felanders/preprocessed huggingface dataset:
The Company leases office spaces in Hamilton, Bermuda, where the Company’s principal executive offices are located. The Company also leases office space in London, United Kingdom, where the Company’s subsidiary, Montpelier Marketing Services (UK) Limited is located. We believe our facilities are adequate for our current needs.
Our expenses consist primarily of loss and loss adjustment expenses, acquisition costs, general and administrative expenses and interest costs related to our debt.
We accrue the projected value of these units and expense the value in the income statement over the course of each three-year performance period. The accrual is based on the number of units granted, the share price at the end of the respective fiscal period end plus an adjustment for any dividends paid out during the performance period, and an initial assumption of a 100% harvest ratio, unless otherwise adjusted as discussed below. At the end of the sixth quarter, and every subsequent quarter, we reassess the projected results for each three year performance period and adjust the accrued PUP liability as necessary. We recalculate the liability under the PUP as our financial results evolve and the share price changes, and reflect such adjustments in the income statement in the period in which they are determined. This may result in an adjustment to the harvest ratio used in the liability calculation which may increase or decrease the amount of liability and expense recorded during the period.
A hard market has sometimes been precipitated by a large catastrophic event or series of events. The terrorist events of September 11, 2001 occurred at the end of a long period of insufficient pricing, and additionally, it was a period where asbestos and other latent loss liabilities had significantly weakened the ability of some competitors to assume insurance risk. For these reasons, adequately priced opportunities were widespread for the past few years.
compared to the same period in 2003 mainly as a result of an increase in proportional business. This increase was offset somewhat by the decreases in premium levels on direct and facultative business.
Acquisition costs are generally driven by contract terms and are normally a set percentage of premiums. General and administrative expenses are comprised of fixed expenses, which include salaries and benefits, share options and office and risk management expenses, and variable expenses which include costs related to our performance unit plan and bonuses.
Report of Independent Certified Public Accountants on Financial Statement Schedules....................................... 37
Total income tax expense varies from amounts computed by applying current federal income tax rates to income before income taxes. The reasons for these differences and the approximate tax effects are as follows:
In 1987, the Company established a deferred compensation plan for its Board of Directors. The Board members have an option of deferring their fees to a cash account or to a stock account and all share deferrals are recorded at the fair market value on the date of the award. Costs of the deferred compensation plan for 1999, 1998, and 1997 amounted to approximately $48,490, $90,300, and $228,525, respectively.
Income (loss) before income taxes: Individual life and accident and health insurance $2,556 $2,489 $2,171 Property and casualty insurance 2,365 (1,000) 1,572 Other (110) (140) (272) ------ ------ ------ 4,811 1,349 3,471 (295) (243) (111) ------ ------ ------ Interest expense $4,516 $1,106 $3,360 ====== ====== ======
Assets Individual life and accident and health insurance $41,323 $41,935 $39,569 Property and casualty insurance 56,714 61,842 67,286 Other 68 196 103 ------ ------ ------ $98,105 $103,973 $106,958 ====== ====== ======
Fair First Second Third Fourth Fifth Thereafter Total Value 2000 $700 $610 $530 $480 $470 $2,754 $5,544 $5,426 1999 690 620 550 490 440 2,730 5,520 5,371
General The comparability of GAFRI's financial statement is affected by the acquisitions and sale of subsidiaries discussed in Note C to its financial statements.
Consolidated Statement of Cash Flows: Years Ended December 31, 2000, 1999 and 1998
Great American Financial Resources, Inc. ("GAFRI" or "the Company") formerly known as American Annuity Group, Inc. markets retirement products, primarily fixed and variable annuities, and various forms of life and supplemental health insurance through independent agents, payroll deduction plans, financial institutions and in-home sales.
Derivatives Effective October 1, 2000 GAFRI implemented SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments (including derivative instruments that are embedded in other contracts) and for hedging activities. Prior year financial statements were not restated. SFAS No. 133 generally requires that derivatives (both assets and liabilities) be recognized in the balance sheet at fair value with changes in fair value included in current income. The cumulative effect of implementing SFAS No. 133, which resulted from the initial recognition of GAFRI's derivatives at fair value, was income of $0.8 million or $0.02 per diluted share.
The table below sets forth the scheduled maturities of GAFRI's fixed maturity investments based on market value as of December 31:
Deferred tax liabilities: Unamortized insurance acquisition costs (144.4) (99.9) Policyholder liabilities (15.0) (38.5) Capitalized assets (0.6) (5.1)
Rental expense for operating leases, net of sublease revenues, was $6.0 million in 2000, $5.6 million in 1999 and $4.9 million in 1998.
changes $0.52 $0.43 $0.35 $0.17** $1.48 Accounting changes (0.11) - - - (0.11) Net income $0.41 $0.43 $0.35 $0.17** $1.37
Operating earnings before income taxes 81.1 92.0 147.9 Provision for income taxes 21.0 26.5 47.5
The historical changes in Re Cap's losses and LAE principally result from changes in its premiums earned, the mix of business between pro rata and excess of loss reinsurance and the profitability of the treaties written. During the period 1992-1994, the casualty lines of business reinsured by Re Cap did not change significantly, other than an increase in auto liability business. During the same three year period the composition of the property lines of business reinsured by the Company changed dramatically. Auto physical damage premiums increased 239% while premiums for the mechanical breakdown and commercial per risk lines decreased 71% and 46%, respectively. In the aggregate, however, property premiums as a percentage of net premiums written, increased only marginally from 15% to 17%.
Re Cap writes a significant amount of business with sliding scale commission arrangements. Lower loss ratios (subject to minimums) will thus result in higher commissions, while higher loss ratios (subject to maximums) will result in lower commissions. For this reason, the Company focuses on the combined ratios rather than comparing loss and expense ratios from different years. Based on this important benchmark, Re Cap equaled or outperformed the reinsurance industry in each of the eight full years of its existence. Management attributes these favorable comparisons to the adherence to strict underwriting standards and overhead cost controls.
Excluding catastrophe losses, the Company's combined ratio in 1994 and 1993 exceeded its average of 102.7% for its first six full years of operation (1987-1992) by 0.7 and 3.3 points, respectively. In 1994, the strengthening of certain casualty loss reserves involving the 1993 and 1994 underwriting years increased the combined ratio by 1.1 points. This strengthening was confined to a limited number of treaties and reduced net income by $.14 and $.09 per share on a primary and fully diluted basis, respectively.
In 1993, the Company's invested assets and cash increased by $88,051,000 or 34.4% from the 1992 level. This increase was due to cash flow from operations and the proceeds of the Company's offering of the Convertible Debentures net of the repayment of its bank loan. Also included in this increase was an adjustment to reflect the implementation of SFAS No. 115. In 1993, the Company sold $12,789,000 of fixed income securities. These sales, from the Company's then held-for-sale portfolio, were made to replace certain taxable securities with tax-exempt securities.
The Columbia, South Carolina headquarters, containing approximately 141,000 square feet of occupied space, is owned by the Company and used primarily by its property and casualty insurance operations. The Winston-Salem, North Carolina office houses Universal. That office contains approximately 18,000 square feet and is leased through 2005. Graward is located in Nashville, Tennessee. That office consists of approximately 20,000 square feet and is leased through 2002. AFS is located in Rancho Cordova, California. AFS leases approximately 5,200 square feet with the lease expiring in 2002. Some additional premises are leased by the Company in locations in which it operates. Management believes that these facilities are sufficient for the Company's current and foreseeable future needs.
Policy acquisition costs increased $9.0 million for the year ended December 31, 1998 compared to 1997, or 746.9%. The Company attributes this increase to the costs associated with the underwriting activities necessary to generate earned premium.
The claims involve four Superfund sites, eight asbestos or toxic claims, two underground storage tanks and 30 miscellaneous clean-up sites. For this direct business there are usually several different insurers participating in the defense and settlement of claims made against the insured. Costs and settlements are pro-rated by either time on the risk or policy limits.
- the fact that the Company has experienced, and can be expected in the future to experience, storm and weather-related losses, which may result in a material adverse effect on the Company's results of operations, financial condition and cash flows;
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) as either held-to-maturity, available-for-sale or trading. The Company currently holds all securities as available-for-sale, and reports them at fair value, with subsequent changes in value reflected as unrealized investment gains and losses credited or charged directly to accumulated other comprehensive income included in shareholders' equity. The fair values of the Company's cash and short-term investments approximate carrying values due to the short-term nature of those instruments.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CHANGE IN ACCOUNTING PRINCIPLE
During the first quarter of 1998, the Company granted a warrant to purchase up to 57,971 shares of common stock in connection with its Credit Facility (See Note 5).
The increased investment yield in 1995 reflects the higher interest rates prevailing during the latter half of 1994 and into fiscal 1995. In addition, investment income in 1995 includes increased contributions from the Company's investments in partnerships and other similar entities, which contributions amounted to $134.1 million in 1995, compared with $63.7 million in 1994 and $45.6 million in 1993. This partnership income represents a yield of 18.17% on related average assets of $738.0 million in 1995, compared with 11.35% on related average assets of $560.9 million in 1994 and 9.37% on related average assets of $486.8 million in 1993.
The Company manages most of its invested assets internally. The Company's general investment philosophy is to hold fixed maturity assets for long-term investment. Thus, it does not have a trading portfolio. The Company carries the portion of its portfolio of bonds, notes and redeemable preferred stocks that is available for sale (the "Available for Sale Portfolio") at estimated fair value. The remaining portion of its portfolio of bonds, notes and redeemable preferred stocks is held for investment and is carried at amortized cost.
Approximately $7.30 billion or 99.5% of the Bond Portfolio (at amortized cost) at September 30, 1995 was rated by Standard & Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's") or under comparable statutory rating guidelines established by the National Association of Insurance Commissioners ("NAIC") and implemented by either the NAIC or the Company. At September 30, 1995, approximately $6.39 billion (at amortized cost) was rated investment grade by one or both of these agencies or under the NAIC guidelines, including $4.82 billion of U.S. government/agency securities and MBSs.
The primary sources of investment risk to which the Company is exposed include credit risk, interest rate risk, and liquidity risk. The Company’s ability to manage these risks is essential to the success of the organization. In particular, the Company devotes considerable resources to both the credit analysis of each new investment and to ongoing credit positions. A default by an issuer usually involves some loss of principal to the investor. Losses can be mitigated by timely sales of affected securities or by active involvement in a restructuring process. However, there can be no assurance that the efforts of an investor will lead to favorable outcomes in a bankruptcy or restructuring.
The Company has not had any significant business changes in the three years ended December 31, 2011.
Interest is credited to policyholder account balances according to terms of the policies or contracts. Interest is credited to policyholder account balances for universal life, fixed deferred annuities and other investments-type products. There are minimum levels of interest crediting assumed in certain policies or contracts, as well as allowances for adjustments to be made to reflect current market conditions in certain policies or contracts. Accordingly, the Company reviews and adjusts crediting rates as necessary and appropriate. Amounts credited are a function of account balances and current period crediting rates. As account balances fluctuate, so will the amount of interest credited to policyholder account balances.
The risk that fraudulent, inaccurate or misleading information could be provided to the Company’s credit, investment and accounting professionals who determine the fair value estimates and accounting treatment for securities;
Level 1 - Valuations are based upon quoted prices for identical instruments traded in active markets.
The following table provides information about the outstanding three-year intervals at December 31, 2011.
The maximum retention on any one life during 2011 and 2010 was three hundred fifty thousand dollars for ordinary life plans and one hundred thousand dollars for group coverage. Effective January 1, 2012, the Company increased its maximum retention limit to five hundred thousand dollars on individual life products. A contingent liability exists with respect to reinsurance, which may become a liability of the Company in the unlikely event that the reinsurers should be unable to meet obligations assumed under reinsurance contracts. The solvency of reinsurers is reviewed annually.
The Company is required to deposit a defined amount of assets with state regulatory authorities. Such assets had a statutory carrying value of $12.9 million at December 31, 2011 (2010 - $12.0 million; 2009 - $11.6 million).
The selected consolidated financial data presented below as of the end of and for each of the years in the five-year period ended December 31, 2009 is derived from the Company's consolidated financial statements. The consolidated financial statements as of December 31, 2009 and 2008, and for each of the years in the three-year period ended December 31, 2009 are included elsewhere in this Form 10-K.
The Company has net operating loss carry forwards for income tax purposes at December 31, 2009 as follows:
The major components of operating cash flows are premiums and investment income while policy benefits are the most significant cash outflow. In 2009, BNLAC collected approximately $42.0 million of premiums and annuity deposits (gross before reinsurance) and $1,122,698 of net investment income. Another source of cash flow in 2009 was overwrite commissions of $2,386,148 on vision products. During the year the Company incurred $31,805,555 in policy benefits and other insurance costs.
The Company does not hedge its investment income through theuse of derivatives.
The Company has a convertible debenture loan investment (“Debenture”) to EPSI Benefits, Inc. (“EBI”), originally dated July 25, 2001 (Exhibit 10.3). The loan bears interest at a rate of 14% and the maturity of the Debenture was August 15, 2015. Monthly principal payments were scheduled to begin on September 15, 2008, and the total principal amount is $1,357,407.
Net investment income was $1,122,698 in 2009, $1,170,901 in 2008 and $1,320,614 in 2007, a decrease of 11% in 2008, and a decrease of 4% in 2009. The decrease in 2009 was due to an increase in short term investments with lower yields. The decrease in 2008 was primarily due to the sharp decline in interest rates throughout 2008 and an increase in short term investments with lower yields. The decrease in interest rates and the challenged financial markets has made it difficult to purchase investment grade bonds with yields equivalent to bonds purchased over the last few years.
Corporate bond defaults and credit downgrades, which have resulted in other than temporary impairment in the value of many securities, have had a material impact on life and health insurers in the past few years. While our debt investments have not been immune to corporate credit problems, losses from defaults have historically not been material to our predecessor’s financial condition. We intend to manage our investment portfolio conservatively in the future to attempt to mitigate the risk of losses from defaults.
The costs of acquiring new business that vary with and are primarily related to the production of new business have been deferred to the extent that these costs are deemed recoverable from future premiums or gross profits and are amortized into income as discussed below. Acquisition costs primarily consist of commissions, policy issuance expenses and some direct marketing expenses.
Amortization of DAC and VOBA: DAC relating to most insurance products is amortized over the premium-paying period of related policies in a manner consistent with the establishment of benefit reserves. The amortization of VOBA is comparable to the amortization of DAC and is recognized using amortization schedules established at the time of acquisition based upon expected patterns of premiums, mortality, policy lapses and morbidity, and adjustments are made to take into account certain variances between expected and actual costs.
We have obligations and commitments to third parties as a result of our operations. These obligations and commitments, as of December 31, 2005, are detailed in the table below:
Cumulative effect of change in accounting for equity based method investment, net of tax
The assets of the plan are held in a trust account and are invested primarily in cash and cash equivalents.
The Company has a non-qualified deferred compensation plan for senior management that allows the deferment of a portion of their compensation until their services with the Company have terminated. The plan includes deferred contributions, which were not elected by employees to be transferred to the 401K plan upon adoption of the 401K plan. The plan’s investments include money market funds and are recorded in investments as held for trading. The corresponding deferred obligations to participants are recorded in other liabilities.
The carrying amounts and fair values of the Predecessor’s liabilities for investment-type insurance contracts at December 31 are summarized in the following table.
Policy acquisition costs, which are net of ceding commissions on reinsurance ceded, decreased $2.6 million or 19% between 1998 and 1997. The decrease reflects a lower level of retained premium.
At December 31, 1998, several of the Company's subsidiaries maintained revolving lines of credit with a bank in the combined maximum amount of $40.0 million available through December 30, 1999. Advances under the lines of credit are primarily used to fund draws, if any, on letters of credit issued by the bank on behalf of the subsidiaries. The lines of credit are collateralized by securities having an aggregate market value of up to $50.0 million, the actual amount of collateral at any one time being 125% of the aggregate amount outstanding. Interest on the lines is payable at the bank's prime rate of interest (7.75% at December 31, 1998). At December 31, 1998, letters of credit totaling $19.8 million had been issued to insurance companies by the bank on behalf of the subsidiaries, with total securities collateralizing the line of $24.8 million.
The Company, together with outside vendors engaged by the Company, has made assessments of the Company's potential Year 2000 exposure related to its computerized information systems and is currently engaged in efforts to remediate and test these systems for potential Year 2000 exposures. The Company has also made assessments of the potential Year 2000 exposure associated with its embedded technology systems, such as telephone systems, environmental control systems and elevators, and does not believe that it has significant Year 2000 exposure in this area.
The Company's own software vendor subsidiary has completed its Year 2000 compliance plan, and, based upon the results, management believes that the subsidiary's products are Year 2000 compliant.
Stock options are excluded from the calculation of the weighted average number of dilutive shares outstanding for 2003, 2002 and 2001 because the inclusion of stock options would have an anti-dilutive effect.
In 2002 we recognized a gain of $671,000 in connection with the settlement of a former executive’s claim under our Supplemental Executive Retirement Plan. This gain was recognized in conjunction with the collection of a note issued by the same executive. Please see “Note 5 - Notes Receivable From Shareholders”. Also in 2002 we recorded $880,000 in litigation and management settlement charges in connection with the previously discussed Services Agreement for Back Office Administration, which we had previously entered into for the benefit of our subsidiaries.
Depreciation and amortization expenses increased 47% during 1999, as compared to the prior year, due mainly to the increased amortization of goodwill and intangibles acquired in the purchase of DRMS in September 1998. Increased depreciation expense also resulted following the addition of new equipment during 1999, which was necessary to accommodate the growth in revenues from new and existing clients. Amortization of internally developed software and related equipment also increased due to CORE's continuing investment in web-based technologies and enhancements to our operating systems.
The 19% increase in cost of services during 1998, as compared to the prior year, is primarily the result of additional payroll costs associated with business acquisitions completed in 1998 and the summer of 1997 in addition to increased staffing levels required to service new and growing WorkAbility clients. Additionally, increased amortization expense was incurred as software enhancements to the Company's operating systems were placed into service.
At December 31, 1999 and 1998, CORE had outstanding borrowings of $14,300,000 and $16,500,000, respectively, under the Credit Agreement which were all tied to the prime base lending rate (8.50% at December 31, 1999) plus the applicable margin. The Credit Agreement is secured by substantially all of CORE's assets and requires CORE to meet certain financial covenants, including minimum ratios for interest, debt service and fixed charge coverage along with minimum net worth levels. Additionally, the Credit Agreement prohibits the payment of dividends by CORE without the Bank's written consent. CORE was in compliance with the financial covenants contained in the Credit Agreement at December 31, 1999.
CORE plans to finance its operations and working capital requirements primarily with future earnings from
We have audited the accompanying consolidated balance sheets of TIG Holdings, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
On December 31, 1997, TIG sold the Independent Agents unit of its Retail Division, based in Battle Creek, Michigan, for $65 million in cash to Nationwide Mutual Insurance Company ("Nationwide"). The purchase price was adjusted for the surplus of TIG Countrywide Insurance Company ("CIC"), which was included in the sale, after giving effect to certain transactions. There was no capital gain or loss recognized on the sale. At closing, TIG entered into several reinsurance arrangements with CIC and ceded all outstanding loss and LAE reserves, unearned premium reserves and premium receivables related to the Independent Agents unit at book value. Under the purchase agreement, Nationwide assumed the risk of loss and LAE reserve development and receivable collectibility. To allow CIC and Nationwide time to make appropriate regulatory filings, TIG will continue to write Independent Agents business and cede such business 100% to CIC for two years, or longer, if needed. TIG has also agreed to provide transition assistance services to CIC for the processing of this business for a period of up to two years. Independent Agents gross premium written for the years ended December 31, 1997, 1996 and 1995 totaled $286 million, $299 million and $291 million, respectively.
December 31, ------------------ (In millions) 1997 1996 ================================================================================ Actuarial present value of other postretirement obligations: Retirees $24.3 $17.2 Active participants 1.3 3.4 Unrecognized net gain (loss) (5.2) - Prior service cost 0.6 0.7 - ------------------------------------------------------------- --------- -------- Other postretirement benefit obligation $21.0 $21.3 ================================================================================
Other: We write canine legal liability policies and also have a small participation in mandatory state joint underwriting associations.
The following table describes the quota share provisional ceding commission rates in effect during 2015 and 2014. This table should be referred to in conjunction with the discussion for ceding commission revenue that follows.
The single maximum risks per occurrence to which we are subject under the new treaties effective July 1, 2015 are as follows:
Stock markets, in general, have continued to experience significant price and volume volatility, and the market price of our common stock may continue to be subject to similar market fluctuations that may be unrelated to our operating performance and prospects. Increased market volatility and fluctuations could result in a substantial decline in the market price of our common stock.
Credit card and ACH fees represented 2.2% and 1.3% of revenues and premium equivalents, respectively, for both the years ended December 31, 2016 and 2015. These percentages are in line with our expectations.
We believe that the amount or estimable range of reasonably possible loss, will not, either individually or in the aggregate, have a material adverse effect on our business or consolidated financial statements with respect to loss contingencies for legal and other contingencies as of December 31, 2016. However, the outcome of litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management’s expectations, our results of operations and financial condition, including in a particular reporting period, could be materially adversely affected.
For the year ended December 31, 2016, three carriers accounted for 60% of our premium equivalents and for the year ended December 31, 2015, two carriers accounted for 70% of our premium equivalents. For the year ended December 31, 2016, HCC Life Insurance Company (“HCC”) accounted for 22% of our premium equivalents, United Life Insurance Company accounted for 20%, and Companion Life Insurance Company accounted for 18%. The Company anticipates that its premium equivalents in 2017 will continue to be concentrated among a small number of carriers, although as a part of the Company’s strategy of improving and increasing its product mix by seeking to add innovative new products, the Company anticipates that its carrier concentration may decrease.
Statement of Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No.133") is effective for all fiscal years beginning after June 15, 2000. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Under SFAS No. 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company adopted SFAS No. 133 effective January 1, 2001. The Company identified one product that meets the definition of a derivative instrument as defined in SFAS No. 133. The identified derivative was formerly accounted for as an insurance contract within the policy liabilities for loss and loss adjustment expenses account in the consolidated balance sheet. At December 31, 2001 the fair value of the derivative instrument has been determined by using a financial model that incorporates market data and other assumptions. Due to the volatility in the marketplace, the Company has suspended marketing of this product effective September 2001.
Written Premiums ----------------------------------------- 2000 1999 % Change ----------------------------------------- Direct ............................ $ 13,775,266 $ 10,816,114 27.4% Assumed ........................... 2,393,468 2,421,346 (1.2)% Ceded ............................. (3,510,537) (2,740,148) 28.1% ------------ ------------ ------ Total ......................... $ 12,658,197 $ 10,497,312 20.6% ============ ============ ======
Interest expense on non-affiliated debt is interest paid to the former owners of The Surety Group and Surety Associates on notes due to agencies the Company purchased in 1995.
The capacity of a surety company to underwrite insurance and reinsurance is based on maintaining liquidity and capital resources sufficient to pay claims and expenses as they become due. Based on standards established by the National Association of Insurance Commissioners (NAIC) and promulgated by the Florida Department of Insurance, the Company is permitted to write net premiums up to an amount equal to three times its statutory surplus, or approximately $19,509,655 at December 31, 2001. Statutory guidelines impose an additional limitation on increasing net written premiums to no more than 33% of prior year's net written premiums. Under these guidelines, the Company could increase net written premiums by approximately $4,400,000.
At December 31, 2001 and 2000, the Company did not have any other commercial commitments, such as guarantees or standby repurchase obligations, or any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
In order to commute the agreement and remain in compliance with requisite regulatory minimum standards, we will need to have a risk based capital ratio of at least 200%. While our current modeling and actuarial projections suggest that our RBC ratio will be at or slightly above 200% and therefore we will be able to commute the 2001 Imagine Agreement on January 1, 2009, we also believe that we should have an additional margin for any adverse development in order to recapture the block of business. We believe that alternatives such as modifications to the current reinsurance agreement, new reinsurance agreements, or additional capital issuances are available to obtain the necessary margin, if needed. These
(1) Includes $4,558 of assets leased under a sale leaseback. See Note 20.
The Notes were convertible to shares of the Company’s stock at $7.00 per share. The Notes were mandatorily convertible if, at any time after October 15, 2005, the 15-day average closing price of the Company’s common stock exceeded 110% of the conversion price. The Notes mandatorily converted in November, 2005.
The fair value decreased during 2005 due to the conversion of the Notes in November, 2005. The decrease in fair value during 2004 is due to the conversions that occurred during 2004 and the decrease in the time period until October 15, 2005, the date that interest was paid through.
The Company recorded interest expense of $1,426 and $820 in 2005 and 2004, respectively related to the reduction in the discount on long-term debt.
Under pre-1984 life insurance company tax laws, a portion of the life insurance subsidiary's gain from operations which was not subject to current income taxation was accumulated for income tax purposes in a memorandum account designated as Policyholders' Surplus. The aggregate accumulation in this account at December 31, 2005 was $1,451. Should the accumulation in the Policyholders' Surplus account of the life insurance subsidiaries exceed certain stated maximums, or should distributions including cash dividends be made from the life insurance subsidiaries in excess of certain amounts, such excess would be subject to federal income taxes at rates then effective. Deferred income taxes have not been provided on amounts designated as Policyholder's Surplus. Under current income tax laws, the Company does not anticipate paying income tax on amounts in the Policyholders' Surplus accounts.
The Company uses December 31 as the measurement date for the plans, which are unfunded. The following table provides the components of the benefit obligation at December 31, 2005:
During 2001, the Company granted 142 replacement options to its employees for all existing options granted under its 1998 Plan. As a result, these options are now subject to the variable accounting provisions of APB Opinion No. 25 until exercised, forfeited or cancelled. No compensation expense or income was recorded in 2005, 2004, or 2003 as a result of the change in the intrinsic value of the stock options. No additional options were granted under the 1998 Plan in 2005, 2004 or 2003.
As part of an RFP process, the state of Texas added a second vendor to the rural CHIP product in September 2010, which we previously managed under an exclusive contract. As a result, our December 31, 2010 membership in this product decreased by approximately 50,000 as compared to the prior year.
Some states enact premium taxes, similar assessments and provider pass-through payments, collectively, premium taxes, and these taxes are recorded as a component of revenues as well as operating expenses. In 2009, one of the states in which we operate increased their premium which was required to be passed through to hospitals in the state. For the years ended December 31, 2010 and 2009, this pass-through totaled $84.2 million and $132.9 million. We exclude premium taxes from our key ratios as we believe the premium tax is a pass-through of costs and not indicative of our operating performance.
Results of operations depend on our ability to manage expenses associated with health benefits and to accurately predict costs incurred. The health benefits ratio, or HBR, represents medical costs as a percentage of premium revenues (excluding premium taxes) and reflects the direct relationship between the premium received and the medical services provided.
Earnings from equity method investee decreased due to the inclusion of investment in Access as a consolidated subsidiary beginning in 2009. Interest expense was relatively stable reflecting modest increases in debt balances offset by the decline in market interest rates associated with variable rate debt.
In 2008, as a result of the plan to sell certain assets of UHP, the Company conducted an impairment analysis of the assets of UHP. The impairment analysis resulted in an impairment charge for fixed assets of $2,546. During the years ended December 31, 2010, 2009, and 2008 the Company incurred exit costs consisting primarily of lease termination fees and employee severance. The change in exit cost liability for UHP is summarized as follows:
Other information pertaining to option activity during the years ended December 31, 2010, 2009 and 2008 is as follows:
(1) In the fourth quarter of 2004, the Company recorded $9.2 million, or $5.9 million after taxes, in litigation settlement costs after taxes. Additionally, the Company amended its pension plan effective December 31, 2004 to cease future accruals resulting in a curtailment gain of $4.8 million, or $3.1 million after taxes.
This group includes businesses that are not significant enough in size to be reported as separate segments as well as the unallocated portion of the corporate expenses (including unallocated interest expense) related to the Company’s corporate offices in Richmond, Virginia. The businesses reported in this group provide commercial and residential inspections, commercial appraisals and assessments, and home warranties.
The Company’s assessment business is managed by the Company’s LandAmerica Assessment Corporation subsidiary that was acquired in 2002 and which is headquartered in California. This business provides due diligence services to commercial customers throughout the United States, Canada, Mexico, the Caribbean and Europe. Revenue is recognized upon completion of the services to the customer.
As previously noted, real estate tax monitoring, flood certification fees, and home warranty service fees received on new contracts entered into since the acquisition dates are deferred and amortized over the estimated lives of the contracts to which they relate. The sum of amortization of the “initial deferred service obligation” and amortization related to fees accrued on new contracts represent the earned fee amount for the period.
The estimated remaining contractual life for real estate tax monitoring services and flood certification services can vary depending on a number of factors, including but not limited to, type of loan, lender, credit quality of the borrower, interest rates, and portfolio turnover. The
A summary of agents’ commissions and related revenues in the Title Insurance segment is as follows:
Financial Services - Financial services salaries and benefit costs increased in 2004 over 2003 and in 2003 over 2002 due to the Company’s acquisition of Centennial Bank in December 2003.
Group insurance products include life and disability products sold to employers. They also include a block of medical policies which are being underwritten by a national managed care company on policy renewal dates, on an "as-rated" basis. Invested capital formerly assigned to these medical policies is being reinvested in other life insurance products or other reportable segments during 1999 and 2000, as the Company exits the group medical business.
Average Life Insurance assets grew 8.8% in 1999 and 24.8% in 1998. 1999's growth was due to sales of UL-type products, and growth in existing policyholder funds from interest credited and equity returns. 1998's increase also included the effect of the JP Financial acquisition. The return on average Life Insurance assets was 2.02%, 2.02% and 1.99% in 1999, 1998 and 1997, as Reportable segment results have grown at a rate consistent with the growth in assets.
Total AIP expenses increased 5.2% in 1999 and 28.9% in 1998. General and administrative expenses as a percentage of average invested assets for fixed annuities were 0.24% for 1999 versus 0.23% in 1998 and 0.26% in 1997. Insurance expenses as a percentage of average policyholder fund balances including separate accounts were 1.6%, 1.6% and 1.3% for 1999, 1998 and 1997. The growth in 1999 and 1998 expenses was primarily due to commissions related to broker/dealer operations, similar to the increases in other income. In 1997, expenses included relocating annuity administrative functions to the Greensboro home office.
Commercial paper outstanding was $361 and $289 at December 31, 1999 and 1998 with weighted average interest rates of 5.80% and 5.61%. The maximum amount outstanding during 1999 and 1998 was $369 and $302.
During 1998, the Company finalized its purchase accounting for the acquisition of JP Financial, resulting in an adjustment to increase the value of business acquired by $12.
Under the Non-Employee Directors' Stock Option Plan, 521,064 shares of the Company's common stock are reserved for issuance pursuant to outstanding or future awards as of December 31, 1999. Nonqualified stock options are automatically awarded, at market prices on specified award dates. The options vest over a period of
To the shareholders and the board of directors of AS Capital, Inc.
In 2000, the Company will consider searching for full time sales personnel and utilizing outside sales representatives. Further, the Company is evaluating opportunities in the Internet and audio streaming industry and in e-commerce technology. If cash flow permits, the Company plans to enhance its information system capabilities to actively host web sites and create a conduit for video and audio streaming of entertainment products to the Internet. Additionally, the Company will consider seeking alliances with other e-commerce companies and utilizing outside sales representatives. Initially, the Company will begin promoting its film library in the Internet markets.
Phase 3 Assessing the Year 2000 Compliance of the items determined to be material to the Company;
To the Board of Directors and Shareholders of Philadelphia Consolidated Holding Corp.:
The Company has established non-qualified stock bonus and stock option plans. Under the stock bonus plan, the Company has granted a total of 137,500 shares to certain officers of the Company, of which all such shares have been issued and are vested.
In addition, the Company has also established a non-qualified Directors Stock Purchase Plan ("Directors Plan") for the benefit of non-employee Directors. The aggregate maximum number of shares that may be issued pursuant to the Directors Plan is 50,000. Non-employee Directors, during monthly offerings periods, may designate a portion of his or her fees to be used for the purchase of shares under the terms of the Directors Plan at a purchase price of the lesser of 85% of the fair market value of the shares on the first business day of the offering period or the date the shares are purchased. No shares have been issued pursuant to the Directors Plan as of December 31, 1998.
The Company currently leases office space to serve as its headquarters location and 40 field offices for its production underwriters. Rental expense for these operating leases was $1,242,000, $916,700 and $736,700 for the years ended December 31, 1998, 1997, and 1996, respectively.
At December 31, 1998, the future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 1998 were as follows:
(1) Share information restated to reflect a two-for-one split of the Company's common stock distributed in November 1997 (see Note 11).
Net losses and LAE incurred increased 6.0% to $2,812.9 million for the year ended December 31, 2000, from $2,654.4 million in 1999. This increase is primarily attributable to the increase in net premiums earned. Both the 2000 and 1999 periods include provisions for increased losses for the recent accident years to reflect adverse market conditions. The 1999 period also included a loss in connection with the settlement of a dispute concerning a finite risk agreement. In addition, the Company incurred $62.4 million of catastrophe losses during the year ended December 31, 2000, in contrast to $122.5 million during the year ended December 31, 1999.
The Company experienced a loss before income taxes and distributions on preferred securities of subsidiary trust of $98.8 million for the year ended December 31, 2000, compared to a loss of $178.0 million in 1999.
The Company's net premiums earned increased 21.0% to $2,927.5 million for the year ended December 31, 1999, from $2,418.9 million in 1998. The increase in premiums earned was primarily attributable to the increase in net premiums written.
With respect to group disability, other assumptions are: (i) changes in market interest rates; (ii) changes in offsets; (iii) advancements in medical treatments; and (iv) cost of living. Changes in market interest rates could change reserve assumptions since the payout period could be as long as 40 years. Changes in offsets such as Social Security benefits, retirement plans and state disability plans also impact reserving. As a result of the forgoing assumptions, it is possible that the historical trend may not be an accurate predictor of the future development of the block. As with most long term insurance reserves that require judgment, the reserving process is subject to uncertainty and volatility and fluctuations may not be indicative of the claim development overall.
See Index to Consolidated Financial Statements and Schedules on page 61.
The Company has available lines of credit with its parent aggregating $200 million ($100 million committed and $100 million uncommitted). The line of credit is used strictly as a short-term source of funds. There were no borrowings outstanding at December 31, 2001. At December 31, 2001, there were no outstanding reverse repurchase agreements.
During 2001, the Company placed a majority of its rated Collateralized Debt Obligation (CDO) (obligations that are backed primarily by high-yield bonds) securities and related accrued interest, (collectively referred to as transferred assets), having an aggregate book value of $675 million, into a securitization trust. In return, the Company received $90 million in cash relating to sales to unaffiliated investors and retained interests with allocated book amounts aggregating $586 million. The book amount is determined by allocating the previous carrying value of the transferred assets between assets sold and the retained interests based on their relative fair values. Fair values are based on the estimated present value of future cash flows.
At December 31, 2001, the Company had a reserve for losses for mortgage loans totaling $21 million and for real estate investments totaling $nil.