The Plan has been challenged in two court actions. On February 14, 2000, the Appellate Division of the Superior Court of New Jersey affirmed the Commissioner's order approving the Plan of Reorganization, rejecting all of appellants' contentions, in response to an appeal filed by three individual insureds challenging the Commissioner's order. Appellants are now seeking review of the Appellate Court's decision by the New Jersey Supreme Court. A second court action challenging certain aspects of the Plan of Reorganization and seeking damages and injunctive relief that was filed by five individual insureds in January 1999 was dismissed by the trial court in August 1999 and is now on appeal. The Company intends to continue vigorously defending against these actions.
The Company reinsures its risks primarily under two reinsurance contracts, a specific excess of loss contract ("Specific Contract") and an aggregate excess of loss contract ("Aggregate Contract"). During 1999, the Company's retention for casualty business under the Specific Contract was $10 million per loss. For medical professional liability and commercial general liability business, coverage was provided up to $65 million per loss above the retention. For other casualty business, coverage was provided up to $15 million per loss above the retention. Property coverage was also provided under the Specific Contract in the amount of $14.5 million in excess of a Company retention of $500,000 per policy. The Company retains an 8% co-participation in covered losses. The Company has maintained specific excess of loss reinsurance coverage generally similar to that described for several years.
REALIZED INVESTMENT GAINS Net realized investment gains increased $26.1 million to $36.4 million in 1998 from $10.3 million in 1997. In 1998 the net gains were primarily composed of $38.4 million in net gains on the disposition of the Company's equity portfolio, partially offset by a $14.0 million loss realized on the expiration of an equity collar position on July 13, 1998. The remaining net
OTHER REVENUE Other revenue decreased $2.0 million, or 69.1%, to $.9 million in 1998 from $2.9 million in 1997 and was primarily composed of finance charge income associated with the Company's financing of policyholder premiums, which declined as the Company outsourced its installment payment plans in the second quarter of 1998.
FUNDS HELD CHARGES Funds held charges of $13.4 million in 1998 remained unchanged from 1997. Funds held charges relate to the Company's ceded aggregate reinsurance contracts, for which balances due to reinsurers are withheld as collateral for losses and loss adjustment expenses ceded under the contracts. Funds held charges remained flat in 1998 compared to 1997 as the result of an increase in interest accrued on funds held of $1.9 million consistent with the change in the funds held balances, offset by an adjustment to funds held interest of $1.9 million associated with adjustments to ceded losses and premium under the aggregate reinsurance contracts during 1998.
Mortgage-backed and asset-backed securities involve similar risks associated with fixed maturity investments: interest rate risk, reinvestment rate risk, and default or credit risk. In addition, mortgage-backed and asset-backed securities also possess prepayment risk, which is the risk that a security's originally scheduled interest and principal payments will differ considerably due to changes in the level of interest rates. The Company purchases mortgage-backed and asset-backed securities structured to enhance credit quality and/or provide prepayment stability.