felanders/preprocessed huggingface dataset:
In July of 1996, Vesta Fire entered into a pro rata reinsurance facility covering substantially all primary and assumed business in order to provide capital flexibility to take advantage of growth opportunities in the future. This reinsurance facility had the effect of reducing net premiums written in the second half of 1996 by $98.0 million. In 1997, the reinsurance facility had the effect of reducing net written premiums by $155.1 million, including reducing Shelby net written premiums by $37.5 million.
Gross premiums written for reinsurance increased by $192.7 million, or 45.6%, to $615.4 million for the year ended December 31, 1996, from $422.7 million for the year ended December 31, 1995. This growth was largely attributable to an increase in gross premiums written on pro rata business. The growth in pro-rata reinsurance gross premiums written was largely due to growth in existing accounts as well as the addition of new accounts in the 1996 period as compared to the 1995 period. Net premiums written for reinsurance increased $87.8 million, or 24.5%, to $446.1 million for the year ended December 31, 1996, from $358.3 million for the year ended December 31, 1995. Net premiums earned for reinsurance increased $124.3 million, or 42.8% to $415.0 million for the year ended December 31, 1996, from $290.7 million for the year ended December 31, 1995. The increase in net premiums earned is primarily attributable to the increase in net premiums written for the year ended December 31, 1996.
Loss and loss adjustment expenses ("LAE") for reinsurance increased by $77.0 million, or 45.0% to $248.1 million for the year ended December 31, 1996, from $171.1 for the year ended December 31, 1995. The dollar amount of loss and loss adjustment expenses incurred increased during 1996 due to the growth in premiums earned. The loss and LAE ratio for reinsurance for the year ended December 31, 1996 was 59.8% as compared to 58.9% for the year ended December 31, 1995.
The principal uses of funds at the holding company level are to pay operating expenses, interest on outstanding indebtedness and dividends to stockholders. During the last three years, the insurance subsidiaries of the Company have produced operating results sufficient to fund the needs of the Company. There can be no assurance as to the ability of the Company's insurance subsidiaries to continue to pay dividends at current levels. However, the Company is not aware of any demands or commitments of the insurance subsidiaries that would prevent the payment of dividends to the Company sufficient to meet the anticipated needs (including debt service) of the Company over the next twelve months. See "Business--Regulation."
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS) NOTE Q--BUSINESS ACQUISITION
HELD FOR INVESTMENT AVAILABLE FOR SALE 12/31/97 12/31/96 12/31/97 12/31/96 -------- -------- -------- -------- U. S. Government $ 1,497,025 3,119,413 29,728,865 29,458,220 A or better 16,607,415 17,126,370 55,898,026 48,953,029 Baa2 or better - - 6,264,380 2,211,000 ---------- ---------- ---------- ---------- $18,104,440 20,245,783 91,891,271 80,622,249 ----------- ---------- ---------- ----------
Investment Income: Investment income increased 6 percent, 8 percent and 10 percent in 1997, 1996 and 1995, respectively. The increases are due to larger investment portfolios. Fluctuations in interest rates on new investments account for the variance in yearly increases.
$ 165,337,309 148,824,187 =========== =========== See accompanying notes to consolidated financial statements.
Consolidation Policy The consolidated financial statements include the accounts of Cotton States Life Insurance Company, its wholly owned subsidiaries, CSI Brokerage Services, Inc. (CSI) and Cotton States Marketing Resources, Inc. (CSMR). All significant intercompany balances and transactions have been eliminated in consolidation.
The Company has elected to continue to apply the provisions set forth in APB Opinion No. 25 and follow the disclosure provisions of SFAS No. 123. See note 8 for further information.
Cotton States Mutual Insurance Company, through its wholly owned subsidiary, Shield Insurance Company, controls approximately 34 percent of the Company's outstanding common stock. Most officers and directors of the Company hold similar positions with Cotton States Mutual.
Included in other assets are deferred software costs relating to various system development projects of the Company and Cotton States Mutual that were amortized over five years, and were fully amortized as of December 31, 1996. Rent for use of the software of approximately $106,216, $448,000, and $644,000 in 1997, 1996, and 1995, respectively, has been charged to Cotton States Mutual and Shield. The Company recorded amortization expense of approximately $-0- in 1997, $342,000 in 1996, and $625,000 in 1995.
Management's Report to Shareholders of Cotton States Life Insurance Company and Subsidiaries
The Company's principal executive office is located in Irvine, California in approximately 3,500 square feet of leased space. The lease expires in August 2002. The Company leases its branch offices, which range in size up to approximately 11,000 square feet. The lease terms for the branch offices range from monthly to five years. The Company believes that its facilities are adequate for its current needs and that suitable additional space will be available as required.
Following is a discussion and analysis of the financial statements and other statistical data that management believes will enhance the understanding of APU's financial condition and results of operations. This discussion should be read in conjunction with the financial statements beginning on page.
In December 1995, Pennsylvania Company ("Pennco"), a wholly-owned subsidiary of APU, entered into a collateralized five-year reducing revolving credit agreement with several banks, under which it can borrow up to $75 million. At December 31, 1996, Pennco had no outstanding borrowings under the agreement.
ILIC owns three buildings which are adjacent to the 40 Parker Road building. One building, which is leased to third parties, contains approximately 3,500 square feet of space. The second building contains approximately 2,500 square feet of space and is leased to persons who perform maintenance services for ILIC's and ILCO's properties in Elizabeth, New Jersey. The third building, purchased during 1985, contains approximately 3,500 square feet of space, and is partially leased to third parties and the remainder is used to provide accommodations for employees working at the New Jersey office.
Income (loss) before federal income tax, equity in net earnings of affiliates, extraordinary items and cumulative effect of change in accounting principle of affiliate 10,394 10,610 11,560 12,179 7,981
Income before cumulative effect of change in accounting principle of affiliate 10,016 9,954 17,180 13,592 10,306
The principal source of liquidity for FIC's subsidiaries consists of the periodic payment of principal and interest by Family Life pursuant to the terms of a Surplus Debenture. The terms of the Surplus Debenture were previously approved by the Washington Insurance Commissioner. Under the provisions of the Surplus Debenture and current law, no prior approval of the Washington Insurance Department is required for Family Life to pay interest or principal on the Surplus Debenture; provided that, after giving effect to such payments, the statutory surplus of Family Life is in excess of 6% of assets (the "surplus floor"). However, Family Life has voluntarily agreed with the Washington Insurance Commissioner that it will provide at least five days advance notice of payments which it will make under the surplus debenture. As of December 31, 1995, the statutory capital and surplus of Family Life was $25.8 million, an amount substantially in excess of the surplus floor. During 1995, Family Life made principal payments of $10.97 million and interest payments of $5.1 million to Family Life Corporation under the Surplus Debenture. As of December 31, 1995, the principal balance of the Surplus Debenture was $49.9 million. The funds required by Family Life to meet its obligations under the terms of the Surplus Debenture are generated primarily from premium payments from policyholders, investment income and the proceeds from the sale and redemption of portfolio investments.
The fixed maturities portfolio of Family Life, as of December 31, 1995, consisted solely of fixed maturities investments which, in the annual statements of the companies, as filed with state insurance departments, were designated under the National Association of Insurance Commissioners ("NAIC") rating system as a "1" (highest quality). As of December 31, 1994, approximately 96.3% of the fixed maturities portfolio consisted of investments with an NAIC rating of "1" and the remaining portion were designated with an NAIC rating of "2" (high quality).
During the years ended September 30, 1997, 1996 and 1995, IRA Inc. Issued notes payable in the amounts of $344,847, $1,216,648 and $79,804 respectively, to stockholders as consideration for the repurchase of their stock by the Company.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in national economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination.
In the normal course of business, the Bank has outstanding commitments and contingent liabilities, such as commitments to extend credit and standby letters of credit, which are not included in the accompanying consolidated financial statements. The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making such commitments as it does for instruments that are included in the consolidated balance sheet. As of September 30, 1997 the Bank has committed credit lines of $3,922,300 of which $1,587,090 has been advanced.
Net investment income for the year ended December 31, 2007 reflects partial period results for Dunn, North Carolina retail property acquired on August 17, 2007.
The following sections discuss those critical accounting policies applied in preparing the unaudited Consolidated Financial Statements of the Account and the Partnership that are most dependent on the application of estimates and assumptions.
Net Investment Income: Net investment income approximated $20.7 million in 1999 and $15.4 million in 1998. Total investments grew to $393.8 million at December 31, 1999 from $356.5 million at December 31, 1998. The growth in investment income is due to investing the proceeds from the Company's May 1998 FELINE PRIDESSM security offering for the entire year, net cash flows provided from operating activities, and the investable assets acquired in the Company's acquisition.
Other Operating Expenses: Other operating expenses increased $6.7 million to $8.9 million from $2.2 million for 1998. The increase in other operating expenses was due to the following: operating expenses of the agency operations of Liberty ($5.6 million); and goodwill amortization due to the acquisition of Liberty ($0.7 million).
The Company is required to maintain certain investments in trust accounts under reinsurance agreements with unrelated insurance companies that cede insurance risks to the Company. At December 31, 1999 and 1998, the Company had investments with a carrying value of $2.4 million and $2.3 million, respectively, in trust accounts pursuant to a terminated
The composition of deferred tax assets and liabilities and the related tax effects as of December 31, 1999 and 1998 are as follows (in thousands):
At December 31, 1999, the future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 1999 were as follows (in thousands):
Intangible assets 22463 18719 –16.7% Investments: Real estate 4511988 4444023 Investments in affiliates 14706 4627 Non-consolidated holdings 4293 3564 Own shares 44544 0 Shares, derivatives, other non-fixed-interest-rate securities and investment funds 2844917 2288576 Fixed-interest-rate securities 13216479 13621768 Promissory loans 737065 865445
A review of the value of fixed assets including goodwill and other intangible assets is made if there are indicators as a result of changed circumstances or events that have occurred that suggest that book values are too high. A negative difference to the book value is recognized in the shareholders’ equity (e.g. real estate)
Investments: Shares, derivatives, other non-fixed-interest-rate securities and investment funds 3657.5 –6.5 1169.7 –1932.6 –17.3 –40.3 2830.5 542.0 2288.6 2844.9
As auditors of the Group, we have audited the consolidated financial statements (profit and loss account, balance sheet, cash flow statement and notes pages 76 to 93) of Helvetia Patria Group for the year ended
Finance Ltd., Jersey. A corresponding own-shares reserve is reported in the shareholders’ equity.
Equity securities are carried at fair value and consist primarily of investments in marketable common and preferred stocks of corporate entities in which the Company's ownership does not exceed 20%.
"Other" primarily represents reclassifications to the reserve for assets acquired in connection with claim settlements. Included in 1995 is $10.0 million in purchase accounting adjustments. Claims activity associated with reinsurance is not material and, therefore, not presented separately.
Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standard Board (SFAS) No. 123, "Accounting for Stock-Based Compensation." In accounting for its plan, the Company, in accordance with the provisions of SFAS No. 123, applies Accounting Principles Board Opinion No 25, "Accounting for Stock Issued to Employees." As a result of this election, the Company does not recognize compensation expense for The Stock Option Plan. The Company's net income and earnings per share would not be materially different if it had elected to recognize compensation expense based on the fair value method prescribed by SFAS No. 123.
The fair value for these options was estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996: dividend yield of 2.8%; expected volatility of 41.0%; risk-free interest rate of 6.5%; and expected life of six years. The weighted average fair value of options granted during 1996 was $9.86.
Future minimum rental payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1996, are as follows (in thousands):
The Company believes its existing facilities are suitable for the Company to conduct its present business. The Company anticipates in 1997 purchasing an adjacent parcel of land and adding an approximate 18,000-square-foot addition to the Company's principal office located in Norristown, Pennsylvania in order to provide for future business needs.
Change in future policy benefits and claims and change in premium due and uncollected, unearned premium and premium received in advance of $8.5 million and $1 million, respectively increased in 1996 compared to 1995 due to increased accident and health new business from "The Provident Solution" and HealthQuest one life managed care health insurance products. The Company anticipates the majority of its unpaid accident and health claims incurred during 1996 will be paid during 1997.
Consolidated Statements of Operations Years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity Years ended December 31, 1996, 1995 and 1994
The Company's principal expense is commissions paid to independent agents. The Company regularly reviews the profitability of its agents, adjusting commission levels or cancelling certain agents where profitability objectives are not being met and expanding operations where acceptable levels of profitability are available. The Company continually monitors its expense ratio, which is the sum of salaries and employee benefits, agency commissions and other expenses (exclusive of interest, goodwill and assimilation costs) expressed as a percentage of operating revenues.
The Company reported pre-tax investment income of $49.3 million, $16.3 million and $36.4 million in 1998, 1997 and 1996, respectively. Excluding capital gains and losses, investment income was $46.5 million, $16.6 million and $13.1 million in 1998, 1997 and 1996,
The following table provides information about the Company's financial instruments that are sensitive to changes in interest rates. For investment securities, the table presents principal
restrictions. Market risk control relates principally to ratings of issuers and length to maturity. The Company does not enter into derivative transactions.
The purchase of MOMED Holding Company (MOMED) was effective December 20, 1996. MOMED operations for the period December 20, 1996 through December 31, 1996 were considered immaterial for inclusion in the Company's consolidated statement of income. Selected consolidated financial data for MOMED and its subsidiaries, including its primary subsidiary, Missouri Medical Insurance Company, for the year ending December 31, 1996 is as follows (dollars in thousands):
Forever Network owns and operates three funeral homes in St. Louis and Independence, Missouri and Los Angeles, California and maintains sales and administrative offices at each of those sites. Forever Network also operates production facilities for the biography business at each location with central operations in Hollywood, California. Our Internet development and operation is based at the Hollywood facility.
During 1999, 1998 and 1997 we derived revenues primarily from premiums on insurance policies generated by National Prearranged Services. In the event of a decline in National Prearranged Services' preneed sales, our future revenue growth could be impacted in the event that we could not replace the National Prearranged Services sales force with our own or another marketing entity's sales force. Net investment income and realized investment gains also have contributed significantly to total revenues as our invested assets have grown.
Our expenses during 1999, 1998 and 1997 consisted principally of benefits paid or accrued, commissions on the sale of policies and general and administrative costs associated with life insurance company operations. We anticipate that benefit costs and commissions will continue to increase as we execute our growth plans. Although general and administrative costs have increased in accordance with the growth in our business, we believe our infrastructure will support increasing levels of internal revenue growth without the need for general and administrative expenses to increase at a similar rate.
Net investment income increased $4.4 million, or 72%, from $6.2 million in the year ended December 31, 1997 to $10.6 million in the year ended December 31, 1998. This increase was attributable to a higher level of invested assets (primarily resulting from the acquisitions of blocks of business from Woodmen Accident and Life Company and World Insurance Company). Invested assets increased by 11% in 1998 compared to 1997. There was a larger increase in investment income due to the addition of the business from Woodmen Accident and Life Company late in 1997.
Deferred policy acquisition costs increased approximately $3.5 million from $16.8 million at December 31, 1998 to $20.3 million at December 31,1999, due to increases in new policies issued and in-force.
include the financial strength and specific prospects for the issuer as well as our intent to hold the security until recovery.
years in the carrying amount of assets and liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the opening balance of retained earnings. SAB 108 also requires the adjustment of any prior quarterly financial statements within the fiscal year of adoption for the effects of such errors on the quarters when the information is next presented. The Company has adopted SAB 108 for the year ending December 31, 2006. The adoption of SAB 108 did not have any impact on the Company’s financial condition or results of operations.
In July 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation clarifies the accounting for income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Interpretation is effective for fiscal years beginning after December 15, 2006. The Company intends to adopt the provisions of this Interpretation in the first quarter of 2007 and does not anticipate that it will have a material impact on the Company’s financial condition or results of operations.
The Company's leasing operations are conducted through its 50% owned subsidiary, Mobile Attic, Inc. The investment in Mobile Attic is accounted for under the Equity Method in the Consolidated Financial Statements of the Company. Mobile Attic was incorporated in August of 2001 and is a joint venture with a manufacturing partner, Cash Brothers Leasing of Elba, Alabama.
Purchase of property and equipment (1,039 ) (335 ) (378 )
The liability for future life insurance policy benefits is computed using a net level premium method including the following assumptions:
NSIC - including realized capital gains of $356, $652 and $986,
In 1987, the Company established a deferred compensation plan for its Board of Directors. The Board members have an option of deferring their fees to a cash account or to a stock account and all share deferrals are recorded at the fair market value on the date of the award. Costs of the deferred compensation plan for 2002, 2001, and 2000 amounted to approximately $19,649, $35,065, and $54,755, respectively.
shareholders’ equity. Our Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our consolidated balance sheets.
The preparation of the consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
conversion of the working capital loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Company’s Class A ordinary shares). The holders of these securities will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
During the second quarter of 2014, we placed our reinsurance program for the 2014 hurricane season. The contracts reinsure for personal lines property excess catastrophe losses caused by multiple perils including hurricanes, tropical storms, and tornadoes. The agreements are effective June 1, 2014, for a one-year term and incorporate the mandatory coverage required by and placed with the Florida Hurricane Catastrophe Fund (FHCF). The FHCF is a Florida State-sponsored trust fund that provides reimbursement to Florida property insurers for covered hurricane losses. The private agreements provide coverage against severe weather events such as hurricanes, tropical storms and tornadoes.
For our Level 3 assets, our internal pricing methods are primarily based on models using discounted cash flow methodologies that determine a single best estimate of fair value for individual financial instruments. In addition, our models use a discount rate and internally assigned credit ratings as inputs (which are generally consistent with any external ratings) and those we use to report our holdings by credit rating. Market related inputs used in these fair values, which we believe are representative of inputs other market participants would use to determine fair value of the same instruments include: interest rate yield curves, quoted market prices of comparable securities, credit spreads, and other applicable market data. As a result of the significance of non-market observable inputs, including internally assigned credit ratings as described above, judgment is required in developing these fair values. The fair value of these financial assets may differ from the amount actually received if we were to sell the asset. Moreover, the use of different valuation assumptions may have a material effect on the fair values on the financial assets.
Investment income is net of investment expenses. Realized investment gains and losses are determined on the basis of specific costs related to those investments sold and are recorded on the trade date. Also included in realized investment gains and losses are losses arising from declines in the realizable value of investments considered to be other than temporary. Unrealized gains and losses on investments classified as available for sale and investments in foreign operations are included net of income tax in Shareholders' equity.
The unaudited pro forma condensed consolidated results of operations presented below assume the transaction occurred at the beginning of each period presented:
The amortized cost and estimated fair value of fixed maturities at December 31, 1994 by contractual years-to-maturity follow. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations.
EPS-Fully Diluted $ 5.47 $ 1.20 $ 0.96 $ 0.38 $ 0.94
• the markets for directors and officers (D&O) and errors and omissions (E&O) insurance; and
• claims and litigation arising out of such disclosures or practices by other companies;
• the ability of our technology resources to perform as anticipated; and
Our Consolidated Financial Statements include amounts that, either by their nature or due to requirements of accounting principles generally accepted in the U.S. (GAAP), are determined using best estimates and assumptions. While we believe that the amounts included in our Consolidated Financial Statements reflect our best judgment, actual amounts could ultimately materially differ from those currently presented. We believe the items that require the most subjective and complex estimates are:
The following table shows our total reserves (including loss expense reserves) segregated between case reserves and IBNR reserves:
At December 31, 2011, Level 3 assets represented four percent of assets that are measured at fair value and two percent of total assets and Level 3 liabilities represented 100 percent of liabilities that are measured at fair value and two percent of total liabilities. During 2011, we transferred $70 million out of our Level 3 assets. Refer to Note 4 to the Consolidated Financial Statements for a description of the valuation techniques and inputs used to determine fair values for our financial instruments carried or disclosed at fair value by valuation hierarchy (Levels 1, 2, and 3) as well as a roll-forward of Level 3 financial instruments for the years ended December 31, 2011, 2010, and 2009.
In 2000, a competitor in our Wisconsin market terminated its participation in the Medicaid program benefiting our enrollment growth. Our membership growth in the northern and central regions of Indiana was offset by our decision to reduce our participation in the southern region. Our El Paso health plan achieved sizable growth because we were named the default health plan in this area and enrolled a majority of the members who failed to select a specific plan.
In applying this policy, our management uses its judgment to determine the assumptions to be used in the determination of the required estimates. While we believe these estimates are appropriate, it is possible future events could require us to make significant adjustments for revisions to these estimates. The estimates are based on our historical experience, terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.
On December 18, 2001, we closed our initial public offering of 3,250,000 shares of common stock at $14.00 per share. We received net proceeds of $41.0 million. Prior to this offering, we financed our operations and growth through private equity and debt financings and internally generated funds, raising $22.4 million between 1993 and 1998. This consisted of $18.4 million through the issuance of equity securities and $4.0 million through subordinated debt financing.
IF WE ARE UNABLE TO MAINTAIN SATISFACTORY RELATIONSHIPS WITH OUR PROVIDER NETWORKS, OUR PROFITABILITY WILL BE HARMED.
IF WE ARE UNABLE TO INTEGRATE AND MANAGE OUR INFORMATION SYSTEMS EFFECTIVELY, OUR OPERATIONS COULD BE DISRUPTED.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN ADEQUATE INSURANCE.
Our consolidated financial statements and related notes thereto required by this item are set forth on the pages indicated in Item 15.
Effective April 1, 2001 we purchased a diagnostic imaging center in Palatka, Florida for $5.8 million in cash, including working capital. The funds used for the acquisition were obtained from the Company's available cash and proceeds from the sale of a facility and previously held in a Starker Trust which is included in deferred taxes and other current assets in the accompanying consolidated balance sheet as of December 31, 2000. Cost in excess of net assets acquired totaled $1.8 million and was amortized using a 30 year life.
Our total costs did not increase at the same rate as our revenues. The increase in volumes and revenues per equivalent admission contributed to the reduction of our total operating expenses as a percentage of revenues because we were able to spread our operating costs over an increased based of revenues.
The estimates, judgements and assumptions used by us under "Allowance for Doubtful Accounts," "Allowance for Contractual Discounts" and "Professional and General Liability Reserves" are, we believe, reasonable, but these involve inherent uncertainties as described above, which may or may not be controllable by management. As a result, the accounting for such items could result in different amounts if management used different assumptions or if different conditions occur in future periods.
At December 31, 2001, our consolidated long-term debt equaled approximately $150.0 million. We also may draw on a revolving credit commitment of up to $200 million under our bank credit agreement. In addition, we have the ability to incur additional debt, subject to limitations imposed by our credit agreement and the indenture governing the notes issued by our subsidiary, LifePoint Hospitals Holdings, Inc. Our leverage and debt service requirements could have important consequences to our stockholders, including the following:
Other hospitals provide similar services, which may raise the level of competition faced by our hospitals.
If the distribution were to fail to qualify for tax-free treatment, then, in general, additional corporate tax, which would be substantial, would be payable by the consolidated group of which HCA is the common parent. Each member of HCA's consolidated group at the time of the distribution, including LifePoint, would be jointly and severally liable for this tax liability. In addition, LifePoint entered into a tax sharing and indemnification agreement with HCA and Triad, which prohibits LifePoint from taking actions that could jeopardize the tax treatment of either the distribution or the restructuring transactions that preceded the distribution, and requires LifePoint to indemnify HCA and Triad for any taxes or other losses that result from LifePoint's actions, which amounts could be substantial. If LifePoint were required to make any indemnity payments or otherwise were liable for additional taxes relating to the distribution, LifePoint's financial position and results of operations could be materially adversely affected.
The ratio of amortized deferred policy acquisition costs and other underwriting expenses to net premiums earned increased to 33.7% in 2002 from 32.9% due to the percentage decrease in net premiums earned being greater than the percentage decrease in other underwriting expenses. Expenses that vary directly with the Company's premium volume, primarily commissions, premium taxes and state assessments, represented 20.0% and 19.8% of net premiums earned in 2002 and 2001, respectively. Other underwriting expenses, such as salaries, employee benefits and other operating expenses vary indirectly with premium volume and comprise the remainder of the Company's expenses.
Voluntary commercial lines direct premiums written for 2001 were $56,323,000, a decrease of 16% from $67,225,000 in 2000. This decrease was attributable in part to the discontinuation in 2001 of a program to underwrite specialized commercial auto insurance (the Auto Program) which produced $5,470,000 of direct premiums written in 2000. All policies issued under the Auto Program were 100% reinsured through certain Lloyd's syndicates and therefore had no impact on net premiums written, net premiums earned or net losses and LAE incurred by the Company. The Company recorded all direct underwriting expenses incurred, including commissions with respect to the acquisition of these policies, which were offset by reinsurance commission income.
The Company maintains a $2,000,000 unsecured credit facility from a bank in the form of a master grid note. Any borrowings under this facility are payable on demand and carry an interest rate which can be fixed or variable and is negotiated at the time of each advance. This facility is available for general working capital purposes and for repurchases of the Company's common stock. No amounts were outstanding related to this loan at December 31, 2002.
In November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" to clarify accounting and disclosure requirements relating to a guarantor's issuance of certain types of guarantees. FIN 45 requires entities to disclose additional information about certain guarantees, or groups of similar guarantees, even if the likelihood of the guarantor's having to make any payments under the guarantee is remote. The disclosure provisions are effective for financial statements for fiscal years ended after December 15, 2002. For certain guarantees, the interpretation also requires that guarantors recognize a liability equal to the fair value of the guarantee upon its issuance. This initial recognition and measurement provision is to be applied only on a prospective basis to guarantees issued or modified after December 31, 2002. In the normal course, the Company may enter into agreements which may contain features which meet the FIN 45 definition of a guarantee, and while the maximum guarantee cannot always be determined, given the nature of the future events which may or may not occur, any such arrangements that were material have been previously disclosed by the Company.
The Company expects to contribute $4,800 to its pension plan and $1,300 to its other post-retirement benefit plan in 2004.
The following table summarizes the range of exercise prices for outstanding Lifeco common stock options granted to Company employees at December 31, 2003:
(d) Calculated using the treasury stock method. Class B warrants to purchase an aggregate of 150,000 common shares were outstanding as of December 31, 2001 and expire on September 19, 2005. Class B warrants become exercisable at $20.00 per share if the closing price of our common shares is at least $30.00 per share for at least 20 out of 30 consecutive trading days or a change of control occurs.
As of December 31, 2001, our readily available cash, short-term investments and marketable securities, excluding amounts held by our regulated insurance subsidiaries, totaled $108.5 million. Such amount consisted of $26.4 million of cash and short-term investments and $82.1 million of fixed maturity investments. As of that date, investments that are restricted or generally unavailable for liquidity purposes (other than our ownership interests in our subsidiaries and the invested assets of our regulated insurance subsidiaries) included $35.4 million of privately held securities and $22.2 million of fixed maturity investments held in escrow in connection with the sale of our prior reinsurance operations to Folksamerica in May 2000. In addition, at December 31, 2001, we had investment commitments relating to our privately held investment, Distribution Investors, LLC, of approximately $0.6 million. In connection with the capital infusion on November 20, 2001, we were released from our obligations to make any further capital contributions to Trident II, other than with respect to outstanding capital calls of approximately $6.5 million, which we funded in November 2001.
Statement of Financial Accounting Standards No. 131 requires certain disclosures about operating segments in a manner that is consistent with how management evaluates the performance of the segment. At December 31, 2001, our primary operating segment was insurance. In 2002, we expect to operate in two different business segments, insurance and reinsurance.
At December 31, 2001, the net deferred income tax asset was $13.7 million after reflecting a valuation allowance of $9.6 million recorded to reduce the net deferred income tax asset to the amount that management expects to more likely than not be realized. This valuation allowance primarily relates to certain deferred income tax assets of ART Services, which was acquired during 2001, and also reflects the reduction in the valuation allowance recorded at December 31, 2000 due to the expected tax effects of the new underwriting initiative, as discussed above. At December 31, 2000, we had a valuation allowance of $5.7 million that adjusted the net deferred income tax asset to its estimated realizable value of $8.2 million. At December 31, 1999, we did not have a valuation allowance because we believed at that time the entire deferred tax asset was realizable due to our ability to generate future taxable income. See "--Critical Accounting Policies, Estimates and Recent Accounting Pronouncements--Valuation Allowance."
The loss ratio in 1998 (loss and loss adjustment expenses related to premiums earned) was 61.0%, compared with 63.5% in 1997. The favorable loss experience is largely related to the effectiveness of Proposition 213, an initiative made effective January 1, 1997 which prohibits recovery of non- economic (pain and suffering) losses by uninsured motorists or drunk drivers injured in automobile accidents. The 7% rate reduction beginning on April 1, 1998 negatively affected the Company's loss ratio during a large portion of 1998. The full impact of the rate reduction on the Company's loss ratio will be felt in 1999 and succeeding periods.
The loss ratio in 1997 (loss and loss adjustment expenses related to premiums earned) was 63.5%, compared with 66.5% in 1996. The improvement in loss experience in 1997 is in large part related to the loss cost savings from the enactment of California Proposition 213 that became effective January 1, 1997. The 1997 loss ratio reflects deficiencies from unfavorable development on allocated loss adjustment expenses from prior periods. The initial estimates were based principally on the Company's actual experience and did not fully reflect the increases in the legal expenses of defending the Company's insureds arising from the Company's policy of aggressively defending, including litigating, exaggerated bodily injury claims arising from minimal impact automobile accidents.
Fixed maturities available for sale include those securities that management intends to hold for indefinite periods, but which may be sold in response to changes in interest rates, tax planning considerations or other aspects of asset/liability management. Fixed maturities available for sale, which include bonds and sinking fund preferred stocks, are carried at market. Short-term investments are carried at cost, which approximates market. Investments in equity securities, which include common stocks and non-redeemable preferred stocks, are carried at market.
Acquisition costs related to unearned premiums, which consist of commissions, premium taxes and certain other underwriting costs, which vary directly with and are directly related to, the production of business, are deferred and amortized to income ratably over the terms of the policies. Deferred acquisition costs are limited to the amount which will remain after deducting from unearned premiums and anticipated investment income, the estimated losses and loss adjustment expenses and the servicing costs that will be incurred as the premiums are earned. The Company does not defer advertising expenses.
Werner Künzle* Balthasar Mätzener* Roger P. Merkelbach* Max Nabholz Samuel Patthey Pierre-Claude Perrenoud Heinrich Pfefferle
Accident business overall produced a profit. In the year under review. Sickness reinsurance, in contrast to the previous year's results, showed a profit.
We believe that our facilities are adequate to meet our current needs and that additional facilities are available to meet our development and expansion needs in existing and projected target markets.
(1) Appraisal service revenue was a new revenue stream in 2004, resulting from providing appraisal services to customers through Nationwide, our subsidiary acquired in 2004.
(3) Preferred stock was non-convertible and could be redeemed after 2023 for $17.5 million. The preferred stock had an 8% cumulative dividend, payable quarterly. This preferred stock was redeemed for $17.5 million on January 2, 2006 with a portion of the proceeds from a secondary offering completed in November 2005.
We are engaged in the business of issuing title insurance policies and performing related services, including escrow, valuation and flood determination services in connection with real estate transactions. We operate through approximately 140 branch offices and employ over 2,500 individuals located in Arizona, California, Nevada, Pennsylvania and Texas.
Notwithstanding the increase in interest rates, home prices appreciated strongly in many markets in 2004 and 2005, benefiting our revenues. Refinance activity decreased during 2005 as compared to 2004, but real estate activity continued at a high rate and the appreciation of home prices remained high. The decreased refinance activity is evidenced by the Mortgage Bankers Association’s (“MBA”) statistics showing that approximately 46.5% of new loan originations in 2005 were refinance transactions as compared with approximately 52.8% in 2004. MBA’s Mortgage Finance Forecast as of January 2006 estimated a $2.787 trillion mortgage origination market for 2005, which would be a 0.5% increase from 2004. The MBA forecast anticipates a decrease in mortgage originations to $2.236 trillion in 2006, with refinance transactions accounting for 35% of the market. The MBA also estimated that purchase money mortgages were expected to rise by 14.0% in 2005, but were expected to also decrease by 2.5% in 2006.
Realized gains and losses on investments are determined using the specific identification basis and are recognized on a trade-date basis. Unrealized gains and losses on investments, net of deferred income tax expense (benefit), are excluded from income and included as a separate component of stockholders’ equity. If unrealized losses on investments are determined to be other than temporary during the reporting period, they are recognized as realized losses.
At December 31, 2005 the Company had fixed maturity bonds with an amortized cost of $17.3 million and fair value of $17.3 million that have provisions, which give borrowers the right to call or prepay their obligations with or without prepayment penalties.
(xiv) deviations from assumptions regarding future persistency, mortality, morbidity and interest rates used in calculating reserve amounts and in pricing the Company’s products; and
The primary segment profitability measure that management uses is pre-tax operating earnings, which is calculated by adjusting income from continuing operations before federal income taxes and the cumulative effect of adoption of accounting principles to exclude: (1) net realized gains and losses on investments, hedging instruments and hedged items, except for periodic net coupon settlements on non-qualifying derivatives; (2) net realized gains and losses related to securitizations; and (3) the adjustment to amortization of DAC related to net realized gains and losses.
Pre-tax operating earnings increased primarily due to higher policy charges and lower amortization of DAC, partially offset by lower life insurance premiums and higher other benefits and claims.