felanders/preprocessed huggingface dataset:
The Company had net income of $3,356,000 for 1997 as compared to $2,403,000 for 1996. The increase in net income was due to higher earnings from annuity and group life segments, the result of higher fees from separate account assets and an increase in the surplus transfer from the unitized separate account, and strong group life sales and good mortality experience, respectively, offset by lower earnings from group health, the result of lower than expected sales combined with higher reserves from increasing claims.
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): SEPARATE ACCOUNTS--
The information presented above includes unpaid benefit claims and claim adjustment expenses for the group life and group long-term disability contracts. As of December 31, 1997, the unpaid claim and claim adjustment liability for these contracts is included in Policy Reserves.
(1) Based on the weighted average number of common shares outstanding during the year.
The following table sets forth revenues by source for the periods shown:
INCOME TAX EXPENSE Current.............................................................. 548,581 Deferred............................................................. 3,656,012 938,986 402,108 ----------- ------------ ------------ 3,656,012 938,986 950,689 ----------- ------------ ------------ NET INCOME................................................................ 9,401,173 2,414,538 1,845,454
DEFERRED POLICY ACQUISITION COSTS Commissions and other costs of acquiring traditional life and health insurance, universal life insurance, and investment products that vary with and are primarily related to the production of new business have been deferred. Traditional life and health insurance acquisition costs are being amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to total anticipated premium income. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization. Under SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments,” the Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates it expects to experience in future periods. These assumptions are to be best estimates and are to be periodically updated whenever actual experience and/or expectations for the future change from that assumed.
SCHEDULE III-- SUPPLEMENTARY INSURANCE INFORMATION PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
Investment and other income, net, increased 6.5% for the year ended December 31, 2003 compared with 2002 as follows:
See Index to Consolidated Financial Statements and Schedule on page 49.
Trends and order counts. For the three years ended December 31, 2012, mortgage interest rates (30-year, fixed-rate) have fluctuated from a monthly high of 5.1% in April 2010 to a monthly low of 3.4% in November 2012. In 2012, total mortgage originations and refinancing mortgage originations increased 28.4% and 43.0%, respectively. During 2012, sales of new homes and existing homes increased 19.9% and 9.2%, respectively. In 2011, sales of new homes decreased 5.9%, while sales of existing homes increased 1.7%.
Cash from investing activities was generated principally by proceeds from investments matured and sold in the amounts of $181.9 million, $339.7 million and $328.5 million in 2012, 2011 and 2010, respectively. We used cash for the purchases of investments in the amounts of $207.7 million, $336.1 million and $303.5 million in 2012, 2011 and 2010, respectively. The cash from sales and maturities not reinvested in prior years was used principally to fund operations.
Sw. Fes. Sw. Fes. Sw. Fes. Sw. Fes. All classes excl. Life
We do have a plan to hire additional employees in the next twelve months to enhance our marking and consultancy service functions. However, this plan will depend largely on the availability of working capital, which we may not have or be able to raise. Because there is no assurance that working capital will be available to us, there is also no assurance regarding the extent to which we will be able to implement our plan of operations within the foreseeable future.
Exchange loss - increased by $11,930 or 337.4% from $3,536 in 2007 to $15,466 in 2008. The increase was mainly due to the difference between the book rate and actual transaction rate increased during the year of 2008.
The Hong Kong Monetary Authority (“HKMA”), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983. The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of US$1: HK$7.8. In fact, the exchange rate for HK$ to US dollars has varied by only 100ths during 2008 and 2007. Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar. Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.
The table below sets forth the composition of the Company's portfolio of fixed maturity investments by rating as of December 31, 1998 (in thousands):
Universal life and annuity contract revenues - Revenues for universal life and annuity contract revenues increased 12.6% in 2007 compared to 2006. Revenues for these products consist of policy charges for the cost of insurance, administration charges, and surrender charges assessed against policyholder account balances, less reinsurance premiums. Cost of insurance charges were $74.3 million in 2007 compared to $67.7 million in 2006, and $63.3 million in 2005. Administrative charges were $20.9 million, $17.1 million, and $15.0 million for the years ended December 31, 2007, 2006, and 2005, respectively. Surrender charges assessed against policyholder account balances upon withdrawal were $33.4 million, in 2007 compared to $28.7 million in 2006 and $25.1 million in 2005.
Investment grade debt securities generated approximately 92.5% of total investment income, excluding derivatives in 2007. Short-term investments contributed $7.1 million, $3.1 million, and $1.4 million for the years ended 2007, 2006, and 2005, respectively. The significant increase relative to short-term investment income in 2007 is attributable to higher asset holdings in these investments compared to prior years. Other investment income for 2007 includes $0.9 million related to income received on various profit participation arrangements compared to $1.2 million recorded in 2006 and $2.8 million recorded in 2005. In addition, proceeds of $4.3 million were received in 2006 from a class action settlement on a disposed debt security.
Other income - Other income revenues consists primarily of gross income associated with nursing home operations of $12.6 million, $11.2 million, and $8.9 million in 2007, 2006, and 2005, respectively. In addition, the Company received $0.5 million and $5.5 million related to lawsuit settlements during 2007 and 2006.
Derivatives income (loss) - Index options are derivative financial instruments used to fully hedge the equity return component of the Company’s equity-indexed products, which were first introduced for sale in 1997. In 2002, the Company began selling an equity-indexed universal life product in addition to its fixed indexed annuities. Any income or loss from the sale or expiration of the options, as well as period-to-period changes in fair values, are reflected as a component of net investment income. However, increases or decreases in income from these options are substantially offset by corresponding increases or decreases in amounts credited to indexed annuity and life policyholders.
Federal Income Taxes. Federal income taxes on earnings from continuing operations for 2007, 2006, and 2005 reflect effective tax rates of 31.8%, 34.6%, and 33.9%, respectively, which are lower than the expected Federal rate of 35% primarily due to tax-exempt investment income related to investments in municipal securities and dividends-received deductions on income from stock investments.
The gross realized gains and losses from sales of fixed maturity securities are as follows:
In September 1995, the Company purchased 1.5 million shares of its common stock beneficially owned by Willis Corroon Group plc for a purchase price of $25.5 million, including related expenses. The Company financed its purchase through an unsecured term loan from commercial lending institutions. This loan matures in varying amounts through 2002 with interest payable at least quarterly. The term loan interest rate is equivalent to either the bank's prime rate or the London Interbank Offered Rate ("LIBOR") plus 1%, at the discretion of the Company. The term loan agreement contains certain restrictive covenants, including restrictions on the Company's ability to declare or pay any cash dividends to its shareholders. As of December 31, 1997, the weighted average interest rate was 6.89%, and the fair value of the loan approximated the carrying value.
The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same maturities. The fair value includes the effect of the interest rate swap.
Effective August 1, 2001, the Company purchased certain assets of Humana’s Houston, Texas Medicaid line of business for approximately $1.0 million. The assets purchased primarily consisted of Humana’s rights to provide managed care services to its Medicaid members.
On November 15, 2001, the Company purchased certain assets of MethodistCare, Inc.’s (‘‘MethodistCare’’) Houston, Texas Medicaid line of business for approximately $1.6 million. The assets purchased primarily consisted of MethodistCare’s rights to provide managed care services to its Medicaid members. The acquisition took effect January 1, 2002.
Cash provided by financing activities was $58.9 million for the year ended December 31, 2001 compared to cash used in financing activities of $1.5 million for the year ended December 31, 2000. Cash provided by financing activities consisted primarily of proceeds from the offering partially offset by principal payments on our long-term debt facility and the redemption of our Series E preferred stock.
RESPA. In late December 2003, the Department of Housing and Urban Development (HUD) issued its proposed final rule concerning reforms to RESPA. We believe the new rule provides exemptions to current RESPA prohibitions against kickbacks and rebates. The new rule may result in a bundling of title and other real estate services and placing them under the control of a relatively small number of major lenders. In our view, the new rule will likely increase prices to the ultimate consumer.
The information required by this Item 7 is incorporated by reference from pages 1 through 4, from pages 6 through 16, and from pages 19 and 21, of Alleghany's Annual Report to Stockholders for the year 1997, filed as Exhibit 13 hereto.
Management continues to monitor production associated with these products. As a result of obtaining the necessary policy approvals by CICA in 1997 and increased sales efforts during 1998, management was successful in reviving production from some of the largest producers of American Liberty. Estimates of future production will continue to be reevaluated based upon the sales activity of the products sold, the size of the active agency force, and the anticipated future production. Management has been successful in returning the largest producing marketing organization of American Liberty to production and anticipates continuing increases in new production in 1999, compared to amounts seen in 1997 and 1998.
The Company's mortgage loan portfolio, which constitutes 0.9% of invested assets at December 31, 1998 and 1997, has historically been composed of small residential loans in Texas. At December 31, 1998 and 1997, one mortgage loan with a principal balance of approximately $38,400 was in default. Management has established a reserve of $50,000 at December 31, 1998 and 1997 (approximately 3% of the mortgage portfolio's balance) to cover potential unforeseen losses in the Company's mortgage portfolio. During the first quarter of 1999 while foreclosure on the above-referenced loan was in progress, the Company was notified that the property had been sold and a payoff of its lien was forthcoming.
FullCircle has engaged Rodefer Moss & Co. PLLC (“Rodefer”) as our new independent registered public accounting firm as of January 11, 2011. Rodefer's engagement commenced with the audit of our consolidated financial statements for the year ended December 31, 2010.
Operating Income. Income from continuing operations before interest and income tax expense and dividends in 1998 was $155.1 million as compared to $132.9 million in 1997, an increase of 17%. The increase is primarily attributable to the growth in the Company's group employee benefits segment, the increase in yield on invested assets in the asset accumulation products segment and the favorable impact of the Company's acquisitions completed during 1998, partially offset by the decrease in realized investment gains.
Interest Expense. Interest expense was $17.4 million in 1998 as compared to $15.0 million in 1997. The increase was primarily due to additional borrowings under the Credit Agreement in 1998 to fund the Unicover and Matrix acquisitions and investment opportunities.
The principal liquidity requirements of the Company's insurance subsidiaries are, in the cases of RSLIC, FRSLIC and SNCC, their contractual obligations to policyholders, and in the case of RSLIC-Texas, its payments to the Company on the Surplus Debenture. The primary sources of funding for these obligations, in addition to operating earnings, are the marketable investments included in the investment portfolios of RSLIC, FRSLIC and SNCC. The Company believes that these sources of funding will be adequate for its insurance subsidiaries to satisfy on both a short-term and long-term basis these contractual obligations throughout their estimated or stated period.
The Company has completed an assessment of its critical computer related systems and is in the process of making the necessary modifications or replacements so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. Approximately 74% of the Company's critical internal computer systems are currently year 2000 compliant, and the necessary modifications to the remaining 26% are expected to be completed and tested by the second quarter of 1999. The Company is primarily utilizing external resources to remediate and test its software for year 2000 compliance.
At December 31, 2002, AFG transferred the NSA Group to Infinity. Financial information for periods prior to the date of transfer represents the combined information of the NSA Group. Infinity also acquired the Assumed Agency Business from GAI through a reinsurance transaction effective January 1, 2003. The historical financial information shown below (in millions) as of and for each of the four years ended December 31, 2002 was derived from audited financial statements. Data as of and for the year ended December 31, 1998 was derived from unaudited financial statements which include all adjustments, consisting of normal recurring accruals, that management considers necessary for a fair presentation of the financial position and results of operations for those periods.
RATIOS The National Association of Insurance Commissioners' model law for risk based capital ("RBC") provides formulas to determine the amount of capital that an insurance company needs to ensure that it has an acceptable expectation of not becoming financially impaired. At December 31, 2002, the capital ratios of all Infinity insurance companies substantially exceeded the RBC requirements.
2002 COMPARED TO 2001 Realized gains (losses) on investments include provisions for other than temporary impairment of securities still held of $9.4 million in 2002 and $16.2 million in 2001. Increased impairment charges in recent years reflect, among other things, a rise in corporate defaults in the marketplace.
(c) For all years presented, the difference between the GAAP Combined Ratio and the SAP Combined Ratio is affected by the accounting for certain costs, which are treated differently under SAP and GAAP. In 2002 and 2001, this difference was more pronounced due to the Company's net premiums written declining at a rate faster than the decline in earned premiums. For 1998, the difference in the accounting treatment for curtailment gains relating to the defined benefit pension plans was the principal reason for the difference between the GAAP Combined Ratio and the SAP Combined Ratio. For further information about the Company's results of operations, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" elsewhere in this Report.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION Statements included in this Report may contain forward-looking statements pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate, but are not limited, to projections of revenues, income or loss, capital expenditures, fluctuations in insurance reserves, plans for growth and future operations, competition and regulation as well as assumptions relating to the foregoing.
The Company generated an income tax expense of $61.0 million and $24.8 million for the years ended December 31, 2003 and 2002, respectively, generally reflecting improved underwriting and investment income results. The income tax benefit of $9.2 million for the year ended December 31, 2001 primarily reflected a tax benefit from various unusual loss events in 2001, in particular the September 11 attacks and Enron, which were partially offset by taxable income on a former client’s demutualization.
During the first quarter 2003, ML of New York discontinued manufacturing its single premium variable life insurance product. As a result, ML of New York currently does not manufacture, market, or issue life insurance products. ML of New York continues to service all life insurance contracts inforce.
The decrease in credit related losses is primarily due to a decrease in OTT declines in the carrying value of fixed maturity securities.
Contemporary man is exposed to a multiplicity of new hazards in the home, on the street and in his job. The accident perils, and in particular traffic perils, have grown considerably. This is also true in respect of the threat to property. The responsibility of the individual for his own actions is becoming an ever more important risk element, be it in his capacity as a motorist, in his occupation, or as a private person. Modern man is, so it seems, insuffi­ ciently aware of the growing threat to life and limb, to his income and to his personal fortune. The carelessness, negligence, lack of discipline and imprudence which give rise to more than half of the accidents, fires and liability claims, could not otherwise be explained. Loss prevention is therefore increasingly important. The insurance industry in general and your Company in particular have always lent their support to every endeavour by the authorities and by associations and industry to implement new mea­ sures for loss prevention or minimization.
Allocation to Reserve Fimd for Catastrophe Losses 6,000,000 Dividend Sw. frs. 75.— per Share 30,000,000 Donations 375,000 Directors' Remuneration 375,000 Carry Forward 1,583,297
The Company owns property located at 135-137 East Rosemary Street, Chapel Hill, North Carolina. This property currently serves as a parking facility.
The selected financial data for the five years ended December 31, 1997 is in the 1997 Annual Report to Shareholders under the caption "Financial Highlights" and is incorporated herein by reference. The information should be read in conjunction with the Financial Statements and Notes and the Management's Discussion and Analysis of Results of Operations and Financial Condition which are in the 1997 Annual Report to Shareholders and are incorporated herein by reference.
Reserves, Life Dept.: Premium Reserve . . . . . ..... . . Fr. 15,996,433. -
The "Selected Consolidated Financial Data" section from the Company's Annual Report to Stockholders for the year ended December 31, 1997, which is included as Exhibit 13(a) to this Form 10-K, is incorporated herein by reference.
Premium deficiency testing is performed annually. Such testing involves the use of best estimate assumptions to determine if the net liability position (all liabilities less DAC) exceeds the minimum liability needed to meet our obligations. Any premium deficiency would first be addressed by removing the provision for adverse deviation, if any. To the extent a premium deficiency still remains, it would be recognized immediately by a charge to the statement of operations and a corresponding reduction in DAC. Any additional deficiency would be recognized as a premium deficiency reserve.
ultimate losses for each incident period by multiplying the current cumulative losses by the appropriate loss development factor. Under the projected claim method, we use ultimate loss ratios when development methods do not provide enough data to reliably estimate reserves. In addition, we use variations on each method as well as a blend of the two. The primary variation is the use of projected claims using differing experience periods. We primarily use these two methods in our Medical line of business because of the limitations of relying exclusively on a single method.
Acquisition costs for preneed life insurance policies issued prior to January 1, 2009 and life insurance policies (no longer offered) are deferred and amortized in proportion to anticipated premiums over the premium-paying period. These acquisition costs consist primarily of first year commissions paid to agents and sales and policy issue costs.
Effective January 1, 1994, the Corporation adopted Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. The after-tax impact of Statement No. 115 decreased common stockholders' equity by $81 million at December 31, 1994. The Statement's adoption had no impact on the Corporation's results from operations. See Note 1 for additional details on the resultant changes to the Corporation's investment accounting.
million. The notes pay interest of 8.0 percent annually to GR-CK and are due on December 30, 2004. The intercompany note has been eliminated in consolidation.
As discussed in Note 1, the Corporation discounts certain workers' compensation liabilities at an annual rate of 4.5 percent. Included in the discount recognized for statutory purposes is a benefit of $489 million for certain liabilities which the Corporation has been permitted by the domiciliary insurance department to discount.
The carrying amounts of the Corporation's notes payable were as follows:
The 9% debenture due in 2009 has a covenant requiring the Corporation not to encumber its common stock holding in General Reinsurance Corporation, the largest subsidiary of the Corporation. The variable rate notes were issued by EIG, which was sold to the Corporation's joint venture partner on December 30, 1994 (see Note 3). The mortgage payable is collateralized by the Corporation's prior home office.
General Re Financial Products Corporation ("GRFP") is a dealer in derivative financial instruments. GRFP's products include currency and interest rate swaps, interest rate caps and floors, foreign exchange contracts, and options on swaps. These instruments are carried at their current fair value, which is a function of underlying interest rates, currency rates, securities values, volatilities and the credit worthiness of counterparties. Future changes in interest rates, currency rates, security values, and interest rate volatilities or a combination thereof may impact the fair value of these instruments with any resulting adjustment, including amounts in excess of those previously recognized in the financial statements, being included currently in the income statement. In the course of conducting its business, GRFP also engages in a variety of other related transactions to manage its exposure to market and credit risks.
Trading account assets/liabilities -- The fair value for trading account assets/liabilities was based on the use of valuation models that utilize, among other factors, current interest and foreign exchange rates and market volatility data.
Other income and expense, net, consists primarily of interest expense as offset by interest income. In 1999, total other expense also included a gain of $332,000 recognized on the June 21, 1999 sale of IBH assets, net of transaction costs. Interest expense primarily represents amounts incurred related to outstanding borrowings under CORE's August 1998 Credit Agreement, as later amended and restated, with Fleet National Bank. The 21% increase in interest expense is primarily due to an increase in costs associated with amending the Credit Agreement and increases in the prime base borrowing rate during 2000.
Revenues from services that CORE exited decreased by 72% in 1999, as compared to 1998. During 1998, these service lines consisted of regional workers' compensation case management services of both Cost Review Services, Inc. ("CRS") and TCM, regional bill audit activities of CRS, and the behavioral health programs of IBH. The CRS operations, which contributed $548,000 to our revenues during 1998 was closed as of October 31, 1998. The operations of TCM, which were acquired on March 17, 1998 and contributed $1,287,000 of the revenues during 1998, was exited in December 1998. In 1999, IBH contributed all of the revenue in our exiting/exited services, amounting to $1,008,000, a decrease of $715,000 as compared to revenue of $1,723,000 from IBH in 1998. As a result of the sale of IBH's assets on June 21, 1999, operations within the exiting/exited services line ceased.
For the year ended December 31, 2014, net premium written was up 8.2% compared to 2013. Year over year growth in property and casualty segment gross premiums written of 5%, coupled with a reduction in catastrophe reinsurance cost of 15.3% were the factors contributing to the increase in net premium written and earned.
of risks, catastrophe reinsurance costs and the ability to obtain adequate and timely premium rates. A major hurricane hitting the coast of Alabama, Georgia, South Carolina, Mississippi or Louisiana could cause the combined ratio to fluctuate materially from year to year. The property and casualty subsidiaries maintain catastrophe reinsurance to minimize the effect of a major catastrophe; however, the geography of our coverage area, frequency of smaller catastrophe events and prohibitive cost of maintaining lower catastrophe deductibles prevents us from further mitigating hurricane risks.
The non-insurance operations of the Company consist of our parent company, The National Security Group, Inc. (NSG). The National Security Group has no material sources of revenue and relies on dividends and management service fees from our insurance subsidiaries to pay expenses. Dividends from subsidiaries are subject to insurance department approval and are subject to statutory restrictions. Subsidiary dividends are eliminated upon consolidation of the subsidiaries in the audited financial statements included herein. Revenues and expense for non-insurance operations for the year ended December 31, 2014 and 2013 are summarized below (amounts in thousands):
Gross premiums earned in the surety bond program decreased 29% and 67% in 2004 and 2005, respectively. Net premiums earned decreased 27% and 66% in 2004 and 2005, respectively. NAICO is no longer actively marketing surety business, and expects premium volume to continue to decline.
Transamerica Occidental Life Insurance Company ("Transamerica") reinsured NAICO for certain workers compensation risks during 1989, 1990 and 1991. Beginning in 1996, Transamerica refused to pay NAICO for balances that it owed under the reinsurance treaties. On March 15, 2004, an arbitration panel ordered Transamerica to pay the losses and loss adjustment expenses owed to NAICO in the amount of $1,607,704 plus interest at 6%, or approximately $577,000, plus $25,000 in costs. NAICO received payment for these amounts during 2004.
For variable annuity products, the DAC balance is sensitive to the effects of changes in the Company’s estimates of gross profits, primarily due to the significant portion of the Company’s gross profits that are dependent upon the rate of return on assets held in separate accounts. This rate of return influences fees earned by the Company from these products and costs incurred by the Company associated with minimum contractual guarantees, as well as other sources of future expected gross profits. As previously stated, the Company’s long-term assumption for net separate account performance is currently 8% growth per year. In its ongoing evaluation of this assumption, the Company monitors its historical experience, market information and other relevant trends. To demonstrate the sensitivity of both the Company’s variable annuity product DAC balance, which was approximately $1.8 billion in aggregate at December 31, 2006, and related amortization, a 1% increase (to 9%) or decrease (to 7%) in the long-term assumption for net separate account performance would result in an approximately $20 million net increase or net decrease, respectively, in DAC amortization over the following year. These fluctuations are reasonably likely to occur. The information provided above considers only changes in the assumption for long-term net separate account performance and excludes changes in other assumptions used in the Company’s evaluation of DAC.
The increase in total sales primarily was driven by strong sales of the recently introduced Lifetime Income (L.INC) and Capital Preservation Plus Lifetime Income (CPPLI) product riders in the Individual Investments segment. Higher COLI sales in the Individual Protection segment from the addition of a large case during 2006 also contributed to the overall increase. However, sales in the Retirement Plans segment continued to decline as a result of the movement of pension business to the NFS trust platform. In recent years, an increasing amount of business has been sold through NFS trust products rather than NLIC group annuity contracts due to NFS’ significant investment in the development of trust product capabilities not prevalent elsewhere in the market.
The following table summarizes for the year ended December 31, 2006 the Company’s largest aggregate losses on sales and write-downs by issuer, the related circumstances giving rise to the losses and the circumstances that may have affected other material investments held:
Statutory capital and surplus is calculated as statutory assets less statutory liabilities. TDI requires that Hallmark maintain minimum statutory capital and surplus of $2.0 million and AZDOI requires that Phoenix maintain minimum statutory capital and surplus of $1.5 million. As of December 31, 2004, Hallmark and Phoenix exceeded the minimum required statutory capital and surplus by 477% and 836%, respectively. At December 31, 2004, Hallmark reported statutory capital and surplus of $11.5 million, which reflects an increase of $1.5 million from the $10.0 million reported at December 31, 2003. At December 31, 2004, Phoenix reported statutory capital and surplus of $14.0 million, which is $3.9 million more than the $10.1 million reported at December 31, 2003. Hallmark reported statutory net income of $1.5 million during 2004 compared to $2.2 million in 2003. Phoenix reported statutory net income of $3.4 million during 2004 compared to a statutory net loss of $0.3 million in 2003. At December 31, 2004, Hallmark's premium-to-surplus percentage was 122% as compared to 150% for the year ended December 31, 2003. Phoenix's premium-to-surplus percentage was 135% for the year ended December 31, 2004 as compared to 215% for the year ended December 31, 2003.
Information regarding the Company's contractual obligations under operating leases as of December 31, 2004 is incorporated by reference to Note 13 of the consolidated financial statements included in this report.
approximate fair value, and include all securities that, at their purchase date, have a maturity of less than 90 days.
Investments with a carrying value of $3,795,000 were on deposit with regulatory authorities as of December 31, 2002.
Under current United States law, Platinum US will be subject to the 35 percent corporate tax rate. Under current United Kingdom law, Platinum UK is taxed at the U.K. corporate tax rate (generally 30 percent). There is no withholding tax on dividends distributed from Platinum UK to Platinum Ireland. Under current Irish law, Platinum Ireland is taxed at a 25 percent corporate tax rate on non-trading income and a 16 percent corporate tax rate on trading income (the latter to be reduced to 12.5 percent as of January 1, 2003). There is no withholding tax on dividends distributed from Platinum Ireland to the Company.
Bonds with amortized cost of approximately $1,804,000 at December 31, 1999 were on deposit with state regulatory authorities in accordance with statutory requirements.
In accordance with APB Opinion No. 25, approximately $373,000, $320,000, and $204,000, in compensation expense has been recorded in 1999, 1998, and 1997, respectively, for the various stock option and restricted stock awards granted in 1999, 1998, and 1997. Had the Company determined compensation cost based on the fair value at the grant date for its stock options and restricted stock awards under SFAS No. 123, the Company's net earnings, basic net earnings per share, and diluted net earnings per share would have been reduced to the pro forma amounts indicated below:
Revenue from service operations increased to $6.9 million for the year ended December 31, 1996 compared to $1.1 million for the same period in 1995. The improvement reflects increases in advisory fee revenues, equity in the earnings of investee companies acquired in the Merger and development of new fee-based revenue sources during the year.
Loss and Loss Adjustment Expenses. Losses and loss adjustment expenses ("LAE") incurred increased 10.7% to $86.9 million for 1995 from $78.6 million in 1994. This increase was primarily attributable to the increase in loss reserves established as a result of the growth in earned premiums. Net losses and LAE expressed as a percentage of net earned premiums (the loss and LAE ratio) decreased to 72.3% for 1995 from 76.5% for the 1994 period. Net losses and LAE for 1994 were increased by $5.5 million, and the loss and LAE ratio increased by 5.4 percentage points for the same period as a result of the Northridge, California earthquake. Chartwell did not incur a significant loss from either domestic or international catastrophic activity occurring in 1995.
o $30.0 million was contributed to the statutory surplus of Chartwell Reinsurance. o $23.4 million was used to retire the remaining amount outstanding under the senior term loan at par. o $18.5 million, the remaining proceeds, was held by Chartwell Re for working capital.
Financial Statements and Supplementary Data. The information required by this Item is incorporated herein by reference from pages 30-58 in Guarantee Life's 1998 Annual Report to Shareholders.
The information required by this Item is included on pages 23-40 of the Registrant's Annual Report to Shareholders for the year ended December 31, 2000, under the captions "Consolidated Statements of Income", "Consolidated Balance Sheets", "Consolidated Statements of Shareholders' Investment", "Consolidated Statements of Cash Flows", "Notes to Consolidated Financial Statements", and "Quarterly Financial Data (Unaudited), Dividend Information and Common Stock Quotations", and is incorporated herein by reference.
Management periodically reviews the Company's guidelines for premiums, premium surcharges, discounts, cancellations and non-renewals and other related matters. As part of this review, rates and rating classifications for its physicians, medical groups and other insureds are evaluated based on current and historical loss, LAE and other actuarially significant data. This process may result in changes in rates for certain exposure classes.
Additionally, the aggregate excess reinsurance contracts, in place since 1993, provide coverage for losses and allocated loss adjustment expenses above aggregate retentions. The aggregate excess reinsurance contracts, therefore, have the effect of holding net incurred losses and allocated loss adjustment expenses at a constant level as long as losses and allocated loss adjustment expenses remain within the coverage limits, which occurred for the years ended December 31, 1996 and 1997.
The Attorney-in-Fact currently leases the Company's headquarters in Lawrenceville, New Jersey from the Medical Society, a related party. The Company is considering purchasing this building. An independent appraisal firm has been retained by the Company to determine the fair market value of the property to assist both parties in negotiating the transaction.
In addition to managing prepayment, extension, and call risks, the Company closely manages the credit quality of its investments in debt securities. The Company continues to follow its conservative investment philosophy by minimizing its holdings of below investment grade debt securities, as these securities generally have greater default risk than higher rated corporate debt. These issuers usually are more sensitive to adverse industry or economic conditions than are investment grade issuers. The Company's small holdings of below investment grade debt securities are summarized below. The increase in below investment grade debt securities from 1995 is primarily due to investment grade issuers that were downgraded to below investment grade status.
The percentage of future expected net amortization of the present value of future profits before the effect of net unrealized gains and losses, based on the present value of future profits at December 31, 1996 and
Unit-linked Product Accounting. Separate account assets and liabilities are maintained primarily for contracts of which the majority represents unit-linked products where benefits on surrender and maturity are not guaranteed. They generally represent funds held in accounts to meet specific investment objectives of policyholders who bear the investment risk. Investment income and investment gains and losses accrue directly to such policyholders. SMC earns income from the investment management fee it charges on such unit-linked contracts, which range from .8% to 1.2% of the value of the underlying separate accounts.
Extraordinary Gain on Early Redemption of Redeemable Preferred Stock. Extraordinary gains are recorded on the early redemption of the Class S Preferred Stock for the amount by which SMC is able to repurchase the Class S Preferred Stock below its book value. SMC will continue to repurchase these shares as long as holders of the Class S Preferred Stock are willing to sell at a substantial discount to book value. The extraordinary gain was $502,000 for the year ended December 31, 1996 compared to no gain for the prior comparable period.
Interest Credited on Interest-Sensitive Annuities and Other Financial Products. Interest credited on interest-sensitive annuities and other financial products was $10,009,000 for 1995, an increase of $1,333,000 or 15% from $8,676,000 for the prior year. The increase resulted primarily from increases in interest credited from the growth in policy reserves for FPDAs. This more than offsets any decreases from the decline in credited interest rates on interest-sensitive annuities and other financial products. At December 31, 1995, the weighted average interest credited rate for Standard Life's interest-sensitive annuities and other financial product liabilities was 5.27% compared to 5.82% at December 31, 1994.
Series E (the "Series E Debentures"). The basic terms of the Series E Debentures are: (a) two year maturity subject to acceleration to July 1, 2000, if requested by WNAH; (b) conversion price of $0.50 per share; (c) "Piggyback" registration rights for three years; (d) for each $5,000 of Series E Debentures acquired, WNAH received a five year warrant to acquire 3,000 shares of Anchor common stock at an exercise price of $0.50 per share; and (e) subordination provisions that subordinates the Series E Debentures to Anchor's "Senior Debt" (as defined in the Series E Debentures). The Series E Debentures are superior in repayment priority to the Series B and D Debentures but are subordinate to "Senior Debt," including the Secured Bank Loan.
1993 1994 1995 1996 1997 --------- --------- --------- --------- --------- (In thousands, except for per share data)
Debt securities that the Company has the positive intent and the ability to hold to maturity would be classified as "held to maturity" and reported at amortized cost.
In October, 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement No. 123") which requires companies to recognize compensation expense for stock options based on their fair value on the date of grant and is effective for financial statements for fiscal years beginning after December 15, 1995, with earlier adoption permitted. Statement No. 123 allows companies to remain under the existing method of accounting for stock options, Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). If companies elect to remain under APB No. 25 then the companies are required to disclose the pro forma effects of Statement No.123 on their net income and earnings per share resulting from the grant of these options and other stock awards. Under APB No. 25, to the extent the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Company has elected to follow APB No. 25 and related interpretations in accounting for its stock options and will disclose the pro forma effects of Statement No.123 on the Company's net income and earnings per share in the footnotes to the financial statements. Pro forma effects of Statement No.123 result in additional compensation expense for December 31, 1995, 1996 and 1997 of $11,000, $133,000 and $183,000 respectively. The results of which reduce earnings per share for December 31, 1995, 1996 and 1997 on a pro forma basis, $0.00, $0.01 and $0.02, respectively.
Addition to policyholders’ reserves and funds includes transfers to and from the separate accounts, based upon policyholder elections, and the change in general account reserves. The increase during 1999 is primarily attributable to a $330 million increase in separate account deposits, partially offset by a $109 million increase in separate account withdrawals and other transfers. The decrease during 1998 was primarily due to a $70 million increase in separate account withdrawals, partially offset by a $44 million increase in separate account deposits. General account reserves also increased by $118 million in 1999 and $20 million in 1998, primarily due to an increase in annuity deposits into the general account.
76% of the portfolio in 1999 and 1998, respectively. Bonds and short-term securities in NAIC classes 1 and 2 were 64% of general account invested assets at December 31, 1999, as compared to 61% at December 31, 1998. The percentage of our general account invested assets representing bonds and short-term investments in NAIC classes 3 through 6 was 6% at December 31, 1999, and 8% at December 31, 1998. See "Investments" section for more discussion of NAIC Investment classes.
In the second quarter of 1998, MassMutual made a $25 million surplus contribution to supply us with cash flow and the capital needed to support our continued business growth. The Board of Directors of MassMutual has authorized the contribution of funds to us sufficient to meet the capital requirements of all states in which we are licensed to do business.
The carrying value of current and potential problem mortgage loans, consisting of restructured mortgage loans, was $10 million at December 31, 1999 and 1998. There were no problem commercial mortgage loans in process of foreclosure, in default or in actively managed properties.
As described more fully in Note 1 to the financial statements, the Company has prepared these financial statements using statutory accounting practices prescribed or permitted by the State of Connecticut Insurance Department, which practices differ from generally accepted accounting principles. The effects on the financial statements of the variances between the statutory basis of accounting and generally accepted accounting principles, although not reasonably determinable, are presumed to be material.
The Company had restructured loans with book values of $10.3 million and $10.4 million at December 31, 1999 and 1998, respectively. These loans typically have been modified to defer a portion of the contractual interest payments to future periods. Interest deferred to future periods was immaterial in 1999, 1998 and 1997.
Investment-type insurance contracts: The estimated fair value for liabilities under investment-type insurance contracts are determined by discounted cash flow projections.
During the first 60 days of operation in Pampa, UMC experienced difficulties with its data communications from Pampa to Dallas. This resulted in reduced productivity in Pampa, delays in revenue generation, and unexpected costs in diagnosing and managing data communication. In addition UMC expended $11,964 for moving expenses and $92,110 in capital expenditures to prepare the Pampa building for operations. Due to the effect of these issues, UMC developed a need for additional working capital. As a result, UMC executed a Forgivable Loan Agreement with the PEDC on October 31, 2000 (included as Exhibit 10.40 to this Form 10-K, and incorporated herein by reference). Pursuant to the Forgivable Loan Agreement, the PEDC loaned UMC $50,000, as an advance against scheduled incentive payments for 2000 and 2001. The principal amount of the loan will be due and payable or forgivable based on the terms and conditions of the Economic Development and Incentive Agreement executed with the PEDC on July 28, 2000. The loan bears interest of 9.5% per annum, which is not forgivable. Interest on the unpaid principal amount of the loan is due and payable at the end of each calendar quarter.
o Ongoing Accounts Receivable Management Services revenue of $2,720,000 in 1999 decreased by $137,000 compared to 1998 primarily due to effect of the aforementioned loss and restructuring of significant WHC contracts.
PROFESSIONAL FEES expense increased $24,000 or 54% primarily due to increased audit fees allocated to UMC in 1999 as compared to 1998 and $10,000 in expense related to capital raising efforts throughout 1999.
The Financial Statements on pages 21 through 40 of the Registrant's annual report to security holders for the fiscal year ended December 31, 1996, are incorporated herein by reference.