felanders/preprocessed huggingface dataset:
NET INCOME totaled $379.1 million or $1.80 per share in 1997, compared with $274.4 million or $1.30 per share in 1996 and $194.2 million or $0.95 per share in 1995. On March 31, 1997, the Company acquired certain annuity contracts from John Alden Life Insurance Company and all of the outstanding common stock of John Alden Life Insurance Company of New York (collectively, the "John Alden Acquisition"). During fiscal 1996, the Company acquired CalAmerica Life Insurance Company (formerly known as CalFarm Life Insurance Company) ("CalAmerica") on December 29, 1995; Ford Life Insurance Company ("Ford Life") on February 29, 1996; and certain annuity contracts from The Central National Life Insurance Company of Omaha (the "Central National Annuity Contracts") on April 1, 1996 (collectively, the "1996 Acquisitions"). The John Alden Acquisition and the 1996 Acquisitions (collectively, the "Acquisitions") were accounted for under the purchase method of accounting, and, therefore, results of operations include those of the Acquisitions only from their respective dates of acquisition. Consequently, operating results for the fiscal years 1997, 1996 and 1995 are not comparable. On a pro forma basis, using the historical operating results of the acquired businesses and assuming the Acquisitions had been consummated on October 1, 1994, the beginning of the earliest period discussed herein, net income would have been $397.4 million ($1.88 per share) in 1997, $323.2 million ($1.54 per share) in 1996 and $232.3 million ($1.15 per share) in 1995.
Income Taxes. Due to higher levels of income before income taxes, income taxes increased $209,000, or 26%, from $789,000 for the year ended December 31, 2002 to $998,000 for the same period in 2003. Income before income taxes is comprised of income subject to taxes that is recognized and due in the current period and income subject to taxes that is recognized during the current period but is due in future periods. The “small life insurance company deduction” available under Section 806 of the Internal Revenue Code for qualifying life insurance companies can reduce the effective federal income tax rate from 34% to less than 20% depending upon the amount of current taxable income. For the years ended December 31, 2002 and 2003, we had no current taxable income and, as a result, we were unable to take advantage of any of the small life insurance company deduction. For 2003, however, we were subject to alternative minimum tax. Our effective tax rate was 34% in both 2002 and 2003.
Cash flows provided by operations in 2001 relating to new policies reinsured under coinsurance and modified coinsurance reflected payments of $2.0 million to Western Reserve and American Skandia to reinsure policies issued in 2001, and cash flows provided by operations for policies previously in force under coinsurance and modified coinsurance and by all policies reinsured under renewable term reinsurance of $15.1 million. Other cash flows used in operating activities of $2.0 million 2001 were the result of cash payments for operating expenses, income taxes and interest expenses. The following table summarizes the components of operating cash flows.
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2001, 2002 and 2003
This increase was due to an inconsistent implementation of a revised claim reserving policy that was uncovered in the third quarter of 2007. Prior year reserves for other liability increased by $3.6 million. This was offset by favorable development of $4.6 million in no-fault coverages and $1.6 million in commercial auto liability.
In addition, we conduct a “sensitivity” analysis of our fixed income portfolio on at least a quarterly basis to determine the market value impact on our fixed income portfolio of an increase or decrease in interest rates of 1%. Based on this analysis, we will continue to hold securities in an unrealized gain or loss position if the payments of principal and interest are not delinquent and are being made consistent with the investment’s repayment schedule. The related impact on the investment portfolio is realized should we decide to sell a particular investment at either a gain or a loss.
The Company's principal operating subsidiary is Max Re. At December 31, 2001, Max Re had $672.2 million of shareholder's equity. The Company conducts its European activities through Max Re Europe. At December 31, 2001, Max Re Europe had $9.7 million of shareholder's equity. The Company also provides reinsurance underwriting and administrative services on a fee basis through Max Re Managers.
Liquidity and Capital Resources. As a holding company, Max Re Capital's principal assets are its investments in the voting common stock of its principal subsidiary, Max Re, and the common stock of its other subsidiaries. The Company's principal source of funds is from interest income on cash balances and cash dividends from its subsidiaries, including Max Re. The payment of dividends is limited under Bermuda insurance laws. In particular, Max Re may not declare or pay any dividends if it is in breach of its minimum solvency or liquidity levels under Bermuda law or if the declaration or payment of the dividends would cause it to fail to meet the minimum solvency or liquidity levels under Bermuda laws. At December 31, 2001, Max Re, which is required to have $206.5 million in statutory capital and surplus in order to pay dividends, had $569.1 million in statutory capital and surplus.
Long-Duration Contracts and Realized Gains and Losses from the Sale of Investments", and FAS No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts," in determining the accounting for its alternative risk transfer reinsurance products. Assessing whether or not the contracts it writes meets the conditions for risk transfer requires judgment. The determination of risk transfer is fundamental to the Company's results of operations and, is based, in part, on the use of actuarial and pricing models and assumptions.
Losses and loss adjustment expenses. The Company's reinsurance reserves are actuarial and statistical projections as of the balance sheet date of the ultimate unpaid claims and benefits associated with its reinsurance contracts. Considerable judgment is required to evaluate claims and benefits and establish liabilities for future claims and benefits. Additional information regarding claims and benefits incurred will be revealed over time and the estimates of loss and benefit reserves may need to be revised, resulting in gains and losses in the periods determined.
The average fee per file and corresponding gross margins are higher for real estate sale and resale transactions than refinance transactions for three principal reasons: (i) a larger percentage of sale and resale orders close as compared to refinance orders, (ii) typically two policies are issued in a resale transaction (one each to the buyer and lender) whereas only one is issued in a refinance transaction and (iii) the base rate charged on sale and resale transactions is typically higher than that charged on refinance transactions.
On August 9, 1997, ATC signed a stock purchase agreement with Pacific Coast Title of Santa Barbara County for the purchase of 100% of the issued and outstanding stock of Santa Barbara Title Company. On January 9, 1998, the Insurance Commissioner of the State of California approved the transaction and the sale was consummated. The purchase price of $160,000 was paid in cash. The impact of the Santa Barbara Title Company acquisition has not been material to the financial position or result of operations of the Company.
The effective federal tax rate for consolidated operations for 2002 was 30.6%. This rate is lower than the statutory rate primarily because of tax-exempt investment income.
Included in current taxes for 2002 is approximately $3,584 of federal tax credits which will be recovered through net capital loss carryback to prior years.
The Company also operates 23 field offices, including the Erie branch office, in 11 states. Eighteen of these offices provide both agency support and claims services and are referred to as “Branch Offices”, while the remaining five provide only claims services and are considered “Claims Offices”. The Company owns three of its field offices. Three other field offices are owned by the Exchange and leased to the Company. The rent expense incurred by the Company for both the home office complex and the field offices leased from the Exchange totaled $11.8 million in 2003.
Significant Assumptions Employed in the Estimation of Reserve for Loss and Loss Adjustment Expenses: The most significant assumptions used at December 31, 2016 to estimate the reserve for loss and LAE within the Company’s segments are as follows:
The table below compares net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned for the years ended December 31, 2015 and 2014:
On June 15, 2016, Maiden NA fully redeemed all of its 2011 Senior Notes using the proceeds from the 2016 Senior Notes issuance. The 2011 Senior Notes were redeemed at a redemption price equal to 100% of the principal amount of $107.5 million plus accrued and unpaid interest on the principal amount being redeemed up to, but not including, the redemption date. As a result, the Company accelerated the amortization of the remaining debt issuance cost of $2.3 million.
Maiden Holdings has two Swedish domiciled operating subsidiaries, Maiden LF and Maiden GF, both regulated by the Swedish FSA. At December 31, 2016, Maiden LF has statutory capital and surplus of $8.1 million, which exceeds the amount required to be maintained of $3.9 million at December 31, 2016. Maiden LF is subject to statutory and regulatory restrictions under the Swedish FSA that limit the maximum amount of annual dividends or distributions paid by Maiden LF to Maiden Holdings. At December 31, 2016, Maiden LF is allowed to pay dividends or distributions not exceeding $2.8 million. During 2016 and 2015, Maiden LF paid no dividends. Maiden GF was granted a general insurance license effective September 14, 2016 with an approved level of initial statutory capital and surplus of $6.1 million. Maiden GF wrote no business in 2016 as such, its first filing with the Swedish FSA will be for the period ending December 31, 2017.
Illustrations 1. Chrysler Building East with the offices of the United States Branch, the North American Reinsurance Cor­ poration, the North American Reassurance Company and the SwissRe Corporation.
North American Reassurance Company 161 East 42nd Street, New York 17 with Regional Offices in Dallas, Chicago and San Francisco
New York: Clifton Park, Dansville, East Greenbush, Endicott, Hornell, Ithaca, Jamestown, Naples, Rochester, Rome, Spencerport, Syracuse, Wellsville, Williamsville, Wolcott
Management believes that it is more likely than not that the current temporary differences will reverse during the periods in which the Company generates net taxable income. There are, however, no assurances that the Company will generate any earnings or any specific level of continuing earnings in future years. Certain tax planning strategies could be implemented to supplement income from operations to fully utilize recorded tax benefits.
The following table summarizes our operating results for the years indicated (dollars in thousands):
result of changes in the net deferred tax asset valuation allowance related to changes in unrealized gains. For the year ended December 31, 2016, the Company reported $0 of current federal income tax expense and $70,000 of current state income tax expense. The Company also reported a deferred tax benefit of $147,000 related to a $400,000 write-off of intangible assets resulting from the merger of ACIC into WPIC in 2016.
Our expense ratio increased by 1.9 percentage points for the year ended December 31, 2016, as compared to the same period in 2015. The increase in the ratio was primarily due to increased policy acquisition costs as ceding commissions from a quota share agreement reduced commission expense in the first seven months of 2015. This increase was partially offset by improved operating expense ratios as we gained efficiencies from an improved earned premium base.
CIGNA's information processing resources include large mainframe computers in major data centers, a multitude of personal computers connected through local area networks and a nationwide backbone network that provides desktop computing and office automation to CIGNA employees. CIGNA's policies regarding the safeguarding of critical corporate data are disseminated to all employees. The policies require data security through the use of appropriate identification and password practices and data backup through appropriate offsite storage techniques. Protection of CIGNA's major data centers, which house large amounts of critical corporate data, involves access controls, fire detection and suppression systems, and other hazard elimination processes. In addition, CIGNA maintains a formal disaster contingency plan, which includes recovery services in the event of a disaster in a CIGNA data center. Critical files are stored offsite, to be available for recovery in the event of a disaster.
We recorded other income of $98,156 for the year ended December 31, 2012, which represented (1) a $60,000 refund of non-resident withholding tax that was erroneously deducted from dividend income earned on our equity investment portfolio in prior years and (2) net interest received from PDIC in the amount of $38,156 in relation to funds that were held in deposit by PDIC pursuant to the 2003 excess of loss reinsurance agreement between AMIC Ltd. and PDIC. No additional “other income” was recorded for the year ended December 31, 2013.
Deferred income taxes, arising from APSL, reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2013 and 2012, management set up full valuation allowances against the deferred tax assets as disclosed below since the success of APSL was not certain and therefore, it was more likely than not that a tax benefit would not be realized.
AmerInst’s ability to pay common shareholders’ dividends and its operating expenses is dependent on cash dividends from AMIC Ltd. and its other subsidiaries. The payment of such dividends by AMIC Ltd. to AmerInst is limited under Bermuda law by the Bermuda Insurance Act 1978 and Related Regulations, as amended, which require that AMIC Ltd. maintain minimum levels of solvency and liquidity. For the years ended December 31, 2013 and 2012 these requirements have been met as follows:
At each measurement date, we estimate the fair value of the security using various valuation techniques. We utilize, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are not available, we utilize valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held as of December 31, 2014 and what level within the fair value hierarchy each valuation technique resides:
To the Board of Directors and Share Owners of Protective Life Corporation
The Registrant owns three office buildings in downtown Minneapolis, Minnesota, which serve as its home offices. Space in the home office buildings not used by the Registrant is rented to other tenants. Northern, United Services, Security- Connecticut and RLNY lease office space in Seattle, Washington; Arlington, Virginia; Avon, Connecticut; and Woodbury, New York, respectively. In addition, the Registrant leases space in various cities of the United States and Europe for regional group, reinsurance, pension and claims offices.
In Q4 2015, the Company’s GMWB dynamic hedge program targets were realigned to reduce structural differences in hedge position which had previously created earnings volatility. In an effort to align hedge programs with earnings presentation and reduce the Company’s earnings volatility management changed the hedge model from economic basis to a non-qualifying fair value basis at December 31, 2015. This is consistent with the Company’s GAAP reporting framework. In addition to the change to the basis of hedge position, management expanded the risk coverage for the Company’s GMWB by moving to three hedges (Equity: Delta/Gamma, Interest Rate: Rho). Only the Equity Delta hedge was included in the program before this change. This helped reduce the hedge mismatch as the majority of the market impacts are hedged through the additional equity and interest rate coverage.
The change in the net DAC for fiscal 1995 resulted in a credit of approximately $500 thousand, as compared to a charge of approximately $1.9 million in fiscal 1994 and a charge of approximately $2.1 million in fiscal 1993. These decreases (which are partially offset by an increase in costs associated with new product sales) are primarily attributable to a decline in the level of surrenders in fiscal 1995 and 1994 compared to fiscal 1994 and 1993, respectively, which had the effect of reducing the DAC associated with such surrenders.
The Company is an insurance holding company and its primary uses of cash are debt service obligations, operating expenses and dividend payments. The Company's principal sources of cash are dividends from the Insurance Company, sales of and interest on the Company's investments and rent from its real estate.
RESERVE for o-va.tsta,nd.irrg- losses: Life . . Frs. 405,454.— Fire, Accident, Marine and Burglary „ 6,591,324.77
The aviation line of business was most affected by the competitive market, with gross writings down by 20%, and coupled with the purchase of additional reinsurance protection resulted in premiums earned decreasing to $2.0 million in 1998 compared with $32.6 million in 1997. Obtaining additional reinsurance protection is consistent with the Company's strategy of minimizing risk and preserving capital as the underwriting climate for gross premiums remained soft in 1998. In addition, large aviation gross losses resulted in additional reinsurance reinstatement costs of approximately $3.7 million that further contributed to the decline in premiums.
The Company monitors cash and short-term investments in order to have an adequate level of funds available to satisfy claims and expenses as they become due. As of December 31, 1999, the Company's assets included approximately $28.8 million in cash and short-term investments. The primary sources of the Company's liquidity are funds generated from insurance premiums, investment income and maturing or liquidating investments.
Investing and financing activities occurred as a result of utilizing the Company's revolving credit agreement and unsecured credit facility. Additional borrowings of approximately $5,000,000 and $9,520,000 were made in 1998 and 1997, respectively, to assist in the payment of gross losses of the Company and to repurchase the Company's Common Stock. Repayments under the Company's existing loan were made at $1,250,000 per quarter through December 31, 1999 and borrowings under the unsecured credit facility were fully repaid after collecting recoverables due from reinsurers on such losses.
The following table presents a reconciliation of net income to EBITDA for the years ended December 31, 2012 and 2011:
Operating costs and expenses consist of fees and commissions paid to distributors for selling our products to members, credit card or ACH processing fees and general and administrative expenses. We expect our operating costs and expenses to represent a decreasing percentage of our revenues due to the scalable nature of our technology platform that allows for mass distribution and online enrollment of our products, requiring minimal maintenance and incremental costs.
The following summarizes our contractual obligations as of December 31, 2012:
(4) We received net proceeds from the IPO of $56,779,000 based on an aggregate underwriting discount of $4,573,000 and estimated offering expenses of $2,506,000. We used $3,294,000 of the net proceeds of the IPO to repay all of the outstanding debt under our term loan. The following table reconciles the gross proceeds from the IPO to the net cash provided to Health Insurance Innovations, Inc. ($ in thousands):
Our intangible assets consist of in-force members, our brand, the carrier network, distributor relationships, capitalized software and a non-compete agreement. Finite-lived intangible assets are amortized over their useful lives from two to seven years.
We evaluate whether events or circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of goodwill and other identifiable intangible assets. We must make assumptions and estimates, such as the discount factor, in determining the estimated fair values. While we believe these assumptions and estimates are appropriate, other assumptions and estimates could be applied and might produce significantly different results. In August 2006, we were notified by the Indiana OMPP that our Medicaid contract would not be renewed in 2007. As a result, we performed a review of our intangible assets associated with the Indiana market and deemed them to have no further economic value. Accordingly, the remaining amortization on the assets with a net value of $2.5 million that were purchased in 2004 was accelerated. Expense of $2.5 million is included in depreciation and amortization expense in our 2006 statement of income.
Medicare. For the year ended December 31, 2006, Medicare segment premium revenue increased $1,280.9 million, or 253.9%, to $1,785.4 million from $504.5 million for the same period last year. Growth in premium revenue within the Medicare segment was primarily the result of PDP membership growth of 923,000 members and premium increases associated with the demographic mix of our Medicare coordinated care plan membership. Membership within the Medicare segment grew by 944,000 members, or 1,368.1%, from 69,000 members at December 31, 2005 to 1,013,000 members at December 31, 2006, principally due to the new PDP product.
Medicare. For the year ended December 31, 2005, Medicare medical benefits expense increased $136.9 million, or 50%, to $412.2 million from $275.3 million for the period ended December 31, 2004. The increase was primarily due to the growth in membership, which accounted for $115.2 million of the increase. Increased healthcare costs and the demographic change in membership accounted for $21.7 million of the increase. For the year ended December 31, 2005, the Medicare medical benefits ratio was 81.7% compared to 82.3% for the period ended December 31, 2004.
Provision for Claims: The provision for claims as a percentage of net premiums written was 0.2%, 4.0% and 4.8% in 2016, 2015 and 2014, respectively. The change in the provision for claims in 2016 compared with the 2015 primarily related to favorable loss development in recent policy years, as the Company’s incurred losses for policy years 2009 through 2015 continue to develop favorably. The decrease in 2015 compared with 2014 was primarily attributable to fewer new claim filings and favorable claims experience. The Company continues to benefit from the absence of large claims related to defalcations in recent policy years.
(1) We have completed a number of transactions which have affected the comparability of our results of operations.
During the course of the year, the Company's management evaluated CIRCL's underwriting results and, as a result of unfavorable results, reduced CIRCL's underwriting. Management decided in early 1999 to cease underwriting any new programs in CIRCL and a number of existing contracts were not renewed for the 1999 year. Those renewed will be allowed to run until they expire at December 31, 1999. Because some contracts were not renewed by CIRCL during 1999, revenues should decrease accordingly.
In November 1998, the AICPA Accounting Standards Executive Committee issued Statement of Position (SOP) 98-7, "Deposit accounting: Accounting for Insurance and Reinsurance Contracts that do not transfer risk". This SOP provides accounting guidance for insurance and reinsurance contracts that do not transfer risk, as determined by the provisions of SFAS 113. The Company is currently reviewing the impact of this standard on its financial reporting.
The individuals in each geographic region report at least quarterly to the overall committee that they are a part of and update that committee on their respective region's progress. The latest update is that each geographic region is proceeding on schedule as planned. In the US and Bermuda, the Company's internal computer system and software is relatively modern and few costs have been or are expected to be incurred to bring those systems into compliance. In the U.K., the Company's internal systems and software were not as modern and the majority of the Company's Year 2000 costs in upgrading the Company's systems and software have been incurred in that region. Because of the Year 2000 issue, one large system in the U.K. was replaced in late 1998.
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE DATA)
DECEMBER 31, 1996, 1997 AND 1998 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
The Company's financial instruments exposed to possible concentrations of credit risk consist primarily of its cash and cash equivalents, paid and outstanding losses recoverable from reinsurers and insurance and reinsurance balances receivable.
Concentrations of credit risk with respect to other financial instruments are to some extent limited due to the number of reinsurers, agents and customers comprising the Company's receivable base. At December 31, 1998 there was an amount due from one reinsurer that totals $17,276 as discussed in Note 8. As at December 31, 1998, management believes that approximately $2,500 (1997 - $Nil) of paid and outstanding losses recoverable from reinsurers is uncollectible and has established a provision for doubtful accounts accordingly, as discussed in Note 8.
During 2010 the Company began to use its external actuaries instead of its internal staff to determine loss and LAE reserves by line of business by producing multiple estimates of required reserves, using both paid and incurred data, to determine if a change in the loss and LAE reserves is required. If the initial projections vary significantly, the outside actuarial staff will analyze the data using additional techniques. Each review develops a point estimate, which allows the Company to establish meaningful reserve levels.
Management believes that there are no reasonably likely changes in the key factors and assumptions that materially affect the Company’s estimate of the reserve for loss and LAE that would materially impact the Company’s financial position, liquidity and results of operations. The Company’s low average policy limit and concentration on the nonstandard auto driver classification help stabilize fluctuations in frequency and severity, thereby limiting the potential variability the reserve level may have on reported results. For example, approximately 96% of policies included within the nonstandard book of business include only the state-mandated minimum policy limits for bodily injury and property damage, which mitigates the complexity of estimating average severity. These low limits tend to reduce the exposure of the loss reserves on this coverage to medical cost inflation on severe injuries since the minimum policy limits will limit the total payout.
The "Management's Discussion and Analysis" on pages 12 through 38 of our 2001 Annual Report to Shareholders is incorporated herein by reference.
Pursuant to an administrative services agreement with American International Company, Limited (“AICL”), a wholly-owned subsidiary of AIG, IPC Holdings and IPCRe are allocated office space in AICL’s building in Bermuda and our principal executive offices are located there. The address of the principal executive offices is American International Building, 29 Richmond Road, Pembroke HM 08, Bermuda and our telephone number is (441) 298-5100.
Discussion and Analysis of Financial Condition and Results of Operations, pursuant to General Instruction (I)(2)(a) of Form 10-K.
The analysis of our results of operations is based upon our financial statements, which have been prepared in accordance with GAAP. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Critical accounting estimates are reflective of significant judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Underlying assumptions for future periods of EGPs are not altered unless experience deviates significantly from original assumptions. For example, when lapses of our insurance products meaningfully exceed levels assumed in determining the amortization of deferred policy acquisition costs, we adjust amortization to reflect the change in future premiums or EGPs resulting from the unexpected lapses. In the event that we were to revise assumptions used for prior year cohorts, our estimate of projected account values would change and the related EGPs in the deferred policy acquisition cost amortization model would be unlocked, or adjusted, to reflect such change. Continued favorable experience on key assumptions, which could include increasing separate account fund return performance, decreasing lapses or decreasing mortality could result in an unlocking which would result in a decrease to deferred policy acquisition cost amortization and an increase in the deferred policy acquisition costs asset. Finally, an analysis is performed periodically to assess whether there are sufficient gross margins or gross profits to amortize the remaining deferred policy acquisition costs balances.
The closings of units began in September 2001 when the first building received its certificate of occupancy. This is the reason the closings are lower in 2001 as compared to 2002 and 2003. During 2004, we expect to close the remaining units at Harbour Village, and we do not expect to engage in any further real estate activities in the future. The earnings and funds generated from Harbour Village will be redeployed into our insurance operations as the project is completed.
Year Ended December 31, 1995 versus Year Ended December 31, 1994
The weighted average shares outstanding for 1995 was 17.32 million compared to 17.88 million for 1994. The Company continued its share buyback program in 1995 and repurchased 404,800 of its shares on the open market at various times throughout the year. Through December 31, 1995, the Company has repurchased 1,025,000 shares out of a total authorized by the board of directors of 1.2 million.
The components of the Company's consolidated provision for income taxes are as follows:
At December 31, 1996 the accumulated post-retirement benefit obligation was $484,000 and was not funded. The discount rate used in determining the accumulated post-retirement benefit obligation was 7% and the health care cost trend rate was 13%, graded to 6% over 8 years.
2,810,985 options (net of expirations and cancellations) had been awarded as of December 31, 1996. Information regarding activity in the option programs follows:
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for option grants awarded in 1996 and 1995:
Prepaid acquisition costs, consisting of commissions and premium taxes, are amortized as the related insurance premiums are earned. All other acquisition costs are charged to operations as incurred.
Reinsurance recoverable represents amounts due from reinsurers for paid and unpaid claims and adjustment expenses through ceded reinsurance agreements.
Short-term investments have a maturity of one year or less and are carried at cost which approximates fair value. Fixed maturities include bonds, notes and redeemable preferred stocks. Equity securities include common and non-redeemable preferred stocks. All fixed maturities and equity securities are classified as available for sale. Accordingly, these investments are carried at estimated fair value. Estimated fair values of securities classified as available for sale are based principally upon quoted market prices.
In 1989, the Company established a Restricted Stock Plan for non- employee Directors of the Company. Stock awards are made on the date of the annual meeting to each Director elected or continuing in office. The maximum number of restricted shares which may be granted under the Plan shall be 20,000 shares of common stock. Under this plan, 2,336; 1,935; and 1,413 shares of restricted stock were granted in 1995, 1994 and 1993, respectively.
The table below discloses the unrealized losses on the bonds that are less than investment grade.
Revenue: Revenue for 2012 was $6,006,543 as compared to $6,592,274 for 2011. The decrease of $585,731 or approximately 9% was mainly due to decreases of commission income from existing clients, consulting income and enrollment fee income.
For 2012, cash provided by operating activities totaled $401,079 compared to $2,150,508 for 2011. The receipt of funds was primarily due to net income for the year plus increases in enrollment fee receivable, deposit and prepayment, fiduciary asset, income tax receivable, accounts payable, claims payable, and accrued expenses which was partially offset by a decrease in commission receivable, other receivables, due to directors and other payable.
Cash used in financing activities in 2012 amounted to $165,376, compared to $96,531 for 2011. The funds were used for the repayment of amount due to directors and payment of dividend declared to non-controlling shareholders.
The functional currency of SHB and ALM Shanghai is the Chinese Yuan (“CNY”) while KIM is the Singapore Dollar (“SGD”). The financial statements of SHB, ALM Shanghai and KIM are translated into United States dollars in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification TM (ASC) No. 830, " Foreign Currency Matters”, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the year for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. At December 31, 2012, the cumulative translation adjustment of $7,430 was classified as an item of other comprehensive income in the shareholders’ equity section of the consolidated balance sheet. For the year ended December 31, 2012, accumulated other comprehensive income was $147,361.
The Company's effective tax rate for 2012 and 2011 was 26.16% and 19.76%, respectively. The provisions for income taxes for 2012 and 2011 are summarized as follows:
On March 18, 2013, the Company subsidiary, Chang An Consultants Ltd., declared dividends of HK$2,870,000, or approximately US$367,949. 40% of the dividends or $148,072 was paid to the non-controlling shareholders in March 2013.
Corporate Expenses. Corporate expenses, which are general operating expenses that are not allocated to segments, were $7.3 million, $8.3 million and $8.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. The movement in corporate expenses was mainly due to changes in employee benefit plan expenses.
Incurred losses and LAE increased by 13.3% to $358.0 million in 2014 compared to $315.9 million in 2013, primarily due to an increase of $31.1 million in current year attritional losses, related to additional losses in the Middle East, Africa and Latin America. The $35.5 million of current year catastrophe losses for 2014 were due to the Chilean earthquake ($10.4 million), Japan snowstorm ($10.0 million), Hurricane Odile ($7.7 million) and Brisbane hailstorm ($7.5 million). The $33.6 million of current year catastrophe losses for 2013 were due to Canadian floods ($19.0 million) and Typhoon Fitow ($14.6 million).
The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The Texas Department of Insurance must be notified of any dividend declared, and any dividend in excess of a statutory maximum (20% of surplus, which approximated $105.2 million as of December 31, 2014) would be by regulation considered extraordinary and subject to preapproval by the Department. Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. However, Guaranty’s actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and the liquidity ratio, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. As of December 31, 2014, our statutory liquidity ratio for our principal underwriter was 0.96 to 1. Our internal objective is to achieve and maintain a ratio of at least 1:1, as we believe that ratio is crucial from both a ratings agency and competitive perspective. On an ongoing basis, this ratio will largely guide our decisions as to frequency and magnitude of dividends from the underwriter to the parent company. Further, depending on business and regulatory conditions, we may in the future need to retain cash in Guaranty or even raise cash in the capital markets to contribute to it in order to maintain its ratings or statutory capital position. Such a requirement could be the result of investment losses, reserve charges, adverse operating conditions in the current economic environment or changes in interpretation of statutory accounting requirements by regulators. Guaranty paid $25.0 million in dividends to its parent in 2014 and none in 2013.
Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralization of back and middle office functions and business process outsourcing. Our approach allows us to adjust more easily to fluctuations in transaction volumes. In addition, we remain committed to our stated goal of achieving a minimum of $25.0 million of annualized structural cost savings exclusive of market conditions by the end of 2015. Activity around the cost management program intensified during the fourth quarter 2014 in accordance with the underlying project plans. Although this level of work and related implementation expense will continue through 2015, we have already achieved approximately $10.0 million of annualized savings.
During the years ended 2014, 2013 and 2012, acquisitions resulted in additions to goodwill of $21.4 million, $10.9 million and $4.2 million, respectively.
Amortization of deferred policy acquisition costs were higher in 1998, totaling $15.8 million compared to $14.6 million and $13.6 million in 1999 and 1997, respectively. Changes in anticipated future gross profits resulted in retrospective adjustments to deferred policy acquisition costs, which produced higher amortization in 1998 relative to 1999 and 1997.
Actual annuity deposits collected for the years ended December 31, 1999, 1998, and 1997 are detailed below. Deposits collected on these nontraditional products are not reflected as revenues in the Company's statements of earnings, as they are recorded directly to policyholder liabilities upon receipt, in accordance with generally accepted accounting principles.
Other operating expenses totaled $9,772,000, $15,145,000, and $11,223,000 for 1999, 1998, and 1997, respectively. Expenses for 1998 were unusually high primarily due to two nonrecurring items as previously described in the summary of consolidated operating results. Additional pension expenses were incurred in 1998 related to the Company's transfer of its nonqualified defined benefit plan to a pension administration firm. Also included in 1998 expenses is a $5,000,000 lawsuit settlement for the Diffie, et al vs. National Western Life Insurance Company and National Annuity Programs, Inc. class action litigation. The litigation involved various issues regarding sales of the Company's annuities.
The Company's subsidiaries in Georgia currently provide administrative services for several accounts sponsored by the State of Georgia. These accounts currently comprise approximately 22% of the Company's Blue Cross Blue Shield of Georgia members and are scheduled to be transferred to an entity unaffiliated with the Company over the next two years.
(c)Medical membership includes management services and network services members, which are primarily included in the Large Group membership for each respective state.
(C)Medical membership numbers as of March 31, 2001, June 30, 2001, September 30, 2001, and December 31, 2001 as reported in the Company's quarterly reports on Form 10-Q for the quarterly periods ended such dates and in the Company's annual report on Form 10-K for the year ended December 31, 2001 have been adjusted to include members from two Company-owned or Company-controlled rental networks as well as the Company's proportionate share of members associated with a joint venture providing Medicaid services in Puerto Rico. Total members associated with these entities were 325,747, 320,991, 321,412 and 381,102 as of March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001, respectively.
The Partnership provided, to a developer, short-term financing of approximately $5.0 million for the acquisition of a retail center located in Westminster, Maryland. The loan was repaid to the Partnership on September 13, 2004 together with interest at 10.5% upon obtaining third party construction financing. In addition, the Partnership invested in a Leasehold Mortgage Loan for the acquisition and redevelopment of an adjacent retail center in Westminster, Maryland. As of December 31, 2004, approximately $1.3 million was funded with interest accruing at 10% per annum.
The Partnership's net investment income for the year ended December 31, 2004 was $7.8 million, a decrease of $2.8 million when compared to the corresponding period in 2003. The decrease is due to the sale of two apartment complexes in Salem, Oregon, increased vacancy at the retail center located in Roswell, Georgia due to a late 2003 lease termination, increased rental concessions within the apartment portfolio, and soft market conditions and vacancy within the office portfolio. The Partnership's acquisition of a controlling interest in a 161-room hotel located in Lake Oswego, Oregon resulted in a full year of operating income, partially offsetting the decrease in total net investment income.
Income from other real estate investments was $0.25 million for the year ended December 31, 2004. This was due to short-term financing for the acquisition of a retail center located in Westminster, Maryland.
On March 17, 1999, FPIC acquired The Tenere Group, Inc. (Tenere), which is the holding company for Intermed, a Missouri MPL insurer with approximately 1,700 insureds, and Interlex, a Missouri legal professional liability (LPL) insurer with approximately 990 insureds. The purchase price for Tenere was approximately $19.6 million in cash. The Company anticipates that the acquisition of Tenere will positively impact the Company's 1999 operating results. The acquisition of Tenere, Intermed and Interlex provides the Company with approximately $9.0 million of additional net premiums earned and increases the Company's presence in the southern mid-west. The Company contemplates prudently expanding the LPL business to the Company's other states of operation and to use the Company's existing relationships with legal defense attorneys to help market this business.
Shareholder dividends payable by the Company's insurance subsidiaries are subject to certain limitations imposed by Florida law. In 1999, these subsidiaries are permitted, within insurance regulatory guidelines, to pay dividends of approximately $18,300,000 without prior regulatory approval.
The Company's share of pooled net premiums earned in accordance with the Reinsurance Pooling Agreement for 2003 was $65,097,000. Net premiums earned in 2002 were $83,120,000. The decrease in net premiums earned primarily resulted from the decreases in net premiums written in 2002 and 2003. Had MNH's share of pooled premiums earned in 2003 been 35% (MNH's share for 2004), earned premiums for 2003 would have been $59,960,000.
In developing its investment strategy the Company determines a level of cash and short-term investments which, when combined with expected cash flow, is estimated to be adequate to meet expected cash obligations. Due to declining written premiums however, the Company's operating activities have resulted in a use of cash each year since 2001. The Company's decreasing participation percentage in the pooled business over the remaining years of the Reinsurance Pooling Agreement will likely result in continued negative cash flows from operations. Net cash used in operations was $11,577,000 in 2004. The Company believes that careful management of the relationship between assets and liabilities will minimize the likelihood that investment portfolio sales will be necessary to fund insurance operations, and that the effect of any such sales, if any, on the Company's stockholders' equity will not be material.
There can be no assurance that any of the forgoing strategies can be effected on satisfactory terms. Any failure with respect to the foregoing plan will more likely than not have a material adverse effect on AHO's liquidity and financial position. If AHO is unable to service the forgoing financial obligations as they become due, it will be required to adopt alternative strategies, which may include actions such as selling assets, discontinuing the operations of one or more of the AHO CMHCs, seeking additional equity capital or delaying capital expenditures, or filing for bankruptcy protection.
o During 1996, HAS and MMH provided total revenue of $406,000. The HAS contract was terminated on June 30, 1996. The MMH contract expired on April 1, 1996.
WAGES AND BENEFITS increased $728,461 or 62% due to an increase in employees required to support customer growth as well as to enhance the management infrastructure. Approximately 7% of this increase related to merit and market raises for existing employees. The remaining portion of the increase related to headcount increasing 93% during the past twelve months, from 40 to 77 employees at December 31, 1997.
In addition to pension benefits, the Company provides certain health, dental and life insurance benefits ("postretirement benefits") for retired employees and dependents. Substantially all employees may become eligible for these benefits if they reach normal retirement age while working for the Company, or retire early upon satisfying an alternate age plus service condition. Life insurance benefits are generally set at a fixed amount.
The information presented above includes unpaid benefit claims and claim adjustment expenses for the group life and group long-term disability contracts. As of December 31, 1998 and 1997, the unpaid claim and claim adjustment liability for these contracts is included in Policy Reserves.