Through its various subsidiaries, the Company owns and utilizes in its operations the following significant properties: two office buildings located in Valley Forge, Pennsylvania used by the Colonial Penn P&C Group (totaling approximately 198,700 sq. ft.), one of which is located on land leased from a third party; two offices in Salt Lake City, Utah used for corporate and banking and lending activities (totaling approximately 77,000 sq. ft.); and an office building in Philadelphia, Pennsylvania used by the life insurance companies (approximately 127,000 sq. ft.). In addition, subsidiaries of the Company own six facilities (totaling approximately 970,000 sq. ft.) primarily used for manufacturing and storage located in Georgia, New Jersey, New York, North Carolina, Pennsylvania and Canada.
At December 31, 1996, a maximum of approximately $33,962,000 was available to the Parent as dividends from its regulated subsidiaries without regulatory approval. Additional amounts may be available to the Parent
The Company has a 75% economic interest in PIB and PepsiCo owns the remaining 25%. Under the terms of the joint venture agreement, the Company and PepsiCo have equal voting rights over all significant aspects of PIB's operations. Accordingly, since the Company does not control PIB despite its larger economic interest, the Company accounts for its share of PIB's operating results under the equity method of accounting. The Company's equity in losses of PIB was $17,104,000 for the year ended December 31, 1996, resulting from
In January 1997, the Company sold $150,000,000 aggregate liquidation amount of 8.65% trust issued preferred securities of its subsidiary, Leucadia Capital Trust I, (the "Trust"). These Company-obligated mandatorily redeemable preferred securities have an effective maturity date of January 15, 2027 and represent undivided beneficial interests in the Trust's assets, which consist solely of 8.65% Junior Subordinated Deferrable Interest Debentures due 2027 of the Company. The obligations of the Trust related to its preferred securities are fully and unconditionally guaranteed by the Company.
The investment portfolios of the Company's insurance subsidiaries are principally fixed maturity investments rated "investment grade" or U.S. governmental agency issued or guaranteed obligations, although limited investments in "non-rated" or rated less than investment grade securities have been made from time to time. The investment strategy of the insurance subsidiaries has been to maintain a high quality portfolio of publicly traded, fixed income securities with a relatively short duration. Principally as a result of increases in market interest rates during 1996, the unrealized gain on investments at the end of 1995 of approximately $30,086,000 (net of taxes) decreased to approximately $1,759,000 (net of taxes) as of December 31, 1996. While this has resulted in a decrease in shareholders' equity, it had no effect on results of operations or cash flows.
carryforwards and other tax attributes. As described in the Notes to the Consolidated Financial Statements, significant additional amounts may be available under certain circumstances.
Earned premium revenues of the Colonial Penn P&C Group were approximately $497,100,000, $490,500,000 and $447,200,000, for the years ended December 31, 1996, 1995 and 1994, respectively. Earned premiums from voluntary automobile policies were 10.2% higher in 1996 and voluntary automobile policies in force increased 6.6% from December 31, 1995. Since the first quarter of 1995, the Colonial Penn P&C Group has been successful in growing its voluntary automobile business, principally through direct mail and referral marketing techniques. The increase in earned premium revenues was partially offset by reduced service business and the depopulation of state assigned risk automobile pools. The growth in earned premiums in 1995, as compared to 1994, principally resulted from service business and a modest increase in earned premiums related to voluntary automobile polices.
Property and Casualty Insurance Group: GAAP 105.0% 103.5% 99.1% SAP 101.5% 101.2% 98.8%
In addition to the growth in the Graded Benefit Life product, the increase in this segment's earned premium revenues in 1996 was primarily due to the acquisition of Providential in April 1996 which generated $16,500,000 of earned premium revenues for agent-sold Medicare supplement products. The Company had stopped marketing its own agent-sold Medicare supplement products in 1992 due to inadequate profitability. Providential markets its agent-sold Medicare supplement products primarily in communities where health maintenance organizations are less prevalent, which the Company believes results in adequate profitability. The decline in earned premium revenues in the prior years reflected the run-off of this product line prior to the acquisition of Providential.
Insurance losses, policy benefits and amortization of deferred acquisition costs of the life and health insurance operations were $150,500,000, $133,200,000 and $138,300,000 for the years ended December 31, 1996, 1995 and 1994, respectively. The increase in 1996 was primarily due to increased earned premium revenues and a $3,500,000 gain in 1995 from the termination of a reinsurance agreement. The decrease in 1995 reflected the run-off of the agent- sold Medicare supplement business, which had less favorable loss experience in 1995, reduced IOP insurance in force and the $3,500,000 reinsurance gain. The decrease in 1995 was partially offset by the growth of the Graded Benefit Life product.
Finance revenues and operating profits reflect the reduced level of consumer instalment loans and the increase in automobile loan losses, as discussed above. In addition, in 1996, the decline in operating profit was also caused by increased interest expense on customer banking deposits. In 1995, the increase in finance revenues from consumer instalment loans as compared to 1994 was offset in part by increased interest expense on customer banking deposits and greater losses on automobile loans.
for investment. Investment and other income also reflected increased fee income in 1995 related to service business. Investment and other income in 1994 included $8,458,000 related to the disposition of El Salvador government bonds and $14,490,000 related to the sale of the Company's remaining shares in Bolivian Power Company.
The number of shares used to calculate primary earnings per share was 60,560,000, 59,271,000 and 58,202,000 for 1996, 1995 and 1994, respectively. The number of shares used to calculate fully diluted earnings per share was 60,560,000, 62,807,000 and 61,715,000 for 1996, 1995 and 1994, respectively. The increase in the number of shares utilized in calculating per share amounts principally related to the sale of common shares in an underwritten public offering in September 1995. In addition, for fully diluted per share amounts, the 5-1/4% Convertible Subordinated Debentures due 2003 were not assumed to have been converted in 1996 since the effect of such assumed conversion would have been to increase earnings per share.