The Group's executive and administrative offices are located on six floors of a ten-story office building at 122 Fifth Avenue, New York, New York 10011 and one floor of an adjoining office building at 120 Fifth Avenue, New York, New York 10011. These facilities total approximately 113,300 square feet, under leases which each expire on September 30, 1998.
The Group also conducts limited operations from branch offices located in Manhattan, Mineola, Scarsdale and Rochester, New York, Boston, Massachusetts and Bedford, New Hampshire. The rental charged to the Company for these facilities is prorated in accordance with the pooling agreement described in "Pooling Arrangement" under Item 1, herein.
During each of the three years in the period ended December 31, 1995, the Company operated profitably and net cash was provided from operations.
At December 31, 1995, the yield of the Company's bond portfolio was 5.8% with an average maturity of 2.8 years. Additionally, at December 31, 1995, approximately 91% of the bond portfolio was invested in issues of the U.S. Government and its agencies with the remainder invested in investment grade corporate and industrial issues. The Company presently anticipates reinvesting proceeds from maturities and investment income in substantially similar investments with a slightly longer duration. In February 1996, the Company sold investments available for sale with an aggregate book value at date of sale of $75,517,896 and realized gains of $455,053.
The Company believes its immediate cash needs will not require the sale of bonds, although it may sell certain of these securities from time to time. During 1995, the Company sold certain long-term securities to shorten the average duration of its investment portfolio.
1995 was $1,932,000 above amortized cost. While this has resulted in an increase in shareholders' equity, it had no effect on results of operations or cash flows.
The Company maintains cash, short-term and readily marketable securities in an amount sufficient to satisfy its anticipated cash needs. The Company does not presently anticipate paying dividends in the near future and believes it has sufficient capital to meet its currently anticipated level of operations.
Investment income has increased in each of 1995 and 1994 primarily as a result of growth in invested assets resulting from positive cash flows. During 1995 and 1994, the Company realized losses on the sale of certain investments in order to shorten the average duration of its investment portfolio. In 1993, the Company sold certain investments to generate realized gains.
Losses incurred for 1995 increased primarily as a result of reserve strengthening, while losses incurred for 1994 and 1993 were greater than
those of the preceding year largely due to increased assigned risk automobile premium volume. During 1995, the Company strengthened reserves in automobile and workers compensation lines by approximately $10,300,000, net of salvage and subrogation of $471,000. Actuarial studies conducted during 1995 have identified revised loss development patterns in automobile lines, which may indicate greater ultimate loss experience than previously expected. The Company also reopened closed no-fault claims files during 1995 and made additional payments on prior years' claims. This, along with changes in claim handling practices, have increased the difficulty of estimating ultimate losses, and actual losses may be different than the studies indicated. However, the Company strengthened reserves to the levels indicated in the actuarial studies. The Company will continue to analyze loss development patterns on a quarterly basis and will evaluate the adequacy of it loss reserves. Also, assessments for certain workers' compensation assigned risk pools and funds added approximately $1,060,000, $178,000 and $900,000 to incurred losses for the commercial lines business segment in 1995, 1994 and 1993, respectively. In addition, in 1995, the Company refined its estimate of anticipated salvage and subrogation. Anticipated salvage and subrogation reduced incurred losses by approximately $1,772,000, $28,000 and $300,000 for the years 1995, 1994 and 1993, respectively.