The Company provides automobile, flood, commercial and other property and casualty insurance services and products. The largest sources of revenues during 1997, 1996, and 1995 were derived from the Company's participation in the SC Facility and the NFIP. Other revenues have been derived from acting as a Managing General Agent for an unaffiliated insurance company (this relationship was terminated effective 2/1/98), excess and surplus lines brokerage services and catastrophe claims services. The following table shows revenues by the various segments during the years ended December 31, 1997, 1996, and 1995, respectively (in thousands):
Commission and service income for the year ended December 31, 1997 decreased $2.3 million or 5% to $44.1 million from $46.4 million for the year ended December 31, 1996. This decrease is due to a $1.7 million decrease in premium-based fee revenue from the Company's MGA relationship in commercial lines. Also, flood claim-based revenues decreased $2.1 million due to reduced claims activity during the year ended December 31, 1997. Revenues from SC Facility premium-based and claim-based fees increased $1.2 million and $0.6 million, respectively, for the year ended December 31, 1997. Flood premium-based fees also increased $0.6 million for the same period.
- - A different group of investors acquired 1,562,500 shares of Company Common Stock at a price of $4.00 per share in the third quarter of 1996. The proceeds were used to make a $6.3 million contribution to SCIC. In conjunction with the sale of common stock, the Company also issued stock options to acquire an additional 781,250 shares at the greater of $6.00 per share or the book value per share at the date of exercise, expiring December 31, 1998 and 781,250 shares at the greater of $8.00 or the book value per share at the date of exercise, expiring December 31, 2000.
Investments which exceed 10% of shareholders' equity, excluding investments in U. S. Government and government agencies and authorities, at December 31, 1997, are as follow (in thousands):
The North Carolina Insurance Holding Company System Regulatory Act provides that, without the prior approval of the Commissioner of Insurance of the State of North Carolina, dividends within any 12-month period may not exceed the lessor of (i) 10% of Universal's surplus as regarding policyholders as of the preceding December 31 or (ii) Universal's net income, not including realized capital gains, for the 12-month period ending the preceding December 31.
The 1996 Stock Option Plan (the "1996 Plan") for Employees became effective on November 1, 1995 and supersedes the 1987 Stock Option Plan (the "1987 Plan"). The 1996 Plan has reserved 1,250,000 share of Company common stock for issuance under the plan as options, incentive stock and restricted stock to employees and consultants of the Company. The following table shows the option under the 1987 and 1996 plans for the past three years.
The Company's property and casualty insurance operations include a retained risk bearing component, and a servicing carrier component. The risk business is ceded through several reinsurance programs including pro-rata and excess of loss. In its servicing carrier operation, premiums are ceded entirely to the applicable state's reinsurance facility. A reconciliation of direct to net premiums, on both a written and an earned basis is as follows (in thousands):
The Company, in its relationship with the unaffiliated insurer underwrote, processed, issued and settled claims on behalf of the issuing carrier. For these services, the Company was paid a fee. During 1997, 1996 and 1995 the Company was unable to make a profit on the fee income produced. Pursuant to a mutual agreement in August 1997 to cancel its Agreement, the Company discontinued its commercial lines managing general agency operation in February 1998. Policies previously underwritten on behalf of an unaffiliated issuing carrier began to be underwritten by the Company in the capacity of a risk taker. During 1997, $20.1 million of direct written premium was written under the arrangement and the book of business produced favorable loss ratios. A comparable amount is anticipated to be written as an issuing carrier in 1998. Under the terms of the cancellation agreement, all agents and policies remain with the Company. The Company has reissued licenses to these agents under the Company's name. The Company will also continue to run-off claims for the unaffiliated carrier until such time as the carrier wishes to take this responsibility. The Company is in the process of re-underwriting all of these policies.