felanders/preprocessed huggingface dataset:
the ability of our technology resources, including information systems and security, to perform as anticipated; and
The process of establishing loss reserves for property and casualty claims can be complex and is subject to considerable uncertainty as it requires the use of informed estimates and judgments based on circumstances underlying the insured loss known at the date of accrual. For example, the reserves established for high excess casualty claims, asbestos and environmental claims, claims from major catastrophic events or for our various product lines each require different assumptions and judgments to be made. Necessary judgments are based on numerous factors and may be revised as additional experience and other data become available and are reviewed, as new or improved methods are developed, or as laws change. Hence, ultimate loss payments may differ from the estimate of the ultimate liabilities made at the balance sheet date. Changes to our previous estimates of prior period loss reserves impact the reported calendar year underwriting results, adversely if our estimates increase and favorably if our estimates decrease. The potential for variation in loss reserves is impacted by numerous factors, which we discuss below. In particular, these considerations differ markedly depending upon whether case or IBNR reserves are being established. Reserves for casualty lines are particularly uncertain given the lengthy reporting patterns and corresponding need for IBNR.
The prior period development in 2013 for long-tail lines of business comprised several main components. First, we experienced favorable prior period development on a number of product lines where actual loss emergence was lower than expected and/or increased weighting was given to experience-based methods as relevant origin years mature (typically 2009 and prior). In particular, this included retail D&O, medical risk operations, and umbrella and excess casualty product lines in Insurance - North American P&C ($183 million favorable) principally in origin years 2007 and 2008, casualty and financial lines in Insurance - Overseas General for origin years 2009 and prior ($198 million favorable), and origin years 2007 and prior for long-tail product lines in Global Reinsurance ($71 million favorable). Second, we recorded adverse reserve actions in response to development on specific large claims. Third, we experienced adverse development from Insurance - North American P&C inactive product lines including Westchester and Brandywine run-off operations ($193 million). The causes for the Westchester and Brandywine operations are described further below.
(including $24 million with respect to foreign tax credits) reflects management's assessment that it is more likely than not that a portion of the deferred tax asset will not be realized due to the inability of certain foreign subsidiaries to generate sufficient taxable income and the inability of ACE Group Holdings and its subsidiaries to use foreign tax credits.
The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs):
Policyholders’ account balances increased $0.1 billion from $1.9 billion at December 31, 2016 to $2.0 billion at December 31, 2017, primarily driven by universal life business growth.
Bonds of municipalities » » 44,783,889.60 Bonds of electrical and industrial companies, banks and miscellaneous » » 107,764,668.30 Preference shares of railways, industrial and other companies » » 8,528,732.70 Ordinary shares of railways, electrical, industrial and other companies » » 86,106,628.35 Shares of insurance companies and permanent participations » » 107,956,863.07 Sw. Frcs. 788,871,080.01
The following table shows the geographic distribution of the mortgage portfolio.
As management has stated in Note 17, because the Company's management uses financial information prepared in accordance with accounting principles generally accepted in Canada in the normal course of business, the management of Sun Life Insurance and Annuity Company of New York has determined that the cost of complying with Statement No. 120 would exceed the benefits that the Company, or the users of its financial statements would experience. Consequently, the Company has elected not to apply such standards in the preparation of these financial statements.
GHH - On December 1, 1995, the Company acquired the outstanding stock of GHH and certain of its for-profit subsidiaries, including Greater Atlantic, an HMO operating in Pennsylvania and New Jersey, for $114 million in cash and notes (the "GHH Transaction"). In connection with the GHH Transaction, the Company also paid an aggregate of $12.5 million to certain affiliated hospitals of Graduate Health System, Inc. ("GHS"), GHH's previous parent company, in return for the extension of term and other amendments to such hospitals' provider contracts with Greater Atlantic. In addition, pursuant to the GHH Transaction, the Company established a hospital management company to manage GHS's Philadelphia-area hospitals pursuant to hospital management agreement and acquired certain other healthcare services businesses that provide services primarily to the hospitals in the GHS system. The acquisition has been accounted using purchase accounting and the excess of the purchase price over the fair value of assets acquired in the amount of $88.4 million was recorded as goodwill. In the fourth quarter of 1996, the Company sold certain of the healthcare services businesses for $2 million in cash and recorded revenue of $3 million in connection with the termination of the hospital management agreement. No gain or loss was recognized on the sale of such businesses because the Company's investment in such companies approximated the sales price.
On December 15, 1992, the Company adopted a Supplemental Executive Retirement Plan (the "Prior SERP"). Certain key executives were eligible to participate in the Prior SERP. Under the provisions of the Prior SERP, these executives could elect to credit amounts to the Prior SERP in lieu of compensation. The annual amount so credited was equal to 50% of the premium that would be required to fund a premium variable life insurance policy. The Company then credited the executive's SERP account with the remaining 50% premium. Upon death, beneficiaries are entitled to receive the entire death benefit under the policy plus an additional 78.5% of policy benefits. At retirement or termination, the executive is entitled to the cash surrender value of the policy plus an additional 78.5% of such cash surrender value. The termination or retirement benefit must be paid to the executive in a lump sum. This Prior SERP was discontinued in December 1995.
The Company held net investments in mortgage loans totaling $186,278,000 and $195,665,000 at December 31, 2001 and 2000, respectively. The diversification of the portfolio by geographic region and by property type was as follows:
The following table sets forth certain data for the periods indicated (dollars in millions, except per share data).
Chiquita's results for 1998 include pretax writedowns and costs of $74 million as a result of significant damage in Honduras and Guatemala caused by Hurricane Mitch.
N. INSURANCE Securities owned by insurance subsidiaries having a carrying value of about $900 million at December 31, 2000, were on deposit as required by regulatory authorities.
Investment income. Investment income for 2017 was $18.9 million, which was comparable to 2016. Investment income from debt securities increased as a result of higher invested balances in 2017, offset by lower investment income from short-term investments and cash equivalents. The 2016 investment income increased $2.1 million, or 12%, compared to 2015, due to increased income from our debt securities, short-term investments, cash equivalents and equity securities as a result of higher invested balances in 2016.
Effect of changes in foreign currency rates. The effect of changes in foreign currency rates on the consolidated statements of cash flows was a net increase (decrease) in cash and cash equivalents of $3.7 million, $(0.1) million and $(7.7) million in 2017, 2016 and 2015, respectively. Our principal foreign operating unit is in Canada, and, on average, the value of the Canadian dollar relative to the U.S. dollar appreciated during 2017 and 2016, and decreased during 2015.
The results of operations for Citizens Corporation and subsidiaries ("the Company") include the accounts of Citizens Corporation ("Citizens"), a non- insurance holding company, Citizens Insurance Company of America ("Citizens Insurance"), Citizens Insurance Company of Ohio, Citizens Insurance Company of the Midwest, and Citizens Management Inc.
The Company accounts for its investments, all of which are classified as available-for-sale, in accordance with the provisions of Statement No. 115. The amortized cost and fair value of available-for-sale investments are as follows:
Effective January 1, 1998, the Company modified its catastrophe reinsurance program to include a higher retention. Under the Company's 1998 catastrophe reinsurance program, the Company retains the first $45 million. For losses in excess of $45 million and up to $180.0 million, the Company retains 10% of the loss. Amounts in excess of $180.0 million are retained 100% by the Company.
Effective March 9, 1994, the Company adopted a Long Term Stock Incentive Plan (the "Plan"). Key employees of the Company and Citizens Insurance are eligible for awards pursuant to the Plan administered by the Compensation Committee of the Board of Directors (the "Committee") of the Company. Under the terms of the Plan, options may be granted to eligible employees at a price not less than the market price of the Company's common stock on the date of grant. Option shares may be exercised subject to the terms prescribed by the Committee at the time of grant, otherwise options vest at the rate of 20% annually for five consecutive years and must be exercised not later than ten years from the date of grant.
The Company maintains cash balances in a non-interest bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of April 30, 2010.
Unless and until there is enough authorized common stock available to cover all common stock equivalents, Mr. Donenfeld and Paragon Capital LP will not exercise any of their warrants.
As of April 30, 2009, the Company recognized a liability of $400,000 due to Mr. Goldsmith as a result of the transactions that took place on February 5, 2008. In September 2009, the Company issued 1,600,000 shares of restricted common stock as payment for the $400,000 note payable to Mr. Goldsmith.
On March 8, 2010, the Company, Paragon Capital LP and Scott Goldsmith entered into an agreement whereby the Company paid Scott Goldsmith $65,000. Paragon Capital LP transferred to Scott Goldsmith its warrant issued April 30, 2008 which was due April 30, 2010 to buy 10,000,000 shares of common stock with an exercise price of $.01. This new agreement relinquishes Paragon Capital LP’s requirement to issue 4,000,000 warrants to Scott Goldsmith. The Company extended the warrant maturity date by two years from April 30, 2010 to April 30, 2012. In September 2009, the Company issued 1,600,000 shares of restricted common stock to Scott Goldsmith as payment for the $400,000 note payable. Scott Goldsmith’s 1,600,000 shares of restricted common stock are subject to adjustment from stock splits.
The Company accounts for stock issued for services, stock options, and warrants for compensation under the fair value method.
Generally, title insurance claim rates are lower than other types of insurance because title insurance policies insure against prior events affecting the quality of real estate titles, rather than against unforeseen, and therefore less predictable, future events. A provision is made for estimated future claim payments at the time revenue is recognized. Both the Company's experience and industry data indicate that claims activity occurs for more than 20 years after the policy is issued. Management uses actuarial techniques to estimate future claims by analyzing past claim payment patterns. Independent actuaries review the adequacy of reserves on an interim basis and certify as to their adequacy on an annual basis. Management has continued to emphasize and strengthen claims prevention and product quality programs.
Cash provided by operating activities for the years ended December 31, 2000, 1999 and 1998 was $82.6 million, $97.6 million and $165.1 million, respectively. As of December 31, 2000, the Company held cash and invested cash of $123.4 million and fixed-maturity securities of $796.8 million.
The company's corporate headquarters is located in the American General Center, a complex of office buildings on a 46-acre tract near downtown Houston. American General or its subsidiaries either own or lease pursuant to a sale- leaseback arrangement all of the buildings and underlying land in the complex. The company occupies approximately 45% of the total office space available in the American General Center.
The company's corporate headquarters is located in the American General Center, a complex of office buildings with 2.2 million square feet on a 46-acre tract near downtown Houston. American General and certain subsidiaries own all of the buildings and underlying land in the complex. The company occupies approximately 50% of the total office space available in the American General Center.
Net investment income for 2001 was $14.8 million, a 16.8% increase over $12.6 million in 2000. This increase is the result of growth in the average balance of invested assets by $40.5 million to $252.5 million for the year ended December 31, 2001, from $212.0 million for 2000. The growth in invested assets
Other operating expenses increased 6.3% to $16.0 million for 2000 from $15.1 million for the same period in 1999. This increase in expenses was primarily attributable to advertising, personnel, and facilities and equipment costs required to support the Company's product development, technology enhancements, geographic expansion, and production. Amortization of the Company's policy administration system began in December of 2000 and accounted for approximately $129,000 of other operating expenses.
Total stockholders' equity increased to $246.1 million at December 31, 2001, from $199.8 million at December 31, 2000. This increase resulted primarily from net income of $41.3 million and from additional paid-in capital of $6.3 million resulting from the exercise of employee stock options and the related tax benefit, offset somewhat by a decline in net unrealized gains on invested assets classified as available-for-sale of $1.4 million (net of income tax).
The purpose of this section is to discuss and analyze the Company's consolidated results of operations, financial condition and liquidity and capital resources for the three years ended December 31, 2008. This analysis should be read in conjunction with the consolidated financial statements and related notes, which appear elsewhere in this Form 10-K. The Company reports financial results on a consolidated basis. The consolidated financial statements include the accounts of UTG and its subsidiaries at December 31, 2008.
The companies of the group file separate federal income tax returns except for Acap Corporation, AC, TI, and Imperial Plan, which file a consolidated life/non-life federal income tax return.
An analysis of sales, maturities and principal repayments of the Company's fixed maturities portfolio for the years ended December 31, 2008 and 2007 is as follows:
The following table presents the level within the hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis as of December 31, 2008.
The financial statements include various estimated fair value information at December 31, 2008 and 2007, as required by Statement of Financial Accounting Standards 107, Disclosure about Fair Value of Financial Instruments (SFAS 107). Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in that Statement and does not purport to represent the aggregate net fair value of the Company.
In addition to the above reinsurance agreements, UG entered into reinsurance agreements with Optimum Re Insurance Company (Optimum) during 2004 to provide reinsurance on new products released for sale in 2004. The agreements are yearly renewable term (YRT) treaties where UG cedes amounts above its retention limit of $100,000 with a minimum cession of $25,000 as has been a practice for the last several years with its reinsurers. Also, effective January 1, 2005, Optimum became the reinsurer of 100% of the accidental death benefits (ADB) in force of UG. This coverage is renewable annually at the Company’s option. Optimum specializes in reinsurance agreements with small to mid-size carriers such as UG. Optimum currently holds an “A-” (Excellent) rating from A.M. Best.
The Company reimbursed expenses incurred by Mr. Jesse T. Correll and Mr. Randall L. Attkisson relating to travel and other costs incurred on behalf of or relating to the Company. The Company paid $41,819 and $30,327 in 2008 and 2007, respectively to First Southern Bancorp, Inc. in reimbursement of such costs. In addition, beginning in 2001, the Company began reimbursing FSBI a portion of salaries and pension costs for Mr. Correll and Mr. Attkisson. The reimbursement was approved by the UTG Board of Directors and totaled $261,777 and $249,209 in 2008 and 2007, respectively, which included salaries and other benefits.
On a cash basis, the Company paid $937,437 and $1,271,847 in interest expense for the years 2008 and 2007, respectively. The Company paid $2,094,950 and $407,247 in federal income tax for 2008 and 2007, respectively.
The Company believes that it will continue to maintain a positive cash flow from operations in the foreseeable future and will be able to meet its liquidity requirements. Excess cash flow from operations has principally been used in each year to increase the Company's investment portfolio. In October 1995 the Company completed a private placement of Zero Coupon Convertible Exchangeable Subordinated Debentures due 2015 with a principal amount at maturity of $324 million. The net proceeds from the offering were $112 million after expenses. The Debentures carry a yield of 5.25% per annum and are convertible into 21.52 Common Shares of the Company per $1,000 principle amount at maturity or an aggregate of 6,978,800 Common Shares.
Shareholders' equity increased 25% to $260 million at December 31, 1997 from $208 million at December 31, 1996. This increase was attributable primarily to Net income in 1997, less dividends paid, plus the value of shares issued on the exercise of employee stock options and the movement in unrealized gains and losses on Investments. The unrealized gain on Investments was $4.0 million at December 31, 1997, net of tax compared to $.1 million a year earlier. This $3.9 million change was a result of the changes in the market for fixed income securities. During 1997 the total number of Common Shares outstanding increased to 38,814,051 from the 1996 level of 38,063,706, mainly as a result of the exercise of employee stock options.
(3) The per share data for all periods prior to 1997 has been restated for the required adoption on December 31, 1997 of the new accounting standard on earnings per share. For 1995, 1996, and 1997, includes 13,340,000 shares issued in conjunction with the Company's November 28, 1995 initial public offering and also includes 2,250,068 shares, as of the date of such offering, out of a total of 11,000,000 shares that were previously excluded from weighted average shares. Such shares were subject to contingent recall provisions and the conditions required for the removal of recall provisions on the 11,000,000 shares had not been met. The Company's initial public offering removed the recall provisions on 2,250,068 of the shares and resulted in the cancellation of the remaining 8,749,932 common shares.
The aggregate fair value (carrying value) of the fixed maturity securities was greater than amortized cost at December 31, 1997 by $12.7 million. At December 31, 1996, the aggregate fair value (carrying value) of the Company's fixed maturity securities was greater than amortized cost by $.3 million. The increase during 1997 in the fair value of the Company's fixed maturity securities compared to amortized cost is due primarily to the decrease in interest rates during 1997. Fixed maturity securities of $168.8 million or 45.1% of total fixed maturity securities at December 31, 1997 have stated maturities of 10 years or greater. As a result of these long-term holdings, if interest rates should
increase, the fair value of these securities will decline and common stockholders' equity will decrease.
Properties The physical property of the Registrant consists of the home office building and grounds, owned in fee, at 200 Capital Avenue, Frankfort, Kentucky. Adjacent to the home office, the Company owns additional property on Second Street and on Shelby Street in Frankfort, Kentucky. One building is used for Agency and Company meetings; one building is a print shop used by IHP, one building is used for supplies and additional storage; and one building is leased to a commercial tenant. The Company also leases office space at One Harbison Way, Suite 106, Columbia, South Carolina 29212.
a) The common stock equivalents for the years ended December 31, 1999, 1998, 1997 and 1996 were 744,905, 20,899, 61,864 and 16,875. The common stock equivalents for these shares were not included in the calculation of diluted (loss) per common share because the effect would be antidilutive.
On January 29, 1999, our wholly-owned subsidiary, CarLoanCo., Inc. ("CLC"), filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code. CLC's carrying amount in the December 31, 1998 consolidated financial statements has been written off in 1999 as a result of the bankruptcy filing.
Interest expense totaled $954,000 for the year ended December 31, 1999 as compared with $4,685,000 in the prior year period. The decrease of $3,371,000 relates directly to the discontinuance of our non-prime auto finance business.
Revenues for the year ended December 31, 1997 totaled $19,846,000 as compared with $13,185,000 in the prior year. Revenues from the non-prime automobile finance business increased to $19,099,000 from $11,789,000 in the prior year. This increase of $7,310,000 is directly related to the growth of the automobile receivables portfolio acquired and serviced by us which increased from $62,000,000 as of December 31, 1996 to $97,000,000 as of December 31, 1997. Investment income decreased to $433,000 from $884,000 in the prior year. This decrease is the direct result of the reduction in short-term investments utilized to fund the growth of our automobile receivables portfolio and operations. Revenues from our long distance services business decreased to $315,000 from $512,000 in the prior year. This decrease of $197,000 is the result of the loss of customers to competing long distance carriers.
In establishing reserves for GMDBs and guaranteed minimum income benefits (“GMIBs”) related to variable annuity contracts, we must make estimates and assumptions about the timing of annuitization, contract lapses and contractholder mortality, as well as interest rates and equity market returns. Assumptions relating to contractholder behavior, such as the timing of annuitization and contract lapses, are based on our experience by contract group, and vary by product type and year of issuance. We adjust base lapse rate assumptions at the contract level based on a comparison of the actuarially-calculated value and the current policyholder account value, as well as other factors, such as the applicability of any surrender charges.
future rates of returns on investments. The Company expects these assumptions to be the ones most likely to cause significant changes in the future. Changes in these assumptions can be offsetting and can also impact our DAC and other balances as discussed above. For additional information on the calculation of these reserves, see Note 7 to the Consolidated Financial Statements.
We generate revenues primarily from the receipt of commissions paid to us by insurance companies based upon the insurance policies sold to consumers through our service. These revenues come in the form of first year, bonus and renewal commissions that vary by company and product. We recognize the full first year commission revenues on term life insurance after the insurance company approves the policy and accepts the initial premium payment. At the time revenue is recognized, an allowance is recorded based on historical information for estimated commissions that will not be received due to the non-payment of installment first year premiums and any premium refunds made by the insurance carriers. We recognize commission revenue on other lines of insurance, primarily health insurance, after we receive notice that the insurance company has received payment of the related premium. First year commission revenues per policy can fluctuate due to changing premiums, commission rates, and types or amount of insurance sold. We receive bonuses based upon individual criteria set by insurance companies. We recognize bonus revenues when we receive notification from the insurance company of the bonus due to us. Bonus revenues are typically higher in the fourth quarter of our fiscal year due to the bonus system used by many life insurance companies, which pay greater amounts based upon the achievement of certain levels of annual production. Revenues for renewal commissions are recognized after we receive notice that the insurance company has received payment for a renewal premium. Renewal commission rates are significantly less than first year commission rates and may not be offered by every insurance company. We also generate revenue from the sale of leads for lines of insurance other than life insurance to third parties. Such revenues are recognized when we receive notification from those sources of the revenue due to us. Our revenue recognition accounting policy has been applied to all periods presented in this report.
Our sources of funds will consist primarily of commissions generated from the sale of life insurance products, fee revenue from the sale of leads for other lines of insurance, investment income, and maturity proceeds from our fixed maturity portfolio. The principal uses of funds are selling and marketing expenses, operations, general and administrative expenses, and acquisitions of furniture, equipment and software.
In December 1995, a judgment was awarded against a wholly owned subsidiary of the Company in the amount of $5,156,022. This judgment related to the Company's 1991 and prior E&O program, which was carried by Acceleration National Insurance Companies (Acceleration). Under this program, the Company bore reinsurance risk through the letters of credit that it was required to post as collateral to be drawn upon in the event that the assets in the reinsurance pool, together with investment income earned thereon were insufficient to cover the claims and related expenses incurred. With the change in carriers to CNA, in 1993, the Company removed itself from any risk bearing position in connection with the claims reported under its E&O program, and currently no longer operates in this capacity. Accordingly, the judgment amount was reported in discontinued operations in the accompanying consolidated statements of operations.
The Company has entered into various employment contracts with certain of its executive officers and management personnel, which provide for salary continuation of a minimum of six months in the event of termination without cause. In addition, the Company entered into an agreement with an officer in December 1995, which provides for annual compensation of $377,211, adjusted for changes in the Consumer Price Index, through December 31, 2000, with an automatic three year extension, unless notice of termination is given by either party six months prior to the termination of the initial term. The agreement also contains a change in control provision that would entitle the officer to receive a minimum of 2.99 times the annual compensation. The agreement also calls for certain other fringe benefits during the term of the agreement.
Our investment income includes interest earned on our fixed income investments and income from funds withheld at interest under modified coinsurance agreements. Under GAAP, because our fixed income investments are held as available for sale, these securities are carried at fair value, and unrealized appreciation and depreciation on these securities is not included in investment income on our statements of income, but is included in comprehensive income as a separate component of shareholders' equity. Realized gains and losses include gains and losses on investment securities that we sell during a period and write downs of securities deemed to be other than temporarily impaired.
Commissions and excise taxes vary with premiums earned. Other insurance expenses include direct and indirect expenses of those departments involved in the marketing, underwriting and issuing of reinsurance treaties. In 2002, we have allocated less of these expenses to acquisition costs than in 2001. They are now included in operating expenses. Of these total expenses a portion is deferred and amortized over the life of the reinsurance treaty or, in the case of interest sensitive contracts, in relation to the estimated gross profit in respect of the contracts.
and fees received increased by $199.0 million due to the acquisition of World-Wide and the increase in the number of clients in our Life Reinsurance North America segment. Investment income received increased by $55.9 million due to the growth in our invested asset base. The acquisition of blocks of reinsurance business generated $81.3 million less in cash flows in 2002 compared to 2001. Benefits paid increased by $180.0 million due to the acquisition of World-Wide and the increase in the number of clients in our Life Reinsurance North America segment. Acquisition and other costs, including commissions, increased by $34.0 million. This increase related principally to new business written in our Life Reinsurance North America segment. These costs include commissions on first year business that are deferred when paid and therefore do not impact net income until later years.
Pursuant to stock repurchase programs approved by our Board of Directors, we repurchased 432,500 ordinary shares for $3.8 million in 2000 and 100,000 ordinary shares for $1.5 million in 2001. Since our initial public offering in November 1998, we have repurchased a total of 3,062,200 ordinary shares at a cost of $30.3 million. There were no repurchases in the year ended December 31, 2002.
- developments in global financial markets that could affect our investment portfolio and fee income;
Net realized investment gains increased $.7 million to $1.3 million in 2007 from $.6 million in 2006. These amounts include gains and losses from sales of fixed maturities and equity securities available-for-sale, as well as trading securities 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. Also included in net realized investment gains for the years ended December 31, 2007 and 2006 are gains (losses) of $(683,000) and $114,000, respectively, representing the net change in fair value of a stock put issued by IHC in connection with the acquisition of IAC.
continue to improve the profitability of our Fully Insured Health business, while selectively retaining more risk; (ii) selectively pursue new Fully Insured Health opportunities that leverage our vertically integrated strategy of generating fee income at multiple levels of marketing and administration, as well as risk profit and profit commission income, (iii) continue to improve the profitability of our Medical Stop-Loss business, (iv) expand distribution of our life and disability products and add new life and critical illness products, and
Additionally, in the specialty property and casualty program business, insurance agents often have underwriting authority, are responsible for handling claims and are paid by up-front commissions on the amount of premiums written. We believe that this system does not serve the carriers, the agents or the insureds well. Poor underwriting results have led to underwriting losses for the carriers, which results in carrier turnover in the specialty program business thereby creating instability in the niche insurance markets being served. In turn, agents incur additional costs in searching for, and converting to, new carriers and policyholders experience uncertainty regarding the placement of their coverage and quality of service from year to year.
The estimate of these reserves is subjective and complex and requires us to make estimates about the future payout of claims, which is inherently uncertain. We establish and adjust reserves based on our knowledge of the circumstances and facts of claims. Upon notice of a claim, we establish a case reserve for losses based on the claims information reported to us at that time. Subsequently, we conduct an investigation of each reported claim, which allows us to more fully understand the factors contributing to the loss and our potential exposure. This investigation may extend over a long period of time. As our investigations of claims develop and as our claims personnel identify trends in claims activity, we refine and adjust our estimates of case reserves. When we establish reserves, we do so based on our knowledge of the circumstances and claim facts. We continually review our reserves, and as experience develops and additional information becomes known, we adjust the reserves. Such adjustments are recorded through operations in the period identified. To evaluate and refine our overall reserving process, we track and monitor all claims until they are settled and paid in full and all salvage and subrogation claims are resolved.
costs of medical treatments, including prescription drugs and underlying fee schedules, and use of preferred provider networks and other medical cost containment practices.
Premium revenue: Premium revenue for the year ended December 31, 2017 was $10,773,246 compared to $5,948,978 in 2016, an increase of $4,824,268. USALSC entered into a coinsurance transaction with American Life and Security Corporation (“ALSC”) effective September 30, 2017. This agreement resulted in the immediate recognition of $3,854,902 of assumed premiums and is the primary driver of the increase in premiums. Direct written premiums also increased 22% from the prior year.
Direct, assumed and ceded premiums for the years ended December 31, 2017 and 2016 are summarized in the following table.
Liabilities. Our total liabilities were $25,052,635 as of December 31, 2017, an increase of $17,241,629 from our December 31, 2016 liability of $7,811,006.
Deferred policy acquisition costs For most annuity products that we sell, we defer costs, net of reinsurance, that vary with and are related primarily to the production of new business to the extent these costs are deemed recoverable from future profits, and we record these costs as an asset known as DAC in the Consolidated Statements of Financial Position. We amortize this DAC asset, as well as VOBA, over the expected lives of the contracts, based on the level and timing of estimated profits. The amortization rate is periodically updated to reflect current period experience or changes in assumptions that affect future profitability, such as lapse rates, investment returns, mortality experience, expense margins and surrender charges.
The Bush Administration has also recently proposed (i) that many of the foregoing rate reductions be made permanent and (ii) several tax- favored savings initiatives that, if enacted by Congress, could also adversely affect the sale of our annuity, life and tax-qualified retirement products and increase the surrender of such products.
Earnings (loss) before income taxes and cumulative effect of change in accounting principle, excluding net realized gains on investments, decreased $72 million in 2001, primarily attributable to the increase in the combined ratio (including the significant impact of the events of September 11) and the decrease in net investment income discussed above. Earnings before income taxes and cumulative effect of change in accounting principle, excluding net realized gains on investments, decreased $290 million in 2000, primarily attributable to the significant increase in the combined ratio discussed above.
Cash flows from financing activities increased $944 million in 2001, primarily attributable to an increase in contract deposit liabilities resulting from growth within the life reinsurance business segment and capital contributions received to replenish capital sufficient to cover losses associated with the events of September 11, somewhat offset by a decrease in short-term borrowings. Cash flows from financing activities increased $520 million in 2000, primarily attributable to the following factors: (1) an increase in short-term borrowings, (2) a reduction in dividends paid on common stock and (3) an increase in contract deposit liabilities resulting from growth in financial reinsurance business volumes. The $691 million of proceeds from long-term borrowings in 2000 were substantially all used to repay outstanding borrowings under an interim loan agreement with GE Capital Corporation used to fund the Company's 1998 acquisition of Medical Protective.
Interest rate and currency risk management is important in the normal business activities of GE Global Insurance. The Company uses derivative financial instruments to mitigate or eliminate certain financial and market risks, including those related to changes in interest rates and currency exchange rates. As a matter of policy, the Company does not engage in derivatives trading, derivatives market-making or other speculative activities. More detailed information regarding these financial instruments, as well as strategies and policies for their use, is contained in notes 2 and 14 to the consolidated financial statements.
The Company currently leases space for its home office in Glenmont, New York from the Life Company. The lease provides for the Company to pay the Life Company an annual rental of approximately $712,000. The lease expires on December 31, 1998. See "Related Party Transactions".
Conversion and Initial Public Offering On July 26, 1996, Farm Family Mutual Insurance Company ("Farm Family Mutual") converted from a mutual property and casualty insurance company to a stockholder owned property and casualty insurance company and became a wholly owned subsidiary of Farm Family Holdings, Inc. pursuant to a plan of Reorganization and Conversion (the "Plan of Conversion"). In addition, Farm Family Mutual was renamed Farm Family Casualty Insurance Company. As part of the Plan, Farm Family Holdings was formed and the Farm Family Mutual policyholders received 2,237,000 shares of Farm Family Holding's common stock and $11,735,000 in cash in exchange for their membership interest in Farm Family Mutual.
Preferred Stocks: The Insurance Company had approximately $747,000 of unrealized losses on its preferred stock portfolio. The aggregate holdings consist primarily of banks, financial companies, electric utilities and REIT’s (real estate investment trusts). Most of the changes in market value reflect overall increases in interest rates; this condition should result in a not other than temporary impairment in value. None of the individual losses exceed $ 500,000 and 10% of book value.
Between 1997 and 1999, the Insurance Company made a series of investments in instruments known as principal protected notes. These Notes, marketed by investment companies, consisted of an investment in a trust unit or corporate note. The trusts contained two assets, a variable rate income note issued by a collateralized debt obligation structure and a AAA rated zero coupon security, primarily U.S. Treasury Strips, with maturity dates no later than the variable rate income note and a face value equal to the principal amount of the investment in the principal protected note. The U.S. Treasury Strip was designed to defease the principal amount of the investment, while the variable rate income note provided periodic distributions of cash flow when sufficient cash flow was generated by the collateralized debt obligation structure. In accordance with applicable accounting rules, the Company consolidates the issuers of these notes. As a result, the assets underlying the notes (the variable rate income note and the AAA-rated zero coupon securities) are accounted for separately within the Insurance Company’s investment portfolio. Substantially all of the variable rate income notes were sold in 2005. The zero coupon securities are recorded at cost and annual accretions are recorded as investment income. Investment income in 2006 from such accretions amounted to approximately $12.6 million.
To demonstrate the sensitivity of our net DAC balance ($81.1 million as of December 31, 2006) relative to our future spreads and expenses, the information below indicates how much the net DAC balance would have changed if the future spread assumption decreased by 30% and if the future expense assumption increased by 30%. We believe that any variation in our expense or spread estimate is likely to fall within these ranges.
For policies and contracts where the reserve is reported as the account balance ($2,969.4 million), a change in expected experience would have no effect on the reserve.
In determining appropriate reserve levels for the year ended December 31, 2008, the Company maintained the same general processes and disciplines that were used to set reserves at prior reporting dates. No changes in methodologies were made to estimate the reserves since the last reporting date; however at each reporting date the Company reassesses the actuarial estimate of the reserve for loss and loss adjustment expenses and records its best estimate. Consistent with prior reserve valuations as claims data becomes more mature for prior accident years, actuarial estimates were refined to weigh certain actuarial methods more heavily in order to respond to any emerging trends in the paid and reported loss data. These modifications to the analysis varied depending on whether the line of business was short-tailed or long-tailed and also varied by accident year. The Company takes into consideration several factors in establishing its best estimate of net reserves for losses and loss adjustment expenses. While prior accident years’ net reserves for losses and loss adjustment expenses for some line of business have developed favorably during 2007 and 2008, this does not infer that more recent accident years’ reserves also will develop favorably; pricing, reinsurance costs, the legal environment, general economic conditions and many other factors impact management’s ultimate loss estimates. For accident years 2007 and 2008, pricing for our products was under intense competition and management’s expectation is that profitability for certain lines of business decreased accordingly as loss costs have not decreased proportionately.
the result of increased gross written premiums during 2006. Partially offsetting earned premiums for the year ended December 31, 2007 was a $4.1 million increase in ceded premiums under a property reinsurance contract due to a shortfall in the minimum subject premium under this contract.
The decrease in the expense ratio for the year ended December 31, 2008 as compared to 2007 was the result of the overall increase in earned premium. The increase in the expense ratio for the year ended December 31, 2007 as compared to 2006 was due to the inclusion of the results of operations of Argo Re, which totaled $2.9 million, coupled with the inclusion of new programs in 2007 which resulted in an increase in fixed costs associated with the management of these programs.
In response to the results, the Company centralized underwriting in Dublin. In addition, the Company writes at a conservative ratio of 2:1 net written premium to capital.
The operating expense ratios for the years ended December 31, 2000 and 1999 were calculated by expressing total administrative expenses net of corporate office expense, as a percentage of net premiums earned. Included in 2000 administrative expense is the provision of an $8.4 million legal reserve for the expected costs associated with resolving disputes in respect of certain risks ceded to and in some cases rescinded by the Company.
Foreign exchange losses were $1.3 million in the 12 months ended December 31, 2000 compared to foreign exchange losses of $11 thousand for the 12 months ended December 31, 1999. These gains or losses are primarily unrealized and were incurred on the revaluation of assets and liabilities denominated in foreign currencies for reporting purposes. As the Company maintains a partial natural hedge, whereby foreign currency assets are held in the same currencies in which it must pay liabilities, the impact on cash flows from foreign exchange movements is reduced.
The amortized cost, fair value and gross unrealized gains and losses of fixed maturity investments and equity investments as of December 31, 2000 and 1999 are presented in the tables below:
Losses and loss expenses incurred and earned premiums as reported in the statement of operations are after deduction for retrocessions. Written and earned premiums and losses incurred for the years ended December 31, 2000, 1999 and 1998 are comprised of the following: