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The following discussion and analysis of the financial condition and results of operations of INSU should be read in conjunction with INSU’s audited financial statements and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data.” Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
As of December 31, 2020, we were a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
On February 9, 2021, we consummated the previously announced Business Combination and, as a result thereof, we now own 100% of the outstanding common stock of Legacy Metromile and each share of Legacy Metromile common stock was converted into and exchanged for either (a) cash and shares of our common stock or (b) shares of our common stock, if no cash was elected, in each case as provided in the Merger Agreement. As a result of the consummation of the Business Combination, we paid an aggregate of $32 million in cash, and issued an aggregate of 83,012,000 shares of our common stock to the Legacy Metromile securityholders. We have also agreed to issue up to 10 million additional shares of our common stock if the closing share price of is greater than $15.00 over any 20 trading days within any 30 trading day period at any time during the 24 months following the closing.
In order to finance transaction costs in connection with a Business Combination, the Sponsor or one of its affiliates has committed to loan the Company funds as may be required up to a maximum of $750,000, or the Working Capital Loans, which will be repaid only upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, the Company may use a portion of any funds held outside the Trust Account to repay the Working Capital Loans; however, no proceeds from the Trust Account may be used for such repayment. If such funds are insufficient to repay the Working Capital Loans, the unpaid amounts would be forgiven. Up to $1,500,000 of the Working Capital Loans may be converted into warrants at a price of $1.00 per warrant at the option of the holder. The warrants would be identical to the Placement Warrants. As of December 31, 2020, there were no amounts outstanding under the Working Capital Loans.
The answer to this Item is incorporated by reference to page 1 of the Company's Annual Report to Stockholders for the year ended December 31, 1995, which is included as Exhibit (13) to this Form 10-K Report.
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.
improvements and leasing commissions was spent at the Azusa, CA warehouse related to the lease signed by Best Buy. This is the final installment of such costs related to this tenant. At the Morristown, N.J. office center approximately $193,000 was expended, primarily related to the lease signed by Kodak in the first quarter of 1995. Of the $83,000 that was spent at the Pomona, CA warehouse, approximately $60,000 related to an expansion by Ashley Furniture and $23,000 related to a new tenant, Pac Rosa Enterprises. At the Roswell, GA shopping center these tenant improvements and leasing commissions totaled $78,000 of which approximately $66,000 was attributable to leases signed by Capezio's ($49,000) and Accentrics ($17,000). Approximately $104,000 was expended at the Flint, MI office property primarily related to an expansion for Olsten Kimberly ($66,500) and the lease signed for Combs (37,500). Approximately $46,200 was expended for tenant improvements at the Nashville office center.
There was no interest income from mortgage loans in 1995. This was due to the maturing of the Lincoln, NE loan in May 1994 and the 1994 default of the mortgagor on the Flint loan. Interest income from short-term investments increased $1,089,471 (69.3%) from $1,571,394 for 1994 to $2,660,865 for 1995. This was the result of increased amounts invested and higher interest rates in 1995. The Partnership had retained increased cash balances in anticipation of acquiring properties in 1995.
The warehouses experienced an unrealized loss of almost $184,000 during 1994. The Pomona property had the largest loss, $1,679,740 (9.4% of its year-end 1993 value). This change was due primarily to the increased cost of a planned roof replacement program and an acceleration in the timing of that work.
While we believe the estimates and assumptions used in determining the fair value of our business units were reasonable, actual results could vary materially. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, we may be required to perform the second step of impairment testing prescribed by ASC 350 in future periods and impairment of goodwill could result. We cannot predict future events that might impact the fair value of our business units and goodwill impairment. Such events include, but are not limited to, increased competition in insurance markets, global economic changes and significant declines in our market capitalization.
The $309.6 million of total revenue for the year ended December 31, 2019 was $29.3 million higher than the $280.3 million reported for 2018. This increase in revenue was primarily due to higher net premiums earned of $34.4 million due to higher net earned premium in our Professional Liability, E&S Property, E&S Casualty and Aerospace & Programs business units, partially offset by lower net earned premium in our Commercial Auto business unit. This increase in net premiums earned was partially offset by lower net investment income of $3.5 million and lower commission and fees of $1.6 million for the year ended December 31, 2019 as compared to the same period of 2018.
The Company reported a net loss of $35.1 million for the year ended December 31, 1997 after recording a $16.0 million non-cash litigation charge and a $3.0 million management restructuring charge. This compares to net income of $19.4 million for 1996 which included a tax benefit of $3.3 million. Net loss per common share on a diluted basis was $1.96 for 1997 compared to net income of $1.05 for 1996.
On February 24, 1998, the Board of Directors of the Company (the "Board") adopted a Shareholder Rights Plan (the "Rights Plan")
In December 1990, the Company approved the 1990 Stock Option Plan (the "1990 Plan"). Under the terms of the 1990 Plan, as amended, the Company may issue up to an aggregate of 1,000,000 nonqualified stock options to directors, officers and other employees. In July 1995, the Company approved the 1995 Stock Option Plan (the "1995 Plan"). Under the terms of the 1995 Plan, the Company may issue up to an aggregate of 1,000,000 nonqualified or incentive stock options to directors, officers and other employees. Under the 1990 Plan and 1995 Plan, stock options granted to date have been nonqualified stock options which expire no later than 10 years from the date of grant. Stock options granted to date under the 1990 Plan and 1995 Plan have been at an exercise price equal to 100% of the fair market value of the stock at the date of grant.
Net cash used in financing activities totaled $28.6 million in 2000, compared to $204.1 million in 1999. During the year ended December 31, 2000, the Company repurchased 2.5 million shares of the Company's Common Stock for an aggregate $174.6 million and issued Common Stock for an aggregate of $96.0 million pursuant to the Company's stock incentive and employee stock purchase programs. Additionally, the Company increased indebtedness by $50.0 million under its revolving credit facility.
The Company's operations are subject to substantial regulation by federal, state and local agencies in all jurisdictions in which the Company operates. Many of these agencies have increased their scrutiny of managed health care companies in recent periods or are expected to increase their scrutiny, as newly passed legislation becomes effective. From time to time, the Company and its subsidiaries receive requests for information from regulatory agencies or are notified that such agencies are conducting reviews, investigations or other proceedings with respect to certain of the Company's activities. The Company also provides insurance products to Medi-Cal beneficiaries in various California counties under contracts with the California Department of Health Services (or delegated local agencies) and provides administrative services to the Health Care Finance Administration ("HCFA") in various capacities. There can be no assurance that acting as a government contractor in these circumstances will not increase the risk of heightened scrutiny by such government agencies or that such scrutiny will not have a material adverse effect on the Company, either through negative publicity about the Company or through an adverse impact on the Company's results of operations. In addition, profitability from this business may be adversely affected through inadequate premium rate increases due to governmental budgetary issues. Future actions by any regulatory agencies may have a material adverse effect on the Company's business.
General. Net income for the year ended December 31, 2016 was $2.6 million or $0.43 per basic and diluted earnings per share compared to a net income of $4.6 million or $0.76 per basic and diluted earnings per share for the year ended December 31, 2015. The decrease in net income from $4.6 million to $2.6 million was primarily due to significant net underwriting losses experienced during the year ended December 31, 2016, compared to no losses during the year ended December 31, 2015.
During the year ended December 31, 1998 the amortization of deferred policy acquisitions costs increased to $2,252,195 from $1,778,808 for the year ended December 31, 1997. The increase is attributed to the increase in earned premiums.
Life Re retrocedes portions of certain risks in excess of a predetermined retention amount for which it has accepted liability. From time to time, Life Re also has entered into quota share retrocessional agreements, and maintained catastrophe reinsurance to protect against catastrophic event risks. Failure of a retrocessionaire to honor its obligations could result in material losses to Life Re; to date, no such losses have occurred. No amounts due Life Re from its retrocessionaires were deemed uncollectible at December 31, 1996.
Group reinsurance policy revenues consist of life, accident and health, special risk and credit coverages. During the last three years, Life Re's group accident and health and special risk reinsurance business increased substantially over previous levels. Group accident and health and special risk reinsurance policy revenues increased from $102.0 million in 1994 to $112.4 million in 1995 and $139.7 million in 1996. This growth resulted principally from increased participation in major medical and accident reinsurance pools and quota share arrangements, which are organized and managed by professional managing general underwriters. The rate of growth experienced in accident and health and special risk policy revenues is not expected to continue due to management's decision to selectively reduce or eliminate participation in certain pool arrangements to better balance the mix of risks reinsured.
In 1995, Life Re amended and restated the 1992 Credit Agreement to convert the facility to a senior secured revolving and term loan with a stated maturity of January 5, 2002. The two year revolving loan has a commitment amount of $160.0 million and may be extended for up to two one-year periods with bank consent (see Note 8 of "Notes to Consolidated Financial Statements"). During 1996, the Company received bank consent to extend the maturity date by one year. At December 31, 1996, loans totaling $125.0 million were outstanding.
/s/ Rodney A. Hawes, Jr., /s/Jacques E. Dubois Chairman of the Board and President and Chief Executive Officer Chief Operating Officer
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties. All financial instruments of the Company are carried at amounts which approximate fair value except amounts related to insurance contracts, which are exempt from fair value disclosure requirements.
The value of business acquired attributable to the acquisition of LRCA is amortized with interest at 15% and the value of business acquired attributable to acquisitions at REALIC is amortized with interest at rates ranging from 2.5% to 6.5%. The percentage of the value of business acquired which is expected to be amortized in each of the next five years is 6.1%, 5.7%, 5.4%, 5.1% and 4.8%.
In accordance with various states' AIP rules, Mutual historically has received the assignment of MNH's, as well as its own, AIP policies based on its and MNH's combined voluntary automobile market share, issued the policies and settled the claims associated with those polices. Mutual then allocated the results of the involuntary AIP business to MNH based on MNH's share of the combined voluntary automobile business of Mutual and MNH.
Also included in losses in 1993 and 1994, respectively, were approximately $630,000 and $2,400,000, of losses related to severe winter weather that struck the northeastern United States. The losses from these storms increased the loss and LAE ratio in 1993 and 1994 by .7 and 2.6 percentage points, respectively.
The Company recorded an income tax benefit in 1994. The benefit recorded was larger than that calculated using the statutory federal income tax rate due to tax exempt bond income. The Company's effective federal income tax rate on operating income for 1993 was 23.6%. Tax exempt bond income reduced the Company's effective tax rate by 10 percentage points in 1993.
The Company has several objectives with respect to its investment portfolio, which include maximizing total return while protecting policyholders' surplus, maintaining flexibility and liquidity, and maintaining a reasonable duration match between assets and liabilities. Like other property casualty insurers, the Company relies on premiums as a major source of cash, and therefore liquidity. Cash flows from the Company's investment portfolio, either in the form of interest or principal payments, are an additional source of liquidity. Because the duration of the Company's investment portfolio and liabilities are relatively matched, substantial increases or decreases in market interest
Occupancy at the Bolingbrook, IL property remained unchanged at 100%. Occupancy at the Salt Lake City, UT and Aurora, CO property increased to 33.6% and 46%, respectively from prior year.
Prudential's approach to business partner readiness includes classification of each partner's status as "highly critical" or "less critical" and the development of contingency plans to address the potential that a business partner could experience a Year 2000 failure. Approximately 30% of our business partners have been identified as highly critical and the remaining 70% as less critical. Project phases include inventory, risk assessment, and contingency planning
Certain of the statements contained in Management's Discussion and Analysis may be considered forward-looking statements. Words such as "expects," "believes," "anticipates," "intends," "plans," or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based upon management's current expectations and beliefs concerning future developments and their potential effects upon the Company. There can be no assurance that future developments affecting the Company will be those anticipated by management. There are certain important factors that could cause actual results to differ materially from estimates or expectations reflected in such forward-looking statements including without limitation, changes in general economic conditions, including the performance of financial markets and interest rates; market acceptance of new products and distribution channels;
During 2001, premium rates began to increase in the London Insurance Market. The events of September 11, 2001 had a profound impact on the insurance market. Demand for insurance products to manage risks has increased while the insurance financial and underwriting capacity has decreased. The Company anticipates that the London Insurance Markets will continue to tighten and provide a favourable environment for growth in its operations. The Company does not intend to relax underwriting standards in order to obtain premium volume. Premium volume may vary significantly if the Company alters its product concentration to maintain or improve underwriting profitability.
Shareholder's equity decreased by 39.3% to $169.2 million at December 31, 2001, compared to $278.7 million at December 31, 2000. The decrease of $109.5 million was primarily due to the net loss of $121.2 million and other comprehensive losses of $1.9 million, partially offset by unrealized appreciation of investments after tax of $13.6 million.
The underwriting expense ratio for the auto line of business was 14.2% in 2000, 12.3% in 1999 and 10.5% in 1998. The increase in the ratio for 2000 was mainly caused by increases in occupancy costs, data processing and depreciation expense that more than offset the decrease in advertising expense. The increase in the ratio for 1999 primarily resulted from the rate decrease taken in February 1999 and increased advertising expense.
Total pre-tax investment income, excluding equity in the net loss of 21st of Arizona and before deducting investment expenses, was $50.7 million in 2000 compared to $63.6 million in 1999 and $76.0 million in 1998. Average invested assets decreased 14.6% in 2000 compared to increase of 0.4% in 1999 and 5.4% in 1998. Average invested assets decreased in 2000 compared to 1999 primarily due to the net sale of investments to cover: the payoff of the bank loan of $67.5 million, acquisitions of property and equipment, and dividends to stockholders. The increase in invested assets in 1998 was primarily due to $145.6 million of proceeds received from the exercise of AIG's common stock warrants in the third quarter of 1998. The average annual pre-tax yield on invested assets was 5.15% in 2000, 5.52% in 1999 and 6.62% in 1998. The average annual after-tax yield on invested assets was 4.62% in 2000, 4.34% in 1999 and 4.35% in 1998.
During the second quarter of 1999, the Company's Board of Directors authorized and spent $50 million to purchase shares of the Company's common stock. As of April 19, 2000, 2,632,084 shares had been repurchased.
Common stock, without par value; authorized 110,000,000 shares, outstanding 85,145,817 in 2000 and 85,918,680 in 1999 415,064 429,623
Fair values for fixed maturity and equity securities are based on quoted market prices. The cost of investment securities sold is determined by the specific identification method.
(Amounts in thousands) Available-for-Sale -------------------- Amortized Fair Fixed maturities due: Cost Value ---------- --------
Securities Lending: The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned securities. The lending agent retains the cash collateral and invests it in liquid assets on behalf of the Company. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates.
At inception of the GMAB, GMWB and GMWBL contracts, the Company projects a fee to be attributed to the embedded derivative portion of the guarantee equal to the present value of projected future guaranteed benefits. After inception, the estimated fair value of the GMAB, GMWB and GMWBL contracts is determined based on the present value of projected future guaranteed benefits, minus the present value of projected attributed fees. A risk neutral valuation methodology is used under which the cash flows from the guarantees are projected under multiple capital market scenarios using observable risk free rates. The projection of future guaranteed benefits and future attributed fees require the use of assumptions for capital markets (e.g., implied volatilities, correlation among indices, risk-free swap curve, etc.) and policyholder behavior (e.g., lapse, benefit utilization, mortality, etc.).
During the year ended December 31, 2014, the Company declared an ordinary dividend in the amount of $216.0, which was paid on May 19, 2014. During the year ended December 31, 2013 following receipt of required approval from the Iowa Insurance Division (the "Division") and consummation of the IPO of Voya Financial, Inc., the Company paid an extraordinary return of capital distribution of $230.0 to its Parent.
(4) Amount includes $39.7 valuation allowance. See Income Taxes Note to these Financial Statements for additional information.
Onshore Energy Premium. In 1996, Navigators Insurance began to underwrite onshore energy insurance which principally focuses on the oil and gas, chemical and petrochemical, and power generation industries with coverages primarily for property damage and machinery breakdown. In 1999, the majority of the onshore energy business was written through the Company's facilities at Lloyd's and the UK Branch participated on the gross risk.
Selling, general and administrative expense increased primarily as a result of costs related to the new Medicare Part D business in 2006, reporting a full year of First Health results in 2006, recognizing stock option expense related to the adoption of SFAS 123(R) and increased salary expenses due to annual compensation increases. However, these increases are partially offset by synergies gained subsequent to the acquisition of First Health. Selling, general and administrative expenses as a percentage of revenue have improved as a result of these achieved synergies, continuing revenue growth and success in controlling overall administrative costs.
Reclassifications - Certain 2005 and 2004 amounts have been reclassified to conform to the 2006 presentation.
The majority of states in which we operate health plans have adopted a risk-based capital (“RBC”) policy that recommends the health plans maintain statutory reserves at or above the ‘Company Action Level’ which is currently equal to 200% of their RBC. We have adopted an internal policy to maintain all of our regulated subsidiaries’ statutory capital and surplus at or above 250% of their RBC and a level of 300% in aggregate (referred to below as “300% of RBC”). Some states in which our regulated subsidiaries operate require deposits to be maintained with the respective states’ departments of insurance. The table below summarizes the Company’s statutory reserve information as of December 31, 2006 and 2005 (in millions except percentage data).
The Company's unfunded pension liability increased by $388,000 in 1999 principally because of the Company's decision in early 2000 to terminate the plan. This decision resulted in the use of a discount rate in computing the December 31, 1999 plan liabilities which is intended to approximate the rate which will be in effect when the actual termination takes place. For continuing plans, different assumptions regarding interest rates are generally utilized. The plan is expected to be terminated in late 2000, following Internal Revenue Service confirmation of its qualified status. At December 31, 1999, the plan's estimated unfunded liability was $534,000.
Due to the continuing reductions in its net assets during 1999, the Company reduced the December 31, 1999 liquidation value of its preferred stock from $4.6 million ($10 per share - the liquidation preference) to $4.3 million ($9.35 per share).
A discussion of the important elements affecting the Company's net assets in liquidation at December 31, 1999 and 1998 is presented below.
Accounting procedures and related systems of internal control have been established to provide reasonable assurance that the books and records reflect the transactions of the Company and that established policies and procedures are properly implemented by qualified personnel. Such systems are evaluated regularly to determine their effectiveness.
We have audited the accompanying statements of operations, shareholders' equity and cash flows of Consumers Financial Corporation (a Pennsylvania corporation) and subsidiaries for the year ended December 31, 1997 and for the period from January 1, 1998 to March 24, 1998. In addition, we have audited the statement of net assets in liquidation as of December 31, 1998, and the related statement of changes in net assets in liquidation for the period from March 25, 1998 to December 31, 1998. These financial statements and the schedules referred to below 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.
(b) Deferred income taxes, if applicable, are provided as described in Note 15.
At December 31, 1998, the Company s remaining real estate was classified as non-investment real estate, since the Company intended to sell this property. Accumulated depreciation on the property at the end of 1998 was $27,000. In 1999, the Company sold this property and reported a loss of approximately $2,000.
Other operating expenses include the corporate expenses of our holding company, Kingstone Companies, Inc. These expenses include legal and auditing fees, occupancy costs related to our corporate office, executive employment costs, and other costs directly associated with being a public company.
Other operating expenses. Other operating expenses include the corporate expenses of our holding company, Kingstone Companies, Inc. These expenses include executive employment costs, legal and auditing fees, occupancy costs related to our corporate office and other costs directly associated with being a public company.
As a holding company, we are dependent on the results of operations of our subsidiaries, Kingstone Insurance Company (“KICO”) and Payments, Inc.; there are restrictions on the payment of dividends by KICO.
Total revenues increased $4,983,000, or 30% from $16,661,000 for fiscal 1994, to $21,644,000 for fiscal 1995. Contributing to this increase in total revenues was a $613,000 increase in net investment income, an $832,000 increase in mortuary and cemetery sales, and a $3,773,000 increase in mortgage fee income.
Mortgage fee income and other increased by $71,000, from $1,253,000 in 1993 to $1,324,000 in 1994. This increase was due to $382,000 in additional revenues that were generated by Security National Mortgage, which was formed as a wholly-owned subsidiary of the Company in July 1993, for the purpose of originating and refinancing mortgage loans. Partially offsetting the additional revenues that were realized in 1994 from Security National Mortgage was a $174,000 reduction in revenues from Bonneville Limousine. The higher level of revenues from Bonneville Limousine in 1993 reflected the increased limousine services from the NBA Allstar Game, which was held in Salt Lake City in 1993. There was also a $75,000 reduction in 1994 due to the termination of a computer services agreement. The Company had provided computer services to a third-party in 1993 under a computer services agreement but these services were not provided in 1994.
Shareholders' equity as a percent of assets is one measure of capital strength. At December 31, 1995 the Company's ratio decreased to 16% down from 19% at December 31, 1994. This decrease is primarily due to the mortgage company acting as a warehouse, by financing the mortgage loans through bank debt, and then selling them to investors within 45 days, and repaying the debt. This transaction results in a receivable for mortgage loans sold to investors which are offset by a bank loan payable. Computation of the ratio without this transaction results in the Company's debt to total assets at 11% in 1995 and 10% in 1994 and the Company's equity to total assets to 18% in 1995 and 19% in 1994.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Premium deficiency testing is performed annually and reviewed quarterly. Such testing involves the use of best estimate assumptions, including the anticipation of interest income to determine if anticipated future policy premiums are adequate to recover all DAC and related claims, benefits and expenses. To the extent a premium
Additionally, the Company anticipated and experienced a reduction in workforce of over 1,000 employees as a result of this consolidation and its administrative expense reduction plan.
Year Ended December 31, 2000 Compared with Year Ended December 31, 1999
Net investment and other income for the year ended December 31, 2000 decreased 11.6% to $73 million from $82.6 million in the prior year. Net investment income increased $15.3 million or 24.7% to $77.4 million in 2000 compared with $62.1 million in 1999. The improvement is due primarily to an increase in interest income due to higher investment yields and invested balances and a $5 million increase in capital gains realized during the year. Included in other income (expense) for the year ended December 31, 2000 are losses on the sale of fixed assets of approximately $5.4 million, investment valuation losses of approximately $1.5 million and gains on asset disposals of $1.6 million. In 1999, other income includes a $13.5 million gain on the sale of the Company's New York Medicaid business and a $7 million gain on the sale of the business and certain assets of the Company's wholly-owned mail order pharmacy subsidiary, Direct Script, Inc. See "Liquidity and Capital Resources".
Cash provided by operations was $404.7 million in 2000 compared with $35.5 million in 1999. The improvement is primarily attributable to reductions in deferred tax assets due to the utilization of tax loss carryforwards and the stabilization of claims inventory aging.
The Company has suffered recurring losses from operations since inception and has a negative working capital. These factors raise substantial doubt as to the ability of the Company to continue as a going concern. However, although still negative, the numbers contained herein continue to show greater increases toward overall profitability and management is confident that the next quarter ending September 30, 2013 should indicate that the Company has finally achieved a small level of profitability in its operations. In fact, since net loss for the nine months ended 3/31/2013 was (55,694) and net loss for the year ended 6/30/2013 was (48,715), the last quarter ended 6/30/2013 had a small profit of $6,979.
In March 2016, we extended our contract with the New York State Department of Health to continue providing managed care services for children as part of the Child Health Plus program in 16 counties. The extension runs through September 2019 and does not require annual renewals.
As of December 31, 2016, membership increased approximately 131,000, or 3.5%, compared with December 31, 2015. Membership discussion by segment follows:
Reportable operating segments are defined as components of an enterprise for which discrete financial information is available and evaluated on a regular basis by the enterprise's chief operating decision maker to determine how resources should be allocated to an individual segment and to assess performance of those segments. Accordingly, we have three reportable segments: Medicaid Health Plans, Medicare Health Plans and Medicare PDPs.
Net cash used in investing activities for 2016 was $27.0 million compared with $124.2 million for the same period in 2015, primarily resulting from higher net proceeds from the sales of investments in 2016, partially offset by the acquisitions of Care1st Arizona and Advicare and the effect of higher additions to capitalized software during 2015 resulting from investments in our information technology infrastructure.
The increase in the item „Real Estate" is on account of foreclosures which have been effected on real estate outside Switzerland. The value of this property has been written down in a suitable measure.
correlation among them. For interest rates, each country's yield curve was constructed using eleven separate points on this curve to model possible curve movements. Inter-country correlations were also used. The redemption experience of municipal and corporate fixed maturities as well as the use of financial modeling were employed in the analysis process. Thus, the VaR measured the sensitivity of the asset and the liability portfolios to each of the aforementioned market risk exposures. Each sensitivity was estimated separately to capture the market risk. The following table presents the VaR of each component of market risk as of December 31, 1999 and 1998:
In accordance with the standard, TRH adopted SFAS No. 130 in 1998 and has provided comparable data for 1997.
The Year 2000 (Y2K) issue arises from the historic usage of two, rather than four, digit date fields in computer equipment, software packages and other devices using embedded chip technology, causing a date field '00' to be recognized as the year 1900, rather than the year 2000. Failure to recognize, repair or replace affected devices and systems could cause systems failures or other disruptions resulting in, among other things, an inability to process transactions, collect premiums, pay invoices or engage in similar normal business activities.
In addition, under TRH's 1990 Employee Stock Purchase Plan, as amended, full time employees with at least one year of employment with the Company or any of its subsidiaries are eligible to receive privileges to purchase shares of the Company's common stock at a price which is 85% of the fair market value of such stock on the date of subscription or the date of grant of the purchase privilege, whichever is greater. An aggregate of 750,000 shares of common stock has been authorized for subscription and 6,409 shares were purchased under the plan in 1999.
The charges made to operations for these plans for 1999, 1998 and 1997 were $581,000, $676,000 and $732,000, respectively.
In 1995, the Company's Board of Directors adopted, and the stockholders approved, the '1995 Stock Option Plan' (the 1995 Plan). This plan, as amended, provides that options may be granted to certain key employees and non-employee directors to purchase a maximum of 1,500,000 shares of the Company's common stock at prices not less than their fair market value at the date of grant. At December 31, 1999, 673,063 shares were reserved for future grants under the 1995 Plan. Options granted under the plan may be used to purchase the Company's common stock at the fair market value of each share at the date of grant. The Company also maintains the 'Transatlantic Holdings, Inc. 1990 Stock Option Plan' (the 1990 Plan) which operates under substantially the same terms as the 1995 Plan. The 1995 Plan and the 1990 Plan are together hereinafter referred to as the Company Plans.
A decline in the rating assigned to our claim-paying ability may impact our potential to write new and renewal business.
Excluding the extraordinary development of French Storms Martin and Lothar in 2000, during the last 10 years, reserve development in any single year from prior year losses, expressed as a percentage of stockholders' equity, ranged from 15% adverse development in 1993 (primarily arising from Hurricane Andrew) to 4% favorable development in 1996.
Other operating expenses decreased 16.4% to $29.6 million for 2001 from $35.4 million in 2000. The decrease was primarily related to the expense savings associated with the termination of our Lloyd's operations. Included in other operating expenses were foreign currency exchange losses of $0.7 million for 2001 compared to losses of $0.6 million for 2000.
Commitments under the Credit Agreement terminate on March 31, 2004 and are subject to annual reductions and, unless due or paid sooner, the aggregate principal of the loans are due and payable in full on March 31, 2004. Under the Second Amendment, the reduction of the outstanding commitments has been accelerated. As amended, the outstanding commitment was reduced by $10 million on April 4, 2002 and an additional reduction of $5 million was made on July 1, 2002. The remaining commitment will be reduced by $20 million on March 31, 2003 and by $10 million on March 31, 2004. In addition, commencing on June 30, 2003, 50% of Excess Cash Flow (as defined in the Second Amendment) shall be used to reduce the outstanding commitment. Effective April 4, 2002, the variable interest rate under the Amended Credit Agreement was increased by 100 basis points.
We had no direct investments in real estate or commercial mortgage loans as of December 31, 2002.
In connection with the capitalization of PXRE Lloyd's Syndicate 1224, PXRE Reinsurance has placed on deposit a $35.6 million par value U.S. Treasury security as collateral for Lloyd's. Cash and invested assets amounting to $13.6 million at December 31, 2002, are restricted from being paid as a dividend until the run-off has been completed.
We also hold other investments that are excluded from this disclosure that are expected to provide positive returns under most market conditions representing adverse changes in interest rates and other market factors (See Note 3 of Notes to Consolidated Financial Statements).
(ii) the $4.2 million charge recorded in the second quarter of 1997 related to losses associated with the two contracts related to the Company's Arizona Medicaid membership and (iii) the $5.4 million increase in the reserve for estimated uncollectible premiums receivable recorded in the second and third quarters of 1997. Generally, it is management's intention to continue to increase premiums in all markets over the next several years, as market conditions permit, thereby increasing revenues. In most markets, amounts paid to general dentists through capitation payments will also be increased somewhat to maintain the Company's competitive position and to improve the economics for managed care general dentists. The dental services expense ratio for the Company's fee-for-service products (indemnity and point-of-service) was 98.6% for 1997, as compared to 69.9% for 1996, due to a higher level of claims payments and the $1.9 million addition in reserves charged in the second quarter of 1997.
On September 22, 1997, the Company borrowed $1,630,000 and on September 29, 1997 it borrowed an additional $5,000,000 against the revolving credit facility. The majority of these funds were used to increase the capital surplus at the Company's Arizona indemnity subsidiary, United Dental Care Insurance Company. The revolving credit facility balance was outstanding at December 31, 1997.
When used in this Annual Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements regarding events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. Persons reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such factors are discussed further below under “Trends and Uncertainties,” and also include general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations. Reference is also made to the caption “Forward-Looking Statements” at the forepart of this Annual Report, which information is incorporated herein by reference.
Between May 2018 and July 2018, the Owners entered into agreements that completed a strict foreclosure transaction that transferred these policies from the owners to the lenders in full satisfaction of the loan obligation. As a result of the foreclosure, the Company has lost its position in the residual benefits of the policies and recognized a $1,936,311 impairment of related interest receivable during the year ended March 31, 3018. In addition, we also recognized a $22,950,126 impairment on the NIBs, which is recorded in Other Expenses. Management concluded that the foreclosure event represented the culmination of conditions that provided indications affecting the realization of the Company’s investment in NIBs assets during the fiscal year ended March 31, 2018, and changed the classification of the Investment in NIBs from Held to Maturity to Available for Sale.
For the year ended March 31, 2017, options to exercise 400,000 shares were excluded because they were anti-dilutive. As of March 31, 2018 there were 2,106,875 options outstanding that were excluded because their effect would have been antidilutive. In addition, 235,345 shares related to the potential conversion of the convertible debenture were excluded because they were anti-dilutive for the years ended March 31, 2017. As of March 31, 2018, there was no principal balance on the convertible debenture and therefore, no potential conversion.
On December 6, 2017, the note payable, related party agreement that allowed for borrowings of up to $4,600,000 at December 31, 2017, was amended to extend the due date from August 31, 2018 to August 31, 2019. At the time of the extension, the Company had no outstanding principal owing on that agreement. The $929,508 of notes payable owed as of December 31, 2017 was due November 30, 2018, and was later extended, through a series of amendments, to November 30, 2020. See Note 12 for a detail of activity on the Notes Payable, Related Party subsequent to March 31, 2018.
Our financial statements are based on the selection of accounting policies and the application of accounting estimates, some of which require management to make significant assumptions. Actual results could differ materially from the estimated amounts. The following accounting policy is critical to understanding and evaluating our reported financial results:
Sponsorships: We follow the guidance of Emerging Issues Task Force (“EITF”) Issue 00-21 Revenue Arrangements with Multiple Deliverables, and assign the total of sponsorship revenues to the various elements contained within a sponsorship package based on their relative fair values.
This Update also includes conforming amendments to the guidance on employers' disclosures about postretirement benefit plan assets (Subtopic 715-20). The conforming amendments to Subtopic 715-20 change the terminology from major categories of assets to classes of assets and provide a cross reference to the guidance in Subtopic 820-10 on how to determine appropriate classes to present fair value disclosures. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.
The scope of the reissuance disclosure requirements is refined to include revised financial statements only. The term revised financial statements is added to the glossary of Topic 855. Revised financial statements include financial statements revised either as a result of correction of an error or retrospective application of U.S. generally accepted accounting principles.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8 of this report. This discussion includes forward-looking statements that are subject to risks, uncertainties and other factors described in Item 1A of this report. These factors could cause our actual results in 2019 and beyond to differ materially from those expressed in, or implied by, those forward-looking statements.
Net cash used in investing activities was $29.1 million in 2018, as compared to $51.5 million in 2017 and $50.5 million in 2016. In 2018, major components of net cash used in investing activities included investment purchases of $368.3 million and net purchases of furniture, fixtures and equipment of $1.1 million, offset by proceeds from sales and maturities of investments of $340.2 million.
The following development tables provide the incurred and paid claims and allocated claim adjustment expenses, net of reinsurance, for workers’ compensation and general liability for accident years 2009 through 2018. The incurred but not reported (“IBNR”) claims and claims frequency is included for each accident year presented.
The Company manages risk on certain long-duration claims by settling these claims through the purchase of annuities from unaffiliated carriers. In the event these carriers are unable to meet their obligations under these contracts, the Company could be liable to the claimants. The following table summarizes (in thousands) the fair value of the annuities at December 31, 2018, that the Company has purchased to satisfy its obligations.