As of December 31, 1999, the Company leased approximately 171,000 square feet of space for its corporate office in Bethesda, Maryland, the majority of which is subleased. The Company also leased approximately 667,000 aggregate square feet for office space, subsidiary operations, and customer service centers in the various markets where the Company's health plans operate. The Company's leases expire at various dates from 2000 through 2009. The Company also owns a building in Richmond, Virginia with approximately 45,000 square feet, which is used for administrative services related to its health plan in that market. The Company believes that its facilities are adequate for its operations.
(2) In October 1999, the Company reached a settlement with AHERF. As a result of the settlement, the Company released $6.3 million of its AHERF reserve, which was reflected as a gain in the fourth quarter.
periodically monitors and reviews its IBNR reserves, and as actual settlements are made or accruals adjusted, reflects these differences in current operations.
Health benefits expense increased $25.3 million, or 1.4%, in 1999, compared to 1998 due primarily to the additional expenses associated with the acquisitions of Carelink and KFHPNC membership. Exclusive of the Carelink and KFHPNC transactions, health benefits expense decreased $4.0 million. Coventry's medical loss ratio decreased slightly to 86.1% from 86.9% in 1998 due to premium rate increases which were a result of Coventry's efforts to maintain a strict pricing discipline.
On December 29, 1997, the Company entered into a credit agreement with a group of banks (the "Credit Facility"), which replaced a prior credit agreement. Using a portion of the proceeds received from the sale of its Florida health plan, the Company retired the Credit Facility and the $42.2 million balance then outstanding effective December 31, 1998. On December 31, 1998, the effective interest rate on the indebtedness retired was 7.0625%.
Investments with original maturities in excess of three months and less than one year are classified as short-term investments and generally consist of time deposits, U.S. Treasury Notes, and obligations of various states and municipalities. Long-term investments have original maturities in excess of one year and primarily consist of debt securities.
Reinsurance - Premiums paid to reinsurers are reported as health benefits expense and the related reinsurance recoveries are reported as deductions from health benefits expense.
Computer Software - Effective January 1, 1999, the Company adopted Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Cost of Computer Software Developed or Obtained for Internal Use" issued by the American Institute of Certified Public Accountants ("AICPA"). SOP 98-1 provides authoritative guidance for the capitalization of certain costs related to computer software developed or obtained for internal applications, such as external direct costs of materials and services, payroll costs for employees and certain interest costs. Costs incurred during the preliminary project stage, as well as training and data conversion costs, are to be expensed as incurred. The adoption of SOP 98-1 did not have a material effect on the Company's consolidated financial statements.