Results for the fourth quarter of 2001 were a net loss of $312,000 compared to net income of $924,000 in the fourth quarter of 2000. The 2001 fourth quarter result includes net realized investment losses, net of tax, of $312,000. The insurance segment experienced a significant increase in new business written, with the associated impact on net earnings as described above, producing pre-tax earnings of $228,000 before realized investment losses, compared to 2000 fourth quarter pre-tax earnings of $1.6 million. Practice management segment revenues
YEAR ENDED DECEMBER 31, ------------------------------- 2002 2001 ------------- ------------- (IN THOUSANDS)
Gross premiums earned before renewal credits increased $8.2 million, or 41%, to $28.2 million for the year ended December 31, 2001 from $20.0 million for the year ended December 31, 2000. The increase was primarily due to $6.8 million of additional premiums earned under basic medical professional liability insurance and $1.6 million of additional gross premiums earned for excess limits coverage.
The mix of business produced directly by us versus by agents has changed between years as shown on the following chart of new gross written premium. The proportion of business produced by our independent agency force has increased to 90% of total new business written in 2001 from 59% during in 2000.
Gross premiums earned increased $3.3 million to $8.1 million for the three months ended December 31, 2001 compared to $4.8 million for the 2000 fourth quarter. Reinsurance premiums ceded increased by $1.3 million to $2.2 million for the fourth quarter of 2001. Current year reinsurance ceded premiums increased by $1.0 million to $2.5 million for the fourth quarter of 2001 compared to the fourth quarter of 2000 corresponding to the increase in gross premiums earned. Reinsurance premiums related to prior years under the swing-rated treaty decreased by $279,000 to $301,000 for the fourth quarter of 2001 compared to $580,000 for the fourth quarter of 2000. Favorable development of losses under the swing-rated treaty results in the reduction of premiums due related to prior report years. The 2001 fourth quarter development was less favorable than the 2000 fourth quarter development.
Osprey bond $ (738,000) E-Health Solutions Group (300,000) Treasury securities 536,000 Miscellaneous gains 30,000 ------------- Total $ (472,000) =============
Underwriting expenses increased $3.3 million, or 67%, to $8.2 million for the year ended December 31, 2002 from $4.9 million for the year ended December 31, 2001. The increase in expenses primarily stems from the increase in new business, particularly agent produced business, through increases in commissions, travel, and other underwriting costs. These expenses were partially offset by an increase in ceding allowances as a result of the increase in premiums earned. Underwriting expenses also increased due to legal fees incurred for the collection litigation initiated by us and for the $1.2 million addition to the allowance for uncollectible premiums, as more fully discussed in the section "Net Premiums Earned." In addition, we received guaranty fund assessments totaling $355,000 stemming from the insolvency of PHICO Insurance Company. There is the possibility we could be assessed additional amounts in the future. However, since the amount of any potential future assessment is not reasonably estimable at this time, no additional expense accrual has been recorded.
Underwriting expenses increased $1.3 million, or 36%, to $4.9 million for the year ended December 31, 2001 from $3.6 million for the year ended December 31, 2000. The increase in expenses primarily stems from the increase in new business, particularly agent produced business, through increases in commissions, travel, and other underwriting costs. These expenses were partially offset by an increase in ceding allowances as a result of the increase in premiums earned. Underwriting expenses also increased due to legal fees incurred for the collection litigation initiated by us, as discussed in "Net Premiums Earned," and for the allowance for potential uncollectible premiums. In addition, we received a guaranty fund assessment from the D.C. Guaranty Fund of $243,000 stemming from the insolvency of Reliance Insurance Company. There is the possibility we could be assessed additional amounts in the future. However, since the amount of any potential future assessment is not reasonably estimable at this time, no additional expense accrual has been recorded. No similar assessment was received in 2000.
The tax benefit for the year ended December 31, 2002 was $322,000 compared to tax expense of $597,000 for the year ended December 31, 2001. The Federal corporate income tax rate of 34% was adjusted to an effective tax rate of (77%) for the year ended December 31, 2002 due to tax-exempt income and nontaxable dividends.
The payment of dividends to us by NCRIC, Inc. is subject to limitations imposed by the District of Columbia Holding Company System Act of 1993. Under the DC Holding Company Act, NCRIC, Inc. must seek prior approval from the Commissioner to pay any dividend which, combined with other dividends made within the preceding 12 months, exceeds the lesser of (A) 10% of the surplus at the end of the prior year or (B) the prior year's net income excluding realized capital gains. Net income, excluding realized capital gains, for the 2 years preceding the current year is carried forward for purposes of the calculation to the extent not paid in dividends. The law also requires that an insurer's statutory surplus following a dividend or other distribution be reasonable in relation to the insurer's outstanding liabilities and adequate to meet its financial needs. The District of Columbia permits the
1. I have reviewed this annual report on Form 10-K of NCRIC Group, Inc.;
/s/ Leonard M. Parver Director March 31, 2003 _____________________________ Leonard M. Parver, M.D.