Effective January 1, 2003, we entered into a 100% producer-owned reinsurance arrangement for a new lender/dealer producer. This arrangement was cancelled at the end of 2003.
Effective January 1, 2005, the Company entered into a producer-owned reinsurance arrangement with a GAP agent whereby 100% of that agent’s premiums (along with the associated risk) were ceded to its PORC.
Net Premiums Earned. Net premiums earned increased 3.3%, or $1,652,760, to $51,716,945 in 2005 from $50,064,185 the prior year. Net premiums earned benefited from growth in our CPI, GAP, UC and WSB product lines, which was partially offset by premium decreases in ULI and the discontinued bond program.
Net Premiums Earned. Net premiums earned remained relatively flat at $50.1 million in 2004 compared to 2003. Net premiums earned benefited from growth in our GAP, WSB and discontinued bond program product lines, which was offset by decreases in our ULI, CPI and UC products.
CPI net premiums earned decreased 62.1% to $2,063,840 in 2004 from $5,439,426 in 2003 due to the cancellation of a poor performing book of business in the second quarter of 2004.
Discontinued bond program losses and LAE of $20.2 million in 2004 consisted of $1.4 million of net paid losses and an $18.8 million increase in loss and LAE reserves during 2004. See “Overview-Discontinued Bond Program” above and Note 16 to the Consolidated Financial Statements for more information concerning the discontinued bond program.
In addition to the monthly valuation procedures described above, we continually monitor developments affecting our invested assets, paying particular attention to events that might give rise to impairment write-downs. There were $0, $535,487 and $129,729 in impairment charges included in net realized gains on investments for the years ended December 31, 2005, 2004 and 2003, respectively. Included in impairment charges for 2004 is a write down of $334,136 related to a private equity investment due to its financial uncertainty. Impairments within the portfolio during 2006 are possible if current economic and financial conditions worsen. See Note 2 to the Consolidated Financial Statements for analysis and discussion with respect to securities in an unrealized loss position at December 31, 2005.
Our automobile lender/dealer line offers three types of products. First, ULTIMATE LOSS INSURANCE® (“ULI”), a blanket vendor single interest coverage, is the primary product we offer to financial institutions nationwide. This product insures banks and financial institutions against damage to pledged collateral in cases where the collateral is not otherwise insured. A ULI policy is generally written to cover a lender’s complete portfolio of collateralized personal property loans, typically automobiles. Second, creditor placed insurance (“CPI”) is an alternative to our traditional blanket vendor single interest product. While both products cover the risk of damage to uninsured collateral in a lender’s automobile loan portfolio, CPI covers the portfolio through tracking individual borrowers’ insurance coverage. The lender purchases physical damage coverage for loan collateral after a borrower’s insurance has lapsed. Third, our guaranteed auto protection insurance (“GAP”) pays the difference or “gap” between the amount owed by the customer on a loan or lease and the amount of primary insurance company coverage in the event a vehicle is damaged beyond repair or stolen and never recovered. The GAP product is sold to auto dealers, lenders and lessors and provides coverage on either an individual or portfolio basis.
Municipal Code Publishing. Our wholly-owned subsidiary, American Legal Publishing Corporation (“ALPC”), codifies, publishes, supplements and distributes ordinances for approximately 1,900 local government units in 40 states. Ordinance
Acquisition expenses, mainly commissions and premium taxes, related to unearned premiums are deferred and amortized over the period the coverage is provided. Anticipated losses and other expenses related to those premiums are considered in determining the recoverability of deferred acquisition costs.