The estimated losses presented above by the Life and Health Insurance segment are net of reinsurance recoveries of $2.9 million, $6.0 million and $37.2 million related to Hurricanes Dolly, Gustav and Ike, respectively. In addition to the losses presented above, Insurance Expenses for the year ended December 31, 2008 includes an expense of $3.9 million related to the Kemper segment’s estimate of its share of assessments from the Texas Windstorm Insurance Association (“TWIA”). Insurance Expenses for the year ended December 31, 2009 includes a reduction of expense of $2.8 million due to a decrease in the Company’s estimate of its share of assessments from TWIA.
Homeowners insurance incurred losses and LAE were $188.8 million for the year ended December 31, 2009, compared to $248.1 million for the same period in 2008. Homeowners insurance incurred losses and LAE decreased due primarily to lower catastrophe losses and LAE (including loss and LAE reserve development).
Homeowners insurance incurred losses and LAE increased due primarily to higher catastrophe losses and LAE and to a lesser extent the impact of lower favorable loss and LAE reserve development, due largely to lower favorable catastrophe loss and LAE reserve development. Catastrophe losses and LAE (excluding development) on homeowners insurance were $90.4 million for the year ended December 31, 2008, compared to $35.5 million for the same period in 2007. Catastrophe losses and LAE increased for the year ended December 31, 2008 due
Net Investment Income in the Unitrin Direct segment decreased by $4.3 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to lower net investment income from Equity Method Limited Liability Investments, partially offset by higher levels of investments allocated to the Unitrin Direct segment, due in part to the acquisition of Merastar. The Unitrin Direct segment reported a net investment loss of $4.4 million from Equity Method Limited Liability Investments for the year ended December 31, 2008, compared to net investment income of $0.5 million for the same period in 2007.
Insurance Expenses in the Life and Health Insurance segment increased by $6.2 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to the inclusion of Primesco in 2008, partially offset by lower commission and other expenses. Insurance Expenses from the Primesco acquisition were $20.7 million for the year ended December 31, 2008. Excluding the impact of the Primesco acquisition, commission expense decreased by $11.1 million in 2008 due primarily to fewer career agents and the lower volume of insurance in-force.
Net Income in the Life and Health Insurance segment decreased by $45.2 million for the year ended December 31, 2008, compared to the same period in 2007, due primarily to the lower Operating Profit.
in California and from a collection call center in Arizona. In addition to restructuring costs of $7.1 million after tax incurred in 2009, Fireside Bank expects to incur early lease termination costs ranging from $2.5 million to $5.5 million after tax and employee termination costs ranging from $2.9 million to $6.0 million after tax during the next several years in connection with the exit plan. See the Risk Factor entitled “The Success of Fireside Bank’s plan to exit the automobile finance business is subject to risk.” in Item 1A., “Risk Factors,” in this Annual Report on Form 10-K for additional discussion of Fireside Bank’s exit plan.
Net Investment Income increased by $109.8 million for the year ended December 31, 2009, compared to the same period in 2008, due primarily to higher net investment income from Equity Method Limited Liability Investments, partially offset by lower dividend income from investments in equity securities and lower investment income from short-term investments. The Company reported net investment income of $47.7 million from Equity Method Limited Liability Investments for the year ended December 31, 2009, compared to net investment losses of $76.3 million for the same period in 2008. Investment income from Equity Method Limited Liability Investments increased for the year ended December 31, 2009, compared to the same period in 2008, due primarily to increased investment returns. Dividend income from equity securities decreased by $16.5 million for the year ended December 31, 2009, compared to the same period in 2008, due primarily to sales of the vast majority of the Company’s investments in Northrop common stock and other publicly-traded common stocks
Total Comprehensive Investment Gains (Losses) for the year ended December 31, 2009 included unrealized gains of $234.3 million before tax and gains from foreign currency translation adjustments on investments of $1.6 million before tax. Total Compensative Investment Gains (Losses) for the year ended December 31, 2008 included unrealized losses of $593.6 million before tax and foreign currency translation adjustments on investments of $2.0 million before tax. The losses on Equity Securities recognized in Other Comprehensive Loss for the year ended December 2008 were due primarily to the overall decline in the stock market in 2008. Total Comprehensive Investment Gains (Losses) for the year ended December 31, 2008 include realized gains on dispositions of $127.4 million and realized losses on dispositions of $66.2 million.
Deposits issued, was $428.5 million for the year ended December 31, 2009, compared to net cash used of $163.5 million for the same period in 2008. During 2009, Unitrin borrowed and repaid $220 million under the 2010 Credit Agreement. Unitrin did not repurchase shares of its common stock during 2009, compared to using $69.0 million of cash during 2008 to repurchase shares of its common stock. Unitrin used $66.6 million of cash to pay dividends for the year ended December 31, 2009, compared to $118.4 million of cash used to pay dividends during the same period in 2008. The amount of cash used to pay dividends decreased in 2009, compared to 2008, due primarily to a decrease in the quarterly dividend rate beginning with second quarter of 2009.
short-tail lines, especially in the more recent accident quarters, when compared with the paid loss development methodology. However, in some circumstances changes can occur which impact numerous variables including, but not limited to, those variables identified below that are difficult to quantify and/or impact the predictive value of prior development patterns relied upon in the incurred loss development methodology and paid loss development methodology. In those circumstances, the Company’s actuaries must make adjustments to these loss reserving estimation methodologies or use additional generally accepted actuarial estimation methodologies. In those circumstances, the Company’s actuaries, using their professional judgment, may place more weight on the adjusted loss reserving estimation methodologies or other generally accepted actuarial estimation methodologies until the newer development patterns fully emerge and the Company’s actuaries can fully rely on the unadjusted loss reserving estimation methodologies. In the event of a wide variation among results generated by the different projection methodologies, the Company’s actuaries further analyze the data using additional techniques.
SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (codified into ASC Topic 815, Derivatives and Hedging);
FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (codified into ASC Topic 260, Earnings per Share);
Short-term Investments include fixed maturities that mature within one year from the date of purchase, money market mutual funds, Federal funds sold and repurchase agreements. Short-term Investments are reported at cost, which approximates fair value.
Automobile Loan Receivables consists primarily of sub-prime loans to residents of California and other western and midwestern states. Automobile Loan Receivables is stated net of unearned discount, deferred loan fees and costs and reserve for loan losses. Unearned discount arises when the loan amount includes unearned pre-computed interest. The Reserve for Loan Losses is maintained at a level, which considers such factors as actual loss experience, economic conditions, and regulatory requirements and provides for estimated losses on loans, net of estimated recoveries, inherent in the portfolio. Additions to the Reserve for Loan Losses are charged to expense. Actual loan losses are deducted from the Reserve for Loan Losses when loans are charged off. Loans generally are charged off against the Reserve for Loan Losses at the end of the month that the loan becomes delinquent more than 120 days or when the collateral is repossessed. Recoveries of loans previously charged off are added to the Reserve for Loan Losses when received.
Gross unrealized gains and gross unrealized losses on the Company’s Investments in Equity Securities at December 31, 2009 were:
The vast majority of the Company’s equity securities at December 31, 2009 and December 31, 2008 are perpetual preferred stocks of financial institutions or investments in limited liability partnerships that primarily invest in distressed debt, mezzanine debt and secondary transactions. The Company considers the debt-like characteristics of perpetual preferred stocks along with issuer ratings when evaluating impairment. All such preferred stocks paid dividends at the stated dividend rate during the twelve month period preceding the evaluation date. The Company concluded that the declines in the fair values of the perpetual preferred stocks of these financial institutions were temporary in nature, largely driven by current market conditions, and since the Company intends to hold the securities until recovery, these investments are not considered to be other-than-temporarily impaired at December 31, 2009 and 2008. By the nature of their underlying investments, the Company believes that its investments in the limited liability partnerships exhibit debt-like characteristics which, among other factors, the Company considers when evaluating these investments for impairment. Based on evaluations at December 31, 2009 and December 31, 2008 of the factors in the preceding paragraph, the Company concluded that the declines in the fair values of the Company’s investments in equity securities were temporary at the respective evaluation dates.
Goodwill for the Life and Health Insurance segment at December 31, 2009 includes goodwill of $14.8 million related to the Company’s Reserve National reporting unit. Reserve National focuses on providing limited health insurance coverages to persons who lack access to traditional private options. The U. S. House of Representatives and the U.S. Senate passed separate, but not identical, bills in late 2009 which would effect sweeping changes to the American health care system. In the event that some version of these bills is enacted into law, the legislation could have a material adverse effect on the financial condition and results of operations of Reserve National and could impact the recoverability of the related goodwill. The Company cannot presently predict the ultimate effect, if any, such legislation might have on Reserve National’s operations and the recoverability of its goodwill if such legislation were to become law. Reserve National reported earned premiums of $127.0 million and net income of $3.1 million for the year ended December 31, 2009.
In 2009, the Company reduced its property and casualty insurance reserves by $80.9 million to recognize favorable development of losses and LAE from prior accident years. Personal lines insurance losses and LAE
A reconciliation of the Statutory Federal Income Tax Expense and Rate to the Company’s Effective Income Tax Expense and Rate from Continuing Operations for the years ended December 31, 2009, 2008 and 2007 was:
The components of Comprehensive OPEB (Income) Expense for the years ended December 31, 2009, 2008 and 2007 were:
Segment Net Income for the years ended December 31, 2009, 2008 and 2007 was:
The annual program covering the Company’s Unitrin Direct and Unitrin Specialty segments and Unitrin Business Insurance provided, effective January 1, 2007, reinsurance coverage of 100% of reinsured catastrophe losses of $36 million above retention of $4 million. The 2007 annual programs covering these segments did not include Merastar. The annual program covering Merastar was effective on March 31, 2007 and provided reinsurance coverage of 97.5% of reinsured catastrophe losses of $7.25 million above retention of $0.75 million.
Total catastrophe losses and LAE (including development), net of reinsurance recoveries, reported in continuing operations were $43.5 million, $144.9 million and $39.4 million for the years ended December 31, 2009, 2008 and 2007, respectively. Catastrophe losses and LAE (including development), net of reinsurance recoveries, for the years ended December 31, 2009, 2008 and 2007 by business segment are presented below.