felanders/preprocessed huggingface dataset:
In an effort to pursue the expansion of the Company's business outside the state of California, the Company acquired two businesses in 1996 and 1997, the Life and Health Benefits Management Division ("MMHD") of Massachusetts Mutual Life Insurance Company and the Group Benefits Operations (the "GBO") of John Hancock Mutual Life Insurance Company. The Company's March 1, 2000 acquisition of Rush Prudential Health Plans and its pending transaction with Cerulean Companies, Inc. ("Cerulean") are also components of this expansion strategy.
Management services revenue decreased 1.1% for the year ended December 31, 1999 in comparison to the same period in the prior year. The overall decline is due to a 4.0% decline in management services member months, offset by the implementation of price increases in the Large Employer Group business segment. The decrease in management services member months was primarily related to attrition on acquired MMHD membership and, to a lesser extent, the GBO membership.
The loss ratio attributable to managed care and related products for the year ended December 31, 1999 decreased to 80.2% compared to 80.5% for the year ended December 31, 1998. The decline is primarily due to price increases implemented throughout the year in the Company's Large Employer Group and Individual and Small Employer Group business segments. In addition, the decline was also attributable to membership attrition related to underperforming MMHD and GBO acquired accounts in the Company's Large Employer Group business, which have historically experienced a higher loss ratio than the Company's other business.
The Company believes that cash flow generated by operations and its cash and investment balances, supplemented by the Company's ability to borrow under its existing revolving credit facility or to conduct a public offering under its debt registration statement, will be sufficient to fund continuing operations and expected capital requirements (including the proposed merger with Cerulean) for the foreseeable future.
The efforts which have been directed towards improving Accident business on the Continent of Europe at last show signs of bearing fruit, and we should have been able to record a modest profit in this department, were it not for the toll of aviation losses which was heavier than in previous years. The development of air transport is accompanied by a growing need for insurance cover, but a reasonable increase in the premiums for this inadequately rated risk has yet to be secured. In certain countries, contrary to sound in­ surance principles, the passenger risk on commercial air lines is actually included in the ordinary personal accident policy without extra charge.
PROFIT AND LOSS ACCOUNT for the year ending 31st December, 1937.
The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. The information is presented in U.S. dollar equivalents.
The respective net written premium increases for the commercial lines, specialty lines and personal lines segments for the years ended December 31, 2001 vs. December 31, 2000 amount to $60.3 million (36.9%), $1.9 million (2.8%) and $8.2 million (25.5%), respectively. The differing percentage increases in net written premiums versus gross written premiums for the period is primarily due to the various changes in the Company's reinsurance programs.
The Company believes its unique product features and mixed marketing strategy is a strength, in that it provides the market intelligence and flexibility to quickly deploy the marketing efforts of the Company's direct production underwriters from market segments where pricing is soft to market segments with emerging opportunities.
Risk-based capital is designed to measure the acceptable amount of capital and surplus an insurer should have, based on the inherent specific risks of each insurer. Insurers failing to meet this benchmark level may be subject to scrutiny by the insurer's domiciliary insurance department and ultimately to rehabilitation or liquidation. Based on the standards currently contained in the applicable Pennsylvania and Florida Insurance Company statutes, the Insurance Subsidiaries' capital and surplus is in excess of the prescribed risk-based capital requirements.
Components of comprehensive income, as detailed in the Consolidated Statements of Operations and Comprehensive Income, are net of tax. The related tax effect of Holding Gains (Losses) arising during the year was ($1.5) million, $4.1 million and ($2.8) million in 2001, 2000 and 1999, respectively. The related tax effect of Reclassification Adjustments was $1.2 million, $4.1 million, and $2.0 million in 2001, 2000 and 1999, respectively.
Risk-Based Capital: Risk-based capital is designed to measure the acceptable amount of capital an insurer should have based on the inherent specific risks of each insurer. Insurers failing to meet this benchmark capital level may be subject to scrutiny by the insurer's domiciliary insurance department, and ultimately, rehabilitation or liquidation. Based on the standards, the Insurance Subsidiaries capital and surplus at December 31, 2001 is in excess of the prescribed risk-based capital requirements.
The Insurance Subsidiaries have investments, principally U.S. Treasury securities, on deposit with the various states in which they are licensed insurers. At December 31, 2001 and 2000, the carrying value of the securities on deposit totaled $13.5 million and $12.5 million, respectively.
YEAR ENDED DECEMBER 31, 2003 COMPARED WITH THE YEAR ENDED DECEMBER 31,
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Trust as of December 31, 2004 and 2003, and the results of its operations and changes in its net assets for the years ended December 31, 2004, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America.
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (DOLLARS IN THOUSANDS)
The loss ratio was 62.6% for 1998 compared with 13.7% for 1997 largely due to Hurricane Georges, two aerospace catastrophes and the higher average loss ratio from the PXRE Lloyd's Syndicate operation, the new excess and surplus lines business and new international operations. The loss ratio for 1998 reflected incurred catastrophe losses of $55,564,000 gross and $29,437,000 net for 1998 and prior accident years. In comparison, the loss ratio for 1997 reflected a re-estimation, which reduced catastrophe losses by $1,457,000 gross and $964,000 net for 1997 and prior accident years, after taking into account, among other things, the German, Poland and Czech flood losses referred to below.
Amount of Losses ---------------- Loss Event Gross Net - ---------- ----- --- (in thousands) German, Poland and Czech Floods $1,739 $1,457
During 1998, PXRE experienced savings of $532,000 net for prior-year loss and loss expenses primarily related to the triggering of a retrocessional recovery on a 1994 aviation loss offset in part by adverse development due to the 1997 German, Poland and Czech floods. The loss ratio for 1997 was favorably affected by decreases to reserves of $3,917,000 net for prior-year loss and loss expenses primarily related to the Eurotunnel fire and Hurricane Fran where redundant reserves were recognized in 1997 of approximately $1,644,000 and $1,440,000 respectively. In addition, included in the savings of $3,917,000 were prior-year losses originally thought to have triggered market loss coverage thresholds which have proven to be redundant by approximately $1,800,000, offset in part by development on prior year facultative losses.
Management fee income from all sources for 1997 decreased to $3,006,000 from $6,032,000 for 1996 as reported, reflecting a decline of premiums ceded to managed business participants, as well as management fee income of $2,512,000 earned by PXRE from TREX, before the Merger, in 1996. Management fee income decreased to $3,006,000 for 1997 from $3,520,000 for 1996 on a pro forma basis, reflecting the decreased amount of ceded premium, offset in part by more profitable business.
Net cash flow provided by operations was $4,955,000 in 1998 compared with net cash flow provided by operations of $19,626,000 during 1997, due to a decrease in net income and the effects of timing of collection of receivables and reinsurance recoverables and payments of losses.
In September 1997, PXRE and Phoenix Home Life completed the formation of a joint venture, Cat Bond Investors L.L.C., with initial committed capital of $20 million. The joint venture specializes in investing in instruments, the returns on which are determined, in whole or in part, by the nature, magnitude and/or effects of certain catastrophic events or meteorological conditions.
The following are characteristics of the Amended Credit Agreement at December 31, 1998:
UNCERTAINTIES REGARDING INTANGIBLE ASSETS. Included in SMC's December 31, 1998 financial statements are certain assets that are primarily valued , for financial statement purposes, on the basis of management assumptions. These assets include items such as: deferred acquisition costs; present value of future profits; costs in excess of net assets acquired; and organization and deferred debt issuance costs.
The following rate changes have been filed and approved by the insurance regulators of Massachusetts and New Hampshire in 2019 and 2018. Our Massachusetts private passenger automobile rates include a 13% commission rate for agents.
Commissioner’s prior approval of an extraordinary dividend. Under Massachusetts law, an insurer may pay cash dividends only from its unassigned funds, also known as earned surplus, and the insurer’s remaining surplus must be both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At year-end 2019, the statutory surplus of Safety Insurance was $704,177, and its net income for 2019 was $75,469. As a result, a maximum of $75,469 is available in 2020 for such dividends without prior approval of the Commissioner. As a result of this Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $628,708 at December 31, 2019. During the twelve months ended December 31, 2019, Safety Insurance recorded dividends to Safety of $47,585.
● Bodily Injury Code Indications: This method projects ultimate loss estimates for our private passenger and commercial automobile bodily injury coverage based upon extrapolations of the historic number of accidents and the historic number of bodily injury claims per accident. Projected ultimate bodily injury claims are then segregated into expected claims by type of injury (e.g. soft tissue injury vs. hard tissue injury) based on past experience. An ultimate severity, or average paid loss amounts, is estimated based upon extrapolating historic trends. Projected ultimate loss estimates using this method are the aggregate of estimated losses by injury type.
The following table presents our total net reserves and the corresponding case reserves and IBNR reserves for each line of business as of December 31, 2019 and December 31, 2018.
● Descriptions of assumptions underlying or relating to any of the foregoing; and
Investment income is recognized on an accrual basis of accounting. Bonds not backed by other loans are amortized using the interest method. Loan-backed bonds and structured securities are amortized using the interest
The following tables as of December 31, 2019 and 2018 present the gross unrealized losses included in the Company’s investment portfolio and the fair value of those securities aggregated by investment category. The tables also present the length of time that they have been in a continuous unrealized loss position.
No share purchases were made by the Company under the program during the years ended December 31, 2019 and December 31, 2018. As of December 31, 2019, the Company had purchased 2,279,570 shares on the open market at a cost of $83,835.
●Obligations of states and political subdivisions: overall credit quality, including assessments of market sectors and the level and variability of sources of payment such as general obligation, revenue or lease; credit support such as insurance, state or local economic and political base, prefunded and escrowed to maturity covenants.
These segments are managed in a carefully coordinated fashion with strong elements of central control, including with respect to capital, investments and support operations. As a result, management monitors and evaluates the financial performance of these operating segments principally based upon their underwriting results.
EXPOSURE TO CATASTROPHES. As with other reinsurers, the Company's operating results and financial condition can be adversely affected by volatile and unpredictable natural and other disasters, such as hurricanes, windstorms, earthquakes, floods, fires and explosions. Although the Company attempts to limit its exposure to acceptable levels, it is possible that an actual catastrophic event or multiple catastrophic events could have a material adverse effect on the financial condition, results of operations and cash flows of the Company.
On March 14, 2000, Holdings completed public offerings of $200.0 million principal amount of 8.75% senior notes due March 15, 2010 and $250.0 million principal amount of 8.5% senior notes due March 15, 2005. During 2000, the net proceeds of these offerings and additional funds were distributed by Holdings to Group. Approximately $250.0 million of the distributions were used by Group to capitalize Bermuda Re. Interest expense incurred in connection with these senior notes was $30.9 million at December 31, 2000.
LaSalle Re's sources of funds consist of net premiums written, investment income and proceeds from sales and redemptions of investments. Cash is used primarily to pay losses and loss expenses, brokerage, commissions, excise taxes, administrative expenses and dividends. Under the Insurance Act, LaSalle Re is prohibited from paying dividends of more than 25% of its opening statutory capital and surplus unless it files with the Bermuda Supervisor of Companies an affidavit (at least 7 days before payment of such dividends) stating that it will continue to meet the required minimum solvency margin and minimum liquidity ratio requirements and from declaring or paying any dividends without the prior approval of the Bermuda Minister of Finance if it failed to meet its required margins on the last day of the previous fiscal year. The Insurance Act also requires LaSalle Re to maintain a minimum solvency margin and minimum liquidity ratio and prohibits dividends that would result in a breach of these requirements. In addition, LaSalle Re is prohibited under the Insurance Act from reducing its opening total statutory capital by 15% or more without the approval of the Minister of Finance. LaSalle Re currently meets these requirements.
As a result of the potential for large loss payments, LaSalle Re maintains a substantial portion of its assets in cash and debt securities. As of December 31, 2001, 68% of its total assets were held in cash and investments, which totaled $543.7 million compared to 69% at December 31, 2000 or $499.7 million. The increase in cash and investments of $44.0 million was primarily due to the reinvestment of surplus cash flows. To further mitigate the uncertainty surrounding the amount and timing of potential liabilities and to minimize interest rate risk, LaSalle Re maintains a short average duration for its investment portfolio. The Company has decreased the modified average duration of the portfolio from 2.9 years at December 31, 2000 to 2.7 years at December 31, 2001.
In particular, the Company cautions that the claims and claims expense liability reserves related to the September 11th terrorist attacks remain subject to future adjustment. Because of the scope and uniqueness of these events, standard loss modeling and assessment methodologies have limited relevance. As a result, the Company's expected losses reflect the industry's and the Company's current estimates. As additional information regarding the claims and claims expenses related to the September 11th terrorist attacks becomes available, the Company may be required to adjust its estimate in the future. Also see Note 4 of Notes to the Consolidated Financial Statements.
The Company has negative goodwill from prior acquisitions. Under generally accepted accounting principles in effect through December 31, 2001, these liabilities were accreted over their estimated useful lives. See Note 11 of Notes to the Consolidated Financial Statements.
Future policy benefits comprised 35% of the Company’s total liabilities at December 31, 2020. These liabilities relate primarily to life insurance products and are based upon assumed future investment yields, mortality rates, withdrawal rates and expenses after giving effect to possible risks of adverse deviation. The assumed mortality and withdrawal rates are based upon the Company’s experience modified as necessary to reflect anticipated trends and are generally established at contract inception. If actual results differ from the initial assumptions, the amount of the Company’s recorded liability could require adjustment.
Net earned premiums increased $3.7 million, or 6.3%, during 2020 as compared to 2019. The increase in net earned premiums was primarily attributable to an increase in automobile physical damage coverage resulting from the new agency as previously mentioned. Premiums are earned ratably over their respective policy terms and therefore premiums earned in the current year are related to policies written during both the current year and immediately preceding year.
Investment income decreased $1.2 million, or 13.8%, in 2020 as compared to 2019. The decrease in investment income was primarily attributable to a decrease in the equity in earnings from investments in the Company’s limited partnerships and limited liability companies of $0.9 million.
The principal considerations for our determination that the valuation of claim reserves is a critical audit matter are the high degree of judgment and subjectivity in auditing the actuarial methods and assumptions used in the valuation process, including assumptions around expected loss ratios and reported and paid loss emergence patterns.
Addressing the matter involved performing the following audit procedures, among others:
Performing an independent recalculation of policy reserves for a sample of contracts for comparison to management’s estimate; and
As of December 31, 2020, financial instruments carried at fair value were measured on a recurring basis as summarized below:
The following table presents the Company’s reserves for life, accident and health, and property and casualty losses, claims and loss adjustment expenses at December 31, 2020 and 2019.
Professionals Group is organized and operates principally in the property and casualty insurance industry and has two insurance product segments. The professional liability segment provides insurance coverage and services to health care providers through Professionals Group's wholly owned subsidiary, ProNational Insurance Company. The personal lines segment provides personal auto, homeowners, boat and umbrella coverages primarily for educational employees and their families through Professionals Group's majority owned subsidiary, MEEMIC Holdings, Inc. and MEEMIC Holdings' wholly owned subsidiary, MEEMIC Insurance Company.
A decline in the fair value of an available for sale security below cost that is deemed other than temporary results in a charge to income, resulting in the establishment of a new cost basis for the security. During 2000, losses of $1,359,000 were recognized on securities that were deemed to have other than temporary declines in fair value. All other declines in fair values of the Company's investment securities in 2000, 1999 or 1998 were deemed to be temporary.
Professionals Group and its subsidiaries currently maintain several defined contribution employee benefit plans, stock purchase plans and incentive plans, all of which cover substantially all employees of the respective subsidiaries meeting certain eligibility requirements. The Company's contributions to these plans are primarily based on various percentages of compensation, and in some instances are based upon the amount of the employees' contributions to the plans. The Company's expense under all benefit plans was $3,165,000, $2,193,000 and $1,541,000 in 2000, 1999 and 1998, respectively.
Our acquisition program remains unchanged since it began with the purchase of Bank Compensation Strategies in September 1997. We seek to acquire well-managed and growing companies that will provide an entry into a new and expanding market, as did BCS and MCG, or add to existing businesses as did Schoenke and The Wamberg Organization.
- the assumption of $4.2 million of liabilities and payment of approximately $372,000 of closing costs.
On October 19, 1999, the U. S. Tax Court issued a decision denying the deductibility of interest on policy loans in connection with a leveraged corporate owned life insurance (COLI) program. In addition, the Internal Revenue Service has launched a major program against other companies that have purchased leveraged COLI policies. We have not offered leveraged COLI in our product offerings since 1995. Consequently, we do not expect any adverse effects of this recent Tax Court ruling on our future new business revenue stream. However, because of the varied facts and circumstances surrounding each case, it is impossible to determine the effects of this case on a client's decision to continue or surrender any existing policy. Because of the number of other variables, including adverse tax implications resulting from a surrender, management does not believe this decision will have any material adverse effects on us.
Many of these factors are beyond our control. The sales cycles of our Clark/Bardes Division often takes between twelve to eighteen months, with first year revenue coming from a few large cases. Our revenue is thus difficult to forecast, and we believe that comparing our consecutive quarterly results of operations is not necessarily meaningful, nor does it indicate what results we will achieve for any subsequent period. In our business, past operating results have not been reliable indicators of future performance.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1998 AND 1997 ON A HISTORICAL BASIS
In this regard, it is noted that the working capital ratio declined to .90 to one at December 31, 1999 compared with 1.55 to one at December 31, 1998. As an acquiring company, a significant amount of borrowing is done to finance our acquisitions. Because of this and the strong cash generated by operations, management has determined to dedicate all excess cash to the reduction of bank borrowings and, as a result, only cash for reasonably foreseeable needs and expenses is retained. As an example, the entire $13.8 million cash portion of the acquisition of The Wamberg Organization and Wamberg Financial Corporation was accomplished without any additional borrowings.
In 1996, the Company recognized a net tax benefit of $2,069,000 compared to $2,500,000 in 1995.
Increased commissions, fronting and taxes expense resulted from writing a large proportion of surety business at a higher commission rate. The principal causes of the increased ceding commission income relative to reinsurance purchased were increased ceding commission rates resulting from changes in the major reinsurance programs effective in 1995 in combination with the contingent commission adjustment for the low-value dwelling program quota share resulting from improved claims experience as compared to the prior year.
(viii) changes in interest rates and the equity markets causing a reduction of investment income and/or asset fees; an acceleration of the amortization of deferred policy acquisition costs (DAC) and/or value of business acquired (VOBA), a reduction in separate account assets or a reduction in the demand for the Company’s products; increased liabilities related to living benefits and death benefit guarantees;
The Company’s flagship products are marketed under the Nationwide DestinationSM brand and include individual variable and group annuities and group private sector retirement plans. Nationwide DestinationSM products allow customers to choose from investment options managed by premier mutual fund managers. The Company has also developed private label variable and fixed annuity products in conjunction with other financial services providers that allow those providers to sell products to their own customer bases under their own brand names.
The following table summarizes selected financial data for the Company’s Individual Protection segment for the years ended December 31:
Excluding operating items (periodic net amounts paid or received on interest rate swaps that do not qualify for hedge accounting treatment and net realized gains and losses related to hedges on GMDB contracts and securitizations).
The decrease in other benefits and claims reflects a $13.0 million charge in 1996 related to reserve strengthening in the immediate annuity line due to changes in estimated profitability based on revised assumptions for mortality and reinvestment rates. Amortization of DAC reflects a reduction in 1996 of $6.0 million due to changes in estimates of expected future profits as a result of favorable investment spread and persistency experience.
Other operating expense increased to $58.0 million during 2003 compared to $41.4 million in 2002. The reasons for this increase are as follows:
The guaranty fund and other assessments that our insurance companies incurred in 2003 were higher than normal due to one particular state assessment and assessments in a line of business that has been discontinued. The foreign currency gains included a gain of $1.3 million in 2003 from the settlement of an advance of funds to an unaffiliated entity.
We sold our retail brokerage operation, HCC Employee Benefits, Inc., in December, 2003. The net earnings of HCC Employee Benefits, Inc. and the gain on its sale have been classified as discontinued
Revenue from our underwriting agencies (primarily fee income) increased 56% to $174.7 million in 2003 due to acquisitions made beginning in the fourth quarter of 2002 as well as organic growth in our existing underwriting agencies. Subsidiaries acquired during 2002 and 2003 accounted for an increase in segment revenue in 2003 of $59.1 million when compared to periods prior to their acquisition in 2002. Net earnings in this segment increased 79% to $45.3 million in 2002 for the same reasons. We expect the underwriting agency segment to continue to grow in 2004.
YEAR ENDED DECEMBER 31, 2002 VERSUS YEAR ENDED DECEMBER 31, 2001
Losses in our group life and accident and health, aviation, London market accounts and other specialty lines of business are recorded and paid relatively quickly. There is not a significant amount of long-tailed liability exposure in these lines of business. Therefore, reserves can be determined and recorded with a higher degree of accuracy and significant development should not be expected with respect to losses in these lines of business. There is some reinsurance assumed in these lines of business, but, as discussed above, we monitor the assumed reported losses closely. Losses related to our diversified financial products line of business are reported relatively quickly but can develop over time as, especially with respect to directors' and officers' liability business where we write excess of loss risks, reported losses which are adjusted by the primary underwriter on the risk may not initially appear to be serious but can develop and affect our excess layer over time. We believe that we have adequately reserved for this eventuality. Our discontinued line of business contains both direct business and assumed business. Some of the losses in this line are administered by others, subject to our review. It is possible that there can be development in the loss reserves in this line of business as the business is in run off and some of it is subject to late reporting by those administering the claims. We monitor these reserves carefully on a current basis and believe that they are properly set based upon the information we have at this time.
We have insignificant exposure to asbestos and environment policy liabilities as we did not begin business until 1981 and the type of business we wrote contained pollution exclusions or was not of the type that subjected us to those types of risks.
HOMEOWNER AND CONDOMINIUM. Units in force for the Company's homeowner and condominium programs declined by 31.4% from December 31, 1996 to December 31, 1997, of which 59% occurred in the first quarter of 1997. This was primarily due to a requirement by the California Department of Insurance that the Company non-renew homeowner and condominium policies from July 1, 1996 until February 15, 1997. At that time, the Company began offering renewal of policies for approximately 68,000 homeowner insurance customers. These renewals were subject to an overall 6% rate increase on April 1, 1997. As of December 31, 1997, more than 61,000 policies had been renewed which is 89.7% of those eligible. The Company continues to seek approval to resume writing new homeowner policies; however, unless the Company is granted such permission, the impact of this line on future underwriting results is likely to remain insignificant.
As a result of changes in estimates of insured events in prior years, the provision for losses and loss adjustment expenses decreased by $64,627,000, $25,590,000 and $39,464,000 in 1997, 1996 and 1995, respectively, due to a combination of improvements in the claims handling process and unanticipated decreases in frequency and severity. The 1997, 1996 and 1995 decreases in provisions
For pro forma disclosure purposes, the fair value of stock options was estimated at each date of grant using a Black-Scholes option pricing model using the following assumptions: Risk-free interest rates of 6.5% for 1997 and 1996 and 6.6% for 1995; dividend yields ranging from 1.14% to 1.44% in 1997, from 1.0% to 1.3% in 1996 and from 1.5% to 1.6% in 1995; volatility factors of the expected market price of the Company's common stock of .27, .39 and .43 for 1997, 1996 and 1995, respectively; and a weighted average expected life of the options of 8 years in 1997 and 10 years in 1996 and 1995.
SELECTED FINANCIAL DATA. - ------- ------------------------- The "Selected Consolidated Financial Data" section from the Company's annual report to stockholders for the year ended December 31, 2001, which is included as Exhibit (13)(A) to this Form 10-K Report, is incorporated herein by reference.
Net cash flow from operations was negative in 1996 as loss and loss adjustment expense payments and consolidated operating expense payments exceeded premium and investment revenues. Such negative cash flow resulted in part from poor loss development in the minimum limit automobile personal injury protection line of business for the years prior to 1996. The Registrant's practice of maintaining a highly liquid investment portfolio allowed the Registrant to meet cash demands with no adverse impact on operating performance.
Property and equipment is carried at cost and is depreciated principally under the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to expenses as incurred; additions and major betterments are capitalized and depreciated. Upon retirement or disposal of assets, the accounts are relieved of the cost and the related accumulated depreciation and any gains or losses are reflected in the consolidated statements of operations.
Net realized and change in net unrealized gains (losses) on fixed maturities and equity securities are summarized as follows:
The insurance companies did not pay dividends in 1997, 1996 and 1995.
Consolidated deferred taxes receivable resulting from temporary differences in the recognition of revenue and expense for tax and financial statement purposes are summarized as follows (in thousands):
A significant portion of insurance premium receivables relates to the financing of automobile insurance premiums in south Florida. An allowance for non-collection of $900,000 and $300,000 has been provided for at December 31, 1997 and 1996, respectively. The Company's exposure to loss is limited by the fact that non-payment of premiums will result in cancellation of the underlying insurance policy.
A milestone was achieved with the acquisition of the Spanish insurer Caser, which was announced in January 2020. The transaction is set to be concluded in the course of the summer 2020. The European business will thus become even more important as a second pillar, the attractive non-life business will be expanded significantly and the company’s sales reach will be increased in Spain. Furthermore, Helvetia is opening up new business models with Caser in the form of ecosystems in the healthcare and old age sectors, which are strongly linked to the life and pension business, and thus generating additional fee business. Helvetia intends to finance two thirds of the acquisition of Caser by issuing hybrid bonds and one third by issuing new shares. This financing mix will allow for efficient capital management and contribute to ensuring a balanced capital base.
2019 in brief 1.2.2019 The 2018 Helvetia Protection Alpine Forest Award goes to projects in Austria and Switzerland
Projects in Austria and Switzerland were recognised at the award ceremony for the 13th Helvetia Protection Alpine Forest Award held in the Graubünden village of Klosters. Ruedi Walli is honoured as a protection forest guardian for his services to protection forests.
Helvetia Insurance strengthens its sales reach in the area of mortgages and will in future combine the strengths of its own sales force with those of MoneyPark, Switzerland’s largest independent mortgage broker. Going forward, Helvetia mortgage customers will be served by a MoneyPark advisor team working exclusively for Helvetia. Helvetia customers will thus benefit from an even bigger product range. For Helvetia, there is also the opportunity to exploit the market potential in an even more targeted manner and offer its customer base highly competitive mortgage solutions.
Helvetia Insurance allows logistics and transport companies to conclude a comprehensive transport insurance policy for their customers in less than 120 seconds using a simple and unique web application. The user-friendly online solution was developed in close cooperation with existing customers.
Immediate annuity and supplementary contract premiums were $25.1 million in 1999 compared to $29.6 million in 1998 and $17.2 million in 1997. The decrease in premiums in 1999 was primarily due to decreased immediate annuity sales while the increase in annuity and supplementary contract premiums in 1998 was primarily due to the acquisitions of Delta and AmVestors. Without these acquisitions, immediate annuity and supplementary contract premiums increased by $2.5 million in 1998 due to increased immediate annuity sales.
Total annuity expenses increased by $4.7 million in 1999 to $79.3 million compared to $74.6 million in 1998 and $14.1 million in 1997. Underwriting, acquisition and insurance expenses decreased $4.7 million in 1999 primarily due to cost savings realized from the consolidation of acquired subsidiary operations. Amortization of deferred policy acquisition costs and VOBA increased $9.3 million in 1999. Gross margins increased due to higher interest spreads and the reduced expenses, resulting in the increased amortization. The increase in annuity expenses in 1998 was primarily attributable to the acquisitions of Delta and AmVestors.
Net income increased by $3.9 million to $66.7 million in 1999 compared to $62.8 million in 1998 and $58.1 million in 1997. The increase in 1999 net income resulted from the increased pre-tax adjusted operating income from the Life Insurance operations and Annuity operations, which was partially offset by reorganization costs, increased interest expense, higher effective income tax rates, and lower income from AMAL Corporation. The increase in net income in 1998 was primarily from increased annuity operating income which was partially offset by lower realized gains on investments and increased interest expense and a higher effective income tax rate.
The Company held $269.9 million of other invested assets (including short-term investments) on December 31, 1999. Other invested assets consist primarily of various joint venture and limited partnership investments and derivatives.
The Company markets its products to individual insureds to meet their personal insurance needs. The Company has no commercial risks. Prior to 1994, the Company actively marketed private passenger automobile, homeowners, condominium, earthquake and personal excess liability insurance in California. The Company's primary focus has been private passenger automobile insurance since its inception. Private passenger automobile insurance has always accounted for over 90% of premiums written by the Company.
The Company experienced a reduction in its historical pattern of growth, ceased all advertising and marketing in 1994 for new policies, and suspended its quarterly dividend on common shares for the third and fourth quarters of fiscal 1994 and all of 1995. As of December 31, 1995, total estimated gross losses and allocated loss adjustment expenses from the Northridge Earthquake were $1 billion.
In 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". The adoption of SFAS 109 changed the Company's method of accounting for income taxes from the deferred method to the liability method. The liability method requires the recognition of deferred tax liabilities and tax assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. This adoption is shown as a cumulative effect of a change in accounting for income taxes in the 1993 Statement of Operations.
The Company maintains a catastrophe reinsurance program to provide coverage through the run-off period of its remaining homeowner and condominium policies. The program currently in place provides coverage for the period from July 1, 1995 through June 30, 1996 for a total annual premium of approximately $13 million. Coverage under these treaties is provided by a number of domestic, foreign and London market companies in two layers as follows:
Granted in 1994 25,000 $27.38 Vested in 1994 18,543 Cancelled or forfeited - ------- Outstanding, December 31, 1994 63,172
The quarterly earnings per share amounts do not add to annual amounts due to the changing dilutive effect of common stock equivalents as the price of the common stock fluctuates.
condominium premium volume in accordance with the order from the DOI to discontinue writing new homeowners and condominium owners policies and earthquake coverages. The Auto line reflects a $30 million reduction in amounts previously set aside for Proposition 103 rebates due to the increase in earthquake-related losses, in accordance with the order from the DOI.
During 2006, we wrote down two securities in the automotive industry by $1.3 million due to deterioration in the issuer’s operations and several downgrades of the issuer’s credit rating. These securities were sold in 2006 subsequent to the write down at approximately their cost basis. During 2005, we wrote down the common stock of this issuer by $0.6 million based upon our assessment that this security would remain in an unrealized loss position for a significant period of time. We sold this security in 2006 at its cost basis.
During 2006, we sold two asset-backed securities backed by leases on airplanes concurrent with our decision to write down these securities due to continuing problems in the airline industry and deterioration of the underlying collateral which resulted in decreases in the amount of expected principal and interest payments. The write down/realized loss on these securities was $2.5 million for the year ended December 31, 2006. We had previously written down these securities by $7.8 million during 2001-2003 and $2.7 million during 2005 due to deterioration in the underlying collateral.
Change in fair value of derivatives (call options purchased to fund annual index credits on index annuities) was an increase of $183.8 million in 2006, a decrease of $18.0 million in 2005 and an increase of $28.7 million in 2004. The difference between the change in fair value of derivatives between the periods is primarily due to the performance of the indices upon which our options are based. A substantial portion of our options are based upon the S&P 500 Index with the remainder based upon other equity and bond market indices. The range of index appreciation for options expiring during the years ended December 31, 2006, 2005 and 2004 is as follows:
Amortization of deferred policy acquisition costs increased 39% to $94.9 million in 2006 and 1% to $68.1 million in 2005 from $67.9 million in 2004. In general, amortization has been increasing each period due to the growth in our annuity business. The comparisons between periods are also affected by amortization associated with net realized gains (losses) on investments and amortization associated with the application of SFAS 133 to our index annuity business. The gross profit adjustments from realized gains (losses) on investments increased amortization by $0.5 million in 2006, decreased amortization by $2.7 million in 2005 and had no impact in 2004. As discussed above, the application of SFAS 133 to our index annuity business creates differences in the recognition of revenues and expenses from derivative instruments including the embedded derivative liabilities in our index annuity contracts. The gross profit adjustments resulting from the application of SFAS 133 to our index annuity business decreased amortization by $6.7 million in 2006 and $9.1 million in 2005 and increased amortization by $5.0 million in 2004.
(2) Amount shown is net of equity investments in the capital trusts due to the contractual right of offset upon repayment of the notes.
The uncertainties inherent in the reserving process, together with the potential for unforeseen developments, including changes in laws and the prevailing interpretation of policy terms, may result in our ultimate paid loss and LAE amounts being significantly greater or less than the loss and LAE reserves we initially established. Estimated ultimate losses for Hurricane Harvey, Hurricane Matthew, Hurricane Maria, and the California fires which occurred in the latter half of 2017 are subject to particularly high uncertainty, as the large magnitude and recent occurrence of these events make damages particularly difficult to assess. In addition, there is a great deal of uncertainty regarding the extent to which judicial and regulatory rulings will cause uncovered perils, such as flood, to be covered by the ceding companies, which further increases the uncertainty around the ultimate loss estimates. Any adjustments to our loss and LAE reserves are reflected in our financial results during the period in which they are determined.
We write reinsurance contracts on both an excess-of-loss and a pro-rata basis. For excess-of-loss contracts, written premiums are typically based on the deposit or minimum premium specified in the reinsurance contract. For pro-rata contracts, written premiums are recognized based on estimates of ultimate premiums provided by either the ceding companies or the Manager.
Some of our reinsurance contracts may include contract terms that require an automatic reinstatement of coverage in the event of a loss. Reinstatement premiums are fully earned or expensed as applicable when a triggering loss event occurs and losses are recorded. We record reinstatement premiums on a basis consistent with our estimates of losses and LAE. During 2017, 2016 and 2015 we recorded net written and earned reinstatement premiums totaling $4.7 million, $1.5 million and $0.3 million, respectively.
Trading fixed maturities at fair value (amortized cost of $1,408,618 and
Benefits and expenses related to traditional life, annuity and disability contracts, including group policies, are recognized when incurred in a manner designed to match them with related premium revenue and spread income recognition over expected policy lives. For universal life-type and investment-type contracts, expenses include interest credited to policyholders' accounts and death benefits in excess of account values, which are recognized as incurred.
Reporting and measuring the Company's interest in its separate accounts as investments.
The Company invests in commercial first mortgage loans and real estate throughout the United States. Investments are diversified by property type and geographic area. Mortgage loans are collateralized by the related properties and generally are no more than 75% of the properties' value at the time that the original loan is made. Real estate investments classified as held-for-sale have been obtained primarily through foreclosure.
In addition, the SEC and other regulators have conducted or are conducting investigations and examinations of certain of the Company's affiliates relating to various issues, including market timing and late trading of mutual funds and variable insurance products, directed brokerage, revenue-sharing and other arrangements with distributors, and recordkeeping requirements.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sun Life Assurance Company of Canada (U.S.) and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.