felanders/preprocessed huggingface dataset:
The accompanying Consolidated Financial Statements include the accounts of Berkshire consolidated with accounts of all its subsidiaries. Intercompany accounts and transactions have been eliminated. The accompanying prior year financial statements have been restated from the amounts previously reported in the Company's Consolidated Financial Statements included in its Annual Report for the year ended December 31, 1995. See 1(b) below for further information.
Incurred losses "all prior accident years" reflects the amount of estimation error charged or credited to earnings in each year. In addition, this amount includes amortization of deferred charges re reinsurance assumed and accretion of discounted structured settlement liabilities. The use of estimates is inherent in the process of establishing unpaid losses and loss expenses. Additional information will be revealed over time and those estimates and assumptions will be revised resulting in gains or losses in the period made.
Considerable judgement is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value.
The business segments identified above were responsible in 1996 for 86% of Berkshire's consolidated revenues. Other businesses activities that contributed for 1996, in the aggregate, 11% of Berkshire's consolidated revenues, were as follows:
Consolidated Statements of Operations for the Years Ended December 31, 2010 and 2009
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010 and 2009
States and political subdivisions: overall credit quality, including assessments of market sectors and the level and variability of sources of payment such as general obligation, revenue or lease; credit support such as insurance, state or local economic and political base; prefunded and escrowed to maturity covenants;
Income tax expense on net realized investment gains was $922 and $61 for the years ended December 31, 2010 and 2009, respectively. Deferred income tax expense applicable to net unrealized investment gains, included in accumulated other comprehensive income, was $1,845 at both December 31, 2010 and December 31, 2009, respectively. See note 10 for additional information related to the allocation of tax between continuing operations and accumulated other comprehensive income.
Accumulated other comprehensive income at December 31, 2010 and December 31, 2009 consisted of the following amounts (all amounts net of taxes):
At December 31, 2010, the minimum aggregate rental and lease commitments for continuing operations are as follows:
The Company’s minimum required contribution for the defined benefit pension plan in 2011 is $37.
level and other relevant factors. The expected term assumption was derived using the “simplified” approach for plain vanilla options as set forth in SEC Staff Accounting Bulletin (SAB) Topic 14 for new public companies. The risk-free interest rate assumption was based upon the implied yield on the measurement date of a zero-coupon U.S. Treasury bond with a maturity period equal to the options’ expected term. The Company does not expect to pay dividends; therefore, the expected dividend yield is assumed to be zero. No post-vesting restrictions exist for these options.
Segment information for years ended December 31, 2010 and 2009 is as follows:
Our discussion and analysis of the financial condition and results of operations are based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and judgments that affect the reported amounts and related disclosures. We rely on historical experience and on various other assumptions, that we believe to be reasonable under the circumstances, to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.
The increases in net premiums written for the period under discussion resulted from increased coverage provided and, to a lesser extent in 2001 only, rate increases, and were primarily from treaty business. On a worldwide basis, casualty lines business represented 79.2% of net premiums written in 2001 versus 76.7% and 74.8% in 2000 and 1999, respectively. The balance represented property lines. Treaty business represented 95.7% of net premiums written in 2001 versus 96.3% in 2000 and 96.6% in 1999. The balance represented facultative accounts.
(a) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (GAAP). Certain reclassifications have been made to conform prior years' presentations with 2001.
In August 1998, AIG increased its beneficial ownership of the Company's outstanding common stock from 49% to over 50%. As of December 31, 2001, AIG beneficially owned approximately 60% of the Company's outstanding shares.
Ceded reinsurance arrangements do not relieve TRH from its obligations to the insurers and reinsurers from whom it assumes business. The failure of retrocessionnaires to honor their obligations could result in losses to TRH; consequently, an allowance has been established for estimated unrecoverable reinsurance on paid and unpaid losses totaling $13.0 million in both 2001 and 2000. TRH evaluates the financial condition of its retrocessionnaires through a security committee. With respect to reinsurance recoverable on paid and unpaid losses and prepaid reinsurance premiums, TRH holds substantial amounts of funds and letters of credit to collateralize these amounts. Such funds and letters of credit can be drawn on for amounts remaining unpaid beyond contract terms. No uncollateralized amounts recoverable from a single retrocessionnaire, other than amounts due from affiliates, are considered material to the financial position of TRH.
(1) Revenues represent the sum of net premiums earned, net investment income and realized net capital gains (losses).
The IRA Partnership operations consist entirely of its interests in the operations of the Trust and will continue as long as the Trust is liquidating its assets. The Partnership utilizes the equity method of accounting for its interests in the Trust and recognizes its proportionate interest in the results of the Trust’s continuing operations accordingly.
During the year ended December 31, 2017, the Position Holder Trust paid premiums on Policies totaling $37.5 million on the PHT Portfolio. In addition, the Trust received $66.9 million from the maturity of life settlements during the year ended December 31, 2017. The Position Holder Trust did not engage in any material investing activities during the period ended December 31, 2016.
The Trust’s investments in life insurance policies are its primary source of income. Gain or loss is recognized from ongoing changes in the portfolio’s estimated fair value, including any gains or losses at maturity. Gains or losses from maturities are recognized at receipt of a death notice or verified obituary for an insured party, and determined based on the difference between the death benefit and the estimated fair value of the policy at maturity.
The Servicing Company is paid 2.65% of each maturity as compensation. The estimated cash flows of the Policies are net of such compensation.
Lafayette Insurance Company owns one building in New Orleans, Louisiana which serves as its Home Office. The building consists of two floors of office space and a floor of parking, as well as a parking lot located adjacent to the building.
The Company is not aware of any significant contingent liabilities as far as environmental issues are concerned. Because of the type of business the Company writes, i.e. property coverage, there exists the potential for exposure for environmental pollution and asbestos claims. The Company's underwriters are aware of these exposures and use limited riders or endorsements to limit exposure.
The increase in the property and casualty segments' other underwriting expenses (including amortization of deferred acquisition costs) of $4,904,000 or 9% resulted primarily from an increase in commissions paid to our agents, due to the increase in premium writings.
The Lafayette has been expanding to Arkansas and Mississippi by taking over the business of other companies, while limiting its exposure in the New Orleans area. When we originally purchased the Lafayette in 1979, it was doing business in Mississippi as well as Louisiana, but its experience in the state was so bad and the quality of the business so poor that we eventually had to withdraw and let the business run off the books. Therefore, we are pleased to be able to report that we have successfully reentered the state and our experience is acceptable.
A majority of the annuities we write comes from banks or marketing organizations that work primarily with small town banks. While "banks in insurance" has become a highly controversial topic in the insurance business, it is primarily an agent's problem and one we're afraid the agents are going to lose. (After all, those were bankers, not insurance agents, who paid big money to have coffee in the White House.) As it is evolving, banks particularly small town banks, are becoming an important source of business for us, not a competitor. But then small town banks have always been an important source of business for your Company.
The estimated fair value of mortgage loans was based on the estimated discounted future cash flows using 6.5% at December 31, 1996 and 7.0% at December 31, 1995.
For medical claims, a health care cost trend rate of 9.5% was assumed for 1997, decreasing annually to 6.0% in 2006. For dental claims, a health care cost trend rate of 7.0% was assumed for 1997, decreasing annually to 5.5% in 2006.
MMI serves as the Company’s management services subsidiary as a general agency providing underwriting, policy administration, claims administration, marketing, accounting and financial and other management services to Maison. MMI contracts with independent agents for policy sales and services. MMI has entered into a contract with an independent third-party policy administration company for services. As a managing general agency, MMI is licensed by and subject to the regulatory oversight of the LDI.
Premium deposits were $560 and $213 and represent cash the Company has received for policies which were not yet in-force as of December 31, 2014 and 2013 respectively. The year over year increase of $347 to premium deposits is directly related to the increase in direct written premiums for the year ended December 31, 2014.
Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive.
The Company has reviewed currently available information regarding investments with estimated fair values that are less than their carrying amounts and believes that these unrealized losses are primarily due to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not intend to sell these investments in the short term, and it is not likely that it will be required to sell these investments before the recovery of their amortized cost.
Endowment product sales have been on the rise and represented approximately 76.1% of new sales in the life segment in 2015. The Company currently offers a fifteen and twenty year endowment and our top selling endowment is a product that matures at age sixty-five. We also introduced a new product in 2013 that is an endowment at age eighteen with a payout over four or five years.
Investment income from fixed maturity securities accounted for approximately 83.4% of total investment income for the year ended December 31, 2015. We have increased our investment purchases of corporate and municipal securities over the past several years, focusing on utility service sectors in these security categories. In addition, we currently have $21.5 million invested in equity securities related to bond and stock mutual funds as these securities offer a competitive yield with a shorter duration.
Reserves. The change in future policy benefit reserves has decreased in 2015 by 5.9% primarily due to the high surrenders and increased in 2014 by 11.6% due primarily to the current low interest rate environment necessitating higher reserves for policies issued in the last few years due to lower long term yield projections compared to prior assumptions. In addition, we continue to experience growth in new sales of endowment products, which require higher initial reserve levels, than whole life products. Endowment sales totaled approximately $16.4 million, $16.1 million and $14.3 million in 2015, 2014 and 2013, respectively.
Our liquidity requirements are met primarily by funds provided from operations. Premium deposits and revenues, investment income and investment maturities are the primary sources of funds, while investment purchases, policy benefits, and operating expenses are the primary uses of funds. We historically have not had to liquidate investments to provide cash flow, and there were no liquidity issues in 2015 or 2014. Our investments consist of 67.6% of marketable debt securities and 2.2% of equity securities classified as available-for-sale that could be readily converted to cash for liquidity needs.
At December 31, 2015, all of our insurance subsidiaries were above the required minimum RBC levels.
Results of Operations for the Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011
The Company had net realized investment gains of $8.7 million in 2011 compared to $4.6 million in 2010. These amounts include gains and losses from sales of fixed maturities and equity securities available-for-sale and other investments. Decisions to sell securities are based on management's ongoing evaluation of investment opportunities and economic and market conditions, thus creating fluctuations in gains and losses from period to period. A significant portion of the net realized investment gains in 2011 resulted from sales of invested assets in anticipation of a transfer of assets in the first quarter of 2012 in accordance with the terms of a coinsurance agreement at December 31, 2011. Net realized investment gains in 2010 were reduced by an additional loss of $3.3 million resulting from discussions in the fourth quarter of 2010 with the trustee in bankruptcy pertaining to the resolution of claims related to the non-affiliate broker-dealer that managed the trading accounts of the Company in 2008. The $3.3 million pre-tax loss consisted of: (i) the reversal of $0.5 million of anticipated SIPC recoveries initially recorded by a subsidiary of IHC; (ii) the reversal of $0.5 million of anticipated SIPC recoveries initially recorded by AMIC; and (iii) an additional $2.3 million of withdrawals by IHC and AMIC deemed subject to return. See Note 8 in the Notes to Consolidated Financial Statements included in the Item 8 of this report for more information about net realized investment gains and losses.
Selling, general and administrative expenses in 2011 include twelve months of expenses from AMIC of $28.0 million compared to ten months of expenses from AMIC of $23.1 million in 2010. Excluding these amounts, selling, general and administrative expenses increased $2.6 million. The increase is primarily due to: (i) a $3.2 million decrease in commissions and other general expenses in the Medical Stop-Loss segment due to a decrease in volume as a result of reduced production; (ii) a $1.9 million decrease in the Group disability, life, annuities and DBL segment; more than offset by (iii) a $4.5 million increase in the Fully Insured Health segment largely due to an increase in commissions as a result of increased retentions in the major medical business for groups and individuals, short term medical and limited medical lines of business in 2011 combined with administrative expenses resulting from the increased volume of major medical business for groups and individuals and limited medical business; (iv) a $2.4 million increase in the Individual life, annuity and other segment related to the increase in premium volume of the ordinary life and annuity business; and (v) a net increase of $.8 million in corporate selling, general and administrative expenses.
The following sections describe, for each segment, the unfavorable (favorable) development experienced in 2012, together with the key assumptions and changes therein affecting the reserve estimates.
The Company believes its existing facilities are suitable to conduct its present business.
Interest expense of $1.6 million in 1999 includes $0.7 million on convertible debentures, $0.6 million of accrued interest on ceding commission liability and $0.2 million on loans payable and $0.1 million of interest on other obligations. Interest expense increased in 1999 compared to 1998 due to the 1999 issuance of convertible debentures and the December 31, 1998 execution of a reinsurance agreement which gave rise to the ceding commission liability and interest thereon.
The Company has recorded a loss on the sale of subsidiary of $10.3 million in connection with the sale of PILIC which includes a write-off of net assets including unamortized deferred policy acquisition costs, property and equipment, net of accumulated depreciation in the amount of $2.7 million plus HAI's November 30, 1999 capital contribution to PILIC in the amount of $7.2 million and the value of the Series A Preferred Stock transferred to AHC in the amount of $0.4 million. No consideration was received from AHC as the liabilities assumed exceeded the value of the assets acquired. The value of the Series A Preferred Stock was based on the historical issuance cost by HealthAxis to PILIC during 1998.
o acquire technical expertise and accelerate the carrier partner integration process, which would allow HealthAxis to make more quickly additional products available of its website and accelerate its growth.
o improve the Company's ability to raise capital on more favorable terms than in the private equity markets;
The unaudited quarterly data for the Company for each quarter of 1996 and 1997 have been derived from unaudited financial statements and include all adjustments, consisting only of normal recurring accruals, which the Company considers necessary for a fair presentation of the results of operations for these periods. Such quarterly operating results are not necessarily indicative of the Company's future results of operations.
Renewal commissions on accident and health business in 1997 increased 34.7% to $16,580,473, compared to $12,312,521 in 1996, remaining consistent with the increase in renewal premiums discussed above. The ratio of renewal accident and health commissions to renewal accident and health premiums was 16.1% in 1997 and 15.4% in 1996. This ratio fluctuates in relation to the age of the policies in force and the rates of commissions paid to the producing agents.
We have audited the accompanying consolidated balance sheets of Penn Treaty American Corporation and Subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
The Company is subject to interest rate risk to the extent its investment portfolio cash flows are not matched to its insurance liabilities. Management believes it manages this risk through modeling of the cash flows under reasonable scenarios.
On August 1, 1996, the Company adopted a 401(k) retirement plan, covering substantially all employees with one year of service. Under the plan, participating employees may contribute up to
ANIC reinsures approximately $500,000 of its risk with three reinsuring companies, all of which are authorized to do business in the State of Vermont.
The lower combined ratio in 1998 primarily reflects a general reduction in incurred losses caused by a decline in both the frequency and overall severity of claims, partially offset by the an increase in aviation, hurricane and other weather-related catastrophe losses. The higher combined ratio in 1997 primarily reflects less favorable loss experience, a general decline in international premium rates and market conditions, increased underwriting and operating costs associated with the implementation of new strategic business initiatives and certain large catastrophe losses such as the Eastern Europe floods and aviation losses.
Domestic Investment Operations. The Company's domestic property and casualty investment portfolios are principally invested in tax-exempt state and municipal bonds, which the Company believes provide the most attractive after-tax yield. Some additional commitment was made to equity securities, primarily through limited partnership arrangements, in 1996 to enhance total investment returns in the longer term. The Company's domestic life investment portfolios are largely invested in taxable debt securities.
One means of assessing exposure to interest rate changes is a duration-based analysis that measures the potential loss in net earnings resulting from a hypothetical decrease in interest rates of 100 basis points across all maturities (sometimes referred to as a "parallel shift in the yield curve"). Under this model, it is estimated that, all else constant, such a decrease, including repricing effects in the securities portfolio, would reduce the 1999 net earnings of the Company based on December 31, 1998 positions by an insignificant amount.
Earnings (loss) per common share: Continuing operations $1.41 ($0.50)($0.26) ($0.33) ($0.37) Discontinued operations (.27) (.94) (2.66) (2.37) (4.94) Extraordinary item (.10) - - - - Change in accounting principle - (.17) - - - _____ _____ _____ _____ _____ Net earnings (loss) $1.04 ($1.61) ($2.92) ($2.70) ($5.31) _____ _____ _____ _____ _____
Total annuity receipts increased primarily due to the introduction of new single premium products in the second half of 1992.
which provides additional liquidity for either entity up to $20.0 million. As of December 31, 2018, we had no other material commitments for capital expenditures.
We also have share-based payment arrangements under our Class A Common Stock Compensation Plan, although no new awards have been made since 2011.
The FBL Financial Group Retirement Plan (the Multiemployer Plan) is considered a multiemployer plan, with the participation of affiliated and unaffiliated employers along with FBL Financial Group, Inc. and its subsidiaries. Under the multiemployer plan structure, our contributions are commingled with those of the other employers to fund the plan benefit obligations. Should a participating employer be unable to provide funding, the remaining employers would be required to continue funding all
future obligations. If an employer elects to discontinue participation, prior to departure they will be required to contribute their portion of the underfunded pension obligation associated with their employees. This required contribution will be based on an actuarial estimate of future benefit obligations, which as an estimate may not ultimately be sufficient to fund future actual benefits. None of the participating employers have provided notice that they would be discontinuing participation in the Multiemployer Plan or would otherwise be unable to continue providing their share of required funding as of December 31, 2018.
The intrinsic value of options exercised during the year totaled $0.7 million for 2018, $0.8 million for 2017 and $3.2 million for 2016.
We have management agreements under which we provide general business, administrative and management services to Farm Bureau Property & Casualty Insurance Company and other affiliates. Fee income for these services totaled $2.0 million in 2018 and 2017 and $2.2 million in 2016. In addition, as discussed in Note 1, we provide investment advisory services and lease property and equipment under agreements with Farm Bureau Property & Casualty, other affiliates and non-affiliates.
Amounts are net of adjustments, as applicable, to amortization of unearned revenue reserves, deferred acquisition costs, value of insurance in force acquired, interest sensitive product reserves and income taxes attributable to these items.
During the years 1994 and 1995, the Company derived most of its revenues from providing full service automobile insurance services (policy processing, policy administration and claims administration) through its ISD business. The Company has also provided state-of-the-art computer products for the property casualty insurance industry through its wholly-owned subsidiary, COVER-ALL.
These agreements have resulted in a net loss for 1996 and 1995 of $392,872 and $749,758, respectively. The additional net loss for 1996 relates to additional loss adjustment expenses (mostly legal fees), pertaining to the discontinued operations, in excess of the amount accrued in 1995. The 1995 net loss includes a provision for estimated ISD losses in 1996 prior to the March 1, 1996 effective date of the Restructuring.
On March 31, 1997, the Company sold $3,000,000 of 12 1/2% Convertible Debentures due March 2002 (the "Debentures") to an institutional investor. The Debentures were sold at face value, pay interest quarterly and are convertible, in whole or in part, into shares of Common Stock of the Company at $1.25 per share, subject to adjustment. The Debentures contain certain covenants which restrict the Company's ability to incur indebtedness, grant liens, pay dividends or other defined restricted payments and make investments and acquisitions. The Company cannot redeem the Debentures for two years and thereafter may only call the Debentures if the closing price of the Company's Common Stock for the twenty business days preceding the redemption date exceeds $1.50. The net proceeds from this financing will be used for working capital purposes.
IHC’s health insurance products serve niche sectors of the commercial market through multiple classes of business and varied distribution channels. With regard to those persons in the growing individual market, IHC’s products offer coverage for individuals and families with short-term needs, and fixed indemnity limited benefit and scheduled benefit plans through multiple distribution partners. We offer pet insurance for dogs and cats in all 50 states through select distributors. Our fixed indemnity limited benefit product is primarily purchased by hourly workers and others who are generally not eligible for coverage under their employer’s group medical plan. The dental and vision products are marketed to large and small groups as well as individuals. With respect to IHC’s life and disability business, Madison National Life has historically sold almost all of this business through one distribution source specializing in serving school districts and municipalities.
·Consolidated investment yields (on an annualized basis) of 2.3% and 3.0% in 2020 and 2019, respectively;
While these calculations are based on standard methodologies, they are estimates based on historical patterns. To the extent that actual claim payment patterns differ from historical patterns, such estimated reserves may be redundant or inadequate. The effects of such deviations are evaluated by considering claim backlog statistics and reviewing the reasonableness of projected claim ratios. Other factors which may affect the accuracy of policy benefits and claim estimates include the proportion of large claims which may take longer to adjudicate, changes in billing patterns by providers and changes in claim management practices such as hospital bill audits.
Management believes that the Company's methods of estimating the liabilities for future policy benefits provided appropriate levels of reserves at December 31, 2020 and 2019. Changes in the Company's future policy benefits estimates are recorded through a charge or credit to its earnings.
·Invest both our capital and efforts in continuing to develop a fully integrated D2C division, which will generate leads, fully service consumers on-line via automated sales platforms, service consumers both by phone and in-person with licensed agents providing products underwritten by IHC’s carriers as well as other nationally recognized insurers, and manage the consumer relationship and journey via retention and customer service teams and technology.
Underwriting, acquisition and other insurance expenses in 1993 were made up of $36.7 million of commissions and $19.3 million of general expenses offset by the net capitalization of deferred acquisition costs totaling $46.3 million.
Interest expense increased $2.9 million and $3.4 million in 1995 and 1994 respectively as a result of Surplus Notes totaling $103 million and $69 million, at 1995 and 1994, respectively.
The tremendous growth of this young organization has depended on capital support from its parent.
In order to comply with certain state insurance departments' requirements, the Company maintains bonds/notes on deposit with various states. The carrying value of these deposits amounted to $3,267,357 and $3,410,135 as of December 31, 1995, and 1994, respectively. These deposits are required to be maintained for the protection of contractowners within the individual states.
Unearned premiums represent premium applicable to the unexpired terms of policies in force. The Company evaluates its unearned premiums periodically for premium deficiencies by comparing the sum of expected claim costs, unamortized deferred policy acquisition costs, and maintenance costs partially offset by net investment income to related unearned premiums. To the extent that any of the Company’s programs become unprofitable, a premium deficiency reserve may be required. The Company did not carry a premium deficiency reserve as of December 31, 2019 and 2018.
Commissions to agents/brokers (not including commissions on Crusader policies that are reflected in policy acquisition costs) are generally related to gross commission income from the health insurance program and the daily automobile rental insurance program. Commissions to agents and brokers decreased $2,905 (2%) to $173,796 for the year ended December 31, 2019, as compared to $176,701 for the year ended December 31, 2018. This fluctuation in commissions to agents/brokers was due primarily to timing of payment receipts.
Depreciation on Crusader Insurance Company (“Crusader”), the Company’s subsidiary, owned building, located at 26050 Mureau Road, Calabasas, California, is computed using the straight line method over 39 years. Improvements to the building structure are amortized over the useful life of the improvements. Depreciation on furniture, fixtures and equipment in the Calabasas building is computed using the straight line method over 3 to 15 years. Amortization of tenant improvements in the Calabasas building is being computed using the shorter of the useful life of the tenant improvements or the remaining years of the lease.
In February 2016, the FASB issued ASU 2016-02 “Leases.” ASU 2016-02 requires lessees to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leases, including those historically accounted for as operating leases. The Company adopted ASU 2016-02 effective January 1, 2019. The adoption of ASU 2016-02 did not have a material impact to the Consolidated Statements of Operations and the Consolidated Balance Sheets.
Ceded earned premium as a percentage of direct earned premium was 21% in 2019 and 18% in 2018. Crusader did not assume any premium or losses during the years ended December 31, 2019 and 2018.
The following table shows the ratio of IBNR reserves to total reserves net of reinsurance recoverables as of December 31, 2016 (dollars in thousands):
Operating expenses consist primarily of employee compensation, information technology and occupancy costs, such as rent and utilities. Operating expenses as a percent of net earned premiums and other income was 21.6% and 20.4% for the years ended December 31, 2015 and 2014, respectively. The 1.2 percentage point increase was due to the expansion of our underwriting operations, more specifically, the addition of our security guard team in late 2014 that began contributing premium at the beginning of 2015; the low-value dwelling team, located in the southwest United States, which was formed in early 2015 and began writing business in May 2015; and the hospitality team that joined the Company in the fourth quarter of 2015 and did not start binding policies until January 2016. For the year, expenses also increased as we added corporate staff to support the new underwriting teams and manage responsibilities associated with our recent status as a public company. The increase in the operating expenses as a percentage of net earned premiums and other income was also due to underwriting and administrative expenses related to our run-off personal automobile line (that had very little earned premium in 2015). The expenses related to the run-off business are expected to significantly decline in 2016.
The exchange of MARC shares for American Re shares by Allianz and VICTORIA (totaling 50% of MARC's ownership) was accounted for using the purchase method for business combinations. The exchange of MARC shares for the Company's shares by Munich (the remaining 50% of MARC's ownership) was accounted for as an "as-if-pooling of interests" business combination between parties under common control of the same parent company, Munich Re. The exchange of the insurance assets and liabilities of the U.S. Branch for the Company's shares was also accounted for as an "as-if-pooling of interests" business combination between parties under common control. Common control for American Re, MARC and the U.S. Branch was considered effective at December 31, 1996. As such, the Company's December 31, 1996, balance sheet and related footnote disclosures as originally filed in its 1996 Form 10-K have been restated to reflect a 50% ownership by Munich Re of MARC, a 50% minority interest in the ownership of MARC by Allianz and VICTORIA, and a 100% ownership of the U.S. Branch.
year ended December 31, 1997, with the same period in 1996. Accordingly, selected financial results have been presented below on a pro forma basis for the year ended December 31, 1996, as if the merger transactions which took place in July 1997 had occurred on January 1, 1996. Pro forma adjustments to reflect such transactions have been applied to the respective historical income statements of the Company.
SENSITIVITY ANALYSIS OF MARKET RISK. Interest rate sensitivity analysis is used to measure the Company's interest rate price risk by computing estimated changes in fair value of fixed and variable rate assets and liabilities in the event of a range of assumed changes in market interest rates. This analysis assesses the risk of loss in market risk sensitive instruments in the event of a sudden and sustained 100 to 200 basis point increase or decrease in market interest rates. The following table presents the Company's projected change in fair value of the Company's financial instruments at December 31, 1998 based on the assumptions indicated. All market sensitive instruments reflected in this table are available for sale. The Company has no significant trading securities.
Working Capital and Capital Availability - As of February 28, 2013, we had cash and cash equivalents of $7,575,579 and working capital of $11,381,163, compared to $14,500,384 as of February 29, 2012. Our cash during fiscal 2013 decreased by $3,787,109, compared to a decrease of $16,247,876 in fiscal 2012 and an increase of $7,741,836 in fiscal 2011.
Our outstanding contractual obligations and commitments as of February 28, 2013 were:
The following tables set forth our unaudited consolidated financial data regarding operations for each quarter of fiscal 2013, 2012 and 2011. This information, in the opinion of management, includes all adjustments necessary, consisting only of normal and recurring adjustments, to state fairly the information set forth therein.
Ultimate loss estimates, excluding extra-contractual obligation (“ECO”) losses, usually experience the greatest adjustment within the first twelve months after the accident year. Accordingly, the highest degree of uncertainty is associated with reserves for the current accident year because the current accident year contains the greatest proportion of losses that have not been reported or settled, and we must estimate these elements as of the current reporting date. The proportion of losses with these characteristics typically diminishes in subsequent years.
During calendar year 2009 we experienced $65.4 million of favorable development, primarily from loss and LAE reserves relating to bodily injury and property damage coverages in the California, Florida and Pennsylvania nonstandard programs.
California gross written premium grew 3.2% during 2010 compared to 2009. We believe that two program revisions that became effective in California during the second quarter of 2010 have allowed us to segment our rates more effectively. These revisions, coupled with increases in commissions and other agency incentives, have stimulated growth in the state.
Municipals-The Company analyzes the screened impairment candidates on a quantitative and qualitative basis. This includes an assessment of the factors that may be contributing to the unrealized loss and whether the recovery value is greater or less than current market value.
General corporate expenses consist primarily of occupancy costs, such as rent and utilities. These costs are largely fixed and, therefore, do not vary significantly with premium volume but do vary with the Company’s changes in properties held for investment. Accordingly, our general corporate expenses increased by $150,000, or 47.8%, in 2016 as compared to 2015.
Subject to the approval of the Director of Insurance of the State of Illinois and the applicable provisions of the Illinois Insurance Code, the noteholder had the right at the time of a stock conversion of ICC, upon not less than thirty (30) days’ written notice to us, to convert all or any portion of the outstanding principal amount of the note into shares of our common stock.
As noted in the previous tables, the Company did not have any assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2016 and 2015. Additionally, there were no securities transferred in or out of levels 1 or 2 during the years ended December 31, 2016 and 2015.
On February 1, 2017, the Illinois Department of Insurance approved the Company’s Plan of Conversion filing to convert from a mutual to a stock insurance company.
On March 28, 2017, the Company borrowed $3.5 million from American Bank & Trust at an interest rate of 3.65%. Our line of credit was decreased from $2.0 million to $1.75 million. Additionally, we pledged the ESOP shares and $1.5 million in trust assets.
The Company derives revenues from three principal sources-premiums from reinsurance and insurance business, income from its investment portfolio and, to a lesser extent, management fees from underwriting services. Reinsurance and insurance premiums are a function of the amount and type of contracts written as well as prevailing market prices. Premiums are earned over the terms of the underlying contracts. Each of the Company’s reinsurance contracts contains unique pricing, terms and conditions and expected profit margins. Therefore, the amount of premiums is not necessarily an accurate indicator of the Company’s anticipated profitability.
million sale of shares of Max Re Diversified to the same third party financial institution and entered into a total return swap with the purchaser on similar terms as the terminated transaction. Max Re Diversified shares owned by Max Re with a fair value of $86.2 million at December 31, 2003 were pledged as collateral to which the Company is exposed to credit risk. Under GAAP, these transactions are viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording of a $150.0 million bank loan. The swap termination date is February 2005, with provisions for earlier termination at the Company’s option or in the event that the Company fails to comply with certain covenants, including maintaining a minimum financial strength rating and a minimum Max Re Diversified net asset value. At termination, the purchaser has the option to sell the Max Re Diversified shares to the Company at a price equal to the fair value of the Max Re Diversified shares on the date of repurchase. The swap transaction enables the Company to transform a portion of its Max Re Diversified assets into fixed maturities investments that can be held in trusts for the benefit of certain ceding reinsurance companies that require fixed maturity trust assets to meet regulatory requirements.
The Company also has a $100.0 million letter of credit facility with the New York branch of Bayerische Hypo- und Vereinsbank AG (“HVB”), a shareholder of the Company. HVB is the majority shareholder of Grand Central Re, which is managed by Max Re Managers and in which the Company has a 7.5% equity interest. The Company believes that the terms of this letter of credit facility are comparable to the terms that the Company would expect to negotiate at arms’ length with an unrelated party. At December 31, 2003 and December 31, 2002, letters of credit totaling $21.1 million and $58.5 million, respectively, were issued by HVB under this facility. All letters of credit issued under this facility are collateralized by a portion of the Company’s invested assets. Fixed maturities and cash equivalents with a fair value of $21.1 million and Max Re Diversified shares with a fair value of $81.1 million at December 31, 2003 were pledged as collateral for these letters of credit. Effective January 1, 2004, the letter of credit facility with HVB was reduced to $50.0 million.
Sui-ÄIanagers: Ad. Ammann, W. Baumann, W. Belser, Ch. Burnens, G. de Bardel, M. Grossmann, W. Habicht, K. Hasler,
The year under review at last brought the Armistice so ardently hoped for and it is a source of satisfaction to find that during the war, despite the partial breakdown in inter­ national trading relations, the business connections of the Company have been preserved and that we were able further to strengthen reserves. Financial preparedness is more im­ portant than ever in these days, as the problems which have to be faced in the interval until peace is signed will be no less considerable than those of the war years.
The value of our Investments as set out in the Balance Sheet as Avell as interest income have decreased, primarily owing to the depreciation of various currencies. As the reserves applying to the Life Department and correspondingly the interest thereon Avere more heavily affected than the aggregate of our assets by the devaluation of currencies, the remaining return on investments was higher than in the previous year.
Liabilities, Capital (58,000 shares of Frs. 1000 each) 58,000,000 — Reserve Fund 20,000,000 — Special Reserve Fund ' ; . . ^ 23,500,000 — Reserve for Contingencies 8,500,000 — Due to other Companies 51,072,432 44 Life and other funds retained from other Companies . 126,272,344 02 Sundry Creditors 7,134,609 76 Reserves: . Fire, Accident, Liability, Burglary, Fidelity, Surety and Marine Dep^Premium Reserve Frs. 102,375,691. —
URG leases approximately 45,000 square feet of office space for its headquarters in Calabasas, California. CUIC leases about 19,700 square feet of office space. AUL London is leasing approximately 13,000 square feet of office space in London.
The information required by this Item 7 is incorporated by reference from pages 3, 5, 7 through 9, 11 through 13, 15 through 17, 19 through 20, 23 and 28 through 30, of Alleghany's Annual Report to Stockholders for the year 1999, filed as Exhibit 13 hereto.
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income," which requires items that comprise comprehensive income be reported in a financial statement display with the same prominence as other financial statements. This includes the presentation of items such as market value adjustments of securities, foreign currency translation and certain adjustments made for benefit plans. This statement was implemented in the first quarter of 1998.
The failure of one or more critical software applications or components of the Company's infrastructure to be Year 2000 compliant could cause a material disruption in the normal business operations of the Company. Such disruptions could include the inability to process policies, register and collect premiums and engineering receivables, process claims or schedule inspections and engineering services. Due to the difficulty in estimating the scope and duration of such failures, the Company is unable to determine at this time whether the consequences of such failures will have a material impact on the Company's results of
Earnings (loss) per common share-basic: Income from continuing operations $ 3.55 $ 2.21 $ 1.81 Discontinued operations 1.04 -- (0.04) ------------------------------------ Net income $ 4.59 $ 2.21 $ 1.77 ------------------------------------ 29.3 29.5 30.3 Average common shares outstanding Earnings (loss) per common share-assuming dilution: Income from continuing operations $ 3.35 $ 2.20 $ 1.81 Discontinued operations 0.86 -- (0.04) ------------------------------------ Net income $ 4.21 $ 2.20 $ 1.77 ------------------------------------ Average common shares outstanding and common stock equivalents 35.2 30.2 30.3
The accounting policies of the segments are the same as those described in "Accounting Policies" (see note 1), except for certain benefit charges which comprise the Corporate Account. HSB evaluates the performance of its segments and allocates resources to them based on net income (loss). Segment assets are not included in this evaluation process. Interest income and expense are included in the results of Investment operations.
Earned premiums: Direct $ 408.8 $ 370.1 $ 343.4 Assumed 361.7 239.2 213.1 Ceded (374.4) (118.1) (107.9) -------------------------------------------------- Insurance premiums $ 396.1 $ 491.2 $ 448.6 - --------------------------------------------------------------------------------
1998, 1997 and 1996 claims and adjustment expenses incurred have been reduced by subrogation recoveries of approximately $5.0, $3.3 and $4.9 million, respectively.
For measurement purposes, the annual rate of increase in the per capita cost of covered health care benefits range from 6 percent in 1998 decreasing gradually to 4.25 percent by the year 2001 and remaining level thereafter.