The Company leases approximately 2,517 square feet of office space pursuant to a three-year lease that began July 1, 2008 and leased approximately 200 square feet on a month to month basis during 2008. Under the terms of the leases, the monthly rent expense for the 2,517 square feet is $3,041 through June 30, 2009, $3,146 from July 1, 2009 through June 30, 2010 and $3,251 from July 1, 2010 through June 30, 2011 and the month to month lease is $300 per month.
Cash used by investment activities during 2008 of $3,836,635 resulted primarily from loans made in the premium finance operations and the acquisition of FLAC. Cash used by investment activities during 2007 of $2,639,317 resulted primarily from loans made in the premium finance operations. Cash provided by financing activities in 2008 resulted from the $375,936 received from policyholder account deposits. Cash provided by financing activities in 2007 resulted from the $1,495,480 received from the sale of common stock less $184,877 for cost of the stock offering.
The Company’s marketing plan could be modified to emphasize certain product types and reduce others. New business levels could be varied in order to find the optimum level. Management believes that the Company’s current liquidity, current bond portfolio maturity distribution and cash position give it substantial resources to administer its existing business and fund growth generated by direct sales. The Company will service other expenses and commitments by: (1) using available cash, (2) dividends from TLIC and FLAC which are limited by law to the lesser of prior year net operating income or 10% of prior year-end capital and surplus unless specifically approved by the controlling insurance department (3) dividends from FTCC and (4) corporate borrowings, if necessary.
The Company cedes reinsurance under various agreements allowing management to control exposure to potential losses arising from large risks and providing additional capacity for growth. Estimated reinsurance recoverables are reported as assets and are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 113, “Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts.”
The amortized cost and estimated fair value of fixed maturities, by contractual maturity, at December 31, 2008 is shown below:
To the extent that the reinsurance companies are unable to meet their obligations under the reinsurance agreements, FLAC and TLIC remain primarily liable for the entire amount at risk.
The carrying values of these financial instruments approximates their fair values.
The following disclosure of the estimated fair values of financial instruments, as of December 31, 2008 and 2007, is made in accordance with the requirements of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments.” The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment was required to interpret market data to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.