felanders/preprocessed huggingface dataset:
The following table sets forth summary consolidated income statement data, consolidated balance sheet data and other operating data for the periods indicated. The following consolidated income statement data of the Company for each of the years in the five-year period ended December 31, 1998, and the consolidated balance sheet data of the Company as of December 31, 1998 and each of the preceding four years ended December 31, have been derived from the Company's audited consolidated financial statements. The following data should be read in conjunction with the Company's Consolidated Financial Statements and related notes, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial information appearing elsewhere herein.
Farmers Life Income. As a result of the foregoing, Farmers Life income decreased from $137.8 million in 1997 to $130.6 million in 1998, a decrease of $7.2 million, or 5.2%.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles.
In 1998, the first accident year under the reinsurance treaty, losses paid by Farmers Re were $543,445,000, loss adjustment expenses were $5,736,000, reinsurance commissions were $319,875,000 and premiums assumed were $1,000,000,000. As of December 31, 1998, Farmers Re had loss reserves of $105,944,000.
Proceeds from sales of available-for-sale securities received by the Company were $1,504,131,000, $735,192,000 and $551,122,000 in 1998, 1997 and 1996, respectively. Gross gains of $88,751,000, $100,269,000 and $76,431,000 and gross losses of $50,798,000, $21,274,000 and $32,009,000 were realized on sales and writedowns during 1998, 1997 and 1996, respectively.
(d) Amount includes PGAAP adjustments associated with the AIF contracts ($1,281.8 million) and goodwill ($1,801.3 million).
(e) Amount includes PGAAP adjustments related to the DAC (($250.7) million) and VOLBA ($443.3 million) assets.
Total revenues for 2013 were $1,928.0 million, an increase of $17.6 million, or 0.9%, from $1,910.4 million for the 2012 year.
Our method for recording the reserves for title losses on both an interim and annual basis begins with the calculation of our current loss provision rate, which is applied to our current premium revenues resulting in a title loss expense for the period.
Direct orders closed decreased 6.3%, while the average revenue per file closed (including large commercial policies) increased 10.2% in 2013 compared to 2012 due to an increase in commercial closings coupled with a decrease in residential refinancing closings in the same periods. Direct operating revenues, excluding large commercial policies, increased 1.2%, while the average revenue per closing increased 8.0% in 2013 compared to 2012. On average, refinance premium rates are 60% of the title premium revenue of a similarly priced sale transaction. In 2012, direct orders closed increased 16.7%, while the average revenue per file closed (including large commercial policies) decreased 2.4% in 2012 compared to 2011 due to an increase in residential refinancing closings in the same periods. Direct operating revenues, excluding large commercial policies, increased 13.1%, while the average revenue per closing decreased 3.1% in 2012 compared to 2011.
The year ended December 31, 2011 included charges of $24.6 million resulting from large title claims relating to policies issued in prior years. These charges were partially offset by insurance recoveries of $2.4 million on previously recognized title losses. During the fourth quarter 2011, we resolved a significant number of large claims from prior policy years. Although some large claims remain outstanding, significant progress was made in resolving the existing large claim inventory which will reduce future risk for the company.
Other-than-temporary impairments of investments. We recorded other-than-temporary impairments of $1.0 million and $0.8 million in 2013 and 2012, respectively, relating to impairment of cost-basis investments.
In Aviation reinsurance, despite premium growth of approxim ately 20 % in original currency, as a con ­ sequence of the uninterrupted expansion of w orld ­ wide air travel, the previous year’s premium volume, in terms of Swiss francs, could not be achieved. In the year under report, Aviation business closed neg­ atively. It did not turn out as expected that the tendency for premium rates to fall would be halted fo llow ing the a irport disaster at Tenerife in the spring of 1977. The losses from this catastrophe, which cost 578 lives, have still not been com plete ly settled. It is, however, to be expected that the final loss burden to the insurance industry w ill be well in excess of US8 100 m illion. The accounting year's loss reduces the five-year average of the reinsurance result to a profit margin which, in this catastrophe-prone branch, has to be regarded as absolute ly unsatisfactory.
Zurich, 12th October, 1978 For the Board of D irectors: M. E. Eisenring, Chairman
For the Board of D irectors: The General Management: M. E. Eisenring, Chairman W. Diehl H. Oderm att H. F. Rudolf H. B. V ischer, Deputy Chairman and H. Schönenberger M anaging D irector
In th is year’s accounts, the scope of conso lidation was extended to include the «SWITZERLAND» Gen­ eral and its subsid iary com panies in London and Tarrytown (New York). Additiona l notes on the Group accounts are to be found on page 36.
The Swiss Reinsurance Company (U.K.) Ltd., London, was able to increase its net profit, despite the worsen­ ing of its underwriting result. In contrast, the Austra­ lian Reinsurance Company Ltd., Melbourne, had to accept a clear reduction both in its underwriting profit and its overall annual result.
Adjustm ent in unearned premiums — 115 — 120 — 235 — 289
Reinsurance Insurance 30th June 1978 30th June 1977 companies companies Total Total
Profit app licab le to m inority shareholders 5 5 9 Capital funds app licab le to m inority shareholders — 29 29 45
Investments (except fo r real estate) were valued at the lower of cost or market. The hidden surp lus on the entire investment portfo lio fell by Sw. frs. 54 m il­ lion to Sw. frs. 784 m illion, thereby to ta lling 1 0 .4 % of the present balance-sheet value (previous year, 10.7 % ) .
As of December 31, 2011, the Company’s balance sheet reflects total current assets of $11,632,415, which increased by $2,383,272 (or 26%) as compared to $9,249,143 as of December 31, 2010. Total current liabilities as of December 31, 2011 were $1,882,227, which increased by $472,933 or 34% as compared to $1,409,294 as of December 31, 2010. The increase of total current assets was mainly due to increases of cash and cash equivalents, commission receivable, fiduciary asset and loan receivable which were partially offset by a decrease of amount due from related party. The increase of total current liabilities was mainly due to increases of trade accounts payable, claims payable, other payables, and amounts due to directors, partially offset by a decrease of accrued expenses and income tax payable.
VIE’s are generally entities that lack sufficient equity to operate without additional subordinated financial support from other parties or are entities whose equity holders do not have adequate decision making authority. The primary beneficiary of a VIE is the party that (a) has the power to direct the activities of a VIE that significantly impacts its economic performance and (b) has the obligation to absorb the losses or the rights to receive the benefits that could be significant to the VIE.
For the Shanghai Office, the initial term of the lease is one year beginning January 1, 2012 with a minimum lease commitment of $16,675. For the Office of ALM Shanghai, the initial term of the lease is one year beginning January 1, 2012 with a minimum lease commitment of $25,689. For the SHB Office, the initial term of the lease is one year beginning January 1, 2012 with a minimum lease commitment of $28,258. All the lease arrangements mentioned above have no renewal option and rent holiday.
On February 1, 2012, the Company subsidiary Chang An Consultants Ltd., declared dividends of $314,103. The company has paid $125,641 to the noncontrolling shareholders in February 2012.
At December 31, 1998, total investments and cash were $4,328.8 million compared to $3,992.5 million at December 31, 1997. This increase is principally due to net cash provided by operating activities which totaled $227.0 million in 1998, realized capital gains of $120.9 million and an increase during the year in net unrealized appreciation of investments available for sale of $4.9 million. (See Note 3 of Notes to Consolidated Financial Statements.)
TRH believes that its balance of cash and cash equivalents of $70.6 million as of December 31, 1998 and its future cash flows will be sufficient to meet TRH's cash requirements through the end of 1999 and thereafter for a period the length of which is difficult to predict, but which TRH believes will be at least one year.
TRH's fixed maturity investments, approximately 83.0% of total investments as of December 31, 1998, are predominantly investment grade, liquid securities concentrated in maturities of less than 10 years. Also as of that date, approximately 13.5% of total investments were in common and nonredeemable preferred stocks, approximately 2.9% of total investments were in other invested assets, including investments in partnerships, and the remaining 0.6% consisted of short-term investments. Based on the foregoing, TRH considers its liquidity to be adequate through the end of 1999 and thereafter for a period the length of which is difficult to predict, but which TRH believes will be at least one year.
The Company recorded net realized capital gains of $605,606 in 1999 versus $692,510 in 1998 and $326,905 in 1997. All of these gains were generated from the bonds available for sale category of the fixed maturity portfolio.
Statements made in this report that are not strictly historical may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that important factors, representing certain risks and uncertainties, could cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, (a) heightened competition from existing competitors and new competitor entrants into the Company's markets, (b) contraction of the markets for the Company's various lines of business, (c) development and performance of new specialty programs, (d) the ongoing level of claims and claims-related expenses, (e) adequacy of claim reserves, (f) the ability to complete value-adding acquisitions and fully integrate newly acquired companies and their customers and managers into the Company, as well as, the ability to implement growth strategies which can achieve incremental value, (g) the effectiveness of the redeployment of the Company's bond portfolio and other investment strategies implemented by the Company's investment manager, and (h) general economic conditions including fluctuations in interest rates. A forward-looking statement is relevant as of the date the statement is made. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which the statements are made.
At December 31, 1996, no mortgage loans were delinquent by 90 days or more. The Company does not expect to incur material losses from its mortgage loan portfolio. The Company's loan investment strategy is consistent with that of other life insurance subsidiaries of its ultimate parent, Equitable. Equitable has experienced a historically low default rate in its mortgage loan portfolio and has been able to recover 99% of the principal amount of problem mortgages resolved in the last three years.
Accrued investment income increased $3,371,000 during 1996 due to an increase in new fixed income investments and in the overall size of the portfolio resulting from the investment of premiums allocated to the fixed account option of the Company's variable products.
4. Other factors affecting the performance of the Company, including, but not limited to, market conduct issues, stock market performance, litigation, insurance industry insolvencies, investment performance of the underlying portfolios of the variable products, variable product design and sales volume by significant sellers of the Company's variable products.
CASH AND CASH EQUIVALENTS For purposes of the consolidated statement of cash flows, the Company considers all demand deposits and interest-bearing accounts not related to the investment function to be cash equivalents. All interest-bearing accounts classified as cash equivalents have original maturities of three months or less.
RECLASSIFICATION Certain amounts in the 1995 and 1994 financial statements have been reclassified to conform to the 1996 financial statement presentation.
Expenses decreased $397 to $940 in 1997, which generally reflected a decrease in dividends to policyholders of $394, or 62%, primarily due to the elimination of sales of leveraged COLI as discussed above.
The Variable COLI product offered by this segment continues to be used by employers to fund non-qualified benefits or offset other post-employment benefits liabilities.
The Company's separate accounts reflect two categories of risk assumption: non-guaranteed separate accounts totaling $58.6 billion as of December 31, 1997, wherein the policyholder assumes substantially all the investment risk and reward, and guaranteed separate accounts totaling $10.5 billion as of December 31, 1997, wherein the Company contractually guarantees either a minimum return or account value to the policyholder. Non-guaranteed separate account products include variable annuities, variable life and COLI. Guaranteed separate account products primarily consist of fixed MVA individual annuities and modified guaranteed life insurance, and generally include market value adjustment features to mitigate the disintermediation risk in the event of surrenders.
Credit risk and interest rate risk are the primary sources of investment risk to the Company. The Company manages credit risk through industry and issuer diversification and asset allocation. Credit policies have been established that focus on the credit quality of obligors and counterparties, limit credit concentrations, and encourage frequent creditworthiness reviews. The Company invests in investment grade securities and has established exposure limits, diversification standards and review procedures for all credit risks whether borrower, issuer, or counterparty. Also, the Company maintains credit policies regarding the financial stability and credit standing of its major derivatives' counterparties and, to the extent the current value of derivatives exceed exposure policy thresholds, collateral is pledged to or held by the Company. The Company manages interest rate risk as part of its asset/liability management strategies, including the use of certain hedging techniques (which may include the use of certain financial derivatives), product design, such as the use of MVA features and surrender charges, and proactive monitoring and management of certain non-guaranteed elements of the Company's products (such as resetting of credited rates for policies that permit such adjustments). For further discussion of the Company's interest rate risk management techniques see the Asset/Liability Management Strategies section on page 17.
In 1996 the Company continued the program initiated in 1995 to increase its mandatory deductibles and its minimum premium levels on certain of its commercial lines of business, primarily its businessowners and multi-peril lines. In conjunction with these actions, the Company discounted its premium rates 15% for its workers' compensation line of business. These discounted rates combined with other refinements were designed to attract the entire insurance business of preferred risk commercial accounts and to eliminate certain small premium policies which were generally unprofitable. These actions contributed to the decrease
Involuntary automobile insurance business increased the Company's calendar year loss and LAE ratio by approximately .7 percentage points and decreased the Company's calendar year loss and LAE ratio by approximately .6 percentage points for the years ended December 31, 1996 and 1995, respectively. The combined ratio on involuntary automobile business was greater than the combined ratio on voluntary automobile business.
Total revenues increased 3% from $101,352,000 in 1994 to $104,544,000 in 1995. Of the $3,192,000 increase, $3,904,000 was attributable to a 4% increase in net premiums earned and $519,000 was attributable to a 5% increase in net investment income. These increases were partly offset by an $852,000 decrease in net realized investment gains and a $379,000 decrease in other revenues.
In accordance with various states' AIP rules, Mutual historically received the assignment of MNH's, as well as its own, AIP policies based on its and MNH's combined voluntary automobile market share, issued the policies and settled the claims associated with those polices. Mutual then allocated the results of the involuntary AIP business to MNH based on MNH's share of the combined voluntary automobile business of Mutual and MNH.
Net cash used in investing activities decreased $3,364,000 from $12,473,000 in 1995 to $9,109,000 in 1996. This decrease primarily resulted from a $12,500,000 net decrease in the purchase of fixed maturities which was offset by net increases in purchases of other long-term and short-term investments of $4,944,000 and $3,763,000, respectively.
coverage exclusions contained in the policies. However, there is no assurance that the courts will agree with MNH's position in every case, nor can there be assurance that material claims will not be asserted under policies which a court will find do not explicitly or implicitly exclude claims for environmental damages. Management, however, is not aware of any pending claim or group of claims which would result in a liability that would have a material adverse effect on the financial condition of the Company or MNH.
Various events can cause catastrophes, including severe winter weather, hurricanes, windstorms, earthquakes, hail, war, terrorism, explosions and fires. The frequency and severity of these catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposures in the area affected by the event and the severity of the event.
If we are unable to reduce our exposure to risks through reliable reinsurance or if the cost of reinsurance increases, our risk of loss, or the cost of controlling our risk of loss, will increase.
In April 2009, the FASB issued guidance on “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly.” This provided additional guidance for estimating fair value in accordance with FASB Accounting Standards Codification (ASC) 820 on fair value measurements when the volume and level of activity for the asset or liability have significantly decreased and provided guidance on identifying circumstances that indicate a transaction is not orderly. This guidance lists a series of factors which should be evaluated to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability when compared with normal market activity for the asset or liability. If the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, transactions or quoted prices may not be determinative of fair value and further analysis of the transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. A reporting entity should also evaluate the circumstances to determine whether the transaction is orderly based on the weight of the evidence. This guidance was effective for interim and annual reporting periods ending after June 15, 2009, with prospective application. The adoption of this guidance did not have a material impact on the Company’s results of operations or financial position.
The per share weighted-average fair value of options granted during 2009, 2008 and 2007 was $5.67, $7.52 and $11.03, respectively. The total intrinsic value of options exercised was $1,199,000, $5,557,000, and $4,111,000 for 2009, 2008 and 2007, respectively.
The following is a summary of the fair value of major categories of plan assets as of December 31, 2009.
The decrease in earned premiums during 2001 is attributable to the fluctuation of the effective dates of policies written in the comparative period. Premiums written increased by 7.4% in 2001 to $6,738,231 from $6,276,434 in 2000. The increase in premiums written during 2001 is attributable to the continued growth of the AICPA Plan, primarily the result of an increase in the number of insureds under the AICPA Plan and from rate increases associated with a "step plan" which was initiated during 1995. Under the step plan, insureds are offered discounted premium
Unrealized gain on investments is $3,582,854 at December 31, 2001 as compared to $2,375,234 at December 31, 2000. AIG considers all of its investment portfolio to be available for sale and accordingly all investments are reported at market value, with changes in net unrealized gains and losses reflected as an adjustment to accumulated other comprehensive income.
reflect an increase of 8.9% from $1,770,098 in 1999. Such costs as a percentage of premiums earned (excluding the effects of reductions to retrocession premiums) are 29.5% in 2001, 29.5% in 2000 and 29.5 in 1999, and result primarily from ceding commissions paid to ceding companies determined contractually pursuant to reinsurance agreements and federal excise taxes paid on premiums written to ceding companies.
As is customary in the business, an actuarial review and projection is performed for AIC by its independent actuary as of June 30 and December 31 of each year. Those projections are not adjusted for the first three quarters, but are adjusted at year-end.
The lower section of the table shows the cumulative amount paid in respect of the previously recorded liability as of the end of each succeeding year. For example, the 1995 year end liability was originally $18,629,000. As of December 31, 2001, the Company had paid $7,268,000 of the currently estimated $7,541,000 of losses and LAE that had been incurred for 1995 and prior years through the end of 2001; thus an estimated $273,000 in losses incurred through 1995 remain unpaid as of the current financial statement date.
Total revenues were $279.7 million in 2001, an increase of 31.8% over total revenues of $212.3 million in 2000. Premiums earned increased $59.4 million, or 33.7%, in 2001. The increase was principally attributable to assumed reinsurance premiums of $79.5 million earned in 2001 compared to $27.1 million earned in 2000.
The Company experienced favorable development in loss reserves for many years, including favorable development in loss and LAE reserves established in 2000 of $42.6 million for prior policy years. During 2001, as a result of the poor experience in physician and medical groups outside California, the Company had unfavorable development in loss and LAE reserves in this segment of $12.9 million.
Net income for 2000 was $ 17.3 million, or $1.84 diluted earnings per share, a decrease of 42.2% from net income of $29.9 million, or $2.62 diluted earnings per share, in 1999. Operating earnings, which do not include realized gains or losses, were $1.87 per share in 2000 compared to $2.64 per share in 1999.
Other Operating Expenses-Other operating expenses for the direct segment in 2000 were approximately $32.3 million, compared to total operating expenses for the entire business operation in 1999 of $29.3 million, when the Company did not allocate expenses to the different parts of its operations. The ratio of other operating expenses to premiums earned is referred to as the expense ratio, which increased to 21.6% in 2000 for the direct medical malpractice insurance segment from 19.1% for the entire operation in 1999. This increase reflects higher commission expenses associated with the greater proportion of broker-produced premiums in 2000 compared to 1999 and an increase in employee-related expenses.
The primary sources of the Company’s liquidity are insurance premiums, net investment income, recoveries from
Common stock dividends paid to stockholders were $0.40 per share in 2001. These dividends were funded through dividends from the Company’s insurance subsidiaries received in prior years. The Company has declared a quarterly dividend of $0.10 per share, payable on March 29, 2002. Payment of future dividends is subject to Board approval, earnings and the financial condition of the Company.
New business production decreased significantly over the last two years. New business production decreased 39% or approximately $2,063,000 when comparing 1998 to 1997. In recent years, the insurance industry as a whole has experienced a decline in the total number of agents who sell insurance products, therefore competition has
Income taxes payable and deferred income taxes payable decreased 33% in 1998 compared to 1997. Deferred taxes are established to recognize future tax effects attributable to temporary differences between the financial statements and the tax return. As these differences are realized in the financial statement or tax return, the deferred income tax established on the difference is recognized in the financial statements as an income tax expense or credit. The Company released deferred taxes of $2,050,709 from the deferred policy acquisition costs impairment and the notes payable discounts write offs. Federal income taxes are discussed in more detail in Note 3 of the Consolidated Notes to the Financial Statements.
Ohio domiciled insurance companies require five days prior notification to the insurance commissioner for the payment of an ordinary dividend. Ordinary dividends are defined as the greater of: a) prior year statutory earnings or b) 10% of statutory capital and surplus. For the year ended December 31, 1998, UG had a statutory gain from operations of $3,266,000. At December 31, 1998, UG's statutory capital and surplus amounted to $15,281,000. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation.
The Company holds a $840,066 note receivable for which the determination of fair value is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
UTI and FCC established a deferred compensation plan during 1993 pursuant to which an officer or agent of FCC, UTI or affiliates of UTI, could defer a portion of their income over the next two and one-half years in return for a deferred compensation payment payable at the end of seven years in the amount equal to the total income deferred plus interest at a rate of approximately 8.5% per annum and a stock option to purchase shares of common stock of UTI. At the beginning of the deferral period an officer or agent received an immediately exercisable option to purchase 2,300 shares of UTI common stock at $17.50 per share for each $25,000 ($10,000 per year for two and one-half years) of total income deferred. The option expires on December 31, 2000. A total of 105,000 options were granted in 1993 under this plan. As of December 31, 1997 no options were exercised. At December 31, 1998 and 1997, the Company held a liability of $1,494,520 and $1,376,384, respectively, relating to this plan. At December 31, 1998, UTI common stock had a market price of $8.125 per share.
Number outstanding 105,000 Exercise price $17.50 Remaining contractual life 2 years
Proceeds from sales of investments in debt securities during 1995, 1994, and 1993 were $1,510,553,000, $1,390,974,000, and $911,644,000, gross gains were $24,757,000, $15,025,000, and $43,674,000 and gross losses were $5,742,000, $30,041,000 and $687,000, respectively.
The market values of interest rate swaps and forward spread lock agreements are primarily obtained from dealer quotes. The market value is the estimated amount that the Company would receive or pay on termination or sale, taking into account current interest rates and the current creditworthiness of the counter parties. The Company is exposed to potential credit loss in the event of non-performance by counterparties. The counterparties are major financial institutions and management believes that the risk of incurring losses related to credit risk is remote.
10. LEVERAGED LEASES (CONTINUED): The Company's net investment in leveraged leases is composed of the following elements:
We review these assumptions quarterly and as a result of these reviews, we made adjustments to assumptions used in the calculation of amortization of deferred policy acquisition costs and deferred sales inducements during 2018. The most significant revisions to such assumptions were account balance true-ups which were favorable to us due to stronger index credits than we assumed due to strong equity market performance and adjustments to generally decrease lapse rate assumptions to reflect better persistency experienced than assumed. The favorable impact of the account balance true-ups and lapse rate assumption changes was partially offset by revisions to lower our future investment spread assumptions primarily due to an increase in the cost of money we have been experiencing.
Losses on available for sale fixed maturity securities were realized primarily due to strategies to reposition the fixed maturity security portfolio that resulted in improved net investment income, risk or duration profiles as they pertain to our asset liability management. During 2018 we sold $2.1 billion in book value of lower yielding securities for a yield pick-up of approximately 170 basis points on these investments. As book yields on these securities sold were less than market yields, we recognized losses of approximately $38 million on these sales. In addition, securities were sold at losses in 2018, 2017 and 2016 due to our long-term fundamental concern with the issuers' ability to meet their future financial obligations. See Note 4 to our audited consolidated financial statements for additional discussion of allowance for credit losses recognized on mortgage loans on real estate.
In the normal course of business, we commit to fund commercial mortgage loans up to 90 days in advance. At December 31, 2018, we had commitments to fund commercial mortgage loans totaling $148.0 million, with interest rates ranging from 4.50% to 7.40%. During 2018 and 2017, due to historically low interest rates, the commercial mortgage loan industry has been very competitive. This competition has resulted in a number of borrowers refinancing with other lenders. For the year ended December 31, 2018, we received $178.2 million in cash for loans being paid in full compared to $230.4 million for the year ended December 31, 2017. Some of the loans being paid off have either reached their maturity or are nearing maturity; however, some borrowers are paying the prepayment fee and refinancing at a lower rate.
RESULTS OF OPERATIONS - YEAR ENDED MAY 31, 2001 COMPARED TO THE YEAR ENDED MAY 31, 2000.
The Company reported a net loss of $1.1 million and an operating loss of $1.2 million for the fiscal year ended May 31, 2001. Operating revenues increased by $0.5 million, or 2.7%, for the fiscal year ended May 31, 2001 compared to the fiscal year ended May 31, 2000. This increase is attributable to the implementation in Fiscal 2001 of two major, managed care contracts which accounted for $4.1 million of operating revenues during the fiscal year ended May 31, 2001, offset by the loss of revenues during Fiscal 2001 specific to the Humana contracts and the loss of two major contracts that terminated during the third quarter of Fiscal 2000.
As of May 31, 2002, the Company had stockholders’ deficit of $12.5 million and a working capital deficiency of approximately $12.3 million. The Company had a net loss for the fiscal year ended May 31, 2002 of approximately $770,000. There can be no assurance that the Company will be able to achieve and sustain profitability or that the Company can maintain positive cash flow on an ongoing basis. Present results of operations are not necessarily indicative of anticipated future results of operations.
The Company’s managed care activities are performed under the terms of agreements with health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”), and other health plans or payers to provide contracted behavioral healthcare services to subscribing participants. Revenue under a substantial portion of these agreements is earned monthly based on the number of qualified participants regardless of services actually provided (generally referred to as capitation arrangements). Such agreements accounted for 84.7% or $23.4 million, of revenue for the fiscal year ended May 31, 2002, 79.2%, or $14.4 million, of revenue for the fiscal year ended May 31, 2001, and 81.0%, or $14.4 million, of revenue for the fiscal year ended May 31, 2000. The balance of the Company’s revenues is earned on a fee-for-service basis and is recognized as services are rendered.
In calculating basic earnings (loss) per share, net income (loss) is divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the assumed exercise or conversion of all dilutive securities, such as options and convertible debentures. No such exercise or conversion is assumed where the effect is antidilutive, such as when there is a net loss.
The property and casualty segment's gross reserves before ceded reinsurance for losses and settlement expenses decreased $209,000 between 1995 and 1994. While 1995 produced a record number of hurricanes, the Company did not have much exposure related to any of these storms. Gross reserves remaining on the Northridge earthquake were $3,733,000 as of December 31, 1995, compared to $8,341,000 at December 31, 1994.
The Company's property and casualty segment reported record operating earnings of $30,718,000 in 1995, compared to $22,922,000 in 1994. Premiums earned increased 11%, or $19,142,000. Much of the growth was direct business concentrated in four midwestern states. In addition, the Company has had to pay less for its ceded protection due to a decrease in ceded premium rates.
The increase of $3,743,000 in premiums earned is comprised mainly of a $1,181,000 increase in collected traditional life premiums and a $1,479,000 increase in collected credit premiums. During 1995, we increased our anticipated future lapses and wrote off $1,300,000 of deferred acquisition costs due to the withdrawal of one block of universal life business totaling $15,559,000 in the first two months of 1996.
Investment income rose 15% in 1995, over 1994, which is largely attributable to a growing fixed income portfolio. The Company's investment yield was a consistent 7% for 1995, 1994 and 1993. Realized gains increased by $902,000, most of which was due to the sale of an available-for-sale preferred stock holding.
Investments in held-to-maturity fixed maturities are recorded at amortized cost. The Company has the ability and intent to hold these investments until maturity. If, however, a permanent impairment occurs in a security, the Company writes the security down to the new value. Available-for-sale fixed maturities, equity securities and other long-term investments are recorded at fair value. Mortgage loans are recorded at the unpaid balance amount. Policy loans and short-term investments are recorded at cost. Included in investments at December 31, 1995 and 1994 are securities on deposit with various regulatory authorities as required by law with carrying values of $434,605,000 and $373,432,000, respectively.
Intangibles, including goodwill and agency relationships, are being amortized by the straight-line method over periods of up to twenty-eight years.
The State of Iowa Insurance Department imposes certain capital requirements on insurance companies on a statutory basis. Under the applicable regulations, United Fire & Casualty Company is required to maintain minimum capital stock of $2,500,000 and minimum additional paid-in capital and retained earnings in the aggregate amount of $2,500,000. At December 31, 1995, United Fire & Casualty Company's capital stock was $36,098,000 and total statutory paid-in capital and retained earnings were $121,956,000.
On January 1, 2004, Merrill Lynch Life adopted the provisions of SOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts.” SOP 03-1 required the establishment of a liability for contracts that contain death or other insurance benefits using a reserve methodology that was different from the methodology that Merrill Lynch Life previously employed. As a result, Merrill Lynch Life recorded a $41.3 million increase in policyholder liabilities and a $0.9 million decrease in deferred policy acquisition costs resulting in a charge to earnings of $27.4 million, net of a federal income tax benefit of $14.8 million, which was reported as a cumulative effect of a change in accounting principle during 2004. Excluding the cumulative effect of a change in accounting principle during 2004, the changes in policyholder liabilities related to SOP 03-1 did not have a material impact on Merrill Lynch Life’s Statements of Earnings for the years ended December 31, 2005 and 2004.
Merrill Lynch Life offers products in the highly competitive retirement planning market by selling variable and interest-sensitive annuity products through the retail network of Merrill Lynch, Pierce, Fenner & Smith, Incorporated, a wholly owned broker-dealer subsidiary of Merrill Lynch & Co. Merrill Lynch Life competes for Merrill Lynch & Co.’s clients’ retirement planning business with i) unaffiliated insurers whose products are also sold through Merrill Lynch & Co.’s retail network, ii) insurers who solicit this business directly, and iii) other investment products sold through Merrill Lynch & Co.’s retail network. Merrill Lynch Life competes in this market segment by integrating its products into Merrill Lynch & Co.’s planning-based financial management program.
At December 31, 2005 and 2004, approximately $26.8 million (or 1%) and $21.1 million (or 1%), respectively, of fixed maturity securities were considered below investment grade. Below investment grade securities are speculative and are subject to significantly greater risks related to the creditworthiness of the issuers and the liquidity of the market for such securities. Current below investment grade holdings are the result of ratings downgrades on existing securities as Merrill Lynch Life does not purchase below investment grade securities. Merrill Lynch Life closely monitors such investments.
Discounted Mortgage Loans on Real Estate - Discounted mortgage loans on real estate are loans that the Company purchased at a deep discount through an auction process led by the Federal Government or other intermediary. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price adjusted for any principal receipts received. Management works with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate. For cash payments received during the work out process, the Company records these payments to interest income on a cash basis. For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known.
Fair Value - Fair values for cash, short-term investments, short-term debt, receivables and payables approximate carrying value. Fair values for fixed maturities, equity securities and certain other assets are determined in accordance with specific accounting guidance. Fair values are based on quoted market prices, where available. Otherwise, fair values are based on quoted market prices of comparable instruments in active markets, quotes in inactive markets, or other observable criteria. Mortgage loans on real estate are estimated using discounted cash flow analyses. Discounted mortgage loans on real estate are reported at original purchase price, which Management believes approximates fair value. For more specific information regarding the Company's measurements and procedures in valuing financial instruments, see Note 3 - Fair Value Measurements.
The UTG Avalon promissory note issued on December 29, 2014 carries interest at a rate of 3.50 % with interest payable quarterly beginning in July of 2015. The interest is a variable rate that is equal to the lowest of the U.S. Prime Rates as published in the money section of the Wall Street Journal. The interest rate is subject to change monthly and any change in interest rate is effective the first day of the month following the rate change. Principal is due upon maturity of the note.
The following table represents the total funding commitments and the unfunded commitment as of December 31, 2014 related to certain investments:
American Safety is an insurance and financial services holding company whose principal assets are its investment portfolio and its investment in the capital stock of its subsidiaries. American Safety's ability to pay dividends to its shareholders will depend, to a significant degree, on the ability of the Company's subsidiaries to pay dividends to American Safety. The jurisdictions in which American Safety and its insurance and reinsurance subsidiaries are domiciled place limitations on the amount of dividends or other distributions payable by insurance companies in order to protect the solvency of insurers.
The Year 2000 issue was the result of computer programs being written using two digits rather than four digits to define the applicable year. If not corrected, computer applications could fail or create erroneous results by or at the Year 2000. During 1999, the Company, together with consulting outside vendors, reviewed its information technology systems (i.e., underwriting, insureds, claims and accounting) and the systems have proved to be Year 2000 compliant by processing date information accurately and without interruption when required to process dates in the year 1999 and beyond.
Debt and equity securities generated approximately 94% of total investment income, excluding derivative gains and losses, in 2017 consistent with prior years. The Company’s strategy is to invest substantially all of its cash flows in fixed debt securities within its guidelines for credit quality, duration, and diversification. The Company has experienced incremental cash flow from new business and investment income from its portfolio to be used for investing in debt securities which has caused the debt securities portfolio to grow from $10.0 billion at December 31, 2015 to $10.2 billion at December 31, 2016 and to $10.3 billion at December 31, 2017. Investment yields on new bond purchases in 2017 remained below the portfolio's weighted average yield of approximately 3.97% at December 31, 2017. The yield on debt security purchases to fund insurance operations increased to 3.57% in 2017 from 3.38% in 2016. Also impacting bond portfolio returns has been the volume of higher yielding debt securities maturing or being called by borrowers with the proceeds being reinvested into lower yielding securities.
A summary of segment earnings from continuing operations for the years ended December 31, 2017, 2016 and 2015 is provided below. The segment earnings exclude realized gains and losses on investments, net of taxes.
The contractual maturities of mortgage loan principal balances at December 31, 2017 and 2016 were as follows:
Debt securities held to maturity are recorded at their amortized cost basis. Accordingly, the unrealized gain amounts shown in the table above are not incorporated into the Company's Consolidated Financial Statements at December 31, 2017 and 2016, respectively.
Insurance reserves are the means by which life insurance companies determine the liabilities that must be established to assure that future policy benefits are provided for and can be paid. These reserves are required by law and based upon standard actuarial methodologies to ensure fulfillment of commitments guaranteed to policyholders and their beneficiaries, even though the obligations may not be due for many years. Refer to Note 1, Summary of Significant Accounting Policies, of the accompanying Consolidated Financial Statements for a discussion of reserving methods.
(D) The loss ratio represents health care services and other benefits as a percentage of premium revenue. All other ratios are shown as a percentage of premium revenue and management services revenue.
On August 4, 1997, the Company completed a reincorporation in Delaware (the "Reincorporation") through the formation of a new holding company structure. The Reincorporation involved a merger among the Company, WellPoint Health Networks Inc., a California corporation ("WellPoint California"), and WLP Acquisition Corp. (the "Merger Subsidiary"), a wholly owned subsidiary of the Company. Merger Subsidiary was merged with and into WellPoint California, and WellPoint California's shareholders became stockholders of the Company. As a result of such merger, WellPoint California became a wholly owned subsidiary of the Company. The principal purpose of the Reincorporation was to allow a restructuring of the Company and its various subsidiaries in order to improve the Company's capital as measured for BCBSA purposes.
Selling expense for the year ended December 31, 1996 increased 18.0% to $224.5 million compared to $190.2 million in 1995, corresponding with continued overall premium revenue growth and an additional $21.4 million in selling expense attributable to MMHD. The selling expense ratio for 1996 decreased to 5.6% from 6.4% for the prior year, largely due to the acquisition of MMHD, which has a lower selling expense ratio than the Company's existing business and the BCC Commercial Operations, which has no selling expense. Excluding the acquisitions, the selling expense ratio would have been 6.3% for the year ended December 31, 1996, consistent with the prior year.