felanders/preprocessed huggingface dataset:
Prior to its conclusion on March 31, 2011, our previous TRICARE contract for the North Region was included in our Government Contracts segment. Under our previous TRICARE contract for the North Region, we provided health care services to approximately 3.1 million MHS eligible beneficiaries, including 1.8 million TRICARE eligible beneficiaries for whom we provided health care and administrative services and 1.3 million other MHS eligible beneficiaries for whom we provided administrative services only (ASO).
Government Contracts segment pretax income increased to $185.2 million in 2011 compared to $178.7 million in 2010;
As a result of the award of the T-3 contract for the TRICARE South Region, responsibility for the delivery of services for the Fort Campbell area of Kentucky and Tennessee was realigned from the TRICARE North Region to the TRICARE South Region. This realignment was expected and, as a result, effective April 1, 2012 we will no longer be responsible for servicing the approximately 116,000 eligible beneficiaries in the Fort Campbell area under our T-3 contract. We do not believe the impact of this realignment will be material to our consolidated results of operations.
The decreases in the revenues and expenses in the Northeast Operations segment in 2011 from 2010 reflect the ongoing run-out and wind-down of the Acquired Companies. For additional information on the United Administrative Services Agreements, the Claims Servicing Agreements and the ongoing run out and wind-down of the Acquired Companies, see Note 2 to the consolidated financial statements under the heading “Subsequent Accounting for the Northeast Sale.”
Net cash provided by investing activities increased by $422.8 million compared to the year ended December 31, 2010. This increase is primarily due to a $366.3 million increase in net sales and maturities of investments in available-for-sale securities and by an $86.0 million increase in cash received from United for additional consideration related to the Northeast Sale, partially offset by a $29.5 million increase in purchases of property and equipment.
Certain of our subsidiaries must comply with minimum capital and surplus requirements under applicable state laws and regulations, and must have adequate reserves for claims. Management believes that as of December 31, 2011, all of our active health plans and insurance subsidiaries met their respective regulatory requirements relating to maintenance of minimum capital standards, surplus requirements and adequate reserves for claims in all material respects.
As of December 31, 2011, we had no off-balance sheet arrangements as defined under Regulation S-K Item 303(a)(4) and the instructions thereto. See Note 6 to our consolidated financial statements for a discussion of our letters of credit.
On a monthly basis, we estimate the amount of uncollectible receivables to reflect allowances for doubtful accounts. The allowances for doubtful accounts are estimated based on the creditworthiness of our customers, our
The selected consolidated financial data presented below for, and as of the end of each of the years ended December 31, have been derived from the consolidated financial statements of the Company which have been audited by KPMG LLP, independent certified public accountants. The consolidated balance sheets as of December 31, 2000 and 1999, and the consolidated statements of operations, shareholders' equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2000, and the independent auditors report thereon are included elsewhere in this document. The information presented below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," consolidated financial statements and the notes thereto, and the other financial information included herein.
(3) Based on shares of Common Stock outstanding of 27,369,736, 27,119,833, 20,896,563, 20,874,224 and 21,087,407 at the end of 2000, 1999, 1998, 1997 and 1996, respectively. Common Stock outstanding at December 31, 2000 and 1999 assumes conversion of the Series A Convertible Preferred stock that was issued in the 1999 GMSP transaction.
A defined Conversion Price formula, subject to standard adjustments, will be used to determine the conversion price for the Series B Preferred Stock and to determine the exercise prices for the Stallings warrant and as the base for the amended exercise prices of the GMSP warrants. The Conversion Price will be equal to the lesser of tangible book value per share of GNA Common Stock as of June 30, 2001, or 110% of the average closing price per share of GNA common stock for the 30 trading days immediately prior to April 30, 2001. Under no circumstance may the Conversion Price be less than $2.25.
Underwriting and operating expenses were up 14% in 2000 from 1999, but were down 13% in 1999 from 1998. The increase for 2000 was primarily due to salary increases, personnel additions and bad debt reserve increases. The decrease for 1999 was primarily due to approximately $2 million in non-recurring expenses associated with a reduction in the number of employees, legal fees and consulting fees that were incurred in 1998.
The Gresham, Oregon and Salem, Oregon apartment properties were sold on August 10, 2005 and March 10, 2005, respectively, but certain post-closing adjustments were recognized during the year ended December 31, 2006.
In 2001 mortgage interest rates decreased to levels comparable to rates experienced in 1998. Refinance activity reached record levels and the demand for residential resale and new home sales continued to be very strong. All four quarters of 2001 compared favorably with the respective quarters of 2000.
Investments carried at $22.7 million were on deposit with state treasurers in accordance with statutory requirements for the protection of policyholders at December 31, 2002.
The amortized cost and estimated fair value of debt securities at December 31, 2002, by contractual maturities, are as follows:
The aggregate annual maturities for loans receivable in each of the five years after December 31, 2002, are as follows:
On April 24, 1996, the Company implemented The First American Corporation 1996 Stock Option Plan (the Stock Option Plan). Under the Stock Option Plan, options are granted to certain employees to purchase the Company’s common stock at a price no less than the market value of the shares on the date of the grant. The maximum number of shares that may be subject to options is 14,625,000. Currently, outstanding options become exercisable one to five years, and expire ten years from the grant date. On April 24, 1997, the Company implemented The First American Corporation 1997 Directors’ Stock Plan (the Directors’ Plan). The Directors’ Plan is similar to the employees’ Stock Option Plan, except that the maximum number of shares that may be subject to options is 1,800,000 and the maximum number of shares that may be purchased pursuant to options granted shall not exceed 6,750 shares during any consecutive 12-month period.
were issuable upon exercise of those options. At December 31, 2002, 62,193 Common shares of the Company were issuable pursuant to exercise of the remaining outstanding adjusted NAIG options with exercise prices ranging from $7.65 to $19.40.
The Company and Experian Information Solutions, Inc. (Experian) are parties to a joint venture that resulted in the creation of the Company’s First American Real Estate Solutions, LLC (FARES) subsidiary. Pursuant to the terms of the joint venture, Experian has the right to sell to the Company its interest in FARES at a purchase price determined pursuant to a specified formula based on the after-tax earnings of FARES. Experian may only exercise this right if the purchase price is greater than $80.0 million and less than $160.0 million. As of December 31, 2002, the purchase price exceeded $160.0 million and, therefore, Experian’s right was not exercisable as of such date. In addition to the agreement with Experian, the Company is also party to several other agreements that require the Company to purchase some or all of the minority shares of certain less-than-100% owned subsidiaries if certain conditions are met. The total potential purchase price related to those agreements that have met the necessary conditions as of December 31, 2002, was not material.
(2) Includes the 1997 acquisitions of Colonial Penn and LTC, Inc. and inclusion of a full year of operating results for Life of Virginia, Union Fidelity and First Colony (the "1996 Acquisitions") versus nine months, nine months and one month, respectively, in 1996.
The Company uses swaps primarily to optimize funding costs. Interest rate and currency swaps that modify borrowings or designated assets, including swaps associated with forecasted commercial paper renewals, are accounted for on an accrual basis. The Company requires all other swaps, as well as futures, interest rate floors, swaptions, options and currency forwards, to be designated and accounted for as hedges of specific assets, liabilities or committed transactions; resulting payments and receipts are recognized contemporaneously with effects of hedged transactions. A payment or receipt arising from early termination of an effective hedge is accounted for as an adjustment to the basis of the hedged transaction.
As a condition to the AMEX Life acquisition, certain specified classes of business continue to be underwritten by GECA, but are fully reinsured on an indemnity basis to IDS Life Insurance Company, an insurance subsidiary of American Express Company (former parent of AMEX Life).
1999 $17 2000 13 2001 11 2002 9 2003 7 Thereafter 19 ---------- Total $76 ==========
The following is a summary of industry segment activity for 1998, 1997 and 1996:
For the year ended December 31, 2008 our actuarial firm determined range of loss and LAE reserves on a net basis range from a low of $47.8 million to a high of $58.5 million, with a best estimate of $53.1 million. The Company’s net loss and LAE reserves are carried at $52.4 million. Management’s point estimate of reserves is 1.5% below our actuary’s best estimate in recognition of the inherent uncertainty in assessing the potential ultimate liabilities given legal developments as well as evolution in its operations.
Subsequent to December 31, 2008, the Company engaged external asset managers and the funds were invested in long and short term investments with yields that best match our liquidity needs.
Premiums receivable in connection with our automobile line of business decreased $0.2 million, or 68.8%, to $0.1 million as of December 31, 2008, compared with $0.4 million as of December 31, 2007.
As noted above, the Company’s efforts to expand its commercial general liability lines of insurance products is coming to fruition, as reflected by increased net premiums earned of $5.1 million, or 18.4 % to $32.7 million in 2007, compared with $27.7 million in 2006.
Managing general agent fees decreased $0.6 million, or 22.5%, to $2.0 million in 2007, compared with $2.6 million in 2006.
We rely on our information technology and telecommunications systems, and the failure of these systems could disrupt our operations.
In 2001, we implemented a franchisee stock option plan that was terminated during September 2008, and provided for the granting of stock options to individuals purchasing Company owned agencies that were then converted to franchised agencies. The purpose of the plan was to advance our interests by providing an additional incentive to encourage managers of Company owned agencies to purchase the agencies and convert them to franchises. Options outstanding under the plan were granted at prices, which were above the market value of the stock on the date of grant, vested over a ten-year period, and expired ten years after the grant date. Under this plan, we were authorized to grant options to purchase up to 988,500 common shares, and, as of December 31, 2008, we had no outstanding exercisable options to purchase shares.
On July 31, 2006, we made the final principal payment of $625,000 on the July 2003 Notes and the July 2003 warrants expired. Of the 612,074 shares that could have been issued in connection with the July 2003 warrants, 301,430 were exercised, 225,000 were reacquired in the open market by us and 85,644 were unexercised. The unexercised warrants were cancelled as of July 31, 2006.
We currently lease approximately 13,007 square feet office space at 2900 South 70th Street, Suite 400, Lincoln, Nebraska 68506. This lease was executed October 17, 2013 and expires on January 31, 2024. We executed an amendment to the above lease for the additional 2,876 square feet of office space in Suite 450 on October 23, 2015, which expires on May 31, 2017. Great Plains entered into a lease on October 4, 2013 for office space in Mitchell, South Dakota, which expires on November 30, 2016. First Wyoming Life entered into a lease August 28, 2013 for office space located in Cheyenne, Wyoming for approximately 1,421 square feet which expires on August 31, 2016.
In September, 2014, we completed a private offering of a newly-created class of preferred shares, Series B preferred stock, at $6.00 per share. The Series B shares are non-cumulative, non-voting and convertible into our voting common shares after May 1, 2017 at a rate of two voting common shares for each share of Series B preferred stock. A total of 102,669 shares of Series B preferred stock were sold for total gross proceeds of $616,012 and the net proceeds were used for general corporate purposes.
Bargain purchase gain for business acquisition: The gain in 2015 was a result of the acquisition of First Wyoming in October 2015.
Loss attributable to noncontrolling interests: We owned approximately 60% of the capital stock of Security Capital, and approximately 25.7% of Great Plains Financial through August 5, 2014 at which time we acquired the remaining outstanding common shares of each company not held by us. Great Plains Financial and Security Capital were included in the 2014 consolidated financials and we subtracted from our earnings the portion of the gain/loss that we did not own, or 40% for Security Capital and 74.3% for Great Plains Financial. As a result of the acquisition for the year ended December 31, 2015, we did not have a gain/loss attributable to noncontrolling interests compared to the same period in 2014.
Increases in fixed maturity securities primarily resulted from additional purchases made by American Life and Great Plains Life during 2015.
In evaluating the information in the table above, it should be noted that each column includes the effects of changes in amounts for prior periods. The table does not present accident year or policy year development data. Conditions and trends that have affected the development of liabilities in the past may not necessarily occur in the future. Accordingly, it may not be appropriate to extrapolate future redundancies or deficiencies based on this table.
In February 2006, the FASB issued Statement of Financial Accounting Standards, or SFAS, No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of SFAS No. 133 and 140. SFAS No. 155 becomes effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. This Statement permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133; establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. Management does not expect the adoption of this standard to have a material effect on the Company’s financial position, results of operations or cash flows.
Loss on discontinued operations for 2006 totaled $25.5 million which consists of a $1.1 million loss on operations during the year and a $24.4 million loss on the sale of Family Life.
Treasury stock distributed in lieu of cash of $0.2 million for board of director fees
Effective June 1, 2006, Investors Life recaptured the previously reinsured investment annuity business with Symetra Life resulting in the retention of 100% of this business. The recapture of this previously reinsured business increased other revenues in 2006 by approximately $1.3 million as compared with 2005. Revenues from this business could increase in 2007 as the Company retained only 10% of such business for five months of 2006. However, as this is a closed block of business, annual revenues are expected to decrease as the policies in force decline.
Other income increased $2.2 million during 2006 primarily due to additional fees earned on separate accounts.
In 2004, loss from continuing operations was affected by the following items:
Policyholder benefits and expenses, which consist primarily of death benefit claims, totaled $26.7 million, $29.9 million, and $35.7 million for the years ended December 31, 2006, 2005, and 2004, respectively. The decreases noted from 2005 to 2006 and from 2004 to 2005 are primarily attributable to lower death claims.
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Instruments” (“SFAS No. 155”). This statement amends SFAS No. 133 and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The provisions of SFAS No. 155 (1) permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (2) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, (3) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (4) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (5) amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 will be applied prospectively by the Company and is effective for all financial instruments acquired or issued for fiscal years beginning after September 15, 2006. The adoption of this statement did not have a material impact on the Company’s consolidated financial statements.
Medical benefits expense for the year ended December 31, 2017 increased $2.7 billion, or 22.0%, from 2016 primarily driven by the previously noted 2017 and 2016 acquisitions, our participation in the Missouri Medicaid program expansion, and additional organic membership growth across all lines of business. The increase also includes the previously noted $45.6 million PDR recognized related to the Illinois Medicaid managed care program. The increase was partially offset by the favorable result of continued performance in clinical and pharmacy execution.
Income tax expense for the year ended December 31, 2017 decreased $199.5 million, or 69.4%, compared with the same period in 2016, while the effective tax rate for the year ended December 31, 2017 decreased to 19.0% compared with 54.3% for the same period in 2016. The decrease in income tax expense was primarily driven by the one-year moratorium on the non-deductible ACA industry fee for 2017, higher excess tax benefits resulting from the settlement of stock-compensation awards in 2017 and the favorable effect of the recognition of certain previously unrecognized tax benefits during 2017. The decrease is also related to the effect of revaluing the Company's deferred tax assets and liabilities as a result of the Tax Cuts and Jobs Act of 2017. Refer to Note 14 - Income Taxes to the consolidated financial statements in this 2017 Form 10-K for further discussion regarding the recognition of previously unrecognized tax benefits in 2017 and the current year tax effect of the Tax Cuts and Jobs Act of 2017.
Our Medicaid Health Plans MBR decreased by 50 basis points for the year ended December 31, 2016 compared with the same period in 2015. Our Medicaid Health Plans Adjusted MBR decreased by 30 basis points for the year ended December 31, 2016 compared with the same period in 2015. The decreases in both MBRs were primarily driven by improved operational execution and pharmacy cost structure, as well as higher ACA industry fee reimbursement (affecting the Medicaid Health Plans MBR).
Unregulated cash, cash equivalents and investments totaled approximately $617.0 million at December 31, 2017, a decrease of approximately $298.3 million from $915.3 million at December 31, 2016. This decrease is primarily the result of the early redemption in full of our 2020 notes, including the redemption premium, funding for the acquisition of Universal American and a $100.0 million cash payment to repay borrowings under our Revolving Credit Facility in March 2017. These decreases were partially offset by the receipt of $1.2 billion net proceeds from the 2025 Notes issuance in March 2017 (see Capital Resources - Debt below for further discussion), as well as dividends received from our regulated subsidiaries.
We currently maintain directors' and officers' liability insurance for matters not addressed above.
patient benefits, plus its total spending on quality improvement activities and dividing the total by earned premiums (after subtracting specific identified taxes and other fees). These provisions did not have a material effect on our results of operations in 2017, 2016 or 2015.
We continue to stress productivity gains, and staff count has remained virtually unchanged at 1,288 as of March 4, 2005 as compared to 1,285 as of March 1, 2004, while policy count has grown by 8% and direct written premiums have grown by 8% in 2004 as compared to 2003. We continue to monitor our staffing levels in relation to volume in our claims and policyholder services operations. In addition, we use a number of metrics to track performance, and, generally, performance is meeting or exceeding our internal benchmarks.
Net Investment Income and Realized Capital Gains. Net investment income was $6.7 million compared to $6.4 million last year. Net realized gains on securities sales were $1.2 million for the year ended December 31, 2003 compared to $0.3 million 2002.
The commutation resulted in significant increases/(decreases) in certain balance sheet accounts in 2005, as follows:
(1) Share and per share amounts have been restated to reflect the effect of the June 1995 four-for-one stock split. (2) Operating net income represents net income excluding realized gains or losses on sale of investments, net of federal income taxes and minority interests. (3) The health loss ratio represents benefits, claims and settlement expenses related to health insurance policies stated as a percentage of health premiums. (4) The health expense ratio represent underwriting, acquisition and insurance expenses related to health insurance policies stated as a percentage of health premiums. Expenses relating to providing administrative services are not included. (5) Excludes the net unrealized investment gains or losses which is reported as a separate component of stockholders' equity. (6) Total assets and total policy liabilities prior to 1993 have been restated to reflect the adoption of Financial Accounting Standard (FAS) 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts."
1995, the Company also acquired a block of health insurance policies that contributed to the increase in health premiums.
Life premiums and other considerations. Life premiums and other considerations increased to $45.3 million in 1995 from $40.7 million in 1994, an increase of $4.6 million, or 11%. The increase was a result of the sale of new life policies.
increase was primarily due to the excess net investment income not allocated to the other segments and gains on sale of investments. The increase was partially offset by an increase in interest expense.
During October 1995, the Company acquired the majority interest in Insurdata and UAI, both companies related to the HealthCare Solutions Division. The acquisitions were funded with cash and the issuance of promissory notes to the former stockholders in the amount of $12.0 million due in January 1996. The promissory notes were non-interest bearing loans and were repaid in January 1996.
Other operating expenses increased by $6.1 million or 4% in 1997. This increase is due primarily to higher business insurance costs, additional rent and utility expenses resulting from leasing new office space, expanding and upgrading existing office facilities and the costs associated with closing certain underperforming operations. Other operating expenses increased by $9.4 million or 7% in 1996. This increase is due primarily to an increase in professional fees related to the outsourcing of certain distribution functions, increased performance fees for funds invested with professional money fund managers, an increase in brokerage expenses due to increased business with other brokers, additional rent and utility expenses resulting from leasing new office space, expanding and upgrading existing office facilities and increased bad debt write-offs.
In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income," which is effective for years beginning after December 15, 1997. SFAS 130 establishes standards for the reporting and display of comprehensive income and its components in a full set
At December 31, 1997, securities sold under agreements to repurchase the identical securities are collateralized by government backed small business administration loans and government securities with a
The discount rate used to measure the accumulated postretirement benefit obligation was 7.5% at December 31, 1997 and 1996. The transition obligation is being amortized over 20 years.
The Company generally operates in leased premises. Certain office space leases have options permitting renewals for additional periods. In addition to minimum fixed rentals, a number of leases contain escalation clauses related to increases in the cost of living in future years.
We expect to complete the sale of certain assets of University Health Plans, Inc, or UHP, our New Jersey health plan, in the first quarter of 2010. Unless specifically noted, the discussions below are in the context of continuing operations, and therefore, exclude UHP. The results of operations for UHP are classified as discontinued operations for all periods presented.
In July 2009, we began operating in Massachusetts to manage healthcare services for members under the state’s Commonwealth Care program and in October 2009 under the Commonwealth Care Bridge program, operating as CeltiCare Health Plan of Massachusetts. At December 31, 2009, we served 27,800 members.
In April 2008, we began operating under our new contract in Texas to provide statewide managed care services to participants in the Texas Foster Care program.
the conversion of non-risk membership in South Carolina as additional counties converted to at-risk.
General and administrative expenses, or G&A, primarily reflect wages and benefits, including stock compensation expense, and other administrative costs associated with our health plans, specialty companies and centralized functions that support all of our business units. Our major centralized functions are finance, information systems and claims processing. G&A increased in both the years ended December 31, 2009 and December 31, 2008 primarily due to expenses for additional staff and facilities to support our growth. G&A also increased in 2009 as result of the consolidation of Access. Additionally, G&A increased in 2008 as a result of the acquisition of Celtic. G&A expenses also include business expansion costs, such as wages and benefits for administrative personnel, contracting costs, and information technology buildouts, incurred prior to the commencement of a new contract or state health plan. For example, we incurred business expansion costs for the Foster Care product in Texas in 2008 and Massachusetts in 2009. Our G&A in 2010 will include business expansion costs associated with our new contract in Mississippi.
We have a stock repurchase program authorizing us to repurchase up to four million shares of common stock from time to time on the open market or through privately negotiated transactions. No duration has been placed on the repurchase program and we reserve the right to discontinue the repurchase program at any time. During the year ended December 31, 2009, we repurchased 332,595 shares.
In the normal course of business, the Company invests in various financial assets and incurs various financial liabilities. Fair values are disclosed for all financial instruments, whether or not such values are recognized in the Consolidated Balance Sheets. Management obtains quoted market prices and other observable inputs for these disclosures. The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, premium and related receivables, unearned revenue, accounts payable and accrued expenses, and certain other current liabilities approximate fair value because of their short-term nature.
The following methods and assumptions were used to estimate the fair value of each financial instrument:
Gross premiums written increased by $98.7 million, or 6.3%, for the year ended December 31, 2006 compared to the year ended December 31, 2005. The increase reflected increased gross premiums written in our reinsurance segment, where we wrote approximately $66.6 million in new business during the year ended December 31, 2006, including $14.7 million related to four ILW contracts. We wrote ILW contracts for the first time during 2006. Net upward revisions to premium estimates on prior period business and differences in treaty participations also served to increase gross premiums written for the segment. The amount of business written by our underwriters in our U.S. offices also increased. During the second half of 2005, we added staff members to our New York and Boston offices and opened offices in Chicago and San Francisco in order to expand our U.S. distribution platform. Gross premiums written by our underwriters in U.S. offices were $158.3 million for the year ended December 31, 2006, compared to $94.0 million for the year ended December 31, 2005. In addition, we benefited from the significant market rate increases on certain catastrophe exposed North American general property business resulting from record industry losses following the hurricanes that occurred in the second half of 2005.
Our overall loss reserve estimates did not significantly change during 2005. On an opening carried reserve base of $1,777.9 million, after reinsurance recoverable, we had a net decrease of $49 million including development of 2004 storms, a change of less than 3%.
As a result of the above, net loss for the year ended December 31, 2005 was $159.8 million compared to net income of $197.2 million for the year ended December 31, 2004. Net loss for the year ended December 31, 2005 included a foreign exchange loss of $2.2 million and an income tax recovery of $0.4 million. Net income for the year ended December 31, 2004 included a foreign exchange gain of $0.3 million and income tax recovery of $2.2 million.
Acquisition costs. Acquisition costs increased to $104.2 million for the year ended December 31, 2005 from $80.9 million for the year ended December 31, 2004 primarily as a result of the increase in gross premiums written. The acquisition cost ratio for 2005 was 22.5%, as compared to the acquisition ratio of 22.8% for 2004.
Reserves are estimates because there are uncertainties inherent in the determination of ultimate losses. Court decisions, regulatory changes and economic conditions can affect the ultimate cost of claims that occurred in the past as well as create uncertainties regarding future loss cost trends. Accordingly, the ultimate liability for unpaid losses and loss adjustment expenses will likely differ from the amount recorded at December 31, 2007.
Insurance premium revenue is recognized on a pro rata basis over the respective terms of the policies in-force and unearned premiums represent the portion of premiums written which is applicable to the unexpired terms of the policies in-force. Generally, premiums are collected in advance of providing risk coverage, minimizing the Company’s exposure to credit risk. Premiums due from policyholders are net of an allowance for doubtful accounts of $39,029 and $32,913 at December 31, 2007 and 2006, respectively.
The components of and changes to accumulated other comprehensive income (loss) as of and for the years ended December 31, 2007, 2006 and 2005 were as follows:
Property and equipment is recorded at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method. Estimated useful lives are: building-35 years, computer equipment including software-3 to 5 years and furniture, fixtures and equipment-5 to 7 years. Software is capitalized in accordance with Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” and amortized on a straight-line method over the estimated useful life of the software, generally not exceeding 3 years. Maintenance, repairs and minor renewals are charged to expense as incurred. Depreciation expense was $769,161, $602,687 and $141,665 for the years ended December 31, 2007, 2006, and 2005, respectively. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Upon sale or retirement, the cost and related accumulated depreciation of assets disposed of are removed from the accounts; any resulting gain or loss is reflected in income.
The Company’s boiler and machinery quota share agreements are primarily an equipment breakdown endorsement to commercial and farm policies. The agreements are 100% quota share and the Company receives ceding commissions ranging from 32% to 35% on the premiums ceded.
The following table illustrates the effects of the multi-line quota share agreement in effect during 2005 on selected financial information of the Company (in thousands):
Future minimum lease payments required under the vehicle leases as of December 31, 2007 are as follows:
The Company's Bermuda offices are located at 44 Church Street, Hamilton, Bermuda, and the telephone number is (441) 296-8560. The offices of the Company's U.S. subsidiaries are located at 1845 The Exchange, Suite 200, Atlanta, Georgia 30339, and the telephone number is (770) 916-1908.
Net premiums earned decreased from $19.0 million in 1997 to $15.5 million in 1998, a decrease of $3.5 million or 18.5%. The decrease was primarily due to the loss of the hazard insurance tracking and outsourcing customers, as previously described.
All other expenses increased from $14.2 million in 1996 to $16.9 million in 1997, an increase of $2.7 million, or 19.0%. Approximately $1.4 million of the 1996 expenses was as a result of retention agreements entered into with certain executives in June 1996. The purpose of the agreements was to ensure the availability and employment of those executives through the transition following the change of control of the Company, which occurred in July 1996. The remaining increase in all other expenses was due to several factors, including an increase in direct costs related to growth in revenues (e.g., data, telecommunications cost, postage) and an increase in sales, marketing, consulting and advertising costs.
In connection with the PinTax Acquisition, National and New Arts entered into a term note facility (the "Term Facility") with the Company's primary commercial bank. The Term Facility allows for a maximum borrowing of $11.3 million, including $2 million for any additional consideration ("Additional Consideration") which might have been payable pursuant to the Agreement on or before May 25, 1998. On May 26, 1998, the Company borrowed $1.5 million to pay Additional Consideration. The Term Facility matures in May 2003 and calls for interest payments at the rate of the lending bank's prime rate plus one and one-quarter percent, beginning September 1997. Principal is paid monthly, beginning May 30, 1998, in accordance with a variable amortization schedule. Collateral for the loan includes non-insurance company cash deposits of the Company, the common stock of Pinnacle Data, as well as the stock of PinTax and of New Arts. As of December 31, 1997 and 1998, the outstanding principal balance of the Term Facility was $9.3 million and $10.6 million, respectively.
In the case of the unquoted securities, which include in particular the shares of our six overseas reinsurance sub­ sidiary companies and those of the New Holding, the book value increased by Sw. frs. 16.9 million due to reinforce­ ment on the capital and free reserves of the North Ame­ rican Reinsurance Corporation.
In the account for Depreciation, Fluctuations in Foreign Currencies and Stock Exchange Rates, modest profits were recorded under the heading of fluctuations in stock ex­ change rates for securities and also under fluctuations in foreign currencies, owing to the devaluation of certain currencies in which we have net liabilities. The surplus under these two headings combined reduced the other amounts required for depreciation to Sw. frs. 1.3 million (previous year 0.2 million).
(2) Includes writedowns for impairment and net changes in valuation allowances on real estate, mortgage loans and investment securities aggregating $3.4 million, $5.5 million, $0.9 million, $(0.1) million, and $(0.3) million for the years ended December 31, 2001, 2000, 1999, 1998, and 1997, respectively.
use of assumptions and estimates related to interest rates, default rates, collection of principal, and the timing of cash flows because quoted market prices are not available.
The net increase in VUL and UL product fees was partially offset by lower FPVA product fees of $49.2 million for 2001, a decrease of $13.9 million from $63.1 million reported for 2000. The decline in the FPVA fees is attributable to lower fund values,
The Company's liquid assets include U.S. Treasury holdings, short-term money market investments and marketable long-term fixed maturity securities. As of December 31, 2001, the Company had readily marketable fixed maturity securities with a carrying value of $1,220.9 million, which were comprised of $541.0 million public and $679.9 million private fixed maturity securities. At that date, approximately 87.2% of the Company's fixed maturity securities were designated in NAIC rating categories 1 and 2 (considered investment grade, with a rating of "Baa" or higher by Moody's or "BBB" or higher by S&P). In addition, at December 31, 2001, the Company had cash and cash equivalents of $102.6 million. Management believes that the Company's sources of liquidity are adequate to meet its anticipated needs.
As of December 31, --------------------------------------- 2001 2000 ---------------- ------------------ Carrying % of Carrying % of Value Total Value Total -------- ----- -------- ----- ($ in millions)
CMOs are purchased to diversify the portfolio risk characteristics from primarily corporate credit risk to a mix of credit and cash flow risk. The majority of the CMOs in the Company's investment portfolio have relatively low cash flow variability. In addition, approximately 51.2% of the CMOs in the portfolio have minimal credit risk because the underlying collateral is backed by the FNMA, the FHLMC, or the GNMA. These CMOs offer greater liquidity and higher yields than corporate debt securities of similar credit quality and expected average lives.
The carrying value of commercial mortgage loans at December 31, 2001 was $60.6 million, which is net of valuation allowances aggregating $0.7 million, representing management's best estimate of cumulative impairments at that date. However, there can be no assurance that increases in valuation allowances will not be necessary. Any such increases may have a material adverse effect on the Company's financial position and results of operations.
We account for income taxes in accordance with ASC 740, Income Taxes. Under ASC 740, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies varies adjustments to the carrying value of the deferred tax assets and liabilities may be required. Valuation allowances are based on the “more likely than not” criteria of ASC 740.
converting the financial statements at exchange rates other than the functional currency. Any gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the subsidiaries’ functional currency) are included in income. These gains and losses are immaterial to the Company’s financial statements.
Legal expenses for 2013 were $11.7 million compared to $24.0 million for 2012. Of the legal expense, approximately $4.5 million mainly associated with the USAO Investigation for 2013, compared to $14.3 million for the year ended December 31, 2012. Legal expense also included approximately $2.3 million and $5.1 million associated with class action litigation and derivative action for the years ended December 31, 2013 and 2012, respectively.
Borrowing availability under the Revolving Credit Facility is subject to a borrowing base, which among other items is capped at 75% of the valuation of the policies pledged as collateral. This loan to value calculation is determined by the lenders with a high degree of discretion. At December 31, 2014, $139.3 million was undrawn and $1.9 million was available to borrow under the Revolving Credit Facility. For a description of the facility see Note 10, “Revolving Credit Facility,” of the notes to Consolidated Financial Statements.
At December 31, 2014, there were no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
Results of discontinued operations for the year ended December 31, 2001 include a gain of $16.4 million realized by MHP upon the Indiana Department of Insurance’s placement of the Indiana HMO and its wholly-owned subsidiary, Maxicare Life and Health Insurance Company, Inc., into rehabilitation and the bankruptcy of our California HMO. This gain represents the extent to which liabilities of those subsidiaries exceeded their assets at the date of rehabilitation (Indiana) or bankruptcy (California). Loss from discontinued operations before adjustment for this gain was $28.1 million in 2001 compared to $33.4 million in 2000. The accelerating losses from discontinued operations in 2001 (results for 2001 are only through May 4, 2001 for Indiana and Maxicare Life and Health Insurance Company, Inc. and May 25, 2001 for California) stem from rapidly deteriorating operating performance in the first quarter of 2001 and additional claims liabilities of the Indiana HMO relating to dates of service prior to December 31, 2000.
We have audited the accompanying consolidated balance sheets of Maxicare Health Plans, Inc. as of December 31, 2001 and 2000, 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, 2001. Our audits also included the information with respect to the financial statement schedules listed in the index at Item 14(a). These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We also own and operate Health Care Assurance Company, Ltd., a captive insurer that provided certain insurance coverage to MHP and its subsidiaries. Effective January 1, 2002 Health Care Assurance Company, Ltd., ceased providing all such insurance. We also served as administrator of the California Access for Infants and Mothers program (“AIM”) program through another of our subsidiaries. Administration of the AIM program was transferred to another health care provider effective March 15, 2002.
Our restricted investments consist of securities restricted to specific purposes as required by various governmental regulations. These securities have been designated as held-to-maturity as we have the intent and the ability to hold them to maturity. These securities are stated at amortized cost.
Other current liabilities include estimated liabilities related to litigation and contract termination costs (see “Note 3 - Commitments and Contingencies”).
In the second quarter of 2001 the Company 	recorded a gain of $16.4 million to record the extent to 	which the liabilities of certain subsidiaries that were either 	placed into rehabilitation by regulatory authorities or filed 	for Chapter 11 bankruptcy protection exceeded the assets of 	those subsidiaries (See “Item 7. Management’s 	Discussion and Analysis of Financial Condition and Results of 	Operations” and “Item 8. Financial 	Statements and Supplementary Data - Note 2 to the 	Company’s Consolidated Financial Statements”).