Earnings per share have been calculated in accordance with Statement of Financial Accounting Standards No. 128. All prior years have been restated to conform with the current presentation. Net income per share is calculated by dividing income available to ordinary shareholders by the weighted average number of ordinary shares outstanding. The ordinary shares which were subject to redemption are included in the computation of the weighted average number of outstanding ordinary shares since they have identical rights. Shares held in treasury are not considered outstanding for purposes of the computation. Income per ordinary share assuming dilution is computed by dividing income available to ordinary shareholders by the weighted average number of ordinary shares and potentially dilutive securities such as stock options. The dilutive effect of options are reflected in the computation by application of the treasury stock method.
The Company is party to certain derivative financial instruments, being forward foreign exchange contracts which are used to manage foreign currency exposures on non-U.S. dollar denominated assets and liabilities. The Company does not engage in derivatives for any other purpose. Forward foreign exchange contracts are recorded at their fair value. The fair values of open contracts at the balance sheet dates are based on the quoted market prices of forward contracts with similar maturities. Changes in fair values are recognized in other income as appropriate in the period in which the changes occur. Amounts receivable or payable on open positions are recorded in other assets or accounts payable and accrued liabilities as appropriate. See Note 15(c).
In its various capacities as an insurance intermediary, the Company collects premiums from insureds and other intermediaries, and after deducting its risk management fee and, where appropriate, surplus lines taxes and stamping fees, remits the premium to the respective insurance company or underwriter. Pending the remittance of such funds to the insurance company or underwriter in accordance with the applicable insurance contract, the Company holds collected funds in its own segregated bank accounts and is entitled to any accrued interest on such funds. The obligation to remit these funds is recorded as insurance and reinsurance balances payable on the Company's balance sheet. The period for which the Company holds such funds is dependent upon the date the insured remits the payment of the premium to the Company and the date the Company is required to forward such payment to the insurer.
e) At December 31, 1996 and 1997, there were no individual investments, other than investments in U.S. Government securities, which exceeded 10% of shareholders' equity.
various percentages of original gross written premium income. CIRCL further limits its exposure through the purchase of reinsurance protection for certain risks covering losses in excess of $10 and $50 per occurrence for workers' compensation and employers' liability.
c) The Company's managing general agencies market insurance products and programs developed by the Company on behalf of independent insurance carriers. In addition, the Company through its brokering and reinsurance brokering operations, managing general underwriters, claims and loss control servicing operations provides additional business and services to certain of these independent insurance carriers in respect of these products and other insurance and reinsurance policies. For the year ended December 31, 1996 and 1997 fees received from one independent insurance carrier accounted for approximately 55% and 51%, respectively, of the Company's total revenues. Although the loss of this carrier could have a material adverse effect on the Company, the Company believes that Realm National and other independent insurance carriers have sufficient underwriting capacity to reduce the impact of such a loss.
Realm National did not have any earned surplus available for the payment of dividends in 1996 and 1997 due to its statutory-basis accumulated deficit. Additionally, $101 and $21 of statutory surplus has been segregated as special funds as of December 31, 1996 and 1997 and will not become available for dividend payments until earned.
Realm National's total surplus and net income determined on a United States statutory basis are as follows:
CIRCL is also required to maintain a minimum liquidity ratio whereby the value of its relevant assets are not less than 75% of the amount of its relevant liabilities. Certain categories of assets do not qualify as relevant assets under the statute. At December 31, 1996 and 1997, respectively, CIRCL was required to maintain relevant assets of at least $9,412 and $17,900. At that date relevant assets were approximately $14,932 and $23,900 and the minimum liquidity ratio was therefore met.
The Company is subject to litigation and arbitration in the ordinary course of business.