The Company's corporate headquarters are located in Buffalo, New York in a building owned by Mutual that contains approximately 113,000 square feet of office space. Mutual also has regional underwriting and/or claims office facilities in Buffalo, Albany and Hauppauge, New York; Manchester, New Hampshire; and Moorestown, New Jersey. All of the offices except the Buffalo office are leased.
Total revenues for 1999 were $108,416,000, an increase of $1,448,000, or 1%, from $106,968,000 in 1998.
Voluntary commercial lines direct premiums written for 1999 were $59,621,000, an increase of 10% from $54,246,000 in 1998. This increase resulted primarily from a $3,173,000, or 21%, increase in commercial auto direct premiums written, a $573,000, or 8%, increase in workers' compensation direct premiums written and a $1,406,000, or 22%, increase in contractors coverall direct premiums written.
Total revenues for 1998 were $106,968,000, a decrease of $2,182,000, or 2%, from $109,150,000 in 1997.
Direct premiums written for 1998 were $98,956,000, a decrease of $2,108,000, or 2%, from $101,064,000 in 1997. Net premiums written for 1998 were $92,758,000, a decrease of $4,053,000, or 4%, from $96,811,000 in 1997.
Voluntary commercial lines direct premiums written for 1998 were $54,246,000, an increase of 5% from $51,572,000 in 1997. This increase resulted primarily from a $1,260,000, or 9%, increase in commercial auto direct premiums written, a $1,014,000, or 17%, increase in workers' compensation direct premiums written and a $530,000, or 6%, increase in commercial package policies direct premiums written.
Commissions, premium taxes and other state assessments that vary directly with the Company's premium volume represented 21.7% and 20.8% of net premiums earned in 1998 and 1997, respectively. The increase was due primarily to the increase in agency incentive commissions. Certain other underwriting expenses, such as salaries, employee benefits, and other operating expenses vary indirectly with volume and comprise the remainder of the Company's underwriting expenses.
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. Historically, the excess of premiums collected over payments on claims, combined with cash income from investments, has provided the Company with short-term funds in excess of normal operating demands for cash.
At December 31, 1999, the Company's portfolio of fixed maturity investments represented 92.4% of invested assets. Management believes that this level of bond holdings is consistent with the Company's liquidity needs because it anticipates that cash receipts from net premiums written and investment income will enable the Company to satisfy its cash obligations. Furthermore, a portion of the Company's bond portfolio is invested in mortgage-backed and other asset-backed securities which, in addition to interest income, provide monthly paydowns of bond principal.
At December 31, 1999, $106,752,000, or 54.3%, of the Company's fixed maturity portfolio was invested in mortgage-backed and other asset-backed securities. The Company invests in a
At December 31, 1999, $11,082,000, or 5%, of the Company's investment portfolio was invested in non-investment grade securities compared to $6,706,000, or 3%, at December 31, 1998. All of the Company's non-investment grade securities are currently performing to the Company's purchase expectations.
MNH continues to evaluate the complex issues related to insurance coverage for losses arising from the various possible situations involving Year 2000 problems and its potential liability to its insureds. The Company believes that the coverages MNH provides do not extend to the types of losses which are most likely to occur as a result of Year 2000 problems. For certain classes of commercial risks, MNH adopted endorsements to its policies that exclude coverage for losses resulting from Year 2000 problems based on forms provided and filed for approval with various regulatory authorities by the Insurance Services Office, Inc. Use of these special endorsements is governed by the law and regulatory policies of states in which MNH is authorized to do business.
The Company's and MNH's business and day-to-day operations are closely aligned with those of Mutual. This is the result of a combination of factors. Mutual has had a historical ownership interest in the Company and MNH. Prior to November 1986 MNH was a wholly-owned subsidiary of Mutual. Following the Company's initial public offering in November 1986 and until a secondary stock offering in July 1993 the Company was a majority-owned subsidiary of Mutual. Mutual currently owns 10.0% of the Company's common stock. Under the Management Agreement, Mutual provides the Company and MNH with all facilities and personnel to operate their business. The only officers of the Company or MNH who are paid full time employees are employees of Mutual whose services are purchased under the Management Agreement. Also, the operation of MNH's insurance business, which offers substantially the same lines of insurance as Mutual through the same independent insurance agents, creates a very close relationship among the companies.