The Company leases all of its office space, which as of February 16, 1996, totalled approximately 9,900 square feet. The home office in Columbus, Ohio aggregates approximately 7,000 square feet. The lease provides for a monthly gross rental of $7,817. The leased space is shared with Westford Group, Inc., an affiliate of the Company through a common officer and principal shareholder. Rental expense is allocated in accordance with space utilization. BCIS Services' office in Los Angeles, California occupies approximately 2,900 square feet. The lease provides for a monthly gross rental of $4,182.
Loss and loss adjustment expense reserves are estimates of what an insurer expects to pay on behalf of claimants. The Company is required to maintain reserves for payment of estimated losses and loss adjustment expenses for both reported claims and IBNR claims. The ultimate liability incurred by the Company may be different from current reserve estimates.
The combined ratio, which is the sum of the loss ratio and expense ratio, determined in accordance with statutory accounting practices, is the traditional measure of underwriting experience for insurance companies. The following table reflects the loss, expense and combined ratios of the Subsidiary on both a statutory and GAAP basis for each of the years ended December 31:
Investments of the Subsidiary's assets are restricted to certain investments permitted by Ohio insurance laws. The Company's overall investment policy is determined by the Company's Board of Directors and is reviewed periodically. The Company principally invests in investment-grade obligations of states, municipalities and political subdivisions because the majority of the interest income from such investments is tax-exempt and such investments have generally resulted in favorable net yields. The Company has the ability and intent to hold its held to maturity fixed income securities to maturity or put date, and as a result carries its held to maturity fixed income securities at amortized cost for GAAP purposes. As the Company's fixed income securities mature, there can be no assurance that the Company will be able to reinvest in securities with comparable yields.
YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO YEAR ENDED DECEMBER 31, 1994
Premiums Written; Premiums Earned. Premiums written decreased 60.6% from $35,629,799 in 1994 to $14,038,845 in 1995, while premiums earned decreased 22.5% from $25,535,824 in 1994 to $19,783,307 in 1995. Premiums decreased primarily due to the initial restructuring of the California Automobile Physical Damage Program in May 1995 and later discontinuance of sales and renewals on July 28, 1995. It is anticipated that premium will predominantly be earned through June 1996 as the policies expire. Management anticipates the discontinuance of the Automobile Physical Damage Program will result in a positive impact on underwriting results although there has been and will continue to be a material reduction in premiums associated with its discontinuance. Nonetheless, there can be no assurance that the discontinuance will not have a material adverse effect on the Company's operating results. See "DISCONTINUED PRODUCTS."
Automobile Physical Damage Insurance accounted for $5,272,700 of premiums written and $9,507,516 of premiums earned in 1995, compared with $27,537,712 and $14,835,119 in 1994, a decrease of 80.9% and 35.9% respectively. The Company began commercially marketing the product in California in June 1992 and in Arizona in January 1993. In October 1994, the Company discontinued sales of Automobile Physical Damage insurance in Arizona. On April 30, 1995, the Company canceled its managing general agent contract for the sales of Automobile Physical Damage Insurance in California. On May 1, 1995, the reinsurance agreement applicable to the Automobile Physical Damage written through its managing general agent was canceled. Reinsurance will remain in force for all policies written by its managing general agent. In addition, on May 1, 1995, the Company assumed marketing and underwriting responsibilities and engaged an independent claims agent to handle subsequent settlements. As of December 31, 1995, there were $278,122 in premiums written under the restructured program. On July 28, 1995, Ohio Indemnity Company entered into an agreement with the California Department of Insurance to discontinue sales and renewals of private passenger personal lines in automobile physical damage insurance in California. See "DISCONTINUED PRODUCTS." Premiums earned decreased less significantly than premiums written as a result of reductions in unearned premium resulting from the run-off and reductions in premiums written.
Premiums written for Ultimate Loss Insurance remained relatively constant from $5,378,178 in 1994 to $5,479,857 in 1995. Premiums earned for Ultimate Loss Insurance decreased 11.7% from $7,717,291 in 1994 to $6,817,904 in 1995. The increase in premiums written during 1995 was the result of reductions in return premium and the decrease in net premiums earned related to reductions in unearned premium associated with the canceled policy and the elimination of continuation coverage on a second policy. See Note 14 to the Notes to Consolidated Financial Statements.
stategy was primarily tax driven in order to utilize potentially expiring capital loss carryforwards and to shelter current year realized gains that were primarily market driven. In addition, unallocated investment expenses decreased, primarily attributable to a reduction in bond amortization of 80.4% from $142,365 in 1994 to $27,857 in 1995. The average yield on the investment portfolio was 5.6% in 1994 and 5.8% in 1995.
Claims Administration. Claims administration income generated by BCIS Services accounted for $521,171 of the increase in revenues for 1994 and $533,354 in 1995. The wholly-owned subsidiary commenced business operations in California during the third quarter of 1993.
Other Income. Other income increased from $58,938 in 1994 to $80,190 in 1995. The increase in other income was primarily due to earnings in 1995 of $24,400 attributed to fee income earned and $24,522 in recoveries. A portion of the fees charged to participants in the Bonded Service program by the cost containment service firm are used to establish an aggregate loss fund to cover potential losses. If losses reserved do not ultimately develop, a portion of the reserve fund is earned by the Company. Reserve years 1994, 1993 and 1992, though not fully developed at December 31, 1995 are expected to yield redundant reserves due to lower-than-anticipated losses. The Company expects other income to vary from year to year depending on claims experience of the Bonded Service program.
The absolute decrease in losses and loss adjustment expenses was primarily attributable to initial claims from the Automobile Physical Damage Insurance business in 1994 which totaled $11,111,284 compared with $8,614,845 in 1995. This decrease of 22.5%, was primarily due to the discontinuance of the Automobile Physical Damage program in 1995. The losses and loss adjustment expenses for Ultimate Loss Insurance decreased 14.6% from $4,083,264 in 1994 to $3,485,742 in 1995 due to decreases in loss and loss adjustment expenses connected with two significant lending institutions. See Note 14 to the Notes to Consolidated Financial Statements. Losses and loss adjustment expenses for the Bonded Service program decreased from $316,701 in 1994 to $176,684 in 1995 due to a decrease in reserves.
Operating Expense. Operating expense consists of commission expense, other insurance operating expense, amortization of deferred policy acquisition costs and general and administrative expenses. Operating expense decreased 22.7% from $9,051,956 in 1994 to $6,997,969 in 1995. The decrease in operating expense was primarily attributable to a 8.7% decrease in 1995 in non-deferred commission expense and a 67.0% decrease in policy fees paid to the general agent in connection with administration of Automobile Physical Damage Insurance. Policy fees decreased from $2,483,795 in 1994 to $819,325 in 1995 due to discontinance of the program. Legal expenses increased from $320,800 in 1994 to $590,083 in 1995 as a result of legal work related to a Contract Dispute. See Note 19 to the Notes to Consolidated Financial Statements and Part I, Item 3. Legal Proceedings. Operating expense also decreased as a result of reductions in bond amortization expense, consulting and audit expenses. Amortization of deferred policy acquisition costs decreased 30.0% from $768,059 in 1994 to $538,017 in 1995 due to discontinuance of the Automobile Physical Damage Program. Insurance Department licenses and fees expense decreased 45.5% from $241,550 in 1994 to $131,639 in 1995 primarily due to securing additional states authority to accommodate the expansion of the Surety program during 1994. Additionally, BCIS Services incurred operating expenses of $565,910 in 1995 compared with $667,646 of operating expenses during 1994.
Federal Income Taxes. The difference between Federal income taxes, $335,403 in 1994 and $176,698 in 1995, provided at the Company's effective tax rate, 12.6% in 1994 and 11.1% in 1995, and the 34% Federal statutory rate was primarily due to lower pre-tax income primarily due to a higher unearned premiums deduction and the recognition of
higher losses and loss adjustment expenses in 1995. See Note 6 to the Notes to Consolidated Financial Statements.
Statutory Combined Ratios. The change in the statutory combined ratio from 95.7% in 1994 to 113.3% in 1995 was attributable to a decrease in premiums written primarily associated with the discontinued sales of automobile physical damage insurance together with higher loss and loss adjustment expense experience. See Losses and Loss Adjustment Expenses, Net of Reinsurance Recoveries.
Automobile Physical Damage Insurance accounted for $27,537,712 of premiums written and $14,835,119 of premiums earned in 1994, compared with $26,249,514 and $10,925,091 in 1993, an increase of 4.9% and 35.8% respectively. The Company began commercially marketing Automobile Physical Damage Insurance in California in June 1992 and in Arizona from January 1993 to October 1994.
Premiums written for Ultimate Loss Insurance decreased 39.0% from $8,809,547 in 1993 to $5,378 178 in 1994. Premiums earned for Ultimate Loss Insurance increased 5.9% from $7,289,015 in 1993 to $7,717,291 in 1994. Premiums written decreased primarily from the cancellation of a significant policy and the recognition of a return premium attributable to the elimination of continuation coverage on a second significant policy. Premiums earned increased as a result of reductions in unearned premium resulting from the canceled policy and the elimination of continuation coverage on the second policy. See Note 15 to the Notes to Consolidated Financial Statements. A discontinued product accounted for (0.3%) of premiums written and 0.1% of premiums earned for 1993.
Net Investment Income. Net investment income increased 24.6% from $1,252,922 in 1993 to $1,560,625 in 1994 primarily as a result of higher interest earned on short-term investments and dividends earned on equity securities resulting from growth in invested assets during 1993. In addition, unallocated investment expenses decreased, primarily attributable to a reduction in bond amortization of 37.1% from $226,359 in 1993 to $142,365 in 1994. The average yield on the investment portfolio was 6.1% in 1993 and 5.6% in 1994.
Other Income. Other income decreased from $471,562 in 1993 to $58,938 in 1994. The decrease in other income was primarily due to earnings in 1993 of $396,612 attributed to the release of redundant reserves from the aggregate loss fund established in connection with the Bonded Service program. A portion of the fees charged to participants in the Bonded Service program by the TPA is used to establish an aggregate loss fund to cover potential losses. If losses reserved do not ultimately develop, a portion of the reserve fund is earned by the Company. Reserve year 1993, though not fully developed at December 31, 1994 is not expected to yield redundant reserves due to higher-than-anticipated losses. The Company expects other income to vary from year to year depending on claims experience of the Bonded Service program.
Losses and Loss Adjustment Expenses, Net of Reinsurance Recoveries. Losses and loss adjustment expenses totaled $10,918,649, or 55.2% of premiums earned in 1993 versus $15,564,508, or 61.0% of premiums earned in 1994. Losses and loss adjustment expenses, as a percentage of premiums earned, increased for the same period because premiums earned increased at a lower percentage rate than the percentage rate increase in losses
Operating Expense. Operating expense consists of commission expense, other insurance operating expense, amortization of deferred policy acquisition costs and general and administrative expenses. Operating expense increased 24.1% from $7,295,811 in 1993 to $9,051,956 in 1994. The increase in operating expense was primarily attributable to a 61.4% increase in 1994 in non-deferred commission expense and a 8.7% increase in policy fees paid to the general agent in connection with administration of Automobile Physical Damage Insurance. Policy fees increased from $2,285,575 in 1993 to $2,483,795 in 1994 due to expansion of the program. Legal expenses decreased from $666,084 in 1993 to $320,800 in 1994 as a result of a reduction in legal work related to a discontinued product. See Note 19 to the Notes to Consolidated Financial Statements and Part I, Item 3. Legal Proceedings. Operating expense also increased as a result of recognition of amortized deferred policy acquisition costs that increased from $535,233 in 1993 to $768,059 in 1994 due to the expansion of the Surety and the Automobile Physical Damage programs. Insurance Department licenses and fees expense increased 63.5% from $147,719 in 1993 to $241,550 in 1994 in part due to securing additional states authority to accommodate the expansion of the Surety program. Additionally, BCIS Services incurred operating expenses of $667,646 in 1994 compared with $455,761 in start-up costs during 1993.
Interest Expense. Interest expense increased 93.8% from $210,401 in 1993 to $407,696 in 1994. This increase, despite lower interest rates, was due to higher borrowing levels on the Company's revolving credit line and increases in the prime rate.
Premiums written for the Bonded Service program increased 29.6% from $1,031,336 in 1992 to $1,336,473 in 1993, while premiums earned from the Bonded Service program increased 30.1% from $1,022,178 in 1992 to $1,329,361 in 1993. The increases in net premiums written and premiums earned on the Bonded Service program were primarily attributable to growth in the program comprising two multi-employer groups created by the TPA to service small not-for-profit organizations.
Net Investment Income. Net investment income increased 60.3% from $781,659 in 1992 to $1,252,922 in 1993 as a result of growth in cash and invested assets generated by increases in premiums written. Cash and invested assets increased 46.2% from $20,759,612 in 1992 to $30,347,836 in 1993. The average yield on the investment portfolio was 6.1% in 1992 and 6.1% in 1993.
Losses and Loss Adjustment Expenses, Net of Reinsurance Recoveries. Losses and loss adjustment expenses totaled $5,063,855, or 47.5% of premiums earned in 1992 versus $10,918,649, or 55.2% of premiums earned in 1993. Losses and loss adjustment expenses, as a percentage of premiums earned, increased for the same period because premiums earned increased at a lower percentage rate than the percentage rate increase in losses and loss adjustment expenses. This result reflected higher loss and loss adjustment expense experience, smaller increases in premium volume and marginal increases in premium rates.
The absolute increase in losses and loss adjustment expenses was primarily attributable to initial claims from the Automobile Physical Damage Insurance business written in 1993 which totaled $6,931,248. The losses and loss adjustment expenses for Ultimate Loss Insurance rose 26.0% from $3,300,219 in 1992 to $4,157,401 in 1993. Losses and loss adjustment expenses for the Bonded Service program decreased from $380,969 in 1992 to ($232,993) in 1993 due to decrease in reserves.
Registration Expenses. On March 17, 1993, Bancinsurance Corporation filed a registration statement with the SEC in connection with the proposed sale of additional shares of common stock. Later the offering was withdrawn and registration expenses of $415,390 were charged to operations during 1993.
In October 1994, the Company discontinued sales of Automobile Physical Damage insurance in Arizona which accounted for 2.2% of premiums written and 1.9% of premiums earned in 1994. The Company's managing General Agent withdrew from Arizona and discontinued sales. On April 30, 1995, the Company canceled its managing general agent contract for the sales of Automobile Physical Damage Insurance in California. On May 1, 1995, the reinsurance agreement applicable to the Automobile Physical Damage written through its managing general agent was canceled. Reinsurance will remain in force for all policies written by its managing general agent. In addition, on May 1, 1995 the Company assumed marketing and underwriting responsibilities and engaged an independent claims agent to handle subsequent settlements. On July 28, 1995, Ohio Indemnity entered into an agreement with the California Department of Insurance to discontinue sales and renewals of private passenger personal lines in automobile physical damage insurance in California for a maximum period of three years. It is anticipated that premium will predominantly be earned through June 1996 as the policies expire. The Automobile Physical Damage Insurance program represented 37.6% of the Company's premiums written and 48.1% of the Company's premiums earned for 1995 versus 77.3% and 58.1%, and 71.2% and 55.2%, respectively, for 1994 and 1993. See "RESULTS OF OPERATIONS."
The Company's investments at December 31, 1995 consisted primarily of investment-grade fixed income securities. Cash and short-term investments at December 31, 1995 amounted to $6,583,900, or 27.6% of total cash and invested assets. The fair values of the Company's held to maturity fixed income securities are subject to market fluctuations but are carried on the balance sheet at amortized cost because the Company has the ability and intent to hold held to maturity fixed income securities to maturity or put date. Available for sale fixed income securities are reported at fair value with unrealized gains or losses, net of applicable deferred taxes, reflected in shareholders' equity. The Company earned net investment income of $1,252,922, $1,560,625 and $1,413,493 for the years ended December 31, 1993, 1994 and 1995, respectively.
As of December 31, 1995, the Company had a $10.0 million revolving line of credit with an outstanding balance of $5,616,132. The credit facility has a maturity date of May 1, 1999 and bears interest at the bank's prime rate (8.5% per annum at December 31, 1995).
All material capital commitments and financial obligations of the Company are reflected in the Company's financial statements, except the Company's risk on surety bonds and state mandated performance bonds, written in connection with the Bonded Service program. The financial statements include reserves for losses on such programs for any claims filed and for an estimate of incurred but not reported losses. Such reserves were $500,000 and $345,000 at December 31, 1994 and 1995, respectively.
Under applicable insurance statutes and regulations, the Subsidiary is required to maintain prescribed amounts of capital and surplus as well as statutory deposits with the appropriate insurance authorities. The Subsidiary is in compliance with all applicable statutory capital and surplus requirements. The Subsidiary's investments consist only of permitted investments under Ohio insurance laws.
Management has undertaken several initiatives in 1995 which should favorably impact performance in 1996, although there can be no assurance that this will occur. The discontinuance of the Automobile Physical Damage Program in California should allow the Company to improve its profit potential.
The discontinuance of the Automobile Physical Damage Program in California should result in a positive impact on underwriting results although there has been and will continue to be a material reduction in premiums associated with its discontinuance. Additionally, the restructured business should allow for better concentration on established products and opportunities intended to improve the Company's performance over the long-term. Nonetheless, there can be no assurance that the discontinuance will not have a material adverse effect on the Company's results of operations.
Although the cumulative effects of inflation on premium growth cannot be fully determined, increases in the retail price of automobiles have generally resulted in increased amounts being financed which constitutes one of the bases for determining premiums on Ultimate Loss Insurance. Despite relatively low inflation during 1995, the Company has experienced no material adverse consequences with respect to its growth in premiums.
Management does not know of any trends, events or uncertainties that will have, or that are reasonably likely to have, a material effect on the Company's liquidity, capital resources or results of operations.
On August 9, 1994, the Ohio Department of Insurance issued its triennial examination report on Ohio Indemnity as of December 31, 1993. The examiners reported that the financial statements set forth in the report reflected the financial condition of Ohio Indemnity. Management is not aware of any recommendations by regulatory authorities which would have, or are reasonably likely to have, a material effect on the Company's liquidity, capital resources or results of operations.
The NAIC has developed a risk-based capital measurement formula to be applied to all property/casualty insurance companies. This formula calculates a minimum required statutory net worth, based on the underwriting, investment, credit, loss reserve and other business risks inherent in an individual company's operations. Under the current formula, any insurance company which does not meet threshold risk-based capital measurement standards could be forced to reduce the scope of its operations and ultimately could become subject to statutory receivership proceedings. Based on the Company's analysis, it appears that the Company's total adjusted capital is in excess of all required action levels and that no corrective action will be necessary. The Risk Based Capital provisions have not yet been enacted into the Ohio Revised Code.
The amount of incurred losses and loss adjustment expenses is dependent upon a number of factors, including claims frequency and severity, and the nature and types of losses incurred and the number of policies written. These factors may fluctuate from year to year and do not necessarily bear any relationship to the amount of premiums written or earned.
In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," which defines a fair value based method of accounting for employee stock options and similar equity instruments. Hwoever, SFAS No. 123 also allows an entity to continue to account for these plans according to Accounting Principals Board Opinion No. 25 (APB 25), provided pro forma disclosures of net income and earnings per share are made as if the fair value based method of accounting defined by SFAS No. 123 had been applied. The Company expects to continue to measure compensation cost related to employee stock purchase options using APB 25 and will provide pro forma disclosures as required. This statement is effective for the year ended December 31, 1996.
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993
Schedule I -- Summary of investments - other than investments in related parties
As discussed in Note 1(d) to the consolidated financial statements, effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities".
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) (which vary in certain respects from reporting practices prescribed or permitted by the Department). Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. Statutory accounting practices differ from GAAP in that: (1) assets must be included in the statutory statements at "admitted asset value" and "nonadmitted assets" must be excluded through a charge against surplus; (2) policy acquisition costs are charged against income as incurred rather than being deferred and amortized over the terms of the related policies; (3) ceded reinsurance balances payable are reflected as a reduction of premiums in the course of collection rather than as a liability; (4) adjustments reflecting the revaluation of stocks are carried to the surplus account as unrealized investment gains or losses, without providing for Federal income taxes; and (5) the fixed maturities are carried at amortized cost instead of market value with no unrealized gain or loss reflected in surplus. The effects of these differences on stockholder's equity and net income are shown in Note 10.
The Company received written approval from the Department to record Unearned Premium reserves in the amount of $1,654,848 at December 31, 1995 for the premium applicable to the unexpired portion of certain ultimate loss insurance policies, whereby coverage was extended to include runoff and to record Contract Funds On Deposit for the portion of funds allocated toward the payment of benefits collected pursuant to a bond insuring the payment of certain reimbursable unemployment compensation benefits on behalf of enrolled employers.
The accompanying financial statements include the accounts of the Company and
Realized gains and losses on disposal of investments are determined by the specific identification method and are included in investment income. The carrying value of investments is revised and the amount of revision is charged to net realized losses on investments when management determines that a decline in the value of an investment is other than temporary.
Insurance premiums are recorded as revenue over the period of risk assumed. For the Company's "Ultimate Loss Insurance" products, a form of physical damage blanket single interest insurance sold to lending institutions, premiums are earned in relation to the level of exposure assumed. For the surety and auto physical damage products, premiums are earned pro rata. The portion of premiums written applicable to the unexpired portion of insurance contracts is recorded in the balance sheet as unearned premiums.
Reserve for unpaid losses and loss adjustment expenses includes case basis estimates of reported losses and estimates of losses incurred but not reported based upon past experience. The reserve also includes an estimate of the loss adjustment expenses to be incurred in the settlement of items provided for in the reserve for unpaid losses. These reserves are reported net of amounts recoverable from salvage and subrogation. Management believes the reserve for unpaid losses and loss adjustment expenses is adequate. Amounts recoverable from the reinsurer are estimated in a manner consistent with the reserve for unpaid losses and loss adjustment expenses and are recorded as a reinsurance receivable.
For these short-term investments, the carrying amounts are reasonable estimates of fair value.
Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value of existing debt. The carrying amount is a reasonable estimate of fair value.
The amortized cost and estimated fair values of investments in held to maturity and available for sale securities were as follows:
Ohio Indemnity leases its office facility and an automobile. The office facilities are shared with other affiliated entities and rental and bookkeeping expenses are allocated among them. This operating lease expires in 2000. BCIS Services leases its office facility under an operating lease that expires in 1996.
Consolidated rental expenses under operating leases were $73,750 in each of the years 1995, 1994 and 1993, respectively.
The future minimum lease payments required under these operating leases, as of December 31, 1995 follows:
The difference between income taxes provided at the Company's effective tax rate and the 34% federal statutory rate at December 31, is as follows:
The Company has a 1984 Stock Option Plan for all employees of the Company and its subsidiaries. All options were granted before May 17, 1994 for a term of not more than ten years. The options for 155,000 shares outstanding at December 31, 1995 expire at various dates from 1996 through 2004 and range in option price per share from $.625 to $6.00.
Under Ohio law, insurance companies may only pay dividends to shareholders from shareholders' equity determined in accordance with statutory accounting practices. Further, Ohio law limits dividends to shareholders, without prior approval of the Department, to the greater of the prior year's statutory net income or 10% of statutory shareholders' equity. As of December 31, 1995, dividends from Ohio Indemnity in 1996 are limited to $2,660,432 without prior approval of the Department.
As of December 31, 1994, Ohio Indemnity's statutory surplus differed from GAAP shareholders' equity by an amount of $4,287 in nonadmitted assets, $397,029 for deferred acquisition costs, $710,322 in deferred taxes and ($162,989) in unrealized loss on available for sale fixed maturities. Statutory net income for the year ended December 31, 1994 differed from GAAP net income by $15,980 for deferred acquisition costs, ($212,979) in deferred taxes and $175,000 in restatement for anticipated salvage and subrogation.
The Company maintains quota share reinsurance agreements, by which Ohio Indemnity cedes a portion of its insurance to a reinsurer. These arrangements limit the net claim liability potential arising from specific policies. These reinsurance agreements do not relieve the Company from its obligations to policyholders. Consequently, failure of the reinsurer to honor its obligations could result in losses to the Company. The Company currently recovers 50% of the paid losses and loss adjustment expense applicable to Automobile Physical Damage insurance policies.
A single customer in the Ultimate Loss Insurance program represented $2,343,398, $2,425,234 and $1,515,200 of the Company's net premiums earned in 1995, 1994 and 1993, respectively.
The Company's results of operations have varied, and in the future may vary from quarter to quarter principally because of fluctuations in underwriting results. Consequently, quarterly results are not necessarily indicative of full year results, nor are they comparable to the results of other quarters. The following table sets forth certain unaudited quarterly consolidated financial and operating data:
On November 13, 1995 the Board of Directors adopted a common share repurchase program. The program allows the Company to repurchase, from time to time, up to a total of 100,000 of its common shares. The program will expire on December 31, 1997. As of December 31, 1995, the Company repurchased 60,400 shares at an average price per share of $2.70 under this program. Repurchases have been and will continue to be funded by cash flows from operations.
On November 2, 1994 the James L. Miniter Agency, Inc. ("Agent") filed a lawsuit against Ohio Indemnity alleging that Ohio Indemnity interfered with Agent's broker relationship with a policyholder. The Agent's complaint also alleged that Ohio Indemnity violated Massachusetts Unfair Trade Practices Act which provides for the trebling of damages in some select circumstances. The case is presently pending in the United States District Court for the District of Massachusetts. On February 16, 1995 the Agent made a demand for $5 million (its purported compensatory damages trebled), an amount Ohio Indemnity believes to be unsupported by the facts or law involved in this matter. On June 2, 1995 Ohio Indemnity filed a motion for summary judgement seeking to have Agent's lawsuit dismissed. That motion is presently pending. Should Ohio Indemnity's motion not be granted, Ohio Indemnity is confident that it will nonetheless prevail in this action.