The loss ratio for the risk products within specialty managed care products and services in 2000 was 77.1%, compared with 75.2% in 1999 and 70.9% in 1998. The loss ratios principally relate to the life, disability, workers' compensation and dental product lines of business. These products represent relatively small blocks of business. Therefore, the loss ratio can exhibit significant volatility due to varying levels of claim frequency and severity. Generally, the anticipated aggregate loss ratio for specialty risk products should range between 70% and 75%. The higher loss ratios in 2000 are attributable to increased reported life claims and higher-than-anticipated short-term disability claims, along with additional case reserves on the long-term disability line of business. In 1998, United
Included in other operations is interest expense of $6.5 million in 2000 compared with $5.3 million in 1999 and $1.5 million in 1998. On September 11, 1998, UWS assumed a $70.0 million debt owed to
Should the buyback options be exercised, UWS would lose rights to the future profits on Unity. The cash received by UWS pursuant to the exercise of the buy back option could be redeployed to support additional premium writings, acquire other businesses or be invested to earn a portfolio return.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
When the Company reports a net loss, stock options are not included in the calculation of earnings per share ("EPS") because their inclusion would have an antidilutive effect. Weighted average shares outstanding were 16,941,174 and 16,840,672 for the years ended December 31, 2000 and 1999, respectively.
The Company and certain subsidiaries participate in securities lending programs whereby blocks of securities, which are returnable to the Company on short-term notice and included in investments, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $13,448,000 and $15,030,000 and estimated fair value of $13,730,000 and $14,377,000 were on loan under the program at December 31, 2000 and 1999, respectively.
The Company and certain of its subsidiaries participate with BCBSUW in a multiple employer defined benefit pension plan ("the Plan"). The Plan provides retirement benefits to covered employees based primarily on compensation and years of service. Since the Plan is overfunded, no contributions were made in 2000, 1999 or 1998.
Effective November 1, 2000, the Company completed its negotiations leading to the takeover of the insurance operations of Family Health Plan Cooperative, Inc. ("FHP"), a health maintenance organization in Milwaukee, Wisconsin. At the time of the acquisition of FHP's insurance operations by the Company, FHP was subject to an order of liquidation under the direction of the Office of the Commissioner of Insurance of the State of Wisconsin due to FHP's deteriorating financial condition. In conjunction with this transaction, the Company received certain assets totaling approximately $15,840,000 (primarily cash and accounts receivable) and assumed certain liabilities totaling approximately $26,811,000 (primarily medical claim liabilities). Contingencies related to this transaction, which may result in adjustments to goodwill, include realization of certain accounts receivable and amounts to be recovered from the ultimate liquidation of a former subsidiary of FHP.
The transaction was recorded in accordance with the purchase method of accounting. Goodwill of approximately $10,971,000 was recorded in conjunction with the transaction, which will be amortized over a period of 20 years. As a result of the FHP transaction, the Company expects to maintain approximately 40,000 additional members at new premium rates.