felanders/preprocessed huggingface dataset:
Independent Auditors' Report......... 12 Consolidated Financial Statements Consolidated Statements of Income -- For the twelve months ended December 31, 1998 and 1997, the three months ended December 31, 1996 and the twelve months ended September 30, 1996....................... 13 Consolidated Balance Sheets -- As of December 31, 1998 and 1997.................. 14 Consolidated Statements of Cash Flows -- For the twelve months ended December 31, 1998 and 1997, the three months ended December 31, 1996 and the twelve months ended September 30, 1996....................... 15 Consolidated Statements of Stockholders' Equity -- For the twelve months ended December 31, 1998 and 1997, the three months ended December 31, 1996 and the twelve months ended September 30, 1996............. 16 Notes to Consolidated Financial Statements..................... 17 Supplementary Financial Information See Note 9 to Consolidated Financial Statements under this Item 8.
Allocation of purchase price: Goodwill........................ $ 3,758,659 Inventories..................... 2,348,295 Patents......................... 900,867 Accounts receivable............. 406,529 Property and equipment.......... 289,506 Other assets.................... 13,637 ------------ $ 7,717,493 ============
The accompanying consolidated financial statements include the accounts of Security Capital, all of its subsidiaries and its affiliate FIS prior to its disposition effective June 30, 1997 and FIM prior to its disposition effective December 30, 1997. All significant intercompany balances have been eliminated in consolidation.
In March 1996, the Company effected a one-for-eight reverse split of the Company's Common Stock and Class A Common Stock. The reverse split had the effect of decreasing the number of issued shares from 35,033,880 to approximately 4,378,025. The par value of the reduced shares in connection with the reverse split was charged to Common Stock and Class A Common Stock and a like amount credited to paid-in-capital. Accordingly, all share and per share data in the financial statements and footnotes have been restated to reflect the reverse stock split.
During 1998, Possible Dreams purchased approximately 53%, 15%, and 5% of its supplies from, respectively, Folkraft, Seagull Decor Co. and Novelty Trading. The loss of any of these suppliers could have an adverse effect on Possible Dreams' results of operations and financial condition. During 1998, Possible Dreams obtained an additional vendor to produce the product supplied by Folkraft, which should reduce Possible Dreams' dependence on Folkraft as a supplier.
On November 6, 1997, Pumpkin filed, in the United States Court for the District of Columbia, an action alleging patent, trademark and copyright infringement by a competitor entitled, Pumpkin, Ltd. d/b/a/ Pumpkin Masters, Inc. v. The Seed Corp., Inc. d/b/a Concept Marketing (Civil Action No. 97WY2387CB). Pumpkin had sought a permanent injunction against Concept Marketing and monetary and treble damages. This matter was settled in 1998 with the parties agreeing to a cross-license of certain products.
the vesting date for the respective tranche. All restrictions placed upon the common shares underlying the RSUs lapse at the end of the performance period, December 31, 2008.
We believe that fully converted book value per share and the change in fully converted book value per share adjusted for dividends are measurements which are important to investors and other interested parties who benefit from having a consistent basis for comparison with other companies within the industry. However, these measures may not be comparable to similarly titled measures used by companies either outside or inside of the insurance industry. These measures may be incorporated into the formulae applied by our Compensation and Nominating Committee when determining the harvest ratio under our Performance Unit Plan and our Long-Term Incentive Plan.
As mentioned earlier, the 2006 year benefited from below average catastrophe activity. Our total estimated losses from the largest events of 2006 which were a series of U.S. tornadoes and hailstorms, were less than $10 million. Large individual losses in 2006 were also at or below expected levels for non-catastrophe business. This compares to 2005 when the Property Catastrophe, Property Specialty, and Other Specialty groups of business were all heavily impacted by Hurricanes Katrina, Rita and Wilma. 2004 was impacted to a lesser extent by four Florida hurricanes and two Japanese typhoons.
The net favorable development during the year ended December 31, 2006 of losses incurred during prior accident years primarily resulted from the following:
Net paid claims were $756.9 million, $489.3 million and $192.0 million for the years ended December 31, 2006, 2005 and 2004, respectively.
We expect our investment income will remain at approximately 2006 levels during 2007.
On November 15, 2005, Montpelier Re entered into a Letter of Credit Reimbursement and Pledge Agreement with Bank of America, N.A. and a syndicate of commercial banks for the provision of a letter of credit facility in favor of U.S. ceding companies. The agreement was a one year secured facility that allowed Montpelier Re to request the issuance of up to $1.0 billion in letters of credit. On June 9, 2006, Montpelier Re entered into an amendment and restatement of the Letter of Credit and Pledge Agreement which replaced the above agreement. This Amended Letter of Credit Agreement provides for a 364-day secured $500.0 million letter of credit facility and a 5-year secured $500.0 million letter of credit facility.
In the year ended December 31, 2006, we incurred an operating net cash outflow of $568.5 million, primarily resulting from net paid losses of $756.9 million, offset somewhat by premiums received net of acquisition costs. As at December 31, 2006, we had cash and cash equivalents of $348.6 million of which $35.5 million was restricted.
In the first quarter of 2005, we acquired two insurance brokerage operations. Please read Note 20-“Subsequent Events” to our Consolidated Financial Statements included in Part II, Item 8 of this report for more information.
the timing of certain life insurance, core benefits and enrollment sales with significant first year commissions; and
A reconciliation of EBITDA to net income (loss) in accordance with GAAP.
Compensation and Employee Benefits Expenses. Compensation and Employee Benefits Expenses decreased $1.5 million, or 0.7%, to $195.9 million in 2003 from $197.4 million in 2002. In 2003, we had integration efforts and other charges of $0.4 million compared to $8.1 million in 2002. Also in 2003, we had $6.1 million of Compensation and Employee Benefits Expenses attributable to the impact of acquisitions, compared to zero in 2002. As a percentage of revenues, Compensation and Employee Benefits Expenses were 56.7% in 2003 compared to 61.4% in 2002. The decrease in 2003, as a percentage of revenues, is primarily due to the $8.1 million integration efforts and other charges in 2002, the positive affects of our integration efforts and improvements in performance in our Insurance Brokerage segment. To reduce compensation expense, in the first quarter of 2002 we terminated 32 employees and renegotiated compensations arrangements for four sales professionals.
(a) Excludes the early extinguishment of debt (interest adjustment) in 2003 and 2002.
premiums receivable and payments of premiums payable. Cash provided by operating activities was negatively impacted in 2003 by the pay-down of approximately $13.8 million in liabilities existing at December 31, 2002 in our Corporate segment related to pre-IPO obligations.
On May 10, 2004, we announced that our Board of Directors authorized a limited stock repurchase plan. Using only proceeds, and any related tax benefit amounts from the exercise of stock options and warrants, we may, at our discretion, repurchase shares on the open market or in private transactions in order to help offset dilution from our equity compensation plans and previously issued warrants to purchase our common stock. The amount and timing of repurchases will be based upon the number of shares of our common stock which may be issued from time to time upon the exercise of stock options and warrants, market conditions and other factors. During the second, third and fourth quarters of 2004 we purchased 282,548 shares of our common stock on the open market at an aggregate cost of $3.9 million.
On March 26, 2004, we requested and received a waiver that specifically excludes the Bertholon-Rowland and Dodge, Warren & Peters acquisitions from our credit facility limitations on aggregate cash payments, aggregate total consideration and assumed indebtedness (see Note 5-“Long-Term Debt” and Note 2-“Acquisitions” to our Consolidated Financial Statements in Part II, Item 8 of this report). No other covenants were waived or amended.
Premium income (all branches) — gross 2,151 2,074 - net 1,733 1,696
Results: — Non-Life reinsurance - 12 2 — Life reassurance 18 17
Georges Huguenin Walter Isler Hans R. Kaufmann Lavre Kirianoff Ernst A. Kubli Albert Kunz Jean-Claude Mayor Max Nabholz Samuel Patthey
The gross premiiuns of the Swiss Re Group, within which the Swiss Re is the largest unit writing reinsurance, in­ creased by Sw.frs. 234 million from Sw.frs. 2,777 million to Sw.frs. 3,011 million, i. e. by 8.4 % (previous year, 15.0 %). The net premiums of the Group rose from Sw.frs. 2.468 million to Sw.frs. 2,640 million, i. e. by 7.0 % (pre­
Bonds and Preference Shares of Banks, Public Utilities, Industrial and other Companies 647 600 664 511 484
Real Estate and Real Estate Companies 190 179 176 164 154
The last General Meeting re-elected to the Board of Direc­ tors Mr. Max Petitpierre and Mr. Paul Guggenbiihl for one and three years respectively and Mr. Matheus Klaas for four years. At the same time, Mr. Walter Berchtold was elected to the Board for the first time, which latter at its constituent assembly designated Mr. Paul Guggenbiihl to succeed Mr. Paul Keller as its Deputy Chairman.
Underwriting Result 242,000 9,000 Investment Income 389,000 337,000 Management Expenses - 379,000 - 350,000 Net Realized Capital Gains/Losses 191,000 - 129,000 Taxes - 192,000 - 40,000
The SAP catastrophe loss and ALAE ratio for 2017 was 22.5% compared to 3.1% and 0.2% in 2016 and 2015, respectively (Tables 7 - 9). The 2017 cat loss ratio reflects the impact of Hurricane’s Harvey and Irma, which added 21.2 points, or $50.6 million, to the cat loss ratio. The 2016 SAP catastrophe loss ratio reflects the impact of Hurricane Matthew which added 2.4 points, or $5.9 million, to the cat loss ratio.
ULAE was $3.7 million higher than anticipated in the reserves at December 31, 2015.
stocks. We constantly monitor the equity portfolio holdings for any credit risk issues that may arise. We do not invest in any commodity futures or commodity oriented mutual funds.
The following table sets forth our unrealized holding gains by investment type, net of deferred tax that was included as a component of accumulated comprehensive income at December 31, 2017 and 2016, and the change in unrealized holding gains, net of deferred tax, for the year ended December 31, 2017:
Stateco provides State Auto Mutual and its affiliates investment management services. Investment management income is recognized quarterly based on a percentage of the average fair value of investable assets and the equity portfolio performance of each company managed. Revenue related to these services amounted to $2.0 million, $1.9 million and $1.8 million in 2017, 2016 and 2015, respectively, and is included in other income (affiliates) on the consolidated statements of income.
The following tables set forth the reclassifications out of accumulated other comprehensive income, by component, to the Company’s consolidated statement of income for the years ended December 31, 2017, 2016 and 2015:
•Personal Insurance Segment- personal auto, homeowners, farm & ranch and other personal
The following tables set forth quarterly financial data for 2017 and 2016:
The "Management's Discussion and Analysis" included in The St. Paul's 1998 Annual Report to Shareholders is incorporated herein by reference.
TLIC has also leased 10,000 square feet in the Topeka, Kansas office building under a lease that was renewed during 2006 to run through June 30, 2011 with a 90 day notice to terminate the lease by the lessee. This lease was renewed on July 1, 2011 to run through June 30, 2016. Beginning July 1, 2014, the lessee can terminate the lease with a 180 day written notice. The terms of the lease leave TLIC responsible for paying real estate taxes, building insurance and building and ground maintenance. The lease agreement calls for minimum monthly base lease payments of $17,535.
In late December 2011, the Company completed its acquisition of 100% of the outstanding stock of Family Benefit Life Insurance Company, included in the life insurance segment, for $13,855,129 paid in cash.
The major components of our net investment income for the years ended December 31, 2013 and 2012 are summarized as follows:
There was a $385,562 increase in net realized investment gains for the year ended December 31, 2013.
$134,167 decrease in dividend, endowment and supplementary life contract benefits primarily relates to a decrease in dividends to policyholders, decreased endowments and decreased elections by policyholders for benefits under supplementary life contracts.
Net income was $889,323 ($0.11 per common share basic and diluted) and $1,101,881 ($0.14 per common share basic and diluted) for the years ended December 31, 2013 and 2012, respectively.
As a result of the Company’s purchase of FLAC and Family Benefit Life, an asset was recorded in the application of purchase accounting to recognize the value of acquired insurance in force. The Company’s value of acquired insurance in force is an intangible asset with a definite life and is amortized under Financial Accounting Standards Board (“FASB”) guidance. The value of acquired insurance in force is amortized primarily over the emerging profit of the related policies using the same assumptions that were used in computing liabilities for future policy benefits.
As of December 31, 2013, all of the above equity securities had a fair value to cost ratio equal to or greater than 78%.
The outstanding balance of lottery prize cash flows, by state lottery, as of December 31, 2013 and 2012 are summarized as follows:
Major categories of net investment income for the years ended December 31, 2013 and 2012 are summarized as follows:
Through June 30, 2012, the Company financed amounts up to 80% of the premium on property and casualty insurance policies after a 20% or greater down payment was made by the policy owner. The premiums financed were collateralized by the amount of the unearned premium of the insurance policy. Policies that became delinquent were submitted for cancellation and recovery of the unearned premium, up to the amount of the loan balance, 25 days after a payment became delinquent. Loans from premium financing are carried net of unearned interest and any estimated loan losses.
The property and casualty reinsurance industry historically has been cyclical in nature, owing to fluctuations in the supply of capital. During 2019, several developments have caused an increase in the demand for capital, including:
We monitor the development of our prior-year losses during the course of subsequent calendar years by comparing the actual reported losses against previous estimates. The analysis of this loss development is an important factor in our ongoing refinement of the assumptions underlying our reserving process.
Management uses certain key financial measures, some of which are not prescribed under U.S. GAAP rules and standards (“non-GAAP financial measures”) to evaluate our financial performance and the change in shareholder value. Generally, a non-GAAP financial measure, as defined in SEC Regulation G, is a numerical measure of a company’s historical or future financial performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP. We believe that these measures, which may be calculated or defined differently by other companies, provide a consistent and comparable measure of performance of our business to help shareholders understand performance trends and allow for a more complete understanding of the Company’s business. Non-GAAP financial measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The key non-GAAP financial measures used in this report are:
As of December 31, 2019, a gross deferred tax asset of $3.6 million (2018: $3.6 million) was included in other assets on the consolidated balance sheets. As of December 31, 2019, a deferred tax asset valuation allowance of $2.6 million was recorded by the Company. Based on the timing of the reversal of the temporary differences and likelihood of generating sufficient taxable income to realize the future tax benefit, management believes it is more likely than not that the recorded deferred tax asset (net of the valuation allowance) will be fully realized in the future. The Company has not taken any other tax positions that management believes are subject to uncertainty or that are reasonably likely to have a material impact to the Company, GRIL or Verdant.
The following table shows our aggregate contractual obligations as of December 31, 2019 by time period remaining:
(1) Reflects our minimum contractual obligations pursuant to the lease agreements as described below.
Our insurance segment had revenues of $5,702,708 for the year ended December 31, 2020 and $5,849,201 for the year ended December 31, 2019. Operating and management expenses were $3,259,590 for the year ended December 31, 2020 and $5,452,121 for the year ended December 31, 2019. This resulted in segment income of $2,443,118 and $397,080 for the years ended December 31, 2020 and 2019, respectively.
As of December 31, 2020, our total investments were $20,344,127, a decrease of $10,689,489 or 34.4%, from $31,033,616 at December 31, 2019. This decrease was primarily due to the sale of a portion of its equity securities portfolios to fund the payment of net losses paid under the Reinsurance Agreement and to the Company’s decision to liquidate its remaining equity securities portfolios in September 2020 as a measure to preserve its capital base, partially offset by the purchase of fixed income securities with certain proceeds in relation to the aforementioned equity security portfolio liquidations. The cash and cash equivalents balance decreased from $6,589,810 at December 31, 2019 to $5,732,110 at December 31, 2020, a decrease of $857,700 or 13%. This decrease was primarily due to net losses paid under the Reinsurance Agreement during the year ended December 31, 2020, partially offset by the deposit of certain proceeds in relation to the aforementioned equity security portfolio liquidations. The restricted cash and cash equivalents balance increased from $1,169,805 at December 31, 2019 to $4,964,126 at December 31, 2020, an increase of $3,794,321 or 324.4%. This increase was primarily due to the deposit of certain proceeds in relation to the aforementioned equity security portfolio liquidations. The ratio of cash and investments to total liabilities at December 31, 2020 was .96:1, compared to a ratio of 1.22:1 at December 31, 2019. The decrease in the ratio was primarily attributable to net losses paid under the Reinsurance Agreement and to an increase in unpaid losses and loss adjustment expenses assumed under the Reinsurance Agreement.
The assumed reinsurance payable represents current reinsurance losses payable to the fronting carriers. As of December 31, 2020, the balance was $3,175,098 compared to $6,756,177 as of December 31, 2019. This balance fluctuates due to the timing of reported losses and to the timing of loss payments to C&F under the Reinsurance Agreement.
Liability for unpaid losses and loss adjustment expenses - Refer to Note 2 and 6 to the consolidated financial statements
We compared management’s prior year liability for unpaid losses and loss adjustment expenses to actual development during the current year, and evaluated where within the actuarial range management’s best estimate falls, to identify potential bias in the determination of the liability.
In September 2020, the Company liquidated its equity securities portfolios as a measure to preserve its capital base.
The State of California has completed income tax audits on Mercury General Corporation for tax years ended December 31, 1993 through 1996. As part of these audits the California Franchise Tax Board ("FTB") is challenging the Company's ability to deduct a portion of its management and interest expenses. Upon completion of the audits for tax years ended December 31, 1993 through 1996, the FTB proposed assessments of approximately $7,600,000, plus interest. The Company has formally appealed the proposed assessments and is currently awaiting a hearing before the California State Board of Equalization ("SBE").
The State of California is also performing audits for tax years ended December 31, 1997 through 2000. The FTB is challenging the Company's ability to deduct a portion of its management and interest expenses. Alternatively, based partly on the recent California Court of Appeal decision in Ceridian vs. Franchise Tax Board, the FTB is challenging the Company's ability to exclude intercompany dividends from income tax. No formal assessments have been made for tax years December 31, 1997 through 2000. However, management believes the FTB will assert similar challenges and could propose additional assessments of approximately $17 million, plus interest.
Codification became effective January 1, 2001. At December 31, 2001 the Company realized a surplus increase of approximately $41 million due to Codification. This increase primarily relates to the establishment of a net deferred tax asset.
The following table summarizes information regarding the stock options outstanding at December 31, 2001:
The following table summarizes the fair value by contractual maturities of our fixed maturity securities portfolio at the dates indicated.
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Going Concern Basis) for the Years Ended December 31, 2003 and 2004 and for the Period January 1, 2005 to May 25, 2005
Net premiums earned $32,046 $29,798 $26,246 $40,183 $36,317 Net investment and other income 14,840 14,191 11,509 14,773 14,859 ----------------------------------------------- Total revenue 46,886 43,989 37,755 54,956 51,176
The schedule which follows summarizes the development of the liability for loss and loss adjustment expense from 1986 through 1996. This schedule is also presented net of reinsurance which the Company believes best explains the development as it affects operating results. The Company has a conservative loss reserving policy which, when coupled with a moderation of malpractice insurance losses which began in approximately 1986 for the Company and across the industry, has resulted in redundancies in liabilities larger than expected. The table indicates that the redundancy in loss liabilities, which developed when more actual results were known, has been significantly reduced from the high at December 31, 1990. Loss and loss adjustment expense liabilities have not been discounted in the Company's financial statements.
AMORTIZED MARKET COST VALUE ----------------------------- Due in one year or less $ 7,477 $ 7,514 Due after one year through five years 79,456 81,736 Due after five years through ten years 65,380 66,576 Due after ten years 27,666 27,735 ----------------------------- $ 179,979 $ 183,561 ----------------------------- -----------------------------
The assets and liabilities related to variable annuity and variable life contracts are legally segregated and reflected as Separate Accounts. The assets of the Separate Accounts are carried at fair value. Separate Accounts liabilities represent the contractholders' claim to the related assets and are carried at the fair value of the assets. In the event that the asset value of certain contractholder accounts are projected to be below the value guaranteed by the Company, a liability is established through a charge to earnings. Investment income and realized gains and losses of the Separate Accounts accrue directly to the contractholders and therefore, are not included in the Company's consolidated statements of operations and comprehensive income.
Net income was $5.0 million in 1999 compared to $6.7 million in 1998, as increased net investment income was more than offset by realized capital losses and a $2.0 million write-down of the Company's building and unamortized building improvements. In 1998, net income was $6.7 million compared to $6.9 million in 1997 as higher realized capital gains were more than offset by lower income from AFDI.
are not expected to have a material impact on the financial position, liquidity or result of operations of the Company.
DIVIDENDS The ability of the Company to pay dividends is dependent on business conditions, income, cash requirements of the Company and other relevant factors. The payment of shareholder dividends by the Company without the prior approval of the state insurance regulator is limited to formula amounts based on net income and capital and surplus, determined in accordance with statutory accounting practices, as well as the timing and amount of dividends paid in the preceding twelve months. The maximum amount of dividends that the Company can distribute during 2000 without prior approval of the Nebraska Department of Insurance is $15,113.
Our principal offices in Allentown, Pennsylvania occupy two buildings, totaling approximately 30,000 square feet of office space in a 40,000 square foot building and all of an 8,000 square foot building. We own both buildings and a 2.42 acre undeveloped parcel of land located across the street from our home offices. We also lease additional office space in California, Michigan, New York and Texas.
COMPREHENSIVE INCOME. During 1999, our investment portfolio generated pre-tax unrealized losses of $18,009 due to increased market interest rates, compared to 1998 unrealized gains of $10,032. After accounting for deferred taxes from these gains, shareholders' equity increased by $5,875 from comprehensive income during 1999, compared to comprehensive income of $24,591 in 1998.
The table that follows presents the operating results of the Investment Management segment, consisting principally of AllianceBernstein’s operations.
The Company’s liquidity needs are affected by: fluctuations in mortality; other benefit payments; policyholder directed transfers from General Account to Separate Account investment options; and the level of surrenders and withdrawals previously discussed in “Results of Continuing Operations by Segment - Insurance,” as well as by debt service requirements and dividends to its shareholder. AXA Equitable paid shareholder dividends totaling $600.0 million in 2007; no dividends were paid in 2008 and none are expected to be paid in 2009.
On June 15, 2007, AXA Insurance Holding Co. Ltd. repaid its $400.0 million note to AXA Equitable. That investment had an interest rate of 5.89%.
Management of AllianceBernstein believes AllianceBernstein’s substantial equity base and its access to public and private debt at competitive terms should provide adequate liquidity for its general business needs and its cash flows from operations and the issuance of debt and AllianceBernstein and AllianceBernstein Holding Units will provide AllianceBernstein with the resources to meet its financial obligations. For further information, see AllianceBernstein’s Annual Report on Form 10-K for the year ended December 31, 2008.
At December 31, 2008, AXA Equitable had outstanding $650.0 million of 5.40% senior unsecured notes issued by AXA affiliates.
Recognition of Insurance Income and Related Benefits - Profits on non-participating traditional life policies and annuity contracts with life contingencies emerge from the matching of benefits and other expenses against the related premiums. Profits on participating traditional life, universal life-type and investment-type contracts emerge from the matching of benefits and other expenses against the related contract margins. This matching is accomplished by means of the provision for liabilities for future policy benefits and the deferral, and subsequent amortization, of policy acquisition costs. Trends in the general population and the Company’s own mortality, morbidity, persistency and claims experience have a direct impact on the benefits and expenses reported in any given period.
Performance fees are recorded as revenue at the end of the specified period and will generally be higher in favorable markets and lower in unfavorable markets, which may increase the volatility of the segment’s revenues and earnings.
Except for various allocations discussed below, the accounting policies of the segments are the same as those described in the preparation of the Consolidated Financial Statements (see Note 4 to the Consolidated Financial Statements). The Company evaluates the performance of each operating segment based on profit or loss from operations before income taxes and nonrecurring items (e.g. items of an unusual or infrequent nature). The Company does not allocate certain nonrecurring items to the segments. In addition, all segment revenues are from external customers.
The Company's total capitalization, excluding accumulated comprehensive income, increased $153.1 million, or 7.6%, to $2,153.7 million at December 31, 1999, as compared to $2,000.6 million at December 31, 1998. The increase was primarily the result of net income of $248.6 million offset by decreases in total debt of $76.6 million (which related to the payment in full of certain real estate financing transactions during 1999) and dividend payments of $18.9 million. The Company's debt to equity (excluding accumulated comprehensive income) and debt to total capitalization ratios decreased to 16.1% and 13.9% at December 31, 1999, respectively, from 23.1% and 18.8% at December 31, 1998, respectively.
losses on the investments of separate accounts accrue directly to contractholders and, accordingly, are not reflected in the Company's consolidated statements of income and cash flows. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues.
Gross interest income on restructured commercial mortgage loan balances that would have been recorded in accordance with the loans' original terms was approximately $16.1 million, $17.8 million and $25.0 million at December 31, 1999, 1998 and 1997, respectively. As a result of the restructurings, the gross interest income recognized in net income at December 31, 1999, 1998 and 1997, respectively, was $10.8 million, $12.6 million and $18.6 million.
As of December 31, 1999, the Company had no problem commercial mortgages. As of December 31, 1998, the Company had two problem commercial mortgages aggregating $11.6 million which were New York state retail mortgages.
Equity real estate is evenly distributed across geographic regions of the country with a slightly larger concentration in the mountain region of the United States at December 31, 1999. By property type, there is a concentration in office buildings which represented approximately 49.0% of the equity real estate portfolio at December 31, 1999. The Company's largest equity real estate holding at December 31, 1999 consisted of a hotel property located in Arizona with a carrying value of approximately $107.8 million and representing less than approximately 1.0% of general account invested assets. The ten largest real estate properties as of December 31, 1999 comprise 63.3% of total real estate assets and less than 2.2% of total invested assets.
Superior, Arizona. Harborlite's third largest mine in terms of tonnage produced is located at 45156 Silver King Road in Superior, Arizona and is accessed via public roads and highways. This open-pit mine, along with the perlite expansion plants located in the United States, was acquired in 1992 for a purchase price of $15.8 million from a private, individual landowner and has been in continuous operation for more than 40 years. The Superior property consists of approximately 2,000 acres, of which approximately 200 acres are owned. The remaining 1,800 acres consists of U.S. Forest Service property on which Harborlite holds unpatented mining claims. Of the total acreage of the property, the active mine consists of approximately 100 acres, plant and equipment is on approximately 20 acres and approximately 1,880 acres are undeveloped.
In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position (SOP) 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1). The Company adopted SOP 05-1 effective January 1, 2007, which resulted in a $6.0 million charge, net of taxes, as the cumulative effect of adoption of this accounting principle. See Note 3 to the audited consolidated financial statements included in the F pages of this report for a complete description of SOP 05-1.
The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the
In July 2006, the Company reached substantial agreement with the IRS on all open issues for tax years 2000-2002, including issues related to the DRD. Accordingly, the Company revised its estimate of amounts that may be due in connection with certain tax positions, including the DRD, for all open tax years. As a result of the revised estimate, $114.2 million of tax reserves were released into earnings during the second quarter of 2006.
Net income increased $36, or 51% primarily due to the revenue growth described above. Individual Life incurred an after-tax loss of $3 related to the September 11 terrorist attack. Excluding this loss, operating income increased $39, or 56%, primarily due to the growth factors described above.
As of December 31, 2001, the Company had immaterial currency exposures resulting from its international operations.
December 31, 2001 are reflected in the table below by expected maturity year. Comparative totals are included for December 31, 2000.
The National Association of Insurance Commissioners (NAIC) has regulations establishing minimum capitalization requirements based on Risk-Based Capital (RBC) formulas for life insurance companies. The requirements consist of formulas which identify companies that are undercapitalized and require specific regulatory actions. The RBC formula for life insurance companies establishes capital requirements relating to insurance, business, asset and interest rate risks. The RBC ratios for each of the life insurance subsidiaries are in excess of 200% as of December 31, 2001, which are greater than the minimum threshold.
Claims and Policy Benefits. Claims and Policy Benefits for the year ended December 31, 1999 were approximately $79,953,000 or 79% of net premium as compared with $23,297,000 or 83% of net premium for the initial operating period of eight and one-half months ended December 31, 1998. Mortality experience has been favorable, falling within pricing parameters. We expect mortality to be fairly constant over long periods of time, but it will fluctuate from period to period. Reserve levels are in part determined by claims reported from ceding companies, our aggregate experience and overall mortality trends.
Our invested assets consist primarily of fixed maturity securities. These fixed maturity securities are invested primarily in U.S. government obligations, foreign government obligations, public utilities obligations, corporate fixed maturities, and mortgage backed securities.
At the February 9, 2000, April 27, 2000, July 27, 2000 and October 26, 2000 Board of Directors meetings, shareholder dividends of $.04 per share were declared. The Board intends to continue to declare and pay out of earnings a quarterly dividend. The continued payment of dividends is dependent on the ability of our operating subsidiaries to achieve satisfactory underwriting and investment results, and no assurance can be given that dividends will be declared or paid in the future.
The weighted average fair value of options granted during 2000 is $11.79 per share. The fair values of the options granted in 2000 are estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions; dividend yield of 0.7% per annum; expected volatility of 35%; expected life of 10 years and a risk free interest rate of 5.8%.
The Company's ability to pay dividends depends on the ability of its operating subsidiaries to pay dividends to the Company. While the Company itself is not subject to any significant legal prohibitions on the payment of dividends, its operating subsidiaries may be subject to regulatory constraints, which affect their ability to pay dividends to the Company.
The Company's underwriting expenses decreased during 2003 and 2002 mainly due to the Company having ceased insurance operations resulting in reduced commissions, premium taxes and a reduction in compensation and benefits resulting from downsizing actions taken during 2003 and 2002.
The following discussion should be read in conjunction with the consolidated financial statements and the related notes thereto appearing elsewhere in this Annual Report. The consolidated financial statements for 2003 include the accounts and operations of The MIIX Group and its wholly-owned subsidiaries.
The Company's business is subject to a number of risks and uncertainties. However, many of these risks and uncertainties were impacted by the September 28, 2004 Order of Rehabilitation. The risks include:
Average invested assets at amortized cost decreased to approximately $889.4 million in 2003 from $1.15 billion in 2002. The average annual pre-tax yield on the investment portfolio decreased to 4.03% in 2003 from 5.31% in 2002 primarily as a result of lower market yields and an increase in short-duration investments held during 2003 for the reasons set forth above.
The Company considers the effects of inflation in reserving for losses and LAE. There may be long periods between the sale of insurance coverage and the reporting of losses, particularly with respect to coverage provided by the Company on occurrence-basis policies. Further, there are typically significant periods of time between reporting and settlement of losses. The actual effects of inflation on the Company's operating results cannot be accurately known until losses are reported and ultimately settled. Management believes that the Company's pricing and loss and LAE reserving processes adequately incorporate the effects of inflation.
Prior to the November 2002 sale described below, the Insurance Group included equity interests in two managing general underwriters: IndependenceCare Holdings LLC ("IndependenceCare") and Risk Assessment Strategies, Inc. ("RAS") and a Delaware property and casualty insurer, First Standard Security Insurance Company ("First Standard"). On June 30, 2002, the Company acquired the remaining shares of common stock and preferred stock held by minority shareholders to increase its ownership of RAS to 100%. On November 14, 2002, the Company sold the stock of First Standard Holdings Corp. ("FSHC"), which owned 100% of the stock of IndependenceCare, RAS and First Standard, to American Independence Corp. (NASDAQ: "AMIC") for $31.9 million in cash. At such time, IHC owned 19.9% of the stock of AMIC. The sale of FSHC resulted in a $4.6 million gain, net of tax ($8.1 million pre-tax) to the Company. In February 2003, the Company made a cash tender offer at $9.00 per share for an additional 1,000,000 (or approximately 12%) of AMIC's outstanding shares. Such tender offer is expected to close on April 22, 2003. Two representatives of IHC are directors of AMIC and AMIC's operations are being directed by the management of IHC.
Information pertaining to the Company's business segments is provided in Note 17 of Notes to Consolidated Financial Statements included in Item 8.
Other income increased $2.4 million due to a $2.2 million increase at Standard Life comprised of a decrease in a modified coinsurance reserves adjustment resulting from the surrender in 2000 by a large group of assumed ordinary life policies that are in runoff (such increase in other income is offset by an increase in insurance benefits and claims); and an increase of $1.1 million in fee income earned at IndependenceCare offset by $.9 million less fee income earned by RAS.
If the Rating Agencies Downgrade the Company's Insurance Companies, the Company's Results of Operations and Competitive Position in the Industry May Suffer
The Company is subject to extensive governmental regulation and supervision. Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors. This regulation, generally administered by a department of insurance in each state in which the Company does business, relates to, among other things
The following table summarizes certain selected financial data for the Company's Individual Annuity segment for the years indicated.
The Institutional Products segment is comprised of the Company's group pension and payroll deduction business, both public and private sectors, and medium-term note program. The public sector includes the 457 business in the form of fixed and variable annuities. The private sector includes the 401(k) business generated through fixed and variable annuities. The sales figures do not include business generated through the Company's medium-term note program, large case pension plan acquisitions and Nationwide employee and agent benefit plans, however the income statement data does reflect this business.
Premiums Earned $45,407,270 $ 49,812,496 $53,412,569 $54,378,800 $58,471,950 Net Investment Income 4,377,055 6,368,353 6,150,764 4,808,908 655,755 ------------ ------------ ------------ ----------- ------------ Total Income 49,784,325 56,180,849 59,563,333 59,187,708 59,127,705 ============ ============ ============ =========== ============ Less Losses and Expenses 41,100,065 48,855,731 53,832,415 55,509,335 62,662,673 Net Income (Loss) $ 8,684,260 $ 7,325,118 $ 5,730,918 $ 3,678,373 $(3,534,968) ============ ============ ============ =========== ============ Dividends Per Common Share* 0 0 0 0 0 Total Assets $106,720,748 $108,379,496 $116,131,055 $118,886,919 $132,504,762 ============ ============ ============ ============ ============ Total Policy Reserves and Other Liabilities 79,391,812 87,313,016 93,765,03 397,764,992 117,281,645 ============ ============ ============ ============ ============ Stockholders' Equity 27,328,936 21,066,480 22,366,022 21,121,927 15,223,117 Dividends Paid on Participating Shares 4,930,473 4,318,225 3,083,096 673,134 4,066,464
o to reimburse MIC for the Company's share of premiums returned for business retroceded under the Retrocession Agreements on account of cancellations of such business;
The following table sets forth an analysis of changes in the reserves for unpaid losses for the years ended December 31, 2003, 2002 and 2001.
INCOME TAXES. Income tax expense for 1996 was $0.8 million compared to a $0.8 million tax recovery for 1995. The effective combined income tax rate for 1996 was 17.4%. These rates are below the combined statutory rate due to the significant portion of the Company's investment portfolio consisting of tax-exempt securities.
The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") and Staff Accounting Bulletin No. 98 "Earnings per Share" ("SAB 98") as of December 31, 1997 and has restated 1995 and 1996 share and per share data to conform to the provisions of SFAS 128 and SAB 98. The EPS calculations for the years ended December 31, 1995, 1996 and 1997 were based upon the weighted average number of shares of common stock outstanding. The EPS - assuming dilution calculations were based upon the weighted average number of shares of common stock outstanding adjusted for the effect of convertible securities, and options
Fixed maturities with a book value of $66,096 were on deposit with various regulatory authorities as of December 31, 1997 as required.
In the ordinary course of business, the insurance subsidiaries cede insurance for the purpose of obtaining greater risk diversification and minimizing the maximum net loss potential arising from large claims. The insurance subsidiaries, however, are contingently liable in the event that their reinsurers become unable to meet their contractual obligations. A large portion of the reinsurance is effected under reinsurance contracts known as treaties. PAULA Insurance Company (PICO) maintains excess of loss and catastrophic reinsurance arrangements to protect it against losses above its retention on workers' compensation policies. The maximum retention on workers' compensation policies is $200 in 1995 through June 30, 1996 and $250 for the last six months of 1996 and all of 1997 for each loss occurrence.
In 1997, the Company adopted its 1997 Stock Incentive Plan, reserving 200,000 shares of common stock, none of which have been granted as of December 31, 1997.
The NAIC has adopted a risk-based capital formula for both property and casualty and life insurance companies. These formulas calculate a minimum level of capital and surplus which should be maintained by each insurer. At December 31, 1997, both PICO and PACO's adjusted capital and surplus exceeded their respective risk-based capital requirements.