This report includes "forward looking statements" which express expectations of future events and/or results. All statements based on future expectations rather than on historical facts are forward-looking statements that involve a number of risks and uncertainties, and the Company cannot give assurance that such statements will prove to be correct. Please refer to "Known Trends and Uncertainties" herein and exhibit 99.1 attached hereto for more information about factors which could affect future results.
Net premiums written for Personal lines decreased by $37.0 million, or 14.0%, to $227.8 million for the year ended December 31, 1999, from $264.8 million for the year ended December 31, 1998. The decrease in net premiums written was largely attributable to the declines in the Financial Services and Personal Auto lines (which includes the sale of Vesta County Mutual), partially offset by the continued rollover of the CIGNA homeowners business from the assumed reinsurance lines. Net premiums earned for Personal lines increased $1 million, or .4%, to $248.1 million for the year ended December 31, 1999, from $247.1 million for the year ended December 31, 1998.
Gross premiums written for Reinsurance decreased by $280.4 million, or 97.5%, to $7.2 million for the year ended December 31, 1999, from $287.6 million for the year ended December 31, 1998. The main contributors to the reduction of Reinsurance gross premiums written were the novation of certain treaties to Hart Re, an unearned premium portfolio transfer of a large reinsurance treaty and the continued roll over of CIGNA homeowners business to personal lines. Net premiums written for Reinsurance decreased $142.6 million, or 90.4%, to $15.1 million for the year ended December 31, 1999, from $157.7 million for the year ended December 31, 1998. Net premiums earned for Reinsurance decreased $98.3 million, or 50.6% to $96.0 million for the year ended December 31, 1999, from $194.3 million for the year ended December 31, 1998.
Gross premiums written for Personal lines increased by $102.3 million, or 41.8%, to $347.0 million for the year ended December 31, 1998, from $244.7 million for the year ended December 31, 1997. Included in the $102.3 increase in gross premiums written for Personal lines was a $101.0 million increase in gross premiums written due to a full year of Shelby premiums in 1998 versus six months of Shelby premiums in 1997. The remaining increase of $1.3 million was primarily due to the transfer of business from assumed Reinsurance to Personal lines following the acquisition of Vesta County Mutual partially offset by premium reductions in the Financial Services lines and Hawaiian Insurance & Guaranty("HIG").
Net premiums written for Personal lines increased by $123.6 million, or 87.5%, to $264.8 million for the year ended December 31, 1998, from $141.2 million for the year ended December 31, 1997. The increase in net premiums written was largely attributable to the writings from Shelby and the transfer of business from assumed Reinsurance to Personal lines following the acquisition of Vesta County Mutual. Net premiums earned for Personal lines increased $107.7 million, or 77.3%, to $247.1 million for the year ended December 31, 1998, from $139.4 million for the year ended December 31, 1997.
Net premiums earned from the discontinued Commercial Lines increased $25.5 million, or 59.4%, to $68.4 million for the year ended December 31, 1998, from $42.9 million for the year ended December 31, 1997 due to the inclusion of a full year of Shelby premiums in 1998 versus six months of Shelby premiums in 1997.
The Company has purchased directors' and officers' liability insurance ("D&O insurance") for the purposes of covering among other things the costs incurred in connection with these indemnification obligations. For the period in which most of the claims against the Company and certain of its directors and officers were asserted, the Company had in place a primary D&O insurance policy providing $25 million in coverage and an excess D&O insurance policy covering for an additional $25 million in coverage. The issuer of the primary D&O insurance policy, Cincinnati, has attempted to avoid coverage as discussed above, and the Company is vigorously resisting its efforts to do so.
Assets and liabilities of the commercial lines are primarily comprised of the following at December 31, 1999:
On September 30, 1999, the Company raised $25.1 million from placement of its Series A Convertible Preferred Stock. 2,950,000 shares of the Company's preferred stock were issued at $8.50 per share. Each share of the preferred stock is convertible into two shares of the Company's common stock. Dividends are cumulative at a 9% rate compounded semi-annually. The preferred stock will automatically be converted into shares of common stock of the Company at the date the common stock achieves an average closing price of $8.00 per share for twenty consecutive trading days. The preferred stock can also be converted at any time at the election of the preferred stockholders and must be converted at the end of fifteen years. The preferred stockholders have a liquidation preference senior to common stock, have voting rights of 5.9 million shares of common stock, and have the right to elect 3 members of the Board of Directors.