accounts for the Company's equity-indexed products also fluctuates in a similar manner and direction. In 2005, the S&P 500 Index® decreased resulting in index option losses and a reduction in contract interest expenses. In 2004 and 2003, the S&P 500 Index® increased and the Company recorded gains from index options and consequently increased contract interest expenses.
As previously noted, the Company's earnings are dependent upon annuity contracts persisting or remaining in force. While revenues decline with a reduction in surrender charges, the Company's earnings benefit. A mandated change in accounting for two-tier annuities in 2004 had the effect of eliminating payout annuity revenues pertaining to this product. This change explains the sharp reduction in these revenues in 2005 and 2004 compared to 2003.
account growth rate assumption for individual variable annuities for the three-year reversion period, the Company unlocked that assumption for all investment products and variable universal life insurance products to be consistent across product lines.
Sales should not be viewed as a substitute for any financial measure determined in accordance with GAAP, including “sales” as it relates to non-insurance companies, and the Company’s definition of sales might differ from that used by other companies. As used in the life insurance industry, sales, or similarly titled measures, generate customer funds managed and administered, which ultimately drive revenues.
Policy charges increased 33% to $520.1 million in 2003, following a 24% increase to $391.0 million in 2002. Cost of insurance charges, which are assessed on the amount of insurance in-force in excess of the related policyholder account value, increased 39% and 32% in 2003 and 2002, respectively, and reflect a growing block of investment life business, as insurance in-force increased 3% to $109.45 billion at 2003 compared to $105.79 billion at 2002, which reflected a 50% growth in insurance in-force over 2001. Nationwide Provident contributed the majority of the growth in insurance in-force in 2002.
Liquidity and capital resources demonstrate the overall financial strength of the Company and its ability to generate cash flows from its operations and borrow funds at competitive rates to meet operating and growth needs. The Company’s capital structure, which consists of long-term debt, capital and equity, as of each December 31 is summarized in the following table.
The summary below depicts carrying value of mortgage loans by regional exposure and type of collateral as of December 31, 2003:
As of December 31, 2003, the Company’s largest exposure to any single borrowing group was $157.3 million, or 1.8% of the Company’s general account mortgage loan portfolio.
At December 31, 2001, the Company had approximately $1.5 million of unsecured reinsurance recoveries on unpaid losses due from CSC in excess of collateral and allowances. Also during 2001, the Company recorded a provision of $4.5 million related to balances due from CSC, of which $3.5 million was related to reinsurance recoverable balances.
Unless a further extension is obtained, the line of credit expires and the remaining balance of $24.0 million is payable in full on January 3, 2003. Under the terms of the credit agreement, in the event of default, the banks have the right to terminate the revolving credit facility and demand full and immediate repayment.
The “Mandatory Control Level,” is 	triggered if a company’s total adjusted capital is less 	than 70% of its risk-based capital, at which level the 	regulatory authority is mandated to place the company under its 	control.
Shareholder's Equity $496,911 $359,434 $250,417 $184,421 $126,345 ======== ======== ======== ======== ========
The information required by this item is incorporated by reference to pages 5-13 of the Company’s 1999 Annual Report to Shareholders.
The information required by this item is incorporated by reference to page 16-20 of the Company’s 1999 Annual Report to Shareholders.
Premium revenues are primarily derived from risk-based health insurance arrangements in which the premium is fixed, typically for a one-year period, and we assume the economic risk of funding our customers’ health care services and related administrative costs. Service revenues consist primarily of fees derived from services performed for customers that self-insure the medical costs of their employees and their dependents. For both premium risk-based and fee-based customer arrangements, we provide coordination and facilitation of medical services; transaction processing; customer, consumer and care provider services; and access to contracted networks of physicians, hospitals and other health care professionals.
Cash flows generated from operating activities, our primary source of liquidity, are principally from net earnings, excluding depreciation and amortization. As a result, any future decline in our profitability may have a negative
representing approximately 38% of our total assets. If we make additional acquisitions, it is likely that we will record additional intangible assets on our books. We periodically evaluate our goodwill and other intangible assets to determine whether all or a portion of their carrying values may no longer be recoverable, in which case a charge to earnings may be necessary. Any future evaluations requiring an asset impairment of our goodwill and other intangible assets could materially affect our results of operations and shareholders’ equity in the period in which the impairment occurs. A material decrease in shareholders’ equity could, in turn, negatively impact our debt ratings or potentially impact our compliance with existing debt covenants.
Other policy liabilities include the RSF associated with the AARP program (see Note 11), customer balances related to experience-rated insurance products and the current portion of future policy benefits for life insurance and annuity contracts. Customer balances represent excess customer payments and deposit accounts under experience-rated contracts. At the customer’s option, these balances may be refunded or used to pay future premiums or claims under eligible contracts.
We lease facilities, computer hardware and other equipment under long-term operating leases that are noncancelable and expire on various dates through 2025. Rent expense under all operating leases was $137 million in 2004, $133 million in 2003 and $132 million in 2002.
We have audited the accompanying consolidated balance sheets of UnitedHealth Group Incorporated and Subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
Our sources of funds are from insurance-related operations, financing activities and investing activities. Major sources of funds from operations include premiums collected (net of policy cancellations and premiums ceded), commissions and processing and service fees. As a holding company, Hallmark is dependent on dividend payments and management fees from its subsidiaries to meet operating expenses and debt obligations. As of December 31, 2020, we had $9.6 million in unrestricted cash and cash equivalents, including $6.7 million held in premium and claim trust accounts, at the holding company and our non-insurance subsidiaries. As of that date, our insurance subsidiaries held $93.0 million of unrestricted cash and cash equivalents as well as $507.3 million in debt securities with an average modified duration of 0.8 years. Accordingly, we do not anticipate selling long-term debt instruments to meet any liquidity needs.
The Second Restated Credit Agreement with Frost also provided a $30.0 million revolving credit facility (“Facility B”), in addition to Facility A. We used Facility B loan proceeds solely for the purpose of making capital contributions to AHIC and HIC. We paid a quarterly fee of 0.25% per annum of the average daily unused balance of Facility B. Facility B bore interest at a rate equal to the prime rate or LIBOR plus 3.00%, at our election. On August 19, 2019, we repaid the $30.0 million principal balance and accrued interest on Facility B. Upon such repayment, we terminated Facility B.
On November 3, 2009, our ultimate parent company announced the formation of a distribution company subsidiary, Saybrus Partners, Inc. Phoenix formed Saybrus as part of a series of actions to strengthen its market position and strategy. Saybrus provides dedicated consultation services to partner companies, as well as support for Phoenix’s product line within our own distribution channels.
We carried a valuation allowance of $10,800 thousand on $164,190 thousand of deferred tax assets at December 31, 2010, due to uncertainties related to our ability to utilize some of the deferred tax assets that are expected to reverse as capital losses. The amount of the valuation allowance has been determined based on our estimates of taxable income over the periods in which the deferred tax assets are expected to reverse.
Our federal income tax returns are routinely audited by the IRS, and estimated provisions are routinely provided in the financial statements in anticipation of the results of these audits. Unfavorable resolution of any particular issue could result in additional use of cash to pay liabilities that would be deemed owed to the IRS. Additionally, any unfavorable or favorable resolution of any particular issue could result in an increase or decrease, respectively, to our effective income tax rate to the extent that our estimates differ from the ultimate resolution.
Management exercised significant judgment with respect to certain securities in determining whether impairments are temporary or other than temporary. At December 31, 2010, this included securities with $24,659 thousand of gross unrealized losses of 50% or more for which no OTTI was ultimately indicated. In reaching its conclusions, management used a number of issuer-specific quantitative indicators and qualitative judgments to assess the probability of receiving a given security’s contractual cash flows. This included the issue’s implied yield to maturity, cumulative default rate based on rating, comparisons of issue-specific spreads to industry or sector spreads, specific trading activity in the issue, and other market data such as recent debt tenders and upcoming refinancing requirements. Management also reviewed fundamentals such as issuer credit and liquidity metrics, business outlook and industry conditions. Management does not have the intention to sell nor does it expect to be required to sell these securities. Management maintains a watch list of securities that is reviewed for impairments. Each security on the watch list was evaluated, analyzed and discussed, with the positive and negative factors weighed in the ultimate determination of whether or not the security was other-than-temporarily impaired.
The Company subleases its executive offices for an annual rent of approximately $0.1 million from Equity Group Investments, Inc. ("EGI"), a company affiliated with certain directors, officers, and stockholders of the Company. The executive offices are located at Two North Riverside Plaza, Chicago, Illinois 60606. The Company also leases a corporate office in Atlanta, Georgia, for certain executives with an annual rent of approximately $0.1 million. Western Surety leases office space for its executive offices at 101 South Phillips Avenue, Sioux Falls, South Dakota 57102, under a lease expiring in 2002. Western Surety's office space, consisting of approximately 81,600 square feet, is leased from a partnership in which Western Surety owns a 50% interest. The annual rent, which is subject to annual adjustments, was $1.4 million as of December 31, 1996. Western Surety also leases a 7,900 square foot branch office in Dallas, Texas. Annual rent for the branch office was $0.1 million and the lease expires in 1999. Universal Surety leases office space for its executive offices at 950 Echo Lane, Suite 250, Houston, Texas 77024, under a lease terminating October 31, 1999 with an annual rent of $0.2 million. Universal Surety also leases space for branch offices in Austin, Dallas and San Antonio, Texas; Overland Park, Kansas; Golden, Colorado; and Seattle, Washington, for an additional annual rent of approximately $0.1 million.
The following is a discussion and analysis of Capsure Holdings Corp. and its subsidiaries' ("Capsure" or the "Company") operating results, financial condition, liquidity and capital resources. This discussion should be read in conjunction with the audited Consolidated Financial Statements and notes thereto, which contain additional information regarding the Company's operating results and financial condition.
The Company believes total invested assets, including cash and short-term investments, are sufficient in the aggregate and have suitably scheduled maturities to satisfy all policy claims and other operating liabilities, including anticipated income tax sharing payments of its insurance operations. Management believes the duration of each insurance subsidiary's portfolio is properly matched with the expected duration of its liabilities. At December 31, 1996, the carrying value of the Company's invested assets of the insurance operations was comprised of $135.9 million of fixed maturities, $15.9 million of short-term investments, $4.5 million of equity securities, $2.7 million of other investments and $1.4 million of cash. At December 31, 1995, the carrying value of the Company's invested assets of the insurance operations was comprised of $235.7 million of fixed maturities, $33.1 million of short-term investments, $16.2 million of equity securities, $3.2 million of other investments and $2.7 million of cash. The decrease in investments at December 31, 1996 compared to the prior year primarily related to the net decrease in investments as a result of the sale of United Capitol.
Our recorded reserves represent management's best estimate of the provision for unpaid claims as of the balance sheet date, and establishing them involves a process that includes collaboration with various relevant parties in the company. For information on our reserving process, refer to Note 7 to the Consolidated Financial Statements.
Given the long reporting and paid development patterns for workers' compensation business, the development factors used to project actual current losses to ultimate losses for our current exposure require considerable judgment that could be material to consolidated loss and loss expense reserves. Specifically, adjusting ground up ultimate losses by a one percent change in the tail factor (i.e., 1.04 changed to either 1.05 or 1.03) would cause a change of approximately $658 million, either positive or negative, for the projected net loss and loss expense reserves. This represents an impact of about 8.3 percent relative to recorded net loss and loss expense reserves of approximately $7.9 billion.
uncollectible reinsurance. When regulatory action is taken on a reinsurer, we generally recognize a default factor by estimating an expected recovery on all balances outstanding, net of collateral. When sufficient credible information becomes available, we adjust the provision for uncollectible reinsurance by establishing a default factor pursuant to information received; and
Each quarter, we review securities in an unrealized loss position (impaired securities), including fixed maturities, securities lending collateral, equity securities, and other investments, to identify impaired securities to be specifically evaluated for a potential OTTI. Because our investment portfolio is the largest component of consolidated assets, OTTI could be material to our financial condition and results of operations. Refer to Note 3 d) to the Consolidated Financial Statements for a description of the OTTI process.
In our original eight county service area, our non-exclusive dental HMO provider network includes approximately 95% of the dental providers in the market. This area, which we refer to as our original eight county service area, includes Butler, Clermont, Hamilton and Warren counties in Ohio, and Boone, Campbell, Kenton and Pendleton counties in Kentucky. In that market our dental HMO provides the broad provider access of a dental PPO along with effective utilization and cost control features. Because of the broad provider network and our professional support services to employers, our fully-insured dental HMO is priced higher than other dental HMOs and has premium rates more equivalent to competitor dental PPOs.
Fully-insured dental PPO premium revenue for 2018 increased by approximately $2,722,000 compared to 2017. Fully-insured dental PPO revenue increased by approximately $3,327,000 due to an increase in fully-insured PPO group and individual membership in 2018, offset by a decrease of approximately $605,000 due to a decrease in overall premium rates on a PMPM basis. The fully-insured dental PPO segment represented approximately 25.5% of our total dental business in 2018.
Our fully-insured dental PPO membership increased by approximately 10,300 members in 2017. This membership increase is due to new sales in the Dayton and Central Ohio markets, the Southern Kentucky market and the Indiana market of approximately 11,600 members during 2017, offset by the loss of approximately 6,900 members with employer groups that did not renew with the Company or reduced employee counts of retained employer groups in these markets. The remaining increase of approximately 5,600 members is due to new sales of individual and on exchange dental PPO products in 2017.
In 2018, we made scheduled principal payments of approximately $55,000 related to our office building mortgage and scheduled payments of approximately $442,000 related to our capital leases. During 2018, we repurchased Redeemable Common Shares with a book value (purchase price) of approximately $120,000. We also paid dividends of approximately $570,000 to holders of our Redeemable Common Shares.
The following table presents for each of the fair value levels, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2018 and 2017 (amounts in thousands):
Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control and many of which are subject to change. These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments. Some may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates. Some may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associated with the Company’s investment portfolio. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC. The Company disclaims any obligation to update forward-looking information.
The Company has one business segment, annuity operations, which consists of the sale and administration of deposit-type insurance contracts, such as fixed and variable annuities and universal life insurance contracts. The Company focuses primarily on the marketing of fixed annuity products.
NET REALIZED INVESTMENT GAINS totaled $2.4 million in 2003 compared with net realized investment losses of $10.0 million in 2002 and $19.3 million in 2001 and include impairment writedowns of $3.1 million, $9.5
As a result of these policies, the Company recorded pretax impairment writedowns of $3.1 million in the 2003, $9.5 million in 2002 and $17.3 million in 2001.
The aging of the Bond Portfolio in an unrealized loss position at December 31, 2003 is shown below:
DEFAULTED INVESTMENTS, comprising all investments that are in default as to the payment of principal or interest, totaled $0.2 million of bonds at December 31, 2003, and constituted less than 0.1% of total invested assets. At December 31, 2002, defaulted investments totaled $5.7 million of bonds and constituted less than 0.3% of total invested assets.
Other expenses increased to $15.5 million for the year ended December 31, 2006 from $13.2 million for 2005. The increase is primarily due to interest expense increasing by $2.1 million due to the issuance of $25.0 million of trust preferred securities issued in November 2005.
Year Ended December 31, 2005 compared to Year Ended December 31, 2004
Surety. Net premiums earned remained stable at $1.1 million for the years ended December 31, 2005 and 2004.
Reserves. Claims made policies provide coverage for claims that are incurred and reported during the policy period. Occurrence form policies provide coverage for claims that occur during the policy period regardless of when they are reported. Certain of our insurance policies and reinsurance assumed, including general and pollution liability policies covering environmental remediation, construction and workers’ compensation risks, are occurrence policies and therefore may be subject to claims brought years after an incident has occurred or the policy period has ended. We are required by our regulators to maintain reserves to cover the unpaid portion of our ultimate liability for losses and loss adjustment expenses with respect to (i) reported claims and (ii) incurred but not reported (IBNR) claims. A full actuarial analysis is performed to estimate all of our unpaid losses and loss adjustment expenses under the terms of our contracts and agreements. In evaluating whether the reserves are reasonable for unpaid losses and loss adjustment expenses, it is necessary to project future losses and loss adjustment expenses payments. It is certain that the actual future losses and loss adjustment expenses will not develop exactly as projected and may, in fact, vary materially from the projections.
Further details of the calculation of basic earnings per share are set forth in notes 2 and 22 of the audited financial consolidated financial statements for the years ended December 31, 2006, 2005 and 2004.
of earnings of GA Life from February 1, 2005 to December 31, 2005 to our statement of earnings for the year 2005. Comparable basis information is presented in order to provide a more meaningful comparison of the 2006 and 2005 periods. Comparable basis is not calculated in accordance with U.S. generally accepted accounting principles and is not intended to represent or be indicative of the results of operations that would have been reported by us had the acquisition been completed as of January 31, 2005. Comparable basis information, unlike the pro forma financial information included in note 3 of the audited financial consolidated financial statements for the years ended December 31, 2006, 2005 and 2004, does not reflect adjustments, such as interest expense associated with indebtedness incurred in connection with the acquisition.
The following table sets forth our consolidated operating results for the years ended December 31, 2006, 2005 and 2004. The 2005 comparable basis information is presented to provide a more meaningful comparison of the 2006 and 2005 periods, see “Significant Transactions - Consolidated” included in this Item.
The consolidated effective tax rate decreased from 23.8% in 2004 to 12.1% in 2005 due to the net effect of an increase in exempt interest income during 2005, which decreased the effective rate, and an increase in the property and casualty insurance segment’s deferred tax expense.
Net payments of short-term debt decreased by $37.1 million as a result of the repayment of short-term borrowings incurred by us in 2003 to pay the tax liability related to the closing agreement with the Puerto Rico Treasury Department (PRTD) upon the termination of our tax exemption. This repayment was made with the proceeds of the long-term debt described above.
The following table shows the variance between the segment’s total incurred claims as reported and the total incurred claims for such years had they been determined retrospectively (the “Incurred claims related to current period insured events” for the year shown plus or minus the “Incurred claims related to prior period insured events” for the following year as included in note 9 to the audited consolidated financial statements). This table shows that the segments’ estimates of this liability have approximated the actual development.
Although the Company believes it currently has sufficient resources to fund ongoing operations and obligations and remain in compliance with statutory financial requirements for its California, Indiana and Louisiana HMOs and MLH, the lack of liquidity and available cash poses operational risk. Continuing losses and/or unforeseen cash requirements in the future could leave the Company without sufficient resources to fund its operations. In response to the need to secure additional capital resources, the Company is exploring various financing alternatives including raising debt or equity capital or other source of financing to provide it with additional working capital. However, the
Due after one year through five years..	 1,046 	 1,029 		 -------	 -------- 	 	 $ 8,075	 $ 8,031 		 =======	 ========
The Company is authorized to issue 40.0 million shares of $.01 par value Common Stock. Under the Reorganization Plan 10.0 million shares of the Company's Common Stock were issued for the benefit of holders of allowed claims, interest and equity claims. An additional 6.6 million shares were issued upon the conversion of Series A Stock in 1994 and 1995, and .4 million shares were issued in connection with the exercise of warrants issued pursuant to the Reorganization Plan. As of December 31, 1998 approximately 17.9 million shares of the Company's Common Stock were outstanding. The Certificate of Incorporation of the Company prohibits the issuance of certain non-voting equity securities as required by the United States Bankruptcy Code.
Pro forma disclosures required by SFAS No. 123 include the effects of all stock option awards granted by the Company from January 1, 1995 through December 31, 1999. During the initial phase-in period, the effects of applying this Statement for generating pro forma disclosures are not likely to be representative of the effects on pro forma net income for future years, for example, because options may vest over several years and additional awards generally are made each year. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information is as follows for the years ended December 31 (in thousands except for earnings per share information):
Pro forma loss per common share: Basic 	$ (.78) 	$ (1.62)	$ (1.57) Diluted	 $ (.78) 	$ (1.62)	$ (1.57)
our ability to manage the costs of acquiring new business (principally commissions paid to agents and distribution partners and bonuses credited to policyholders), and
2016 sales levels were supported by sales of MYGA fixed annuity products. These products are often emphasized by banks which are an expanding source of distribution for Eagle Life. Our rates on these products were more competitive during the first half of 2016 and together with the larger number of bank distribution relationships, translated into a significant increase in sales of those products. In 2015, we had robust sales of fixed index annuities by independent agents during the final three quarters of 2015 following the withdrawal in the first quarter of 2015 of a competitor’s guaranteed income product that had been the source of significant competition. This competitor returned to the market in 2016 and in general the market in the independent agent distribution channel was more competitive in 2017 and 2016 than it was in 2015.
As discussed above under Change in fair value of derivatives, the fair value of the 2015 notes embedded conversion derivative changes based upon the same factors effecting the changes in the 2015 notes hedges and, in general, the amount for the change in the fair value of the 2015 notes embedded conversion derivative was equal to the amount for the change in fair value of the 2015 notes hedges.
Interest expense on notes and loan payable increased 8% to $30.4 million in 2017 and decreased 2% to $28.2 million in 2016 from $28.8 million in 2015. Interest expense by debt instrument is as follows:
The decrease in unrealized losses from December 31, 2016 to 2017 was primarily due to a decrease in interest rates in addition to price improvements due to tighter credit spreads during the year ended December 31, 2017. The 10-year U.S. Treasury yield rates at December 31, 2017 and 2016 were 2.40% and 2.45%, respectively. The 30-year U.S. Treasury yields at December 31, 2017 and 2016 were 2.74% and 3.06%, respectively.
We validate external valuations at least quarterly through a combination of procedures that include the evaluation of methodologies used by the pricing services, analytical reviews and performance analysis of the prices against trends, and maintenance of a securities watch list. Additionally, as needed we utilize discounted cash flow models or perform independent valuations on a case-by-case basis using inputs and assumptions similar to those used by the pricing services. Although we do identify differences from time to time as a result of these validation procedures, we did not make any significant adjustments as of December 31, 2017 and 2016.
our intent and ability to retain equity securities for a period of time sufficient to allow for recovery;
The Company made an assessment of the materiality of this item on the Company’s historical financial statements in accordance with SAB No. 99, “Materiality,” and concluded that the error was immaterial to all periods. The Company also concluded that had the error been adjusted when it was identified within the first quarter of 2008, the impact of such an adjustment would have been material to its first quarter 2008 financial statements and was expected to be material to its full year 2008 financial statements.
The Company’s net income was $5,283,016 in 2008, $6,712,444 in 2007, and $11,925,466 in 2006.
Unifax began producing commercial earthquake insurance policies in California for non-affiliated insurance companies in 1999. Unifax receives a commission from these insurance companies based on premium written. Commission income on the earthquake program for the year ended December 31, 2008, decreased $4,703 (36%) compared to 2007. Commission income on the earthquake program for the year ended December 31, 2007, decreased $24,896 (66%) compared to 2006. Effective February 1, 2009, this program was terminated.
The Company presently occupies a 46,000 square foot office building located at 23251 Mulholland Drive, Woodland Hills, California, under a master lease expiring March 31, 2012. Erwin Cheldin, the Company's president, chairman, and principal stockholder, is the owner of the building. The Company signed an extension to the lease with a 4% increase in rent effective April 1, 2007. The lease provides for an annual gross rent of $1,025,952 through March 31, 2007, and $1,066,990 from April 1, 2007 through March 31, 2012. In addition, the lease extension provides for two, five-year options with a rent increase of 5% for each option period. The Company believes that at the inception of the lease agreement and at each subsequent extension, the terms of the lease were at least as favorable to the Company as could have been obtained from non-affiliated third parties. The Company utilizes for its own operations approximately 100% of the space it leases.
The line items in the financial statements that are impacted by this error are detailed in the tables below.
The Company, by virtue of the nature of the business conducted by it, becomes involved in numerous legal proceedings as either plaintiff or defendant. The Company is also required to resort to legal proceedings from time to time in order to enforce collection of premiums, commissions, or fees for the services rendered to customers or to their agents. These routine items of litigation do not materially affect the Company and are handled on a routine basis by the Company through its general counsel.
Summarized unaudited quarterly financial data for each of the calendar years 2008 and 2007 is as follows.
The Company is a life insurance company that conducts its business primarily in the annuity markets, and to a lesser extent in the life insurance markets of the financial services industry. The Company’s gross earnings are principally derived from two sources:
The Company’s financial position and/or results of operations are primarily affected by the following economic factors: equity market performance, fluctuations in medium-term interest rates, and the corporate credit environment, which affects credit quality and causes fluctuations in credit spreads. The impact of each of these economic factors is discussed below.
The Company’s portfolio of private placement securities is valued using a matrix pricing methodology. The pricing methodology is obtained from a third-party service and indicates current spreads for securities based on weighted average life, credit rating and industry sector. On a monthly basis, the Company reviews the matrix to ensure that the spreads are reasonable by comparing them to observed spreads for similar securities traded in the market. In order to account for the illiquid nature of these securities, illiquidity premiums are included in the valuation and are determined based upon the pricing of recent transactions in the private placement market as well as by comparing the value of the privately offered security to a similar public security. The impact of the illiquidity premium to the overall valuation is less than 2% of the fair value. The Company’s portfolio consists primarily of publicly-traded securities with only a minor portion comprised of private placement securities. At December 31, 2017 and 2016, approximately $82.7 million (or 5.2%) and $107.0 million (or 7.0%), respectively, of the fixed maturity and equity securities portfolio consisted of private placement securities.
The Company uses variance swaps to hedge equity risk. The Company also enters into total return swaps that are based on various global market indices. The Company recognizes gains (losses) from the change in fair value of the variance swaps and total return swaps in net derivative gains (losses) in the Statements of Income (Loss).
During 2017 and 2016, the decrease in VOBA was primarily driven by positive gross profits due to favorable performance of Separate Accounts during the period, which resulted in amortization. Annual mortality assumption updates and model changes recorded in the third quarter of 2017 resulted in an unlocking adjustment which decreased the VOBA asset. For both 2017 and 2016, the adjustments related to unrealized (gains) losses and OTTI on investments decreased VOBA as the result of net unrealized gains on AFS during the year compared to net unrealized losses in the same period.
(7) Enrollment as of December 31, 2002 includes 175,000 New York State PPO account members who reside in New York State but outside of our service areas. Prior to this time, these members were enrolled in the New York Blue Cross Blue Shield plan licensed in the area where the members resided and, accordingly, the membership was reported by these plans and not by us. Starting in 2002, in accordance with a change to the contract with New York State under which we administer the entire plan, we began including those members enrolled outside of our service area, and all members were therefore enrolled in, and reported by, HealthChoice. New York State PPO account members who reside in New York State but outside of our service areas are excluded from enrollment totals for all other periods presented.
We also have capitated arrangements with service providers for certain disease management programs and utilization management services. At December 31, 2002, we had approximately 55,000 members under a capitated utilization management program for eye care services and 851,000 members under capitated disease management programs.
The medical loss ratio for other insurance products and services decreased to 86.2% for the year ended December 31, 2001, from 86.4% for the year ended December 31, 2000, due to an improvement in the small and large group indemnity products and Medicare supplemental plans, partially offset by higher claims cost as a percentage of premium with respect to the New York State-mandated direct pay products.
Allstate's home office complex and most major offices are owned. Other facilities are leased, in almost all cases for terms of not more than five years. The Company believes its properties and facilities are adequate and suited to Allstate's current operations.
The operating results for 1997 were impacted by the write-off of approximately $150,000 in capitalized software costs related to software which was included in the sale of assets for the vehicle extended service contract business and the write-off of approximately $1.25 million in deferred tax assets for ACCEL and ANIC in order to reflect deferred tax realizable values as a result of the sale of the Auto Aftermarket Group.
A factor affecting the comparison of general and administrative expenses in 1998 versus previous years, was the allocation of overhead expenses in previous years among the Company and its subsidiaries that were sold effective December 31, 1997. In 1998, overhead expenses were fully absorbed by the Company. The increase in 1998 was primarily due to increased salaries of $.6 million of which the majority related to the change in allocation as previously discussed, increased legal fees of $.2 million, increased underwriting costs and
Net investment income for 1998 was $10.7 million or 71.3% higher than for the preceding year primarily due to increases in the average amount of invested assets associated with the coinsurance transaction described above. The percentage earned on average cash and investments was 6.4% in 1998 and 7.6% in 1997.
Year Ended Effective Income December 31 Tax Rates ----------- --------------- 1998........................................... 28% 1997........................................... 34%
Statements of Income for the years ended December 31, 1998, 1997, and 1996..
BASIS OF PRESENTATION The accompanying financial statements of Protective Life and Annuity Insurance Company ("the Company") are prepared on the basis of generally accepted accounting principles. Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities. (See also Note B.)
At December 31, 1998, the average mortgage loan was $0.5 million, and the weighted average interest rate was 9.2%. The largest single mortgage loan was $1.9 million.
1998 1997 ------------------------ Deferred income tax assets: Policy and policyholder liability reserves..........$ 12,392,740 $ 401,636 Deferred policy acquisition costs................... 195,580 ------------------------ 12,392,740 597,216 ------------------------ Deferred income tax liabilities: Unrealized gain on investments...................... 5,276,789 516,942 Other............................................... 2,085,442 Deferred policy acquisition costs................... 14,421,332 ------------------------ 19,698,121 2,602,384 ------------------------ Net deferred income tax liability $ 7,305,381 $2,005,168 ========================