The Company’s results and the results in the Property & Casualty Insurance segment were significantly and negatively impacted in 2014, compared to 2013, by the level of catastrophe losses and LAE and a charge to write off certain internal use software. Catastrophe losses and LAE in the Property & Casualty Insurance segment (excluding loss and LAE reserve development from prior accident years) were $96.5 million before taxes for the year ended December 31, 2014, compared to $47.1 million in 2013, an increase of $49.4 million. See MD&A, “Catastrophes,” beginning on page 28 for a discussion of the impact of catastrophe losses and LAE on the Company’s results and MD&A, “Property & Casualty Insurance,” beginning on page 31 for a discussion of the impact of catastrophe losses and LAE on the Property & Casualty Insurance segment’s results. Results for the Property & Casualty Insurance segment in 2014 also include a charge of $54.6 million before taxes to write off certain internal use software. See MD&A, “Write-off of Long-lived Asset,” beginning on page 48 for more information related to the internal use software write-off.
rate actions taken by the Company on average premium. Catastrophe losses and LAE (excluding reserve development) were $38.2 million in 2013, compared to $90.4 million in 2012. Favorable loss and LAE reserve development was $20.1 million in 2013, compared to $11.7 million in 2012.
Under GAAP, a company may elect to use the fair value option for some or all of its investments in financial instruments. Under the fair value option, a company is required to recognize changes in the fair values into income for the period reported. Had the Company elected the fair value option for all of its investments in financial instruments, the Company’s reported net income for the year ended December 31, 2014, would have increased by $151.2 million.
The Company’s Property and Casualty Insurance Reserves are reported using the Company’s estimate of its ultimate liability for losses and LAE for claims that occurred prior to the end of any given accounting period but have not yet been paid. The Company had $733.9 million and $843.5 million of gross loss and LAE reserves at December 31, 2014 and 2013, respectively.
Property and Casualty Insurance Reserves for the Company’s business segments at December 31, 2014 and 2013 were:
Level 3 - Unobservable inputs for the asset or liability being measured.
The expected maturities of the Company’s Investments in Fixed Maturities may differ from the contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments in Mortgage- and Asset-backed Securities Not Due at a Single Maturity Date at December 31, 2014 consisted of securities issued by the Government National Mortgage Association with a fair value of $133.1 million, securities issued by the Federal National Mortgage Association with a fair value of $9.2 million, securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $0.3 million and securities of other non-governmental issuers with a fair value of $69.8 million.
Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2013 were:
is below a “minimum” performance level, none of the shares of performance-based restricted stock originally issued to the award recipient will vest.
The number of shares of Kemper common stock that were excluded from the calculations of Equity-based Compensation Equivalent Shares and Weighted-average Unrestricted Shares and Equivalent Shares Outstanding Assuming Dilution for the years ended December 31, 2014, 2013 and 2012 because the exercise prices for the options exceeded the average market price is presented below.
Components of AOCI were reclassified to the following lines of the Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012:
The investment objective of the Pension Plan is to produce current income and long-term capital growth through a combination of equity and fixed income investments which, together with appropriate employer contributions and any required employee contributions, is adequate to provide for the payment of the benefit obligations of the Pension Plan. The assets of the Pension Plan may be invested in fixed income and equity investments or any other investment vehicle or financial instrument deemed appropriate. Fixed income investments may include cash and short-term instruments, U.S. Government securities, corporate bonds, mortgages and other fixed income investments. Equity investments may include various types of stock, such as large-cap, mid-cap and small-cap stocks, and may also include investments in investment companies, collective investment funds and
The Company expects to contribute $3.2 million, net of the expected Medicare Part D subsidy, to its OPEB Plan to fund benefit payments in 2015.
Coverage for the Property & Casualty Insurance segment’s primary catastrophe reinsurance program effective January 1, 2013 to December 31, 2013 is provided in various layers as presented below:
Catastrophe losses and LAE (including reserve development), net of reinsurance recoveries, for the years ended December 31, 2014, 2013 and 2012 by business segment are presented below.
Trinity and Capitol are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by Capitol, subject to a cap, effective April 1, 2012, for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from Capitol were $21.9 million, $22.4 million and $25.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. Capitol is a mutual insurance company and, accordingly, is owned by its policyholders. Trinity and ORCC, a subsidiary of Capitol, are parties to a quota share reinsurance agreement whereby Trinity assumes 100% of the business written by ORCC, subject to a cap, effective January 1, 2013, for ceded losses for dwelling coverage. Earned Premiums assumed by Trinity from ORCC were $6.7 million, $7.2 million and $8.2 million for the years ended December 31, 2014, 2013 and 2012, respectively.
party fund managers, third party appraisers, or that are generated internally. These valuations typically employ various valuation techniques commonly used in the industry, including earnings multiples based on comparable public securities, industry-specific non-earnings based multiples, market yields based on comparable public securities and discounted cash flow models.
In response to the Illinois declaratory judgment action, the Illinois Department of Insurance and its Director (collectively, the “IDOI”) filed a motion to dismiss, and in July 2014, the court in Illinois denied, in part, such motion. Specifically, the court denied the IDOI’s motion to dismiss the Life Companies’ claim seeking a declaration that the IDOI cannot compel the Life Companies to provide their policy records to the IDOI or persons acting on the IDOI’s behalf so as to permit a comparison against the DMF for purposes of identifying deceased insureds, as well as the Life Companies’ associated claim for injunctive relief. The court dismissed with prejudice the other counts in the complaint. In August 2014, the IDOI filed its answer to the counts of the complaint that the Illinois court allowed to stand, and in October 2014, the Life Companies filed a motion for summary judgment with respect to those remaining counts. The IDOI filed a cross motion for summary judgment in December 2014. Formal briefing and a hearing schedule on the summary judgment motions are expected to be set by the court at a May 2015 status conference. The actions against the insurance regulators in the states of Florida and Pennsylvania have been stayed by agreement of the parties pending the outcome of the Illinois action.