The effect of inflation on the net income of the Company during the years ended December 31, 2011, 2010, and 2009 was not significant.
Other Income from Insurance Company Revenues and Insurance Company Operations is primarily comprised of miscellaneous non-recurring income or items not relevant to the primary income statement captions:
At the end of each fiscal quarter, the Company’s unpaid claims costs (reserves) for each accident year (i.e., for all claims incurred within each year) are re-evaluated independently by the Company’s president, the Company’s chief financial officer and by an independent consulting actuary. Generally accepted actuarial methods including the widely used Bornhuetter-Ferguson and loss development methods are employed to estimate ultimate claims costs. An actuarial central estimate of the ultimate claims costs and IBNR reserves is ultimately determined by management and tested for reasonableness by the independent consulting actuary. During 2011, the claims costs emerging for the current accident year were slightly better than expected, hence the ultimate claims cost estimated using the Bornhuetter-Ferguson incurred method was not materially different from ultimate claims costs calculated by the expected loss ratio method. It was noted that the 2010 claims costs emerging during 2010 were higher than expected; however the 2010 claims costs emerging during 2011 were slightly lower than expected. Total 2009 claims costs emerging through 2011 were higher than expected. Each year, management reviews such aberrations to determine whether they are a normal part of the process or an indication that a change in reserve assumptions is appropriate. Management concluded that the differences noted above are normal differences between actual and expected claims costs that emerge from time to time, particularly in an insurer the size of the Company, and does not believe a change of assumptions to be appropriate.
In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” (ASC 220). The new standard requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. Under the continuous statement approach, the statement would include the components and total of net income, the components and total of other comprehensive income and the total of comprehensive income. Under the two statement approach, the first statement would include the components and total of net income and the second statement would include the components and total of other comprehensive income and the total of comprehensive income. The ASU does not change the items that must be reported in other comprehensive income. The new guidance is effective retrospectively for interim and annual periods beginning after December 15, 2011, with early adoption permitted. The adoption of the new standard will not have a material impact on the Company’s consolidated financial statements.
The amortized cost and estimated fair value of fixed maturity investments at December 31, 2011, by contractual maturity are as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.