The Company leases approximately 49,500 square feet of office space, including its corporate headquarters located in New York, New York and underwriting offices located in Woodland Hills, California and Hoboken, New Jersey, respectively. The headquarters in New York, which consists of 3,900 square feet, is leased for a term ending in the year 1999. The Woodland Hills office space consists of 30,275 square feet and is leased for a term ending in the year 2008. The Hoboken office space consists of 13,525 square feet and is leased for a term ending in the year 2000. The Company also leases small regional offices in Grand Rapids, Michigan and Denver, Colorado.
The following table sets forth selected consolidated financial data of the Company for the periods indicated. The selected consolidated financial data for the five years ended December 31, 1996 set forth below are derived from the audited consolidated financial statements of the Company. The selected statutory data have been derived from the financial statements of Associated and Calvert prepared in accordance with statutory accounting practices ("SAP") and filed with insurance regulatory authorities. The following information should be read in conjunction with the Consolidated Financial Statements and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations", included elsewhere herein.
Net premiums earned increased by 5.4% to $87.9 million in the year ended December 31, 1996 from $83.4 million in the year ended December 31, 1995.
Net Income. Net income was $6.2 million for the year ended December 31, 1996, compared with $12.9 million for the year ended December 31, 1995.
Net premiums earned increased by 35.4% to $83.4 million in the year ended December 31, 1995 from $61.6 million in the year ended December 31, 1994.
Net Realized Gains (Losses) on Investments. For the year ended December 31, 1995, the Company realized a net gain of $3.6 million compared to a net loss of $2.0 million for the year ended December 31, 1994. Portfolio sales were effected in each year to optimize the mix of taxable and tax-exempt securities.
Underwriting, Acquisition, and Insurance Expenses. Underwriting, acquisition, and insurance expenses increased by 34.5% to $34.6 million for the year ended December 31, 1995 from $25.7 million for the year ended December 31, 1994, primarily due to increased acquisition costs and additions to staff related to new business.
Interest Expense. For the year ended December 31, 1995, the Company recorded $0.6 million for interest expense associated with a term loan of $25.5 million in connection with the purchase of 1.5 million shares of its common stock in September of 1995.
Net Income. Net income was $12.9 million for the year ended December 31, 1995, compared with $6.2 million for the year ended December 31, 1994.
Reinsurance recoverables on unpaid losses were $138.0 million at December 31, 1996 and $153.0 million at December 31, 1995. Because of the high limits on many policies relative to the Company's net retentions, reinsurance recoverable on unpaid losses can fluctuate significantly depending upon the emergence and severity of reported and unreported losses.
As a holding company, the Company depends principally on dividends from its insurance company subsidiaries to pay corporate overhead expenses, including principal and interest on its borrowings. The Company's subsidiaries are subject to state insurance laws that restrict their ability to collectively pay dividends. See "Regulation and Other Matters." Under the insurance code of Pennsylvania, dividends from Calvert are limited to the greater of 10% of surplus as regards policyholders as of the preceding year end or the net income for the previous year, without prior approval from the Pennsylvania Department of Insurance. Under the insurance code of California, dividends from Associated are limited to the greater of 10% of policyholders' statutory surplus as of the preceding year end or the company's statutory net income for the previous year, without prior approval from the California Department of Insurance. In 1996, 1995 and 1994, the aggregate dividends paid by the two subsidiaries were $4.7 million, $2.0 million and $1.3 million, respectively.
The NAIC has adopted a risk-based capital system for assessing the adequacy of statutory capital and surplus for all property and casualty insurers. Based on the guidelines and computations made by the Company in conformity with such guidelines, Associated and Calvert have exceeded the required levels of capital. There can be no assurance that capital requirements applicable to the Company's business will not increase in the future.
The Company has no present plans to make any significant capital expenditures in the foreseeable future.
The Company has no off-balance-sheet obligations that are not disclosed in its financial statements. The Company believes that retained earnings will be sufficient to satisfy its long- term capital requirements to fund growth.
An index to financial statements and required financial statement schedules is set forth at Item 14.