General and administrative expense. General and administrative expense for 2000 increased over 1999 principally due to increased new business production and non-recurring expenses related to the implementation in May, 2000 of the Company's new policy administration and claims data processing systems.
|X| To holders of Old Common Stock as of December 10, 1998, 130,000 shares or 2%, of the New Common Stock issued on the Effective Date and New Warrants to purchase an additional 693,761 shares, or 5%, of the New Common Stock issued on the Effective Date, on a fully diluted basis. Fractional shares of New Common Stock were not issued in connection with the Plan. As a result of this provision, certain holders of Old Common Stock received no distribution of New Common Stock or New Warrants under the Plan.
Included in fixed maturities at December 31, 2000 and 1999, are high-yield, unrated or less than investment grade corporate debt securities comprising approximately 0.9% and 1.5% of fixed maturities at December 31, 2000 and 1999, respectively.
As of the Effective Date, these Convertible Notes were canceled, extinguished and retired. Holders of the Convertible Notes and allowed general unsecured creditors received their pro rata share of 94% of the New Common Stock issued on the Effective Date.
As of December 31, 2000, the Company has reported cumulative pre-tax losses since the fresh start date of March 31, 1999. Realization of the Company's deferred tax asset is dependent upon the return of the Company's operations to profitability. Pre-tax losses during 2000 were principally attributable to adverse claims experience for certain major medical products. Management believes that such product losses can be significantly reduced through aggressive rate increase management. However, projections of future profitability are significantly discounted when evaluating the recoverability of deferred tax assets and do not overcome the negative evidence of cumulative losses. Accordingly, the Company increased its deferred tax asset valuation allowance by $10.4 million to $18.3 million to fully reserve the remaining net deferred tax assets as of December 31, 2000. As a result of limitations arising from the action of sections 108 and 382 of the Internal Revenue Code, the Company's net operating loss carryforwards and valuation allowance as of December 31, 1999 were reduced by $9.1 million. Changes in the valuation allowance applicable to the net deferred tax asset for the three years ended December 31, 2000 are as follows:
The weighted average option exercise price was $2.82 and $2.88 for options outstanding at December 31, 2000 and 1999, respectively. The weighted average option exercise price was $1.63 and $2.74, respectively, for options granted and forfeited during 2000. For 1999, the weighted average option exercise price was $2.85 for both options granted and forfeited.
The Insurance Subsidiaries cede insurance to other insurers and reinsurers on both life and accident and health business. Reinsurance agreements are used to limit maximum losses and provide greater diversity of risk. The Company remains liable to policyholders to the extent the reinsuring companies are unable to meet their treaty obligations. Total premiums ceded to other companies were $4.0 million, $2.6 million and $2.8 million for 2000, 1999 and 1998, respectively. Face amounts of life insurance in force ceded approximated $12.6 million, $6.5 million and $7.3 million at December 31, 2000, 1999 and 1998, respectively.