The selected consolidated financial data presented below for, and as of the end of, each of the years in the five-year period ended December 31, 1994 are derived from the consolidated financial statements of 20th Century Industries and its subsidiaries. The consolidated financial statements as of December 31, 1994 and 1993 and for each of the years in the three-year period ended December 31, 1994 are included elsewhere in this Form 10-K. All dollar amounts set forth in the following tables are in thousands, except per share data. For a further discussion regarding the impact of Proposition 103 and the Northridge Earthquake on the results of 1994, refer to Notes 12 and 13, respectively, of the Notes to Consolidated Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INDUSTRY OVERVIEW AND COMPANY STRATEGY
Underwriting results for the business written by the Company, excluding earthquake, are sensitive to weather-related claims and may vary substantially
ful claim of this nature to be remote. Removal of asbestos materials necessitated by earthquake claims has been included in the estimated loss values for these claims.
The Company had been writing earthquake insurance since 1982. Since that time, the Company has always believed that its major catastrophe exposure was to a loss caused by an earthquake. The Company reduced its net exposure from such an event with the purchase of reinsurance in amounts based on global reinsurance market conditions and the Company's estimates of its exposure. The exposure from such a loss was consistently reviewed each calendar quarter. Prior to the Northridge Earthquake, the Company had purchased property catastrophe reinsurance for a catastrophe up to $110 million.
The Northridge, California Earthquake, which occurred on January 17, 1994 ("Northridge Earthquake"), has significantly affected the financial condition of the Company and its operating results for the entire year of 1994. The Northridge Earthquake occurred in an area in which the Company's homeowners and earthquake business was concentrated and the forces of the earthquake were much greater and caused significantly more damage than usually associated with an event of this Richter magnitude.
On June 9, 1994, the Company announced an order by the California Department of Insurance ("DOI") designed to reduce the Company's earthquake exposure. The DOI ordered the Company's insurance subsidiaries, 20th Century Insurance Company and 21st Century Casualty Company (the "Insurance Subsidiaries") to discontinue writing new homeowners, condominium owners and earthquake insurance and to discontinue renewal of existing earthquake insurance. The DOI also approved a 17% rate increase for the homeowners program. The Insurance Subsidiaries agreed to offer renewal without earthquake coverage to existing homeowners and condominium owners policyholders for two more annual renewal periods. The Company also agreed to increase the combined statutory surplus of the Insurance Subsidiaries to at least $250 million by June 30, 1994.
The DOI, after discussions with the Company's management, requested that the Company expeditiously implement a plan that would provide a more appropriate level of surplus at the Insurance Subsidiaries. At the same time, an agreement was reached among the DOI, two consumer intervenors and the Company regarding the Company's proposed automobile insurance rate increase that had been filed for approval in December, 1993. On September 14, 1994, the Commissioner approved a 6% rate increase, which was estimated to generate an additional $56 million a year in revenues. The agreement provided that the 6% rate increase would decrease to 3% when the Insurance Subsidiaries' total net written premium to statutory surplus ratio had reached 3:1. See the discussion regarding the impact of the Proposition 103 rollback below.
On October 17, 1994, the Company entered into an Investment and Strategic Alliance Agreement (the "Investment Agreement") with American International Group, Inc. ("AIG"), to provide $216 million of equity capital. The agreement provided for, among other things (a) the sale to AIG, or to certain wholly-owned subsidiaries that AIG may designate, for an aggregate purchase price of $216 million, of (i) 200,000 shares of Series A Convertible Preferred Stock stated value $1,000 per share (the "Series A Preferred Stock"), which are convertible into shares of Common Stock at a conversion price of $11.33 per share (subject to customary antidilution provisions), and (ii) 16 million Series A Warrants to purchase an aggregate of 16 million shares of Common Stock at an exercise price of $13.50 per share (subject to adjustment as described in the Investment Agreement); (b) the issuance of shares of Common Stock upon conversion of shares of Series A Preferred Stock and upon exercise of the Series A Warrants in accordance with their terms; and (c) the issuance of additional shares of Series A Preferred Stock on the terms described in the Investment Agreement at the election of the Company in the event gross losses and allocated loss adjustment expenses associated with the Northridge Earthquake exceed $850 million (the "Transaction").
The Company also negotiated with the Lenders the terms of an amendment and waiver to the Bank Credit Agreement (the "Amendment and Waiver") in order to facilitate the proposed transaction with AIG. The Amendment and Waiver, which was executed and delivered by the Company and the Lenders on October 17, 1994, conditionally waived the Lenders' rights to pursue remedies based on existing defaults pending consummation of the Transaction, and made certain amendments to the Bank Credit Agreement, effective upon the closing of the Transaction.
The Series A Warrants are, by their terms exercisable at any time fol- lowing the first anniversary of the consummation of the Transaction. However, both the exercise and sale of Series A Warrants are subject to transfer re- strictions in the Company's Articles of Incorporation, which limit exercise or sale of the warrants until February 1998. The exercise price of $13.50 per share and the number of shares of Common Stock obtainable per Series A Warrants are subject to adjustment pursuant to customary antidilution provisions. The exercise date may be accelerated in the event the Company's Board of Directors approves such an acceleration, and shall automatically be accelerated to any earlier date that AIG is entitled to acquire additional securities of the Company pursuant to the standstill provisions of the Invest- ment Agreement. These Warrants will expire on the thirteenth anniversary of the Closing Date.
In connection with the Investment Agreement, subsidiaries of AIG and each of the Insurance Subsidiaries have entered into a five-year quota share reinsurance agreement for 10% of each of the subsidiaries' policies incepting on and after January 1, 1995. At AIG's option, the agreements may be renewed annually for four years following the initial term, with an annual reduction of 2% in the quota share percentage ceded to AIG's subsidiaries.
On September 2, 1994, the Company filed a petition for rehearing with the California Supreme Court which was denied. The Company filed a petition for a writ of certiorari with the United States Supreme Court.
As part of the settlement, the Company withdrew its request for a hearing with the United States Supreme Court to appeal the California Supreme Court decision in the Proposition 103 test case "20th Century vs. Garamendi" and agreed to abide by the terms of Commissioner Quackenbush's order. Upon announcement of the settlement, a consumer group objected to the settlement terms, and threatened legal action. The Company is advised by counsel, and believes that any challenge to the settlement will be unsuccessful.
Premiums Earned Automobile $ 981,893,000 $908,522,000 $823,680,000 Homeowners and Other 52,110,000 81,190,000 72,673,000 -------------- ------------ ------------ Total $1,034,003,000 $989,712,000 $896,353,000 ============== ============ ============ Underwriting Profit (Loss) Automobile $ (45,854,000) $ 25,064,000 $ 36,890,000 Homeowners and Other (877,487,000) (11,598,000) 1,714,000 -------------- ------------ ------------ Total $ (923,341,000) $ 13,466,000 $ 38,604,000 ============== ============ ============
the earthquake losses exceed current estimates, $32 million in reserves related to the Proposition 103 settlement will be available to offset the additional earthquake losses. However, should the earthquake losses exceed $974 million, future financial periods will be impacted and additional capital may be required. The capital transaction with AIG includes provision for the Company to receive up to an additional $70 million of capital from AIG to cover excess losses. The Company, however, may determine not to obtain some or all of the additional capital from AIG in light of certain rules under the Internal Revenue Code governing the Company's ability to utilize its net operating losses to offset taxable income in future years, or the Company could elect to obtain some or all of the additional capital from AIG notwithstanding the fact that the issuance of securities in exchange for such capital could result in a limitation on the Company's ability to utilize its net operating losses.
Automobile insurance continues to be the major line of business written by the Company and has been consistently profitable. Excluding earthquake related claims and expenses, the earthquake reinsurance reinstatement premium and the Proposition 103 rollback, the Company would have realized an automobile underwriting profit of $10,127,000. Because of the cessation of advertising, total automobile policies in force for 1994 remained level with
The automobile insurance business written by the Company is comprised of "Good Drivers", as defined by California statute. While this business would have been acceptable to the Company before Proposition 103, those who had no prior insurance would have been written at a higher rate level than those who had been insured prior to being written by the Company. The underwriting losses produced by this segment of the market suggests that the former differential was appropriate. These drivers have produced automobile underwriting losses of $31,134,000 in 1994, compared to $16,877,000 in 1993 and $9,719,000 in 1992.
The Company also received a homeowner rate increase averaging 17% effective August 1, 1994. The proposed increase reflects the rising costs of claim payments in this product line and a modest provision for weather and for catastrophes.
Net pre-tax investment income was $84,761,000 in 1994, $97,574,000 in 1993 and $94,255,000 in 1992 which produced an increase (decrease) over the prior year of (13.1%) and 3.5% for 1994 and 1993, respectively. Average invested assets decreased 14.0% in 1994 from 1993 and increased 8.8% in 1993 over 1992. Average annual pre-tax yield on invested assets has declined from 7.4% in 1992 to 7.1% in 1993 to 6.7% in 1994 because of lower interest rates available on bonds purchased in 1992 and 1993 and because bonds that had been purchased previously with rates that were higher than currently available were sold in 1994 to generate cash for paying earthquake claims. In addition, in 1994, available cash was invested in commercial paper which yielded a lower interest rate then that earned on the bond portfolio.
Realized capital gains on the sales of investments has increased from $11,498,000 in 1992, to $16,729,000 in 1993 and to $61,554,000 in 1994.
As of December 31, 1994, the Company had a net unrealized loss on bonds of $61,425,000 compared to a net unrealized gain in 1993 and 1992 of $145,746,000 and $84,418,000, respectively. The primary reason for the shift from an unrealized gain to an unrealized loss is that interest rates rose sharply since late 1993 causing a reduction in fair value of the bond portfolio, and the Company had recognized significant gains on the portion of the bond portfolio sold in 1994.
Historically, the Company has experienced positive cash flow from operating activities. Due to the severe earthquake losses, the Company did not generate a positive cash flow from operating activities in 1994. The Company paid for these losses with cash from operations, investment sales, loan proceeds and equity financing. Funds needed to pay for remaining earthquake related losses and expenses will come from normal positive operating cash flows and from available cash on deposit. As of December 31, 1994, the Com-
pany had total cash of $249,834,000 and total investments of $942,174,000. Of the Company's total investments, $229,216,000 at fair value was invested in tax-exempt state and municipal bonds and the balance was invested in taxable government, corporate and municipal securities.
In order to realize capital gains to increase statutory surplus, to provide cash for earthquake claims payments and to maximize investment income, the Company has restructured its investment portfolio to increase the proportion of investment-grade taxable instruments. Accordingly, the entire portfolio is shown as available-for-sale. As of December 31, 1994, the portfolio contained 76% taxable instruments compared to 13% a year earlier. All of the Company's investments are of high-quality and very liquid.
At December 31, 1994, the Company has $200 million of preferred stock outstanding, bearing interest at 9% per year payable quarterly. This results in a dividend of $18 million a year, or $4,500,000 per quarter. The Company also has a revolving credit line obligation of $160 million, with interest obligations varying according to market conditions. First quarter 1995 interest payments are estimated to be $3,900,000.
Funds required by 20th Century Industries to pay dividends are provided by the Insurance Subsidiaries. The ability of the Insurance Subsidiaries to pay dividends to the holding company is regulated by state law. Because of statutory regulations which require dividends to be paid from earned surplus, no dividends may be paid by the subsidiaries in 1995 without prior approval. The order from the DOI in January, 1995 specifically provides that the Insurance Subsidiaries may pay dividends to service existing debt and preferred stock obligations, and to service the additional contributions. The DOI and the Company have been in constant communication, and currently the DOI is permitting the Company to operate at a net premiums written to surplus ratio in excess of 3:1. The Company has requested approval from the DOI for an extraordinary dividend to pay the required dividends and interest, and anticipates a favorable response.
In 1994, the losses caused by the Northridge Earthquake resulted in a net operating loss of approximately $788.5 million and $759.5 million for regular tax and alternative minimum tax, respectively. Of these amounts, $238.0 million and $350.0 million for regular tax and alternative minimum tax, respectively, were carried back to the previous three years offsetting most of the taxable income for those years and resulting in a tax refund of $74.1 million. The balance of the 1994 net operating loss ($550.0 million and $408.0 million for regular tax and alternative minimum tax, respectively) will offset taxable income for future years. For the next two to three years, the Company
The National Association of Insurance Commissioners (NAIC) requires property and casualty insurance companies to calculate and report information under a Risk-Based Capital (RBC) formula effective with the filing of their 1994 annual statements due March 1, 1995. The RBC requirements are intended to assist regulators in identifying inadequately capitalized companies. The RBC calculation is based on the type and mix of risks inherent in the Company's business and includes components for underwriting, asset, interest rate and other risks. The Company implemented the RBC formula for year-end 1994 and has exceeded the minimum RBC requirements. Therefore, no corrective action is required.
The Company leases its Home Office building in Woodland Hills, California, which contains approximately 234,000 square feet of leasable office space. The lease was amended in October 1994 which extended the lease term until November 1999. The lease on this building may be renewed for two consecutive five-year periods.
As more fully discussed in Notes 7, 12, 13 and 14, the Company's financial position has been adversely impacted by an earthquake in the Southern California area and other events occurring in 1994.
20TH CENTURY INDUSTRIES AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY DECEMBER 31, ----------------------------- 1994 1993 ---- ---- (Amounts in thousands, except share data)
Commitments - Note 9 and Contingencies - Note 11 Stockholders' equity - Note 10 Capital Stock Preferred stock, par value $1.00 per share; authorized 500,000 shares, none issued Series A convertible preferred stock, stated value $1,000 per share, authorized 376,126 shares, outstanding 200,000 in 1994 200,000 - Common stock without par value; authorized 110,000,000 shares, outstanding 51,472,471 in 1994 and 51,447,471 in 1993 69,340 68,848 Common stock warrants 16,000 - Unrealized investment losses, net - Note 2 (39,777) - Retained earnings 72,381 586,361 ---------- ---------- Total stockholders' equity 317,944 655,209 ---------- ---------- $1,702,810 $1,644,670 ========== ==========
Furniture, equipment and leasehold improvements are recorded at cost. The provision for depreciation is computed on the straight-line method over the estimated useful lives of the related assets which generally range from 5 to 7 years. Leasehold improvements are capitalized and amortized over the shorter of the life of the asset or the lease term. Maintenance and repair costs are charged to operations when incurred. Depreciation and amortization expense was $7,256,000, $7,158,000 and $6,020,000 for 1994, 1993 and 1992, respectively.
Premiums written are recorded as earned proportionately over the term of the policy.
The estimated liabilities for losses and loss adjustment expenses include the accumulation of estimates of losses for claims reported prior to the balance sheet dates, estimates (based upon actuarial analysis of historical data) of losses for claims incurred but not reported and estimates of expenses for investigating and adjusting all incurred and unadjusted claims. Amounts reported are estimates of the ultimate net costs of settlement which are necessarily subject to the impact of future changes in economic and social conditions. Management believes that, given the inherent variability in any such estimates, the aggregate reserves are within a reasonable and acceptable range of adequacy. The methods of making such estimates and for establishing the resulting reserves are continually reviewed and updated and any adjustments resulting therefrom are reflected in earnings currently.
Policy acquisition costs, principally direct and indirect costs directly related to production of business, are deferred and amortized against the premiums earned.
Earnings (loss) per common share are computed using the weighted average number of common shares outstanding during the respective periods. The weighted average number of shares was 51,387,120 for the year ended December 31, 1994, 51,411,968 for 1993 and 51,394,806 for 1992. Primary earnings per share amounts
for 1993 and 1992 reflect a simple capital structure in which there were no securities in existence allowing common stock to be acquired as a result of exercising the conversion rights of such securities. The 1994 primary and fully diluted loss per share amounts reflect a complex capital structure in which securities exist that allow for the acquisition of additional common stock through the exercise of conversion rights in these securities. However, as there is a net loss for the year, primary and fully diluted loss per share amounts for 1994 are the same, as including the convertible securities in the computation of the loss per share would be antidilutive.
The carrying amounts of financial instruments other than investment securities, approximate their fair values. For investment securities, fair values are based on quoted market prices. The carrying amounts and fair values for all investment securities are disclosed in Note 2.
As of January 1, 1994, the Company adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" for investments held as of or acquired after that date. In accordance with SFAS No. 115, prior-period financial statements have not been restated to reflect the change in accounting principle.
In accordance with the criteria contained in SFAS No. 115, certain fixed maturities previously classified as held-to-maturity (with an amortized cost of $166,786,000 and fair value of $189,921,000) were transferred to the available-for-sale category; in addition, the carrying value of the existing available-for-sale portfolio was adjusted to fair value as of January 1, 1994. The effect of adopting SFAS 115 on January 1, 1994 increased fixed maturity investments available-for-sale by $56,549,000, decreased deferred taxes by $19,792,000, and increased stockholders' equity by $36,757,000. In the three- month period ended March 31, 1994, those net unrealized holding gains decreased by $15,551,000 (net of deferred income taxes of $8,374,000). Effective March 31, 1994, the Company, in response to the unprecedented losses resulting from the Northridge Earthquake
The maturity distribution of the Company's fixed maturity investments at December 31, 1994 was as follows: (Amounts in thousands)
Available-for-Sale --------------------------- Amortized Fair Fixed maturities due: Cost Value --------------------- ---------- --------
1995 $ 11,056 $ 10,927 1996 - 1999 223,727 216,932 2000 - 2004 241,483 232,175 2005 - 2014 288,982 268,718 2015 and after 237,583 212,654 ---------- -------- Total $1,002,831 $941,406 ========== ========
The Company's net deferred income tax asset is composed of: YEARS ENDED DECEMBER 31, ----------------------------- 1994 1993 ---- ---- (Amounts in thousands) Deferred Tax Assets: Net operating loss carryforward $192,334 $ - Unearned premiums 20,810 20,898 Loss reserves 21,886 19,621 Alternative minimum tax credit 8,084 - Proposition 103 14,138 3,337 Unrealized investment losses 21,419 - Non-qualified retirement plans 2,761 2,578 Other 1,373 1,088 -------- -------- 282,805 47,522 -------- -------- Deferred Tax Liabilities: Deferred policy acquisition costs 5,173 5,499 Salvage and subrogation 1,062 1,118 -------- -------- 6,235 6,617 -------- -------- Net Deferred Tax Asset $276,570 $ 40,905 ======== ========
Under normal operations, the Company's principal deferred tax assets arise due to the discounting of loss reserves for tax purposes which delays a portion of the loss deduction and the acceleration of 20% of the unearned premium reserve into taxable income before it is earned. As a result of the losses arising from the Northridge Earthquake, the Company, as of December 31, 1994, after available carryback, has a net operating loss carryforward of approximately $550,000,000 for regular tax purposes and $408,000,000 for alternative minimum tax purposes expiring in the year 2009 and an alternative minimum tax credit carryforward of $8,084,000.
1) The Company as of December 31, 1994 has approximately 76% of its $1 billion investment portfolio invested in taxable securities compared to 13% at December 31, 1993. By converting its investment portfolio from tax-exempt securities (and investing new cash flow) into taxable securities, the Company has significantly increased its future taxable income.
1995 and out of the homeowners line of business by July 23, 1997. This will substantially reduce the Company's exposure to future earthquake catastrophes.
Effective January 1, 1988, the Company adopted an unfunded Supplemental Executive Retirement Plan (Supplemental Plan) which covers certain key employees, designated by the Board of Directors. The Supplemental Plan benefits are based on years of service and compensation during the last three years of employment, and are reduced by the benefit payable from the Pension Plan.
The Company has a qualified contributory savings and security plan for eligible employees which incorporates Section 401(k) of the Internal Revenue Code to permit certain pre-tax contributions by participants. Under the plan (which is voluntary as to an employee's participation), the Company matches 75% of all employee contributions up to a limit of 6% of each participating employee's compensation. Contributions charged against operations were $2,210,000, $1,943,000 and $1,516,000 in 1994, 1993 and 1992, respectively.
As of December 31, 1994, the Company's outstanding advances against the Facility totalled $160 million for which loan origination fees to the Agents of $7.2 million were incurred. Loan fees are being amortized over the five- and-one-half year life of the Facility. Interest is charged at a variable rate based, at the option of the Company, on either (1) the higher of (a) the prime rate or (b) the sum of the Federal Funds Effective Rate plus 0.5%, plus a margin of 2.0%, or (2) the Eurodollar rate plus a margin of 3.25%. Margins will be reduced in relation to certain financial and operational levels of the Company. Interest is payable at the end of each interest period. The stock of the Company's Insurance Subsidiaries is pledged as collateral under the loan agreement. At December 31, 1994, the annual interest rate for the specified interest period was approximately 9.25%. Interest paid as of December 31, 1994 was $7,277,000.
At December 31, 1994 and 1993, reinsurance receivable/recoverable was $2,737,000 and $3,318,000, respectively, and ceded unearned premium was $1,237,000 and $1,393,000, respectively.
Following the January 17, 1994 Northridge Earthquake, the Company's reinsurance coverage of 75% of $100 million in excess of $10 million was reinstated at a cost of $13 million and additional reinsurance of 75% of the next $100 million was purchased effective April 1, 1994, for approximately $3 million. These treaties expired on June 30, 1994.
mately $28 million. Coverage under these treaties is provided by a number of domestic, foreign and London market companies in layers as follows:
An extension of the additional coverage from National Indemnity Company was purchased effective January 23, 1995 for a total premium of approximately $7.8 million. This coverage begins at a limit of $200 million and decreases in increments ranging from $25 million to $35 million on the 1st and the 16th of each month beginning March 1, 1995 through May 1, 1995. The treaty expires May 15, 1995.
The Company also leases office space in several other locations throughout Southern California, primarily for claims servicing.
Minimum rental commitments under the above lease obligations are as follows: 1995 $10,701,000 1996 10,684,000 1997 10,246,000 1998 8,824,000 1999 7,881,000 Thereafter 3,642,000 Rental expense charges to operations for the years ended December 31, 1994, 1993 and 1992 were $11,694,000, $11,259,000, and $10,572,000, respectively.
Stockholder's equity of the Insurance Subsidiaries on a statutory accounting basis at December 31, 1994 and 1993 was $207,018,000 and $582,176,000, respectively. Statutory net income (loss) for the Insurance Subsidiaries was $(657,331,000), $96,218,000 and $105,959,000 for the years ended December 31, 1994, 1993, and 1992, respectively.
Granted in 1992 33,940 $20.63 Vested in 1992 25,478 Cancelled or forfeited - ------- Outstanding, December 31, 1992 54,950
Granted in 1994 25,000 $27.38 Vested in 1994 18,543 Cancelled or forfeited - ------- Outstanding, December 31, 1994 63,172 =======
Should the earthquake losses increase above $974 million, future financial periods will be impacted and additional capital may be required.
On December 15, 1994, at a special shareholders meeting, a definitive agreement entered into between the Company and American International Group, Inc. ("AIG"), to provide $216 million of equity capital was approved. The agreement provides for an investment and strategic alliance agreement which provides for the issuance of, (i) 200,000 shares of the Company's Series A 9% Convertible Preferred Stock (the "Preferred Stock"), par value $1.00 per share, at a price and liquidation value of $1,000 per share convertible into common shares at a conversion price of $11.33 per share, and (ii) 16,000,000 Series A Warrants (the "Warrants") to purchase an aggregate 16,000,000 shares of the Company's Common Stock at $13.50 per share.
In addition to AIG's capital investment and quota share agreement, the Company and AIG are negotiating a strategic business alliance agreement for joint ventures for the sale of automobile insurance outside California. This alliance will enable the Company to expand its business into other geographic areas.
Upon approval by the shareholders, AIG, as holders of the Preferred Stock, voting separately as a class, elected two of the Company's eleven directors. Holders of Common Stock were not entitled to vote in the election of such two directors.
The following table presents premium revenue and underwriting profit (loss) for the Company's auto lines and homeowner and other lines on a GAAP basis. ---- Homeowner (Amounts in thousands) Auto Lines and Other Lines ---------- ---------------
Direct premiums written $ 991,268 $ 87,395 ========= ========== Premiums earned $ 981,893 $ 52,110 ========= ========== Underwriting loss $ (45,854) $ (877,487) ========= ==========
In 1994, both the Auto and Homeowner lines experienced an underwriting loss due to the high level of claims incurred as a result of the January 17 Northridge Earthquake and the cost of the Proposition 103 rollback order.
On January 28, 1995, the California Department of Insurance, as part of the Proposition 103 settlement, ordered the Company to contribute an additional $50 million to the Insurance Subsidiaries' surplus, including $30 million by March 31, 1995. In March 1995, the Company received $20 million from the issuance of preferred stock to AIG and $10 million from the existing bank credit facility and contributed such funds to the Insurance Subsidiaries' surplus.