felanders/preprocessed huggingface dataset:
The Company leases approximately 7,204 square feet of office space in an office building in La Jolla, California, under a lease expiring in August 1999 at a monthly rental of $9,005, at which SDIA conducts its insurance agency operations.
The Company generally invests in securities with fixed maturities with the objective of providing reasonable returns while limiting liquidity and credit risk. As a result, its investment portfolio consists primarily of government and governmental agency securities and high-quality marketable corporate securities which are rated at investment grade levels. At December 31, 1995, the Company held rated, or better-than-investment grade, corporate debt securities with a carrying amount of $521.1 million. Those holdings amounted to 99.95% of the Company's fixed maturity investments.
and insurance risks such as asset quality, mortality and morbidity, asset and liability matching, benefit and loss reserve adequacy, and other business factors. The RBC formula will be used by state insurance regulators as an early warning tool to identify, for the purpose of initiating regulatory action, insurance companies that potentially are inadequately capitalized. In addition, the formula defines new minimum capital standards that will supplement the current system of low fixed minimum capital and surplus requirements on a state-by-state basis. Regulatory compliance is determined by a ratio of the enterprise's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specific corrective action. The levels and ratios are as follows:
We currently lease office space at Harbour Place office building at 103 South Church Street, Georgetown, Grand Cayman. We believe that the Harbour Place office is suitable and sufficient for us to conduct our operations for the foreseeable future.
The following table summarizes our contractual obligations as of December 31, 2014:
Commission and brokerage increased by 9.8% to $327.2 million for 2007 from $298.1 million in 2006, principally due to an $18.9 million increase in contingent commissions and somewhat higher base ceding commissions. Segment other underwriting expenses for 2007 increased to $33.3 million from $24.9 million
Management estimated that the projected economic loss from its largest 100-year event does not exceed 10% of its projected 2009 shareholders’ equity. Economic loss is the gross PML reduced by estimated reinstatement premiums to renew coverage and income taxes. The impact of income taxes on the PML depends on the distribution of the losses by corporate entity, which is also affected by inter-affiliate reinsurance. Management also monitors and controls its largest PMLs at multiple points along the loss distribution curve, such as loss amounts at the 20, 50, 100, 250, 500 and 1,000 year return periods. This process enables management to identify and control exposure accumulations and to integrate such exposures into enterprise risk, underwriting and capital management decisions.
Interest rate risk is the potential change in value of the fixed maturity portfolio, including short-term investments, from a change in market interest rates. In a declining interest rate environment, it includes prepayment risk on the $1,878.4 million of mortgage-backed securities in the $10,802.7 million fixed maturity portfolio. Prepayment risk results from potential accelerated principal payments that shorten the average life and thus the expected yield of the security.
Cash and short-term investments totaled $102.6 million and $444.7 million as of December 31, 1996 and 1995, respectively. At December 31, 1996 and 1995, respectively, the Company held approximately $12.2 million and $3.8 million in short-term investments needed in the settlement of investment trades early in the following year.
Cash Flows From Operations. The periods covered by Management's Discussion and Analysis of Financial Condition and Results of Operations indicate cash provided by operating activities of $164.7 million, $75.7 million and $5.6 million in 1996, 1995 and 1994, respectively. The positive cash flow from operating activities is not necessarily indicative of the Company's cash flow as $(205.2) million, $(53.2) million and $2.1 million of cash was (used) provided to fund cash flows for interest sensitive life and accumulation products during 1996, 1995 and 1994, respectively, which are classified as financing activities in accordance with generally accepted accounting principles.
On March 3, 1997, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," replacing Accounting Principles Board ("APB") Opinion No. 15, "Earnings per Share." SFAS No. 128 replaces "primary" and "fully diluted" earnings per share ("EPS") under APB Opinion No. 15 with "basic" and "diluted" EPS. Unlike primary EPS, basic EPS excludes the dilutive effects of options, warrants and other convertible securities. Dilutive EPS reflects the potential dilution of securities that could share in the earnings of an entity, similar to fully diluted EPS. However, under SFAS No. 128, the Company would use the average market price for its stock during the reporting period to determine the cost of options as opposed to the greater of the closing price at the end of the period or the average market price during the period, as currently required by APB Opinion No. 15. SFAS No. 128 is effective for years ending after December 15, 1997.
Deferred policy acquisition costs represent commissions, certain costs of policy issuance, including underwriting and certain variable agency costs.
Information relating to these costs for the years ended December 31, is as follows:
Total income taxes for the years December 31, 1996, 1995, and 1994 were allocated as follows:
The Company's Canadian branch and Canadian subsidiary report to Canadian regulatory authorities based upon Canadian statutory accounting principles that vary in some respects from U.S. statutory accounting principles. Consolidated Canadian net assets based upon Canadian statutory accounting principles were $51,567 and $43,186 as of December 31, 1996 and 1995, respectively.
The following is a summary of the quarterly results of operations for the two years ended December 31, 1996 and 1995:
Range of Net Reserves for Losses and LAE as of December 31, 2006
Income Tax Expense. Our effective tax rates were 32.0% and 31.2% for the years ended December 31, 2006 and 2005, respectively. These effective rates were lower than the statutory rate of 35% primarily due to adjustments for tax-exempt investment income and a $1,161 tax benefit recorded as a reduction to income tax expense for the year ended December 31, 2005. This tax benefit represents a reduction in federal income tax reserves for tax years 2001 through 2003 during 2005 upon completion of an examination of the Company’s federal income tax returns for the tax periods ended December 31, 2003, 2002, and 2001 by the Internal Revenue Service.
Net Realized Gains on Investments. Net realized gains on investments decreased to $305 for the year ended December 31, 2005, from $1,274 for 2004.
Equity and deposits in pools represents the net receivable cash amounts due from the residual market mechanisms, Commonwealth Automobile Reinsurers (“CAR”), for automobile and Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), for homeowner insurance in Massachusetts. See Note 8 for a discussion of the Company’s accounting for amounts assumed from residual markets.
Premiums received in advance of the policy effective date are recorded as a liability and not recognized as income until earned. Such amounts are included in accounts payable and accrued liabilities and totaled $17,335 and $20,437 at December 31, 2006 and 2005, respectively.
In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140” (“FAS 155”). This statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also adds clarity regarding interest-only strips and principal-only strips that are not subject
The Company incurred interest expense of $86, $948 and $672 for the years ended December 31, 2006, 2005 and 2004, respectively, related to all current outstanding obligations during these periods.
The following table sets forth a reconciliation of beginning and ending reserves for losses and LAE as shown in the Company’s consolidated financial statements for the years indicated:
The consolidated financial statements of the registrant are contained on pages 24 through 40 of registrant's 1998 Annual Report to Stockholders and are incorporated herein by reference.
We have ceased to write new reinsurance agreements and are not accepting new business on existing agreements. We do not anticipate resuming to write new reinsurance agreements in the foreseeable future, unless we are able to increase our cash and liquidity positions. As a result, our cash flow and results of operations in the near future will be based solely upon the performance of our remaining book of business and the returns generated from our invested assets. Of our remaining book of business, we have a few large reinsurance contracts that represent a material concentration of our net premiums, funds withheld at interest asset, deferred policy acquisition costs and interest sensitive contract liabilities. We have experienced substantial losses on our annuity reinsurance contract with Transamerica Occidental Life Insurance Company (“Transamerica”) over the last three years, which remains in force as of today. In addition, we recorded losses of approximately $7.0 million in 2003 on our remaining three largest life reinsurance agreements. Unless these contracts perform substantially better than they have in past periods, the losses from these contracts will have an increasingly significant adverse impact on our results of operations.
Annuity and Life Re (Holdings), Ltd. (“Holdings”) was incorporated on December 2, 1997 under the laws of Bermuda. Holdings provides annuity and life reinsurance to insurers and reinsurers through its wholly-owned subsidiaries: Annuity and Life Reassurance, Ltd., which is licensed under the laws of Bermuda as a long term insurer; and Annuity and Life Re America, Inc., an insurance holding company based in the United States, and Annuity and Life Reassurance America, Inc., a life insurance company domiciled in the United States. Holdings, Annuity and Life Reassurance, Annuity and Life Re America and Annuity and Life Reassurance America are collectively referred to herein as the “Company.” The Company completed an initial public offering of its equity securities and commenced operations on April 17, 1998.
Company is not successful in convincing Transamerica and IL Annuity to restructure the portfolio and/or to redesign the product, it may incur additional losses on the agreement in the future.
Net Derivative Expense. We sold seven equity index put options, which are outstanding. These contracts meet the definition of a derivative under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”). We recognized net derivative expense of $2.1 million, $0.4 million and $2.6 million for 2007, 2006 and 2005, respectively, which represent changes in the fair value of these contracts year over year.
Shareholders’ equity increased by $0.6 billion to $5.7 billion in 2007 from $5.1 billion in 2006, principally as a result of the $839.3 million of net income generated for the period, partially offset by the repurchase of 2.5 million common shares at a cost of $241.6 million and the payment of $121.4 million of shareholder dividends.
Premiums.Gross written premiums increased by 10.1% to $805.9 million for 2007 from $731.7 million for 2006. Approximately half of this increase was attributable to the impact of other currencies strengthening against the U.S. dollar. We wrote reinsurance contracts in multiple currencies and as these currencies strengthened and were converted to U.S. dollars for financial reporting, they converted to higher dollar values. Business written through the Miami and New Jersey offices increased by $35.0 million (8.0%), business written through the Asian branch increased by $22.3 million (15.6%) and business written through the Canadian branch increased by $17.9 million (11.8%). We have experienced strong fundamental growth in geographic areas where economic growth and demand for reinsurance is strong. Net written premiums increased by 10.3% to $806.0 million for 2007 compared to $730.7 million for 2006, principally as a result of the increase in gross written premiums. Net premiums earned increased 11.7% to $803.8 million for 2007 compared to $719.5 million for 2006, consistent with the increase in net written premiums.
We sort both our reinsurance and insurance reserves into exposure groupings for actuarial analysis. We assign our business to exposure groupings so that the underlying exposures have reasonably homogeneous loss development characteristics and are large enough to facilitate credible estimation of ultimate losses. We periodically review our exposure groupings and we may change our grouping over time as our business changes. We currently use over 200 exposure groupings to develop our reserve estimates. One of the key selection characteristics for the exposure groupings is the historical duration of the claims settlement process. Business in which claims are reported and settled relatively quickly are commonly referred to as short tail lines, principally
Asbestos and Environmental Exposures. We continue to receive claims under expired insurance and reinsurance contracts, asserting injuries and/or damages relating to or resulting from environmental pollution and hazardous substances, including asbestos. Environmental claims typically assert liability for (a) the mitigation or remediation of environmental contamination or (b) bodily injury or property damage caused by the
The Company experienced a net gain after tax in 1997 and 1996 and a net loss after tax in 1995. The 1997 and 1996 result was related to the strong sales volume, favorable market climate, expense savings relative to sales volume and recognition of certain tax benefits.
Annuity premium income represents premiums earned on sales of immediate annuities with life contingencies and supplementary contracts with life contingencies.
As of December 31, 1997 and 1996, shareholder's equity was $184.4 million and $126.3 million, respectively, which includes the carrying value of state insurance licenses in the amount of $4.6 million and $4.7 million, respectively.
We anticipate full internal compliance by September 1998, followed by continuous evaluation of internal systems, external business partners and software providers until the year 2000.
The Company also reinsures certain mortality risks. These risks result from the guaranteed minimum death benefit feature in the variable annuity products.
Investments in fixed maturities as of December 31, 1996 consisted of the following:
The Profit & Loss Account closes with a profit of . . . Frs. 7,510,414.58 which at the General Meeting of the shareholders it was decided to distribute as follows: Special Reserve Fund Frs. 1,100,000.— Staff Life Insurance and Pension Fund » 800,000.— Dividend Frs. 128.72 on old shares and Frs. 30.98 on new shares issued in October 1929 » 4,880,200.— Directors, Management and staff ........ » 836,470.— Carried forward » 948,744.58
Assets. Shareholders' Liability 30,000,000 — Real Estate . Frs. 2,889,577.55 Mortgages , 29,265,612.95 Government and other Securities . , 152,677,336.60 Life and other funds deposited with ceding Companies . „ 188,760,386.17 Bank Balances , 9,461,619.93 Cash in hand . „ 57,468.81 383,112,002 01 Due by other Companies and Sundry Debtors . . . 63,666,892 07 Accrued Interest 1,618,025 25
New primary insurance written during 1998 was $21.9 billion, a 59.6% increase compared to $13.7 billion for 1997. The increase in CMAC's primary new insurance written was primarily due to a 55.3% increase in primary new insurance written volume in the private mortgage insurance industry for 1998 as compared to 1997. In addition, CMAC completed a bulk transaction in the second quarter of 1998, insuring approximately $700 million of seasoned California loans with a risk profile similar to the Company's regular business. CMAC's market share of the industry volume increased to 11.5% in 1998, compared to 11.2% for 1997. Additionally, in 1998, CMAC wrote an increased amount of pool insurance which represented risk written of $389.4 million as compared to $277.5 million in 1997. Most of this pool insurance volume relates to a group of structured transactions composed primarily of Fannie Mae- and Freddie Mac-eligible conforming mortgage loans that are geographically well dispersed throughout the United States and have lower average loan-to-value ratios than CMAC's primary business. The performance of this business to date has been better than anticipated although the business is relatively young and the historical performance might not be an indication of future performance. Under a pool insurance transaction, the exposure to CMAC on each individual loan is uncapped; however, the aggregate stop-loss percentage (typically 1.0% to 1.5% of the aggregate original loan balance in the Fannie Mae/Freddie Mac transactions) is the maximum that can be paid out in losses before the insurer's exposure terminates. The Company expects its pool insurance activity to decline during 1999 as certain outstanding commitments expire and are not renewed. Premium rates on such pool insurance are significantly lower than on primary insurance loans due to the low stop-loss levels, which limit the overall risk exposure to CMAC, and the focus of such product on high quality primary insurance customers. Both S&P and Moody's have determined that the capital requirements to support such pool insurance will be significantly more stringent than on primary insurance due to the low premium rates.
In December 2006, the IRS completed all fieldwork with regards to its examination of the consolidated federal income tax returns for tax years 2002 and 2003. The final report was initially submitted to the Joint Committee on Taxation for their review in April 2007. The final report was resubmitted in March 2008 and again in April 2008. The Joint Committee returned the report to the IRS for additional review of the industry issue regarding the methodology for calculating the DRD
- Relevant rating history, analysis and guidance provided by rating agencies and analysts.
The table below summarizes the number of asbestos and non-asbestos claims outstanding at December 31, 2003, 2002 and 2001. For additional information about our environmental reserves, see Item 1. "Business," page 13 and Item 8. "Financial Statements and Supplementary Data," Note 18(a) to the consolidated financial statements.
force. The Company regularly conducts reviews for potential premium deficiencies. There were no premium deficiencies for any of the reported years as the sum of the anticipated losses and loss expenses, policyholder dividends and other expenses did not exceed the related unearned premium and anticipated investment income.
(a) A reconciliation of federal income tax on pretax earnings at the corporate rate to the effective tax rate is as follows:
Options exercisable and their weighted average exercise price at year end are 1,122,491 and $20.41 for 2003, 1,287,204 and $19.22 for 2002, and 1,562,244 and $18.38 for 2001.
Under the Company's stock option plan for directors, 688,000 shares of the Company's common stock are available for issuance. Each director who is not a full-time employee of the Company participates in the plan and automatically receives a nonqualified option to purchase 3,000 shares of common stock at not less than fair value on March 1 of each year. Each option becomes exercisable one year after the option was granted and expires no more than ten years from the date the option is granted. Under this plan, the Company granted 30,000 options in 2003 and 33,000 in 2002 and 2001.
in environmental cases include the interpretation and application of policy exclusions, the determination and calculation of policy limits, the determination of the ultimate amount of a loss, the extent to which a loss is covered by a policy, if at all, the obligation of an insurer to defend a claim and the extent to which a party can prove the existence of coverage. Courts have reached different and sometimes inconsistent conclusions on these legal and coverage issues. We do not discount to present value that portion of our loss reserves expected to be paid in future periods.
Properties. 	 The Company owns its 275,000 square foot principal offices located in 	 Amelia, Ohio. The Company's insurance subsidiaries lease office space 	 in Montgomery, Alabama, Atlanta, Georgia, St. Louis, Missouri, Auburn 	 Hills, Michigan and Grand Rapids, Michigan. The Company's 	 transportation subsidiaries lease offices in Metairie, Louisiana.
Our expense ratio decreased by 1.4%, to 45.3% for the year ended December 31, 2018, as compared to the same period in 2017. The decrease in the expense ratio was primarily due to there being less impact in 2018 from the ADC. The expense ratio before the ADC and reinstatement costs for the year ended 2018 was 44.8%, compared to 43.1% for the year ended 2017. The increase in the expense ratio before the impact of the ADC and reinstatement costs was due to lower net earned premium in 2018, as much of the wind-exposed homeowners business rolled off.
Our expense ratio decreased by half of a percentage point, to 46.7% for the year ended December 31, 2017, as compared to the same period in 2016. The decrease in the ratio was primarily due to continued improvement in our operating efficiencies as our earned premium grew faster than our more fixed expense structure. The decrease was dampened by the impact of both the hurricanes and ADC which occurred in the third quarter of 2017. During 2017, $7.2 million was ceded to the ADC (a one-time charge) and $806,000 was ceded as reinstatement costs of catastrophe reinsurance relating to Hurricane Irma. Before these two costs, the expense ratio would have declined even further, to 43.1% for the year, and 41.1% in the fourth quarter of 2017.
expense. The Company also reported a deferred tax benefit of $147,000 related to a $400,000 write-off of intangible assets resulting from the merger of ACIC into WPIC in 2016.
There is a $9.9 million valuation allowance against 100% of the net deferred tax assets at December 31, 2017, which would increase book value by $1.16 per share if reversed in the future. The valuation allowance was $8.4 million for 2016. As of December 31, 2017, the Company has net operating loss carryforwards for federal income tax purposes of $43.6 million, which expire in tax years 2029 through 2037. Of this amount, $15.1 million are limited in the amount that can be utilized in any one year and may expire before they are realized under Section 382 of the Internal Revenue Code. The Company has state net operating loss carryforwards of $11.0 million, which expire in tax years 2029 through 2037.
Financing Activities. Cash provided by financing activities for the years ended December 31, 2018 and 2017, were $3.7 million and $16.2 million, respectively. There was a $5.0 million issuance of common stock in 2017 and none in 2018. Also, there was $6.9 million greater cash flow from debt, net of repayments and debt issuance costs in 2017, than in 2018.
In the following discussion, segment operating income is defined as income before income tax excluding net realized investment gains and losses and related amortization of deferred policy acquisition costs (DAC). Management believes that segment operating income provides relevant and useful information to investors, as it represents the basis on which the performance of the Company’s business is internally assessed. Although the items excluded from segment operating may be significant components in understanding and assessing the Company’s overall financial performance, management believes that segment operating income enhances an investor’s understanding of the Company’s results of operations. Note that the Company’s segment operating income measures may not be comparable to similarly titled measures reported by other companies.
The Company generally considers a number of factors in determining whether the impairment is other than temporary. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) the intent and ability of the Company to hold the investment until recovery, 5) the time period during which the decline has occurred, 6) an economic analysis of the issuer’s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security by security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position and continued viability of the issuer are significant measures considered.
Realized losses are comprised of both write-downs on other-than-temporary impairments and actual sales of investments. During the year ended December 31, 2004, the Company recorded pretax other-than-temporary impairments in its investments of $0.2 million as compared to $0.3 million in the year ended December 31, 2003.
Protective and the Company entered into a guaranty agreement on October 27, 1993, whereby Protective guaranteed the payment of all insurance policy claims made by the holders or beneficiaries of any of the Company’s policies which were issued after the date of the guaranty agreement in accordance with the terms of said policies. Total liabilities for policies covered by this agreement were $108.8 million and $100.4 million at December 31, 2004 and 2003, respectively.
Included in the plans' assets are Common Shares of the Company valued at $11.2 and $12.7 as of December 31, 1998 and 1997, respectively.
(b) Leases-Some of the Corporation's subsidiaries maintain their offices in leased premises. Certain of these leases provide for the payment of real estate taxes, insurance, and other operating expenses. At December 31, 1998, aggregate minimum rental commitments (net of expected sub-lease receipts) under noncancellable operating leases of $128.2 are summarized as follows: 1999: $30.3; 2000: $24.4; 2001: $18.5; 2002: $13.4 2003: $10.9; 2004 and after: $30.3.
Total revenues for the year ended December 31, 2002 was $4.96 billion, up 12.3% from $4.42 billion in the prior year. Net income attributable to common stock in 2002 totaled $222 million, or $2.45 per diluted common share, compared with $322.4 million, or $3.21 per diluted common share in 2001. Results for 2002 and 2001 were positively impacted by approximately $55.3 million and $15 million, respectively, of favorable development of prior period estimates of medical costs and claims recoveries and New York Stabilization Pool recoveries. See “Liquidity and Capital Resources” and “Overview”.
During 2002, the Company received distributions from the 2000 New York Stop Loss Pool and the 1998 Market Stabilization Pool of approximately $12.2 million and $3.6 million, respectively. During 2001, the Company received distributions from the 1997 and 1998 New York Stabilization Pools of approximately $25.1 million and collected receivables of approximately $22 million from a health care risk contract for fiscal 1999 and 2000. In September 2001, the Company entered into a five-year agreement with Merck-Medco, effective beginning January 1, 2002, pursuant to which Merck-Medco and certain of its subsidiaries provide pharmacy benefit management services, including retail and mail-order pharmacy services, to the Company’s members. This agreement provided for a payment of $4.5 million to Oxford to offset systems and other costs associated with implementation of designated services. In addition to the pharmacy services agreement, the Company also entered into an alliance agreement with Merck-Medco under which the Company develops and provides certain historic and current information and furnishes strategic consultative and other services to Merck-Medco over a five-year period in return for a total payment of approximately $82.9 million. The Company received these amounts, which were included in unearned revenue at December 31, 2001, during the third and fourth quarters of 2001. Effective January 1, 2002, substantially all of these amounts are being amortized to income on a straight-line basis over the life of the agreement.
Operating lease terms generally range from one to ten years with certain early termination or renewal provisions at the Company’s option.
The components of medical costs payable were as follows at December 31, 2002 and 2001 (in millions):
We develop the best estimate of expected outstanding liabilities for medical IBNR reserves using generally accepted actuarial principles. The various product lines are evaluated using experience data of sufficient detail to allow for the compilation of historical loss patterns including but not limited to claim lag factors, projected claims per member and restated development factors. If sufficient experience data is not available, experience data from other similar blocks may be used. Industry data as well as data from consulting actuaries provide additional benchmarks when historical experience is too limited. This information is used to provide a range in which the expected outstanding liabilities may fall. The selection of the ultimate loss estimate varies by product line as the credibility of certain methods differs depending upon the in-force volume, the product’s claim volatility and the method itself. The selection is also influenced by other available information that may indicate that historical experience data may not be appropriate to use for current liability estimates. Examples of such information include but are not limited to changes in claims inventory levels, changes in provider negotiated rates or cost savings initiatives, increasing or decreasing medical cost trends, product changes and demographic changes in the underlying insured population.
A key sensitivity is the loss development factors used. Loss development factors selected take into consideration claims processing levels, claims under case management, medical inflation, seasonal effects, medical provider discounts and product mix.
Net realized gains and losses decreased $201,504 in 2004 to $732,491 from $933,995 in 2003. Net realized gains and losses in 2003 increased by $1,939,180 from a $1,005,185 loss in 2002.
During 2004, 2003 and 2002, the Board of Directors declared quarterly dividends payable on March 15, June 15, September 15 and December 15 of each year of $0.65 per share. The fourth quarter 2004 dividend was our thirty-eighth consecutive quarterly dividend of $0.65 per share.
decrease in the combined ratio from fiscal year 1994 to fiscal year 1995 was primarily due to the 6.0% decrease in the policyholder dividend ratio and the 1.3% reduction in the underwriting expense ratio. The underwriting expense ratio decrease is primarily due to the decrease in employee salaries and benefits to 9.7% of premiums in fiscal year 1995 from 11.0% in fiscal year 1994. CalComp was able to achieve this decrease during a period when net premiums earned increased by 20%; however, approximately one-half of such increase was the result of cancellation of CalComp's quota share reinsurance arrangement effective July 1, 1994. Workers' compensation reforms and increased price competition have also resulted in lower policyholder dividends incurred as policyholders now receive the benefit of lower workers' compensation costs in the form of reduced premiums at the inception of the policy versus policyholder dividends paid after the policy expires.
The Company's net loss for the year 1994 was approximately $241,000, compared with net income of about $442,000 for 1993. For 1994 there was a tax benefit from net operating loss carry forward of approximately $207,000. The loss before provision for income taxes and net operating loss carryforward was approximately $321,000 for the year 1994, as compared to income of approximately $985,000 for 1993.
Retained earnings increased from $1,855,005 at December 31, 1994 to $2,080,704 at December 31, 1995 as a result of the Company's operating income.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows (in thousands):
Premium revenue decreased by $12.4 million, or 12.8%, from $97.3 million in 2000 to $84.8 million in 2001. The average membership for which the Company provided dental coverage decreased by approximately 190,000 members, or 23.6%, from 805,000 members during 2000 to 615,000 during 2001. The decrease in the average number of members is primarily due to the loss of a number of customers during 2000 and at the beginning of 2001. The Company believes the loss of these customers was primarily due to the Company's poor financial condition in late 1999 and early 2000, large premium increases necessary for clients with high loss ratios, and customer service problems during 1999 and 2000. The Company believes it significantly improved its financial condition by completing the recapitalization transaction that was initiated in March 2000 (see Liquidity and Capital Resources below), and by implementing various cost reduction strategies during 2000 and 2001. The Company also implemented various operational improvements during 2000 and 2001, which it believes addressed and improved customer service. As a result, the Company believes its financial condition and level of customer service are no longer significant factors in its ability to retain its existing customers or to generate new customers. Premium revenue decreased by only 12.8% even though average membership decreased by 23.6%. This was primarily due to increases in premium rates, and a shift in the type of plan designs toward preferred provider ("PPO")/indemnity plan designs, which have higher premium rates than HMO plan designs. Substantially all of the Company's premium revenue was derived from dental benefit plans in 2001 and 2000. Premium revenue from vision benefit plans and other products was not material in 2001 or 2000.
Loss on impairment of assets decreased from $450,000 in 2000 to zero in 2001. The loss on impairment in 2000 is due to an increase in the reserve related to notes receivable, as discussed in Note 8 to the accompanying consolidated financial statements.
The amount of rebates recognized as reductions to revenue or cost of claims is based on estimates tied to actual claims data. The third party administrators provide estimates to Health Card based on their analysis of the amount of rebates that Health Card's claims should generate. These estimates are prepared based on estimates of how Health Card's claims might influence the market share of a particular drug covered under an agreement with a drug manufacturer. Market share is generally defined as the percentage of utilization of a certain drug or drugs within its therapeutic class. Under Health Card's contract with its previous rebate administratior which terminated June 30, 2001, and its new contract with the Administrator, Health Card receives a specified amount per claim. Therefore once the total number of claims is known, then the total amount of rebates to be received will be known. These amounts are paid within 120-150 days after the end of a quarter.
Manufacturer rebates have historically had a significant impact on Health Card's financial performance as the following table shows:
The Company established at December 31, 1997 a $6.4 million estimated medical claims reserve for UltraMedix and maintained it until March 31, 2000, when the Company concluded the continuing reserve requirement should be $0.8 million, and therefore reduced the $6.4 million reserve by $5.6 million and offset that amount against medical services expenses. At March 31, 2001, the Company eliminated the remaining reserve of $0.8 million.
• Medical premiums generated by the Medicare business increased by $277.7 million, or 24.6%, to $1,408.0 million, primarily reflecting an increase in enrollment of approximately 203,000 member months and higher average premium rates, mainly reflecting higher membership risk score in 2019 and an increase in reimbursement rates.
The lower change in unearned premiums had a favorable impact on premiums earned of $5.7 million when compared to prior year, mostly reflecting higher premiums written and the effect of changes in the current year’s reinsurance program.
The Company does not invest in swaps, forwards, futures, option contracts or other financial instruments with similar characteristics.
The increases in consolidated shareholder's equity are attributable to the Company's consolidated net income and capital contributions from Nationwide Corporation. On March 1, 1995, Nationwide Corporation contributed all of the outstanding shares of Farmland Life Insurance Company to the Company, which then merged Farmland Life Insurance Company into West Coast Life Insurance Company effective June 30, 1995. The contribution resulted in a direct increase to consolidated shareholder's equity of $47 million. In addition, during 1994 and 1993, the Company received capital contributions of $200 million and $111 million, respectively, from Nationwide Corporation to support the Company's growth in operations.
Effective January 1, 2009, the Company adopted certain provisions under ASC Topic 740, Income Taxes, (“ASC 740”), which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company’s adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes. The Adoption of ASC 740 did not have an impact on the Company’s financial position and results of operations.
See Note 21 to the accompanying consolidated financial statements for a calculation of net underwriting loss and combined ratio.
Refer to “Non-GAAP Financial Measures and Other Financial Metrics” for a description of the net investment return on investments managed by Third Point LLC.
Selling expense consists of commissions paid to outside brokers and agents representing the Company. Selling expense for the year ended December 31, 1998 increased 12.3% to $280.1 million, compared to $249.4 million for the year ended December 31, 1997, generally corresponding with continued overall premium revenue growth. The selling expense ratio for the year ended December 31, 1998 decreased to 4.4% from 4.6% for the year ended December 31, 1997, largely due to the acquisition of the GBO in the Company's National business segment, which has a lower selling expense ratio than the Company's existing business due to the use of an internal sales force. Excluding the GBO for the period prior to its acquisition for the year ended December 31, 1998, the selling expense ratio would have been 4.5%. The California business segment's growth in Medi-Cal and large employer group medical products had a further impact on lowering the selling expense ratio as a result of the lower selling costs associated with these products in comparison to the Company's other products.
Earnings per share for the year ended December 31, 1998 is based upon weighted average shares outstanding of 69.1 million, excluding common stock equivalents, and 70.3 million shares assuming full dilution. Earnings per share for the year ended December 31, 1997 has been calculated using 68.8 million, excluding common stock equivalents, and 69.5 million shares, assuming full dilution. For the year ended December 31, 1998, the increase in weighted average shares outstanding primarily relates to common stock issued through the Company's stock option plans and the incremental impact in 1998 of the public offering of 3.0 million shares of the Company's common stock in April 1997, partially offset by the repurchase of 3.5 million shares during the latter part of 1998.
Net cash flow provided by continuing operating activities was $394.6 million for the year ended December 31, 1998, compared with $496.1 million in 1997. Cash flow from continuing operations for the year ended December 31, 1998 is due primarily to income from continuing operations of $319.5 million, increased medical claims payable of $23.8 million and increased other current liabilities of $35.4 million, offset by an increase in other current assets of $20.1 million.
The recognition of other-than-temporary impairment losses on debt securities is dependent on the facts and circumstances related to a specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security prior to recovery of the amortized cost, the difference between amortized cost and fair value is recognized in the income statement as an other-than-temporary impairment. As it relates to debt securities, if we do not expect to recover the amortized basis, do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. We recognize the credit loss portion through earnings in the income statement and the noncredit loss portion in accumulated other comprehensive loss. The credit component of an other-than-temporary impairment is determined by comparing the net present value of projected cash flows with the amortized cost basis of the debt security. The net present value is calculated by discounting our best estimate of projected future cash flows at the effective interest rate implicit in the fixed income security at the date of acquisition. Cash flow estimates are driven by assumptions regarding probability of default, including changes in credit ratings, and estimates regarding timing and amount of recoveries associated with a default.
The Company is not actively engaged in conducting any business. Rather, the Company is in the process of investigating potential business ventures which, in the opinion of Mr. Eardley, will provide a source of eventual profit to the Company. Therefore, the Company does not presently intend to invest in real estate or real estate securities, nor has it formulated any investment policies regarding investments in real estate, real estate mortgages, or securities of or interests in persons engaged in real estate activities.
and regional brokers and covered facilities in four states outside California. At approximately the same time, the Company undertook a major geographic expansion in the physician and small medical group market through an arrangement with Brown & Brown, a leading publicly held insurance broker. This arrangement commenced in 1998, eventually encompassed nine states and in 2000 was expanded to include dentists in two states. During the same period, the Company also expanded into underwriting greater risk nonstandard physicians in a number of states outside California.
The Company invests its cash flow from operations in both fixed-maturity securities and equity securities. The Company’s current policy is to limit its investment in equity securities and its real estate to no more than 8.0% of the total market value of its investments. Accordingly, the Company’s portfolio of unaffiliated equity securities had a fair value of $34.2 million at December 31, 2002. The Company plans to continue its focus on taxable fixed-maturity securities for the indefinite future.
management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related notes. Management believes that the following critical accounting policies, among others, affect the more significant judgments and estimates used in the preparation of the Consolidated Financial Statements. Actual results may differ from these estimates under different assumptions or conditions.
Our GAAP combined ratio for the year ended December 31, 2011 decreased to 95.8% from 99.9% for the year ended December 31, 2010. The loss and LAE ratio decreased by 3.9 points to 57.2% while the expense ratio decreased by 0.2 points to 38.6%. The decrease in the loss and LAE ratio was primarily due to a decrease in current accident year non-catastrophe losses. We experienced a number of large losses in our property and inland marine business within Specialty Insurance Operations and in our non-specialty commercial lines business within Other Insurance Operations during the year ended December 31, 2010. The decrease in current accident year losses was partially offset by a decrease in favorable loss reserve development. The year ended December 31, 2011 included $2.9 million or 0.3 points of favorable loss reserve development, as compared to $57.1 million or 4.1 points of favorable loss reserve development in the year ended December 31, 2010. During the year ended December 31, 2011, we completed a detailed review of run-off expenses and, as a result, increased our run-off loss and LAE reserves. For the year ended December 31, 2011, we recognized $26.7 million of adverse loss reserve development, which includes the impact of the expense reserve strengthening, in Other Insurance Operations. During the year ended December 31, 2011, the favorable loss reserve development in Specialty Insurance Operations was primarily related to lower than expected severity on non-catastrophe losses related to professional liability lines, multiple peril liability lines and other general liability lines. Current accident year catastrophe losses were 0.3 points lower than the prior year. The year ended December 31, 2011 included $36.9 million or 3.6 points of current accident year catastrophe losses, as compared to $55.3 million or 3.9 points of current accident year catastrophe losses in the year ended December 31, 2010. The slight decrease in the expense ratio reflects lower acquisition costs, primarily related to the Commercial Lines Transaction and Personal Lines Transaction, essentially offset by other underwriting expenses that have not decreased proportionately with the reduction in earned premium associated with the exited businesses.
Service Operations Revenue from service operations, exclusive of net investment income, decreased to $19.6 million for the year ended December 31, 1998 compared to $33.1 million for the same period in 1997. The decline principally reflects the decrease in profit commissions, advisory fee revenues and equity in the earnings of investee companies. In March 1998, New London Capital plc ("NLC") notified Chartwell Advisers Limited ("Chartwell Advisers") that it chose not to renew the Advisory Agreement between NLC and Chartwell Advisers (the "Advisory Agreement") after its contractual expiration on December 31, 1998. In 1997 and 1998 the Advisory Agreement produced base fees of $1.7 and $1.3 million, respectively, and profit commissions of $0.7 and $(0.3) million, respectively, for Chartwell Advisers. Following expiration of the Advisory Agreement, Chartwell Advisers will continue to earn profit commissions on the open years of account (1996, 1997 and 1998) to the extent such years are profitable.
Corporate Interest and Amortization. Interest and amortization expenses were $9.6 million for the year ended December 31, 1997 compared to $7.8 million for the same period in 1996. Interest and amortization on the Senior Notes was $5.2 million for the year ended December 31, 1997 and $6.0 million for the comparable period in 1996. Also included in interest and amortization expense for the year ended December 31, 1997 is $3.4 million related to a credit facility with First Union established to fund the acquisition of CMA and replace an existing $20 million credit facility.